Ago Hotels announced it had secured at least nine hotel leases from Travelodge following the break clause deadline on 18 November.
The company told us it was talking to a further 35 owners about a possible change of brands.
Lionel Benjamin, co-founder, Ago Hotels, told us: “The first nine hotels to switch to the Ago Hotels platform is a real milestone, marking the culmination of a long journey to provide landlords with an alternative lease structure to safeguard their interests and the value of their investments.
“The platform has very significant expansion potential by offering the best of both worlds - institutional leases and operational participation. Ago Hotels is in discussions with owners of individual hotels and portfolios who stand to benefit from our disruptive business model, enjoying downside protection and upside participation.
“We have been punchy, creative and entrepreneurial in a market dynamic nobody has experienced - launching in this market is pioneering and we will grow from here - today we are an acorn. We dreamt it, we created it and now we nurture and grow it.”
The full Ago Hotels offering for the Travelodge landlords included 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 the contracted 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 the initial joining landlords as a diversified income stream and “major” equity stake in Ago Hotels for the incoming Travelodge landlords.
Philip Lassman, VP development, Accor Northern Europe, said: “Accor is pleased to be a founding partner of Ago Hotels which has now secured nine new hotel sites. Ago is an innovative model for the UK with strong potential for the Ibis budget brand”.
The news came shortly after Whitbread announced it had exchanged contracts to secure two trading Travelodge hotels for Premier Inn. The agreements with separate private landlords will see the Travelodge Bury St Edmunds hotel and Travelodge London Uxbridge hotel convert into Premier Inns.
Mark Anderson, managing director for property & international, Whitbread, said: “Securing new Premier Inn hotels in Bury St Edmunds and Uxbridge is a strategic investment by Whitbread in popular markets for business and leisure travel. It’s part of our ongoing strategy of growing market share, through Whitbread’s strong balance sheet and financial flexibility and resilience, in locations where we are underrepresented and where we see opportunities to create long-term value for our shareholders and guests.”
Benjamin commented: “Major hotel brands, may have missed the chance to use their balance sheet and take broader advantage of the opportunity. This represents a great start for Ago Hotels, we have the flexibility to expand with Accor and Ibis Budget as well as hotels and developments outside of the Accor family, giving Ago Hotels commercial and entrepreneurial flexibility. Ago Hotels are looking to potentially acquire assets.”
Secure Income Reit, which had helped to lead the revolt against Travelodge, surprised the market in October by withdrawing its portfolio of Travelodge hotels for sale, despite reports that a deal had been struck with Aroundtown.
The company said that none of the “multiple bids” received “reflected the potential for value recovery once the pandemic has subsided”.
SIR will maintain the current arrangements following the recent CVA, whereby the leases of its 123 hotels portfolio remained in place on the same terms and conditions, with a short term reduction in rent.
SIR said that it had undertaken discussions with several third party hotel operators in order to ascertain whether there were opportunities to enhance shareholder value in relation to the Travelodge portfolio. It said it had concluded that Travelodge remained “one of the best in class operators in the low-cost hotel sector and the terms offered by any replacement would carry unacceptable risks for the company”.
Insight: The market is ripe for disruption and the sector was agog at the revolt against the Travelodge brand after pushing for what was seen as a restructuring too far. Fool me once, shame on me, fool me twice, shame on you.
A number of global players weighed into the battle to pick apart the carcass, although after the initial frenzy, only Accor was left, playing on its enthusiasm for flexibility but aligning itself with Benjamin and the founder of the Travelodge Owners’ Group, Viv Watts.
Nine may not feel like a lot, but the process has shined a light on the status quo and shown not only that it is wanting - we knew that - but that something could be done. The breaking of every dam starts with a single crack.