Center Parcs is weighing a takeover of smaller rival Forest Holidays in a move that would seek to capitalise on growing demand for staycations fuelled by the weak pound.
Sky News understands that Center Parcs, which operates five resorts across the UK, is among a pack of suitors for Forest Holidays, which has been put up for sale by its private equity owner.
A deal would enable Center Parcs and its Canadian owner to accelerate the consolidation of the UK market at a time when demand is expected to grow for domestic holidays from cost-conscious British consumers.
The weakness of sterling against the euro, and a series of terrorist attacks on the Continent and elsewhere, have impacted on overseas holiday bookings, according to industry analysis.
Forest Holidays is jointly owned by the Forestry Commission and LDC, the private equity arm of Lloyds Banking Group, and trades from nine sites across the UK.
The company pays rent to the Forestry Commission based on each cabin it operates.
Center Parcs is already pursuing an expansion plan that includes the opening of a resort in Ireland, while the wider sector has seen significant corporate activity with the £1bn merger of Park Resorts and Parkdean Holidays, two caravan park operators.
The company created from that merger, Parkdean Resorts, is also expected to lodge a bid for Forest Holidays, according to City sources.
Acquired by Brookfield Property Partners in 2015 for £2.4bn, Center Parcs continues to report quarterly results under the terms of its financing.
It said recently that in the 12 weeks to July 13, it recorded a 5% rise in group revenue to £99m, with earnings before tax, interest, depreciation and amortisation up 4.6% to £45.2m.
A spokesman for Center Parcs declined to comment on Tuesday.