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Travelodge has reported that its Q3 revenue saw a 0.5% increase to £786.1m (2023: £782m) driven by opening of five new UK hotels in London Bermondsey, Rotherham, Colchester, Bristol and London Oval and performance in Spain including five new freehold Spanish hotels.
It also attributed the positive revenue growth to the resilient UK customer demand from leisure and business customers driving a slight increase in occupancy, offset by a decline in room rates.
It also reported a group comparable EBITDA of £187m, while Travelodge OpCo delivered a comparable EBITDA of £178m (2023: £195.2m) for the nine months ended 30 September 2024, as it navigated ongoing inflationary pressures, including successive increases in the National Living Wage, rent reviews and energy costs.
The recent Budget confirmed that the National Living Wage will increase by 6.7% from April 2025, following the 10% increase in April 2024, increasing costs by £12m.
In addition, employer National Insurance contributions will increase by 1.2% to 15% from April 2024, alongside a reduction in the threshold that employers start to pay National Insurance, from £9,100 to £5,000 that is expected to increase costs by c. £9 million.
As a result, the group estimates the combined impact of these wage cost changes to Travelodge in 2025 to be £21m.
However, Travelodge said that it is “confident in its strong operating model, continuing its cost efficiency program to mitigate these pressures as much as possible”. Despite macroeconomic uncertainty, it stated that it is “confident in the long-term prospects for budget hotels and its future growth opportunities”.
Overall, demand from Travelodge’s diverse range of business and leisure customers “remains resilient”. The regions performed well, with occupancy ahead of last year and rates broadly in line.
London saw weaker performance due to lower rates and the deliberate phasing of the accelerated refit program.
Early Q4 trading was also impacted by poor weather and fewer events in October, but recent weeks show improvement, just slightly below 2023 levels, with the Regions ahead, but London still behind on rate.
The group stated that forward booking patterns are “positive” with strong long lead event demand and booked revenue to the end of the year ahead of 2023.
The business continues to incorporate technology to enhance the guest and colleague experience and drive operational efficiency, including the roll out of robot vacuums to improve quality, reduce physical demands on colleagues and increase efficiency.
According to Travelodge, customer demand is also “resilient across its range of business and leisure segments”.
Coupled with favourable UK market supply dynamics, Travelodge is “optimistic about the future trading environment”.
Jo Boydell, Travelodge chief executive, said: “Travelodge has performed in line with expectations against the market backdrop, benefitting from solid customer demand from a diverse mix of both business and leisure customers. Occupancy was slightly ahead of 2023 levels but there was softer market rate, particularly in London. We continued to invest in the business, while navigating the impact of inflationary cost pressures. Bookings in the quarter were supported by leisure events such as Wimbledon, the British Grand Prix, Kings of Leon and Justin Timberlake music concerts, as well as business meetings and events such as the European Society of Cardiology (ESC) event at ExCeL London and the Farnborough International Airshow.”
He added: “…Trading in the fourth quarter is modestly below 2023 levels but shows an improving trend with the most recent weeks just slightly below 2023 levels. Forward booking patterns are positive, with strong long lead event demand and booked revenue for the remainder of the year ahead of 2023. While macroeconomic uncertainty persists amidst a challenging operating environment for the sector, we remain confident in the long-term prospects for the budget hotels and future growth opportunities for Travelodge. Our strong financial position, affordable proposition and diversified hotel network positions us well for long-term growth.”
