• Travelodge has breakfast escape

Travelodge, the second biggest budget operator in the UK which this week opened its 300th hotel, had a narrow escape over the Christmas period following the near collapse of Little Chef, a restaurant chain that is the meal provider next to 112 of its hotels.
   The last minute rescue of the restaurant chain should provide further pause for thought both with the nature of sale and leaseback transactions and with losing control of f&b provision.
   Little Chef was bought from Travelodge's then private equity backers Permira for £52m back in October 2005. The move saw 130 sites closed and 234 pass into the hands of the Peoples Restaurant Group.
   Four months later a £60m sale and leaseback transaction saw 65 sites purchased by Israeli investment group Arazim.
   Poor trading since then has seen the group struggle to meet its rental obligations to Arazim and to the 112 sites owned by Travelodge as losses grew to a rumoured £3m a year.
   A deal has been struck with turnaround specialist RCapital buying Little Chef for an estimated £10m. The terms of the deal have not been disclosed, except for the closure of around 40 sites.
   The rent obligation on the Arazim owned properties did not look onerous at the time the deal was struck at £3.8m. But it is believed a series of operational errors were subsequently made which saw profitability slump.
   Dubai International Capital, the new owners of Travelodge, avoided the worst case scenario of seeing restaurants next to its hotels cease training but almost certainly it will have seen its rental income from the sites take a hit.
   Meanwhile, the rapid growth of the budget hotel sector relative to other hotel segments has been highlighted by the four-yearly London Accommodation Census published by Visit London.
   The figures showed that between 2002 and 2006, budget hotel rooms in the capital increased by 61% to represent 16% of the entire London hotel market or a total of 13,650 budget rooms.
   Of the graded segments, budget was the fastest growing in London, with the next fastest growth shown by the three-star segment at 17%. The two-star segment shrunk by 36%.

Share →