WESTLAKE, Ohio — TravelCenters of America Inc. (TA) continues to make headway with its multi-pronged growth strategy that focuses on acquisitions, new builds, site refreshes, and franchising. The strategy is part of the larger transformation journey the retailer embarked on in early 2020 to improve its sites and the company's performance.
TA's current acquisition pipeline under review and consideration totals between $250 million and $300 million, and is primarily comprised of existing travel-center targets, as well as two development sites on land the company already owns — one of which it expects to break ground on later this month, CEO Jonathan Pertchik reported during TA's third-quarter 2021 earnings call, held Nov. 2
"In total, we may potentially initiate, through offer or beginning of ground construction, as much as $40 million to $60 million by year-end, with additional opportunities in the first quarter of next year," Pertchik stated.
In addition to potential acquisition activity, TA continues to invest in its asset base. These investments span upgrades; talent; leveraging outside consultant expertise on an interim basis; investing in operational initiatives; IT and systems improvements; expansion of its ability to sell biodiesel and diesel exhaust fluid; and the retailer's capital plan, which is focused on site refreshes and a remediation program.
"Most of these investments and improvements are guest-facing and intended to drive efficiency and financial performance — all designed around improving our guest experience based on a more examined understanding of their needs," Pertchik said.
Some TA customers are getting the opportunity to experience the changes. In mid-October, TA reopened its Seymour, Ind., location which was destroyed by fire in summer 2020.
"We saw this as an opportunity and treated Seymour as the first and highest-level platinum site refresh, and the first of more than 100 planned refreshes over the next 12 to 18 months," the chief executive explained.
The Seymour travel center showcases many of the company's new design concepts, including:
Comfortable driver lounges;
Repaved parking lots;
Renovated restrooms and showers;
New lighting fixtures;
New flooring and paint; and
The Seymour location also debuts TA's new signage and store flow.
"A key pillar to our transformation plan, these improvements will create a better guest experience that is a more attractive, bright, clean and fresh environment to increase new traffic and give existing guests reason to return, while more effectively driving purchasing behaviors," Pertchik shared.
He remains confident in TA's "robust capital plan" and the impact it will have on the company's overall performance. However, he noted that labor pressures and supply chain challenges have affected the pace at which TA has been able to carry out the plan this year.
"The good news is, despite this impact, we continue to generate a new level of EBITDA for TA, and the financial growth we anticipate from the capital plan remains nearly completely in front of us," he said. "Nonetheless, our ability to rapidly deploy capital has been impacted."
For the third quarter of 2021 compared to the third quarter of 2020, TA reported:
Adjusted net income of $22.2 million, a 36-percent improvement;
Adjusted EBITDA of $65.2 million, a 28-percent improvement; and
Adjusted EBITDAR of $129.1 million, a 12-percent improvement.
"While these results do reflect the comparison to the prior-year quarter when the COVID-19 pandemic was still acute, they also represent notable improvement to the 2019 third quarter," Pertchik pointed out.
Specifically, adjusted EBITDA during the latest quarter increased by $24.2 million, or 59 percent, when compared to the third quarter of 2019.
TA is also expanding its network through franchising. The company has signed 52 new agreements since the beginning of 2019 and opened 18 new franchise locations during the same period. TA anticipates that 34 new franchise locations will open and begin operations by the third quarter of 2023, as it moves toward a sustained target of 30 per year.
Westlake-based TravelCenters of America's network currently comprises more than 275 locations in 44 states and Canada, principally under the TA, Petro Stopping Centers and TA Express brands. It also operates more than 600 full-service and quick-service restaurants and nine proprietary brands, including Iron Skillet and Country Pride.
In addition, TA maintains a specialized business unit, eTA, that is focused on sustainable energy options for professional drivers and motorists, while leveraging alternative energy to support its own operations.