Today, the UK’s first budget hotel chain, Travelodge has written to East Riding Council proposing an innovative new development partnership to finance the construction of a new Travelodge hotel in Beverley, which will not only create jobs in the community but will also generate a profit for the Council.
By borrowing money from central Government via the Public Works Loan Board at a fixed low interest rate, local authorities can regenerate surplus land that they own and generate double-digit profits on their investment.
Travelodge has already successfully opened two hotels in conjunction with local authorities via this innovative programme which includes an 81-room hotel in Aylesbury which officially opened this week and Eastleigh Central Travelodge, which opened earlier this year.
The Company is also in advanced negotiations with a further five authorities across the UK about similar deals.
To develop Aylesbury Travelodge on a 16,000 m² site, which is part of a wider regeneration project in Aylesbury town centre, the local council borrowed £18m from the Public Works Loan Board, a division of HM Treasury, which funded the development at a fixed low interest rate of 4.5%.
The rental deal agreed between Travelodge and the District Council, plus the income from the two other site occupiers mean that Aylesbury Vale is set to generate a double digit return on its investment.
Travelodge, which operates over 500 hotels in the UK, Ireland and Spain, is currently looking to boost its portfolio in Yorkshire. The budget hotel chain
already has eighteen hotels across the County, employing 270 staff members.
Paul Harvey, Managing Director for Property at Travelodge Hotels, said: “Working with local councils in this creative way has been a great experience for us and as a result of these innovative development partnerships, we have today written to 124 councils, which includes East Riding, to see if we can work together on a similar partnership.
“If East Riding Council has suitable land or assets in a location that is viable for a Travelodge hotel, then we would be delighted to work with them to help boost their local economy, create new jobs within the community and generate a good return for their investment.”
The letter sent to East Riding Council by Travelodge reads:
This week Travelodge will be opening a new hotel in Aylesbury, a development that was funded by Aylesbury & Vale Council using money borrowed from the Public Works Loan Board.
The Council borrowed £18m at a fixed low interest rate of 4.5% to develop strategic land it owned, constructing not just a Travelodge but a Waitrose and a multi-storey car park.
Last year a hotel funded in a similar manner was opened in Eastleigh whilst we are also in advanced negotiations with five other local authorities for similar developments.
The benefits for a local authority are:
- Low borrowing costs, with income generated significantly exceeding them.
- Long term, secure, rising income (Travelodge enters into 25 year RPI leases with upward only rent reviews every five years).
- The development programme can be de-risked with guaranteed maximum price build contracts, and forward commitments to sell if desired.
- Travelodge’s can speed-up regeneration, acting as a catalyst for other developments.
The briefing paper enclosed provides an overview of the typical options available to a local authority looking to work with Travelodge and a commentary on their relative advantages and risks.
We would welcome the opportunity to meet with yourself and other relevant people within the Council if you feel that there is land or assets in your possession that could be suitable for a Travelodge development.
If you would like to meet with someone from Travelodge then please contact Alan Oliver from our development team at email@example.com, 07825 982 759 or our Thame Postal address below.
Managing Director – Property
Travelodge Hotels Ltd