The Caterer interview: Craig Bonnar of Travelodge on opening its 600th hotel

Peter then left in December 2020 and I picked up in January 2021, when we expected to open all the hotels, but instead, on my third day as chief executive, we were back into lockdown. The truth is that having worked with the company for four years I knew the team, I knew what we were capable of, and I knew that we'd shown in the previous 12 months we could be pretty resilient if we acted quickly, and that's what we've done for the last year.

In May 2021, when the hotels reopened, it was relatively slow but you could see the signs were positive. Since ‘freedom day' in July it's been outstanding. We've been front and centre with staycations and we've had a really strong summer and that set us up really well as we came out of 2021.

When you took on the role of chief executive you said you wanted to repair relationships with the group's landlords following the CVA. Do you think you're making progress in this?

Landlords told us it wasn't that the CVA was the wrong decision, it was that we could have improved communication with them during that period of time.

Now we want to build a closer working relationship with our landlords. We've spent a lot of time thinking about what's the right way to communicate with them, so they feel they are partners in our business, rather than having a traditional landlord-tenant relationship and the feedback has been really, really strong. It's given us a joint view over the estate and we've already identified a dozen hotels we think we can extend over the next three years, which will be better for the landlords and better for us. That's all come out of just building that level of communication.

Did you feel that the CVA had damaged your reputation as a business?

I didn't really think that our reputation had been damaged, there was just a lot of noise. We were one of the first companies to go through a CVA and any time you're the first you provoke focus and attention, but we weren't the last and nothing we did through the CVA was permanent. I think the fact we were not losing hotels or doing permanent rent reductions was well received, it was all temporary to get us through. We had over 90% support. We lost 17 hotels out of the best part of 600, so the majority of our landlords stayed with us and our outcome was very strong.

Why did so many landlords choose to stay?

Our strong brand and track record for performance. Covid affected the world, it wasn't just Travelodge, but we will come back. We're a strong business with good foundations and I genuinely believe we're a good company to work with. Our common objective is to build the business back up to strength and I think our bounce-back will have given the landlords confidence. Travelodge is considerably ahead of the industry, showing that the decisions we made were the right decisions.

What's your financial position now?

As we stand today performance has been stronger than probably most people would have expected. In Q3 [revenue per available room (RevPAR)] was 17.8 points ahead [of the competitive segment and 11.8% ahead of 2019 figures], and we're 10 points ahead year-to-date. It was a consistent level of performance and we've ended with a healthy cash balance that allows to make decisions going into 2022. We will be looking at a refit programme and reinvesting into our hotel estate because while I think there will still be uncertainty in the short term we're building for the future.

Q3 of 2021 saw a 9.9% increase in revenue to £229.5m – do you think the staycation boom can deliver similar results in 2022?

I think there will be more short breaks than ever before, because I think people have seen there's lots to see and do out there and you can do it relatively cheaply. People have learned that short breaks in the UK are just a fabulous way to go and experience the country and we have pretty much every corner of the UK covered. We're offering really good locations at a great price and a consistent quality.

How important is maintaining that low price point?

Price for us is really, really important. We have to maintain that position in the market, so we'll always have the headline prices and the £29.99 rooms. Outside of that room prices fluctuate through the year, dependant on demand and location. What we do is offer consistent quality and great value. So, we'll never take our eye off the price because that's what Travelodge stands for.

What about business travel? How important is that to your model?

We've got a pretty diverse mix of customers across our hotels: it's broadly 50/50 business and leisure. The majority of our business custom is from construction and logistics, so that's protected us a bit over the last six months.

Blue collar is very strong. When it comes to white collar, there are signs it's starting to recover, but that's still the biggest unknown. I don't think people will return into the office five days a week. I think if you look forward it's more likely people will travel on a Tuesday, stay over and do three days in the office then head home.

As the staycation boom has been so fantastic for Travelodge, do you have any nerves about the return of international travel?

In the summer of 2021, because you couldn't go abroad, that was a catalyst for the staycation and that was really good for hospitality. People will do more of that in the future, no question. Short breaks in the UK are here to stay.

International travel is a very small part of Travelodge's business. It's not something we rely on, but what it does do is create tension and demand in the market, so I think we'd like to see international travel come back as it's important for the economy.

Are you looking to grow your portfolio of properties?

