THAME, England—United Kingdom-based Travelodge Hotels Limited is celebrating its 30th birthday amid buoyant growth that was perhaps unimaginable three years ago.
Reason for more candles on the celebratory cake: concerted capital expenditure from owners; and a guest makeup across its core U.K. economy-sector market that did not exist until recently.
Peter Gowers, CEO of Travelodge, took over the reins in November 2013 after new owners came in August 2012 and embarked on a strategy to emerge from a serious recessionary dip, with debt having soared to £635 million ($963 million).
“Travelodge also has been a strong trading company, but it lacked the right capital structure,” Gowers said during an interview with Hotel News Now at the recent Hotel Investment Conference Europe.
“Travelodge is the founding U.K. hotel brand. Everyone in the U.K. knows it, and it is in their hearts and minds. We always were aware of that but did not have the quality to match it,” he said.
Indeed, Travelodge’s rich history began when Sir Charles Forte, also known as Lord Forte, bought the U.S. brand and brought it over the Atlantic and as Forte Travelodge. Its first hotel, opened in 1985, was the 20-room Burton A38 Northbound, which remains in the portfolio.
(Forte sold the North America branding rights in 1996. It eventually became part of franchisor Wyndham Worldwide.)
Travelodge’s owners over its initial 30 years included Granada, which had television interests, and Dubai International Capital. The latter sold to current owners Goldman Sachs, Avenue Capital Group and Goldentree Asset Management its entire portfolio (then amounting to properties) and debt of some £517 million ($784 million). In July, there were news reports that the current owners were looking to exit.
Quality and quantity
Gowers said Travelodge had lacked quality.
One of his first projects was to pump into the chain more than £100 million ($151.7 million) of capital expenditure. More than 90% of guestrooms now have been renovated.
“It was needed, especially to attract the number of business clients now staying with us. We added, too, separate kids’ beds and improved breakfast,” Gowers said.
The CEO puts the new emphasis on quality at the heart of Travelodge’s return. He said a combination of a new U.K. budget travel demographic, better staff training and the company’s rich history—which he claims have all boosted TripAdvisor ratings—have more than helped, too.
The chain welcomes 38,000 guests per day, Gowers said.
“That’s the same number as can fit into Spurs’ stadium,” he said in a reference to the White Hart Lane stadium of the soccer club he supports, Tottenham Hotspur.
Another massive change for the company is in its locations, Gowers said.
“We see potential for another 250 locations in the U.K.,” he said, “which would put us on par with (Whitbread’s) Premier Inn. We’re getting back to being in the middle of towns and in places where we were not formerly expected to be in.”
Gowers conceded that in the U.K. only Travelodge and Premier Inn can undertake sizable TV and marketing campaigns. Travelodge’s current campaign involves puppets (see photo above) and a jolly song underlining the benefits of staying at the brand.
Travelodge hotels are no longer adjacent to freeways and economy Little Chef restaurants, as was the case for many years, he added, but in destinations with new demand generators, such as Greenwich and Wembley, London and Harrogate.
“Value brands are now mainstream,” Gowers said, “which is reflected in our corporate performance.”
The company’s first-half 2015 results up to 1 July, 2015, mirrored the executive’s positivity:
- Revenue per available room, U.K. like for like: +15.2% to £35.87 ($54.41)
- Average daily rate: +11.4% to £48.19 ($73.10)
- Occupancy: +2.4 percentage points to 74.4%
- Total revenue on a continuing basis: +17.9% to £261 million ($396 million)
- Last 12 months’ earnings before interest, tax, depreciation and amortization: £90.1 million ($137 million)
Travelodge thinking
According to an earnings release, Travelodge has a pipeline of 45 hotels and 3,600 keys, all to open before mid-2017. The company has 504 assets in the United Kingdom, 12 in Ireland and five in Spain.
Gowers said Travelodge’s business model is to partner with developers and high-net-worth individuals who will bankroll and build hotels to the company’s specifications. Travelodge then takes on the lease, at which point the original owner will sell the asset to a pension fund.
Its focus will remain on the U.K., although Spanish expansion is also of interest, Gowers said. He projects 2,500 keys will be added per year.
“Our future is to continue our reputation as the best hotel chain for value and to get an ever greater share of the market,” Gowers said. “The economy will continue to grow, as will customer shift. The U.K. customer is looking for value, which can be seen in the rise in entrepreneurs and (small- or medium-sized enterprises).”
Added to that culture of seeking value is a new type of guest, which he most clearly saw during a recent Ed Sheeran concert.
“Attendees were coming to the concert, enjoying it and then deciding to stay at a Travelodge, as they saw the value of that, rather than traveling all the way back to their homes. That would not have happened just a few years ago, and 90% of our rooms are booked direct,” Gowers said.
“We are in a very good position. ADRs will not fundamentally change (at Travelodge), but now we need not discount farther out,” he added.
Gowers said Travelodge’s guest base and corporate boardroom understand the value proposition. Only half of his boardroom came from the hotel industry, he added.
“Our COO comes from Audi, our revenue director from (budget airline) Flybe,” Gowers said.