LONDON—Buoyed by the weak pound and what retailers hope are recession-busting offers, the shops of London are filled with European tourists. But the higher-end of the hotel market does not seem to be reaping many benefits from the increased influx of visitors. According to STR Global, overall revenue per available room for London is down 9.9 percent through February (in GBP) and total revenue is down 8.1 percent for the same period. Add to this the scaled-down corporate budgets, and it’s not surprising that budget hotel brands appear to be attracting what trade there is.
Although the overall U.K. hotel market is struggling, budget chain Travelodge are optimistic they will fare relatively well in the current, and indeed future, climate.
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Guy Parsons
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Guy Parsons, managing director of Travelodge U.K., said that against one of the toughest trading environments he has ever seen “the U.K. budget sector is doing considerably better than the rest of the hotel market.” He added that within the budget sector Travelodge is out performing the rest.
Despite the downturn, the chain is continuing to expand and is looking forward to an interesting year, Parsons said. A better-than-expected February and a promising Easter are adding to the optimism.
Marketing rooms from just £9 and selling them up to 12 months out has meant Travelodge presold most Easter 2009 rooms towards the middle of last year. This healthy forecast could be indicative of a more robust 2009; however, a small top-up promotion two weeks ago saw sales peak at one room sold every 1.3 seconds. Around 85 percent of standard bookings are made directly via the brand’s Web site, www.travelodge.co.uk.
Forecasts show that more U.K. holiday makers than ever are this year intending to vacation at home. Parsons is optimistic this trend will also lead to a good summer for Travelodge. Although the increase in trade from the European continent does not tend to affect Travelodge’s trade—the majority of its customers tend to be U.K. based—Parsons believes the weak pound combined with deals at the top will be helpful in providing a knock-on effect.
“As more Europeans and Americans come over this will increase the amount of stayers in 4-star and 5-star hotels and this will mean that increasingly U.K. residents will end up using more and more budget hotels,” Parsons said.
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| A new Apple iPhone application allows customers to locate and book their nearest Travelodge room at the push of a button. |
With new initiatives, such as an Apple iPhone application which allows customers to locate and book their nearest Travelodge room at the push of a button, and the new business incentive card (already said to be being used by several FTSE 100 companies and major high street banks), Travelodge is certain things will continue to look comparatively good. Last year’s opening of 38 new hotels is set to be followed by another 35 in the U.K. this year. With a current portfolio of 26,000 rooms, the plan is to reach 70,000 rooms by 2020.
Parsons likened the current climate to the difficult trading environment seen within the airline industry in 2002. “As people go through this recession their mindsets are going to change, and I see for the budget hotel sector this will end up being as dramatic as the post 9/11 period was for budget airlines.” He said. “Pre 9/11, whilst people were starting to use easyJet, there was still—for a lot of people—some stigma about using budget airlines. These days, whether it is for business or leisure it’s a perfectly acceptable thing to do.
“We know that the vast majority of people who use our hotels are not using the hotel for the hotel’s sake. They’re going somewhere—whether this is to a concert or a sporting event or to visit friends and family—the main thing they are doing is outside the hotel and they’re using the hotel as a place to live. All hotel rooms are the same with the lights off, but our rooms are considerably cheaper.”
Parsons maintained that business trade is also on the rise.
“We’ve seen a dramatic increase in the number of companies using our brand for the first time and I think that this will continue,” he said.
He also foresees that the recession will mean crossing a tipping point in terms of attitude to spending on hotel accommodation.
“Once people try a budget hotel, try a Travelodge for the first time, it’s unlikely that they will go back to using the mid-market, four star hotels for their general stays. That is not to say that lovely, spa hotels will disappear, because people still want that experience. But when all you need is a bed for the night people will try Travelodge and not return to the four stars after this recession.”
As well as the 35 U.K based hotels, Travelodge will soon announce plans about expansion in Spain as well as continuing to develop the brand in Ireland. This somewhat rapid expansion certainly demonstrates a healthy dose of confidence in the brand not obviously emulated at the higher end of the market.
