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400 UK Travelodge hotels may change brand as landlords lose patience – and money

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The UK hotel industry may be facing one of its biggest shake-ups in recent years, as landlords of over 400 UK Travelodge hotels open talks over rebranding.

Accor, Marriott, IHG, Hilton, Jury’s Inn and Magnuson Hotels are among the groups who are in detailed discussions about taking over prime Travelodge sites, although the poor condition of many properties may mean that some fail to find a new home.

Travelodge has had financial problems for many years.  In 2012 it was saved from administration when its biggest lenders, Goldman Sachs, Avenue Capital and GoldenTree Asset Management, took over the company from its indebted owner, Dubai International Capital (DIC).  DIC had massively overpaid for the company when it acquired it from another private equity investor and was left with no money for investment, leaving the hotels to deteriorate.  The majority of the freeholds and long leaseholds had already been sold by this point.

The situation picked up after the lenders took control.  New money was pumped in to refurbish existing hotels and open new ones.  We reviewed the Travelodge PLUS in the City of London a couple of years ago and were impressed.  In general, however, the chain never came close to matching the reputation of Premier Inn (I am also a big Premier Inn fan myself) which could always count on the deep pockets of owner Whitbread.

Over 400 UK Travelodge hotels may change brand

And then coronavirus hit …..

Coronavirus hit and Travelodge was back at square one, with its debt burden quickly pushing the business to the brink.

Travelodge has had a bad relationship with its landlords since the 2012 restructuring.  This time around, affected landlords were asked to take an 80% reduction on 2020 rent and a 50% reduction in 2021.  This was eventually reduced to a 38% rent cut across 2020 and 2021.

The complex rules of a ‘Company Voluntary Arrangement’ restructuring mean that – in effect – landlords can be forced into accepting a deal that they do not want.  Other creditors can outvote them because the banks are owed more than the total of unpaid rent.

This time, however, landlords did extract one concession.  A break clause was inserted into leases of the hotels where Travelodge is no longer paying full rent.

Over 400 UK Travelodge hotels may change brand

The break clause is the escape route

The break clause means that Travelodge landlords can now break their agreements with the chain during the period when reduced rent is being paid.  It seems that most are rushing to do so.

Landlords representing over 400 of Travelodge’s 580 hotels refused to support the Company Voluntary Arrangement.  This group, who are working together as the Travelodge Owners Action Group, are now talking to the UK’s major hotel brands over switching.

Viv Watts, who is co-ordinating the landlords group, said in a statement:

“A majority of creditors took the difficult decision to support Travelodge’s CVA, an insolvency deal which will have a profound impact on many savers and investors across the UK, including employees, individuals, charities, pension funds and local authorities.

Following the inclusion of a landlord break option for over 500 Travelodge hotels within the terms of the CVA, we are in talks with a number of leading global hotel brands aimed at providing savers and investors with the long-term stability they require. Advanced discussions are ongoing with major operators such as Accor, Marriott, IHG, Hilton, Jury’s Inn, Magnuson Hotels and others. The purpose of this is to present a range of alternative options to Travelodge landlords, so that they can decide which structure would work best for them.

Travelodge’s conduct over the years has demonstrated a willingness to exploit landlords and ignore contractual lease obligations. This makes it necessary for landlords to seek a more equitable structure. The Travelodge Owners Action Group will continue to fight for a fair and just outcome for the savers and investors that underpin Travelodge but have been forced to subsidise the business”.

There is a real opportunity here for a hotel brand to pick up a critical mass of properties is one swoop.  Some landlords may be willing to take revenue risk and become operators themselves, using an established brand, whilst others will prefer to sign a new lease with an established branded hotel operator such as Interstate.

Marriott, for example, has been slowly rolling out its Courtyard brand in the UK and may welcome the chance to pick up a large number of sites in one go.

Accor – which tends to operate lower-budget brands than its competitiors – would also seem an obvious partner for some of the poorer quality and so cheaper Travelodge properties.

Magnuson Hotels, which you have probably never heard of, is a growing brand which uses its exceptionally low franchise fees as its selling point.

It will be interesting to see where this ends up.  Given that Travelodge had no loyalty scheme, it is likely that this will be a positive move for HFP readers with many hotels becoming part of points-earning brands.

Comments (69)

  • JPa says:

    I am a big fan of Marriott’s Fairfield Inn’s but I have only seem them in the US. I have had some great price redemptions like a very new one on the east side of Orlando at UCF, great access to Kennedy, beaches and access to the parks for 40,000 points for 5 nights in August two years ago. Free breakfast, hot drinks, iced water, office pc/printer, upgrade to mini suite with kitchen for gold member, outdoor pool and BBQ, with loads of restaurants nearby.

