Travelodge profits surge amid talk of £1bn sale

Travelodge, one of Scotland’s biggest hotel operators, today revealed a surge in profits as its owners reportedly lined it up for a sale that could value the business at more than £1 billion.

Travelodge said a 100m modernisation programme was now nearing completion. Picture: PA
Travelodge said a 100m modernisation programme was now nearing completion. Picture: PA

The figures highlighted the progress made by the group which has 40 hotels north of the Border but almost collapsed under a debt mountain three years ago.

Underlying earnings for 2014 were up 63.5 per cent to £66.2 million as it benefited from greater room occupancy and rates boosted by business customer usage.

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Current owners Goldman Sachs, Avenue Capital and GoldenTree Asset Management took control in 2012 after Travelodge faced the threat of collapse under a £500m debt pile.

The owners, who had injected £75m of cash into the business as part of a financial restructuring two years ago, are now understood to be preparing to appoint advisers to weigh up strategic options, including a possible flotation.

Chief executive Peter Gowers said in an interview: “There’s probably never been a better time to run a value hotel business than now because the value hotel sector is huge. Britain is becoming a nation of value shoppers.”

On reports of Travelodge’s possible sale, he admitted the current owners were “not natural long-term holders of the business”.

He added: “I think you’d expect them always to be thinking about ways to realise value from their shareholdings, but for now we stay focused on running the business we have got.”

Revenue last year rose 14.9 per cent to £497.2m while the key industry measure of revenue per available room was up 16.8 per cent to £34.24m.

Gowers said the momentum from 2014 had continued into the new year.

Travelodge said a £100m modernisation programme was now nearing completion, while five of 15 hotels expected for 2015 were already open.

The chain has opened more than 500 hotels since launching in 1985 and has identified 250 more sites across the UK. Gowers said the first 150 were expected to be opened over the next eight years.

In London, it has been targeting sites such as Wembley and Greenwich, just outside the more expensive Zone 1 tourist and business destinations.

Last year Travelodge said it was looking for ten further hotel sites across Scotland as part of an ongoing expansion drive.

The budget hotel chain said it was considering locations in Aberdeen, East Kilbride, Falkirk, Hamilton, Motherwell, North Ayrshire, Oban, Peterhead, St Andrews and Wishaw. Travelodge said it represented an investment of £75m and the creation of 200 additional jobs. The chain opened its first Scottish hotel in Stirling back in 1986 .

Unveiling its expansion plans last year, Travelodge said the value hotel market in Scotland was around 14 per cent of the total market north of the Border, compared to 18 per cent in England and more than 30 per cent in the US.

It predicts that by 2020 the budget hotel sector could account for almost a quarter of the UK market.

The firm said it had invested £4m in the previous 12 months in modernising more than half of its Scottish hotels.

Work has included revamping rooms, bar cafes and reception areas. It was part of a wider £57m refurbishment programme Travelodge undertook throughout the UK.

Travelodge operates ten hotels in Edinburgh, five in Glasgow, and four in Aberdeen. It also owns sites in Ayr, Cumbernauld, Dumbarton, Dunfermline, Falkirk, Fort William, Glenrothes, Helensburgh, Kilmarnock, Livingston, Musselburgh and Stirling.