The head of the Travelodge budget hotel chain has criticised a declaration by Whitbread, which owns the Premier Inn brand, that it might be interested in making a bid for its smaller rival.
Grant Hearn said that Dubai International Capital (DIC), the embattled Middle Eastern private equity firm, had no intention of selling the chain until the hotel market recovered, probably towards the end of next year.
In an interview with The Times Alan Parker, the outgoing Whitbread chief executive, had confirmed that the group would “have a look” at Travelodge if it came up for sale as a result of DIC’s financial problems.
Mr Hearn, the Travelodge executive chairman, was adamant that there was no prospect of a sale. “I don’t see that there is any reason for Whitbread to think they’d be able to acquire this business,” he said.
“DIC understand the business cycles and are aware that trading — and values — should recover in the next 18 months. They know there is no need to do anything precipitous.”
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Mr Hearn said that a takeover by Whitbread would run into competition problems if, as Travelodge’s lawyers believed, the authorities were to consider the deal’s impact on the budget sector rather than the wider hotel market.
A merger of the two companies would create a budget hotel giant with nearly 1,000 hotels in Britain. Both companies have small overseas operations.
DIC, which acquired Travelodge for £675 million almost four years ago, injected a cash sum of £20.1 million into the business last year in the form of loan notes in return for its lenders relaxing their covenants.
According to last year’s accounts Travelodge had net debt at the year-end of £794 million, including £447 million of bank debt provided by a consortium led by Royal Bank of Scotland and Barclays, plus eurobonds of £319 million.
Two years ago detailed talks over a Whitbread takeover of Travelodge ended acrimoniously, with each side blaming the other. They clashed again at the end of last year when Travelodge lodged a formal complaint with the Advertising Standards Authority over the £29-a-room Christmas promotional campaign fronted by the actor and comedian Lenny Henry.
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Earlier in his career, Mr Hearn worked for Mr Parker as managing director of Travel Inn, the predecessor company to Premier Inn.