Budget hotel chain Travelodge will this week challenge its competitors to lower prices as it announces a £5m package of price cuts for the rest of 2008. Travelodge believes that increased price pressure on mid market rivals will maintain the momentum of customers switching to the budget sector.
Following the recent announcement of Travelodge's £9 sale for spring 2009, Travelodge has cut rates in 15 of the UK's biggest cities taking an average of 10% off every room night for the rest of the year. Room prices will be dropped below 2007 prices to drive volume and steal market share from budget and mid market rivals.
Travelodge Managing Director, Guy Parsons said: "We are stealing customers from mid market rivals everyday but we intend to up the ante even further. No other hotel chain can cut prices harder or longer than us so we will use this to our advantage. During the last consumer recession, the budget airlines drove a structural change in the market that did not reverse when good times returned. We believe budget hotels will do the same this time around mid market customers will demand value today and reject high prices for good".
This month alone, Travelodge has announced promotions pricing 200,000 room nights from £9 to £29. These promotions cover key holiday periods including Christmas, February half term and Easter. The budget chain stated that gaining an early share of these markets will pile more pressure on its rivals. Along with these promotions cuts on Travelodges every day rates will ensure that the budget chain will remain number one choice on price.
Guy Parsons commented: "By taking sales for next year, we are taking next year's demand out of the market now and away from the competition. Our mid market rivals will be forced into making sloppy last minute promotions that will fail to take traction. We our already seeing these hoteliers making panic price cuts in a bid to shore up the falling revenues."
Travelodge believes that this winter will be a precarious time for many hotel companies as cash flow contracts due to seasonally low occupancies. The budget chain is being contacted daily by hoteliers willing to sell its 'going concern'. Travelodge has been offering 500 a room to any site or existing hotel proposed to the company that could be turned into one of its own. Travelodge is has acquired nine going concerns in 2008 alone and expects 2009 to generate many more.
"We are now seeing many more hotels coming onto the market due to a more severe financial climate. This new landscape will require hotels to offer genuine value to the customer and we believe that can only be good for the long term success of the hotel industry", said Parsons.