By Zsarlene B. Chua

Hand in hand with the growth of budget airlines came the rise of budget accommodations which provide the bare necessities for the global traveler who values experiences more than an expensive hotel room.

Bare Necessities

In the Philippines — a country playing catch-up in the tourism game with its Southeast Asian neighbors — the budget hospitality sector is gearing up for competition as a new upstart, which launched in the second half of 2016, intends to change the entire landscape.

“The industry is very flawed and the hotel industry — especially the budget hotel segment — we noticed that compared to neighboring countries like Bangkok, there are four times more budget hotels than in Manila and Bangkok is a smaller city than Manila,” Benjamin Nicolas, Philippine country manager of ZEN Rooms, told BusinessWorld in a June 5 interview at their offices in Makati City.

ZEN Rooms, a budget hotel brand backed by Rocket Internet SE of Germany, was founded in the middle of 2015 by Nathan Boublil and Kiren Tanna, who built in 2012 — also backed by Rocket Internet — which has become the largest food delivery service in Asia.

It currently serves countries such as Indonesia, Thailand, Malaysia, Hong Kong, and Sri Lanka.

Mr. Nicolas attributed the lack of available accommodations to the sudden influx of tourists in the country, putting front and center the need for more rooms.

During the first quarter of 2017, the Philippines welcomed 1.8 million international tourists, up 11.4% compared to the previous year according to the Tourism department.

But beyond the scarcity of budget options, ZEN Rooms found that Manila has a more pressing problem — lack of great service.

“There is lack of competition in the sector… and when you don’t have competition, you lack great service,” Nathan Boublil, global managing director of ZEN Rooms, said in the same interview.

Bare Necessities
A room at a ZEN Rooms property. —

And while this is a problem the region in general has, it seems to be magnified in Manila because tourists are just beginning to come in and discover the country.

“We noticed that in the Philippines, in particular in Manila, hotels have a much lower average reviews than in other countries. In Manila, 50% of budget hotels are rated below 7.5 which is not the case in Bangkok,” he said.

“It’s a temporary inefficiency that we’re hopefully contributing to solve,” said Mr. Boublil, explaining that the Philippines has “very good fundamentals” and is a “very beautiful country.”

A cursory inspection of players in the sector via travel review web site TripAdvisor — Bangkok-based Red Planet and local chain Go Hotels — showed that Red Planet has an average rating of four out of five for its Metro Manila branches while Go Hotels, also for its Metro Manila branches, has an average rating of four out of five.

Going by the rating system of ZEN Rooms which gives ratings as high as 10, both Red Planet and Go Hotels pass muster as they rated an average of eight.

But smaller independent budget hotels have reviews lower than four and even three on TripAdvisor.

ZEN Rooms currently operates in 12 locations in the country, including Boracay, Puerto Princesa, and Bohol.

By yearend, they expect to be in 15 locations and are looking at properties in Siargao, Cagayan de Oro, and Naga or Legazpi.

Bare Necessities
Go Hotels currently operates in 14 locations including Puerto Princesa in Palawan. —

In comparison, Go Hotels currently operates in 14 locations including Iloilo and in Butuan City, while Red Planet operates in 11 locations including Cagayan de Oro, Cebu, and Davao.

Unlike budget hotel brands which typically construct properties from the ground-up, ZEN Rooms operates by taking over existing rooms in already-built buildings such as condominiums or hotels and re-branding them and furnishing them with all the fixtures of a hotel: a front desk, a restaurant, etc.

This accounts for the company’s rapid expansion — it had 600 rooms across 100 properties in January and expects to have “close to 2,000” rooms by yearend.

With that growth, which Mr. Boublil described as exceeding their expectations (though afterwards he mused that they could have been more aggressive in expanding if they weren’t as thorough in looking over properties as they are currently), they expect to overtake major players by 2018 in terms of number of rooms.

Meanwhile, Gokongwei-led Go Hotels is also expecting to add 400 or so rooms to its current 2,100, bringing it to 2,500 by yearend as it opens hotels in Iligan City and Timog in Quezon City.

“It depends on how you would qualify ‘number one’… it’s subjective,” Jacquelyn T. Lim, OIC of marketing at Go Hotels told BusinessWorld in an interview on June 15 at the company’s offices in Ortigas.

