Accountancy Age feature: Making room for budgets

Not so long ago, accommodation in budget hotels also meant budget standards. A bill for £40 a night might have pleased the company accountant, but the hapless business traveller was subjected to a ropy bedroom, dubious standards of cleanliness, and as for service, it was an optimistic fantasy in the mind of the guest. The need for combining quality with value was simply not recognised, and not surprisingly, executives stayed away in droves.

But some five years ago, there was a revolution in this sector, as hotel groups saw a gap in the market and regular travellers recognised that today’s budget inn was offering a reasonable sized room, en suite bathroom and often meeting facilities. The price is generally per room rather than per person, breakfast is sometimes included and although there is not always a restaurant on the premises, there is usually one nearby. In addition, bedrooms can double as mini offices with good lighting, desks big enough for a PC and a modem.

The only obvious item missing from budget hotels available in the more exalted accommodation is room service. According to Shane Harris, vice president for Express by Holiday Inn, Europe, Middle East and Africa, a shift in consumer attitudes is behind the increased demand for budget accommodation.

In the 1980s, it was important to advertise the fact that you had arrived, so business people opted to stay in hotels that appeared to reflect their status. But by the late 1990s things had changed. ‘When people have created their wealth they have arrived and with that comes the confidence not to advertise it,’ he says. ‘Value for money matters. Travellers are more budget-conscious, and have moved from upward mobility to downward nobility.’ Hence the simultaneous growth of low-cost airlines.

Combine this change in priorities with the value for money offered by budget hotels and it becomes clear why this choice of accommodation is so popular. Not only is budget the fastest growing sector of the hotel market but occupancy rates are also unusually strong, around 78%. The average length of stay is 1.5 nights.

Travel Inn undertook some research two years ago with hospitality and leisure consultancy at Deloitte & Touche, which led to Whitbread’s assigning a £300m development project to Travel Inn. ‘The budget sector has up to 15 years before it reaches maturity,’ says Travel Inn’s director of marketing Guy Parsons. ‘In the US the brand outperforms the market and in the UK Travel Inn does the same, running at 87% occupancies from Elgin to Truro.’ At the time of the research, there were 10,000 budget rooms in the UK. By the end of last year, there were 40,000.

Travel Inn has 233 properties, with another 60 in the planning stage or under development. They are divided into three price bands. Travel Inn, found on motorways and major routes, is £39.95 per room per night; Travel Inn Metro, in major cities and at regional airports, £46.95; and Travel Inn Capital (London) £62.95.

Some 50% of Travel Inn guests are business travellers and prices include a room for a family of four, en suite shower, TV and radio alarm, hot drinks facilities, large desk, integral or adjacent restaurant and bar. No smoking rooms are available on request. Modem points are installed in the public areas of selected hotels and in rooms of Travel Inns Capital.

Receptions are manned 24 hours a day and guests pay for the room on arrival, allowing a quick getaway in the morning. Breakfast costs an additional £4.00 for continental; £6.00 for full English with meals paid for direct. Selected Travel Inns also provide meeting rooms.

New to the UK is Choice Hotels’ Sleep Inn, which has five properties opening either late this year or early next, with a view to developing 50 in the first five years. The rate is £49.50 per room per night, breakfast is included and receptions are again manned for 24 hours. There will be few city centre properties but the rate will be between £55 and £59.50.

Rooms will have modems, large desks, TV, direct dial phones with dataport for PCs, tea/coffee making facilities and en suite showers. No smoking rooms are available and integral restaurants or services are in all properties.

But with so many budget hotels now available and many more coming on line, is there not a risk of excess capacity? Peter Cashman chief operating officer for Choice Hotels Europe thinks not: ‘There is no risk of over supply,’ he says. ‘Because people are more budget conscious, a change in attitude that started in the mid-1980s and supply is matching increasing demand. These properties offer a good standard of accommodation.’

Also growing rapidly is Express by Holiday Inn, which has 78 properties across Europe, 53 of which are in the UK. The group is opening one hotel every two weeks ‘for the foreseeable future’, according to Shane Harris and is aiming for 120 in the UK by 2003. Although the strong pound has made the budget sector attractive to business visitors from abroad, the majority are from the domestic market and the business/leisure mix at Express properties is 80:20.

Holiday Inn saw a gap between lodges with its cheapest at around £32 a night and full service establishments at £75. ‘There was a demand for a limited service property at a price level between the two,’ says Harris. ‘People were prepared to trade up from lodges in both price and facilities.’

Express by Holiday Inn bedrooms have satellite TV, work areas, phones with dataport and message facility, and en suite power showers. ‘Because rooms are smaller than you would get in a full service brand, design is creative so that rooms appear larger,’ says Harris. This includes open wardrobes with shelves.Occupancies run at around 90% during the week, but because weekends are quieter, it averages out at around 75%. Receptions are manned 24 hours a day and lobby lounges provide areas to relax. There is meeting space and fax and photocopying facilities.

Prices range from £47.50 to £52 per room but there are no recognisable bands according to location and the rate includes buffet breakfast. Properties are on major routes and in city centres with four in London and hotels to come in Bristol, Manchester, Newcastle, Sheffield and two in Glasgow.

Also aiming for a lively lobby is Ramada Encore. Its lobby bars will serve coffee during the day and alcoholic drinks during the evening, so that it is ‘a space people will want to spend time in’, says Elaine Ellis, Marriott spokeswoman. Furnishings will be simple, colours strong and glass bathrooms add a touch of style. ‘Encore is aiming for business and leisure travellers who want something more stylish than traditional budget hotels,’ she says.

The French are generally associated with style, and Ibis, part of the Accor group, has 23 properties in the UK and Ireland with seven more scheduled to come on line this year. It claims to be the first budget hotel chain in the UK to receive ISO 9002. Some 60% of guests are business people and there are three price brands: £39.95 outside city centres, £49.50 (city) and between £53 and £59.95 in and around London. Breakfast costs an additional £4.25.

Rooms are sound proof with air conditioning and have direct dial phones, satellite TV, modem links and tea/coffee making facilities. Receptions are operated 24 hours, lobby, lounge and caf‚s are integral allowing the hotels to offer a snack on arrival at any hour. Restaurants are based on themes with rugby in Cardiff, for example.

The group also offers a 15-minute satisfaction guarantee: if guests have a problem with their room, which cannot be solved within 15 minutes, the hotel will provide the accommodation free that night.

Unusually, for budget properties, Travelodge bedrooms have baths with shower facilities, desk, hot drinks facilities and TV, but a phone is not guaranteed. Rates vary from £39.95 to £69.95, although hotels do not fall neatly into three price bands, and breakfast is not included. Most properties have a bar/caf‚ on site (city centre) or a Harry Ramsden or Little Chef adjacent. Many Travelodges have meeting rooms.

Borge Ellgaard, vice president hotel relations and destination services Europe for American Express says: ‘Budget hotels enjoy excellent occupancies and they do not have difficulty maintaining their value rates. The strong pound has acted as an additional advantage, and the hotels are getting better and better,’ he says. He also points out that the massive growth of the sector puts downward pressure on rates.

‘I cannot see why the budget market should plateau in 2003/4,’ says Ellgaard. ‘With minimal services, the standard of rooms rising, budget accommodation is a good buy.’ Business travellers cannot lose.