A Strategic Analytical Review of The Hotel Sector

A Strategic Analytical Review of The Hotel Sector In The U. K. By: Kirsty Ireland Luisa Tapner Chris Crook Andy Stock Claire Gulliver

Contents • • • Introduction Key Markets and Trends D. E. E. P. L. I. S. T Factors (Macro-Economy) Porters 5 Forces Models B. C. G Matrix Sector Life Cycle Stakeholder Map S. W. O. T (The sector as a whole) S. W. O. T (Recommended area within the sector) Predicting the future of the sector

Introduction A definition of the hotel sector The hotel sector is a range of commercially rated businesses which provide accommodation, breakfast and at least one other main meal service to residents and non-residents. Additional facilities sometimes include room service, a gym, a licensed bar, and a swimming pool. Due to the diversity and complexity of the hotel sector, we have chosen to look at the U. K and divide the sector using the AA star classification system (1*- 5*)

Key Markets • • • Corporate Leisure Conference Weddings Private Parties Masonic Lodges All of which exist: • Nationally and Internationally • On a budget to deluxe level

Trends – Pre September 11 th • The U. K’s economy has shown steady growth since 1995. Increase in the value of the pound meant the U. K was seen as an expensive destination. • Higher disposable income and cheaper flights/destinations means that much of the U. K population is holidaying abroad. • The number of leisure guests visiting the U. K (Long stay or short break) are declining. • High proportion of investment in the 3 and 4 Star markets. • Corporate clients remain the hotels’ main revenue earner. • Conference business is slowing down due to advances in technology. • Rise in national and international hotel chains • Lack of adequately trained/qualified staff (Skills shortages)

Trends – Post September 11 th • Fewer people are travelling (staying closer to home) • Consumer confidence is getting weaker • Job cuts have already been made by many companies • Declining overall investment • Manufacturing is in recession whilst services are holding up • Only a 1 in 3 chance of U. K going into full recession • Airlines have slashed routes and staffing • Major decline in Rev. PAR in most large cities

D. E. E. P. L. I. S. T Demographic • U. K population is stable but an ageing “grey” population is emerging. Ecological • Foot and Mouth • Increased Environmental Awareness Economic Political • • • War • Terrorism Possible Recession Foot and Mouth, B. S. E Terrorism and War Euro

D. E. E. P. L. I. S. T Cont. Legal Sociological • • • Disability Discrimination Act Monopoly and Mergers Commission Minimum Wage Euro Informational • Increased availability of worldwide information eg World Wide Web Ethnic Issues Personal Disposable Income Technological • • • Internet Awareness Transport Infrastructure Key cards, in-house movies

Porter’s 5 Forces Threat House Conversions Property Acquisitions Buyers Supplie r Very Little Supplie r Power 1 Star Hotels Cost Orientate d “Cheapes t Option” Substitute s Guest Houses Inns Caravans Tents

Threats Foreign Chains Uprating Supplie r Some Supplie r Power Buyers 2/3 Star Hotels Substitute s Other hotels Luxury Static Caravans Selectiveness Location Incentives for business markets

Threats Entry of “Flagship” Hotels Uprated Hotels Luxury Chains Supplier Luxury items Brand awarenes s Quality Food Supplier Buyers 4/5 Star Hotels Substitutes Other luxury hotels Apartments Celebrity Venues Timeshare Affluent Higher PDI Loss of Busines s trade

BCG Matrix High Market Share High Low ? ? ? 4* 2* Growth 5* 3* 1* Low

Sector Life Cycle Introduction Growth 4* Maturity Decline 3* 5* Rev. PAR 2* 1* N. B – Only a static view of which phase each segment is currently in

Stakeholder Map For Investment In The 2 Star Hotel Sector Low Power Minimal Effort • Casual Staff • Suppliers • Community Level of Interest Keep Informed • Other Operations • Independants • Long Term Staff Keep Satisfied Key Players • Government • Customers High • Chairman • Shareholders

S. W. O. T For The Hotel Industry In General Strengths Weaknesses • Linked closely to the economy • There will always be a demand • Plentiful staff • Lower PDI in short term • Linked closely to the economy • Lack of trained & qualified staff • Volatility of demand Opportunities Threats • 6 -12 months = good time to invest • Declining airline usage = Recapture U. K short break and longer holiday markets. • European markets instead of America • Technological Advances. • Operationally mature but investment is only really just starting to emerge. • • Foot and Mouth, BSE Terrorism and war High levels of competition (Nat/Int. ) Established chain competition Travel to hot countries within a few hrs Increased insurance costs Cost of redundancies Main cities under threat due to terrorism

S. W. O. T For The 2 Star Hotel Sector Strengths Weaknesses • Budget sector is resilient • Trained and qualified staff not needed • Less volatility due to constantly high occupancy rates • Possible bad image due to cheapness Opportunities Threats • Increased budget airline activity = • Established chain competition budget hotels used by customers/staff • Same Nat/Int. threats as previous slide • High bankruptcy rates during recession may mean cheap properties available. • Franchises eg Choice Hotels, Express • Displacement of business from B&B’s and 3* hotels • High revpar through refugees

Predicting The Future of The Sector • Hot sectors will be the budget/economy resort hotels. (Indicated Growth of 52% over next 5 yrs in budget hotels) • Major cities will remain exposed due to terrorism/Int. demand. However this may be shorter lived than first imagined. In this case the hotels in major cities will be the first to bounce back after recession • Rev. PAR decline should start to slow down • Potential for refurbishment programmes • Recession predicted to last for between 6 -12 months • Property prices will fall over the coming year posing an excellent opportunity to invest (Especially in strong cities)

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