UK Budget Hotels & Premier Travel Inn - Case Study Example

Budget Hotel Sector Budget hotels are hotels which are meant to provide conventional hotel services at low cost, they target in providing affordable services to customers. The hotels offer services such as accommodation and breakfast for guest who book at the hotels. It has been noted that, in the current years, the model of a "budget hotel" in the U.K. has changed so that presently lots of these low cost hotels are nearly indistinguishable from a lots of their more upmarket and expensive counterparts. (Hotel benchmark, 2002) Budget hotel sector According to industry observers, the budget industry in the UK is poised to increase more than twice its present size in the coming 20 years. The industry will account for over a quarter of the total hotel industry market share come the year 2027, this is according to different research done. According to Melvin Gold a consultant in the industry and whom it is reported that has done the most comprehensive research in the industry, he states that the industry presently enjoys a market share of 12% and it is predicted that it will reach a market share of 26% in the next 20 years. This is attributed to the fact that consumers are increasingly demanding for low cost hotels. (Hotel benchmark, 2002) Growth of the industry Despite a lower demand in the hotel sector, in the UK and Europe as whole, budget hotels and mid -market hotels have continued to grow at an average of 12%. The improvement of the budget hotel sector is witnessed in the UK market where the rate of occupancy has moved up. The sector is the only one posting improved occupancy in the hotel industry in the UK. The budget hotel sector has continued to grow despite the factor that the hotel industry has been declining. (Hotel benchmark, 2002) Chart A - UK rolling occupancy analysis by grade of hotel source; www.hotelbenchmark.com Premier Travel Inn Premier inn budget hotels are the biggest UK band hotel, with a total of more than 32,500 rooms and a chain of over 490 hotels. Initial the chain was operated under the "travel in" name. The hotel chain is owned by Whitbread Company and it was opened to over competition to the Travelodge. The very first group of the hotel were built next to Beefeater in 1987-1988. Ever since 1987, the premier hotels have developed to become the biggest chain of hotels in the whole of UK. In the year 2004 Whitbread re-branded the travel inn company to be known as premier Travel Inn after acquiring the rival group Premier Lodge that was owned by Spirit group at a total sum of 505 US Dollars. The name has been re-branded again to Premier Inn in this year (2007) Company logo; source (Premier Inn, 2007) Premier inn summary information (Premier Inn, 2007) Type Public Founded 1987 Headquarters Flag of England Luton Area served United Kingdom Industry Hospitality Parent Whitbread Rooms capacity 32,500 Rooms The hotel chain has created a policy of having similar rooms in all of its hotels; the rooms usually have a double bed/ twin beds, a working desk, shelves, a TV set and a shower. Some rooms have extra pull-out beds or on sofa, there are referred as family rooms. Usually these rooms are not priced higher than the standard rooms, as they are same in size. In the year 2006 premier inn modified their general room design; however the rooms still have the same standard of facilities as in the past. Currently, the company offers a few numbers of rooms where smoking is allowed, but as from January 2008, the company aims at making banning smoking in all rooms. (Premier Inn, 2007) Pricing policy Premier Inn's charges a daily amount per room occupied not considering the number of people occupying the room, the maximum allowed number is two adults and two children. The price of a room according to the company website is from $ 48, however many of its chain charge a minimum of $55, though the pricing depends on where the hotel is located and on particular days of the week. For example prices are higher on a week day than during a weekend. Unlike their main competitor Travelodge, Premier Inn does not give discounts when customers book early. Breakfast is not included in the price of the room though it is available at an adjoining restaurant. (Premier Inn, 2007) Other facilities Each Premier Inns have got restaurants located in the hotel or located on same compound of the hotel. The restaurants are usually well established branded named such as Brewer Fayre or Beefeaster, they also belong to Whitbread. (Premier Inn, 2007) Assessment of the opportunities and threats Most organizations and industries today are using SWOT analysis as a strategic method/tool for evaluating their strengths, Weaknesses, Opportunities and Threats with reference to strategic planning. SWOT analysis identifies the internal and external factors that determine the achievements a company has specified in its goals and objectives. It categorizes the external factors that have been identified to boost or hinder the achievements of the industry especially in terms of growth and expansion. These external factors are the opportunities and threats. (Chekitan and Schultz, 2005) Opportunities Strong and stable macroeconomic The strong private sector growth has put an emphasis on maintaining of a stable macro-economy environment, most important being the stabilization of prices. Monetary policies of the UK currently are sound and have allowed the expansion of the economic growth in