Over the past few years, there has been a definite trend of international budget brands successfully entering the marketplace in Thailand , be it the hyper mart concept with Lotus Tesco, Carrefour and Makro, or low-cost carriers (LCCs) such as Tiger, Air Asia and Jet Star.
These types of volume and value-for-money offerings are garnering legions of loyal consumers. Within the hotel industry, the opening of the first Ibis property - a venture in Patong between Thai developer Erawan and the giant French chain Accor - is looking to change the mass accommodation market. There is already a second Ibis under construction in Kata, while in Bangkok , a multitude of new properties in this sector are being built.
Two of the main proponents of the major proponents of budget brands are the Intercontinental group (Intercon, Crowne Plaza, Holiday Inn) with their holiday express model the Accor (Sofitel, Pullmann, Novotel, Mercure) with Ibis. There are also other global brand in on the game with Carlson (Regent, Radisson) targeting Park Plaza , Hilton, Hampton Inn and regional chains such as Hong Kong 's Langham promoting a no-frills Eaton product.
Asian hotel owners, developers and consumers in the region have traditionally resisted budget offerings because they, are seen as downmarket or 'cheap, but perceptions are now shifting.
In North America and Europe , the budget segment has been around a long time. Budget establishments are often located in areas with low land costs and rely on transportation links, such as the inter-state highways in the US and nearby railways in Europe . Here, expensive land costs in central business districts (CBDs) has long been a deterrent to this modelling.
Looking at a normal hotel operating model, although operating trends vary from market to market and between city-centre and resort properties, guestrooms make up the most profitable element in both these markets. Direct profitability in a well-run operation with a stable occupancy is in the region of 80-85%, whereas profitability for food and beverages tends to be 20-25%.
Comparing a budget hotel to a four-star property, gross operating profits for a four-star hotel may be in the region of 40-45%, whereas a budget hotel can see profits of 55-60% and above.
With greater revenue in the higher-yielding-rooms segment and less income from food and beverages and other segments, there is a superior flow through of profits to the bottom line. In most cases of branded hotel models with good overseas distribution, rate-effective models trade at higher occupancy than full service hotels. For example, a four-star hotel can run effectively at 60-70% occupancy, whereas a budget property