Travelodge reduces rent payments to stay afloat
Travelodge has confirmed it has entered a company voluntary arrangement (CVA) in order to retain its liquidity during the Covid-19 pandemic.
The budget hotel operator says the CVA forms part of its recovery plan, which includes steps to re-open its hotels once the government restrictions are lifted, reduce operating and capital costs, raise additional funds and temporarily reduce rents paid to landlords.
Travelodge employs 10,000 people nationwide across 700 properties. There are no planned closures of any of its hotels.
The CVA proposes a schedule of differing rent levels, with some hotels receiving full rents and the majority receiving a temporary reduction in the rent payable covering the period between April 2020 and the end of 2021. All hotels will return to full contractual rents in 2022, the operator notes.
The majority of Travelodge’s estate has remained shut since the government ordered the closure of hotels on 24 March. Hotel industry analysts project the likely halving of hotel revenues for the full year, which would be the equivalent of approximately £350m in lost revenues for the business in 2020.
Travelodge says it generates approximately 70% of its annual profitability in the period from April to September.
To retain liquidity, the chain is to temporarily reduce its rents payable as rent payments are the company’s largest cost at around £215m each year.
Landlords will be paid £230m in rent, being approximately 62% of the contracted sum due, and there will be a temporary reduction to landlord rents of up to £144m. This is equivalent to 2-3% of the total rent due under the remaining lease term.