|By Lucy Farndon, Daily Mail,
LondonMcClatchy-Tribune Business News
Sep. 7, 2006 - Judging by the stench of urine outside Travelodge's London office, Grant Hearn is fond of the no-frills approach. Renting hotel rooms from £15 a pop, while simultaneously keeping private equity owners happy, does not leave much spare cash for executive comforts.
Hearn, a mouthy 48-year-old who has run the Travelodge chain for three-and-a-half years, is unashamedly thrifty. Although much of his career was spent working for plush chains such as Marriott and Hilton, he professes to prefer staying at a Travelodge rather than taking the four-star option.
"Its a no-nonsense, no-disturbance, no-pretension stay," he says. "We are like the Ronseal advert of the hotel business -- we are exactly what we say on the tin. Ideally, we'd like our regular customers to find their way around the room blindfold."
Permira hired Hearn when it bought Travelodge for £712 million three-and-a-half years ago. Ownership changed hands again yesterday when it was sold for £675 million to Dubai International Group, the private equity arm of Dubai Holding which is owned by the Gulf state's ruling Maktoum family.
Permira had already taken out £500 million of cash from the property assets, selling its Irish hotels and Little Chef motorway restaurants, so "their ambitions were satisfied." Hearn is unfazed by his new owners, having already taken a trip out to Dubai.
"DIG is just like any other private equity business," he says. "It is quite an international company. The chief executive Sameer Al Ansari is from Dubai, but the finance director is from India. We also deal with a French-Canadian and an Austrian."
DIG was only set up in 2004, but has big ambitions and no shortage of cash. It already owns Madame Tussauds and the Thorpe Park theme park and engineer Doncasters. The group also has a $1 billion investment in Daimler-Chrysler.
Travelodge has 291 hotels and plans to open 30 each year, though DIG has the funds for big acquisitions if it fancies.
Hearn says: "They share our ambitions. If the right opportunities come along they will work with us to make things happen." They are "up for looking at" possible deals in the UK and Europe.
Travelodge is the second largest budget hotel chain in the UK to Whitbread's Premier Travel Inn. It does not disclose profits, but they are understood to have doubled last year, with sales up 15 percent. But its market share of the hotel industry is just 3.3 percent, even though it has 20,000 rooms.
Hearn said: "A lot can be said for getting chains together and leveraging off back office and distribution."
Though the cost synergies would be better by doing a domestic deal, he says: "We've got to think bigger than that. We will have to show people that we are not constrained by borders."
As a child he remembers being taken on trips to see the kitchens in motor service station restaurants. At 15, he started washing up at a Little Chef at weekends before leaving school at 18 to study hotel management in Ireland.
Weekends away are increasingly popular in the UK, but many still believe that hotels are beyond their reach financially. One in three Britons used a hotel last year, up from one in five in 1990.
That is all thanks to budget operators, says Hearn, who is on a mission to reach the unconverted. With an increasing number of rooms under £30, he wants to make it as natural as going out for dinner.
He admits he would probably opt for a country spa rather than a Travelodge when taking his wife out for their wedding anniversary. But he reckons the basic amenities are fine for other trips.
"The bed is important, cleanliness, a good bathroom and shower and some sort of TV. It's as simple as that," he says.
"Frankly, rooms are all the same once the lights are off. Why are you paying all that extra money for a chandelier, a fantastic looking old fireplace that doesn't work any more or that extra sewing kit or hand lotion? Is it really worth it?
"Most three- or four-star hotels don't even provide a doorman these days. Nor is there someone there to help you with your luggage to your room."
Hearn could go on and on. He loves to get on his soap box, admitting he is "turning into a grumpy old man."
Even at school, he had run-ins with the economics A-level teacher which resulted in him leaving the class. "I was very Tory blue. I'm a lot older than I look and it was very pink in those days."
His latest bugbear is the mooted "bed tax." The Local Government Association is trying to push through legislation that would put a 10 percent extra levy on all overnight stays, in addition to VAT.
"It is an appalling idea being considered by Sir Michael Lyons in his review of funding of local government," he says.
"We are fighting very hard to make sure it doesn't come in. To make us the highest taxed hotel industry in Europe with the possible exception of Denmark is just crazy.
"Eighty per cent of people will think twice about holidaying in this country or will reduce what they spend on other things."
Another current preoccupation is the environment. "I'm getting into this green thing," Hearn declares. "I think it's fantastic what the likes of David Cameron and Ken Livingston are doing. I'm changing my car to have lower CO2 emissions." Not to a supermini. But soon a BMW saloon diesel rather than a petrolguzzling-4x4 will transport him from his home in Thorpe to Travelodge's head office in Thame in Oxfordshire.
He looks nonplussed when I suggest getting a train. "Is the train good for green things? I'm not entirely sure. It's impractical for me anyway."
Quickly steering the conversation back to the tax issue and Britain's £18bn balance of payments deficit on tourism, Hearn starts sounding off again.
He blames the budget airlines for taking tourism away from the UK: "You get people like [Ryanair boss] Mr O'Leary parading Winston Churchill lookalikes trying to get people back on the aeroplanes.
"If there is going to be a tax, that is where it should be. And frankly the idea that Winston Churchill's response to terrorism would be to increase the profits of an Irish flag carrier is..."
He pauses for breath in frustration, before changing direction once more -- this time alighting on the topic of football. "I'm not overly happy with the start Chelsea has made to the season."
Apart from that, life is going swimmingly. Though he will not admit it, Hearn is bound to have got a good few million from the Permira deal and could be on the way to making even more.
His Middle Eastern bosses appear happy to let him get on with it. But like any private equity owner they will keep a tight eye on costs.
This should not be a problem. After three decades in the hotel industry, there is not much that Hearn has not seen or dealt with.
He even knows best to dispose of dead bodies, without alarming other guests. Fortunately for DIG, even such tragedies, won't be a drag on profits. Hearn says: "Our customers pay upfront so that is not an issue."
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