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A CRITICAL ANALYSIS OF THE HOTEL SECTOR

BUSINESS STRATEGY GROUP 4


BY ANDREA FIUMANA, CASSANDRA BRAHAMS, FELICITY STRAWSON, HANNAH MAXWELL, ZOE SWAIN

DEFINITION
Ho-tel [ho tl] (plural ho-tels) noun Place for an overnight stay: A building or commercial establishment where people pay for lodging, and where meals and other facilities such as conference rooms are often available.

PRESENTATION OUTLINE
Description of the hotel sector The UK hotel market in context How the market is segmented External Influences Key Players / The Competitive Environment Customer/ Market trends SWOT analysis Conclusion References

CD's & Video Games Books & Magazines

10 9 8 7 6 Bn 5 4 3 2 1 0

UK HOTEL MARKET IN CONTEXT 2000

Sector
Gambling (inc lottery) Hotels
ONS Data/Mintel

Theatre, Sports Admission

Turnover of the UK Hotel Market Bn Current Prices


Actual Turnover of Hotel Sector
14 12 10 8 6 4 2 0 Y1994 Y1996 Y1998 Y1999 Y2000 Y2001 Y2002 Y2003 Y2004 Year
16

actual turnover Predicted Turnover

Bn

A Year on Year Percentage Growth Analysis


18

14

12

Year

10

Actual Growth Predicted Growth

0 Y1996 Y1998 Y1999 Y2000 Y2001 Y2002 Y2003 Y2004

BRANDS
THREE TYPES:
Four / Five Star: High Quality, Excellent Service, Premium Price Mid-Market: Good Quality, Wide Range of Facilities, More Accessible price Budget hotels: Functional / Basic Facilities, Lower Price Point

PEST ANALYSIS
Political
Legislation

Economic
Recession

Social
Social Changes Inbound tourism

Technological
New influences Internet

NO OF HOTELS

No of Hotels

100

150

200

250

300

350

400

50 0

100

150

200

250

300

50

Top Ten Budget Hotel Groups in the UK

Re ga l Ja rv is M ro ac up do na ld Ho te ls Ho te lG

Martin information Ltd Dec 2000


W hit br ea d Hi lto n Th ist Ba ss Tr av el In n Tr av el od Pr ge em ie Ho rL lid od ay ge In n Ex pr es s O ld le Co m pa ss Ch oi ce ho te ls Ac co r

Top ten hotel groups in the UK

IB IS En gl ish In ns Da ys In n Ca m pa nil e cit y In n Fo rm ule 1

Number of Hotels

No of hotels

Percentage of Market Share for Top Ten UK Hotel Groups

Bass Whitbread Hilton Thistle Compass Accor Choice hotels Jarvis Regal Macdonald

Percentage of market sector for Budget Hotel Groups

Travel Inn Travelodge Premier Lodge Holiday Inn Express IBIS Old English Inns Days Inn Campanile City Inn Formule 1 Howard Johnson Hotels

The Competitive Environment


LOW COST
Broad Target

DIFFERENTIATION

Travel Lodge Holiday Inn Express Marriott Courtyard Posthouse


COMPETITIVE SCOPE

Mariott De Vere Hilton Heritage

Guest Houses Bed & Breakfasts Youth Hostels


Narrow Target

The Savoy The Lanesborough The Ritz

Porters five forces model


Potential Entrants

Threat of Entrants

Suppliers Bargaining Power Competitive Rivalry

Buyers Bargaining Power

Threat of substitutes

Substitutes

Industry Sector Stakeholder Mapping


Low LEVEL OF INTEREST Suppliers Employees Community Auditors of Key Players Competitors Lenders High

Low P O W E R High

Government

A C

B D
New Entrants Lenders Competitors shareholders Chairmen of Competitors Board of Directors

Customers/ Potential

CUSTOMER TRENDS
Future customer trends Customer Demand

MARKET TRENDS
Industry Life cycle number of UK Hotels

Number of UK Hotel Operators


16000 14000 12000
Number of Hotels

10000 8000 6000 4000 2000 0 Y 1991 Y1992 Y1993 Y1994 Y1995 Y1996 Year Y1997 Y1998 Y1999 Y2000 Y2005

Hotel Industry Life Cycle


% Growth According to Turnover Year on Year

9 8 7 6 5 4 3 2 1 0 Y 199495 Y 199596 Y 199697 Y 199798 Y Y 1998- 199999 00 Time Y 200001 Y 200102 Y 200203 Y 200304

SWOT ANALYSIS
Strengths
Well established brands UK is a leading tourist destination Major brands are offering specific products Internet

Weaknesses
Major brands are less flexible Hotel Industry is linked with the wider Economy leaving the sector vulnerable in times of the recession High costs Hotel classifications VAT Strength of the pound

SWOT ANALYSIS
Opportunities Internet Increase revenue from non-residents Scope for further growth Budget hotel sector Euro Ageing Population Threats Alternative accommodation Hotel groups V Independent Corporate spending Competitive prices on overseas travel

CONCLUSION
The UK hotel sector in the future Fewer hotels but more rooms Major investing from large Hotel groups, i.e. buy outs and mergers Analytical tools which a new entrant should use to determine success and position

Tim Knowles, Corporate Strategy For Hospitality, 1996 Johnson, Scholes, Exploring Corporate Strategy, Fifth edition Mintel Market Research.com Joan Marsan, Hotels, July 1999 Geoff Tyler, Hotel & Restaurant, January 2001 Jay Kandampully, Dwi Suhartanto, International Journal Of Contemporary Hospitality Management, Vol 12 issue 6 Gaby Huddart, Caterer & Hotelkeeper, December 1999 Paul A Philips, International Journal of Contemporary Hospitality Management, Vol 9 issue 4 Trevor Ward, International Journal of Contemporary Hospitality Management, vol 9 issue 7 Gavin Eccles, Philip Durand, Managing Service Quality, Vol 7 issue 5 Vinitia Mathews, International Journal of Contemporary Hospitality Management, Vol 12, issue 2 Encarta, world English dictionary BDO Hospitality Consulting, International Journal of Contemporary Hospitality Management, Vol 8 issue 7 Marty Whitford, Hotel & Motel Management, November 1998 Sarah Toyne, BBC News What now for Tourism?, 18th September 2001 TRI Hospitality consulting- United Kingdom Hotel Industry 2001 International Journal of Contemporary Hospitality Management vol 11 issue 7 and vol 12 issue 2. Norma Cohen, FT.com, Regus expects more tough times ahead July 31st 2001. Margaret Brown, International journal of contemporary Hospitality Management vol 8 issue 3. Environmental policy in the Hotel sector: green strategy or strategem? Peter McGunnigle and Stephanie M. Jameson HRM in UK Hotels: a focus on commitment, Employee Relations, vol 22, issue 4. Mark Poustie,Jenifer Ross, Norman Geddes and William Stewart, Hospitality and Tourism Law, 1999. Office of National Staistics Martin Informantion Limited, Guide to Hotel Brands in the Uk December 2001. Bob Brotherton, An Introduction to the UK Hospitality Industry, 2000. The Business Enviroment

REFERENCES