Unviable housing sites targeted by Travelodge
By Daniel Thomas
Published: July 19 2008 03:00 | Last updated: July 19 2008 03:00
Travelodge, the budget hotel group, is hoping to exploit the downturn in value for residential development land to help boost expansion plans for its chain across the UK.
The group – owned by Dubai International Capital – is to send letters next week to housebuilders and property developers urging them to offer their “unviable” sites for use as hotels.
Travelodge wants to expand its chain by more than 1m sq ft this year – equivalent to about 45 new hotels – and hopes that the sharp downturn in market values means that it can strike bargain prices for previously expensive prime residential sites.
The cheaper end of the hotel market is performing strongly as businesses look to cut costs, and Travelodge wants to capitalise on this with its rapid growth plans.
The letter to developers from Paul Harvey, managing director, international and development, says: “Whilst two years ago you may not have considered a hotel to be optimum use for your developments, it is clear the landscape has changed dramatically. A Travelodge could well prove to be the ideal solution for sites that are currently not looking viable.”
Travelodge operates 340 hotels, but has ambitious growth plans to run as many as 1,000 hotels by 2020, equivalent to a market share of 10 per cent.
It is keen on opening new hotels in town and city centres, particularly in London and the surrounding home counties.
Most sites would have been far more valuable for residential rather than commercial or hotel use until this year, when the fall in house prices began to seriously affect the value of the underlying land.
Housebuilders admit privately that some sites are effectively worthless in current market conditions because of an unwillingness to build homes that will not sell – and many are looking to move land assets from their balance sheets as they look to bolster cash positions.
“The correction in land values continues,” Mr Harvey told the FT.
“Sites that would have gone to residential a year ago are suddenly no longer attractive and those are exactly the places that we usually want to expand.
“The residential market is under the most pressure for 15 years or more, which gives us an opportunity.”
Mr Harvey said that it was already in discussion with developers in provincial towns and London boroughs to convert sites that were destined to become flats.
Travelodge is also planning an international expansion.
Copyright The Financial Times Limited 2008