Travelodge delivers strong revenue growth

Travelodge has reported results for the period (26 weeks) ended 27 June 2018, showing a UK like-for-like RevPAR rise of 3.1% to £38.68, 2.7pts ahead of the growth rate of the MS&E segment, which was up 0.4% for the same period.

In the period, outperformance benefited from the re-opening of one of the brand's London hotels, which was temporarily closed in the first half of 2017, alongside the temporary room closures in 2017 as part of the ‘SuperRoom’ refit program.

UK like-for-like occupancy rose by by 2.1pts to 75.6%, with UK like-for-like average room rate maintained at £51.14 (2017: £51.07).

The positive like-for-like sales growth, together with good growth in food & beverage sales and the contribution from the maturing new hotels opened since the beginning of 2017, has resulted in total revenue growth of 8.0% for the year to date to £317.2m.

This revenue growth has helped to mitigate the impact of the significant cost increases, particularly on regulated costs such as the National Living Wage and higher operational costs as a result of the higher occupancy. The period also included a number of one-off cost increases alongside the impact of changes to the legislation regarding payment card charges.

The combination of the revenue growth and cost increases has resulted in EBITDA increasing by £1.3m to £43.3m (2017: £42.0m).

Travelodge now has 564 hotels across the UK, Ireland and Spain at the period end, with a further 3 openings to date, including the new 395 room flagship hotel London City.

At this stage in the year, Travelodge remains on track to achieve its target of 20 new hotel openings in 2018, with the majority of these hotels expected to open in the fourth quarter of the year.

The UK continues to be in a period of economic uncertainty with the sector facing a number of significant regulatory and inflationary cost pressures.

The demand for budget hotels remains good and in the early weeks of the third quarter we have seen modestly improved RevPAR growth in the segment, impacted by the good weather, and Travelodge has continued to outperform the segment. However, the significant cost pressures remain and will continue in the short-term.

Peter Gowers (pictured), Travelodge Chief Executive, commented, “In the first half of the year, Travelodge delivered strong revenue growth and has continued to outperform the midscale and economy market segment. Our focus on location, price and quality is paying off with another period of increased occupancy.

'We now offer UK travellers more choice than ever, with a modernised core estate, our premium economy ‘SuperRooms’ and our new ‘Travelodge PLUS’ format. The recent opening of our new flagship hotel with 395 rooms in the heart of the City of London is a major milestone, highlighting just how far Travelodge has come since we opened our first small hotel by the roadside in 1985.”

“While the UK continues to face economic uncertainty, demand for budget hotels remains strong and more and more businesses are choosing the budget sector. Although the general economic picture, the impact of new supply growth and clear short-term cost headwinds lead us to remain cautious about the immediate outlook, our strategic focus and growing pipeline will position us well as these pressures abate.”