Travelodge Owners Action Group has teamed up with Accor to launch Ago Hotels, which it describes as a “landlord-friendly” platform.
Ago Hotels offers a hybrid lease model under the Ibis Budget flag, with Accor potentially investing £32m in rebranding, distribution and IT.
The offering came as a group of around 80 Travelodge hotels were expected to sign new leases with Goodnight, a brand due to launch in January in conjunction with Village Hotels.
The full Ago Hotels offering includes a 25-year lease term from Ago Hotels on a full repairing and insuring basis (capex, repairs and maintenance fully managed by Ago Hotels); RPI-linked base rent at 50% of current Travelodge rent, adjusted for inflation since last rent review with five-yearly rent reviews; 50% of individual property Ebitda to landlord; 50% of total Ebitda paid into Ago Hotels and redistributed to landlords as a diversified income stream and “major” equity stake in Ago Hotels for incoming Travelodge landlords
Accor said it was “delighted to be selected as exclusive brand partner to Ago Hotels in this innovative and exciting new platform”. It added: “We are especially pleased to be partnering with Viv Watts and Lionel Benjamin. Viv owns multiple hotel assets in the UK and Middle East and has formed a majority coalition of Travelodge owners under the Travelodge Owners Action Group, leading them through the recent CVA process whilst also pioneering this innovate structure alongside Lionel who is recognised in the industry as a best-in-class asset manager when it comes to transforming hotel operational performance.
"The agreed Ago Hotels structure will be executed as a partnership between landlords, management and Accor, preserving asset values and enhancing income. The exclusive brand partnership will see us working hand in hand with Ago Hotels who will manage the operational business led by Lionel. We believe the hybrid lease structure creates a disruptive business model which will change the face of the UK hotel industry for investors, operators and brands alike.
“Accor currently has cash reserves in excess of $2.5bn placing us uniquely among hotel operators to participate in the delivery of a viable and attractive solution for Travelodge landlords. The Ibis brand family, including Ibis, Ibis Styles and ibis budget, represent well over 100 hotels in UK&I and more than 2,000 hotels globally, making us one of the leading economy brand networks in the world and a best-fit partner for Ago Hotels and Travelodge landlords.
“Accor has the strongest balance sheet of any hotel operator globally, offering the stability and long term alignment sought by Travelodge landlords who have been denied the opportunity to participate in the success of their portfolio while bearing the brunt of shareholder cash shortfalls in challenging times. No longer the case, the Ago Hotels structure will bolster asset values and deliver enhanced long-term returns to property owners.”
Accor has not been the only hotel company to throw its hat into the Travelodge ring. The landlord group has been looking at alternatives after last month’s vote to pass Travelodge’s CVA, including Accor, Marriott International, InterContinental Hotels Group, Hilton, Jury's Inn and Magnuson Hotels.
Tom Magnuson, co-founder & CEO, Magnuson Hotels, told us: “I can confirm that Magnuson Hotels is in discussions with Travelodge owners, as is Accor - it’s getting to an advanced level. What attracts us in this Travelodge situation is that it is a mirror image of what Magnuson has achieved in the US. Secondary and tertiary locations, rural, highways - that’s where we’ve found ourselves and in a similar price range: upper economy and midscale.
“We’ve turned around a lot of these hotels, repositioning a lot of them. In the USA, Magnuson outperformed the national revpar average of 2019 at 22% vs 2%, and so far this year, Magnuson is outpacing the US revpar average two to one.
“We are ready to invest significantly in the Magnuson UK brand, to do whatever it takes for the landlords as well as the travellers. There are a lot of hotels where which we feel are operating at too low a level, which we feel are at a midscale level.
“These hotels are the same type of geographic markets and it’s a hard work strategy, but one which must be done: to go into places such as Aberdeen, which was once all oil business, but to expand into government, medical, agricultural. When one really looks hard, one can find that there is more business for the hotels. This is the engine room we’ve been building for years.
“There’s a lot of upside for the owners, to be elevating a brand, to set a higher rate per room. We know what will be very important is that the Travelodge landlords is that they will be able to regain a situation of a predictable rate of return.”
Insight: This hack had, sorry to say, underestimated Accor in the Travelodge ankle-show parade, overturning a lifetime of learning about Accor. ‘It’ll never spend money getting into these Travelodges’, ‘Accor’s not interested in budget any more’ and plenty of other ludicrous thoughts were behind the dismissal of the French group’s involvement.
Well not so much. And oh to be a Travelodge landlord, which is not something you hear a lot of, as they look to all the brands who are, unusually, offering to fork out cash for the pleasure of collecting what could be an estate in the hundreds in the UK. The bidding is rising and Whitbread may well be starting to feel a little hot under the collar as it faces new competition.
Who will win? It’s no clearer at this stage, although don’t start placing bets on the future of Travelodge. A safer punt might be on the owners themselves, and that is truly something you don’t get to say every day.