    Last year stayed in one about 40 mins south of Boston for 50,000 points for 5 nights in August, not a glamorous place, off a motorway. No pool this time, but nearly refurnished. Access to Boston, Plymouth, Newport, Cape Cod etc were all between 30mins and 1 hour drive as on motorway interchange to to in different directions (near Middlesbough).

    I think Fairfield inn would work well (as long as they are the one’s a restaurant area or can make a restaurant area for breakfast). Even then many UK Travelodge’s will need a lot of investment to get to that standard. Being able to get/use Marriott points (at the right price) in a lot of places where travelodge exist would be useful as Marriott is limited to big towns/cities in the UK. In the US they are everywhere.

    • BJ says:

      Might be of interest to some readers to know that Fairfield have properties opening in both Osaka and Kyoto. Also a new Mercure in Kyoto close to the station.

  • Anna says:

    We stayed in some really good Travel Lodges when my son was small for the reason that they don’t leg you over for a family room, unlike many of the more prestigious chains (especially Hilton, unless you are gold or platinum and they can suddenly accommodate you). The ones which served a proper breakfast were great for breaking up a long car journey to a holiday destination. We stayed in a brand new one (Droitwich Spa, I think), some years ago which – yes – was in better nick than a couple of Hiltons I’ve been in!

    • vol says:

      Old Bob – TMI 🤦🏽‍♀️

    • Chrisasaurus says:

      I stayed in the Droitwich one many years ago which was cookie cutter travelodge but they did build a brand new one in Worcester.

      They served a purpose, though were never as nice as premier in. But in the race to the bottom, mortgaging all your freeholds and saddling yourself with massive debt doesn’t give you a lot of options when the volume dips…

  • Aaron Wells says:

    I spent a year living in Travelodges across the UK and the variance in the stays was unbelievable. They varied from terrible to decidedly average. Once we were allowed to choose premier inns we all moved to those straight away.

    I avoid Travelodge at all costs, more Hampton by Hiltons or a cheap Accor brand would not go amiss in my eyes.

    • Aston100 says:

      Yeah I think Premier Inn are probably the best of the lower budget hotels.
      Travelodge are a rung too far down and the standards are (in my experience) really bad.

    • vol says:

      Aaron – what crime did you commit that was so heinous that you spent a year in Travelodges?

      You either had a really tough judge or a crap solicitor

      😄

  • Sam Coates says:

    Viv Watts lives in la-la-land. He’s posturing for some post-CVA concessions but won’t get anything. Hotel chains, particularly multinationals he is hoping to court like Marriott and Accor, are in a financial mess and will be closing hotels. Picking up even some of the city centre ones just isn’t an attractive option for the returns on offer & investment required. Under the CVA hotels in B category have 5 months to break (now 4), the C1 and C2 hotels have longer but, well, Travelodge would prefer to see the back of them.

  • Stu N says:

    Agreed – after some terrible Travelodge stays I avoid them completely, they have ranged from tired to shabby. Even ones that used to be decent 5 years ago have downhill substantially.

    Premier Inn are on the whole, much, much better and much more consistent. Some new-build Hampton by Hilton can be very good value too.

    • BJ says:

      I’ve largely used Travelodge only soon after opening. This worked great for me at London Waterloo, hot a great stay when nights were around £19. I risked it again for two nights a year later and it was already falling apart.

  • RussellH says:

    Maybe Wyndham might like to merge UK Travelodge with their North American Travelodges?
    They would fit right in without any serious refurbishment work, in my (limited) experience.
    😉

    • mike says:

      Funny you say Wyndham, I was thinking the nearest comparison to a travelodge in the UK is some of the very tired welcome break operated Days Inns, see on a mattress run promotion what feels like about 5-10 years ago!

  • 1nfrequent says:

    I used to work for a company that mandated Travelodge for corporate travel right up until the FD checked into one in London and discovered that (a) his room had not been cleaned, (b) the bin was filled with condom wrappers and there were suspicious liquids on many of the surfaces and (c) there were a number of scantily clad ladies in reception. Yup. It was being used as a brothel. Policy changed over night and Premier Inn picked up all the business, which came to a couple of million every year.

    • Alex B says:

      Usually the board aren’t subject to the same policies as the little people!

      • Michael Jennings says:

        This is a perfect demonstration of why they should be.

        Also, if management dines in the same canteen as everyone else, the food will be way better.

      • 1nfrequent says:

        The board directors made up for it by having quarterly board meetings in countries where there wasn’t a Travelodge/Premier Inn chain. This also meant travelling to those countries in first class because they were board directors.

        1F

    • RussellH says:

      There are some pretty awful Premier Inns around, though – they are not all good!. Presumably older properties. At least one of the Dover hotels has neither a lift nor air-con – indeed, it looks very like one of the many downmarket Travelodges!

  • Amber Lynn says:

    Sounds lush.