The Rise Of Economy Hotel Segment

Factors like surge in middle class, increase in business and leisure travel, higher economic growth, urbanisation etc. have resulted in bolstering mid-market or mid-priced (often referred to as economy/budget) hotels in India’s hospitality sector. Historically, the midmarket hotels fell short on standardisation. However, things have changed. Over the years, a more uniform product profile with product coherence and consistent hotel specifications have been observed with several international brands entering the market. The past few years have seen an influx of about two dozen mid-market brands. This has been mainly due to the expanding domestic tourism, increasing foreign tourist arrivals, forex earnings growth etc., which has put the Indian hotels industry – particularly the mid-market segment – on an upswing. Ashok Malkani examines various aspects of the midmarket segment and finds that macroeconomic data suggests that the road ahead will be bright.

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For over half-a-decade, the big boom in the hotel industry, which was driven by 5-stars and 4-stars, has waned. The announcements of opening of new big budget luxury hotels have come to a trickle. And while the action at the top of the pyramid seems to be fizzing out, a silent revolution is believed to be taking place at the bottom with the rise in the budget/economy hotel segment. It is believed that OYO (Own Your Own) Rooms, Airbnb, Zo Rooms, et al have been the game changers. The technology driven aggregation of this format has led many nouveau entrepreneurs to follow suit resulting in a surge in the growth of budget/ economic hotels.

The influx of these budget brands could be attributed to the extremely competitive pricing introduced by them. This, in turn has given a boost to domestic tourism. Figures from India’s ministry of tourism show that the number of tourist visits within India across the different states, or domestic tourism visits, totaled 16.5 billion in 2017, up 2.3% over the previous year and rising from 526 million visits a decade earlier.

So, is price the only factor – or a dominant reason for the growth of budget/ economy hotel segment?

Sunil Bhatia, Director Sales & Marketing, The Mirador Hotel Mumbai, declares, “There has been a perceptible presence of Budget Hotels in the last 2 decades or so and their increase has purely to do with the quality offered at an acceptable price. Till the start of the 21st century, the budget category hotels were always there, however in the non-branded segment. This segment has now become more streamlined in terms of offering customer experience and a standardised product”.