Is ‘budget-luxury’ the next big trend?

Consumer preferences develop over time and the values ​​which they once held at the forefront of their decision-making are easily changed. “The most successful hospitality companies are those constantly evolving to reach their target audience”, discloses hospitality site Revfine, and according to hospitality trend website SiteMinder, travellers are now more frequently looking for ‘cool’, ‘experiential’ hotel stays, in other words , any hotel provisioning a “novelty factor.” It correspondingly posits that trends are influenced and structured by “greater social movements” which is why it is paramount that hoteliers “shift away from the traditional and embrace the radical” if they want to uphold a strong business.

Yet not all trends are novel and they do not necessarily come at the expense of another. In 2008, Airbnb “majorly disrupted” the travel sector, however it did not cause hotels to fail, rather contributed to an expansion in the industry which SiteMinder added, “can only be a good thing”. Likewise, trends vary depending on the age of the intended market. As Airbnb is a fairly new venture, young people can be “expected” to interact with it more regularly, while “older generations” favor the more traditional “hotels and car rentals” stereotype. In today’s climate, young travellers have become a great consideration for hoteliers.

“What I’ve seen over time is that ‘budget travel’ has become a lot more popular than it’s ever been before”, says Shakila Ahmed, communications director at Travelodge.

Ahmed has worked at the hotel company for 15 years. She has witnessed many changes over the decade but notes “an increase in more customers staying with budget hotels” as one of the principle trends that has gained pace and popularity.

Pre-pandemic, the hotel group studied the landscape of consumer trends in the sector and found the increase of a distinct category: a business traveller staying for “two-to-three weekdays” in a more economic hotel. After discovering the ascendance of this new trend, the group launched the UK’s first budget premium economy room in 2017, “where you pay that little bit extra for those ‘creature comforts’”.

“We looked at what other things we could bring into the hotel to make the travelers stay more enjoyable and more comfortable” but the group maintained it is still “very much” a budget principle.

In the following years, Travelodge continued to assess consumer trends to make for any changes in participants in traveler preferences and initiated its “largest study ever” comprising over five thousand participants. The feedback from the survey guided the brand to build ‘budget-luxe’ – Travelodge’s latest hotel design. “We are more clever and smart, using design to be able to immerse those little extras that they want when they’re staying away,” Ahmed says. The group’s principle of being a low cost operator still sits at the “heart” of its business and all it’s doing is “moving with the consumer trends that consumers want nowadays.”

So what is the new ‘budget-luxe’ design and who is it intended for? As a budget operator, Ahmed explains “it’s about asking what ‘little touches’ we can add that will secure that home-from-home feel, but not impact on the actual room rate”.

She continues “We’re seeing many business travelers meeting in hotels where they can work, socialise and meet up with clients” – and that’s where budget-luxe comes in.” The rooms have been designed to create a “three dimensional” effect; one side of the wall is dark navy blue to make the traveler feel “cosy” and the other is more light to allow for working and getting ready, “so you stay in one room but that one room has cleveryly been created to give you two very clear spaces.”

We already understand the popularity workspaces have gained since the pandemic, yet this is set to expand even further. According to Hospitality Insight, the number of coworking spaces worldwide is projected to reach 40,000 in 2024, double of what it was in 2020. Since Covid-19, some large hotel franchises such as Marriott, Hilton, Hyatt and Accor managed to at least retain some of their occupancy by targeting remote and hybrid workers. From workspaces and increased amenities to new schemes such as day passes and free provisions for accumulated credit, these groups “adapted” and took “key learnings” from one another.

“People still want value,” urges Ahmed. “And especially in the current climate where every penny is counting, everyone’s been hit by additional costs within their wallets and purses.” It is about affordable luxury.

