(Corrected on Jan. 22 to update a percentage in a quote in the 17th paragraph.)

Following the end of Travelodge U.K.’s well-documented 2020 financial reorganization, a couple of new hotel platforms have emerged as landlords exercised contract-breach clauses to seek new branding.

One of those new entities, Ago Hotels, secured nine former Travelodge properties, which will be branded Ibis Budget and initially managed by Accor.

Landlords representing most of the Travelodge assets elected to remain, but CEO Peter Gowers, at the helm of the Thame, England-based company since 2013, left his role at the end of the year, following the end of the first landlord deadline. He was replaced on an interim basis by Craig Bonnar, the firm’s former chief operating officer.

Lionel Benjamin, co-founder of Ago and CEO of Gullwing Hospitality, said Ago is offering a new type of hybrid lease that better shares the pain of operations and ownership, something he said is of utmost importance as the industry prepares to emerge from the pandemic crisis.

He said Ago leases include a 25-year term on a fully repairing and insuring basis and a retail price-linked base rent of 50% of the formerly contracted Travelodge rent.

They also allow landlords to benefit in the good times, not just languish in the background picking up a guaranteed rent, he said.

“We wanted to have a hybrid lease model, to encourage landlords to be more open to the idea of profit upside in the good times, which they did not have. Landlords traditionally get a fixed rent, as they are developers, not operators, but if you are willing to take some element of risk, then enjoy some profitability on ground rent,” Benjamin said.

The initial nine assets are in Bromley, Bishop’s Stortford, Bromsgrove, Burton-on-Trent, Lancaster, Portishead and Thurrock in England, and Dundee and Glasgow in Scotland.

On Jan. 19, Ago announced its 10th hotel, the former 63-room Travelodge Peterhead, another Scottish property, that will now fly the Ibis Budget flag.

Other assets are being discussed, Benjamin added.

He said the nine hotels are a slow start, but one he and partner and co-founder Viv Watts, managing partner of Oasis Holding, intend to expand.

Watts owns two Travelodge properties and formed the Travelodge Owners Action Group to bring together fractional ownership when Travelodge first announced it was reducing rent payments via a company voluntary arrangement.

Benjamin said having Accor as a partner is critical. Landlords wanted to know what Ago is and why it should be trusted, something he and Watts have been working on since May.

“With Accor it is initially a manchise deal for the first two years. Then Ago will take over as a franchisee. We wanted a seamless change to allow landlords to settle in but also the optionality of having an Ago operating platform, but that obviously requires HR, revenue management, etc.,” he said.

“Accor has excellent management and revenue management, and key is the cost of distribution, to be more competitive than any other budget provider in the U.K. And Accor understands leases,” he said.

Benjamin said Accor is investing in Ago, their team and their new model.

“Accor has 10% of the company. That is not insignificant. Everything is transparent, and the [profit-and-loss] details are there to be seen,” he said.

Accor is guaranteeing revenue, said Benjamin, who added he could not have asked for better leaders and partners than Accor CEO Sébastien Bazin and lifestyle division CEO Gaurav Bhushan, who was until very recently global chief development officer.

“They are seasoned investors. Fifty percent rent is so achievable, and when valuers look at that, it is like looking at a ground-rent valuation with six-month rent guaranteed by Accor behind us,” Benjamin said.

He said that partnership along with a streamlined model should make the pitch to owners a successful one in the long term, noting that he expects “yields to sharpen” as business conditions improve.

“Accor is like an angel investor. It is disruptive and pushing the boat out with this, being truthful with landlords, with facts that can be sustained. Yes, maybe we are dreaming big, but we will push and drive new business,” he said.

Another hotel to go under the Ibis umbrella, but now with Ago, is a 297-room hotel at Heathrow Airport’s Terminal 5 owned by Sidra Capital.

Benjamin, the one member of a property-ownership family who went into hotels, said he felt that a change in how leases are structured was due to happen.

“Where we are today in my view is that the bubble had to burst at some point. It needed an adjustment, and COVID-19 was the stimulus for that, and that has given us the opportunity to see how we could play with a hybrid lease model,” he said.

He said ultimately more companies will seek those types of leases.

“Inevitably, it will go down this road, as (landlords) embrace more an aligned model that has benefits at the heart of it. In the past, landlords wanted the guarantee, to collect the rent check and invest on that basis,” he said.

Benjamin said restructuring mechanisms such as lease re-gearing and CVAs are getting more common as the pandemic bites, notably in the retail sector.

“Flagship Oxford Street stores are being vacated. That is unheard of, and we are right at the cusp of this. We feel Ago has driven something new into the hotel sector,” he added.

He said landlords, especially in the space they operate, who are more proactive now will fare better during the eventual rebound.

“We know that the first part of the sector to recover from crises such as SARS, 9/11, always is the budget sector. It is the stimulus for other areas of the sector, and our model will really start working when hotels get back to normal trading of where we were in 2018 and 2019. Then our landlords will see the upside,” Benjamin said.

“Ago is in the market ready to do more deals,” he said. “It is a small acorn we are cultivating, and history will tell. I believe we are lucky in that the vaccine is coming now.”

Benjamin said he considers Travelodge itself as Ago’s biggest challenger in trying to secure the 170 Travelodge landlords they approached to join the Ago platform.

“We are still embryonic, small with an appetite to grow. There was a lot of competition at the start, but some fell away. A lot of landlords are loyal as they are not hoteliers. They bought an income stream,” he said.

But despite only getting a small piece of the pie during their initial push, Benjamin remains optimistic for the long term.

“We aim to take the portfolio to double the size, 20 to 25 over the next two years. A lot of that depends on how the market goes. Some landlords will want to wait to see how the model does, that it gets a track record,” he said.

Ultimately, he believes hotel brands must take care of their owners to succeed.

“If you have a landlord that is not happy, the tenant will soon not be happy, and then the guest, who is king, will not be either,” he said.