MACDONALD Hotels has soared back into profit but the company said it did not expect this to prompt 50% shareholder Lloyds Banking Group to sell its stake.
West Lothian-based Macdonald Hotels posted a pre-tax profit of £1.9 million for the year to March 29. It had recorded a £5.3m loss for the preceding period, the 18 months to March 31, 2011.
Chief executive David Guile told The Herald: "The market is still very challenging."
Macdonald Hotels has upgraded its conference facilities, enabling it to take a bigger share of the commercial market where budgets remain constrained.
The company, which has 45 hotels across the UK, has also invested in a revenue management system, which helped it boost room rates by 4%.
Mr Guile added: "The marketplace is still very tough and we do not expect to see that changing through 2013 and beyond."
Macdonald Hotels saw net debt tick down £326m to £320m over the financial year and it currently sits at £314m. It remains in talks with Lloyds about renewing the facility which expires in September.
Finance director Gordon Fraser said: "We could reach an agreement with them [Lloyds] tomorrow. But the important thing for our business is to strike the best deal we can."
Macdonald Hotels, which generated enough cash to invest £8m in its hotels last year on top of debt repayments, is keen to secure more money to upgrade its facilities.
Asked if Lloyds might be tempted to sell out now that Macdonald Hotels is in profit, Mr Guile said: "No, Lloyds have indicated to us that they are fully committed to the business."
Asked if he anticipated Lloyds remaining a shareholder for the long term, he replied "absolutely".
Lloyds has sold a number of
hotel businesses in which it has picked up stakes either during the credit bubble or during subsequent debt restructuring. Last year, it sold the Mint Hotels chain, which included Finnieston Quay in Glasgow.
It is also thought to be in talks with US investor Starwood Capital about the sale of hotel and conference centre chain Principal Hayley, whose residences include the Grand Central Hotel in Glasgow and Edinburgh's George Hotel, in which it is a 30% investor.
Mr Guile said that, on balance, the Olympic Games last summer had been negative for the business, as it deterred usual leisure travellers.
However, hotels at Windsor, near the rowing event and Manchester, where it hosted a Paralympic group, both benefited. City centre hotels in England are posting the best performance, Mr Guile reported, notably the likes of Manchester, Oxford and Chester.
He said that business was slower in parts of northern England and Scotland.
"Edinburgh in the current year is holding up fine, he said. "The central belt is flat year on year but at Aviemore we are seeing some really strong growth."
Mr Fraser said fuel cost the company an extra £100,000 last year; its food bill rose £250,000; and the increase in the national minimum wage added £400,000 to expenses.
Staff numbers at Macdonald Hotels last year fell from an average of 4107 to 4051.
Mr Guile said he did not expect to cut posts this year but said the company was working on managing staff hours so they had fewer people on at quiet times.