Travelodge delivers record financial results and continued out-performance

Travelodge well positioned in uncertain macroeconomic environment

Jo Boydell, Travelodge CEO

Headlines (period ended 30 September 2022, comparison vs 2019)

  • Record financial results for the period, surpassing the 2019 full year results by the end of the third quarter
  • Total underlying revenue up 22.7% to £669.9m (2019: £546.1m, 2021: £374.7m)
  • Occupancy1 up 0.7pts to 81.5% (2019: 80.8%, 2021: 58.2%)
  • Average room rate1 up 19.8% at £63.59 (2019: £53.08, 2021: £51.15) 
  • RevPAR up 20.8% to £51.80 (2019: £42.86, 2021: £29.76)
  • RevPAR performance 10.8pts ahead of the competitive segment vs 2019
  • EBITDA (adjusted) of £164.4m (2019: £102.2m, 2021: £43.7m)
  • Cash of £221.6m at 30 September 2022 
  • Repaid £61.2m super senior term loan on 26 October
  • Rating agency (Moody’s) upgrade from Caa1 to B3 on 17 November
  • 5 new hotels opened to date, including one Irish franchise
  • Total network now 595 hotels and 45,624 rooms as at 30 September 2022

Headlines (quarter ended 30 September 2022, comparison vs 2019)

  • Total underlying revenue up 33.5% to £278.6m (2019: £208.7m, 2021: £229.3m)
  • Occupancy1 up 1.0pts to 86.0% (2019: 85.0%, 2021: 83.6%)
  • Average room rate1 up 31.7% at £74.81 (2019: £56.79, 2021: £64.48) 
  • RevPAR1 up 33.4% to £64.37 (2019: £48.26, 2021: £53.92)
  • RevPAR performance 12.8pts ahead of the competitive segment2 vs 2019)
  • EBITDA (adjusted)3 of £93.8m (2019: £57.5m, 2021: £87.0m)

Jo Boydell, Travelodge Chief Executive commented: 

“Travelodge has delivered a record set of financial results, significantly ahead of 2019, driven by strong demand for our great value hotels as customers return to both business and leisure travel.  Our purpose is to provide affordable travel for everyone and amid the growing cost of living pressures, we have seen that more customers are choosing to stay with us. 

We have continued to outperform against the competitive segment, for the eighth consecutive year, and it’s particularly pleasing to see these trends continue in the first weeks of the fourth quarter.  Our cash position remains strong, and we have continued to invest in the business whilst also further de-leveraging, with the term loan repaid in full on 26 October.  We were also pleased that on 17 November Moody’s upgraded our credit rating from Caa1 to B3, reflecting the businesses strong performance.  

Looking ahead, we are very mindful of the cost-of-living crisis and are doing all we can to navigate the cost pressures on our business.  The near-term trading signs are positive, but booking patterns remain short-lead and we therefore have limited visibility.  However, the budget end of the hotel segment is the most resilient, with budget brands historically performing strongest in tough economic times. Travelodge, with its strong brand, diversified network of hotels, value proposition and efficient operating model, remains well placed to deliver for customers and we are excited about the growth opportunities ahead.”

London Docklands Central Travelodge – Opened July 2022

Summary

Travelodge has delivered a set of record financial results in the period, surpassing the 2019 full year results by the end of the third quarter.  This performance has been driven by strong leisure and ‘blue-collar’ business demand, more than offsetting the more gradual recovery in ‘white-collar’ demand, together with our continued outperformance against the MS&E segment, now in its eighth consecutive year, as well as new hotel openings.  We do face pressure from inflation, but costs remained well controlled, supported by our industry leading cost model. 

Trading in the first weeks of quarter four has continued to benefit from strong leisure and ‘blue-collar’ business demand with encouraging improvements in ‘white-collar’ demand and sustained outperformance against the market segment.  Whilst the current political and macro-economic environment creates an uncertain backdrop, the budget hotel segment has proven resilience and we expect to benefit from attractive demand drivers. 

So overall, with our strong brand, diversified network of well invested hotels, direct distribution model, value proposition, customer mix and domestic travel focus, Travelodge is well positioned for the future, and we are confident in the long-term prospects for budget hotels. 

Performance Overview

The UK budget hotel market has performed strongly, with revenue as a percentage of 2019 levels ahead of the total UK hotel market in every week of the period, driven by strong levels of domestic leisure demand and a rapid recovery in ‘blue collar’ business demand, with a more gradual recovery in ‘white collar’ corporate demand. 

