Budget hotel chain chairman is looking to invest £100m in 30 new hotels north of the Border, writes Perry Gourley
When Brian Wallace was working his way up the corporate ladder in London back in the 1990s, he recalls colleagues turning their noses up at the thought of using a budget airline for business travel.
‘A good sleep is still as important to them as if they were spending much more’
“They would just expect to be booked on a British Airways flight,” says Wallace, chairman of Travelodge.
He argues that the fact a no-frills airline like EasyJet would now be seen as an attractive option for a business traveller highlights the changing attitudes which have helped fuel significant growth at the chain in recent years.
Wallace, a former deputy chief executive at Hilton Group, reveals that Travelodge is looking to invest some £100 million in around 30 new hotels north of the Border to capitalise on further growth potential. He has already overseen a similar level of investment to upgrade rooms across its estate since he was appointed by the chain’s US owners three years ago.
Wallace – visiting Scotland as part of the chain’s 30th anniversary celebrations – says growing demand was being seen across its customer base with particularly strong growth in the corporate market, which in the past would have perhaps booked more upmarket locations for staff.
“We have seen a fourfold increase in the number of business travellers using our hotels, with the likes of some of the big accountancy practices now regular customers,” points out Wallace, who was in Edinburgh on Friday to mark the chain’s 30th anniversary.
“There has definitely been a shift in people across the board wanting to feel they are getting good value, whether that’s in their grocery shopping or which hotel they stay in.”
According to latest figures from the two biggest players in the UK budget – or “value” as Wallace prefers to refer to it – hotel market, it is a profitable time to be in the sector.
Earlier this year, Travelodge revealed a surge in profits as its owners reportedly lined it up for a sale that could value it at more than £1 billion.
The figures highlighted the progress made by the group, which almost collapsed under a debt mountain three years ago. Underlying earnings for 2014 were up 63.5 per cent to £66.2m as it benefited from greater room occupancy and rates boosted by business customer usage.
Rival Premier Inn last week also reported strong trading, with like-for-like sales growing 6.3 per cent in the 13 weeks to 28 May. It is also planning expansion in Scotland, with locations such as Falkirk key targets.
The latest BDO Hotel Britain report confirmed that the budget end of the market continues to outperform other parts of the hotel sector.
Market leaders Travelodge and Premier Inn have continued to grow their estates, but there has also been development of new budget brands such as Citizen M and Qbic hotels.
Tune, which launched its first site in Scotland with the opening of a 179-room hotel opposite Haymarket in Edinburgh, has announced plans to invest £200m to open 25 hotels in the UK over the next five years.
German group Motel One and EasyHotel have also set up in Scotland in recent years and contributed to the number of budget hotel rooms in Edinburgh alone rocketing from 890 to more than 3,000 in the past eight years.
The BDO report identified plans for in excess of 1,300 additional hotel rooms to be developed in Edinburgh, Glasgow and Aberdeen this year, with a significant proportion of those expected to be in the budget sector.
According to Wallace, the growing use of lower cost hotels by business travellers has been an important factor in underpinning Travelodge’s expansion plans.
“People on business typically want to stay on Tuesday, Wednesday and Thursdays, which is when the leisure market tends to be quieter, so that helps keep occupancy levels throughout the week high,” observes Wallace who is also a non-executive director at Aberdeen transport group FirstGroup.
A £100m modernisation programme across the existing UK Travelodge estate has included the installation of new beds in every room.
“People come and stay in our hotels because they are doing something else, whether that’s business, attending a sporting event or visiting family, but a comfortable bed and a good night’s sleep is still as important to them as if they were spending much more.”
He believes many leisure travellers are also using money saved on finding cheaper accommodation on other things, such as better meals out during their trips.
The 30 new sites Wallace wants to open across Scotland will see the creation of more than 500 jobs to add to the 700 or so the company already employs.
Glasgow is a key focus area, with five new sites being targeted along with St Andrews, where Wallace went to university.
“We have wanted to be there for a long time but just haven’t been able to find the right site yet,” says Wallace.
Other locations include Ardrossan, Aviemore, Greenock, Inverness, Oban and Pitlochry.
Wallace is confident that there is no shortage of demand from customers.
“Our performance in recent years and the investment we have made in our hotels means we are very positive about the future.”
The chain is likely to have new owners in the next year or so with a long list of potential buyers no doubt already running the rule over a company which has built a strong position in a sector that continues to outperform the wider market.
TRAVELODGE’S first Scottish hotel opened at the M80 services near Stirling in 1985.
It now operates 40 hotels in Scotland with a total of 2,729 rooms and is the biggest hotel operator in Edinburgh with 11 properties.
Key facts and figures about Travelodge in Scotland over the past three decades include:
• Starting price in pounds for a Travelodge room in 1985 was £19.50 – today it is £29.
• The company’s biggest hotel in Scotland is Edinburgh Central (193 rooms), the smallest hotels are Dundee and Dumbarton (32 rooms each).
• 700 people work for Travelodge in Scotland.
• 7.5 million have stayed at Travelodge in Scotland over 30 years with 375,000 breakfasts served.
• £5.5m invested over past two years in modernising its hotels in Scotland.
• Group-wide, Travelodge now operates more than 500 hotels and 38,000 rooms across the UK, Ireland and Spain.
• Total revenues last year rose by 14.9 per cent to £497.2m.