Rooms revenue in UK budget sector breaks £1b barrier

Sales in the budget hotel sector broke the £1b barrier for the first time last year, research released today (Thursday) will reveal.

The study, by hospitality analysts TRI Consulting, will show that total rooms revenue has nearly doubled since 2000 and that the sector is now worth £1.062b, up 13% from £940m in 2005. Between 1994 and 2006, business guest stays rose from 2.7 million (38 million roomnights) to 3.8 million (57 million roomnights) a year.

With average occupancy rates of 75.5% and average room rates of £46.96 last year, revenue per available room was £35.47, up 4.6% from the previous year. The typical budget hotel room generated about £12,947 of revenue annually, meaning a standard 73-bedroom unit made £945,131 a year.

These findings show that the budget market is able to withstand pressure caused by external factors such as terrorist attacks and bad weather, according to Ben Walker, research analyst at TRI.

"The growth in demand for the budget product has steadily increased since 2000 and appears to be less susceptible to market variations," he said.

Colin Roy, marketing chief at InterContinental Hotels Group, which runs Express by Holiday Inn, said the growth shows no signing of stopping. "The growth of the sector so far has been phenomenal, but we've not come to any impasse. It's going to continue," he said.

The next driver of growth will be the increasing use of lower-revenue spaces which would never have been considered suitable for a hotel, such as basements, Walker said.

"This is one to watch," he said. "The Japanese pod model is interesting - to optimise lower-revenue space for people who just want somewhere to sleep in a city centre. It will be interesting to see if it emerges further."

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By Emily Manson

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