Is the Gulf ready for ultra-budget hotels?

While much of the world is accustomed to spartan budget hotels, the Middle East is new to the game. But these cheap options have already been a big hit, says Viability director and Hotelier columnist Guy Wilkinson

Over the last decade, the first branded budget hotels have begun to appear and gain popularity in the Gulf, with the largest concentration of them being in Dubai.

I refer of course to such nominally two- and three-star brands as Ibis, the pioneer in this sector that opened its first property at Dubai World Trade Centre in 2003, Holiday Inn Express, Premier Inn, Centro by Rotana and Dubai’s own Citymax.

To be clear, I do not refer to mid-market brands that frequently get lumped in with the budget brands, although I do understand that it’s confusing in a region where previously, hotel branding was more or less restricted to five-star hotels — and therefore anything less was assumed to be a budget brand.

The model for traditional non-branded hotel development in the Gulf is that hotels are essentially equipped with the amenities that will make money for the owner. Thus, especially in markets where bars can only be found in hotels, there is no contradiction in having a hotel full of cheap rooms, as well as multiple restaurants and bars, a health club, a swimming pool, etc.

By contrast, the modern theory of hotel brand differentiation is that the cheaper the rooms, the fewer amenities and services must be available to guests. Essentially, the full-service template is that of a five-star hotel, with plush, amply proportioned rooms and everything from smart restaurants to grand ballrooms and 24-hour room service.

To create more affordable brands that fit neatly beneath this template, without undermining it, the corresponding brand concepts must each have successively less to offer.

Hence the development of euphemistic labels like ‘limited service’ or ‘essential service’ hotels, that imply you have made a wise decision in choosing the best interests of your wallet over your own comfort. At the bottom end of this pecking order are extremely basic brands like Accor’s F1 brand where rooms have bunk beds, bathrooms are communal and the reception (also breakfast bar) is manned for just three hours a day.

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Budget categorisation
According to a recent report by HVS, there are now four sub-categories of budget hotel. Among the ‘Ultra Budget’ brands are F1, easyHotel and Premiere Classe, the latter now planned for roll-out in the Gulf by Louvre Hotels affiliate, Golden Tulip. ‘Core Budget’ brands include Ibis and Premier Inn, while Holiday Inn Express is one of the ‘Upper Budget’ brands.

There is a cross category of ‘Design Budget’ brands that includes Yotel, which is owned by Kuwait’s IFA, but not yet present in our region. In Europe, Asia and the Americas, the public is already well accustomed to patronising these spartan budget hotels.

In the Middle East, we are relatively new to the game, but it appears these cheap options have already been a big hit. Such brands as Ibis and Express were essentially over-specified when launched in our region compared to the West and their cosy offer has evidently been appreciated.

Even the easyHotel in Jebel Ali has much larger rooms than other properties in the chain, as well as an excellent Italian restaurant that is far from brand standard. Both Centro and Citymax have emphasised attractive interior design, and the latter boasts multiple branded F&B outlets to boot, with a good local following.

My hotelier friends involved in Dubai’s branded budget market report not only excellent occupancies, but also that high demand has caused a new trend away from fixed prices towards rates of the day to achieve better yield management.

Many also comment that their car parks regularly feature their fair share of luxury vehicles, with one of these hotels having a permanent resident who drives a Porsche. It seems that the regional positioning of most budget brands at upper three-star level was definitely the right way to go, at least as far as this initial phase of the market’s maturing process.