CASE STUDY: Conversion from another hotel brand to a new Travelodge

Travelodge Liverpool John Lennon Airport

Travelodge’s new openings programme is complemented by the selective acquisition of existing hotels (Going Concerns) that fit the company’s locational and branding criteria. In the last five years we have acquired 500 rooms through converting other brands’ purpose-built hotels across the UK. Our experienced team is able to assess the suitability of any hotel through discreet inspection and conduct all required due diligence in conjunction with the current owners/operators, to deliver a smooth and satisfactory outcome for all parties.

This has seen us successfully acquire both independently-branded hotels as well as hotels trading with recognised brands, such as Holiday Inn Express, Ramada Encore and Days Inn. These acquisitions mean we can open a new hotel in a target location without the need for any lengthy planning applications and the new Travelodge is open and trading without adding to the overall bedstock in the local market. Recent examples include Days Inn Haverhill (2016), Ramada Encore Milton Keynes (2016), Ramada Encore Chatham Maritime (2015) and Holiday Inn Express Liverpool John Lennon Airport (2017).

Going Concerns also have the attraction of being delivered to the business without the lead time of a new development. In common with Travelodge’s growth strategy, all of them are dealt with under our standard leasehold model, with an occupational, rack-rented lease being granted to Travelodge, using our institutionally-acceptable standard lease.

The majority of these deals are structured so that the Landlord (existing or new) funds the required conversion works, with Travelodge’s team being responsible for these works.

Outside of London, we will consider any purpose-built hotel for conversion to our brand. Our objectives are for a finished Travelodge that accords with our brand standards in terms of room sizes and layouts, decor, food and beverage provision, the “look and feel” of a Travelodge and parking provision. The outcome of this approach has seen us deliver conversion projects that are consistent with new Travelodge specifications and thus deliver a better customer experience as a result.

In Central London, we are prepared to consider a more flexible approach to projects and will review any opportunities for a conversion to a Travelodge, where more than 40 bedrooms are presently traded.

Our hotel at Liverpool John Lennon Airport is a good recent example of a going concern conversion to a new Travelodge.

• Going Concern
• Previously operated by Peel Land & Property under a franchise agreement and trading as Holiday Inn Express Liverpool John Lennon Airport. 
• 100 Bedrooms
• Bar Cafe, three meeting rooms and on-site car parking 

Travelodge agreed an off-market deal to take a new, 25-year lease of the Holiday Inn Express hotel at Liverpool John Lennon Airport. The hotel was owned and operated by Peel under a franchise agreement with Intercontinental Hotel Group, that was terminated on handover of the property to Travelodge.

The hotel’s employees transferred under the TUPE Regulations to Travelodge and we then executed a rolling, floor-by-floor conversion of the property to Travelodge brand standards. The works were carried out by our partnering contractor, Troy Group, in line with a detailed scope of works that we produced following surveys of the hotel. The works were completed within 12 weeks of us taking possession of the property and the cost of £1.6M was funded by Peel as part of the transaction.

Situated adjacent to Speke Retail Park and in close proximity to the airport, the location was our tenth hotel in Merseyside and, as it was a conversion of an existing going concern, no additional rooms were added to the overall roomstock in the local area room supply.

The created investment was forward sold by Peel to a private investor, for a sum in excess of £7.5M, reflecting a 5.25% net initial yield.

For further information about this transaction of any other potential going concern deals throughout the UK please contact our Development Managers John Hardy, Jeff Hocking or Nick Howard. Contact details below:

John Hardy – 07767 768 949

Jeff Hocking – 07876 675 364

Nick Howard – 07825 559 787

The simple matrix below should be taken as a guide of Travelodge’s positioning on five key areas that we assess immediately in considering a potential Going Concern conversion. Whilst we encourage anyone with a potential opportunity to get in touch, this may help you in acquiring a basic understanding of what we are looking for.

The simple matrix below should be taken as a guide of Travelodge’s positioning on five key areas that we assess immediately in considering a potential Going Concern conversion. Whilst we encourage anyone with a potential opportunity to get in touch, this may help you in acquiring a basic understanding of what we are looking for.

Travelodge’s positioning on five key areas that we assess immediately in considering a potential Going Concern conversion

Preferred

• No single rooms
• Demised on site parking
• Double rooms have an overall size of > 15 sq.m including bathroom
• No function rooms for meeting/wedding hire
• No wet heating system

Acceptable

• 20% of overall mis if the rooms are larger than 9.6 sq.m each
• Shared parking with co-user or easy options nearby
• Shower rooms are equally acceptable
• Function Rooms that are capable of conversion to additional rooms if demand calls for it or the overall location merits it at the outset.
• A wet heating system that is removable at an economic cost

Unacceptable

• More than 20% overall mix
• Zero parking options available (Unless town or city centre location)
• Over 20% of room stock is below 15 sq.m in size.
• Function Rooms that are incapable of conversion and lead to a difficult split of demise if not required by Travelodge
• A wet heating system that cannot be removed from the building without incurring significant cost and disruption