Travelodge rejects short-term deferrals in recovery plan proposed to landlords

Travelodge has written to its landlords proposing a recovery plan that includes foregoing £103m-£146m in rent.

The letter, seen by The Caterer, acknowledges their landlords’ “constructive engagement” and says that short-term deferrals “simply don’t address the need for stability” or the scale of the issue.

Under the recovery plan, Travelodge said its shareholders were expected to absorb an impact on equity value of approximately £200m through the use of the company’s cash reserves and additional borrowing.

Their proposal also includes a move to a “period of monthly rents and reduced rent for some landlords” through to the end of 2021, at which time the hotel chain expected to return to “the full level of contracted rent payments”.

Travelodge said it would seek formal agreement to its proposal from all landlords next week.

The letter says: “Our landlords are being asked to forego £103 million to £146 million in rent, or approximately 2.4% to 3.3% of the total of more than £4 billion in rent due over the remainder of the leases.”

The letter goes on to say that landlords who accept a temporary period of reduced rent will be offered an option to extend their lease for a “period equivalent in value to the amount of rent foregone, as well as an additional further year”.

The hotel chain stressed that not all landlords will face reductions as many rents were being paid in full and those with the higher reductions were small hotels that may “not break even for some time even when they open”.

Travelodge, which claims it has 10,000 jobs at stake, delivered six straight years of growth and entered 2020 with cash reserves of more than £100m.

Two weeks ago it was reported that Secure Income REIT, which owns 123 Travelodge hotels had initiated legal action against Travelodge to recover outstanding rent.