The planned £105m sale of London's Strand Palace and Regent Palace hotels to London & Regional Properties has collapsed. The failure means that global caterer Compass Group has still to sell the unwanted hotels it acquired when it merged with Granada in May 2000.
But Compass, which also owns the Travelodge budget hotel chain, denied this week that the news was a major setback. A spokesman said: "This is a small part of the overall sales process. We're very relaxed about it."
The hotels are being managed through the Travelodge team but the spokesman said that converting them into Travelodges had been ruled out. The hotels would eventually be sold, although they were "not currently being actively marketed", he added.
The sale to London & Regional, announced in March last year, had been conditional on landlord's consent. However, this is not thought to have been a key stumbling block. While London & Regional had run into some problems with obtaining approval from the freeholders of the hotels for alterations, one property expert said he believed that 11 September had also played a part.
The Strand Palace is a 785-room three-star hotel close to Aldwych on the Strand. The Regent Palace has 919 bedrooms and overlooks the Eros statue on Piccadilly Circus.
The Regent Palace is on a short lease from the Crown Estates and it sits on a piece of land earmarked for development.
The Strand Palace freehold is owned by Freshwater and is a more attractive proposition for most upscale hoteliers. Last summer saw speculation that Hyatt wanted the site as a possible replacement for London's Carlton Tower hotel that has now been rebranded Jumeirah International.