A new luxury budget hotel group called NiteNite was launched last week.
The group's first hotel, a 104-bedroom property near New Street station in Birmingham, will cost £5m and is due to open next March. Prices will start at £49.95 per room per night.
The group, which is funded through a joint venture between Royal Bank of Scotland and private investors, plans to grow to 4,000 rooms within five years both in the UK and abroad. It is already in negotiations for other sites in city centres, including Manchester, Cardiff, Bristol and Berlin.
All rooms, which are designed to fit spaces not normally suitable for traditional hotels, include a 42in plasma TV screen, automatic deadbolts and noise excluders.
"This is a highly designed product. The room feels like a cocoon and is a very special product for the style-conscious traveller on a budget," said a NiteNite spokesman.
The move comes as European hotel group Accor announced the opening of its first 250-bedroom Etap hotel, also in Birmingham. The brand, which is already prominent in continental Europe, is designed to target the same luxury budget market as NiteNite.
Chris Rouse, senior director of property consultants CB Richard Ellis Hotels, said: "These new brands are very interesting and trying to exploit a perceived gap between price and quality. The market is not slow to spot quality and, when the price is right, they should find they are quickly accepted in the marketplace."
But Peter Anscomb, Royal Bank of Scotland's head of hotel finance, warned that there was a limited market for budget brands in the UK.
"Unlike the USA, there are difficulties of scale in the UK. There are only a limited number of quality sites which are suitable for development."
By Emily Manson