Travelodge seeks Olympic gold

Travelodge, the budget hotel chain owned by Dubai, is expanding aggressively with the aim of becoming the biggest hotel brand in London by the 2012 Olympic Games. Dubai International Capital (DIC), the investment arm of Dubai Holding, bought Travelodge Hotels for £675 million (Dh3.55 billion) in 2006 from Permira Funds.

Since then the chain, based in the UK, has expanded at a rapid pace to about 400 properties from 279 hotels in the UK, nine in Ireland and three in Spain. Travelodge said it planned to open 26 properties this year, creating about 500 jobs and taking its room count to more than 30,000. The expansion would represent an investment of about £115m. "DIC don't really fund it themselves," said Greg Dawson, the spokesman for Travelodge.

"Travelodge will seek a construction partner and a funding partner for every different project." Among its many other investments, DIC bought The Tussauds Group, one of the biggest leisure operators in Europe, for £800m in 2005. The group's attractions include the London waxworks museum Madame Tussauds, the theme parks Alton Towers and Thorpe Park, and the London Eye, which was acquired in 2006. The investment company says on its website that two years later it merged The Tussauds Group with Blackstone's Merlin Entertainments Group to create the second-largest attractions operator in the world after Disney.

DIC kept £1.02bn cash and a 20 per cent stake in the combined company, Merlin-Tussauds Group. DIC bought the engineering company Doncasters Group for £700m in 2006 and owns a stake in Sony. It came close to acquiring Liverpool Football Club in 2006, but a deal never materialised despite long negotiations. The company was unavailable for comment yesterday. "It [Travelodge] is a strong brand with good growth potential," said Sameer al Ansari, the chief executive of DIC, at the time when it acquired the company.

"The budget hotel sector is growing and, in our view, is underdeveloped in the UK market. "Travelodge ? has an aggressive expansion plan which we are confident will give us an excellent return on this investment." Travelodge said in a statement that demand for budget-branded accommodation in the UK was fuelled last year by the recession, which prompted UK travellers to spend holidays closer to home and companies to cut travel expenditure. "Despite a very challenging market, we have chosen to invest and grow throughout the recession and for many more years to come," said Grant Hearn, the chief executive of Travelodge.

"The prevailing economic climate has accelerated the forecast structural change of the hotel market as consumers have chosen low-cost, quality accommodation rather than overpriced full service and mid-market establishments." The hotel operator cut room prices to as low as £9 last year due to the economic downturn. Lord Forte bought the Travelodge brand and launched it in the UK in 1985, originally setting up lodgings at roadside locations for drivers. Last month, Travelodge announced it was setting up a £100m development fund to help it achieve its growth targets.

"What we found in these difficult economic times, because we use so many different investors, in the current climate they have found funding a little more difficult so it would help us to have a separate pot of money," said Mr Dawson. Travelodge, which employs 5,500 staff, plans to grow to about 70,000 rooms, or about 1,000 hotels, by 2020. @Email:[e-mail]