Travelodge comes up with three price-band strategy

Travelodge has recently announced its aggressive pricing strategy for 2006.

The company stated that a hundred thousand rooms will be priced at £10, 500,000 rooms will be available at £26 and price cuts will be made on thousands of standard room rates across the whole estate, including city centre and airport locations. An official release added that the new rates have been created following a price review of all of Travelodge’s 280 hotels – the key local competition have been undercut in every location.

The new pricing structure will heap further pressure on Travelodge's competitors across the hotel industry, not least Whitbread's Premier Travel Inn. Travelodge is committed to lowering prices to drive growth in the sector,” said the company. The strategy will also produce just three new, simple price bands - Supersaver (£10), Saver (£26) and Flexible.

Hotel expansion plans have also been increased to 2,750 rooms in 2006 and 3,000 in 2007, which will bring the total number of Travelodge rooms to over 20,000. As a result of a review of its low cost business strategy, Travelodge has stripped out an additional £3m of head office costs to maintain its industry lead on price and support the new strategy, added the company.

Customers will also have the option of booking rooms in advance from 6 months to 12 months, making it much easier for customers to find a reduced room rate.

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“Budget hotels are about offering a quality night’s sleep at a low price. Our competitors have lost sight of this - we will not. With our rivals constantly raising prices, we are now the only true budget hotel offer in the UK. We can sell rooms at £26 but our competitors cannot,” said Travelodge chief executive officer Grant Hearn. “This new strategy means customers get the same great product but at even lower prices. Affordability and accessibility are what we are all about as we aim to make a hotel stay affordable for everyone.”

It was also shared that Travelodge’s website upgrade (www.travelodge.co.uk) and investment in new IT systems this year have enabled the business to alter the balance of web and phone reservations radically. Online bookings have increased from 17% in 2003 to over 65% in 2005, meaning a much leaner reservations operation. Hearn added, “This strategy is another major step in cementing our position as the customers first choice for hotels. It is our intention that through our efficiencies we will sustain a long term programme of relentless price reductions to open the hotel market up to everyone.”

Visit London’s Hotel Development Monitor had highlighted the potential growth for the sector in London. According to Visit London, the total supply of branded budget hotels in London has increased by ten fold in the last fifteen years and has the capacity to grow even further. “Currently London has just over 13,000 budget rooms, which accounts for around 13% of total London hotel supply. In other parts of the UK, budget penetration rates are close to 20%, implying that London still has a 7% growth opportunity. This translates into a potential 8,000 rooms that could be developed before budget supply in London becomes mature,” it had said.

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