MARZF Marstons PLC (PK)

Budget hotel operator Travelodge remains committed to its rapid U.K. expansion rather than further ventures overseas, and will not be affected by the troubles faced by its owners in Dubai, its new chief executive Guy Parsons told Dow Jones Newswires.

"The focus now really is on the U.K.," said Parsons in an interview in London. "For the next two-to-three years you're not going to see a change in strategy because the opportunity's so much greater here than other locations."

Travelodge operates almost 400 hotels in the U.K. and also operates a handful of hotels in Spain and the Republic of Ireland.

Parsons is currently the company's U.K. managing director but steps up to the chief executive role on July 1. The current CEO Grant Hearn is stepping up to be Executive Chairman to "focus on the company's growth opportunities." Some observers saw this as a prelude to an expansion overseas.

"The 'opportunities' don't have to be outside the U.K.," said Parsons. He wouldn't say where these opportunities for growth in the U.K were, but said some ideas were "very leftfield."

Whatever the opportunities, Parsons was adamant the problems faced by its parent Dubai International Capital would not affect them.

Dubai Holding's investment arm DIC bought Travelodge for GBP675 million in 2006. It was badly affected by the recession however and in January, Dubai Holding dissolved DIC's board and enforced a "new governance structure."

DIC was last month forced to seek a three-month extension on a $1.25 billion loan which was due in June.

"Anything that happens with DIC does not affect the operations of Travelodge now and nor would it do so in the future," said Parsons. "It doesn't have an effect on us."

Parsons said Travelodge was responsible for the payment of interest on its own debt. "If anything happened to DIC we would have conversations with the major banks that made the original loans but it wouldn't affect the way we operate the business."

Parsons said that theoretically the problems faced by DIC could impact on expansion overseas, "but we're not at that place anyway."

In the U.K., developers are "very happy" with the company's situation. "We've had conversations with them but its not preventing the hotel opening program at all," he said. "It's just not a concern."

Travelodge is aiming to double its number of rooms in the U.K. to 70,000 over the next 10 years. This would give Travelodge around 10% of the U.K. hotel market, he said, and would leave ample room for competitors like Whitbread PLC's (WTB.LN) Premier Inn chain to grow as well.

Travelodge continued investing in growth throughout the recession and now has a pipeline of 15,000 rooms to open over the next three years, said Parsons.

The 26 hotels due to open this year are all on track, he said, and there's a possibility this target could be beaten.

The fact that Travelodge rooms need to be paid for in advance means hotels can be cash positive prior to opening.

In recent years, Travelodge has opened hotels above supermarkets, in Central London office blocks and in the car parks of pubs.

Parsons said there was a large opportunity to open hotels alongside pubs. It has already built a number of hotels alongside Marstons's PLC (MARS.LN) pubs and Parsons said Travelodge would continue to work with pub operators.

"It gives us a landbank in locations that we might not have been able to get into," he said. "I think there's a lot of opportunity for us to develop in that way."

Parsons doesn't see himself as a typical hotelier or Travelodge as typical hotel company. "We're an e-commerce business that retails bedrooms," he said. "We're a very different business to what we were."

Parsons' decision to withdraw Travelodge from the industry body The British Hospitality Association reflects this attitude. "It's counterintuitive being part of a body which represents thousands of individual hoteliers when actually what I'm trying to do is put a lot of hoteliers out of business," he said.

Parsons is expecting the recovery from the recession to take a number of years. "Without doubt there is going to be some pain felt in the recovery," he said.

"What's encouraging from our point of view is that we have come out of recession much more quickly than the rest of the market," he said.

This was largely driven by the strength of the London market, with the recovery elsewhere in the U.K. "patchy."

One positive effect of the recession was that budget hotels picked up business customers who may not have tried budget brands before.

While it would be naive to think all of these customers would remain with Travelodge, he was confident of keeping most of them.

"We have a great opportunity to continue stealing market share," he said. "When the lights are out, all hotel rooms are the same."

-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com

Marstons (PK) (USOTC:MARZF)
Historical Stock Chart
From Oct 2024 to Nov 2024

Marstons (PK) (USOTC:MARZF)
Historical Stock Chart
From Nov 2023 to Nov 2024