Guy Parsons: No time for resting on laurels as Travelodge chases Olympic dream

The Business Interview: The new chief executive of the budget hotel chain wants to dominate the domestic market in time for the 2012 Olympics

The timing of Guy Parsons' promotion to chief executive of Travelodge earlier this month after six years at the budget hotel operator seems excellent. Post-recession, Travelodge delivered "record" sales last week, boosted by new hotel openings and its recent advertising campaign featuring the cuddly toy, Mr Sleep & the Zzz squad. Mr Parsons says: "In the last week, sales have really exploded as Mr Sleep returned to TV screens."

Mr Parsons took the helm when Grant Hearn moved on to become executive chairman. While Mr Parsons declined to provide more recent sales data, Travelodge, which also has hotels in Ireland and Spain, saw its overall underlying sales rise 3 per cent in the first quarter of this year.

His timing is also exciting because Travelodge plans to double the size of the business by 2020, with a specific target to become London's biggest hotel operator by the 2012 Olympics. "We are opening a hotel every eight days in the UK," says Mr Parsons.

However, there are geographical differences in the current performance at Travelodge, which opened its 400th hotel this month. London's underlying sales jumped by 13 per cent in the first quarter. Mr Parsons says: "From the Midlands down, southern Britain is performing better than northern Britain, although there are some notable exceptions, such as York and Edinburgh, which are performing well."

In terms of its underlying sales turning positive, Mr Parsons says London emerged from the recession in September 2009, whereas elsewhere this came in the first quarter. He adds that London is busier now than it was at the peak in 2008.

Travelodge has 34 hotels in Greater London, providing more than 5,200 rooms. But by the time of the Olympics, Travelodge expects to have opened a further 18 hotels in the capital, giving it more than 7,000 rooms and making it the biggest hotel brand in London. This strategy is backed by Dubai International Capital, which acquired Travelodge from the private equity investor Permira in 2006.

But in common with its main rival, Whitbread's Premier Inn, Travelodge suffered during the recession. For example, there was a "dramatic fall" in business customers, as corporations slashed their travel budgets, says Mr Parsons. But he adds that it also benefited from businessmen trading down from three and four-star hotels to Travelodge.

He says: "We had customers staying with us for the first time during the recession and particularly businessmen, such as those at the government banks partly owned by the Government [Lloyds and Royal Bank of Scotland]." Since the recession ended, many business customers have stayed loyal to Travelodge.

Mr Parsons says: "When the lights are off, all hotel rooms are the same. What customers really want is good nights' sleep and you get that from a good bed, making sure the rooms are quiet, and that when they get up, they have a good power shower." Travelodge uses Hypnos beds, which have a royal warrant, in all its hotels.

A focus on getting the basics right underpins Travelodge's entire strategy as well as the Mr Sleep campaign. While other operators allow hotel managers to make individual decisions on issues such as pricing and menus, Travelodge takes these decisions centrally to remove complexity. Mr Parsons says this leaves hotel managers free to "look after their staff, customers and profit".

In short, Travelodge runs itself like a retailer rather than a traditional hotel. This is further illustrated by Travelodge's impressive e-commerce operation. Some nine million people stayed with Travelodge in 2009 and 87 per cent of reservations are made online, compared with just 19 per cent in 2004.

"The Travelodge site is about the same size at ba.com," says Mr Parsons. Over the past six years, he says that e-commerce has been a major element of how he and his team have "transformed" the business.

This is not the only similarity between Travelodge and the airline industry, as its rooms cost more the later they are booked. For instance, it sells rooms up to six months in advance and runs special promotions. In an offer in April, Travelodge sold out of 30,000 rooms priced at £9 in just six hours. However, customers who book on the day for a night in one of its central London hotels will pay over £100.

Its hiring policy also distinguishes Travelodge from traditional hotel operators. "We don't employ people from the [hotel] industry. We don't think of ourselves as hoteliers," says Mr Parsons. In other ways, Travelodge has shown itself to be a pioneer by recruiting "entry-level" staff from the long-term unemployed. Through its partnership with Jobcentre Plus, Travelodge says that more than 90 per cent of staff in new London hotels have been hired from the local unemployed since 2007.

However, Travelodge was buffeted by the downturn. For the year to 31 December 2009, Travelodge's earnings before interest, tax, depreciation and amortisation fell by 20 per cent to £45.7m, primarily because of weaker demand in provincial towns, cities and roadside locations.

Furthermore, Mr Parsons says the decision by the new Government to increase VAT to 20 per cent from 4 January 2011 is "bad for the industry". He says: "Britain is still criticised for having poor-quality hotels, expensive accommodation and if you push up VAT, it will stop people from building the hotels that they need to."

These clouds will not slow down Travelodge's aggressive opening programme ahead of the London Olympics and beyond. "Whilst other hotel operators have cut back their development teams, we were alone in the industry in growing ours last year to strengthen our property pipeline. We are very well placed to benefit from the upswing," says Mr Parsons.

The CV: Guy Parsons

* Joined Travelodge as UK managing director in 2004 from TGI Friday's, where he held the same role. Before then he had been in sales and marketing director roles at rival Whitbread's hotel division. He also did a stint as director of operations at the hotel operator Accor.

* He keeps fit by cycling into work a couple of times a week and swimming regularly. Mr Parsons also plays the piano and has a one-hour lesson each week that has helped him get up to grade five.

* He is married with five children and lives in Wimbledon, south-west London. "I enjoy going out, particularly with my wife, to get away from the kids," he jokes.

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