1,906
28
Analysis Paper, 8 pages (1900 words)

Analysis of uk hotel industry

Advertising We'll write a high-quality original custom paper on Analysis of uk hotel industry just for you with a 15% discount for the 1st order Use a Discount Use a Discount

The hotel industry, (despite its importance to the UK economy) has not received the attention that it deserves from the central government at Downing Street. A report by the British Hospitality Association in 2010 showed that it has grown over the years to contribute 45 billion pounds to the UK economy. The hotel industry also employs about 3.

64 million people both directly and indirectly making it the fifth largest industry in the UK in terms of labour force (British Hospitality Association, 2010). The hotel industry is regarded by Downing Street to be a segment of the leisure industry to which it is strongly related. It is pertinent to state here that users of hotel facilities can be categorized into mainly three groups: Leisure travellers (about 44%), Business travellers (about 45%) and Organizations (11%) like the London 2012 committee and perhaps London 2018 committee if a certain Octopus by the name of Paul is right. INDUSTRY BOUNDARY AND STRUCTUREThe UK hotel industry for the purpose of this paper will follow the most commonly set boundaries which refer to the industry being inclusive of all hotels, motels and inns with or without restaurants, conference centres and other hospitality related facilities with operations in the UK. The structure of the hotel industry can be divided into two major groups: the hotel chains and the independent small hotels (Brooks and Weatherston, 2000; and Medlik and Ingram, 2003). Hotel establishments may also be categorized into: * Economy and Budget hotels like Travel lodge and Campanile * Mid-Market Hotels like Swallow and Garden Court Upper market hotels like Thistle andHiltonThe Hotel Value Chain Structure Acquisitions Orders Bed Capacity (BC) Supply Chain (SC) Desired SC Adjust SC This industry does not include campsites, trailers and parks, youth hostels and flats for short or long rent (in accordance with the Standard of Industry Classification 2007). It is pertinent to state that some hotel groups are international in terms of their operation like the Accor group and Hilton group. The major players in terms of market share based on a May, 2010 report by IBIS World are Accor, Hilton and Marriot groups respectively. Other major players are WhitBread, Intercontinental Group, Travel lodge, De Vere Group, Britannia, Thistle and Ramada Jarvis (mintel database, 2008). It is interesting to note that all these hotels fall under the hotel chain classification. Hotel chains are reputed to hold about 40% of entire market share while independent hotels together hold the rest but the hotel chains are ever increasing their foothold on the market due to obvious advantages in economies of scale.

Competitive Arenas of the Hotel Industry AirlinesLeisure Users Banks and Financial Institutions Tourism Car RentalsHotels Business Users Food and Beverage SuppliersTravel AgenciesOrganizations The diagram above shows the supply side and the demand side of the hotel industry. The supply side of the competitive arenas is to the left while the demand side is to the right. IDENTIFYING THE KEY ISSUES OF THE UK HOTEL INDUSTRY The Strengths and Weaknesses of the UK Hotel Industry Strengths Weaknesses Source: adapted from Mintel database report, 2008. The diagram above clearly summarizes the key issues in the UK hotel industry. However for the purpose of this report, three key issues shall be identified and the likely response or current response by hotels shall be discussed in greater detail.

The UK economy The UK economy just like most western economies suffered a recession which started from approximately 2008, although current economic data released by the office for national statistics showed an increase of 0. 8% in GDP in the last term. However, despite latest signs indicating a recovery of the economy from the global recession the recent astronomic budget cuts recently announced by the government may dampen any gains the hotel industry might hope to receive from a growth in the industry. The hotel industry is heavily dependent on the economic clime for its own sustained growth. In Scotland 12 000 jobs are to go, in London 200 jobs, in Wales a cut of 1. 8 billion pounds in government expenditure is expected (BBCnews.

com). The job losses, cuts in expenditure, cancellation of projects and the dampening of public morale is very likely to affect UK residents desire and ability to spend on domestic holidays and thus less bookings for hotels. A job loss is not just a shrinking of the national income but also an increase in dependency maintenance payments. Personal disposable income that might have contributed to meet holiday expenses is now redirected to maintain a dependant. The cancellation of public projects which might have attracted foreign contract staff to the UK is now lost. The credit crunch and general uncertainty in the financial sector has also limited sources of finance for expansionist and redevelopment projects.

