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Travelodge eyes Europe expansion

Source: Reuters - Wed 14th Sep 2011

Britain's second-biggest budget hotel group Travelodge will announce plans for a major expansion in continental Europe over the next few months, Chief Executive Guy Parsons told Reuters.

The group is looking to ramp up expansion having set a long-term target to open 100 hotels in Spain, where it has already successfully opened four sites.

"There are still big opportunities in a number of European countries. What Spain has proven to us is that the brand is completely transferable," Parsons said in an interview.

"We're actively working on what our European strategy looks like and we'll be able to announce that in the coming months," he added.

Parsons declined to comment on what countries Travelodge will look to enter, but analysts have suggested Germany, the Netherlands, Scandinavia and Italy would be suitable markets.

"The only country that is locked out for us at the moment is France. We'd need to do some M&A activity to get into France but in the rest of continental Europe there's no really dominant player," he said.

Travelodge, which operates 466 hotels in Britain, has set a long-term target in the UK of 1,100 hotels and 100,000 rooms by 2025.

The group, owned by Dubai International Capital, on Tuesday reported a 15% rise in total sales in the 13 weeks to end August. Revenue per available room at hotels which have been open more than a year grew by 3%.

Travelodge said August's riots, which affected 81 of its hotels, had taken 2% off its top-line growth, equivalent to 1 million pounds. However Parsons said the group had benefited from cash-strapped Britons holidaying in the UK rather than abroad.

"Due to hefty financial cutbacks the 'staycation' break has been bigger than ever this summer with 35% of Britons holidaying at home," he said.

Travelodge said it had focussed on increasing occupancy rates by lowering prices by 5% to an average room rate of 42 pounds per night. It has around 750,000 rooms available through the end of the year at a rate of 19 pounds per night or less.

"For the back end of this year prices are going to remain very keen ... If we need to keep prices low we will," Parsons said.

The group's flexible pricing means rooms at its Covent Garden hotel in central London are this week fetching 250 pounds a night due to one of the world's largest military shows taking place in London.

Parsons said that kind of rate could be repeated for next year's Olympic Games but cautioned forward bookings so far had been subdued.

"It's not as popular as a Take That gig that's for sure. Until more Brits get more tickets I don't think we'll really see a big impact," he said.

Travelodge's main rival Premier Inn, owned by Whitbread, lifted comparable sales by 7.1% in Q2.

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