Folio Hotels, a privately owned company with turnover of about £70 million, has called in administrators because of a sharp decline in trading.

The group, set up three years ago by two former managing directors of Regal Hotel Group, is the biggest corporate failure to date in the industry, although experts believe that more are inevitable.

Folio, which is based in Swindon and employs 2,000 people, runs 34 three- and four-star properties, including the Richmond Hill and Richmond Gate hotels in southwest London, Hall Garth Hotel in Darlington and Etrop Grange at Manchester Airport. The company, which leases rather than owns its hotels, had been in negotiations with its landlords for several weeks with the aim of securing a rent holiday to allow it to continue trading.

It is understood that the administration was precipitated when the owner of nine of its hotels - believed to be the Landesberg and Rosenberg families, who also own Admiral Taverns - pulled out of the negotiations.

The Times understands that the two families are preparing to take back control of the nine hotels and are considering appointing Bespoke Hotels, another private operator, to take over the management.

Folio was founded at the beginning of 2005 by Nicholas Crawley and Charles Holmes, who worked at Regal in the late 1990s and more recently at the Four Pillars Hotels group.

The administration is being handled by MCR, the London-based restructuring firm that is handling the administration of MFI, the furniture retailer.

Although Folio has very little debt, the recent fall-off in trading has left it unable to pay the rent on the hotels. Under its tenure, about £40 million has been pumped into the properties, resulting in higher rents, but it is believed that Folio may continue to trade if it can negotiate new deals with the owners of the remaining 25 hotels.

The demise of Folio comes after the collapse in October of GuestInvest, the buy-to-let hotel operator.

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