18th March 2019

Results for the year ended 31 December 2018 (unaudited)
Strategic progress driving excellent results
strong performance highlights five year transformation

Highlights – Full Year 2018

·         Total revenue up 8.8% to £693.3m (2017: £637.1m)

·         RevPAR([1])up 3.2% to £41.69 (2017: £40.40)

·         RevPAR growth 2.3pts ahead ofcompetitive segment ([2])

·         Occupancy(1)up 2.5pts to 78.5%

·         Average room rate(1) maintained at £53.09 (2017: £53.13)

·         EBITDA (adjusted) ([3])up £9.6m to £122.0m

·         Cash of £81.8m at 31 December 2018

·         17 new hotels opened in the year,further 3 shortly after year end

·         ‘Premium economy’ SuperRoomsrolled out across 47 hotels

·         First ‘budget chic’ Travelodge Plus hotels launched

·         Network now 575 hotels/43,840 rooms (up 4%)(4)

Five Year Transformation – 2013 to 2018

·         Sales up more than £250m

·         EBITDA more than trebled to £122m

 

Peter Gowers, Travelodge Chief Executive commented:

"Our strategic focus on location, price and quality has enabled Travelodge to deliver a set of excellent results.  We extended our network of hotels, remained focused on delivering attractive prices and took another step forward on quality. Once again we outperformed our competitive segment and delivered another year of strong growth, with EBITDA up £9.6m to £122m.  These are uncertain times and we are not immune from the short-term challenges, but beyond, we remain confident that there are more opportunities ahead.”

Peter continued:

"These results highlight Travelodge's transformation over the last five years.  Over that period, Travelodge’s sales are up by more than £250m, we’ve outperformed our competitive segment for five years in a row, opened more than 60 new hotels and more than trebled our profitability.  We've invested in better quality and choice for our guests, while staying true to our budget roots.  People are noticing the difference, culminating in our being recognised, for the first time, as one of the world's top ten global hotel chains by TripAdvisor.  The long-term growth opportunities for the budget sector remain strong and we expect to open 100 new hotels over the next five years, creating approximately 3,000 jobs."

Summary

Travelodge delivered total revenue growth of 8.8% in 2018, with 3.2% like-for-like RevPAR growth and a significant contribution from new hotels opened since 2017.

We have continued to outperform our competitive segment with our like-for-like RevPAR growth 2.3pts ahead of the STR MSE segment, which grew by 0.9%. 

This strong growth has helped to mitigate the impact of significant cost increases, particularly the National Living Wage, business rates and the costs associated with our improved occupancy.  EBITDA of £122.0m was up £9.6m on the prior year. 

We opened 17 hotels in 2018 with a further 3 opened shortly after year-end. 

Outlook and Recent Trading

The UK economic situation remains uncertain and there are well documented cost pressures facing the wider sector, which together lead us to maintain a cautious short-term outlook.

The first quarter of the year is our smallest in revenue terms and our lowest occupancy period, with typically lower levels of business and leisure demand.  In the first 8 weeks of the year, the STR MSE segment has seen mixed trading.  Overall the STR MSE segment RevPAR is down (2.3)%([4]), with relatively strong London growth offset by declining performance in the Regions.  Travelodge has continued to outperform the segment, largely as a result of stronger occupancy.  Our new opening programme remains on-track, with the majority of our new hotels for 2019 expected to open in the final quarter of the year.

Financial Performance

For the year ended 31 December 2018, UK like-for-like RevPAR was up 3.2% to £41.69, 2.3pts ahead of the growth rate of the STR MSE segment, which was up 0.9% for the same period. 

Our investments in an improved standard room product, ‘SuperRooms’ and ‘Travelodge Plus’ have helped attract a growing number of customers and we continue to use effective revenue management to optimise the balance between occupancy and rate growth.  We grew UK like-for-like occupancy by 2.5pts to 78.5%, with UK like-for-like average room rate maintained at £53.09 (2017: £53.13).

The positive like-for-like sales growth, together with good growth in food and beverage sales and the contribution from our maturing new hotels opened since the beginning of 2017, has resulted in total revenue growth of 8.8% for the year, to £693.3m.

Cost increases were driven by the pressures on the like-for-like estate and the extra costs associated with additional new hotel openings.

In the like-for-like estate, the principal regulated cost pressures included the impact of the National Living Wage, higher business rates and changes to the rules regarding charges for payment cards.  Operational costs were also higher as a result of the direct costs associated with our higher occupancy levels and higher utility costs in connection with weather patterns. 

For new hotels, the cost increases principally reflect the additional lease costs, wages and other operating costs from a full year of operation for hotels opened in the prior year, and those costs from the date of completion of the 17 new hotels opened during the year.

We continued our ongoing productivity and efficiency programme and this helped to mitigate the overall impact of the cost pressures, and EBITDA increased by £9.6m to £122.0m (2017: £112.4m).

The business continues to generate strong cashflow with a closing cash balance of £81.8m at the period end.  We also benefit from our long-term facilities including an undrawn £50m revolving credit facility. 

Operational Update

We continue to make good progress towards our aim of becoming the favourite hotel for value, by delivering our customers a combination of location, price and quality that suits their travel needs.

Location

We successfully opened 17 hotels in 2018, including our first new-build ‘Travelodge Plus’ hotel in the City of London, which continues to perform in line with expectations, alongside our other new and maturing hotels.  

