The consumer appetite for budget hotel rooms continues to grow as more UK residents than ever seek to indulge in “staycations” during the holiday season. This has proven immensely profitable for Travelodge which, thanks to its ongoing expansion programme, has seen a 63.5 per cent leap in underlying profits in the year to the 31st of December 2014.
Since its launch in 1985, Travelodge has opened more than 500 hotels in the UK and this year alone is due to open a further 15, five of which are already operational – the remaining locations set to open this year include Richmond, Greenwich, Bristol, Glasgow and in the Thames Valley tech corridor.
In addition, management have identified a further 250 sites throughout the UK, 150 of which are expected to open during the next eight years – including a hotel at one of the UK’s most popular shopping and leisure destinations, intu Lakeside.
Yet whilst expansion remains firmly on the cards, Travelodge has also committed a huge amount of capital in order to improve and upgrade existing stock. The £100 million modernisation programme is now nearing completion according to executives, and has been welcomed enthusiastically by customers nationwide.
Chief executive Peter Gowers says; “The value hotel market is performing well and new Travelodge is delivering strong outperformance.
“Customer feedback on our changes has been excellent and we have seen strong growth from business customers.
“The improved guest experience and effective yield management have led to significant profit growth.”
The takeover of the brand by a joint venture between Goldman Sachs, Avenue Capital and Golden Tree Asset Management in 2012 has been a major contributory factor in Travelodge’s growth, as prior to this the hotel chain was heavily ensconced in a downward spiral.
Due to the economic crisis and ensuing recession, the firm had notably fewer customers and a heavily depreciated turnover, resulting in the accumulation of a £500 million debt pile.
Yet thanks to the strong turnaround, the owners are now considering a number of options for the brand, with rumours of a potential stock market flotation within the next 12 months.
Another option they are rumoured to be considering is a sale of the brand and its numerous assets for as much as £1 billion – this is currently believed to be the most logical course of action, given that the joint venture partners appear to be seeking advisors to shortlist strategic options.
Mr Gower indicates that a sale is indeed in the offing, claiming that the present owners were “not natural long term holders of the business.”
He continues; “I think you’d expect them always to be thinking about ways to realise value from their shareholdings, but for now we stay focused on running the business we have got.”
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