The owners of Travelodge are preparing to check out of the hotel business after appointing Deutsche Bank to advise them on a £1bn sale or stock market float of the company, The Telegraph reported on Monday.
Goldman Sachs, GoldenTree Asset Management and Avenue Capital are thought to be eyeing an exit of the budget hotel group in the autumn. An initial public offering is believed to be less likely than a sale, and there is speculation that Travelodge could draw the attention of an Asian suitor.
The trio, which were never considered to be long-term investors in the chain, are hoping to capitalise on a recovery at the hotel company, which came perilously close to collapse in 2012 after it laboured under more than £1bn in debts.
Goldman and the two US hedge funds seized control of Travelodge from Dubai International Capital when the hotels group was forced into a debt-for-equity swap and company voluntary arrangement.
Peter Gowers, the industry veteran who took the helm in November 2013, has since spearheaded a £100m modernisation programme of the hotel chain that has helped to revive its fortunes, paving the way for a change in ownership.
“Our shareholders are not natural long term holders of a hotel business and they are working with Deutsche Bank to explore their options for the future,” the Travelodge boss said.
“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.”
The company is enjoying the fruits of the turnaround under Gowers.
Revenue per available room climbed 15.2 per cent to £35.87 in the six months to July 1, with total revenues rising 17.9 per cent to £261m.
The company-wide revamp, which has seen 92 per cent of its rooms in the UK modernised, helped to drive a 40 per cent increase in business customers from companies such as Vodafone and Lloyds Banking Group, Gowers said. The introduction of separate beds for children has also boosted Travelodge’s appeal among families, he added.
Five hotels were opened during the period, and the expansion is set to accelerate with another 45 planned for the UK in the next two years. Travelodge currently has 521 hotels, including 12 in Ireland and five in Spain, although the business has identified about 250 locations in Britain where it would like open a site in the future, the chief executive added.
Travelodge, like other companies across the hospitality, retail, leisure and social care industries, is expected to suffer higher costs as a result of the plan for a new national living wage for workers aged 25 or over, which was unveiled by Chancellor George Osborne earlier this month. The minimum wage is currently £6.50, but will rise to £7.20 next April and reach £9 by 2020.
“In the short-term it’s clearly a cost-hit but in the long-term it’s not a significant issue,” Gowers said. He added that the Government could help to offset the impact by cutting VAT on tourism services, a long-running sore for the industry as the rate is much higher than in Europe. Campaigners want the rate slashed from 20 per cent to 5 per cent.
“The government has to look at its changes as a package,” Gowers said. “[The living wage] does increase the strength of the call for a reduction in VAT on family holidays and business travel.”
Source : Punch