Direct competition, over capacity and market saturation The hospitality magazine (2006) reported that 30% of hotel businesses complained that direct competition is the greatest challenge in the industry. Since 2006, budget hotels alone have accounted for an increase of 85 000 rooms in the hotel industry (Mintel, 2008) and with occupancy rates falling from 2008 there is a vicious battle for market share in the competitive arena. However, occupancy rates have started picking up slightly and with the Olympics rapidly approaching at least the London market is expected to witness vast improvements in occupancy rates. Completion not only comes from the immediate environment but also from outside the UK. The dollar continues to have a more favourable exchange rate with other currencies and the euro despite gaining ground against the pound is more affordable than the pound to leisure travellers outside the UK. This has made destinations outside the UK to be more attractive and hotel rates outside the UK to be more affordable to potential foreign visitors.

The UK hotel industry (largely helped by London being the most popular European destination) had the highest occupancy rates in Europe prior to 2008 but it recently lost that position due to lower hotel rates charged in other European countries. Therefore, hotel businesses in the UK have to watch pricing in the domestic market and European markets (BHA report, 2010). Market Share across Europe Source: Datamonitor, 2009. Government policies Government policies on taxation, foreign policy and immigration laws will always have a telling impact on the hotel industry. The BHA in its 2010 report on the state of the hotel industry revealed that UK hotels pay 20% VAT to the government.

In other European countries like France, Spain, Portugal, Malta, Cyprus, Luxembourg and Italy, it is common to find VAT to be charged at 10% or less. This cost burden is also worsened by the need to further expand facilities to support the tourism industry and the hosting of the Olympics in 2012 and possibly the World Cup in 2018. In October 2010, the UK Border Agency announced a hike in VISA fees and added South Africa to the list of countries whose citizens require a visa to visit Britain. South Africa according to the BHA accounts for a fifth in foreign visitors. These policies may further render the UK Hotel industry unattractive to foreign travellers. The decision of the Government to place the hospitality industry under the department of culture, arts and tourism constrains the coalition government from paying enough attention to the needs of the hotel industry.

Hotel Business Response to Challenging Operational Environment The state of the UK economy is largely outside the control of hotel businesses. However despite the recession which affected the industry for the past two years, available data showed that the hotel industry has continued to employ more people over the years suggesting that hotel businesses coped well with the recession. Hotel businesses have over the years invested in loyalty schemes, image branding campaigns, efficient customer service recovery to boost revenue and repeat bookings. In the face of fierce competition for market share in the hotel industry, businesses have adopted sophisticated pricing tools. Travelodge, the fastest growing budget hotel chain utilized information management software like Travel Click to instantly detect changes in the prices of competitors so that changes to their own prices can be effected in the space of minutes. Cannibalization is not uncommon and many small independent hotels have suffered as a result of the saturated market by being bought over by the hotel chains.

Therefore mergers, alliances and franchising have been the most common methods of dealing with the fierce competition in the market. Hotels in the UK have also employed sustainable technologies and eco friendly tools to develop “ Green Hotels” to tap into the ethical consumer market niche. Major players in the hotel industry have come together under the auspices of the Institute of Hospitality and the British Hospitality Association (BHA) to put pressure on government to reverse or amend existing policies that trammel growth in the UK hotel industry. INDUSTRY PROFITABILITY AND ATTRACTIVENESS The picture painted of the UK hotel industry may be seen to be grim and unfriendly to new investors but recent data still continue to show that the industry is growing in size and with the Olympics and perhaps the FIFA World Cup coming up in 2012 and 2018 respectively there is possibly a case for sustained growth of the industry. The industry has an estimated turnover of 90 billion pounds, continues to generate 2.

44 million jobs and earn 7. 4 billion pounds in foreign exchange (BHA report, 2010). Financial data available also suggests that hotels have begun to experience increase in bookings and revenue after the last sluggish two years. UK Hotel Industry Value (2004 – 2009) Year| ? billion| % Growth| 2004| 15. 3| | 2005| 16. 0| 4.

