Expert insights

Are budget hotels the best value choice for business travellers?

15 June 2016 by Sam Welch

Good corporate citizens often opt for the cost-conscious hotels. But with so many brands, strong marketing and new budget products, do guests know which ones offer best value?

The growth of budget hotel brands

The strong recovery of the accommodation sector in 2014 and 2015 has resulted in significant investment in the UK supplier pipeline. The spike in the budget accommodation sector, in particular, has been phenomenal.

BDO’s Hotel Britain 2016 report tells us that Whitbread, owner of the Premier Inn brand, has the highest percentage of hotel rooms in the UK. Travelodge was ranked as the third largest UK chain. Combined, these two brands offer over 98,000 rooms across the UK.

As a specialist in managing accommodation for businesses, Capita Travel and Events has been recommending budget brands for preferred hotel programmes since the ‘economy’ concept was born in the UK. But as with any supplier, there are many factors that customers should consider before they book.

Do they have the facilities business travellers need?

Before adding any property to a corporate hotel programme, we always recommend benchmarking. From a traveller welfare perspective, it’s important that any property can meet the minimum standards for safety and security set out within each customer’s policy.

For example, not all budget brands offer full-service facilities – but 24-hour room service or an onsite restaurant could be important criteria if you have lone travellers arriving late at night.

Does a budget brand mean a budget price tag?

You need to be comfortable that a budget brand actually means you are getting good value for money. Our regular price analysis shows that this isn’t always the case. Occupancy levels for some of the low-cost brands were as high as 97% in certain cities hosting high-profile events last year. This peak in demand often resulted in budget brand average room rates outstripping other mainstream providers.

Some of the economy brands have highly successful business models and have invested heavily in their product offering, as well as offering plenty of choice in terms of UK locations. These offerings can tick a number of boxes in terms of meeting value, quality and service promises.

However, when we first analysed the budget sector against traditional accommodation providers in mid-2015, we found they they weren’t necessarily the cheapest option. We discovered that at least one brand usually billed as budget was more expensive than a three-star property in 16 of the top 20 locations we booked – and our most recent analysis showed the same results.

Dispelling the myths

I recently read a statement that many travel management companies (TMCs) aren’t offering one of the most popular economy brands via their online booking tools. While all TMCs should offer budget brands as part of their services, there were a few things the feature neglected to mention.

Firstly, one of the top brands doesn’t make most of its rooms available on the GDS (the Global Distribution System through which hotels sell rooms). So it’s only the more progressive and specialist TMCs that are able to access and display these rooms and rates through direct connectivity with the group’s systems.

Also, as with any property on a preferred programme, the location of each hotel needs to be right, the facilities and services need to meet the duty-of-care minimum standards and the price needs to be competitive and within the customer’s rate-cap policy. Properties at the top of the search order should meet the customised criteria for each customer, displayed in the right order.

The choice of budget brands

In the UK alone, there are currently at least 13 different hotel chains with products and services that could be classed as part of the economy sector. Our recent benchmarking report found that in London (always a popular destination for business travellers), economy options range from ibis Hotels, with average room rates at £91 a night, to Premier Inn, which averages £139. In the provinces, the options range from Big Sleep Hotels, with average room rates of £59, to Premier Inn, at £82.

The difference is always in the detail, with average room rates varying from city to city. In Birmingham, for example, ibis Hotels was the cheapest brand, with average room rates at £53, while in Manchester, Comfort Inn was the lowest at £64. In Glasgow, ibis again took first spot with an average of £65, whereas in Edinburgh, Travelodge had the lowest rates, averaging £61 across its various properties. (These rates are inclusive of VAT and breakfast and commission for some brands).

Do economy hotels have a place in your supplier programme?

Absolutely! Our message is the same as it always has been: include budget brands wherever you can, but do your due diligence on the facilities, and do the maths. Good benchmarking removes the myths and will ensure you can make an informed decision about the best-value accommodation option on a city-by-city basis.

Interested? Let’s have a chat about your company’s travel, meetings and events objectives - from the stuff that keeps you awake at night, to the everyday experiences of your employees! Call us on 0330 390 0340, or submit the details below, with an idea of the times that suit you for a call.