The value of the UK branded budget hotel sector has nearly doubled since 2000.

Total rooms revenue, the principal driver of budget turnover - has grown from ï¿¡504m in 2000 to ï¿¡1,062m in 2006.
 
Inbound tourists – opportunity in the capital
 
And there is plenty of scope to increase this massive rise in rooms revenue even further. For inbound tourists who want to visit London this summer but are short of cash, budget hotels appear to be a solution they may not have considered. TRI's unique HotStats database of UK budget hotel performance shows a pronounced dip in budget occupancy in London during August, a key month for inbound tourism.
 
"The fall off in demand for London budget hotels in August clearly shows that UK budget brands are not fully recognised by inbound tourists and that the great proportion of demand in London is domestic and commercial in nature," said Mark Dickens, deputy managing director of TRI Hospitality Consulting. 
 
Last year London budget occupancy dropped from 83 per cent in July to 74 per cent in August, compared to 89 per cent and 86 per cent for full-service hotels during the same months. 
 
"Although the weak dollar is currently contributing to a reduction in North American visitors, London's budget hotels can provide an affordable solution for inbound tourists," said Dickens. 

The search for sites
 
As the sector matures, budget hotel developers will need to be ever more creative in finding sites. Supermarket-owned land could represent an opportunity. Other possibilities include sports stadia and university campuses. New entrant Sleeperz saw railway-owned land as an opportunity and spent eight years working towards a partnership with Network Rail to lease its land for a series of new-builds. 
 
For some, the greatest innovation is the realisation that budget hotels such as easyHotel, nitenite and Yotel that use windowless rooms can optimise lower revenue space in prime city centre mixed developments, filling unused basements or otherwise non-utilised space.
 
"Fierce competition rages between the budget brand operators for growth, for sites, and for the hearts and minds of consumers – in short for market dominance," said Dickens.
 
Increase in consumer demand
 
The budget hotel sector has appealed to the public imagination and in the process drawn in great swathes of customers new to hotel staying. In the most recent BDRC data released earlier in 2007, branded budget hotel staying is clearly established as a mass market activity.

A total 1.5m domestic business users means that nearly four out of every 10 business travelers have stayed budget. Even more dramatic is the growth in the leisure market there being a total of 5.1m leisure users of the main branded budget hotels in the last year in Britain.
 
Amongst the leading economies in Western Europe, only France's branded budget hotel sector achieves a higher market penetration of all business travelers with 55 per cent compared to Britain's 39 per cent. In 1994 the equivalent proportion in Britain was just 14 per cent, which is the same as Italy today.

In 2000 it was 27 per cent, about the same as Germany now. This is a measure of how far the British market has come. It also hints at the opportunities in other countries where the budget hotel concept is less developed.