LONDON - IT SEEMED too good to be true.

At just £1 (S$3) a night, travellers get not just a room with a snug bed and Egyptian-cotton towels, but also tea, coffee, fresh milk, mineral water and Wi-Fi access throughout the hotel.

In the morning, a light breakfast of a banana, yogurt and orange juice is delivered to every door, at no extra charge.

Small wonder that the 600 nights on offer at the newly-opened Hoxton Hotel sold out within three hours.

Sure, the £1 deal was an eye-catching opening promotion. But even at its regular rates of between £59 and £119 including tax, this hotel is offering competitive prices in a city where double rooms in 3 to 5-star hotels come often at over £120 a night.

'In addition, this is a hotel that does not try to rip you off everytime you turn a corner,' says Mr David Taylor, who is the hotel's director of sales and marketing.

Forget the minibar stocked with over-priced chocolates and multi-coloured liqueurs. It only has fresh milk, which comes at no extra charge to the guest.

Those who fancy a snack or a beer can, however, go to the reception, which sells these products at supermarket prices. A can of Coca-Cola costs 50p, a bar of chocolate also 50p, and a beer £1.50.

It was precisely after being 'ripped off' on Kit-kats from mini-bars that Mr Sinclair Beecham, more commonly known as the co-founder of sandwich chain Pret-a-Manger, decided to develop what is described as the 'luxury budget' hotel.

So here, telephone calls are charged at standard London rates: a local call is 3p a minute, while calls to the United States would be 5p a minute.

There is no gym here, but for £5 a day, guests can use a gym with a pool across the street.

And late check-out is charged at just £5 an hour, up to 4pm.

Mr Taylor explained that the hotel has been able to charge such prices because it saves on things such as hiring employees to stock mini-bars.

The concept is reminiscent of no-frills low-cost carriers (LCC)- you pay only for what you need.

Indeed, the hotel's pricing strategy is modelled after the LCC - the earlier you book, the cheaper the deal you're likely to get.

But this is more chic than EasyHotel - the hotels run by the founder of Easyjet, offering rooms from £30 a night.

The design here is modern with a slight industrial feel. Each of the 250 rooms come with flat-screen TVs and duck down duvets. The beds are by Hypnos, the linen by Frette and the towels are 'the same as Claridge's'.

The rooms are standard size - there are 20 twins and 185 doubles - so as to make the pricing structure straightforward.

As the hotel is located within a few minutes' walk from the financial district, business travellers are an important customer base.

In fact, the staff calls the dressing table the 'workstation'.

And rooms are also available for day hire, to appeal to business travellers from other cities in Europe or Britain who want to work or rest in between meetings.

Mr Taylor believes another group would be leisure travellers who may want to get away from the West End theatre land.

With clubs such as Fabric and Turnmills a short hop away, this district could be attractive to leisure travellers looking for an alternative London. The hotel even has an area featuring club listings.

For now, it looks like the concept has struck a cord with travellers - Didi Liu is happy. She didn't get the £1 deal but said she got a reasonable rate for her two-week stay.

'The staff here are extremely friendly and helpful,' she noted.

Are there plans to build more Hoxtons?

Mr Taylor says: 'Our priority now is to get the details right, but yes we'll certainly look at it.'