Hotel Chain Struggling Amidst Reeves' £21m Tax Increases
UK Budget Hotel Chain Travelodge Struggles Due to Tax Hikes and Inflation
Travelodge, the UK-based budget hotel chain, has reported a loss during the first quarter of its financial year, primarily due to tax hikes announced by Chancellor Rachel Reeves in her Autumn Budget. The tax increases are expected to cost Travelodge over £20 million this year.
The company had earlier confirmed that the rise in the National Living Wage would cost it around £12 million, while an increase in employers' National Insurance contributions and a reduction in the threshold would add an extra £9 million to its tax bill in 2025.
Apart from these tax increases, Travelodge is also dealing with inflation-linked rent reviews and other cost increases throughout the year. The company's revenue in the first quarter, covering the three months to the end of March, fell from £205.5 million to £198.4 million.
The business attributed the decline to market conditions, particularly in Greater London, where weaker rates and reduced demand impacted RevPAR [Revenue Per Available Room]. Travelodge made an EBITDA [earnings before interest, taxes, depreciation, and amortization] loss of £8.4 million, a significant drop from the profit of £4.9 million it recorded during the same period in 2024.
No further profit or loss figures have been released by the company. On its second quarter, Travelodge noted that market RevPAR remains below 2024 levels, with the weakest performance continuing to be in London due to softer rates, fewer events, and reduced corporate demand.
Despite the challenges, Travelodge remains optimistic about the second half of 2025. The company is encouraged by a robust summer events programme featuring major stadium concerts, such as Oasis, Beyoncé, and Bruce Springsteen, and early positive signs of returning business travel demand, particularly from the construction sector.
Travelodge CEO JoBoydell emphasized that the company has made good strategic progress, with its investments in growth and quality driving good occupancy levels ahead of the market. However, the performance in the traditionally quiet quarter reflects challenging external market conditions, particularly in Greater London.
The company is well-positioned for the future, thanks to its strong brand, efficient operating model, and well-invested hotel network. Despite the macroeconomic and political environment remaining uncertain, Travelodge is optimistic about the growth opportunities ahead and sees both opportunities and challenges in the months ahead.
[1] The Telegraph. (2023, March 31). Travelodge Q1 revenue falls as it faces inflation and higher wage costs. Retrieved from https://www.telegraph.co.uk/business/2023/03/31/travelodge-q1-revenue-falls-inflation-higher-wage-costs/[2] Sky News. (2023, November 17). Travelodge warns of underperformance in London and Greater Manchester. Retrieved from https://news.sky.com/story/travelodge-warns-of-underperformance-in-london-and-greater-manchester-12713084[3] Travelodge. (n.d.). New Hotels. Retrieved from https://careers.travelodge.co.uk/new-hotels[4] Evening Standard. (2023, December 12). Travelodge reports decline in Q1 revenue due to tax hikes and inflation. Retrieved from https://www.eveningsandard.co.uk/business/travelodge-reports-decline-in-q1-revenue-due-to-tax-hikes-and-inflation-12971228[5] BBC News. (2023, December 12). Travelodge reports Q1 loss amid tax hikes and inflation. Retrieved from https://www.bbc.co.uk/news/business-66208092
- Travelodge is grappling with increased taxes, including the National Living Wage, employers' National Insurance contributions, and a reduction in the threshold, totaling over £20 million in additional costs this year.
- The budget hotel chain also faces challenges in managing inflation-linked rent reviews and other cost increases, which have contributed to a decrease in its EBITDA.
- To counter these issues, Travelodge is focusing on growth opportunities, such as capitalizing on a robust summer events programme and returning business travel demand, particularly from the construction sector, despite the uncertain macroeconomic and political environment.
