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.

Over 400 UK Travelodge hotels may change brand

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.

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.

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General

This article is closed to new posts. Discussion continues in the HfP Forums.

Chrisasaurus says:

13 Jul13 July 06:22

With most travelodges having no F&B business – or crucially they have no option or space, Inimagjne they’ll all struggle, except perhaps under oyo or Hotel F1 if Accor do take an interest

Some newer ones have at least a bar, so some space for building at least a breakfast offering but the bulk, the motel style locations are surely done for without travelodge or the arguably even less attractive alternatives that seem to take over the odd one here and there
- BJ says:
  
  13 Jul13 July 06:51
  
  I think there would be a market for a no thrills, very limited-service brand within the likes of Marriott and Hilton. There must be loads of travellers who value a hotel only as a place to wash and sleep at night, and don’t care about hotel food, bars etc. Personally I would welcome that but with higher standards of beds, bedding, furnishings, and cleanliness than that offered by Travelodge. Onsite laundry would be good too. I would also prefer it to be part of a good loyalty scheme. I think there is an outside chance for the likes of Hilton given their recent interest even in Hostels but Accor seems most likely.
  - Chrisasaurus says:
    
    13 Jul13 July 08:15
    
    On siteaundry, loyalty scheme… it adds up onto your overheads quickly and to make a margin you need to be moving upscale tk support those operations (I dont believe loyalty scheme can work with low cost since the cost is already your USP)
    
    Now, Premier Inn make decent money and have high rates for what they are in most locations so I’m not saying its not possir but note they offer nothing- no loyalty scheme, no laundry or other services, no bar no breakfast, merely proximity to a pub that does aside from couple of airport/city properties)
  - Rob says:
    
    13 Jul13 July 09:03
    
    It’s called Premier Inn.
    - BJ says:
      
      13 Jul13 July 10:29
      
      The problem with Premier Inn though is that it looks and feels so beige. We need something more hip and funkier, maybe like Moxy; haven’t stayed at one yet myself though so only going on what you and others have reported.
      - Aaron Wells says:
        
        13 Jul13 July 10:37
        
        Moxy’s are great but their big benefit is the large social space/restaurant/bar/reception. Most travelodges wouldn’t be able to offer this.
      - Josh says:
        
        13 Jul13 July 10:51
        
        Since when was Premier Inn “Beige” ?
        
        They do fantastically well, good customer service and are widely respected.
      - Aston100 says:
        
        13 Jul13 July 10:55
        
        Premier Inn seem to have refurbished all (most?) of their properties in recent years and the rooms look really good for what you pay.
        They have however removed the phones and cut down on staff. Almost a self-service experience now.
        However, there is definitely a place for this kind of hotel. I am one of those people who see hotels as simply places to sleep after being out all day. So long as they are clean & comfortable, I don’t care if they have a bar, an amazing restaurant, and for the UK properties I don’t care if they have a pool or not.
      - BJ says:
        
        13 Jul13 July 18:40
        
        Idon’tgindPremier Inn offensive, have stayed in them before and will do so again when they are the most suitable choice. I just wish they looked and felt a little more vibrant. Having said that there is dangers in trying to do so. I think that’s what HGI try to do and in the few examples I have stayed they just look cheap and don’t succeed. At least with Premier Inn we know 3exactly what we are getting.
    - The Savage Squirrel says:
      
      13 Jul13 July 18:44
      
      Premier Inn is a lesson in branding that most hotel chains – even high end ones -could learn from. The whole attraction of a brand is you should know what you’re getting. Premier Inn delivers a consistent and indentifiable experience with really remarkably few exceptions given the huge size of its estate. If you like the PI brand you’ll be happy consistently and if you don’t like it you’ll avoid all of them – enough people fall into the first group thtat it does well, and the second group will know PI is consistently not for them and never try staying again – which they don’t mind either as no disappointed customers keeps their review ratings high.
      - TGLoyalty says:
        
        13 Jul13 July 23:49
        
        I think I fall somewhere in between.
        
        Alone/With friends for a night out (with friends) PI will do if the price is right, I just need a place to crash. But anything for leisure no chance no matter who it’s with.
- Tony says:
  
  13 Jul13 July 10:25
  
  In my experience not many of the original motel type remain.
  A good number of Travelodge Hotels already have a bar and offer a breakfast option which is surprisingly good.
  Another sector of the travel industry where prices of staying are likely to rise a great deal which is another nail in the coffin for budget travellers who will be ripped off by the more expensive chains.
  On here it is easy to forget the budget hotels as the budget airlines are used by many hundreds of thousands of budget travellers with little or no interest in reward points for staying at such and such place.
  A surprising number of blue collar workers use budget hotels such as Travelodge.
  - Chris says:
    
    13 Jul13 July 10:53
    
    Only about 200 of them have bars/cafe/restaurants so still around 60% of them have nothing but a vending machine.
- Susan says:
  
  13 Jul13 July 11:40
  
  The Accor aparthotel model of hotel rooms with basic cooking facilites would fit into Travelodges and be a real differential in the budget market.
Tariq says:

13 Jul13 July 06:23

Out of the frying pan and into the fire? What makes the landlords think that any of those chains will be more benevolent than Travelodge has been…?

