Marriott pairs with IKEA for budget hotels

Marriott International moved into the economy hotel market, teaming up with IKEA's real estate arm to launch a new European chain for travellers seeking style on a budget.

Cool and contemporary budget hotels such as Motel One, B&B Hotels and CitizenM are springing up all over Europe to meet demand from people who are keen to get away from it all despite squeezed leisure budgets.

Marriott said that in Europe, the economy tier represented nearly half of total room supply, but that there was still space in the market, which also includes the likes of Ibis, Holiday Inn and Premier Inn.

"You're talking about 2.5 million rooms in this segment and we don't have anything yet," Marriott chief executive Arne Sorenson told Reuters at the IHIF hotels fair in Berlin, where the group installed one of the chain's 17 square metre rooms with cream and brown furnishings and flat screen TVs.

The first Moxy hotel is expected to open in Milan in early 2014 and rooms will be priced at 60-85 euros.

Marriott said it was aiming for 150 of the hotels in Europe over the next 10 years in countries from Britain to Germany, the Netherlands and Sweden.

"That would be 25,000-30,000 rooms, so that's a small segment of the market. It gives us hope at least that we could be a number of multiples of that size over time," Mr Sorenson said.

Rooms at Moxy hotels will all have USB ports next to wall sockets and floor-to-ceiling wall art representing the local city, such as the Brandenburg Gate for Berlin or bicycles by canals for Amsterdam.

To keep costs under control, each room will be the same size and feature the same decor, although not from IKEA, Sorenson said, stressing that Inter Hospitality was separate from Swedish-based group IKEA's retail arm.

Marriott's European head Amy McPherson said the plan was to focus on Europe for now, with no plans at present to introduce the chain farther afield.

MID-MARKET MAGIC

Highlighting the importance of the economy sector to the big hotel chains at the fair, Hilton announced plans for 10 new mid-range hotels in Germany and Austria, and Intercontinental Hotels said it had signed a deal to develop 15 new Holiday Inn Express hotels in Russia by 2019, doubling its estate there.

Inter Hospitality, which has been keen to expand in the budget hotels sector, said that it wants to secure 50 sites over the next five years, mainly in Germany, Britain, Italy, the Netherlands, Belgium and Austria.

"The great thing about Inter Hospitality is that they come with a significant balance sheet so there is no financing challenge," Mr Sorenson said.

Like German rival Motel One, Moxy is hoping to attract a mix of leisure and business travellers.

"Given the product we have, I believe the space is still wide open. There's room for a number of good competitors," Mr Sorenson said.

Copyright @ Thomson Reuters 2013