Overall UK like-for-like RevPAR for the period ended 30 September 2022 was up 20.8% on 2019 levels, approximately 10.8pts ahead of the Smith Travel Research (STR) MSE benchmark competitive segment.  

Total underlying revenues for the period were up 22.7% on 2019 levels, with the additional benefit of new hotels.  

Costs were impacted by inflationary pressures but remained well controlled and whilst Travelodge is not immune to the supply chain pressures affecting the wider hospitality industry, these were well managed, supported by our in-sourced housekeeping model and strong supplier relationships.  

Travelodge delivered record profits in the period with EBITDA (adjusted) of £164.4m (2019: profit of £102.2m, 2021: profit of £43.7m).

We ended the period with cash of £221.6m and repaid the £61.2m term loan in full after the period end, with over £100m of debt repaid this year to date. 

London Lewisham Travelodge – Opened April 2022

Financial Performance

For the period ended 30 September 2022:

For the period, compared to 2019, UK like-for-like RevPAR was up 20.8% to £51.80 (2019: £42.86), with UK like-for-like occupancy up 0.7pts to 81.5%, and UK like-for-like average room rate up 19.8% to £63.59.  

Travelodge continued to outperform, with UK like-for-like RevPAR performance 10.8pts ahead of the competitive segment vs 2019, with outperformance in both London and the Regions.  

Total underlying revenue for the period of £669.9m was up £123.8m (22.7%) vs 2019 and up £295.2m vs 2021.  

EBITDA (adjusted) was a record profit of £164.4m compared to a profit of £102.2m for 2019 and a profit of £43.7m for 2021.  

During the period there was free cash inflow of £159.3m predominantly driven by the EBITDA (adjusted) profit and working capital inflows, partially offset by capital investment. Working capital benefited from an increase in prepaid rooms, reflecting seasonality and the trading recovery, and creditors increased impacted by VAT.

For the quarter ended 30 September 2022:

Trading performance was strong throughout the quarter, driven by strong leisure demand, including events, and ‘blue collar demand.  We also saw an encouraging recovery in ‘white-collar’ demand before the seasonal decline over the summer holiday weeks and benefited from strong demand in the period leading up to the Queen’s funeral. 

For the quarter, compared to 2019, UK like-for-like RevPAR was up 33.4% to £64.37 (2019: £48.26), with UK like-for-like occupancy up 1.0pts to 86.0%, and UK like-for-like average room rate up 31.7% to £74.81.  

Travelodge continued to outperform, with UK like-for-like RevPAR performance 12.8pts ahead of the competitive segment vs 2019, with outperformance in both London and the Regions.  

Total underlying revenue for the quarter of £278.6m was up £69.9m (33.5%) vs 2019 and up £49.3m vs 2021.  

Costs were impacted by inflationary pressures but were well-controlled and the well documented industry wide supply chain challenges continue to be well managed, supported by our in-sourced housekeeping and good supplier relationships. 

EBITDA (adjusted) was a record profit of £93.8m compared to a profit of £57.5m for 2019 and a profit of £87.0m for 2021.  

Hexham Travelodge – Opened July 2022

Recent Trading 

We have continued to deliver a strong trading performance in the first weeks of the fourth quarter, with all areas ahead of 2019 supported by strong leisure demand, including events, ongoing good ‘blue collar’ demand and improving ‘white-collar’ demand. 

Regional and London trading performances are both strong, significantly ahead of 2019 levels.  Trading patterns have been encouraging as we have transitioned away from the seasonal leisure periods into more typical business demand weeks, with Central London benefiting from weekend leisure demand and now also improved mid-week demand.  We also continued to benefit from events and the half term holiday.  There are positive signs in forward booking patterns, albeit booking patterns remain predominantly short-lead, so we still have limited forward visibility. 

Revenue for the period from 1 October 2022 to 16 November 2022 was approximately 35% ahead of 2019 levels. 

We have continued to outperform the STR MSE benchmark segment at similar levels in the fourth quarter so far, with London and the Regions both outperforming. 

Our cash position remains strong. We repaid the £61.2m super senior term loan on 26 October, together with early termination costs, and continue to keep our liquidity position under review. 

As at 16 November the group held cash reserves of approximately c. £185m, before quarterly rent and other month end payments. 

Outlook 

The MSE segment of the UK hotel market has recovered the fastest, benefiting from its domestic focus, business/leisure mix and value proposition, and we are continuing our track record of outperformance.  

Whilst the current political and macroeconomic environment is putting pressure on household spending and consumer choices, it is possible that customers will trade down from other hotel segments into the budget hotel segment. 