60| 2006| 17. 5| 9. 20| 2007| 18. 5| 5. 40| 2008*| 19. 1| 3.

30| Source: Datamonitor, 2009 The industry has clearly witnessed growth over the years up till 2007 when signs of the global recession had started to appear. The year 2008, the recession had fully hit most western economies. UK Hotel Demand Segmentation (Excluding Organizations) Source: Datamonitor, 2009 Revenues and Profitability of Some Major Players Whitbread PLC Metric| 2005| 2006| 2007| 2008| 2009| Revenues | 2, 661. 90| 2, 906. 90| 2, 589.

10| 2, 232. 80| 2, 449. 20| Net Income | 324. 1| 485. 2| 516.

6| 175. 4| 168. 5| Profit Margin | 12. 20%| 16. 70%| 20.

00%| 7. 90%| 6. 90%| Source: Datamonitor, 2009 Intercontinental Hotels Group PLC Metric| 2004| 2005| 2006| 2007| 2008| Revenues| 2, 204. 0| 1, 910. | 960. 0| 1, 771.

0| 1, 854. 0| Net Income| 299. 0| 515. 0| 405. 0| 463.

0| 262. 0| Profit Margin| 13. 6%| 27. 0%| 42. 2%| 26. 1%| 14.

1%| Source: Datamonitor, 2009 Choice Hotels Metric| 2004| 2005| 2006| 2007| 2008| Revenues| 428. 8| 477. 4| 544. 6| 615. 5| 641.

7| Net Income| 74. 3| 87. 6| 112. 8| 111. 3| 100.

2| Profit Margin| 17. 3%| 18. 3%| 20. 7%| 18. 1%| 15. 6%| Source: Datamonitor, 2009 Projected Market Growth for Hotel Industry Year | ? billion| 2008| 19.

1| 2009| 18. 2| 2010| 18. 9| 2011| 19. 8| 2012| 20. 9| 2013| 22. 1| Source: Datamonitor, 2009The tables above indicate that revenue generated by firms in the industry has been on the decline but it should be taken into note that most of the years ubdr study were during the global recession.

As stated earlier the UK has recovered from the recession as indicated by the growth in GDP, therefore, revenue is expected to rise in the industry especially coupled with the fact that the Olympics and possibly the world cup is coming to at least England. The industry can be described as being attractive for an already established successful brand wishing to expand but for the new investor caution would be watchword.

Thanks for your opinion!
Analysis of uk hotel industry. Page 1
Analysis of uk hotel industry. Page 2
Analysis of uk hotel industry. Page 3
Analysis of uk hotel industry. Page 4
Analysis of uk hotel industry. Page 5
Analysis of uk hotel industry. Page 6
Analysis of uk hotel industry. Page 7
Analysis of uk hotel industry. Page 8

Your fellow student wrote and submitted this work, "Analysis of uk hotel industry". This sample can be used for research and reference in order to help you write your own paper. It is prohibited to utilize any part of the work without a valid citation.

If you own this paper and don't want it to be published on EduFrogs.com, you can ask for it to be taken down.

Ask for Removal

Cite this Analysis Paper

References

EduFrogs. (2022) 'Analysis of uk hotel industry'. 19 November.

Reference

EduFrogs. (2022, November 19). Analysis of uk hotel industry. Retrieved from https://edufrogs.com/analysis-of-uk-hotel-industry/

References

EduFrogs. 2022. "Analysis of uk hotel industry." November 19, 2022. https://edufrogs.com/analysis-of-uk-hotel-industry/.

1. EduFrogs. "Analysis of uk hotel industry." November 19, 2022. https://edufrogs.com/analysis-of-uk-hotel-industry/.


Bibliography


EduFrogs. "Analysis of uk hotel industry." November 19, 2022. https://edufrogs.com/analysis-of-uk-hotel-industry/.

Work Cited

"Analysis of uk hotel industry." EduFrogs, 19 Nov. 2022, edufrogs.com/analysis-of-uk-hotel-industry/.

Get in Touch with Us

If you have ideas on how to improve Analysis of uk hotel industry, feel free to contact our team. Use the following email to reach to us: [email protected]