Growth in Re-branding of Hotels Provides Boost to the Hotel Market by Shaun Baugh, Wakemans
Author: Shaun Baugh
Last Updated: 8/16/2009 11:58:01 AM
Summary
The credit crunch has had a significant impact on the commercial property sector and the hotel market has to find new ways of meeting its bed expansion programme as traditional forms of funding become increasingly difficult.
Shaun Baugh director of national property and construction consultants Wakemans looks at the opportunities presented by re-branding and converting existing hotels that are under-performing or falling into distress.
Article
Wakemans has a great deal of experience in this sector as it
has worked closely with Travelodge for the last 14 years and
has helped them adapt their property procurement routes and
construction models to meet changing market conditions.
According to MINTEL research, the UK's budget hotel market
overall is still buoyant with this sector out-performing that
of the overall UK hotel market and growth of 38% is predicted
over the five year period from 2006- 2011.
New build Travelodge hotels are now often procured via
developers but the lack of availability of finance for schemes has
made it more difficult to get projects off the ground over the last
twelve months. However Travelodge is committed to continuing
with its ambitious expansion programme and has recently announced a
£77m investment in 12 new hotels which are to be built in
town centre locations throughout the UK.
To some extent there are opportunities available to take
advantage of the reduced land and building values and lower
construction costs, to compete with office developers for sites for
new build hotels in prime locations. However, the long
timescales involved in purchasing sites means that the option of
refurbishing a going concern is proving attractive in the current
market.
Finding the right location is always key and this can sometimes
take years. If you factor in the planning system, which is
taking longer and longer as it becomes more complex, then the
turn-around time to bring new beds on stream is extensive.
Once a going concern is identified, Travelodge can be on site in
a matter of months once board approval has been obtained to
proceed. Some projects can also continue to trade whilst the
refurbishment works are being carried out- so that revenue streams
starts even earlier.
The economic downturn has led to some private or smaller hotel
groups failing. It is often the case that the management have
run the hotel poorly and failed to invest in the upkeep. With
no access to funds to invest then the business will fail unless a
company like Travelodge steps in. The funding to re-develop
in this case can come from a number of different avenues. In
some instances the original hotel owner will raise the finance for
the refurbishment works and retain ownership of the hotel, taking a
25 year lease from Travelodge for the beds.
Another advantage to Travelodge is that these hotels tend to be
in traditional seaside location or popular tourist destination.
They are also likely to be historical buildings of merit,
providing an opportunity to develop the brand in locations and a
market place that would be difficult with a new build project,
locations such as Edinburgh, Tunbridge Wells and Leamington
Spa.
Seaside hotels in particular are proving successful. There is a
general revival of interest in the traditional British holiday by
the sea. Resorts such as Brighton and Eastbourne have new
Travelodge hotels on the seafront as does Worthing, the most
recently completed and flagship development for the group.
Recent research completed by Travelodge found that one in
three Brits will be holidaying in the UK this summer and that the
number going abroad for holidays has fallen from 33% in 2008 to 27%
in 2009. In 2009 47% of those holidaying at home are planning
to visit the coast.
Clearly people are still feeling uncertain about jobs and the
decline in the value of the pound against the Euro has also had an
impact.
The programme of going concerns refurbishment is very healthy ,
Wakemans has completed around 10 refurbished hotels in
the last 2 years and has a further 320 beds across five
hotels about to start on site and another 20 schemes all in the
planning stages.
These types of projects provide a win/win situation for everyone
involved. Travelodge can progress its aggressive growth strategy in
a difficult market, targeting a 10% share of the total UK hotel
market by 2020. They save jobs that would be lost if the
hotel was to close and regenerate area of towns and cities that are
often run-down and lacking in investment.
The Author
Shaun Baugh BSc (Hons), MRICS is a director of
national property and construction consultants
Wakemans, whose head office is in Edgbaston,
Birmingham. Tel: 0121 454 4581
Visit the Wakemans website: www.wakemans.com