Travelodge, Britain’s second-biggest budget hotel operator, will announce plans today to launch a £100 million fund aimed at the growing number of distressed hotels that are coming up for grabs.

The move comes a day after the head of Whitbread, which owns the Premier Inn chain, warned of significant industry restructuring.

Whitbread and Travelodge are among the few hotel groups that continue to seek acquisitions as weaker rivals retrench — but while the Premier Inn owner will try to use its existing balance sheet strength to fund deals, Travelodge has teamed up with Meghraj, an Anglo-Indian property fund manager, to pursue opportunities.

The new Tamesis Capital will seek to raise £40 million of equity and £60 million of debt with a view to acquiring up to 14 hotels that would then be converted and leased by Travelodge.

Meghraj and Travelodge will each invest £500,000 of equity, with Haneet Vaswani, a Meghraj client and executive producer of the film Bend it like Beckham, stumping up a similar sum and joining the Tamesis board.

Meghraj, already an investor in 15 existing Travelodges, aims to raise about £20 million of equity from its high-net-worth clients, with the rest of the equity coming from institutions.

Paul Harvey, managing director of development at Travelodge, said that despite the credit crunch, he was confident of raising the debt.

“We have tested the water and believe there will be an appetite for this,” he said. Travelodge, which is planning to grow from 380 hotels to about 1,000 over the next ten years, will use the funds to target struggling hotels in mature town and city centre locations with limited new development opportunities. Targets include Oxford, Canterbury and London boroughs.

Mr Harvey said that the decision to set up a fund followed evidence that price expectations from owners and administrators were coming down. He cited the example of three hotels acquired from the administrators of the Real Hotel Company, where the landlords had agreed to a 20 per cent rent cut.

Alan Parker, the Whitbread chief executive, said yesterday that he expected asset values to become more realistic towards the end of the year. “We will see further pressure mounting over the next 12 months as banks look at their assets.”

He said that talk of green shoots was “premature in the hotel sector”, given room discounts of 30 to 40 per cent being offered by four-star chains.

He admitted that Premier Inn had launched a promotion offering 10 per cent of rooms at £29, but cautioned against excessive discounting: “It took five to six years for rates to recover from the reductions of the early 1990s.” Room rates, he said, were at similar levels now to those that devastated the hotel business during that recession.

Whitbread reported a 7.9 per cent fall in first-quarter like-for-like sales at Premier Inn as occupancy and revenue per available room both fell by almost 10 per cent.

Nevertheless, Mr Parker said, the performance was still ahead of the market and he remained confident of what he called the chain’s medium-term prospects. For the group as a whole, like-for-like sales for the quarter fell by 2.7 per cent as its Beefeater and Brewers Fayre pub-restaurants and Costa coffee shops reported robust trading.

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