Travelodge Declares Price War on UK Hotel Rivals

LONDON (Reuters) – British budget hotel chain Travelodge on Sunday announced 5 million pounds ($8 million) worth of price cuts for the rest of 2008 designed to lure its budget and mid-market competitors into a price war.

The chain, owned by Dubai International Capital, said it had cut rates in 15 of Britain’s biggest cities by an average of 10 percent for the rest of the year.

“Room prices will be dropped below 2007 prices to drive volume and steal market share from both budget and mid market rivals,” it said in a statement.

The move will increase pressure on direct competitors such as Whitbread’s (WTB.L: Quote, Profile, Research, Stock Buzz) Premier Inn chain, as well as more upmarket rivals like InterContinental Hotels Group’s (IHG.L: Quote, Profile, Research, Stock Buzz) Holiday Inn Express chain.

Whitbread has held talks to buy Travelodge but negotiations broke down earlier this year over price and regulatory concerns. One source close to the deal said Dubai International Capital had priced the business at 900 million pounds.

Travelodge is currently benefiting from customers cutting spending on more expensive hotels. It offers promotional rates starting at just 9 pounds per night.

The company said it believed budget hotels would drive structural change in the market in the way that budget airlines had done, with customers not necessarily returning to more expensive alternatives when the economy improved. (Reporting by Georgina Prodhan; Editing by Jon Loades-Carter)