The Concept of Budget Hotels in the United Kingdom - Essay Example

27 August 2009 How Budget Hotels in UK Offer Quality Services to Travellers at Extremely Low-Tariff? Introduction Budget hotels are not a new concept for UK as prior to 1980, it was christened as inns, guest houses, farmhouses and other kinds of bed and breakfast services. Budget hotels can be described as an innovative concept which is being offered as repackaging of low cost accommodation to the travellers. Of late, large catering companies and hotel chains in UK have demonstrated an increasing interest in diversifying brand new chains of low-tariff and low-cost accommodation divisions which are commonly mentioned as “budget hotels.” This ontogeny originates from the triumph of the egressing budget chains in Europe, specifically France’s well-organised variety of budget hotel chains and from the USA where the economy motel and hotel was copied. (Brown 94). This research essay analyses how budget hotels in UK are satisfying the customer’s needs in detail. How Budget Hotels in UK Offer Quality Services to Travellers at Extremely Low-Tariff? Major growth in economy hotels in U.S can be attributed to well laid highways coupled with the American fascination for cars and because of rapid increase in travelling by road. Many of the budget hotels of UK are also located either on or proximate to major roads facilitating a traveller to identify budget hotels easily without straying too long from an envisaged route. Budget hotels are really a boon to a traveller who do not want to enter into a town or city, who looks for an overnight stay and those who do not afford to spend much. The economy hotels has been intended to bestow basic overnight stay competence to the transient traveller who do not look for secondary facilities like swimming pool or restaurants. Thus, in a budget hotel, both peripheral and core services are left behind over the basic amenities for overnight stay. Since, these hotels offer only basic overnight stay facilities, the room tariff will be considerably less as compared to full-service hotels. (Brown 94). It is being commented that budget hotels in UK are offering two or three star facilities at a half star tariffs. These hotels are designed to locate at important highways with salient features like “no-frills” and convenience as their top priority. They offer a differentiated product from conventional hotels by offering at low price and at convenient location. The salient features of these hotels are demonstrated as of bare minimum facilities, lower tariff and with locational advantages. According to English Tourist Board ( ETB) , budget hotels are those which offer a highly sophisticated and branded product , with simple back and front –of-house operations , with a typical nationwide room tariffs either including or excluding breakfast , with the bare minimum common / public amenities and offers no discounts. Table -1 - Details of Branded Budget Hotels that is in operation in UK. Brand Hotel Group Number of Budget hotels Number of Budget hotels rooms Tariff In £ Express by Holiday Inn Six Continents + 60 n/a 42.95 Travel Inn Whitbread 227 14,500 41.95 Travelodge Compass 213 10,695 42.95 Premier Lodge Scottish & Newcastle 116 n/a 42.95 Ibbis Accor 34 3705 64.95 Source: (Jones 77). As the budget hotel concept has been imported from French and North American concepts, they do not have benefit of synergy with existing hotel units in UK. They are handicapped for expansion due to paucity of suitable development sites. The preponderance of budget hotels in UK which are detailed above are managed in an owner-operator facility by the relevant group who posses the brand. Due to extremely customary nature of the product and the vigour of brands involved, franchising may become a vital feature of the budget hotel market in UK in the near future. For instance, the preponderance of Travel Inns are managed under franchise to other Whitbread business like TGI Friday’s, Brewers Fayre and Beefeater. (Jones 77). It is said that operating cost in budget hotels are extremely low which being quoted around £5 per room per night including staffing and laundry expenses. In such scenario, the net profit opportunities are probably high in both the long and short term perspectives. Moreover, these hotels offer a good return on investment made and also escalation in value of the property immediately after its completion. Bed –and-Breakfast restaurants in UK are under great pressure from the budget hotel establishments who are fighting face to face on quality and price to destabilise the customary B&B market. According to Dow Jones report, the market share of mid-market operators like Regal, Thistle and Jarvis are under constant threat due to emergence of budget hotels. Merrill Lynch project that there would be a 100% increase in the budget rooms in the year 2009 as compared to the figures in 2003. Budget hotel rooms are expected to occupy about twenty percent of total UK hotel market in the year 2009. Whitbread, a leading budget hotel operator in UK publicised that it would be developing on the side of Punch Taverns, a network of Travel Inns, in an £81 joint venture project. Likewise, other operators like Bass, Granada, Premier and Accor are anticipated to divulge in analogues joint ventures in near future. As part of their marketing strategy, the preponderance of budget hotels in the UK employs a standard pricing strategy. A budget hotel customer is expected to pay the same room tariff for a room in Portsmouth which is in the south of UK and in Gateshead which is in the north of UK. The cost of land and building in Gateshead is much lower than compared to that of in Portsmouth. This implies, given the analogues occupancy rates, the ROCE /RI will be lower in Portsmouth as that of Gateshead. To increase the profitability, one of the solutions suggested is to charge differential price throughout the nation but this will defeat the strategic goal of attaining a consistency in brand value across the nation – a traveller being able to enjoy the analogous quality of room, service and tariff throughout the UK. (Doole & Lowe 82). Conclusion Just 12% of the total room supply or just six percent of the aggregate of accommodation market in UK is being accounted by the branded budget hotels. This implies that there is noteworthy opportunity for further development in this sector. There is more than 100% growth in the use of budget hotels in UK as the number has increased to 6.55 million in 2007 from 3.04 million in 1999. Budget hotels are being enjoyed by both business and leisure travellers as the client make their preference on the basis of convenience rooms available in the area they need. Apart from convenience of location, customers prefer brand standards and high quality. Like low cost airlines, low cost budget hotels have gained noteworthy market share to the detriment of the 2 or 3 star hotels in UK. (Sfodera 21). In short, a budget hotel will have the following features: Bare minimum tariffs than industry standards Quality of accommodation with tariff at two or three star levels Restricted services and facilities ( no frills like bar, restaurant or swimming pool) Focusing on the travellers on highways. Situated on major highways and in derivative urban locations. An adjacent food operator will take over the catering services. Network of budgeted hotels with top brands of the industry Regularised operational processes and uniform tariffs across the countrywide. Purpose –built in terms of design and location. (Jones 76). Works Cited Brown, Stephen Walter. Service Quality: Multidisciplinary and multinational perspectives. London: Lexington Books, 1991. Doole Isobel & Lowe Robin. Strategic Marketing Decisions in Global Markets. London: Cengage Learning, 2005. Jones, Peter. Introduction to Hospitality Operations. An Indispensable Guide to the Industry. London: Cengage Learning, 2002. Sfodera, Fabiola. The Spread of Yield Management Practices. London: Springer, 2006. Read More