Brits Embrace Budget Beds As Brands Begin To Boom
<B> Brits Embrace Budget Beds As Brands Begin To Boom</B>
By Amon Cohen
Business travelers in the United Kingdom are finally grasping with enthusiasm a cost-saving opportunity long established in the United States: sleeping in a budget hotel. With room nights in this hospitality segment booming and demand outstripping supply, the major players are announcing significant expansion plans.
The market leader, Travel Inn, has declared its intention to double the number of rooms it has in the United Kingdom to 20,000 during the next five years, exactly the same time it has taken to reach its current size, while the entire budget sector--of which Travel Inn has an estimated 40 percent market share--doubles in size.
Travel Inn has a phenomenal nationwide occupancy rate of 87 percent. In London, it is even higher--94 percent--and corporate travelers account for 62 percent of the chain's business. ''Monday to Thursday, it is pretty difficult to get in,'' said Grant Hearn, managing director for the brand. Travel Inn is owned by brewing giant Whitbread, which also owns Marriott's U.K. properties.
Loyalty from those business customers is very high: 67 percent stay at a Travel Inn more than 21 nights per year, 18 percent stay more than 50 nights and a hard core 1.6 percent stay more than 200 nights. The main reason for their loyalty is the price.
A night at a Travel Inn property in central London costs $96, whereas the 1999 Corporate Travel Index (<I>BTN,</I> Feb. 8) revealed that the average top-tier hotel room in the U.K. capital costs $449, the most expensive rate in the world. ''Our guests don't want frills like turndown service or satellite TV,'' said Hearn. ''They simply want to be left alone.''
Andy Duncan, a director in the hotel consultancy business of Pannell Kerr Forster, is not at all surprised to see corporate travelers flocking toward the budget sector. ''People with tight budgets or on a fixed per diem previously had to use guest houses. Now they have a branded alternative,'' he said. ''The alternative is mom and pop establishments, which can be very nice but carry no quality assurances.''
Hearn also finds that Travel Inn is receiving more support from business travel agents than ever before. ''We pay no agency commission, so we have benefited from the move to management fees,'' he said. However, travel managers who pay their agents a higher fee for booking by telephone, rather than via a global distribution system, should note that Travel Inn is not on the GDSs, so reservation costs could be higher. The chain does not yet have an Internet booking facility either.
As part of its no-frills policy, Travel Inn also says no to corporate discounts. This is in contrast to its main competitor, Travelodge, which has 7,500 rooms in the United Kingdom, a number that will rise to 10,000 by year-end.
Travelodge last November launched a corporate invoicing and discount program that already has attracted 800 companies. Travelodge issues a business account card to each traveler, and rather than having guests settle up upon departure, instead sends a single monthly invoice for all guests to each corporate client.
Other budget brands expanding on a more modest scale in the United Kingdom include Holiday Inn Express and Ibis, which offers Heathrow Airport's best-value hotel at $96 per night. Ibis is owned by Accor of France, which also co-owns Carlson Wagonlit Travel and is largely responsible for the fact that France has the second-highest number of budget properties in the world, behind only the United States. There are 302 Ibis hotels in France, with 26,240 rooms. Fifty percent of its customers are business travelers.
The rest of Europe has very few branded budget hotels, said PKF's Duncan. Especially resistant is the fragmented German market, which has few branded properties in any sector.