August, the month of holidays, was anything but in the shadowland created for us all by the pandemic; part work, part play, lines of demarcation missing in action. But, as governments across Europe encouraged their citizens to take a break - but stay at home - the hotel sector wound itself up to look more like a September in its enthusiasm for deals and derring do.
The story of the summer was Travelodge and the potential ramifications for stakeholder alignment meant that it attracted viewers from all over the world. It started innocently enough, with rumblings of a CVA at the group, which had many muttering ‘so far, so Travelodge’. Protected by Covid-19 legislation in the UK, the brand’s owners were able to push through a plan to cut rents, which caused an uprising and banding together of hotel owners who felt that enough was very much enough and managed to ensure that a break clause was put into the final agreement.
The size of the group - over 500 - created quite a prize for a sector thrown into stasis. This left owners in a kid-in-a-candy-shop scenario, assuming your kids want to spend their time in what is essentially a hotels-focused franchise fair. The global operators all had a look - even Travelodge itself set up a stall - but many were deterred by the vast spread of quality across the estate. Owners were reluctant to spend big on conversions at a time when there was no money coming in through the door, something which results season also served to highlight, as brand swapping increased, but not enough to make up for barely-bubbling pipelines.
This left a space for the innovators and gaining a few headlines from this publication at least was Ago Hotels, which described as a “landlord-friendly” platform, created by the Travelodge Owners Action Group and Accor, driven by Viv Watts and Lionel Benjamin.
Ago Hotels offered a hybrid lease model under the Ibis Budget flag, with Accor potentially investing £32m in rebranding, distribution and IT. In a call with the owners, Accor chairman & CEO Sébastien Bazin was eager to sell the story that the group was not like other hotel companies, that it was not “draconian” but flexible.
Also talking to owners was Magnuson Hotels, where fees were a simple slice with access to a global distribution network and the promise of investment in conversion and the opinion that many of the hotels could be pulled up into higher rate categories. The group has had success in the US looking at alternative demand, including extended stay, and saw much to mirror this in the UK.
Then Goodnight, partnered with Village Hotels to provide the management and operational platform and aimed to “offer landlords as close a product to what they originally had under their Travelodge lease, where investors had originally often bought the hotels for four rent cheques a year and have little appetite for or experience of operational hotel risk”. And a similar colour palette.
Adding to the intrigue, Secure Income Reit was looking to sell its portfolio of over 120 hotels currently under lease with Travelodge and, at the time of writing, had attracted an array of bidders who would also have to make a branding choice of their own. Under normal circumstances the wining and dining industry would be enjoying a boom year.
While Travelodge played out to the entertainment of all, in the wider world results season was less of a source of potential fees and more of a source of lowering expectations. For an industry which had been all about the luxury sector and the loyalty schemes which would feast on it, there was a sudden switch to the economy and budget sectors, of interest as a pressured travelling public looked to save money on the few hotel nights it was enjoying away from home. Attention was on what lower-priced leisure demand, what Chris Nassetta, president & CEO, Hilton, acknowledged as “the biggest bucket of demand”.
Nassetta spoke for everyone when he said that expected the company to “grind, up slowly and surely” as business transient recovered to compensate for an anticipated drop off in leisure travel in the autumn. How true that proves as local lockdowns grow remains to be seen. The hope was that governments will come up with flexible travel strategies based around testing and tracing to allow us all to move around the globe again.
For Airbnb, pushed to the side by hotel industry which had started to hope that the danger had passed, the much-chatted-of move into longer-term stays, attracting students and the like, seemed to have been pushed to the side as a nervous public looked to use other people’s houses - preferably with pools - in which to self isolate over the sunny months.
Towards the end of the month the platform filed - confidentially - with the SEC to go public, with the number of shares and price range yet to be revealed. Having acquired absolute stacks of cash from some feisty private equity types earlier in the year, Airbnb will need to replace the money that it has burned through in the tense times and possibly replace some of those investors too. Hotels were waiting to see whether it sold itself as a competitor to hotels or to student housing.
While we wait for clarity on the caring, sharing economy, the market was tickled by a story leaked to the French press about Accor’s designs on InterContinental Hotels Group. Remember those budget and economy hotels? Well those two have them and suddenly it was looking like a strength rather than a weakness. A combined company would have over 1.6 million rooms, ahead of Marriott International, which had close to 1.4 million rooms at the end of last year.
Was the story appearing as a distraction to Accor’s downgrading from S&P Global, or as leverage in negotiations? Both sides were quick to tell us that they didn’t comment on market speculation. Very quick.
As for those staycations? As the month drew to a close, figures were starting to come in describing the summer’s hotel performance. The picture was one of good for beaches, bad for cities. The global operators have had to shift where they were targeting demand since hotels have been able to reopen and further flexibility will be required as we head towards winter, with many hoping that leisure will bleed into September.
So that was August. One of the most active on record. Hold onto your hats as the winds pick up.