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Travelodge gives ‘cautious' outlook as cost pressures hit profits

17 May 2018 by
Travelodge gives ‘cautious' outlook as cost pressures hit profits

Travelodge has said its outlook for the immediate future is "cautious" as cost pressures hit profit.

The caution was expressed within the company's financial results for the year ended 31 December 2017, which saw profit fall to £44.5m, compared to £53m the year before.

The fall in profits was reported despite revenue growth of 6.6% to £624m, a 2.9% increase in like-for-like revpar to £40.49 and EBITDA growing by £2.4m to £108.8m.

Travelodge said this revenue growth had gone some way to mitigate factors such as increases to the National Living Wage and business rates, adding it that it will be "well-positioned" once such pressures begin to abate.

Operating expenses increased by £24.3m to £334.4m in 2017, driven by increased employee costs as well as business rate rises and expenses related to the opening of new sites.

The company, which has 553 leased, franchised or managed sites in the UK and Ireland, also reported that its average room rate rose by 2.8% to £53.19, helped by rising sales to business customers, following the launch of its SuperRooms. Occupancy during 2017 was maintained at 76.1%.

The company's strategic report reads: "Demand for budget hotels has remained positive since the start of the year. However the market is up against tough comparables for last year which included strong inbound travel owing to the weak pound and it also faces the impact of new supply growth in what is traditionally a low occupancy period.

"For the midscale and economy sector the first few weeks of the year have seen a decline in London revpar and somewhat flat performance in the regions. We have continued to outperform our segment and deliver like-for-like revpar growth.

"In view of the wider economic uncertainty and the well-known cost headwinds, especially those relating to the National Living Wage, other regulated cost increases and general inflationary pressures, we remain cautious on the immediate outlook. However once these pressures abate, we are well positioned."

Travelodge opened 15 new hotels in 2017 and plans to open a further 20 hotels in 2018.

The company also has five hotels in Spain, which are held under a separate parent company.

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