Ms. Lim said that while ZEN Rooms may claim to have superior customer service, Go Hotels prides itself in their being the “first Filipino value-essential hotel chain.”

“You’re paying for what you need,” she said before adding that it makes no sense to pay for services customers don’t want and even use.

Bare Necessities
ZEN Rooms had 600 rooms across 100 properties in January and expects to have “close to 2,000” rooms by yearend —

And what they need is “spectacular comfort” in the form of comfortable Mandaue foam beds custom made for the chain and hypoallergenic pillows.

This system helps keep costs low — Go Hotels can offer rooms for as low as P588 +VAT and up to P3,088 +VAT a night.

Toiletries and breakfast cost extra though the hotel provides a single-use soap and shampoo and towels.

“Travelers usually bring their own toothbrushes,” Ms. Lim said.

Other services such as access to a spa and tours are available for a fee.

ZEN Rooms has rates starting at P500 to P2,100+ and comes with toiletries.

Both brands offer Wi-Fi connection for free.

“And the reason we’re able to present that as an option rather than built-in is because we’re also very well-placed where we are. Wherever we’re located, we’re very near a Robinsons mall or a commercial center,” Ma. Rosanna Villegas, director for corporate public relations at Robinsons Land Corp., said in the same interview.

Bare Necessities
Go Hotels is expecting to add 400 or so rooms to its current 2,100, bringing it to 2,500 by yearend. —

Mr. Boublil, meanwhile, stressed the importance of keeping hotel room costs down because of the low minimum salary.

“The minimum salary in Metro Manila is P10,000. How can a budget room in a chain which is very basic, cost P3,000 a night? These are the rates you see in France where the minimum salary is not P10,000. So there is a complete misalignment between the value-for-money of hospitality and cost of living in the country,” he said.

Go Hotel room sizes range from 16 sq.m to 22 sq.m while ZEN Rooms, by virtue of them taking over existing properties, have accommodations at varying sizes which could be a steal as a few thousand pesos can give you a nice-sized condo unit — but Ms. Lim of Go Hotels pointed out that it might be harder for them to maintain such an arrangement due to the non-standard rooms.

ZEN Rooms, said to be a disruptor of the budget hotel sector, has also introduced a new feature which would further “democratize travel” — card-less reservations.

Travelers booking through ZEN Rooms’ website need not have credit or debit cards at ready as they can reserve a room with only a phone number.

“You have to adapt to the realities of those demographics and today in Southeast Asia, at least two-thirds are still un-banked,” Mr. Boublil said.

The new feature was introduced roughly two months ago in a third of its properties and it is now currently rolling it out the remaining two-thirds.

“It requires adjustments on our side and it took us six months to pilot and the results are very strong,” he said before adding that they are the first ones to offer such a service.

Bare Necessities

Of course, with a service which works with only a phone number as a reservation guarantee there is bound to be an increase in no-shows, and while Mr. Boublil said their no-show rate is confidential, it has increased — but more people have decided to check-in with them he noted so it’s all good.

No card reservations are also accepted in Go Hotels, according to Ms. Lim as customers can call the customer service hotlines or walk-in in any of their locations, but they do stress that they would like to encourage travellers to “travel smart.”

In 2015, credit card penetration in the country stood at 11.4% according to global payments technology firm Visa Inc. The number is up from 9.2% in 2010.

“It is, of course, growing. There is no question that the Filipino population, like all around the world, will become more modern over time in its payment method, whether it’s through credit card or mobile banking,” said Mr. Boublil.

“But the reality is that this will still take a lot of time. So what should people do in the meantime? Should they not travel?” he added.

He said that with the new feature they are “taking away market share from (other players) at a pretty fast pace.”

“Every other hotel businesses should have done this a long time ago but it’s probably laziness in innovation,” he said.

While the competition heats up in the budget sector of the hospitality industry, in the end, travellers are winning as more and more options for quality accommodations open up.

And even though they are competitors, both ZEN Rooms and Go Hotels agree that as more budget value-for-money accommodations become available, more travellers will find themselves enticed to pack their bags and go on an adventure.