Travelodge - comment

The bonds will be slightly softer today, with expected net cost inflation of 6.5%, which outweighs a decent trading performance (albeit Q1 is seasonally the weakest quarter). Revenue of £207m was ahead of our £197m forecast; driven by occupancy +0.8% (forecast -0.4%), balanced by RevPAR -1% (forecast +1%). The higher revenues flowed down to EBITDAR of £56m (£5m above forecast). Financing outflows of £78m were above our expectations, and we will adjust our model accordingly. Forward visibility is limited (as normal). We had stress-tested Q2/Q3 2026 in terms of Occupancy, and so far in Q2, Travelodge is still seeing growth in London and Regional Occupancy, balanced by softer RevPAR. We are getting more confident in the SSNs, but are awaiting the more significant Q2 results. Travelodge ended the quarter with £91m vs our expectation of £102m; we are still confident that liquidity is adequate, even if there is a sharp downturn in the UK economy over the summer period. Call today at 2 pm UK time.

Travelodge faces headwinds from government-mandated wage increases and taxes (£21m); visitor levies and the Employment Rights Bill could add to this burden. Around 100bp of the additional costs will be clawed back through cost savings, but net cost inflation will be 6.5%+.

The softer London market in Q1 was due to lower business stays.