The Big INterview: Travelodge chairman Brian Wallace
“I speak to many people in this job and quite a lot of them come up to me and say ‘Travelodge? That’s Lenny Henry isn’t it?’” laughs Brian Wallace. “Actually, I’m quite happy if people associate Lenny with Travelodge – at least I’m not having to pay for him.”
The affable Wallace is a hotel man through and through, having spent 12 years at industry heavyweight Hilton, where he was instrumental in re-unifying the brand through a series of alliances with Hilton Hotels Corporation and in selling down some £2 billion of hotel real estate.
He came on board at Travelodge in early 2013 and has since played a key role in the overhaul and rebuilding of the 32-year-old hotel brand following a refinancing in 2012 that resulted in it gaining new US owners.
These days, the chain spans more than 540 hotels, chiefly in the UK, but also with a handful in Ireland and Spain. In terms of scale, in its home market, that places it in second place behind Whitbread-owned Premier Inn with some 750 sites but the gap is closing as the Travelodge expansion gains traction.
Its chairman sees plenty of scope for growth in a UK “value” hotel sector that still has catching up to do when ranked against other comparable markets.
“There is room for a lot more Travelodges in this country,” says Wallace. “If you look at somewhere like the US, then one in three is a budget hotel. In the UK, that ratio is about one in five. We think there is a long way to go in terms of penetration in the UK and it’s certainly the right time to expand.
“People are much more value-conscious than they used to be – they now choose these value operators,” he adds, drawing a parallel with the way that airlines such as EasyJet and Ryanair have changed public attitudes towards using low-cost service providers.
“We came out of a difficult period a few years ago but have now invested through our current owners. Every room in the estate has been refitted and refurbished over the last three years or so. We are still very much a value proposition so you are not going to find chandeliers in our rooms. What you will find are the likes of a very high quality bed and a good power shower.”
The firm last week cut the ribbon on its latest Scottish establishment, which also marked the first branded hotel in Peterhead. The 63-bedroom site – a £3 million transformation of residential properties in the town’s Chapel Street – will be the first of three openings for Travelodge in Scotland this year. A 74-room hotel in Stirling and a 54-room Travelodge in Inverness are scheduled to open towards the end of 2017.
The three hotels represent an investment value of about £14m for third-party investors and developers who fund the properties and then lease them back to Travelodge, while also creating about 50 jobs.
More ambitiously the firm is eyeing a further 21 potential locations in Scotland, which if secured would mark a 50 per cent increase on the current 42-strong estate. From that target list, nine locations could get their first branded hotel – Ardrossan, Aviemore, Galashiels, Kirkwall, Lerwick, Loch Lomond, Montrose, Oban and Pitlochry. Five targeted areas could get their first Travelodge hotel – East Kilbride, Elgin, Greenock, Newton Mearns and St Andrews, where Wallace attended university and obtained an honours degree in economics. The group is also hopeful it can double its portfolio of hotels in Glasgow, which would equate to five new sites.
Overall, the ongoing Scottish assault would represent an investment value of £100m for third-party investors and lead to the creation of several hundred jobs. Across the UK as a whole, Travelodge has identified 250 hot spots giving it a potential estate of 750 or so hotels, level pegging with Premier Inn’s current scale, though it too is unwilling to stand still.
“We are very much in a phase now where we want to expand the business across the whole of the UK,” says Wallace, who also chairs Softcat, the FTSE 250 reseller of computer hardware, software and services, and has held a string of non-executive directorships, including at Scottish & Newcastle and FirstGroup.
“Our mantra is to be Britain’s favourite hotel for value and this expansion programme is very much part of that.”
The former Edinburgh Royal High School pupil says the task of identifying potential locations is “more scientific than you might think”.
“We have a dedicated development team whose sole job in life is to think forward over the next few years as to where we would want to put a Travelodge,” explains Wallace. “Studies are done regularly to look at demographics, population size, business needs and leisure travel. We map out the entire country very scientifically and analytically and keep that up to date. Out of that we can work out locations – some of them obvious, some perhaps less obvious.”
The group already has a strong presence in the Edinburgh market, where hoteliers have been enjoying some of the strongest occupancy and room rates in the UK, driven by foreign visitors, staycationers and business travellers.
Tourism market research specialist LJ Research’s Scottish Intercity Report highlighted a “staggering” 20.7 per cent year-on-year increase in average room rates in December to £113.48. Of the key cities in Scotland, occupancy was highest in the capital, where hoteliers sold 82.3 per cent of their rooms during the month.
Future bookings also showed positive signs for Edinburgh as forward business for each of the following six months was all up on 2016 levels.
Wallace says the impact from the fall in the pound following last summer’s Brexit vote has largely been positive, while the trend to take additional short breaks at home has also provided a revenue driver.
He says: “We will have to see how the staycation market develops over the summer but there are lots of indications that people in the UK may choose to stay more in the UK.
“The currency effect was quite marked at the start of the year, with more inbound tourists from the likes of Asia and the US. They tend to go more for the upper end of the market but as these four-star hotels start to get full we see a push-down effect.”
Wallace describes the growth in business customers at the chain as “very significant” in the last few years – a market that the company has been targeting “very actively”.
“We work with about half of the FTSE 100 companies who are sending staff around the country continuously,” he notes. “They realise that it is more than acceptable now to put their people into a Travelodge.”
Where the chain was once synonymous with motorway and trunk road service areas – Travelodge’s first Scottish hotel opened at the M80 services near Stirling in the mid-1980s – that model has evolved over the past three decades.
“We are much less trunk road than we used to be,” stresses Wallace. “That is certainly very much part of our heritage but we are now more focused on urban centres. As always, location is critical to the success of a hotel.”
The chairman concedes that there are plenty of headwinds out there, many of which are beyond any company’s direct control.
“There are clearly lots of cost pressures on businesses and we are no different,” he says. “We have to continuously become more efficient and look to reduce costs where we can without impacting on the customer.
“Across the UK, about 15 per cent of hospitality workers are from the EU, and so having sensible access to that going forward is clearly important to the industry.”
He adds: “I don’t know where we are going to get to with the independence referendum but the most important thing for me is that Scotland should be a vibrant economy, generating jobs and prosperity for everybody. My great concern would be if something happened that made that less likely.”