You might have noticed if you look at recent developments in any of Scotland’s major cities that we are experiencing a major boom in budget hotels, driven by the growth of national and in some cases international brands. The gap that existed 25 years ago between global five star accommodation providers, aimed at high spending tourists and the business traveller, and small private hotels and guest houses which catered to the rest of the market has now virtually disappeared. A new generation of the competitively priced hotel chain has now emerged, establishing itself in towns and cities across the UK.
Scotland has certainly seen a significant influx of new budget hotels in the past few years. In Edinburgh we’ve seen the openings of Motel One and Tune Hotel and the recent announcement by Premier Inn to open on York Place at the end of the city’s new tram line. Glasgow has also seen major growth in budget accommodation, including the city centre Citizen M which combines style with economy.
Accountants PWC acknowledged the increased supply of the low cost hotel in many cities across the UK, especially London, in recent years. In one of their latest insight reports, the firm highlighted the rapid expansion of the budget hotel sector which, they claim, has been driven by ‘competitive rates for business and leisure travellers in a recessionary climate’.
Figures for the UK show that budget hotels accounted for only three per cent of the total number of hotel bookings in 2000. This increased to 18 per cent in 2010 and is predicted to rise to 25 per cent by 2016. According to the industry publication Business Traveller Magazine, companies like Premier Inn and Travelodge are now doing more business in the UK than the older established brands like Hilton, InterContinental and Holiday Inn.
Over the last 10 years budget hotels have also increased their share of business travellers. While smaller businesses, which often run tighter expense budgets, are no strangers to budget accommodation, we are seeing more corporate organisations including those within government, banking, and financial sectors also starting to use them in a wider capacity. The banking crisis and subsequent economic woes we experienced from 2008 will have helped fuel this development as many companies clamped down on external costs like travel expenses. Within our business we have seen growth in the budget hotel sector with increased sales year on year over the last 12 months of more than 70 per cent amongst our own clients.
As we now find ourselves emerging from recession I think it is very unlikely we will see any decline in corporate business for the budget chains. Firstly, priorities are changing for the business traveller. Premium hotel extras such as a trouser press or a towelling robe have become less of a necessity and, in many cases, the budget hotels provide them if they are required. Today’s business traveller spends little time in a hotel room and is generally satisfied if they can sleep well, get a decent shower and internet connection during their stay, all of which tends to be on offer at budget hotels.
Low cost hotel chains have also enhanced their offering to make themselves far more appealing to the business traveller. New, higher spec budget accommodation brands, which provide a cost-effective compromise between the rates of four and five star hotels and the standards available at the lowest end of the sector, are now becoming established. These include Hub by Premier Inn, which positions itself as a ‘city centre hotel where smart technology meets stylish design,’ Sleeperz, Comfort Hotel, Yotel, Ibis Styles and the aforementioned Citizen M. The Mariott Group, one of the premium accommodation providers facing the threat from low cost rivals, have got in on the action launching its new Moxy brand.
Given the improved offering of budget accommodation and the likelihood that many organisations will remain vigilant on spend and travel policies regardless of an economic upturn, I expect the rise of the low budget hotel to continue. However, with the fragmentation of this sector we will likely see a clearer divide between the lowest cost operators and the higher priced ones which are seeking to strike the balance between luxury and value for money.
Overall this is good news for business as increased competition is driving higher standards and offering them better value for what can be a significant on-going operating expense.