Two years after being bought by a Goldman Sachs consortium and undertaking a company voluntary arrangement that allowed it to almost halve its debt, the UK’s first budget hotel chain is back in expansion mode.
Having reduced its debt burden from £635m in 2012 to £329m today, and boosted its profits by 17%, Travelodge is on a mission to win back the confidence of landlords.
It has ambitions to expand its 500-strong estate by 40% over the next eight years.
The comeback plan began with a vengeance last year with the launch of a £100m refurbishment programme that has so far seen it overhaul around 80% of its estate.
But sprucing up the existing hotels was not enough and now the group, under the leadership of former Safestore boss Peter Gowers, is seeking to open around 25 new properties a year.
“Since restructuring in 2012 we have been focused on building a new Travelodge, so the business has gone through considerable change,” says Gowers, who took over in 2013 from Grant Hearn, who had been in charge for 10 years.
That change has involved the transfer of 33 of its 49 worst performing properties to other operators, including Best Western, Ibis and Metro Inns, with deals on four more under way; the return to the fold of 11 of those properties, with eight coming back under the Travelodge banner through franchise agreements; and a three-year grace period on 109 other hotels allowing it to reduce its rent obligations by 25%.
But with the CVA luxuries due to come to an end, what is Travelodge doing to win back the favour of its landlords and make good on its ambition to have a 700-strong portfolio?
Communication is key, says Gowers.
The company now sends regular newsletters to landlords in the hope of regaining and maintaining their confidence in the brand and its business model.
“The aim has been to reach out to the real estate community and to make sure that they know how the company is growing so they can have confidence in the business,” says Gowers.
This year that growth will come through adding 15 new properties to its portfolio, claims Gowers. One month in to the new year, Travelodge has already invested £13m in three sites – a 60-bedroom hotel in Peterhead, Aberdeenshire, a 77-bedroom hotel in Dagenham, east London, and a 108-bedroom hotel in Dover, Kent.
New properties will be targeted at city centre sites, with a focus away from its traditional motorway-side locations. Glasgow, Birmingham, Cambridge and Liverpool are all on the target list.
Gowers says: “One of the things that we feel strongly about in the new Travelodge is that we want it to be on the right sites, both for the customers and for the landlords, so that has become a focus. The portfolio today demonstrates everywhere we wanted to stay, but we are moving away from the roadside and into the university and old market towns as they are the most attractive places to live.”
Alongside the £100m invested last year to makeover the estate, a further £30m of capital expenditure will be spent this year on modernising the remaining 22% of its existing portfolio. Refurbs include the installation of 37,000 king-sized beds, WiFi access in all rooms for business customers, plus a fresh look and feel to the bedrooms.
It has also invested in training for staff, using Jaguar Land Rover’s production lines as inspiration, to ensure that the rooms can be cleaned efficiently and to the highest standard.
And it has taken the executive decision to provide shower gel in all rooms, ditching the previous “prison soap” which became a notorious feature of its hotels.
“We still have a long way to go,” admits Gowers. “The most important thing has been to get business stability back quickly.
“It is important to be open with your real estate partners about where you are going and how fast. That is what we have tried to do to make sure investors know what we are about.”
And with Goldman Sachs, Avenue Capital and GoldenTree Asset Management behind it, a dramatically reduced debt pile and a move back into the black, the UK’s first budget chain is hoping for a new lease, not only on 200 new hotels, but on life.
