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Budget hotel development on the increase

By Liam Garrahan , 11-Nov-2015
Last updated on 11-Nov-2015 at 17:39 GMT2015-11-11T17:39:18Z

Budget hotels such as Premier Inn are a popular choice with travelers.
Budget hotels such as Premier Inn are a popular choice with travelers.

For the first time budget hotels account for more than half of the UK’s hotel development pipeline, with growth in the sector showing no signs of slowing down, according to a report by HVS, AlixPartners and AM:PM.

The figures are reported in the Hotel Bulletin Q3 2015 report which also shows that in Q3 of 2015 over 1,500 budget rooms were added to the sector’s pipeline.

HVS chairman, Russell Kett, says that guests at budget hotels like the basic approach that they offer and that operators enjoy running them as they are cheaper to run.

“The low-cost budget sector continues to be popular with both leisure and corporate guests who appreciate their emphasis on the basic necessities of a decent bed, quality shower, free Wi-Fi and a TV," he said.

"With the development of sub-brands such as Hub by Premier Inn, the budget offer is becoming even more pared down and cost-efficient.

“While the economy is now much stronger, cheaper hotel stays have become the new norm and guests are reluctant to go back to spending more. Budget hotels are popular with operators as they are cheaper to build and run. With the check-in and check-out function becoming increasingly automated, the cost of running a budget property is relatively low.”

During this period, Whitbread added over 500 bedrooms to its Premier Inn brand, bringing its total number of rooms to over 60,000, with a goal in place to reach 85,000 bedrooms by 2020. In comparison Travelodge opened 260 bedrooms in the same period while Tune Hotels opened its eighth UK business with its 100-bedroom Liverpool city centre branch.

The report shows that RevPAR growth has slowed year-on-year at three per cent, the lowest since Q1 2013.

RevPAR in Cardiff shot up 17 per cent having benefited from an Ashes test in July and prices soaring during the Rugby World Cup. RevPAR in Birmingham grew 12 per cent and growth in London rose six per cent. Aberdeen was the UK’s worst performing city with a 22 per cent drop in RevPAR due to a lack of recovery in the oil industry.

Kett said: “More hotel supply in the market means that future growth will come in the form of achieved average room rates, rather than occupancy as we move forward. The change in the mix of hotel types with more emphasis on budget accommodation means we are unlikely to see high levels of growth in RevPAR.”

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