Analysis platform Global Data (GD) reported that price is the most important factor to 47% of consumers when selecting accommodation. GD’s consumer survey (Q1 2021) also suggested that travelers are more price sensitive than before the pandemic, which is “unsurprising” given that 87% of global respondents expressed that they were “financially concerned” about their personal position. “Britain is now a nation of budget travelers, with more of us choosing to stay in budget hotels than any other hotel type,” said Craig Bonnar, Travelodge chief executive, and after the Spring Statement announced last month (23 March 2022) this may be set to continue.

Christie and Co said the industry was “deeply shocked and disappointed” with the chancellor’s deficient hospitality industry-specific support in his statement. There were “high hopes” to freeze VAT at 12.5%, yet the chancellor chose to “’essentially” ignore the unprecedented cost and inflationary pressures” that the sector is experiencing.

“The impact on our industry is likely to be immense, and many owners who are still feeling the effects of the pandemic may be unable to survive,” added Carine Bonnejean, managing director of hotels at Christie and Co. In a study, cited by a website Food Navigator, assessing the price sensitivity of consumers and retail products, respondents appeared to be more sensitive to premium products. Nearly half of consumers (48%) said they would switch to a cheaper brand with 26% changing to an own-label product. As people have less discretionary income, they may look for luxury stays on a budget.

According to data site Research and Markets, budget boutique hotels are already becoming “increasingly popular” among business and leisure travellers, particularly for those who wish to “spend less but seek quality and amenities,” in other words, those ‘creature comforts’ that consumers desire. “That’s what the customers are saying. It’s the little touches that really do matter,” stresses Ahmed. “Bringing in the elements like the comfy chair while you’re watching TV and offering travelers complimentary tea and coffee – it’s about feeling at home, from home,” especially in the new working-from-home world.

Travelodge says its redesign delivers for more than just the business traveller by dividing its cafe and bar space into different sections: If guests want to have a drink they can relax in the “comfy area”; if they want to work, Travelodge provides high benches to do so; if they are socializing and meeting with friends, it provides “different zones and types of seating” to suit the style of the occasion – “a bar cafe is still a bar cafe, it’s how you design it,” Ahmed says.

According to Research and Markets, the new players in the budget hotels market focus on “redefining” the budget from the earlier perception of “basic hotels” and this is exactly what Travelodge’s redesign is trying to achieve. Although it is described as ‘budget’, Travelodge explains it focuses on those “extra stylish elements” to make guests feel it’s “more the ‘premium’ budget appetiser”.

Although both ‘budget’ and ‘luxury’ are independent and successful trends in their own right, it is rare that they are used in the same sentence, let alone the same title. In 2011, Horwath HTL – in its future of luxury travel report – defined ‘luxury’ based on ‘high price’ but also referred to a redefinition of “ultra-luxury.” At the opposite end of the spectrum, design specialist RMJM suggested there is still a misconception of ‘budget hotels’ and discovered a “strong” positive relationship that reflected between ‘overall satisfaction’ and the respondent’s ‘loyalty’ to a brand.

PwC Consumer Intelligence research found that guests esteemed room value “above all else” when it came to hotels. Value in this instance does not simply mean ‘value-for-money’ but any additions that provide a “unique and memorable experience,” or alternatively described, luxury.

“Luxury, it seems, can be a small thing such as creating a meaningful experience or showing you care. But large or small, it should create an emotional connection with people, the product and the brand,” said Chris Fradin, Europe vice president for the Forbes Travel Guide.

It seems the new budget-luxe design by Travelodge caters to more than the business traveller; it combines two wholly independent markets. While it is likely the introduction of budget-focused hotels helped diminish, at least to some extent, preconceptions about ‘budget’ and ‘luxury’, Travelodge’s new design intends to showcase their combined capabilities. From housing creature comforts and creating multiple sections in its cafe and bar area, to “cleverly” providing guests with two spaces in the same room, budget-luxe is offering a unique and memorable experience, but “at an affordable price.”

“It’s just about tapping into the consumer trends and observing what consumers want nowadays,” and with the surfacing financial pressures – and those financial pressures to come but the remaining desire for value, it may be that we see a widening market for budget-luxe surface sooner rather than later.

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