GlobalData: U.S. Tops Budget Hotel Market

LONDON—In 2018, the U.S. reported the highest revenue in the budget hotel market worldwide, followed by the U.K. Revenue increased by 3.5% year-over-year (YOY) in the U.S., mainly due to an increase in ADR, which is expected to grow at a compound annual growth rate (CAGR) of 2.7% between 2018-2023, according to GlobalData.

GlobalData’s latest report, “Global Budget Hotels Market to 2023,” reveals that cost-focused disruptors such as OYO will drive future demand. The use of its unique business model, which utilizes data analytics and dynamic pricing to predict and create consumer demand, has excelled its growth. This kind of tech-focused strategy may become increasingly adapted as the trend of big data accelerates within the lodging sector.

Ralph Hollister, travel and tourism analyst at GlobalData, said, “OYO rolled out its first Townhouses in 2019 on U.S. soil. There is great opportunity for expansion in the U.S. due to the size of the nation and its variation of customer types. However, the U.S. lodging market is highly saturated and fiercely competitive, meaning that OYO needs to maintain a gradual growth strategy to gauge the markets reception to its offerings.”

The budget hotel market in the U.K. is estimated to generate total revenue of $13.9 billion by 2023. Branded budget hotels accelerated growth in the U.K. Total revenue and RevPAR were up 8.8% and 3.2% YOY respectively for Travelodge in its 2018 end-of-year report. In terms of revenue, the U.K. was the second-largest market for budget hotels in the world in 2018. As far as the number of rooms added is concerned, budget hotels surpassed all other categories.

Hollister added, “Growing demand for budget hotels in the U.K. can be mainly attributed to uneven travel trends and a decline in disposable income levels. This is due in part to Brexit uncertainty surrounding the conditions under the U.K. leaving the EU.

“Budget boutique hotels have become a favorite among business travelers with a shift in their preference to spend less money without compromising on the amenities and quality which they have come to expect,” he said.