GlobalData: Budget Hotels Set to Benefit from Increase in Price-Sensitive Travelers

Price is the most important factor to 47%* of consumers when selecting accommodation, according to a poll by GlobalData. The data and analytics company notes that, with less budget for travel but a strong desire to escape, many will turn to budget providers to satisfy their travel cravings.

Gus Gardner, Associate Travel and Tourism Analyst at GlobalData, comments: “Budget hotel operators will be well positioned to benefit from an increase in bargain-hunting travelers looking for the cheapest accommodation possible. With many countries still only permitting outbound travel to a handful of countries and domestic holidays booming in the short term, accommodation prices have risen. Research conducted by consumer group Which? revealed that UK breaks were 35% more expensive this year than last year. Therefore, travelers will be looking for a bargain among a sea of inflated rates.”

GlobalData’s consumer survey (Q1 2021) showed that travelers are more price sensitive than before the pandemic, which is unsurprising given that 87%** of global respondents expressed that they were concerned about their personal financial position during the pandemic.

Gardner continues: “The pandemic has placed a considerable strain on travelers’ finances. Despite this, travel demand is still high, and many are looking to escape in desperate need for a change of scenery. Travelers are more likely to trade extras offered at mid- to upper-scale hotels for a more basic ‘pay for what you need’ service standard.”

The same GlobalData poll showed that ‘prestige and loyalty offered’ was the least important factor when selecting a hotel/accommodation. Many upscale hotels have invested in developing a loyal following. However, the pandemic has caused a shift in traveler sentiment that could impact this type of investment.

Gardner adds: “The financial squeeze from the pandemic will likely push travelers to budget travel options, forgoing loyalty benefits in the process. To counteract the shift towards budget alternatives, mid to upper-scale hotels should focus their efforts on price promotions. Offering additional discounts for loyalty program members, freebies, or free upgrades could entice those looking to make their stay more comfortable despite a depleted travel budget.

“As travel begins to return, post-pandemic travelers are likely to have reduced funds, and budget hotels will benefit. Price promotions and incentives could be a crucial strategy for mid to upper-scale hotels to counteract this trend, however, travelers are more likely to be influenced by price in the initial travel recovery period.”

* GlobalData live tracker Verdict poll of 425 respondents, live since 19 April 2021.

** GlobalData Q3 2019 consumer survey, 29,744 global respondents. ‘Extremely’, ‘slightly’, or ‘quite’ responses combined.