Travelodge’s decision to extend its brand into a new sector for the first time with the launch of a travel insurance product (MW last week) seems, on the face of it, to be a logical move.
Travelodge Travel Insurance is the chain’s first major online product and is being rolled out across the country following a three-month trial. The service is being provided by American International Group (AIG) Europe and will be available for single trips and annual policies.
Observers, for the most part, believe travel insurance is a natural brand extension for the budget hotel chain. They point out that it will allow the company to drive new revenue streams and gain a competitive advantage over rivals such as Premier Travel Inn, while establishing a foothold in the lucrative £680m UK travel insurance market.
Graham Hales, executive director at Interbrand, says: “Brand extensions must go into areas where they are applicable. Travel insurance is a fairly logical move and it makes sense to get into this market. But it shouldn’t stray out of its heartland.”
Moreover, commentators believe Travelodge is tailor-made for travel insurance. As with budget airlines, Travelodge’s business model involves selling no-frills, budget hotels online – the channel customers are increasingly using to buy travel insurance. The company claims its insurance, like its hotels, will undercut most other brands.
While commentators believe it will take time for Travelodge to establish itself in a market awash with specialist providers, it plans to extend the brand into other categories which have been off-limits in the past. These include, according to Travelodge’s marketing and sales director Daniel Heale, motor and home assistance services. While no definite plans have been finalised, Heale says: “We have moved into insurance and it is about extending the brand into other low-cost areas.”
Straying from the familiar
One critic says moving into categories like motor insurance would be a “stretch”, arguing that it is too far removed from its core offering and could weaken the brand. The source points to the example of easyJet, which has had mixed success by diversifying its low-cost, no-frills model into other sectors.
Some believe Travelodge could find it difficult to establish itself in highly competitive and congested sectors where expertise and trust jockey for importance with cost in customers’ minds. Yet others argue that Travelodge has an “enviable database” built up through its budget hotels that will allow it to make inroads into other insurance sectors with targeted marketing campaigns.
“It has a fantastic database because people are filling in details when they are booking their hotels,” says an industry source. “This will allow it potentially to move into an array of sectors.”
Travelodge, which was recently acquired by Dubai International Capital, runs on a low-cost model and its marketing approach and price promotion have set the tone for the budget hotel sector.
The chain’s marketing strategy is built around efficiency and promotion. It will offer rooms for as cheap as £15 a night, but that price will only be available if rooms are booked well in advance and online. However, observers believe Travelodge has built up “tremendous” customer loyalty using this model.
While Travelodge is continuing to improve its core hotel offering with the introduction of wireless internet access and other supplementary services, it is an altogether different challenge to diversify into new sectors.