CASE STUDY: Partnering with Councils to deliver a new Travelodge hotel

A new, town centre regeneration scheme, comprising a new Travelodge, cinema, bars and restaurants. Forward funded by Council.

A new, town centre development, retaining part of an existing listed building and incorporating a new Travelodge above new ground floor retail. Forward funded by Council.

A new Travelodge hotel brings a host of significant benefits to local Councils:

• Long-term commitment to the local area – Travelodge takes lease terms of a minimum of 25 years, making a significant long-term investment in every location
• Guaranteed new visitors to a town – around 32,000 people per year will stay in a new 80 room hotel
• Significant inward investment – Travelodge’s customers spend a very significant amount in the local areas, in the shops, bars, restaurants, cafes and attractions. Customers staying in an 80-room Travelodge will spend approximately £1 million per year in the local area outside of the hotel
• New job creation
• New Business Rates
• For lease-wrapper deals, long-term annual income for the Council
• Stimulates other investment – often, a new Travelodge development will precipitate other new development and inward investment into an area because of the guaranteed visitor numbers that the hotel will attract

For these reasons, Travelodge has partnered with many Councils, to enable High Streets to be regenerated, new jobs to be created and new visitors attracted. These have resulted in new Travelodges opening in Ashford, Aylesbury, Bicester, Bolton, Dudley, Eastleigh, Edinburgh, Faringdon, Leicester, Lincoln, London Dagenham, London Elephant & Castle, Newark, Redhill, Rhyl, Sittingbourne, Solihull, Telford and Thetford. In addition, three new Travelodges are being developed in Braintree, London Docklands and London Wimbledon as a direct result of Council partnerships.

Travelodge’s Innovative Partnering Deals with Councils

Aylesbury

Developed by Aylesbury Vale District Council, the 81-bed hotel was built on the site of an existing Council-owned, surface car park as part of an £18m regeneration project, including a Waitrose and a 270-space multi storey car park. Funding was via the Public Works Loan Board.

Bicester

A 53-room Travelodge was built as part of Cherwell District Council’s regeneration of the Franklin Yard area of the town centre. The development included a new library, Council office space and a number of retail units.

The development was carried out and funded by The Council, employing an external Development Manager.

Subsequently, the hotel was extended into the vacant office space, with the works being undertaken by the Council, to increase the room numbers up to 71.

Eastleigh

Located in the centre of Eastleigh, this 60-room Travelodge was developed and funded by Eastleigh Borough Council on a town centre site in its ownership. An external Development Manager was employed by the Council to manage the development process.

Redhill

A 68-room hotel developed by Reigate & Banstead Borough Council above a large new supermarket developed by J Sainsbury.
The hotel was constructed as a separate phase of the Sainsbury development, using the same Building Contractor. The project was funded by the Council and retained for income.

Telford

A 60-room hotel developed by Telford and Wrekin Council on its own land, utilizing Prudential borrowing from the Public Works Loans Board and utilizing the services of an externally-appointed Development
Manager. Scheme forms one of the later development phases of the Southwater Leisure Park in the town centre

Thetford

A 62-room Travelodge, forming part of a town centre regeneration development comprising a new Cinema, hotel, shops and restaurants, undertaken by Breckland District Council, utilising an external Development Consultancy.

Council Lease-Wrapper/Income Strip Deals

As well as Council-funded and retained developments, such as the one recently completed in Newark-on-Trent, a number of these partnering developments have been enabled by the Council entering into a lease-wrapper agreement, under which it takes a headlease, with Travelodge entering into a 25-year or 30-year sublease from the Council and paying it a higher annual rent than the headrent. This provides the Council with an annual profit rent but also takes advantage of the Councils’ AAA-grade covenants, enabling these projects to be forward funded at extremely competitive yields by some of the major investment funds who want the long-term income that these deals provide.

These sharp investment yields provide sufficient capital to enable these projects to be delivered, to the benefit of all parties. Consequently, lease wrapper deals are becoming an increasingly-attractive option for Local Authorities, as a way to enable beneficial developments within their Boroughs, whilst also generating an annual income stream to the Council via a profit rent, as well as additional Business Rates, job creation and subsequent inward investment in the local area shops, restaurants, pubs, cafes and attractions from the thousands of visitors that stay in the new Travelodges each year. 

The Travelodge at Dudley Town Centre and Rhyl were both delivered under this model:

Dudley Town Centre

In September 2017, Travelodge opened its seventh hotel in partnership with a Local Authority – a 78-room hotel in Dudley.
The Council recognised that a branded hotel could play a leading role in regeneration, creating jobs and stimulating economic growth in the Borough.

The hotel is located on Discovery Way, on land that was owned by the Council, adjacent to the Black Country Living Museum (where BBC drama Peaky Blinders is filmed) and Dudley Zoo. The development was funded via an innovative structure involving Dudley Metropolitan Borough Council, Hinton Properties, Travelodge and Aviva.

• Dudley MBC sold a plot of land to local developer Hinton Properties at an agreed, market-tested land value.
• Hinton Properties entered into a contract with Travelodge to develop out a new, 78-room hotel, with Travelodge entering into a new 25-year lease of the hotel when the development was completed
• Once the hotel was built, Dudley MBC was granted an overriding lease for 25 years at a lower rent than Travelodge is paying, giving the Council an annual profit rent from the hotel
• Aviva acquired the freehold interest in the land, getting the benefit of the lease and rent from the Council.
• The acquisition by Aviva provided the funding for the construction of the hotel by Hinton Properties

The deal worked for everyone. Travelodge opened a new hotel in a target location with high customer demand. The hotel attracts visitors who spend money in the local area, creates local jobs and provides rental and Business Rate income to the Council. By leveraging its covenant, the Council enabled funding to be secured and the project to be delivered. Aviva secured a long-term income from a good covenant for its investment/pension fund. The developer had a fully forward-funded scheme, which reduced its project risk and enabled it to complete the project at
a lower profit, making the scheme viable.

Councillor Ian Kettle, Cabinet Member for Regeneration at Dudley Council, said:
“The new Travelodge on Discovery Way is a further asset to the tourism hub which includes the Living Museum,
Canal Trust, Dudley Archives and new Dudley Museum. Working with Travelodge, we’ve not only been able to provide accommodation for the thousands of visitors to our borough, but the development has allowed us to ensure a source of income for the council which can be invested in vital council services for future generations.”

We are currently working with several councils across the country to deliver new hotels under this deal structure and our new, flagship Travelodge Plus hotels in London Docklands and London Wimbledon are being delivered under this structure. 

London Wimbledon

London Wimbledon will provide a new, 177-room Travelodge Plus hotel and x ground floor retail units. This project is located in the heart of Wimbledon, 100m from the Rail and Underground Station. The development is being undertaken by Reef Developments, with forward funding being provided by LaSalle Investment Management and a lease-wrapper deal agreed with Three Rivers Council. This flagship development is on site and expected to reach practical completion in Q3 2022.

London Docklands

London Docklands is another flagship, Travelodge Plus hotel project, which will be a standalone, 19-storey development, 300 metres from East India DLR station and with panoramic views across the Thame over to the O2 Arena. Being developed by Marrick Capital, forward funding is being provided by Aviva, with a Council lease-wrapper from The London Borough of Barking & Dagenham. Practical completion is expected in Q4 2022.