This year we will open six hotels, including our 600th hotel. We're not sure exactly which one it will be, but potentially it could be Docklands down in London, which will be a fabulous 400-bed flagship hotel and a really good mix of business and leisure.

I think we've also got somewhere in the region of 250-300 target locations across the UK so we're not short of growth opportunities. I think generally it's been new-build opportunities we've been looking at, working closely with landlords, councils or development partners to either create standalone hotels or more recently mixed-use developments. Moving forward I expect new-build opportunities to drive our expansion, but we're always looking at the market. I think one outcome of the pandemic will be more opportunities bought to the market for acquisition.

We're predominantly a UK company, but we're trademarked in about 80 countries across the world so I think while we're looking at maximising the UK estate we're also casting a view wider than the UK. We know the brand can travel it's just when and how.

This year we are opening a new flagship hotel in Dublin City Centre. We're looking at Ireland and Spain, we're in both markets but we've not opened significantly in the last five years.

In September you had 750 vacancies and were looking to tap into new applicant streams, such as parents. How's that going?

We've spent a lot of time in the last 18 months thinking about attracting parents in particular, because we can offer great flexibility. The other big thing we offer is an opportunity to progress. There's a path to come in as a receptionist or housekeeper and work up to become an assistant hotel manager or hotel manager. Almost 80% of our management positions are filled internally, so we have really good role models of coming through the ranks.

It's a huge challenge though and we're only starting to realise the impact of Brexit. The impact of losing the EU workers is massive and will manifest itself further in the coming months. At some point I think the government will have to react as they have done with lorry drivers, I think hospitality should be on the list of areas they need to do something different with visas for.

You brought your housekeeping teams in-house five years ago – has that helped you through the staffing crisis?

It has been really important because, when you work for a company rather than being contracted, the whole sentiment is different; there's an emotional connection. And the fact we offer these opportunities for progression – it's just fantastic to see people develop and come up through the business. We've not put wages up because I don't think that's the solution. We offer flexibility, progression opportunities and ensure a good working environment. You can't buy loyalty – you've got to create an environment where people want to stay.

What does the future hold for Travelodge?

One of the things we've managed to do over the last six months is think about the future of the business and we're clear on a couple of principles. One is that the customer needs to be at the heart of our decisions, so we've done the most extensive piece of customer research in the company's history. The other is looking at what role we play in society and we've been working with a sustainability expert.

What was the feedback from your customers?

They consistently want a good night's sleep, a nice environment to relax in, limited noise and distraction and a good shower in the morning. That's our proposition and it ticks the boxes of 95% of our customers.

You mentioned sustainability, is that something that budget hotels can achieve?

Of course they can. There are simple things every operator can do, such as removing any plastic straws or plastic cups and putting recycling stations in the foyer.

But wider than that it's understanding the changes you can make in hotel design and that's really important. So, we're looking at designing the most energy efficient hotels we can. All new hotels are A-rated for energy efficiency and we're looking across our estate at waste, at the way we heat and fuel the hotels, looking at sustainable sourcing there's a whole raft of activities.

Our colleagues are keener on environmental activity than ever before. Feeling like we're making a difference is so important to our teams. We took all the plastic off our linen supplies last year. The reality is it makes the operation slightly more complex, but the team buy into it because they can see it's making a difference. It's an important area and it's becoming more important.

The Travelodge CVA

As Covid-19 threatened to ravage Travelodge's revenue in 2020, the company approached landlords with a proposal, including large-scale rent reductions. An agreement proved difficult to reach and resulted in a formalised company voluntary arrangement (CVA), eventually granted on 19 June 2020.

However the CVA, which had to gain the approval of a majority of landlords, was not reached without the formation of the Travelodge Action Group – a disperse group of landlords who argued Travelodge should cover the losses from its own pocket. The spat was acrimonious and made the headlines.

Terms of the eventual agreement included the company's owners using Travelodge's £100m of reserves and £40m in fresh cash to prop up the firm; 50% rent reductions through to December 2021 for 477 properties, and no rent for 37 loss-making hotels; as well as a break clause that hotels had until the end of that year to exercise.

That break clause could have allowed landlords to terminate their leases and re-let the hotels without penalty, and saw some rivals, including Accor, launch campaigns to woo disgruntled landlords. In the end though, only 17 hotels would jump ship.