A Room with No View

The hospitality industry hasn't exactly been a hotbed of innovation. There have been some new ideas over the decades, it is true. In 1952, for example, Kemmons Wilson built the first Holiday Inn and revolutionized American motels by introducing standardization and emphasizing cleanliness and value. The era of the big convention-oriented hotels checked in during the 1970s. And in 1984, New York City nightclub entrepreneur Ian Schrager came up with the boutique hotel concept. But for the most part, the basic business model has changed little: sell travelers perfectly acceptable yet generic places to stay for the night at ever-increasing prices, particularly in the world's major cities.

Today, several trends make that model ripe for a makeover. The World Tourism Organization predicts global tourism will grow at an average annual rate of 4.1% over the next several years, which means more than a billion tourists a year will be on the move by 2010. And many of them will be economy-minded travelers who often pay less than $100 for a plane ticket and aren't inclined to spend several hundred bucks more for a hotel room. At the same time, large plots of real estate in major cities have become increasingly scarce and expensive, making it less profitable to develop traditional hotels. This puts hoteliers in a bind. With costs rising, how will they accommodate the growing legions of budget travelers who want a cheap but reliable place to kip for the night?

Several successful European entrepreneurs are working on answers — and their novel approaches to issues such as room size and pricing could change the travel industry. One of these fledgling hoteliers is Sinclair Beecham, co-founder of the U.K.'s Pret A Manger sandwich-shop chain, who last autumn opened the 205-room Hoxton Hotel, which he calls an "urban lodge," in London. Urban lodge? Unlike a Shrager-inspired boutique hotel, where cool, sleek design often comes off cold, Hoxton Hotel has the homey comforts of a rural inn. Yet, says Beecham, "It's got concrete floors, exposed columns and exposed ceilings — it's very urban." Simon Woodroffe, owner of the YO! Sushi restaurant chain, is taking a similar, less-is-more approach to hospitality. Later this month he opens his first "Yotel" at London's Gatwick Airport. "We're doing what I call the Holy Grail of retail: delivering what rich people have to ordinary people," says Woodroffe.

They've picked the right place to stress-test budget lodging concepts. The average cost of a London hotel room is $234 a night, making the city one of the priciest in the world. Beecham says it was his personal experiences as a consumer — specifically, his distaste for what he calls "rip-off" charges for things like phone calls and movies — that inspired him to go into the business. He built a traditional hotel, but lowered costs by making careful choices in siting and design. Rooms at the Hoxton are all 20 sq m in size, roughly 20% smaller than those you'll find in conventional hotels of similar quality. All rooms have identical layouts and furnishings, which reduces costs. The hotel is also located in the offbeat but increasingly trendy Hoxton neighborhood near London's financial district, where property prices are lower than in most central locales.

The Hoxton's phone and movie fees are rock-bottom, and the only thing in the minibars is a carton of milk and two bottles of water, all free. Yet the Hoxton doesn't feel cheap. Rooms include touches such as Egyptian cotton sheets and duck-down duvets. Beecham calls them "beautiful little boxes people can stay in." Standard rates start as low as $115, and the typical traveler pays about $190 a night — roughly 18% less than the London average. Since opening, the Hoxton has been 100% full. "If it was twice the price, there would be nobody here," Beecham says.