Travelodge books £1.3bn expansion

Travelodge is set to embark on a £1.3bn expansion programme targeting 205 new hotel sites, in a sign of renewed ambition from the once struggling chain, Property Week can reveal

The move, which has been in the planning since Peter Gowers took the role of chief executive last year, is part of a strategy to improve and upgrade its portfolio by 2022 and will see Travelodge attempt to regain ground ceded to Premier Inn, which has 30% more rooms and is the UK’s biggest budget hotel chain.

Travelodge faced financial collapse in 2012 before a bailout package resulted in the group being taken over by its creditors, banking giant Goldman Sachs and US-based hedge funds Avenue Capital Group and Goldentree Asset Management.

The rescue deal involved Travelodge entering a Company Voluntary Arrangement, selling 49 hotels and writing off £235m of debt. Since then it has largely focused on refurbishments and reducing its debt pile.

Agents representing Travelodge across the country are contacting developers and landowners offering them 25-year leases, backed by the group’s US investors. The landowner would then build the hotel to Travelodge’s specifications and the hotel group would fund the fit-out.

“One of the attractions is that Travelodge will sign up to 25-year leases, with no break and indexed-linked rent reviews,” said Alan Hill, Travelodge consultant development manager for the south London area.

Travelodge has also written to 140 local authorities to offer the same deal being offered to developers and landowners. Since sending the letter in December, four councils have expressed an interest in developing hotels and leasing them to the group.

The growth plan comes after rival Premier Inn launched its own £1bn expansion plan in 2013 aimed at increasing its portfolio by 45% to 75,000 bedrooms by 2018. Travelodge’s plan will see it increase its bedrooms from 39,000 to around 50,000 and increase the number of hotels in its group from 500 to around 700.

The largest concentration of new openings will be in London and the South East, but the expansion programme will take in other towns and cities, as well as some motorway service station locations.

“The 205 sites on our requirement list are part of a strategy to improve our offer to customers,” a Travelodge spokeswoman said.

The spokeswoman confirmed the average cost of the current new-build programme was around £6.6m a hotel, meaning if Travelodge was able to secure 205 sites the investment programme would total around £1.3bn for fit-out costs and leases. She added the group expected to launch at least 150 of the hotels at a rate of 25 a year.

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