Recession pricing: the rise of the budget hotel

Do you like freebies or do you value ‘value’? A couple of years ago Travelodge stopped putting ‘free’ shampoo in their rooms. The logic is that customers would prefer a lower room rate than freebies.

What do you think? My wife loves those little bottles and sachets, as part of the excitement of staying in a hotel. However, after a few conversations I’m revising my theory. Freebies are an important part of staying in a ‘posh’ hotel, but perhaps Travelodge customers do value ‘value’. Especially since they may be paying their own room rate, rather than claiming it on expenses from their employer.

Now a new hotel chain, Tune, have opened up a super budget hotel that takes the concept even further….....

The BBC has a video clip that shows you around the no-frills hotel. The standard room charge is £35 but early bookings can secure cheaper rates. The Tune hotel charges £1.50 for a towel and soap, £3 each day to use the television, £1 per stay to use the hairdryer, £2 for a safe and another £2 to store a suitcase on checkout.

The management say their research showed that many people do not need all the hotel services that traditional chains offer, and end up paying for what they don’t use. It’s a model that’s already been successful in SE Asia.

The BBC quote the firm’s chief executive: “It took us a long time to look at the hotel business models and disassemble them and we took out all the stuff people said they didn’t use. We are managing this just like a budget airline and that means keeping costs low. We outsource most services and encourage people to book early to get the best deals’‘.

There is already stiff competition in the crowded budget hotel market. The Easy hotel chain is well-established and is expanding. Travelodge currently offers rooms at a promotional price of £19 and, like the Premier Inn chain, their rooms are family-friendly and they provide most extras free of charge.

It will be interesting to see how these business models work out over the next few years – the recession, the rise of value conscious customers and the upcoming Olympics seem to make the environment favourable, for now.