The latest, third quarter review of the UK hotel industry from accountant and business advisor PKF warns landlords of hotels to “take warning” from the recent Travelodge saga.
PKF’s review, entitled hotelquarters, said the budget chain’s recent use of a company voluntary arrangement (CVA) as part of a major restructuring which required landlords of 49 hotels (out of a total of 505) to accept a 45 per cent reduction in rent, and gave six months for the hotels to be transferred to new operators, was likely not to be the last such example of the practice.
Over 100 Travelodge hotels are being retained but at a reduced equivalent monthly rent of 75 per cent before reverting to a market based rent after three years. PKF estimated affected landlords will get back 23.4p in the pound (though this compares with approximately 2p in the pound in the event of administration).
Under the terms of the financing agreement with three key investors, GoldenTree Asset Management, Avenue Capital Group and Goldman Sachs, £75m of new money was injected into the company, £55m of which is being invested in a major refurbishment programme covering 11,000 rooms and 175 hotels.
A total of £235m of Travelodge bank debt is also being written off and £71m repaid. Initially, at least, no hotels will be closed on day one, and there will be no immediate redundancies. Suppliers will continue to be paid in full.
Travelodge CEO Grant Hearn had earlier put a brave face on the restructuring agreement: “The financial restructuring completed will provide further stability to the business. It demonstrates our investors’ confidence in the company and I believe we have now secured the long-term future of the business.”
“Travelodge may not be the first hotel operator to succumb to a CVA, but it is the largest, and it won’t be the last,” PKF’s hotelquarters said.
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