As U.K. Hotels See Signs Of Recovery, Budget Chain Scores Funding

As the United Kingdom's hotel market begins to show signs of recovery, one of the country's budget hotel chains has secured funding to grow its portfolio through acquiring hotels that have become distressed as a result of the downturn.

U.K.-based budget hotel chain Travelodge this month announced that it has joined with real estate fund Meghraj to launch a £100 million fund to acquire distressed hotels from operators, banks and administrators, largely properties in the midprice tiers. The fund, called Tamesis Capital, will purchase between eight and 14 hotels and then lease them to Travelodge, which already has acquired 13 such hotels in the past 15 months.

Travelodge managing director of development Paul Harvey said that the company for the last year has been approached to buy several distressed hotels, but high property valuations stalled negotiations. "Over the last two months, however, it has been clear that expectations on value have moved in our direction, meaning some exciting opportunities are presenting themselves," he said in a statement.

Deloitte's business advisory practice this month reported that the U.K.'s hotel market has improved over the last five months, including London's weekday corporate business market. While revenue per available room was down 11.1 percent year-to-year for the beginning of the year through the end of April, weekend leisure demand both in London and the regional United Kingdom as well as weekday corporate demand in London are showing an upward trend, which Deloitte hospitality managing partner Marvin Rust said is "signaling that the worst may be over for hoteliers."

Some cities, including Glasgow, Edinburgh and London, have even seen increases in leisure demand through May 20, according to Rust. Weekday demand in regional areas and the country's airport hotels, however, has not shown signs of recovery, according to Deloitte.