CHE Hotel Group says it is now ready to transform itself from a "defensive survivor" into a "more aggressive" force in the market.
In the group's annual results, chairman Peter Catesby said that shareholder support for raising £18.6m from a new share issue this January would allow the group to put its development strategy into action "after years of restraint".
The company, which suffered five consecutive years of losses until 2004, plans to use £8.6m of the proceeds to accelerate the roll-out its premium limited-service brand, Sleep Inn.
New openings in Shrewbury, Birmingham, London, Doncaster and Glasgow by the end of 2007 will kickstart its plans to have 60 Sleep Inns open within two years.
Another £10.8m has been earmarked to upgrade the group's mid-market full-service brands, including the introduction of a new food offer based on the demand for healthier eat-and-go menus.
The group owns or leases 58 hotels in the UK, France, Germany and Belgium under the Sleep Inn, Comfort, Quality and Clarion brand names.
It also holds the master franchise for the brands in the UK and Ireland and across most of Continental Europe except Scandinavia, which encompasses 330 hotels in total.
The group's five-year waiver on paying franchise fees to the brands' US owner Choice Hotels International expired in January.
CHE is now reviewing the financial viability of its two master franchise agreements, especially on the Continent.
Options include keeping the agreements under news terms, relinquishing them to become a franchisee or keeping just the UK and Ireland master franchise. The decision is not required before 2008.
Key figures for the year ending 31 December 2005
- Sales: £79.2m (2004: £79.6m)
- Operating profit: £4.6m (2004: £4.6m)
- Pre-tax profit: -£400,000 (2004: -£200,000)
- Profit after tax: £600,000 (2004: -£200,000)
By Angela Frewin