The group has accelerated the launch of its budget brand, “buoyed” by the performance of the hometel concept throughout Covid-19 and in response to the opportunity arising out of UK hotel landlords facing an income shortfall as a result of tenants either unable or unwilling to pay rent during the Covid-19 pandemic.
The room2 team said it is already in negotiations with a number of landlords who are also “attracted” to the renewed long-term hybrid lease structure, which includes a guaranteed fixed rent portion plus a rent portion pegged to performance.
Room2 said the “improved design”, focuses on experience and functionality offered by the kitchenettes in each room, the brand expects to drive increased customer satisfaction, higher margins and landlord returns but with relatively low capex requirements and a short refurbishment timescale.
It added the lite hometel concept aligns with room2’s low-risk and lean hometel product model, designed to be able to remain profitable during an economic downturn and which has proved itself to be “highly resilient” since the start of the Covid-19 pandemic.
The company said it has benefitted from a flexible cost base, enabling it to continue trading throughout the crisis by adjusting the service offering, and focusing on extended stay and essential worker guests.
Room2 Southampton, the group’s flagship offering, has continued trading since the government imposed lockdown on March 23, achieving monthly occupancy rates well above 50%. This compares favourably to the national average of around 5% occupancy.
Robert Godwin, managing director at Lamington Group and room2, said that the Covid-19 pandemic has caused “disruption on an unprecedented scale and the hospitality industry has been one of the most affected”.
He said: “Many hotel landlords who previously thought their leases offered them protection suddenly found themselves at the mercy of tenants who were either unwilling or unable to pay, even those signed with strong, seemingly well financed hotel brands.
“As a result, whilst our near term focus continues to be working with all our stakeholders to manage our way through the crisis, we have accelerated the launch of room2 lite, recognising that, now more than ever, the UK budget sector remains ripe for disruption, particularly at a time when landlords are looking elsewhere to avoid being stuck with unfavourable reduced terms.”
He added: “room2 lite was originally borne out of our view that UK budget hotels are underserved by operators in the extended stay and design-led segment, and that there is lot of untapped potential to create truly memorable experiences. The market is dominated by large corporates, unable to pivot quickly in light of a changing economic landscape and changing consumer demands.
“Our hometel model has held up extremely well in recent months and proved its resilience despite the worst of economic cases. We now see a real opportunity to replicate this success in the budget hotel market, setting a new standard for consumers, while offering landlords a hybrid leasing model which aligns their interests with ours, and is resilient enough to drive sustainable returns over the long term.”