IKEA Plans Stylish Budget Hotel Chain in Europe

IKEA, best known as the world's largest furniture retailer, plans to build a budget hotel chain across Europe, following a trend for cheap-but-cool accommodation driven by low air fares and increasingly price-conscious business travellers.

The 100 hotels, which will not feature IKEA's eponymous flat-pack furniture nor its brand name, represent the company's biggest real estate development to date.

Demand for stylish yet affordable rooms from austerity-hit business guests and leisure travellers is high and growing, according to Harald Muller, senior executive at the property unit of Inter IKEA, the company that owns the IKEA brand and concept.

"Budget designer hotels' is today the fastest developing hotel segment.'' he said. Motel One, citizenM and B&B Hotels are all part of a new breed challenging established budget brands such as Travelodge, Whitbread's Premier Inn and Accor's Formule 1. IKEA's first hotel will most likely open in Germany in 2014 and the chain will be run by an international hotel operator, Muller said.

"There is no IKEA furniture in it,'' Muller said. "It is not an IKEA hotel. It's a continuation of our normal investment activities in real estate.''

Inter IKEA already owns a few hotels and has more in the works, but the new project would be its first chain and will top its 26-acre home, office and hotel scheme around the Olympic park in London. Inter IKEA is identifying and buying sites for future hotels in the chain which will be launched in Belgium, Austria, the Netherlands, Scandinavia, Britain and Eastern European countries like Poland.

Inter IKEA's property assets total around 750 million euros but it has the financial muscle to be a larger developer. In its fiscal 2010/11 year, IKEA Group, which operates most IKEA stores under franchise from Inter IKEA, raised net profit by 10% to a record 2.97 billion euros ($3.66 billion) on revenues of 25.17 billion euros, another all-time high.