This year is the 20th anniversary of the arrival of the first budget hotels in the UK, a 20-bedroom Travelodge in Staffordshire, which opened in 1985.
Since then the market has grown rapidly and, according to Deloitte Corporate Finance, was in November last year worth about £3.25b.
At the end of 2003, according to the most recent figures from consultancy PKF, there were 1,009 budget hotels in the UK, with a total of more than 65,000 bedrooms.
The biggest three players in the market are Whitbread's Premier Travel Inn brand, with some 450 hotels, Travelodge, now owned by Permira, with about 240 sites, and InterContinental's Express by Holiday Inn with 89 properties.
Other key operators include Accor, with its Ibis brand, Mitchell & Butlers, through its Innkeeper's Lodge and Choice Hotels' Comfort Inn brand.
Recent newcomers to the market are fitness club founder David Lloyd who is launching a chain of "deluxe" budget hotels under the brand name Metro.
Ken McCulloch, founder of the Malmaison chain, is also entering the fray, and is in the process of developing a chain of "super budget" hotels under the brand name Dakota.
There is still a lot of opportunity for growth within the sector, argues Robert Barnard, partner at PKF.
In the USA and France, for instance, budget hotels account for some 25% of the total market, compared with less than 15% in the UK.
Deloitte, in its November 2004 report, predicted the market would grow by 10,000 bedrooms to 75,000 by the end of this year, and to 87,000 by 2007.
Growth in the market is being fuelled by both owner-operated and franchised hotels, says Deloitte.
Underpinning all this is a boom in bookings being taken via the internet, with online bookings doubling to 20% between 2001 and 2003.
A study last summer by Barclaycard also painted a rosy picture for the sector, arguing it would continue to do well as more and more travellers, particularly business travellers, switched to budget hotels.
The main constraint to growth for the sector, however, remains the availability of affordable sites, particular in greater London.
A year ago a study by Deloitte found virtually 100% of budget hoteliers viewed the cost of sites as a threat to their future growth prospects.
Budget hotels are particularly vulnerable in this area because they are, by the nature of their sector, limited in what they charge.
As the market grows, it is becoming more fragmented and differentiated, says PKF's Barnard.
"There are now quite a few other players apart from Travelodge and Premier Travel Inn. There is also quite a lot more product add-on than there used to be," he explains.
While most budget hotels are still situated near main roads, within motorway service areas or in other high-traffic locations, they are now likely to be found springing up in city centres or on-edge-of-town sites as well.
Inevitably, because of the competition from three-star hotels and guest houses, the look and feel of the sector has started to change in such areas.
While, for instance, the food offer is still normally pretty basic, some brands, such as Express by Holiday Inn, are developing much more sophisticated offers.
There has also been "amenity creep" in areas such as TVs in bedrooms, availability of a bar or café lounge, 24-hour receptions and access to satellite TV.
The size of many budget hotels is also changing as the market matures, suggests Jon Patrick, director at Christie & Co.
"Probably three to five years ago around 60 beds would have been average. Now it's more like 80 beds and even higher in some city-centre hotels, as much as 250," he says.
The largest budget hotel in the country is Whitbread's 590-bedroom Travel Inn at Heathrow airport.
As elsewhere in the hotel sector, there is a trend towards "splitting bricks and brains", argues Christie's Patrick, as evidenced by £400m sale-and-leaseback deal agreed by Travelodge in October 2004 when it sold 135 of its portfolio of 240 properties to Prestbury Hotels.
That deal should see Travelodge expanding rapidly this year, as it has pledged to open a new hotel every 10 days throughout 2005.
Pricing structures are developing too. Where it very much used to be a case of "one size fits all", more and more operators, such as Travelodge in March last year, are following the lead of budget airlines and offering discounts to people who book early or through online booking systems.
Some have begun also offering hourly rates for short stayers, particularly business people on the road who simply want a break and a nap before carrying on.
Where once you might have expected to pay between £40 and £50 per night, in regional city centres this will often creep up to £70 or £80, estimates Nigel Bland, director at Deloitte.
"There is now much more regionally-based pricing, or pricing based on time of stay, time of the week or season," he suggests. "In some cases the tariff is getting quite complicated."
|Operator||Brand||Number of properties|
|InterContinental||Express by Holiday Inn||89|
|Market size||Number of hotels||Number of beds|