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No-frills hotels attract millennial travelers
January 22 2013

This emerging segment of hotels offers its consumers all the amenities they desire—comfortable beds, free Wi-Fi, quiet rooms—at cheaper rates.

  • No-frills hotel brands, such as Yotel, have sharpened their allure around the features that matter to young travelers—comfortable beds, free Wi-Fi, quiet rooms, etc.
  • These niche hotels streamline the decision to motivate bookings: cheaper rates are apparent and fewer features simplify this mental balancing act.
  • The entire conceit of the capsule hotel is that the guestroom is designed for sleep and not lavish vacationing.

As a frequent flyer living in Toronto, the city’s Pearson International Airport is a routine commute. One of the newer additions to the vicinity’s landscape is the Alt Hotel Toronto Pearson. Passing this structure on my return drive home via the airport expressway is a constant reminder of this emerging brand, as well as my thoughts on how the hospitality industry is segueing from the prowess of the baby boomer to the millennial traveler.

No-frills chic
The Alt Hotel brand is a part of a new niche that also includes such soon-to-be-household names including citizenM, easyHotel, the Pod Hotel and Yotel. Catering almost exclusively to the aptly dubbed “no-frills chic” audience, these brands focus on delivering minimalist product with several near-universally appealing services and all for a competitive rate.

Larry Mogelonsky

These no-frills brands appear to have sharpened their allure around the few top-of-mind features that matter to young, independent travelers: comfortable beds, quiet rooms, good lighting, a small workspace and free Wi-Fi. The rapid proliferation of these newer brands within an overall forecast that we’ve long considered stagnant proves that there is indeed a market for these stripped-back accommodations.

There are other amenities these hotels incorporate to better differentiate their brands within the budget caste. Limited multipurpose ergonomic furniture keeps the 200 to 300 square foot rooms from inducing claustrophobia. Self check-in and check-out expedite mobility. Additives services are regularly 24-hour offerings, such as the common area lounges and cafés with their rolling fresh food selections or a gym at an Alt Hotel property. Lastly, drip pricing is a familiar practice. Start with only the most elemental features to qualify as a night’s stay, and then trickle in everything else a la carte.

Understanding the modern traveler
This genre of hotels has flourished because of the strict targeting of several core demographics—young, smart, thrifty and electronically fluent.

Young travelers have many choices to select precisely where they will stay. Given income constraints, price is the key determinant, and with inexhaustible online resources, it isn’t hard to be scrupulous. By eliminating features to substantially lower the price tag, these hotels streamline the decision on two fronts to further motivate bookings: cheaper rates are easily apparent in any cross-comparison and fewer features simplify this mental balancing act.

Apart from being self-sufficient and Internet-savvy, this cluster also spends far less physical time in their rooms. Much like their smartphones, laptops and tablets, these travelers truly are mobile. With public Wi-Fi carriers aplenty, the modern traveler has everything they need to stay out until they’re ready for bed.

The entire conceit of the capsule hotel (the Pod Hotel a notable provider) is that the guestroom is designed for sleep and not lavish vacationing. You sleep, you wake, you get ready, and then you hit the road. In Tokyo, where capsule hotels have long made their mark, it isn’t uncommon for a weary worker burning the midnight oil to rent such a room instead of journeying all the way home. Capsule hotels are typically closer to the office, and for the convenience of purging the commute times, they are well worth the price.

This raises another important issue: the dissolution of nine-to-five work days. With email accessibility along with tools, such as video conferencing and cloud-based group workflows, the modern employee can fulfill their duties anytime and anywhere.

There are more and more people working from home, working long, erratic hours and working from their hotel rooms (with variable flight times as a central adjunct to this). This demands a readjustment of the service industry still in sync with the nine-to-five doctrine. Stores are open later, banks are open earlier and hotels must follow suit. Sticking to the outdated system of limited hours of operation won’t earn you any bankable word-of-mouth advertising. In a world that never sleeps, the 24-hour hotel is king.

More notes on the no-frills chic story
To state the obvious, the binding force of all these progressions is the Internet. It’s an essential service and providing it for free is a cardinal tenet of the modern traveler, both for business and leisure.

The modern traveler doesn’t care about your rationale for charging. All they see is a big, separate bill for Internet connectivity, and it frustrates them. Not offering free Wi-Fi is a great tactic for disenfranchising the next generation of consumers. No-frills means no hassle.

No-frills chic hotels get by primarily on their price and the services they deem as indispensable, therein drawing a certain type of traveler, such as commuters, layovers, transient workers, young urban tourists, backpackers and anyone who just needs a quick snooze. For this archetype of traveler, hotels are commodities with situational convenience and competitive rate trumping loyalty to any one particular chain. Luxury is a different ball game.

The common undertones of no-frills brands also serve to reinforce the statement that a hotel’s unique expression of service is rapidly becoming the sole factor of brand differentiation. Brands in this contemporary subclass are highly conscious of their core appeal. Their strategy is geared around what features contribute the most toward increasing occupancy within a firmly defined demographic.

No-frills chic is not without its drawbacks. Self check-in and check-out are fundamental points of human interaction from guest to staff. Their absence removes a critical point of brand imprinting on the consumer as well as an opportunity to promote amenities, alleviate concerns or garner feedback. The sparse décor also operates in much the same way with nothing in the clinical furnishings to elicit a strong emotional response.

Think of your hotel
What’s your primary demographic? Really narrow it down. If it’s harried business travelers and sightseeing tourists between the ages of 18 and 30, you’re in for an uphill battle as these no-frills chic abodes have already plucked prime real estate and packed each location with enough small rooms so that the low-cost, high-occupancy model is viable.

For application beyond economy hotels, disregard the no-frills but keep the chic. The minimalist approach to furniture can be hybridized to more luxurious accommodations. For instance, a room’s workspace might include an extra monitor and a portable keyboard, both readily attachable to an incoming guest’s laptop. Also, what amenities can you convert into 24-hour offerings? Do you have any truly outstanding features that single-handedly command attention like an avant-garde spa, a great restaurant, a rapid-response social media team, a rooftop bar with a view or a thoroughly resourceful concierge mobile app?

With the deepening diversity of choices within the hotel space, there are two general actions that stretch beyond any individual market segment:

  1. Continually refine and pinpoint your target consumers. What’s the purpose of your guests’ stay and what are their basic expectations from a hotel? What type of guest is your property destined to accommodate? How can your hotel better fit this objective? How is this predefined consumer different from those for your competitor set?
  2. What works for them may not work for you. If your awareness and loyalty hinge on the quality of services you provide, then simply imitating your competitors isn’t enough. This isn’t a shotgun approach. Be very selective about what services you offer, scouring a multitude of providers to see what unique points of differentiation they add to these services. Through all the permutations, your goal is to select only the services that work for your guests and perform them to perfection.

Larry Mogelonsky is the president and founder of LMA Communications Inc., an award-winning, full service communications agency focused on the hospitality industry (est. 1991). Larry is also the developer of Inn at a Glance hospitality software. As a recognized expert in marketing services, his experience encompasses Four Seasons Hotels & Resorts and Preferred Hotels & Resorts, as well as numerous independent properties throughout North America, Europe and Asia. Larry is a registered professional engineer, and received his MBA from McMaster University. He’s also an associate of G7 Hospitality and a member of Cayuga Hospitality Advisors. Larry’s latest book entitled “Are You an Ostrich or a Llama?” is available on Amazon and Barnes & Noble. This article may not be reproduced without the expressed permission of the author.

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