the UK. The inflation rate has been able to be brought down. On the international scene the competitiveness of the UK still continues to and the volume of its exports is increasing. On the local scene, the macroeconomic prospects remain good. Credit and profits are high, thus the volume of investment in the UK is expected to continue while the consumption rate is anticipated to remain solid. The stable macroeconomic is providing Budget hotel sector with a good opportunity of doing business in the country. Also the current trend of customers tending to go for low cost hotels is another opportunity for the industry to expand its services and capture the new customers. (Doyle, 2000) Foreign market As globalization continues to open up new markets and eliminate barriers of doing business budget industry will continue to have an opportunity of opening up new hotels in other countries or increase their presence in the countries where they have already established. The main opportunities lie in Asia which has continued to witness good economic growth. Especially in expanding hotel services in countries such as India and China or located new markets. Also there is still market in other continents as the industry is serving less than 1% of the total population of the world. (Doyle, 2000) Competition and government policies Since budget hotel industry is offering similar services as the main stream hotels, it is subject to harsh competition as almost other players in the industry in the for example the main stream hotels will be trying to adopt and budget hotel sector in terms of market base. The biggest competitors of Budget hotel industry are hotel, motel, restaurants and others hospitality players which are posing a threat to its market share (Doyle, 2000) Political threats Being a global business the industry is exposed to threats from government polices in different countries. Political environment is crucial for any industry operation in the world, political setting has a significant important to any industry and to each business operation whether it is big or small, whether the business is local national or multinational. Political policies of the country in which a business is located will definitely affect it. More so the when it comes to international industry like Budget hotel sector, the political factors of the host country and home governments both affects the budget hotel companies in the business operation. (Doyle, 2000) The governments policies in the budget hotel sector interest reflects the attitudes that the governments have towards the industry, and will shoe the governments scheme on how well to promote its national interests. Putting in consideration the government resources and its philosophy, different government will formulates different control measures to hinder or promote budget hotel sector in their countries. These government policies will in turn directly affects the operations of the budget hotel sector in these particular countries. (Doyle, 2000) The perfect political climate in the current global market is supposed to stable, free and friendly encouraging free market, unfortunately this is never the case, and since many government are different controls to protect their markets and stability and freeness remains to be relative. There are number of political threats that continue to face budget hotel sector this are; 1. Heath policies 2. bans on some prospective locations 3. Pressure to offer better services (Douglas, et al 2006) Summary of the commonalities and differences between Premier Travel Inn and Travelodge Service marketing is a type of marketing which is based on value and relationship A service is offered by a company when it performs something for its customers, services are normally intangible. Kasper and Gabbott (2006), states that a service is an experience which is consumed at the point of purchase. In this case a service will be the accommodation and food provided by the budget hotels. It is possible for a person to have great service in one hotel and go to the other hotel chain and have poor service. Service offered is normally termed as; Inseparable; services is consumed at one point and it can not be carried to another place to be used. For example accommodation being offered Intangible; service can not have a physical form Perishable; once one is offered a service it is not possible to have the exact service in the similar way. Variability; because the service is being offered by human beings it naturally that it will vary to some degree and can not be exactly similar (Kasper and Gabbott, 2006) Services marketing comprises of the 7Ps of marketing mix with are outlined below in relation to Premier hotel and the Travelodge hotel Service Marketing implications terms of the 7Ps Product This is an object or service that a company produces or manufactures particularly on large scale with precise amounts. (Kasper and Gabbott, 2006) A company should have a large collection of products that it sells to the market. The products cater for different tastes of consumers. In relation to the service marketing strategy that is being witnessed in the budget hotel industry between Premier Travel Inn and Travelodge, both hotels are coming up with high quality services that are lowly priced, the rooms offered to customers by both hotel are well furnished and matches well with the description given. However while premier Travel Inn strive to have similar rooms in all its chain Travel