As a reminder each 1 percentage point change up or down in RevPAR compared to 2019 levels would be expected to impact Travelodge revenues by approximately £6-7m over a year.

We face a number of cost headwinds, including the significant inflationary pressures facing the wider UK economy, as well as some specific supplier price increases impacting laundry and F&B, which we continue to work with suppliers on. 

The National Living Wage will increase by 9.7% from 1 April 2023 and the 2022 National Insurance increase of 1.25% has been reversed.  Our single largest cost is rent, and as a reminder the majority of our leases are either RPI or CPI based 5-yearly upwards only rent reviews with no caps or collars, although the majority of newer leases do contain caps and collars. The review pattern across all leases is spread broadly evenly over a 5 year period.  We expect rent to be between £235-£240m in 2022 and in 2023, £250-260m, reflecting the impact of rent reviews and new hotel openings in 2022 and 2023. 

The majority of our energy volumes are fully hedged to March 2023 so we expect our energy costs to increase from April 2023, although the impact remains uncertain and much will depend on a number of demand and supply factors, including the weather over winter, the situation in Ukraine and any available Government support which remains unclear. 

Our refit programme, including the new look room and improved reception and bar cafe, is on-track to complete 65 hotel refits this year with 50 completed to date.  Early indications from the program are encouraging, with positive trading performance and good customer feedback.  We are also continuing our ongoing investment in hotel maintenance, health & safety, IT, development and projects, including energy efficiency.  Capital expenditure in 2022 is expected to be approximately £80m, in line with previous guidance, and to continue at similar levels in 2023, and will continue to be reviewed in line with trading conditions.  

We have opened five new UK leased hotels and one Irish franchise so far in 2022, with a further hotel now expected to open early in 2023.  This is lower than our long run averages, as new deals were impacted by the pandemic, and we expect to return towards more normal levels over the next few years.  We expect to open ten new hotels in 2023, with a number currently scheduled to open in the final quarter of the year. 

Whilst the political and macro-economic environment remains uncertain, the budget hotel segment has proven resilience and has recovered more quickly than the rest of the UK hotel market to date.  In tough economic times budget brands perform strongest and we expect the segment to benefit from a number of positive demand drivers including continued staycation demand, trade down to budget hotel operators, changes in working patterns, events and also indirectly from inbound tourism as a result of the weak pound.

With our strong brand, large, diversified network of hotels, direct distribution model, value proposition, customer mix and domestic travel focus, Travelodge is well positioned. We are confident in the long-term prospects for budget hotels and excited about future growth opportunities.

Notes:

1  Revenue per available room, Average room rate and Occupancy on a UK like-for-like basis for the management accounting period 30 Jun 2022 to 28 Sep 2022 and 4 Jul 2019 to 2 Oct 2019 for the quarter. Revenue per available room, Average room rate and Occupancy on a UK like-for-like basis for the management accounting period 30 Dec 2021 to 28 Sep 2022 and 3 Jan 2019 to 2 Oct 2019 for the period.

2  Our competitive segment is the Midscale and Economy Sector of the UK hotel market as reported by Smith Travel Research (STR), an independent hotel research provider, providing aggregate benchmarking information on the UK and other hotel market performance

3  EBITDA (adjusted) = Earnings before interest, tax, depreciation and amortisation, and before rent adjustment and non-underlying items, and in line with historic accounting principles (before IFRS 16). This measure reflects the cash benefit of rent reductions following the CVA which completed on 17 June 2020. Non underlying items have been removed as they relate to non-recurring, one-off items.

Financial results in this summary document are extracts from the management reporting of Thame and London Limited and its subsidiary companies, including Travelodge Hotels Limited.  All financial references in this summary document are unaudited.

Smith Travel Research (STR) is an independent hotel research provider, providing aggregate benchmarking information on the UK and other hotel market performance.

Ringwood Travelodge is one of the company’s first hotels to be upgraded to the new budget-luxe premium look & feel design

Travelodge Budget Luxe Bedroom

This is the group’s most radical transformation to date 

Travelodge, the pioneers of the UK budget hotel sector are delighted to announce that Ringwood is one of the group’s hotels to be upgraded to the brand’s new budget-luxe design and the fifth hotel in Hampshire, with completion this week.     

In April this year, Travelodge, announced that it was evolving its core brand product to a new budget-luxe premium look and feel design. This is the company’s biggest brand transformation to date, and in 2022, Travelodge is investing in a multi-million pound programme to upgrade 60 UK hotels in popular business and staycation destinations to its budget-luxe design.

