Travelodge will this week kick-start a full frontal price attack on its rivals designed to steal up to 400,000 room nights of market share during 2009. The budget chain is targeting £29m* of its competitors' revenues by exposing rip-off hotel practices and highlighting the major price gap between itself and the UK's major hotel brands.
Travelodge will use an independent price monitoring company*** to price check over 1,000 of its main brand competitors everyday to stay ahead on price. If any branded hotel rate across the country drops below a local Travelodge price, new analytical software will make the budget chains' price team aware, allowing them to adjust the rate in minutes. This intensified focus on price will see the budget chain invest over £13m in price cuts in 2009 to win the growing population of mid and full service customers that are looking to save money on travel.
Travelodge has seen a significant increase in new customers from mid market rivals over the last six months, a trend supported by an independent study by market specialists, BDRC. The Usage and Attitude survey stated that 46% of hotel users prioritise price when booking an overnight stay. The study also shows that a £10 price reduction would encourage 30% of business and 37% of leisure customers to switch to another hotel in that same location.
Travelodge's Managing Director, Guy Parsons said: "We have spent the last three years shaping the business to be the outright winner on price. We have established clear blue water between ourselves and even our closest budget rivals which will enable us to steal share. Business and leisure customers are already very price conscious but with family income getting tighter, the focus on price is now more acute than ever".
"Along with our aggressive UK growth plans, this new way of managing price will enable us to grow stronger during the downturn. During the last recession of the nineties, budget airlines used that period to affect a structural change in their industry. We are confident that budget hotels will do the same this time around. said Parsons".
To support the changes to Travelodge's revenue management strategy, the budget chain will today launch the hotel industry's biggest ever price advertising campaign. The £5m investment will see eye catching adverts, naming and shaming its higher priced rivals and highlighting practices such as 'ex VAT' prices and 'per person, per night' rates. Supermarket style, price comparison tables will compare towns and cities across the UK, laying bare its own prices alongside its competitors.
In its first wave of advertising Travelodge will use newspapers, web and direct marketing to highlight an average national rate difference of £63 against mid market rival, Hilton and £17 against its budget rival, Premier Inn. Travelodge will follow up the first wave of adverts with regional comparisons across the country.
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Guy Parsons said: "It cannot be right that mid market hotels such as Hilton and Marriot can charge up to 100 more for the same location on the same night. Our price checking shows that even fellow budget operator Premier Inn is charging up to 20 more a night for the same nights sleep".
Over the last two years the budget sector has made major inroads into mid and full service market share. Low cost hotels have increased the number of room nights sold by 26% whilst the rest of the hotel market slid by 7%***. Travelodge believes that this trend will now accelerate, threatening the existence of the mid market hotel sector. Budget hotel supply is currently growing at 10% per annum and will treble by 2027 to 225,000**** meaning a new low cost hotel will be opened every three working days for the next 18 years.
"The change in market conditions is already having a stark affect on hotel supply in this country. We are now seeing ten times more going concern hotels up for sale compared to just six months ago", said Parsons.
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