As prices continue to rise in travel, the future looks bright for budget, and the future looks orange. Sally White reports

Cynics may be sceptical, but there is really no arguing against the fact that travel and its prices continue to boom! There are just too many figures around to comfort the naysayers – air traveller numbers and room rates increases, to name just two – despite all the gloom.

According to latest The Global Travel Forecast 2019 from the Global Business Travel Association and Carlson Wagonlit, price rises will be 3.4% for hotels and 1.7% for flights! Not surprising, as prices rise, is the growth in budget hotels and the hostels. Both look robust, despite incursions into their customer base by accommodation disruptors Airbnb et al.

London is an excellent illustration of the strength of the budget sector. Fuelling the city’s dramatic 70% rise in new build hotel openings has been the strong rise of budget hotel rooms, according to estate agents Knight Frank. The budget segment accounts for 67% of the 4,100 new build bedrooms, it says.

In its UK Hotel Development Opportunities 2018 report Knight say the budget hotel sector will continue to dominate with some 8,300 new branded budget hotel rooms planned to open in 2018. 

At the bottom of the lodging price range, revenues are expected to jump from 2017’s $5 billion to $6.4 billion by 2020

Australia-based research group CAPA

For the global hostel market the Australia-based research group CAPA has just put out a reminder that here, at the bottom of the lodging price range, revenues are expected to jump from 2017’s $5 billion to $6.4 billion by 2020.

Meanwhile, Hostelworld, the hostel booking platform, took four million bookings in the first half of this year (up from 3.6 million three years ago) and believes that hostel bed supply is rising at around two per cent a year. It has announced first half 2018 growth in its own brand bookings of six per cent on the same period last year, and a like-for-like increase in average booking value of five per cent. (In current currency values they were flat at €12.2.) It currently covers 36,000 properties in more than 170 countries.

Hostelworld’s latest profits’ presentation has some interesting things to say about its clients – most are women (58%) and most are travelling solo (53%). Indisputably, hostels appeal to millennials, with 46% of Hostelworld’s bookings coming from travellers aged 22 to 30, the next largest segment being 31-40 year olds (19%). Bookings through its app were up by 27%, and a huge 64% came from unpaid channels.

Easy does it  

Just one example of budget hotels’ rapid expansion comes with the announcement last month from easyJet’s hotel wing, easyHotels, that it is buying a prime 103-bed hotel site in the UK’s seaside resort of Blackpool and has just opened five more hotels. This brings the group’s total of owned and franchised rooms to over 3,000.

Super budget easyHotels.com is now in 34 locations across Europe and the Middle East. Three of latest hotels are in Leeds, Sheffield and Barcelona and are owned and two, in Reading and Belfast, are franchised. Backed by £50 million raised from investors earlier this year, the group plans to spread further into mainland Europe.

There is no doubting easyHotels’ super budget status

There is no doubting easyHotels’ super budget status – it has a £19.99 offer splashed across its site, but for London £17.99 a night is listed. More, in the view of many European cities, than one can say about Airbnb. The Europe Commission has warned Airbnb that it falls foul of EU consumer rules and that it is failing to tell consumers up-front online the total cost of renting a property, including service and cleaning charges.

Anyway, Airbnb is not necessarily the cheapest stay in town, according to a survey by American bus ticketing site USBUD. Looking at a range of cites in Europe and the North America it found that hotels were competitive in five of 12 cities examined.

Big chains and budget action

Of course, the major hotel groups have seen the attraction that the low cost of rooms on Airbnb (and its peers) have for millennials. Hilton, for one, has been building its Tru chain to offer a small and cheaper version of its brand. (The OTAs have prices for $89 upwards.)

There are now 16 Tru properties open and 470 deals in various stages of development, Alexandra Jaritz, global head for the brand, recently told a group of journalists. She says she is aiming for “more than 50 this year, and by 2020 we hope to have more than 300 hotels open.” With an eye to keeping down room price rises, Hilton has recently announced steps to cut build-costs.

Hilton has been building its Tru chain to offer a small and cheaper version of its brand

Latest into the sector is Intercontinental Hotels – it is launching an ‘Avid’ brand internationally, with the first site opening in Oklahoma City in the US later this year. This is planned as a chain of budget hotels which will have gyms and will offer free snacks and drinks.

Meanwhile, Marriott got into the budget sector very early, launching ‘Moxy’ with IKEA back in 2013. Moxy has since grown to include nearly 30 operating hotels. The chain now has more than 90 properties in its development pipeline globally, including four hotels in the Caribbean and Latin America region. The plan is to double the size of its current portfolio by 2020.

However, Moxy is not purely a budget group and is spreading its client risk to aim at ‘fun lovers’. The hotels are hi-tech and offer a wide range of prices – from micro to moderate. Rates fluctuate and can go up to $200 a room, location and time depending.

Yet another approach can be seen at Accor, which is in the throes of transforming itself from a hotel company to a hotel platform. It has been rolling out a new Ibis budget hotel room concept, incorporating it across its chain as hotels come up for refurbishing.

A tip for watching hotel prices from the Global Travel Forecast – air travel is creating the demand for hotels and room prices ‘mirror air prices’. So, it says, while rates are expected to rise next year in Europe and the Middle East, in Latin America and Japan they will fall.