in rooms differ in some of its hotels. (Kasper and Gabbott, 2006) Promotion Promotion includes all communications that a company uses in marketing its products. We have four different elements in promotion; this includes advertising, point of sale, word of mouth and public relations (Bitner and Booms, 1981) if a company incorporates all the four elements then a certain level of crossover do occur. Companies have greatly used this marketing mix to its full advantage. Premier Travel Inn and Travelodge have incorporated all the four aspects of promotion which as seen them capture and retain a big share of their market especially in the budget industry, it is estimated that the two companies controls almost 60% of the total budget hotel market in the UK. Premier Travel Inn and Travelodge continue to sell their services through using captivating adverts that entices consumers to visit their hotels. It should be noted that advertisement is a very powerful marketing tool that is used to create more market for the company. (Kasper and Gabbott, 2006) Price The amount that a customer pays for a certain product is its price. This amount is determined by various factors which includes product identity, competition, market share and the perceived worth of the service by the customer. Travel Inn and Travelodge target cost sensitive customer by focusing on offering quality services at a low price. Thus they both offer low pricing service market strategy. Never the less, Travelodge offers lower prices when compared to Travel Inn (Bitner and Booms, 1981) Place This stands for, location where the service from a company are found and purchased. This in many cases refers to distribution channels of the company which can be physical stores or even virtual stores found on the internet. (Barlon, 2006) In order to reach many potential and present customer both Travel Inn and Travelodge are expanding their chain of hotels to different parts in the UK and even venturing out of the countries to foreign markets. People Any person that will interact with your consumer will create a certain impression, and the impression can have a profound effect on your customer either in a positive way or a negative way in regard to customer satisfaction. (Barlon, 2006) Thus the reputation of the company services rests in the hands of the company employees who will come in contact with the company's customers. The employees have to be well trained and highly motivated to leave the right impression on the customers. Both Travel Inn and Travelodge have ensured that; employees who come in contact with the customers are the right ones and have proper training Give a high level of after sale service and support as one way of adding value to the product and giving the company an advantage over its competitors. To many customers this is more important than the price of the product. When relating this to the current market strategy, it is clear that, today, Travel Inn and Travelodge companies are taking employees to be part of their brand image. (Barlon, 2006) Process This includes the process of how the service is delivered, and the behaviour of those who are offering the service, is important for customer satisfaction. (Barlon, 2006)Aspects as information about the service and the time it takes to serve the customer are aspects that make a customer happy or not. Companies have to note that; 1. Customers are more interested on how the system of the company works and not in details of how the company runs. 2. The quality of customer service that a customer receives is what is important to the customer. Travel Inn and Travelodge continue to use high technology to improve their services and the process in which the services are offered. The quality of services offered by the two companies has continued to be improved tremendously in order to attract more customers. However, it has been noted that the service delivery of Travelodge are better in terms of efficiency than those of Travel Physical evidence This general applies to service providers, Barlon (2006) notes that a service can not be experienced, unless it is delivered. Thus it means that a customer takes a risk when choosing a service that he/she can not see or experience. This risk can be reduced by assisting prospective customer to "see" what they are purchasing. This can be done through offering testimonials and case studies which can give evidence of good services from the company. The physical evidence being shown by the company has to validate the customer's previous assumptions. For example, both Travel Inn and Travelodge have elaborate websites for customers to "see" the type of services offered in terms of rooms, customers also are shown the physical rooms upon request when the visit the hotels. (Barlon, 2006) Key strategic service marketing issues Business strategies are those that are adopted to strengthen the position of an organization. This strategy focuses on how each business unit will compete in the market. Premier Inn has formulated business strategy that has been able to counter threat of new entrants and level of competition brought about by its rival firms in the alcohol industry. The collective strengths of the above forces have enabled Premier Inn to determine the ultimate profit potential in the industry and to continue expanding its market share. (Hotel benchmark, 2002) Place The company has the best hotel chain in the industry which has been a strength that has significantly