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Travelodge to be sold or floated

Article By: ,  Financial Analyst
July 20, 2015 6:36 PM

Budget hotel chain Travelodge could be up for sale or floated on the stock market, it has emerged.

The owners of the hotel – Goldman Sachs, GoldenTree Asset Management and Avenue Capital – have appointed Deutsche Bank to advise them on a £1 billion sale or flotation in the autumn, reports the Telegraph.

Analysts say that an initial public offering would be less likely than a sale and the chain could be purchased by an Asian buyer.

The three current owners have only been involved with the hotel chain for a few years – after it came very close to collapsing under £1 billion in debts in 2012.

Since taking over the business, however, the owners have turned it around with improvements including a £100 million modernisation project and an economic turnaround spearheaded by chief executive officer Peter Gowers.

In 2014, the chain even launched its first television advert campaign in more than four years.

Mr Gowers recognised that the current shareholders were not in the business for the long-term.

"Our share holders are not natural long-term holders of a hotel business and they are working with Deutsche Bank to explore their options for the future," he explained.

"While that takes place, we continue to focus on driving the business forward and building on the great momentum seen in our performance so far this year," he added.

2015 performance

In the six months to July 1st, revenue per available room rose by 15.2 per cent to £35.87. In the same period, total revenue went up 17.9 per cent to £261 million.

The company has also seen a renovation-programme on a massive level. 92 per cent of its UK rooms have been modernised and this has helped to drive a 40 per cent increase in business customers.

In addition, the company has started to appeal more to families, with the introduction of separate beds for children.

Five hotels were opened during the period and another 45 are expected to open in the UK over the next two years. Currently, the company has 521 hotels, including 12 in Ireland and five in Spain.

Commenting on how the business might be impacted by the introduction of the new national living wage, Mr Gowers said: "In the short-term it's clearly a cost-hit but in the long term it's not a significant issue." He believes the government could help to offset the impact by reducing VAT on tourism services – since the rate is higher in the UK than the rest of Europe.

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