Huge growth predicted for budget sector

The budget hotel sector is set to "explode" in the next decade, with as many as 440,000 rooms available for development, experts have predicted.

Speaking at the International Hotel Investment Forum (IHIF) in Berlin last week, Reas Kondraschow, managing director of Wyndham Hotel Group, said that the company - which has 36,000 rooms in the UK - has plans to expand to as many as 100,000 rooms.

"The budget market will continue to explode significantly until 2025," he told delegates. "We see this increase coming from the 440,000 rooms in independent hands classified as bed-and-breakfast that are lacking investment."

Kondraschow claimed that independent midmarket hotels cannot sustain reinvestment in their product and maintain quality in the same way that a group can. He said: "In the past 24 months we've bought mid‑tier, and there is a significant amount of potential. You just need to be creative to tap into it."

Kondraschow warned that there were risks facing the budget sector, such as land availability and the growing cost of construction, which is set to rise by 5% next year, but added that there was plenty of room for expansion in Europe.

Reto Wittwer, president and chief executive of Kempinski Hotels & Resorts, agreed with this and insisted that the budget hotel sector would survive the credit crunch. "The budget and luxury brands will be alright - but you don't want to be in-between," he said.

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