Profits climb at budget hotel chain Travelodge

Travelodge today announced increased annual profits.

Travelodge today announced increased annual profits. - Credit: PA

Budget hotel chain Travelodge has revealed a surge in profits, amid reports that its owners are lining it up for a sale that could value the business at more than £1billion – three years after its near-collapse.

Underlying earnings for 2014 rose by 63.5% to £66.2million as Travelodge benefited from greater room occupancy and rates, boosted by business customer usage.

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 mountain.

The owners are now understood to be preparing to appoint advisers to weigh up strategic options, including a flotation, according to The Times.

Chief executive Peter Gowers told BBC Radio 5 Live’s Wake Up To Money: “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.”

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Revenue last year rose 14.9% to £497.2m while the key measure of revenue per available room (revpar) was up 16.8% to £34.24. Mr 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.

Mr 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.