Strategic Management case study in the Hotel industry Essay Sample

in different types of accommodations. A mid-range hotel is a standard room with additional facilities. Hostels or motels, although less common now, are also options for travelers. Bed and Breakfast establishments, on the other hand, are private homes that offer several suites for overnight guests who also enjoy breakfast as part of their paid accommodations (The American Heritage Dictionary of the English Language). In the competitive UK hotel industry, there is intense competition among key players. For example, according to Smith Travel Research, there was a high demand of 30% for the Residence Inn, while the supply was only at 8%. To cater to this market demand, Marriott PLC has introduced a new category called "Residence Inn." This demonstrates the competitive nature of the UK's mid-market hotel sector.

Thistle is expanding its luxury brand, Guoman, worldwide by upgrading existing properties in the UK and implementing an ambitious acquisition strategy abroad. Meanwhile, Whitbread, the UK operators of the Marriott brand, has decided to reduce its exposure to the full-service hotels sector due to low returns from this franchised business.

The company also acquired Premier Lodge from Spirit Group for ?505 million. They united Travel Inn and Premier Lodge and marketed them to the UK consumer under one trade name. Hilton International has been implementing an aggressive e-commerce scheme since 2002, aiming to build a series of websites for its largest markets, including the UK, Germany, and Japan. This effort resulted in the creation of eight localized websites representing seven different languages.

Environmental Analysis: The main external factors that currently and will continue to impact the hotel industry.

The text below provides a list of topics that are significant in various

domains, including plague analysis, political matters, and economic factors. These topics are as follows, with their corresponding :

- Plague Analysis
- Political Disability Discrimination Act – It took effect in 2004, requiring service providers and businesses to take appropriate measures for disabled access. This particularly affects small businesses and may have serious implications for the leisure and tourism industries.
- Migrant workers – With more countries joining the EU, workers from these new states could help alleviate staff shortages.
- Economic Olympic – London has won the bid to host the 2012 Olympic Games, which will enhance tourism revenues due to increased visitor numbers. London hotelkeepers have pledged to offer 40%

There are a total of 000 affordable suites available for London 2012. In terms of the Euro, hotels have varying views on whether or not to adopt the currency. Approximately 52% of hotelkeepers were against using the Euro. Interest rates reached their lowest point in 2003 in the past four decades.

The Bank of England has recently decided to raise interest rates in order to address the issue of high levels of consumer debt. In May 2004, interest rates experienced a third increase within the last seven months, reaching 4.25%. Similarly, the domestic vacation market encountered rising rates during 2003 and 2004 due to anxieties surrounding international travel amidst the Iraq War and several natural calamities. Despite these factors, total spending has consistently climbed by 16% from 2000 to 2004, primarily reflecting nominal expenditures rather than those adjusted for inflation.

Detail to see Appendix1-Domestic vacations and outgo by UK occupants. 2000-05 Significant growing in cardinal socio-economic groups – There has been a important displacement over the last few old

ages towards the higher socio-economic groups, proposing a better-educated and more flush population, already backed up by lifting degrees of disposable income which is an advantage to the hotel industry.

Advancements in technology have greatly impacted the booking process and amenities offered in hotels, including broadband Internet and digital Television. According to the Mintel Report, the penetration of the internet shows no signs of slowing down.

As of April 2004, 57% of the UK population had broadband and synergistic digital Television, which both reached 19%. Consequently, numerous large hotel groups are investing significantly in their online booking systems while also offering internet access at their hotels. This allows customers to enjoy the comforts of home or, in the case of business guests, maintain their usual amenities.

Office-to-office installations and comforts have had an impact on the hotel industry. These effects can be seen in the increased travel encouraged by networks between corporations, the rise of budget airlines, and the implementation of a comprehensive evaluation system across England, Scotland, and Wales. Additionally, hotels have been diversifying their services to include other sources of income.

However, there are weaknesses to consider. Profit has been minimized due to events such as the 9/11 attacks and the July 7th terrorist onslaughts. Furthermore, there is no control over external factors that may affect the industry.

FMD, SARS, Bird Flu - the unpredictable British conditions create both opportunities and threats. The weakening pound against the euro leads to growth in domestic travel and the chance to increase room rates to levels prior to 9/11. The July 7th terrorist onslaughts cause increased concern among people with higher disposable incomes. On the positive side, there is an expected

increase in inward tourism, with visas provided within 24 hours for Chinese travelers and an increase in flights. However, there is always the threat of terrorist attacks.

Such events as the July 7th 2005 London Bombing, FMD, SARS, Bird Flu, etc., and the Iraq war in 2003 significantly reduced net incomes due to uncertainty. The Five Forces Model indicates that barriers to entry in the market are high, buyers have strong power, suppliers have low power, and the threat of substitutes is low. As a result, the UK hotels operate in a highly competitive market. In terms of future development, profitability can be increased by raising rates instead of focusing on occupancy. Although hotelkeepers have previously maintained occupancy levels by reducing rates, the recent increase in demand suggests that rates can now be increased.

According to TRI Hospitality Consulting's forecast of UK chain hotel performance, it is likely that there will be ongoing growth for hotel gross figures in the short to medium term. This growth is expected to come from increasing room rates while occupancy levels remain relatively constant. The forecast also predicts that London will continue to lead the growth of the hotel industry, with a projected 22% increase in revenue per available room (revPAR) until 2006, compared to a 9% increase in other areas.

According to Mintel's Budget Hotels - UK. Leisure Intelligence. April 2003, TRI Hospitality Consulting predicts the performance of chain hotels in the UK from 2004-06.

The budget hotel is expected to experience a 40% increase in growth between 2002 and 2007, reaching a value of just over ?1.1 billion in 2007. This indicates an actual growth of 23% after accounting for inflation

over the next five years. However, on the other end of the market, strong growth is predicted to continue in the upscale hotel sector of the industry. The domestic market is of great significance as consumer confidence rebounds in the UK, ensuring sustained growth within the hotel industry.

The market will be sustained by the increasing number of domestic short interruptions, the weakening Pound against the euro, and ongoing fears of global terrorism. Consumer trends are derived from Mintel's research on the "Type of hotel stay by gender, age, socio-economic group, and region."

May 2004 data (see Appendix 4 & A; 5) reveals that consumer tendencies can be summarized as follows: there is a 25% increase in the number of people going on leisure trips compared to business trips. Men not only have a higher likelihood of staying in a hotel for business, but they also have a slightly stronger preference for leisure activities compared to women. In terms of age demographics, the 35-44 age group dominates business usage at 19%, while leisure usage is more evenly spread across ages from 20 to 64. Unsurprisingly, respondents from higher socio-economic groups have a greater presence in hotel use. Approximately a quarter of ABs state they have stayed in a hotel for business in the past year, compared to only 2% of Es.