Ringwood Travelodge, a 31-room hotel, is one of the hotels in the first phase of the group’s selected 60 hotels to receive its budget-luxe make-over. To date, 46 hotels have been completed. 

Travelodge budget-luxe has been created on the success of the group’s budget chic hotel format, TravelodgePLUS with feedback from the company’s largest consumer study – which surveyed around 5,000 UK business and leisure travellers to find the psychographics of the modern budget traveller. Key findings revealed that modern travellers crave style, choice and little homely touches to make it easier to work, rest and relax both inside and outside of the room.  

In response to this consumer insight, the Travelodge interiors team have remodelled their core product with a new budget-luxe design that includes all the low cost efficiencies you would expect from Travelodge but with the added benefit of thoughtful, stylish design and homely touches throughout its interiors. 

This is underpinned by the introduction of a new signature rich navy blue brand colour which pays homage to the first iconic Travelodge blue brand colour- chosen for its calming and uplifting qualities. In essence all the key essentials that matter to modern business and leisure travellers.

The new budget-luxe design includes a timeless classic, elegant style reception which is the hub of the hotel. A next generation room which has been smartly devised to create a multi-dimensional space by utilising the new luxurious signature Travelodge navy blue colour for the R&R (resting and relaxing) section of the room and a serene colour palette for the functional and energising side of the room to work and get ready. 

The budget-luxe design also includes a number of sustainable initiatives. This includes the new carpet being made from recycled fishing nets which are part of a project supporting clean ocean initiatives, tackling over 640k tonnes of discarded fishing nets currently impacting marine life. The carpet backing is also made of old plastic bottles. Every ten of these bottles which are recycled rather than being sent to landfill saves enough energy to power a laptop for 25 hours.  The other features include low energy lighting, motion sensing controls and aerated showers and taps

Bar Cafe

Raquel Lopez, Hotel Manager, Ringwood Travelodge, said: “My team and I are delighted that our hotel is one of the first Travelodge’s to be upgraded to the new budget-luxe premium look and feel design. This is our most radical brand transformation to date and the budget-luxe design certainly has the wow factor for our customers.”    

“The Travelodge budget-luxe design has been created in response to ever increasing expectations from customers. Britain is now a nation of budget travellers, with more of us choosing to stay in budget hotels than any other hotel type and thoughtful, stylish design and homely touches really matter in today’s world when staying away for business or leisure.”

Psychologist Corinne Sweet said: Recent psychological research shows people’s tastes are changing and incorporating homely touches into décor and design are becoming essential to create a calming environment for wellbeing.  The new Travelodge budget-luxe design fits the bill as the premium look and feel is a good mixture of high functionality, comfort and calmness which helps guests feel psychologically refreshed.” 

The new Travelodge budget-luxe design features  

A new hub of the hotel – a redesigned elegant reception 

The new reception area has been designed in a warm timeless classic style featuring a decorative panel design, soft low LED lighting, stylish leather bench seating and wooden style flooring. The new colour palette includes the new warm Travelodge signature navy blue shade complemented against a palette of fresh tranquil neutral shades – creating a big warm welcome from Travelodge. 

The next generation multi-dimensional Travelodge room  

The new chic Travelodge room offers everything a business or leisure guest needs for a comfortable, relaxing stay and most importantly a good night’s sleep. The room has been smartly decorated to create a multi-dimensional space by utilising the new luxurious signature Travelodge navy blue colour for the R&R (Resting and Relaxing) section of the room and a serene colour palette for the functional and energising side of the room where you need to work and get ready. 

The bespoke luxurious king-size Travelodge Dreamer bed remains the king of the room and is dressed with crisp white bed linen which includes a cosy 10.5 tog duvet and comfy pillows. The bed sits within a light box bed frame that emanates a soft, warm glow to aid relaxation and features bedside reading lights and USB charging points.  Located above the bed is a bespoke piece of artwork commissioned by Travelodge which has been inspired by classic lullabies, with clever use of playful and discoverable elements to help you drift off to sleep.  

The en-suite bathroom also features a new brilliant white complementary design and décor with complimentary hand, hair and body wash. 

Other key features of the new room include: 

  • A spacious desk and a stylish desk chair
  • A cosy statement armchair where you can kick back and curl up to read your book or watch TV  
  • Blackout curtains to create a dark space for a good night’s sleep
  • Complimentary tea & coffee making facilities 
  • A TV with Freeview 
  • LED lighting in the room and bathroom 

● Complimentary WIFI for 30 mins £3 for 24 hours