Why Travelodge is on the rise in the UK

(Travelodge London Liverpool Street)

Travelodge plans to open at least 19 hotels this year, as its secure development pipeline—currently at approximately 3,000 rooms—continues to grow.

The company reported “a record year” in 2015 as earnings before interest, taxes, depreciation and amortization rose by 58.8 percent, with the budget brand seeing an increase in business travelers.

Travelodge said that, since its restructuring in 2012, it had made “strong progress…resulting in strong revenue and profit growth, improved customer scores, a powerful direct distribution model and an accelerating development pipeline.”

In the short term, the group said that, while its overall performance would reflect trends in market growth, it expected to outperform the wider market.

The company also made its first debt repayment since 2012’s restructuring, as it continued to expand, identifying a further 250 UK locations that it deemed suitable for the brand.

“We are seeing significant growth from business customers and like-for-like sales growth was again substantially ahead of the UK hotel market,” CEO Peter Gowers said.

The group said that there continued to be “strong underlying growth potential for value hotels, with growing customer demand and relative under-supply compared to other key international market. Significant further growth from business customers remained one of the principal drivers of our improved performance, with direct business sales up 45 percent on the prior year.”

Ongoing Growth

According to results filed with Companies House, for the year to Dec. 31, 2015, the company reported 12.7 percent growth in revenue to £552.1 million for the UK business and a 2.7-percent increase to £7.5 million for the international business, which includes Spain and Ireland. The group moved into profit, seeing a pre-tax profit of £5.9 million, against a loss of £25.5 million in the same period last year.

UK like-for-like revenue per available room rose by 11.7 percent to £38.44, against a 7.2-percent increase over the same period for the midscale and economy sector, according to STR. The end of the year saw the group complete its three-year £100-million modernization program, which it said had driven improvements in its TripAdvisor scores which, it said, now averaged four out of five stars.

The investment we have made in upgrading our guest rooms led to UK like-for-like occupancy rising 1 percentage point, to 76.6 percent like-for-like average room rate, supported by effective yield management was up 10.2 percent to £50.19,” the group said.

The group cut its net bank debt to £304.7 million from £355.4 million and said that it had made its first debt repayment since the restructuring of £10 million, with a further £12.6 million repaid in March 2016. Total funding rose to £527.4 million from 521.3 million, as unsecured funding increased by £16.1 million to £143.1 million. Travelodge said that it had no requirement for debt repayment until June 2017 and only a minimum cash liquidity test until September this year.