The unbalanced number of hotel growth and visitor growth in Surabaya created a pressure between hotels which targeting the same market segments. . The highest growth of hotel numbers was found in budget hotels level, which means that the properties need to have a winning competitive strategy. This study aimed to analyze the existing competitive strategy that is generally used by budget hotel, and to find an alternative strategy to help budget hotels to compete using blue ocean strategy approach. The research method was a qualitative exploratory and descriptive, employing semi-structured interviews with hotel managers of three budget hotels in Surabaya. The results showed that in general, budget hotels still used red ocean strategy to compete. The techno-sustainable hotel concept was eventually proposed as a result of alternative competitive strategy that could be implemented but hotel industries