helped Premier Inn to conquer the Market within a short time. The competitive strategy associated with Premier Inn is that it has utilized its ability to identify the market segments and hence the competitive position of the Premier Inn is considered to be high than that of its competitors and has in the process developed workable marketing strategies The company has a marketing strategy of increasing its chain network to reach more customers. In view that more and more people are seeking for low cost hotel services, Premier Inn hotel as a comprehensive 5 year program of building more hotels both inside the UK and in foreign countries such as Dubai. Pricing There are many ways by which Premier Inn has targeted in improving its pricing in the coming 5 years. The hotel chain is focusing to maintaining low prices. To this end Premier Inn intends to use a pricing matrix. A price matrix will be suitable that will incorporate factors such as demand, supply, quality and economy. The price mix will be suitable when considering the right pricing strategy to utilize which include; a) service adoption strategy- making modifications to existing services and raising its price b) Technical strategy- demonstration of superior services, In this case, issues such as better room facilities, efficient customer care, and using latest technology in providing of services. (Barlon, 2006) This pricing strategy, will allow the price for the rooms be set to lower prices than its competitors so as to gain a market share. Areas to improve It had been observed that Premier Inn service delivery at times is not up to required level, this is due to lack of ability to maintain uniform service delivery in all of its hotel chains. The main root cause can be attributed to lack of proper coordination, planning and unequally employee motivation. Similar in its quest for increasing its number of hotels it has been noted that the company lacks aggressive marketing policy of building new hotel chains in the local markets, while at the same time it has not exploited the big a global market. (Hotel benchmark, 2002) Recommendations Even though Premier Inn is accredited with success in its business undertakings there are various improvements that the organization needs to embark on in order for it to improve or maintain the good services it is offering currently. The company needs to understand clearly the aspect of service delivery well. Premier Inn should integrate the planning, organizing, directing, and controlling functions of the organization in order to boost the company's organizational effectiveness. Being a vast and multinational company the company is thus faced with the challenge of ensuring of its services are uniform in all places. This can only be achieved through continuous training employee's assessments that need to be carried out regularly. (Barney, 1991) The company should also utilize opportunity of its strong financial base exploring more markets. The amount of revenue that the company collects presents an opportunity of development of unique Budget hotel services that will give a competitive edge of its competitors. This means that the company requires carrying out an extensive research on identifying new markets and the hotel services that sells more in those places. (Barney, 1991) Conclusion The study can conclude that the Premier Inn and Travelodge are the two main competitors in the U.K. budget hotel industry. These hotel chains have attained this feat with careful concentration to market trends and the wants and needs of their guests. It is also clear that budget hotel industry is growing and with time and its growth is expected to continue. Both two companies have a strong financial base and customer orientation that has enabled to two companies to continuously succeed in their ventures. However, Premier Inn hotel is at the fore front in the industry and it has had tremendous success. Service marketing strategy that has been undertaken by the premier Inn hotel has enabled the company to deliver its service well. Nevertheless, there are areas that need to be improved by the company which are; quality of service delivery and increasing of its presence through building more hotels. If the company address these key areas well, it bound to see its market share increasing. Reference: Barlon, K. (2006): The concept of the marketing mix Presentation on marketing management, Volt 1, Oulu University -Finland Bitner, J. and Booms, B. (1981): Marketing strategies and organizational structures for service firms, in Donnelly, J. and George, W. Marketing, American Marketing Association, Chicago. Barney, J. B. (1991): Firm Resources and Sustained Competitive Advantage, Journal of Management, 1 (January), Chekitan S. D and Schultz, D. E (2005): In the Mix: A Customer-Focused Approach Can Bring the Current Marketing Mix into the 21st Century, Marketing Management v.14. Doyle, P. (2000) Value based marketing, Wiley, Chichester. Hotel benchmark (2002): Budget hotel Proving Resilient retrieved from; www.hotelbenchmark.com, accessed on 16/12/07 Kotler, Philip, Keller and Lane (2005): Marketing Management, Prentice Hall Kasper, H. V and Gabbott, M. (2006): Services Marketing Management: A strategic perspective'2nd edition, John Wiley and Sons Premier Inn (2007): About Us; Retrieved from; www.premier.com/pti/home.do, accessed on 16/12/07 Travelodge (2007): Travelodge company; retrieved from: http://www.travelodge.co.uk; accessed on 16/12/07 Read More