Budget inns for growth
While three-, four- and five-star hotels have been reeling from the impact of foot-and-mouth, 11 September and economic uncertainty, budget hotels have been going from strength to strength. All the major budget hotel brands have declared strong like-for-like sales growth as full-service hotel brands have been reporting massive declines.
What is driving this huge success? Increasingly, travellers are choosing budget hotels over full-service alternatives. "No frills" airlines, such as Go and Easyjet, have helped to raise the awareness of value-for-money travel, changing customer attitudes, so that it is now completely acceptable to choose a budget hotel when planning a leisure or business trip.
We live in a brand-led culture where customers expect service and product consistency, something that, historically, the hotel industry has failed to deliver. Yet meeting the core customer need for high quality accommodation at value-for-money prices is the heart of the budget offering and the formula to which the main players in the budget sector adhere.
In pursuit of differentiaton and higher levels of customer satisfaction, some budget hotel brands have chosen to introduce extra amenities, such as satellite television. But this strategy risks compromising the value proposition by adding in costs that will inevitably be met by the customer, and operational complexity that could lead to service failure.
Budget hotels should maintain their properties to the highest standards and ensure that their products remain contemporary. At the same time, they should strive to be as efficient as possible and scrutinise any enhancements by asking whether the customer is prepared to pay more.
Budget hotels have changed the hotel industry landscape. They now rank among the largest UK hotel chains. Travel Inn plays host to nearly nine million customer visits a year.
Deloitte & Touche's sixth annual budget hotel survey reveals that the number of rooms in the sector rose by more than 10% between 2000 and 2001, representing some 51,900 rooms.
The budget sector in the UK is said to be maturing, but the number of branded budget rooms is predicted to increase to over 80,000 by 2005. Even then, the budget sector will account for less than 10% of the total UK accommodation market, compared with the USA, where the budget sector accounts for up to 30% of all accommodation and continues to grow at twice the rate of the overall market.
Ultimately, customers will determine the size of the budget hotel sector. At the moment they are voting with their feet in huge numbers, demonstrating that their first choice is a quality product that meets their needs at a great price.
Discerning customers are rightly asking themselves why they should pay more.
Carl leaver is managing director of Travel Inn
