The move to cheaper sleeping

The budget hotels market in the UK is estimated to be worth £660m in 2001, although the sector’s growth rate has fallen this year due to a decline in domestic tourism, and the effects of foot-and-mouth disease.

The budget hotels market in the UK is estimated to be worth &£660m in 2001, although the sector’s growth rate has fallen this year due to a decline in domestic tourism, and the effects of foot-and-mouth disease. According to Mintel research, budget hotels represent about ten per cent of all stays in guesthouses in the UK. Mintel predicts that, by the end of 2001, there will be 840 budget hotels in the UK. The number of budget hotel rooms has risen from 39,000 in 1999 to 60,000 in 2001.

It is 15 years since the first budget hotel opened in the UK. Between 1995 and 2000 the number of budget hotels increased at an average rate of 15 per cent a year. Today there are over 800 budget hotels, representing six per cent of the UK’s hotel accommodation market.

The traditional concept of a budget hotel has become less clear as the sector has grown. Major operators have developed budget hotels with new facilities. Increasingly, features such as a six-foot beds are becoming standard, as are secure car parks and 24-hour receptions. In the same way, the flat-rate prices are changing to a more flexible structure. Budget hotel operators are not pricing by season, but offering tiered rates. These are usually priced according to location (London being the most expensive), day of the week and late availability. The budget hotel market is no longer based on cost competition: there is now more emphasis on providing value for money and consistency of product delivery.

The key customers of UK budget hotels are frequent business travellers and families on holiday or on a short break. Only 57 per cent of the adult population claim to have stayed in a budget hotel, leaving a significant untapped market. In terms of age and socio-economic group, those aged over 25 and the ABC1 and C2 groups are most likely to stay in a budget hotel.

About half of consumers who have stayed in a budget hotel are from London, the East or the Midlands, and over two-thirds are in work.

Typically, a large proportion of budget hotels’ guests have been businesspeople. It is evident that the success of budget hotels has led to a decline in other accommodation sectors such as mid-market hotels and family-run bed-and-breakfasts – 53 per cent of respondents would use a guesthouse or bed-and-breakfast if budget hotel accommodation was not available, compared with 41 per cent who would use three-star hotels.

With the budget hotel market becoming more competitive, above-the-line advertising plays an important role in promoting budget chains. One of the most effective methods of marketing by leading operators is the use of signage and branding outside their buildings. The leading brands are using traditional and non-traditional advertising media to promote themselves and their individual units.

The significance of the corporate market to the budget hotels sector is reflected in the increasing use of local corporate sales activity and accounts. In addition, the major budget hotels now have comprehensive websites. At present only one to five per cent of bookings for budget hotels are made via the Internet, but in terms of information sources the Internet use is more significant.

Brands account for 30 per cent of the UK hotel market. This is considerably lower than in the US market, where 70 per cent of hotels are branded. Many of the UK hotel brands are now budget hotel brands. Mintel predicts that the development of budget sites will exceed that of other hotel developments.

Mintel also forecasts that the foot-and-mouth outbreak in the UK will have only a short-term effect on the budget hotels market.

In order to differentiate branded budget hotels, operators will have to develop more facilities. In particular, areas such as in-room Internet access, conference facilities and even room service may become more common features of the budget hotel in the future. To a certain extent, budget hotels with very basic facilities and low prices will become a minority, thus moving away from the traditional concept.

The Mintel study indicates that the trend away from three-star hotels and bed-and-breakfasts is set to continue. Moreover, the number of adults who stay in budget hotels is likely to rise from 57 per cent in 2000 to 65 per cent by 2005. The Internet is likely to be a key factor in the market’s growth. It will increasingly be a medium for advertising, as well as taking reservations and controlling inventory. By 2010, the survey says that 50 per cent of budget hotel bookings will be made via the Internet.

Factfile is edited by Sonoo Singh. Cecilia Anto-Awuakye, consumer goods consultant at Mintel, contributed.

Latest from Marketing Week


Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now


Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.


From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.


Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3703 or email

If you are looking for our Jobs site, please click here