Goldman Sachs among group looking to sell UK's Travelodge

Goldman Sachs is among a group of investors looking to exit the hotel ownership business. Reports are that the U.S. investment bank giant and its partners, hedge fund groups GoldenTree Asset Management and Avenue Capital, have enlisted Deutsche Bank to advise them on a possible sale of UK budget hotel chain Travelodge or stock market float. The former, however, is more likely, and could fetch as much as £1 billion (USD $1.5 billion).

Early speculation is that the buyer could be Asian, which is not unlikely given the amount of capital Asia-based groups have spent recently on hotel-related assets.

Like many other hotel owners, Goldman et al. are looking to exit their investment while the going is good. Just last week, private equity firm Carlyle Group said it is exploring the possible sale of its European budget hotel chain B&B Hotel Group, reportedly enlisting Morgan Morgan Stanley to look into the divestment or possible stock market listing by this fall.

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The trio came under control of Travelodge in 2012 from Dubai International Capital when the hotel group was forced into a debt-for-equity swap and company voluntary arrangement.

Subsequently, under the leadership of Peter Gowers, the chain's fortunes have turned around. Gowers has since helmed a £100-million modernization program with the goal of adding adding 45 hotels, or more than 3,600 rooms, over the next 24 months.

"Our development momentum is beginning to accelerate," Gowers said. "We have already exchanged contracts for more new rooms in the first half of 2015 than we did in the whole of 2014. "Boosted by our strong trading performance and the attractions of the value segment, major developers and financial institutions are showing their confidence in the future of new Travelodge."

Revenue per available room climbed to £35.87 in the six months to July 1, with total revenues rising to £261 million.

On news of the possible sale, Gowers said, "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. 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."

While Travelodge could be a good play, a planned new national living wage for workers aged 25 or over, which was unveiled by Chancellor George Osborne earlier this month, could cast shade. 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.

The U.S. is going through a similar debate now. The hotel industry's lobby, the American Hotel & Lodging Association (AH&LA), has taken a side against raising the minimum wage, which it says will harm small businesses and hotel franchisees.

Travelodge was founded in 1985. There were 519 Travelodge hotels and 38,665 rooms in the UK, Spain and Ireland as at 30 June 2015. 

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