A Strategic Analytical Review
of The Hotel Sector
In The U.K.
By:
Kirsty Ireland
Luisa Tapner
Chris Crook
Andy Stock
Claire Gulliver
Contents
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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
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Corporate
Leisure
Conference
Weddings
Private Parties
Masonic Lodges
All of which exist:
• Nationally and Internationally
• On a budget to deluxe level
Trends – Pre September 11th
• 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 11th
• 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 RevPAR in most large cities
D.E.E.P.L.I.S.T
Demographic
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U.K population is stable
but an ageing “grey”
population is emerging.
Ecological
• Foot and Mouth
• Increased Environmental Awareness
Economic
Political
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• 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
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Disability Discrimination Act
Monopoly and Mergers Commission
Minimum Wage
Euro
Ethnic Issues
Personal Disposable Income
Technological
Informational
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Increased availability of worldwide
information eg World Wide Web
• Internet Awareness
• Transport Infrastructure
• Key cards, in-house movies
Porter’s 5 Forces
Buyers
Supplie
r
Very
Little
Supplie
r Power
1 Star
Hotels
Cost
Orientate
d
“Cheapes
t Option”
Supplie
r
Some
Supplie
r Power
Buyers
2/3 Star
Hotels
Selectiveness
Location
Incentives for
business
markets
Supplier
Luxury
items
Brand
awarenes
s
Quality
Food
Supplier
Buyers
4/5 Star
Hotels
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*
2*
RevPAR
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
Minimal Effort
Low
Power
High
• Casual Staff
• Suppliers
• Community
Level of Interest
High
Keep Informed
• Other Operations
• Independants
• Long Term Staff
Keep Satisfied
Key Players
• Government
• Customers
• 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.
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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
• RevPAR 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)
Thank You
For Listening To Our
Presentation
Any Questions?