The Travelodge network stood at 575 hotels across the UK, Ireland and Spain at the end of 2018 with a further 3 opened shortly after the year end.  At this early stage of the year we remain on track with our new opening programme for 2019. We expect to open 20 new hotels in the year with the majority scheduled to open in the final quarter.

Price

Our value proposition continues to support our strong revenue growth, including record food and beverage sales.  Our investments in the website continue to deliver improvements to the customer journey.  Targeted customer offers have helped to improve website conversion, driving increased occupancy and outperformance. 

Quality

We continued to strengthen quality and choice for our guests, investing in our refit upgrade programme on the core estate, adding SuperRooms to 47 hotels and launching the first 6 ‘Travelodge Plus’ hotels.  We also completed the roll-out of our new Wi-Fi network as planned, offering customers improved speed and reliability. 

We maintained our average 4 star TripAdvisor rating and increased our number of certificates of excellence during the year.  In 2018, for the first time, we were ranked as one of TripAdvisor’s top 10 Global ‘Most Excellent’ Large Hotel Chains.  Our continued attractiveness to business customers looking to save money in travel costs was reflected in Travelodge winning ‘Best Budget Hotel’ at the 2019 Business Travel Awards. 

Five year review

Since the launch of our new strategy five years ago, Travelodge has undergone a substantial transformation.

We have extended our hotel network, opening more than 60 new hotels and increasing our presence in key city centres, business parks and leisure destinations.  We now have more than 575 hotels, operating across the UK, Ireland and Spain.  More than 180 of our hotels now have on-site bar cafe restaurants.  The changing shape of our network reflects the changes to the needs of our customers and we have come a long way from our original beginnings as a roadside hotel chain, with the majority of our revenues now coming from city centre locations.

We have remained true to our budget roots, continuing to offer attractive prices for both businesses and leisure customers alike.  More than half of all Travelodge rooms are still sold for less than £50 per night, and we have welcomed thousands of new business accounts, many taking advantage of our business account card.  Our occupancy has increased significantly and we have grown our RevPAR at a compound annual growth rate (CAGR) of 7.3%, almost 3 percentage points faster than our competitive segment, which grew at a CAGR of 4.4% over the same period.

We have made significant investments to improve the quality of our hotels.  We undertook a £100m modernisation programme of our core estate, introducing a new-look design, bespoke Travelodge Dreamer beds and new separate beds for children in our family rooms.  We now offer more choice for customers, with the addition of ‘premium economy’ SuperRooms that offer an extended choice of pillows, USB charging ports, a larger desk and a Lavazza coffee pod machine.  We also launched our first new 'budget chic' Travelodge Plus hotels in London, Edinburgh, York, Brighton and Gatwick Airport.  These hotels feature more stylish rooms and new-look bar/restaurants.  These improved quality levels culminated in Travelodge being named for the first time as one of TripAdvisor's Top 10 Global 'Most Excellent' Large Hotel Chains in 2019, and being recognised at the 2019 Business Travel Awards as 'Best Budget Hotel Brand'.

Our transformation has been made possible by the enormous hard work and commitment of our more than 10,000 colleagues across the UK, Ireland and Spain.  We are therefore proud to have been able to ensure our colleagues have also shared in the benefits of our growth, through a significantly improved employment package.  We have continued to invest in our Aspire training programme, which has seen hundreds of colleagues progress from entry-level roles into management.  We ended the practice of out-sourcing housekeeping, bringing our housekeeping colleagues into our directly employed team, we abolished the use of zero hour contracts, introducing minimum guaranteed hours and offering more advance notice of shift patterns.  We strengthened our record on gender diversity and the majority of hotel managers are women.  Our track record in helping colleagues grow their careers was reflected in record numbers of applicants for roles with Travelodge in 2018.

The net result of these changes has been a significant improvement in our key metrics over the last five years:

 

2013

2018

Increase

RevPAR

£29.36

£41.69

+ £12.33

Total Revenue

£432.6m

£693.3m

+ £260.7m

EBITDA

£40.5m

£122.0m

+ £81.5m

Network Size (rooms)

38,295

43,840

+ 5,545 rooms

 

With the strength of the value sector, UK households still spending a relatively small percentage of household income on domestic hotels, the trend for businesses to choose budget and our platform of domestic scale, international bridgeheads and established franchise operations, we believe that once the current pressures abate, we are well positioned to build on our improved position in the years ahead.

 

 

ENDS

About Travelodge

Founded in 1985, Travelodge is one of the UK’s leading hotel brands.  There were 575 Travelodge hotels and 43,840 rooms in the UK, Ireland and Spain as at 31 December 2018. Travelodge welcomes approximately 19 million customers every year and more than 10,000 colleagues work across the business.

Notes:

 

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.  The STR Midscale and Economy Segment (STR MSE Segment) is our principal benchmark competitive segment.

 

For further information, please contact:

 

Travelodge Investor Relations

01844 358655

investors@travelodge.co.uk

 

Travelodge Press Office

01844 358 703

pressoffice@travelodge.co.uk



[1] Revenue per available room, Average room rate and Occupancy on a UK like-for-like basis

[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, taxes, depreciation and amortisation, and before rent free adjustment and exceptional items

4 As at 31 December 2018

 

[4] STR MS&E RevPAR growth 27 Dec 18 to 20 Feb 19