Travelodge expands in Spain as holidaymakers cut their budgets

The UK hotel chain will be one of few low-cost options in cities such as Barcelona and Seville

Budget hotel chain Travelodge and its property partner Citygrove have secured funding to kick off its expansion plans across Spain.

London-based developer Citygrove has finance for hotels in Barcelona and Valencia and is in talks for a third in Seville. Travelodge, which already has three hotels in Spain, plans 50 more over the next 10 years to take advantage of hotel guests trading downwards since the credit crunch.

Paul Harvey, Travelodge's managing director, international and development, said: "Our existing three hotels have been trading well. When a country has economic concerns it is the time consumers choose a low-cost model."

Standard Life Investments has stumped up the cash to build a £28.2m 250-bed Travelodge in the central district of Barcelona. Standard Life will own the 10-storey building and Travelodge will be the operator. In Valencia Travelodge's proposed 116-bed hotel near the airport is being financed by Spanish bank BBVA.

Citygrove is in talks with potential funders for a third, 200-bed Travelodge in Seville. It is currently seeking a planning licence that will allow Citygrove to develop the hotel.

Mr Harvey said that future locations will include Madrid, Malaga, Bilbao and Granada. There will also be further hotels in Barcelona.

He said: "Budget is now understood by the Spanish. They travel on Easyjet and understand the concept. At present there are very few budget hotels – in Spain the hotel sector is predominantly expensive mid-market hotels that are underinvested. We have also been helped by the fact that the Spanish's use of the internet has grown so online booking is up."

Travelodge, which is 80 per cent owned by Dubai International Capital (DIC), has a 1,000-room agreement with Citygrove to develop hotels in the UK and Spain. Citygrove chairman Toby Baines said: "Spanish banks such as BBVA or Santander will still lend on property, but only for certain deals such as development where there is a pre-let to a tenant. Like in the UK many of the banks have an overhang of debt and they need to clear this."

Travelodge is attractive to institutional investors and banks as it takes a 25-year lease, creating a secure income for investors. Travelodge is now evaluating western Europe for its next step for expansion. Mr Harvey said Germany, France, the Netherlands, Scandinavia and Italy are all under consideration.

In the UK, Travelodge has more than 300 hotels and is the largest hotel brand in London. The chain's Mr Sleep and the Zzz Squad advertising campaign has helped raise Travelodge's profile over the past year. It plans to expand to 14,000 rooms in the capital by 2016 and to 30,000 rooms in the long term. Citygrove is also developing hotels for Travelodge in the UK, including Maidstone and Aldershot.