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Cheap hotels gain as U.S. travelers skip $500 rooms

November 26, 2009 | Hospitality Industry

The world’s largest hotel companies, stung by the industry’s biggest declines since the Great Depression, are trying to do for lodging what Ikea did for furniture: Offer fashionable products at low prices.

Starwood Hotels & Resorts Worldwide Inc., the third-biggest U.S. lodging company, is developing boutique hotels for frugal travelers that cost about $119 a night. That’s a far cry from the $399 to $639 at the company’s upscale W Hotels. InterContinental Hotels Group Plc is following a similar strategy with its boutique chain Hotel Indigo.

Both companies are seeking to capitalize on a formula popularized in the 1980s, when small, individual properties with luxury amenities, designer interiors and quirky decor gained in popularity among travelers. This time, the demand for affordable, fashionable lodging was fueled by a global recession that left many people unable or unwilling to spend as much on vacations.

“You mix the luxury elements into the lower-priced product and it’s fair to presume that what’s more value-driven is faring much better during the downturn and beyond,” said David Katz, an analyst at Oppenheimer & Co. in New York.

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