Travelodge investing £75m in Scottish tourism growth

BUDGET hotel operator Travelodge is looking to tap into Scotland’s tourism growth with a £75 million investment to build ten hotels north of Border.

The group, which is backed by wealthy hedge fund owners, has put its 2012 crisis behind it and is ramping up investment in the face of the aggressive expansion of rival Premier Inn as the pair battle over a booming low-cost segment in the hospitality industry.

Whereas Premier has just opened a new site in Edinburgh, Travelodge feels well represented in the capital and is concentrating on Glasgow, where it is already building a 171-room hotel that is due to open before the year end.

It plans to start work on another slightly smaller site in Scotland’s largest city as part of the latest wave of growth.

Chief executive Peter Gowers told Scotland on Sunday that Glasgow could be set for a tourism boom following the Commonwealth Games.

“There is an interesting parallel with Manchester, which has really gone through a resurgence since hosting the games [in 2002], which really put it on the tourism map. We are hoping that it will happen in Glasgow as well,” he said.

Other sites the company has identified are Oban, Peterhead and St Andrews, all of which are in line for 120-bed establishments.

The plan, which will add about 900 rooms to the 2,700 Travelodge already has north of the Border, would also see the company expand its presence in Aberdeen and set up in other towns, including Falkirk, Hamilton and Motherwell. The firm said its investment will create 200 jobs and boost the Scottish economy by £16m a year as a result of guests spending with local businesses while staying at the new hotels.

Gowers said that with 40 hotels, Scotland is still slightly under-represented in Travelodge’s portfolio, and yet is well placed to benefit from the cost-conscious consumer recovery taking place in the UK.

He said: “Throughout the last five or six years, people’s desire to go on holiday or take a break has not diminished in the slightest, but they are perhaps having to be more conscious of cost. I think there is a big opportunity in Scotland generally. The value hotel market is only about 14 per cent, compared to 18 per cent in England and more than 30 per cent in the US.

“Scotland’s tourism policy is targeting visitors from the British Isles, which is our target market. So there are a lot of people being encouraged to come here and a low proportion of value hotels.”

Travelodge believes that by 2030 the budget sector could account for almost a quarter of the UK market, with a similar level of growth expected in Scotland.

The expansion is being funded by Travelodge’s owners, Goldman Sachs and US hedge funds Golden Tree Asset and Avenue Capital Group. The American firms took over the company in a 2012 restructuring that halved its debt and trimmed its 500-plus estate by nearly 10 per cent.

The new owners are already funding a refurbishment programme that will see the group’s 38,000 rooms made over with new beds and decor. The process is around two- thirds complete, with around £1m a week being spent.

Gowers said that the 49 hotels that were divested in the refinancing, which took place before his arrival at the group last November, were legacy properties that no longer fitted with the needs of the company’s customer base.

Rival Premier Inn plans to increase its UK hotel rooms to 75,000 by 2018, compared with 55,000 now.