Travelodge announces its trading update for 2022 and confirms completion of a lease regear with its biggest landlord LXI REIT

Today, Travelodge, one of the UK’s largest hotel brands, which operates 595 hotels across the UK, Ireland and Spain announces record results for 2022 and the completion of a mutually beneficial lease re-gear with its largest landlord, LXI REIT for the majority of the properties in the 122 Travelodge hotel portfolio they acquired as part of Secure Income REIT merger in 2022.

Travelodge has delivered record financial results in 2022, significantly ahead of its previous best year in 2019.  This performance reflected the strength and resilience of the UK budget hotel market which performed well in 2022, 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.

UK like-for-like RevPAR growth outperformed the Smith Travel Research (STR) MSE benchmark competitive segment, marking the eight consecutive year of Travelodge outperformance.

Total underlying revenues for the year were up c. 25%, on 2019 levels and Travelodge delivered record profits in the year with EBITDA (adjusted) expected to be between £210m and £215m (2019: £129.1m, 2021: £81.1m)(unaudited).

The strong leisure and ‘blue collar’ business demand has continued in the first weeks of 2023, as customers continue to prioritise travel and seek out value in tough economic times.

We are also pleased to confirm that the administrators have issued their final report, confirming the CVA has now been fully implemented and is now formally at an end.   Based on the expected EBITDA range above, reflecting Travelodge’s excellent 2022 trading performance, we now expect to make a one-off payment under the excess cumulative EBITDA landlord rent payment clause shortly after we publish our 2022 audited annual report and accounts.  We thank our landlords for their support and look forward to continuing to work together.

On 27 January 2023 we completed on our lease regear with LXI REIT plc on 97 of the 122 Travelodge hotels which they acquired as part of the Secure Income REIT acquisition, with the remainder subject to agreement by the superior landlords.

As part of the LXI lease regear, Travelodge has negotiated new caps and collars on rent reviews to limit rental increases during high inflation periods and lease extensions averaging 9 years for all 122 hotels. Previously the rent increases were based on uncapped RPI, but have now been converted to CPI+0.5% with a cap (maximum uplift) of 4% and a collar (minimum uplift) of 1%.

The regear also includes rent smoothing across the portfolio, resetting rent levels for the 122 Travelodge hotels to reflect the trading performance of each site.  The total rent across the hotels remains the same, but has been smoothed on a site by site basis, to ensure that each hotel has a robust stand-alone rent cover.

Also new green lease provisions have been added to support Travelodge’s sustainability plan, ‘‘Better Future’. This includes:

• Sharing of energy, water, recycling and waste data.

• Co-operating on the environment, social and governance strategies of the landlord and tenant.

• Future-proofing the leases to ensure the landlord has the necessary rights to enter the properties to make environmental performance improvements.

This lease regear also provides a secure long-term, fixed-rate income for LXI REIT and is expected to have a materially positive impact on their Travelodge hotel asset portfolio and further enhance the investment attraction of these hotels.