Skift Take

There is no turning back on the transformation of low-budget hotels from the “uncategorized” class into a legitimate segment of the global hotel industry. Future technology and the rise of Gen Z will further fuel innovation and change in the design of economy accommodations — especially in Asia.

Series: Megatrends 2020

Skift Megatrends 2020

We recently released our annual travel industry trends forecast, Skift Megatrends 2020. Download a copy of our magazine here and read on for highlights online.

Upstarts across the globe led by Oyo Hotels & Homes, RedDoorz, Yanolja, and many other players are reviving faceless buildings, guesthouses, hostels, so-called love hotels, and budget vacation rentals into legitimate, respectable businesses.

The trend is being driven by tech-focused entrepreneurship and points to a deepening democratization of travel. Whether or not these ventures are profitable eventually, what they’ve done is reinvent the category, giving it the distribution scale to wholesalers and online travel agencies. With this ingenuity, these previously dismissed hotels are making three-star hotels look too pricey and too old.

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What’s Smart Design for Budget?

The snowball effect is that traditional chains, such as Accor and Wyndham Hotels & Resorts, are also jumping in to redesign the budget space. In doing so, we can be sure the evolution of budget accommodations is not a flash in the pan. Accor’s lowest-priced category, Ibis Budget, sports new “snug designer rooms” and the chain has fielded a modern-day hostel version in Jo&Joe. Wyndham’s Super8 brand is reimagining the hostel with a new Room8 communal space that can sleep four individuals.

Smart design in budget hotels centers on the promise of clean rooms and bathrooms, communal spaces, comfortable beds with spotless linen, free Wi-Fi, safety and security, and end-to-end efficiency, from the ease of booking to payment. There is design in the aesthetic sense, although it is nowhere near the lavishness of luxury hotels.

Both Oyo and RedDoorz have a team who look at interior design and procurement of furnishings. Adding portraits of Marilyn Monroe above the twin beds at Oyo Hotel Tyler Lindale in Texas lifted occupancies by 10 percent in just seven days.

These hotel chains use a stack of proprietary technology to standardize services, amenities, and in-room experience. Oyo, for instance, has a “transformation app,” Optimus, which enables its engineering and design team on the ground to assess what needs to be renovated and at what cost, as well as assign tasks and track progress, said an Oyo spokesperson. This kind of technology enables Oyo to transform and onboard properties within three to 14 days; traditional hotel companies, on the other hand, can take 10–18 months as they go back and forth with owners on a brand and property improvement plan. This accounts for why Oyo has been able to amass over 35,000 hotels in its portfolio globally as of late last year.

Across the Asia-Pacific, there’s a rash of players that have more or less a similar template, including amply funded Yanolja, a $1 billion company famous for turning South Korea’s love hotels into popular accommodations for couples, families, business travelers, and groups of friends. There are also smaller national players such as Indonesia’s Airy Rooms, Thailand’s Hotel Nida, and the Philippines’ Go Hotels, to name just a few.

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Why Asia is Driving the Trend

On the one hand, Asia has hundreds of thousands of super-low-priced rooms. In Indonesia alone, there are around 300,000 non-classified and 233,000 classified hotel rooms, according to Statistics Indonesia. The majority (70 percent) are three stars and below. Any wonder why Oyo and RedDoorz have made Indonesia their No. 1 focus of expansion in Southeast Asia?

RedDoorz estimates that Southeast Asia alone has over 120,000 budget hotels in the three-star or below segment as of 2018. The region’s hotel market, valued at $17 billion, is three times as big as India’s. By 2023, it’s expected to reach $23 billion.

On the other hand, Asia is home to a huge population of middle-class millennials for whom travel is a lifestyle and affordability and efficiency are a given. The latest Google, Temasek, and Bain study of Southeast Asia’s internet economy points out that it is budget hotels that have propelled the region’s online travel growth to $34.4 billion this year, from $29.7 billion in 2018.

Future Budget Hotels

The needle, however, is shifting from millennials to Generation Z, and this will shape how budget hotels might look in the future. For the first time this year, the Gen Z population has surpassed millennials.

A Skift Research report, Millennial and Gen Z Traveler Survey 2019: A Multi-Country Comparison Report, shows that both politics and sustainability matter in Gen Zers’ travel decisions.

Sustainability will certainly influence the future shape of budget brands, as will technology such as voice, artificial intelligence, and robotics. New budget brands have already emerged, consciously or unconsciously giving hints of what’s around the corner.

Accor’s Greet, which is pushing the sustainability angle through interior design, is one. The brand has partnered with homeless charity Emmaüs and recycling company Valdelia to help hotel owners source secondhand furniture or unusual decorative items.

Alibaba’s FlyZoo prototype showcases the technology that the hotels of the future will deploy. Guests check in using the mobile app and use facial recognition in the elevator and at the room to open the door. Within guest rooms, voice recognition enables visitors to adjust temperature, lights, and curtains. Robots deliver water and fresh towels.

Oyo said that it’s investing in signage powered by augmented reality. “These signages will enhance customer experience by routing guests to check-in counters, breakfast locations, or even the safest evacuation route during emergencies,” said the Oyo spokesperson.

“Internet of things is a big area for us where we are experimenting with smart switches and smart lighting to significantly improve the guest experience.”

Amit Saberwal, CEO of Singapore-based RedDoorz, said the startup chain is already trialing “the likes of self-check-in/checkout functions, smart-locking systems, and automated temperature regulation and controls.”

But one thing is clear, he said. It all has to go back to creating a comfortable, hassle-free, and seamless stay for customers, Gen Zers and millennials alike, from the moment they begin searching for a room to when they arrive, stay, and check out.

Using design in the quest for this connected traveler is leveling the playing field between budget hotels and their luxury sisters.

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Tags: budget hotels, hotel design, megatrends 2020

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