Research: U.S. reports highest revenue in budget sector worldwide

Analysts forecast that the number of budge rooms will increase 1.9 percent on a compound annual growth basis from 2019 to 2021. Photo credit: Motel 6

In 2018, the United States reported the highest revenue in the budget hotel market worldwide, according to GlobalData’s latest report, “Global Budget Hotels Market to 2023.” Revenue for budget hotels increased 3.5 percent year-over-year in the U.S. during the year. That growth was driven mainly by an increase in average daily rate, which GlobalData expects to grow at a compound annual growth rate of 2.7 percent between 2018 and 2023.

The reported noted that cost-effective disruptors such as OYO will drive future demand in the segment. Analysts pointed to the company’s business model, which uses data analytics and dynamic pricing to predict and create consumer demand, as a growth driver. The firm expects that this type of tech-focused strategy will become more widely adopted in the industry.

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“OYO rolled out its first townhouses in 2019 on U.S. soil. There is great opportunity for expansion in the U.S. due to the size of the nation and its variation of customer types,” Ralph Hollister, travel and tourism analyst at GlobalData, said in a news release. “However, the U.S. lodging market is highly saturated and fiercely competitive, meaning that OYO needs to maintain a gradual growth strategy to gauge the market’s reception to its offerings.”

GlobalData projects that the number of budget hotel rooms in the U.S. will continue to increase through 2023. Analysts forecast that the number of rooms will increase 1.9 percent on a CAGR basis from 2019 to 2021, and then grow again by 1.7 percent CAGR from 2021 to 2023.

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