Travelodge CEO Peter Gowers said that the group remained “cautious on the immediate outlook” as cost pressures grew in the UK.
In mainland Europe, Motel One accelerated its development, with nine hotels due to open this year as demand for branded budget accommodation grew.
At Travelodge, Gowers said: “In view of the wider economic uncertainty and the well-known cost headwinds, especially those relating to the national living wage, other regulated cost increases and general inflationary pressures, we remain cautious on the immediate outlook.
“Our continued focus on quality and service is delivering good results. Rising sales from business customers, boosted by our new SuperRooms, helped drive strong sales growth, with like-for-like revpar once again ahead of the competitive segment. This helped mitigate the significant macroeconomic and external cost pressures facing the sector and deliver another year of progress for the business.”
The comments were made as the company reported revenue up 6.6% on the year in 2017 to GBP637.1m with revpar at 76.1%. Ebitda was GBP112.4m, up from GBP110.1m in the previous year.
Travelodge said that it was not immune to the cost headwinds facing many UK leisure and hospitality businesses, but that, “with strong underlying demand for budget hotels and a healthy secure pipeline of new hotels to open, we will be well positioned once the current cost pressures abate”.
The group opened 15 new hotels in 2017 and expected to open 20 new hotels across the UK in 2018, expanding its network to 578 Travelodge hotels in the UK, Spain and Ireland. Gowers said: “Despite the uncertainty caused by Brexit and economic pressures, the UK budget hotel market remains attractive, and we are extending our network to put us where our customers want to be, while creating hundreds of new jobs across the country.
“Much of our recent success has been driven by our investment in quality and growing appeal to business customers. Our new hotels increasingly serve business locations.”
Looking ahead, the company said that: “Demand for budget hotels has remained positive since the start of the year. However, the market is up against tough comparables for last year, which included strong inbound travel owing to the weak pound, and it also faces the impact of new supply growth in what is traditionally a low occupancy period”.
Travelodge said that, for the midscale and economy sector, the first few weeks of the year had seen declines in London revpar and somewhat flat performance in the regions, with the overall midscale and economy sector down 0.5% in the first seven weeks of the year.
Expanding into the UK, but based in mainland Europe, Motel One described 2017 as a “successful year” opening seven new hotels, including its second in Switzerland, with additional hotels in Manchester and Amsterdam and two in Berlin.
Revenue rose to EUR401m, up from EUR357m and of this, 71% was generated through German hotels. The brand’s international share was up by two percentage points on the year and the UK share – from its seven-strong portfolio – rose to 9%, making up EUR35m of Motel One‘s total revenue.
Average occupancy increased slightly to 77.3% from 76.6% in 2016. Of total bookings made, 76% were generated through Motel One’s own channels. 27% of rooms were booked on motel-one.com, 49% through Motel One’s own offline channels, and 24% through OTAs and GDS.
The company was set to open nine new hotels in the 2018 financial year, with 2,800 extra rooms. Openings in Barcelona and Paris will mark the brand’s debuts in Spain and France, and further openings in Glasgow, Munich, Lubeck, Leipzig, Bonn, Frankfurt and Cologne will also join the brand’s portfolio. Motel One‘s upcoming development pipeline includes 30 hotels with 9,498 rooms.
The results came as Wyndham Hotel Group announced a partnership with German hotel management company HR Group to open multiple properties across Europe under the Ramada brand. Two hotels have already opened under the agreement – Ramada Amsterdam Airport Schiphol and Ramada Flensburg in Germany. Four additional properties are expected to open throughout 2018 in Berlin, Munich, Hanover and Bottrop.
Ruslan Husry, founder & managing director of HR Group, said: “We believe the [Ramada] brand has tremendous potential for growth, and in Wyndham Hotel Group we found an excellent, like-minded partner sharing the same ambition to bring quality accommodation to a diverse range of locations.”
HA Perspective [by Katherine Doggrell]: The message from Premier Inn and Travelodge has, in recent months been very similar, with costs impeding progress. Both remained convinced that they could weather the Brexit storm, although while Premier Inn was making a concerted effort to spread the love to Germany, Travelodge has not made a similar stand with Spain.
It is hoped that the Brexit draft transition deal will bolster the UK economy, with UKHospitality CEO commenting that the plan would provide businesses with “more peace of mind and give employers a chance to begin drawing up their plans for their businesses post-Brexit. A full right to remain during the transition period with a chance to work towards full status, will provide non-UK EU workers with an opportunity to come to the UK with a sense of security and stability. With a significant portion of the UK’s hospitality workforce coming from outside the UK, this is the clarity and assurance that we have been calling on the government to deliver”.
The pound strengthened on the news, but while the progress was reassuring, the UK has let to learn what it is transitioning to, or what will be done about Ireland. Even without this slow waft towards a solution, Mark Brumby, analyst at Langton Capital, remained hopeful, telling us: “Facility creep has a rolling tendency to create a gap at the lower end of the market. This is helpful to Travelodge and even more so to super budget operators such as easyHotel. The fact that UK growth is slowing could bolster demand for value”.