Real Estate

Travelodge asks landlords to take £146m rent hit


Travelodge, the budget hotel company, is asking landlords to waive up to £146m in rent over the next two years as it cuts costs amid uncertainty over when the hotel sector will recover after coronavirus.

In a letter to landlords seen by the Financial Times, Travelodge said it expected to lose £350m in sales this year and that it would take hotels “several years” to return to 2019 levels, when its revenues were £727.9m for the full year.

It has proposed that the company move to paying rent monthly, rather than quarterly, until the end of 2021 and that some landlords accept reduced sums.

The offer, due to be sent on Monday, is a counter proposal to landlords who accused the hotel group and its shareholders of taking advantage of the coronavirus lockdown to cut its bills.

Travelodge is owned by the New York-based hedge funds Golden Tree Asset Management and Avenue Capital and the investment bank Goldman Sachs, which bought the company out of administration in 2012.

The shareholders had been forced to write down the value of their equity by about £200m because of the £100m extra debt Travelodge had taken on to see it through the crisis and its use of cash reserves, the letter said. The debt includes a £60m credit facility provided by the investors.

The hotel operator said that the £146m it was asking the landlords to forgo amounted to roughly 3 per cent of the £4bn due in rent for the remainder of their leases. In return, it has offered landlords an optional extension to leases at the end of their term and a share of profits if Travelodge outperforms a baseline set by the company.

Landlords had expected Travelodge to seek a £175m reduction in rent bills under previous proposals.

The company expects to pay a third of its £230m annual rent bill in full.

The dispute is among the most public of a series of clashes between landlords and tenants since hospitality and retail businesses were forced to close in the pandemic, leaving many operators unable to pay their rents.

Retailers have so far paid just over half of the rent they owe for the three months to June 24, which was due on March 25, according to data compiled by Remit Consulting.

Among those that have withheld rent are the high street chemists Boots and Superdrug, the budget chain Poundstretcher and fast-food restaurant Burger King.

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Viv Watts, who owns two Travelodge hotels and is representing a group of more than 80 of the company’s landlords, said the hotel’s development directors had warned landlords that the business could become insolvent next year if rent cuts were not agreed.

But, he added that Travelodge should “exhaust all avenues of finance” before negotiating on rent.

Mr Watts sent proposals to the company on Friday offering monthly payments and a deferral of the rent bill for April until June. The landlords estimate that these proposals would give Travelodge £53m in immediate cash relief.

Travelodge has outperformed its peers in the budget hotel sector in recent years. In the six months to the end of June last year, like-for-like revenues increased 6 per cent to £337m. The company said its revenue growth was 0.2 per cent ahead of rivals and that it had £85m in cash.

Travelodge declined to comment.



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