Travelodge is planning to develop a £5.5m hotel in Greenwich, London, on a site previously designated for residential use after original plans for the site collapsed.

The site was purchased by developer City & Suburban Homes with the view of building 14 flats but, despite planning permission having been granted, the buyer pulled out leaving an opportunity for the group to build a 97-room hotel. City & Suburban Homes have exchanged contracts with Travelodge – the first budget hotel chain to build on a residential site – but the plans are subject to planning approval.

Paul Harvey, managing director for property development at Travelodge, said: "Since the downturn began we have been offered more than 100 former residential sites but the vast majority are simply not suitable for development as a hotel. "I have no doubt this will become one of our strongest performing hotels."

Last year Travelodge, as another way of reducing construction costs, built Europe's first 120-room hotel from modified shipping containers in Uxbridge, London. The group has also opened six UK hotels in what were former office blocks, bringing its total of office conversions to 22.