Budget hotels in Madeira: prospects and market trends

António Almeida


Purpose: The term low-cost has come into common use by the tourism industry in the 90s. The concept is highly attractive to destinations recording growth rates below expectations. This study aims at providing a detailed analysis of the principal factors affecting the budget hotel’s development prospects in a mature destination.

Methodology: This study is based on survey carried out amongst 3-star hotel guest to identify the critical factors of success of this brand-new market niche.

Findings: Based on the results of a survey, we suggest that most visitors display a high level of disinterest in the low budget concept. The current pricing trends based on 4 and 5 stars hotels offering discounted rates prevents any attempt of developing innovative concepts based on price moves. The average visitors only accept a decrease in their level of comfort (eg. attributes and services) in exchange for huge discounts. 

Practical implications: This study suggests that respondents appear to refuse lower levels of comfort in exchange for marginal discounts appear to be unfeasible. Therefore, the is no easy room for ready-to-use measures and concepts and further research is needed to re-understand customers and to study new concepts adapted to this highly uncomfortable position. 

Originality/Value: This study shed some light on the prospects of developing accommodation services based on basic hotel facilities in mature destinations marked by development strategies focused on top quality accommodation and well-off tourists. Our results highlight the responsibility of governments and industry operators in developing coherent long term strategic thinking.

Keywords: low-cost, Madeira Island, Madeira hotel´s, tourism, hotels.

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