Travelodge claims ‘exploitation' of development tax costing it an extra £27m

The way in which some London boroughs "exploit" the Community Infrastructure Levy (CIL) could cost budget hotel operator Travelodge an extra £27m as it develops hotels across the capital.

That's the warning from Paul Harvey, managing director of the hotel business, in a letter to Communities Secretary Eric Pickles.

Harvey called for an urgent review, after he claimed the Community Infrastructure Levy (CIL) is being exploited by London boroughs in an attempt to raise revenue, at the same time putting the capital's growing budget hotel sector under "severe threat".

CIL was introduced by the previous Government with the intention of ensuring financial clarity for developers in a bid to ensure developments make a fair contribution to infrastructure whilst providing an alternative solution or replacement to Section 106 payments.

But Travelodge alleged that instead of helping to drive long term sustainable growth, job creation and investment, the majority of London Boroughs are using this initiative to generate additional revenues.

Travelodge said it had identified 19 London boroughs that have already implemented or are looking to put into practice a CIL charge. Across these 19 boroughs, Travelodge is currently looking to develop 95 hotels which would create 2,600 new jobs. However for these developments to go ahead, the 19 boroughs combined are seeking an additional £27 million from Travelodge.

Harvey said: "In today's post recession economic climate, Government should be supporting businesses who are trying to help drive long term sustainable growth and not be placing barriers, such as the Community Infrastructure Levy.

"This additional development charge is being interpreted by some London boroughs as a quick win revenue generator, when in reality by setting such high rates, they are actually losing out on long term growth, revenue and job opportunities. It is unviable for companies such as ours to invest in new developments as a direct result of this extortionate charge."

"The London hotel market is the strongest in the world however its supply of branded budget accommodation is less than 20%. In contrast other major UK cities such as Manchester, Birmingham, Leeds and Glasgow boast a 30% supply. It is evident that there is a clear need for good quality budget hotel rooms across the capital as many of the existing B&B's and hostels offer inadequate accommodation, poor value and extortionate prices.

"However the levels of tax being proposed by a majority of London boroughs rule out future hotel development and job creation. Therefore Eric Pickles must recognise the damage that the poorly thought through CIL levels will have on future economic growth, and he needs to stop Councils implementing such harmful rates of tax."

The Department for Communities and Local Government was not immediately available for comment.