Travelodge sale talk values chain at £1bn

Travelodge sale talk values chain at £1bn

Travelodge is being tipped for a sale that could value the budget chain at more than £1 billion, only three years after it was rescued from potential collapse.

Its owners - Goldman Sachs, Avenue Capital and GoldenTree Asset Management - are understood to be preparing to appoint advisers to weigh up strategic options, including a flotation, the Times reported.

This comes on the back of soaring profits and a surge of interest in the hotel sector.

The newspaper quoted City sources as saying the company has been talking to investment banks including Deustche Bank, Jefferies and Goldman Sachs, with a sale in the next nine to 12 months seen as the most likely option.

Travelodge is expected to confirm a 63% jump in underlying earnings last year to £66.2 million from revenues up 14.9% to £497.2 million.

Revenue per available room (revpar) was up 16.8% to £34.24 as occupancy and room rates both improved.

With next year’s earnings tipped to reach £115 million, analysts are forecasting a price tag for Travelodge of at least £1 billion, the newspaper reported.

Travelodge has 501 hotels in the UK, with 15 openings in the pipeline this year. Chief executive Peter Gowers said the rate of openings would rise to 20 to 25 a year and there is scope for another 250 hotels.

“The value market is going gangbusters,” he said. “Britain is steadily becoming a nation of value shoppers as people migrate to brands such as easyJet and Aldi, and the hotel market is slap bang in the middle of the revolution.”

Another factor in Travelodge’s favour has been the gradual move upmarket of its biggest rival, Whitbread-owner Premier Inn.

“Premier Inn has an average price per room of £59 versus £45 for Travelodge,” he said. “It’s a big gap and it’s bigger in London. They’re gradually putting more stuff in the rooms and they’re competing, very successfully as it happens, with the midmarket.”

Asked about the possibility of an exit by Travelodge’s backers, Gowers said: “They’ve said themselves they are not natural long-term holders, but that’s a subject for them.”

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