CHE Hotels Group has issued a profit warning following a poor second half during 2006.

In a trading update, the Sleep Inn and Quality Hotel brand operator said full year results to 31 December will be “significantly” below analysts expectations.

The company blamed difficult trading conditions in the fourth quarter as well as its ongoing restructuring programme for the decline.

CHE chief executive, Michael Prager, said actions to address the situation were already in place and that the statement would not affect the group's expansion plans.

“We expect to have 13 Sleep Inns open or in an advanced stage of construction by the end of 2007 - doubling the size of the brand in the UK,” he said.

Prager, who was appointed as the group's CEO in September, also said that the company would commence a “ruthless drive” to reduce the cost base of the business.

CHE operates 58 owned, leased or managed hotels in the UK, France, Germany and Belgium under the Comfort Inn, Quality Hotel, Clarion Hotel and Sleep Inn brands.