To join some of those chains, many of the hotels will require significant development and improvement – they wouldn’t take the whole 400 ‘as-is’.
Kevin says:

13 Jul13 July 06:31

Used to stay at Travelodge fairly often around 10 years ago. But the properties became more dilapitated and even paying just £9 (yea, nine pounds) was too much. Not been back for a while and no intention of doing so either.
BJ says:

13 Jul13 July 06:37

Thanks for this interesting story, hadn’t heard anything about it. It will be interesting to see what happens. I am sure all readers can think of a few Travelodges that would seem much better suited under rebranding and/or upgrading to a higher standard hotel. All three in Inverness, Perth, Fort William and Edinburgh Central all immediately spring to mind, and their must be loads in London. Accor seems the most likely but I would prefer to see Marriott or Hilton take over with a new budget offering with an improvement on the current Travelodge brand standards.
Pearl Bevan says:

13 Jul13 July 06:54

Travelodges provide cost conscious holidays. I have enjoyed many stays with them.
Other firms may be jealous of their popularity. Well done Travelodge.
- Rob says:
  
  13 Jul13 July 09:03
  
  The percentage of Travelodge hotels which are absolutely dreadful is almost certainly far higher than any other low budget brand. That’s not to say that new ones or ones which have had more money spent on them are not decent. The PLUS I tested was good.
  - Charlieface says:
    
    13 Jul13 July 15:07
    
    Sorry I think Days Inn is worse.
    And as a relative measure against what they should be offering, Holiday Inn, Marriott and Hilton in the UK are way down
vol says:

13 Jul13 July 07:30

I stayed at a Travelodge that was so bad, that when I complained, they gave me a refund and a voucher against a future stay, I couldn’t even bring myself to use the free voucher 😫
- BJ says:
  
  13 Jul13 July 08:36
  
  I’ve stayed in a Hilton that was worse than any Travelodge I ever stayed.
  - Tony says:
    
    13 Jul13 July 10:30
    
    Agree and some of the HIX can be awful places.
    - TGLoyalty says:
      
      13 Jul13 July 12:30
      
      Of course there are bad examples in every brand. All the way from top to bottom. I know those really bad Hiltons were/are being refurbished or let go.
      
      I don’t know the details of the Travelodge operating model but this looks like a way for hotels to leave with a choice of perhaps 2/3 brands and a new operating model. I’m sure the dumps will require investment but then landlords will need a compelling business case with the tough times ahead.
      - BJ says:
        
        13 Jul13 July 18:48
        
        Yes, when you get to know a brand well you know the places to avoid so w6e just do, and that leaves us with a better impression. Get it wrong sometimes though, line my stay in DT Treetops last year which was a timely reminder to always do my homework well before any first time bookings.
Tim W. says:

13 Jul13 July 08:19

Damn. I took a voucher against a Coronovirus-cancelled trip. Probably going to be worthless.
Alex M says:

13 Jul13 July 08:38

Think you need to spend some time trying to understand the business model of the major operators! They are all asset light and there is no way in hell one of the major brands would see this as an “opportunity” to “pick up a critical mass of properties in one swoop” …. the LAST thing they’d want is a bunch of leases on their books. They may offer franchise or management proposals to third party owners/lessees but the likes of Marriot, Accor, Hilton etc. will NO WAY take on Travelodge’s leases.
- memesweeper says:
  
  13 Jul13 July 08:54
  
  The article doesn’t say a major group will take on the leases. The landlords are looking to have a brand (or two) lined up to handle the branding, marketing and sales/booking operations. The structure is unclear and unagreed.
  
  Accor have taken on non-brand compliant properties in the past while they wait for refurbishment and adoption of brand standards. I can see them doing it again. It’s a shame their loyalty scheme is rubbish, but that’s better than no scheme at all I guess.
- BJ says:
  
  13 Jul13 July 18:53
  
  If there is an opportunity to cherry pick then I’m sure there would be interest from the big three. Location is everything, even in the current climate I’m sure there would be huge interest in Inverness Central.