While economy hotels may have a lower ADR than higher grade properties, they typically will yield a better return on investment (ROI). For example, economy hotels in the US generate 40% GOP margins, which is up to 15 percentage points higher than for more upscale properties, according to HotStats’ COO, Michael Grove.
At the same time, economy hotels are less vulnerable to a drop in demand in a recessionary environment. Indeed, they may even enjoy a bump up in occupancy, as travellers trade down when times are hard. For example, while a significant proportion of European hotels struggled to fill their rooms during Covid, economy hotels were able to benefit from a more local clientele and to continue serving corporate clients who had to travel for business despite the restrictions.
Economy hotels benefit from a low cost of construction as a derivative of the lower build up area that is required and a smarter approach to construction materials and FF&E investment. A perfect example is the use of modular units, which can be mass-manufactured and assembled onsite substantially reduce building costs. In addition, no-frills guestrooms and optimized common areas make for low capital outlays for FF&E (furniture fixtures & equipment).
Most revenue generated by high margin rooms
It’s well known that, in most hotels, the rooms division is the most profitable operating department, both in terms of margin and share of a property’s total GOP. The focus of economy hotels is primarily on selling rooms, which is typically the most profitable activity in a hotel.
Notably, economy hotels usually have minimal food & beverage service, typically offering only a simple breakfast, which is often supplemented by some vending machines selling snacks. Running a traditional restaurant operation is labour-intensive, entails significant cost of perishable merchandise and often requires additional manning and dedicated management attention.
In an era of staff shortages industrywide, economy hotels are favoured since they can operate with askeletal staff. Since customer service is very basic, multitasking is well adapted to an economy hotel. For example, reception staff can also help to serve breakfast, thus keeping headcount low.In addition, since operated departments are straightforward and basic, many tasks can easily be outsourced like housekeeping, F&B, as well as maintenance, security, marketing and revenue management.
Direct bookings save on distribution costs
Economy hotels in Europe depend essentially on a local, national or regional clientele, which allows them to register a high proportion of direct bookings; this saves on the cost of distribution intermediaries, such as OTAs. Established loyalty programmes also play an important role in driving direct hotel bookings by informing existing and potential guests about a hotel’s latest promotions and developments as well as providing attractive hospitality incentives that encourage guests to stay for longer.
Partnering with internationally recognised brands
There are plenty of reasons to believe that stylish economy hotels can be a sound investment. Partnering with an internally recognised brand, certainly provides even more benefits. Associating with a reputable brand not only enhances a hotel's visibility but gives guests more confidence and peace of mind when picking a hotel in the first place, and very importantly unlocks access to a number of support services and its loyalty program, which is a key success factor in the competitive hotel industry.
Wyndham Hotels & Resorts is the world’s largest hotel franchising company with approximately 9,100 hotels across over 95 countries. Wyndham commands a leading presence in the economy and midscale segments of the lodging industry, with recognised brands in the resilient select-service segment.
Super 8 by Wyndham
Super 8 by Wyndham is Wyndham’s leading economy flag with more than 2,600 hotels around the world—including the US, China, Dominican Republic, Indonesia, Germany, UAE, Saudi Arabia and recently introduced to the UK. Super 8 by Wyndham is known for elevating the economy hotel experience, offering sleek accommodations with redesigned rooms, and friendly service at an affordable price.
Days Inn by Wyndham
With over 1,500 locations, Days Inn by Wyndham is one of the largest, most well-recognised hotel brands in the world. Welcoming guests with a warm smile and an inviting room, most locations offer fast, free Wi-Fi, complimentary light breakfast and more. The brand provides a great stay to cost-conscious travellers seeking quality accommodation without breaking the bank.
Latest additions in EMEA
Opened in collaboration with motorway service area operator Roadchef, Super 8 by Wyndham Chester East marked the entry of the brand into the UK earlier this year. The hotel offers a mix of contemporary rooms with the latest tech, a stylish bar and restaurant, as well as on-site EV charging facilities.
With ample amenities and rooms with mountain views, Days Inn by Wyndham Gangtok Tadong is located in northeastern India, in a central land lively location in downtown Gangtok, full of shops, cafés, and restaurants. Guests also have access to wellness facilities, free parking and an airport shuttle.
Situated near the city centre of Koblenz, one of Germany's oldest and most beautiful cities, Super 8 by Wyndham Koblenz is a stylish hotel close to many popular attractions offering light-filled rooms, a breakfast restaurant and bicycle rentals to tour the city.
Days Hotel by Wyndham Deira is the first property in UAE under the popular economy brand. Located close to Dubai’s popular landmarks with direct access to the Dubai Metro, facilities include spacious rooms, a modern fitness centre and two restaurants.
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