‘Strong revenue growth' for Travelodge cushions impact of cost increases

Budget hotel brand Travelodge has revealed that revenue growth of 8% in the first half of the year helped cushion the impact of cost increases.

For the six months ended 27 June 2018, the group's total revenue hit £317.2m due to positive like-for-like sales growth together with good growth in food and beverage sales. This helped to mitigate the impact of cost increases, particularly National Living Wage and higher operational costs, including the impact of occupancy increases.

The combination of good revenue growth and cost increases resulted in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increasing £1.3m to £43.3m.

Revenue per available room for the first half of the year was also up 3.1% to £38.68, occupancy was up 2.1% to 75.6% and average room rate was flat at £51.14, compared to £51.07 during the same period last year.

Travelodge chief executive Peter Gowers said: "In the first half of the year, Travelodge delivered strong revenue growth and has continued to outperform the midscale and economy market segment. Our focus on location, price and quality is paying off with another period of increased occupancy.

"While the UK continues to face economic uncertainty, demand for budget hotels remains strong and more and more businesses are choosing the budget sector. Although the general economic picture, the impact of new supply growth and clear short-term cost headwinds lead us to remain cautious about the immediate outlook, our strategic focus and growing pipeline will position us well as these pressures abate."

The group said the second half of the year typically brings in more revenue and the demand for budget hotels remains good, but due to significant cost pressures and economic uncertainty it "remains cautious" on the immediate financial outlook, while remaining "well-positioned" once these pressures abate.

Travelodge opened six hotels during the period and has opened three more since June, including its new 396-bedroom flagship hotel in the City of London, its largest new-build hotel. It also launched its new Travelodge Plus format.

Founded in 1985, Travelodge had 564 hotels across the UK, Ireland and Spain at the period end and says it is "on track" to achieve its target of 20 new hotel openings in 2018, with most of these hotels expected to open in the fourth quarter of the year.

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