Ikea sets sights on budget hotel sector

New hotel jobs could be created in the UK and around Europe following the news that Ikea is planning on entering the budget accommodation sector.

According to a report in the Financial Times, Inter Ikea, the company that owns the intellectual property rights of the Swedish furniture retailer, is looking to build and develop at least 100 budget hotels across the continent.

The company has previously made several ventures into the property market and it is understood that it would look to build hotels in countries where it already has a real estate portfolio, including the UK, Netherlands and Poland, as well as in new markets such as Germany.

The hotels will not be branded with the Ikea name nor run by the Swedish company directly but by an established hotel operator.

"We will announce within a few weeks the first location for our budget hotel in Germany and we are in talks with hotel operators to rapidly implement our concept," the Financial Times quoted Harald Muller, a senior manager in Inter Ikea's property division, as telling the Frankfurter Allgemeine Zeitung newspaper in Germany.

With Inter Ikea revealing last week that the Ikea brand is valued at €9 billion (£7 billion), making it one of the world's most valuable marques, it could become a significant major player in the budget hotel sector and add even greater competition to a market that is already burgeoning with growing chains.

Indeed, the budget sector is one of the fastest-growing components of the hotel sector and could prove a great place for those interested in hotel careers to begin their search for vacancies.

Just this month, InterContinental Hotels Group announced it has vastly expanded its presence across Europe in the first half of the year by adding 16 new properties under its low-cost Holiday Inn and Holiday Inn Express hotel brands.

However, as the budget hotel sector has grown, it has also evolved significantly in recent years.

Whereas in days gone by budget could often mean shabby, extremely basic accommodation with the price the only thing of importance, a new trend has emerged with hotel chains offering low-cost rooms while at the same time providing style, comfort and often a touch of luxury.

"Budget hotels are making a bid for the cost-conscious but style-seeking consumer and are remodelling their rooms and atmosphere to compete with the look that the boutique hotels made famous," Euromonitor travel and tourism analyst Nadejda Popova told Reuters recently.

Examples include Citizen M, which offers rooms in London from about £99 with the motto 'affordable luxury for the people', and German Motel One, whose rooms generally start at €50 to €60 a night.

The latter of these two currently has plans to expand into the UK and other markets following its success in Germany, starting with the opening of a new hotel in Edinburgh later this year.

Earlier this year, Motel One announced it achieved a 70 percent jump in revenue in 2011, to €134.8 million, with pretax profit up 25 per cent at €23.4 million.

And its success is not unusual among the budget hotel sector at the moment.

According to Ms Popova, sales figures for budget hotels rose ten per cent in 2011, representing a 41 per cent share of the $162.5 billion (£103.6 billion) European hotel industry.

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