Travelodge Hotels Limited in Hospitality Industries - Essay Example

?Hospitality Industries Table of Contents Table of Contents 2 Introduction 3 Review of Measures taken by Company in Response to Economic Downturn 5 Review and Evaluation of the Key Social Factors that Influenced the Growth of the Business and Development of Hospitality, Leisure and Tourism 7 Examination of the Internal Resources Used to Support the Business 9 Future Trends to be Adapted by Hospitality and Other Relevant Sectors 10 Conclusion 12 References 14 Introduction Travelodge Hotels Limited is a privately own company that deals with hospitality and hotels industry throughout the United Kingdom. The company was founded in the year 1985. Currently the company has 456 hotels operating in the United Kingdom, 11 hotels in Ireland and 3 hotels in Spain. The company is the second largest hotel chain in the hospitality industry after Premier Inn. It was the first budget hotel launched in the United Kingdom which established its first hotel in Needle wood in Barton. Since the inception of the hotel, Travelodge had undergone a drastic expansion and growth. It has opened more than 500 hotels with over 37,000 rooms and thus had gradually moved from a roadside hotel chain to become one of the fastest, largest as well as the most famous brand of budget hotels in the United Kingdom. It has been ascertained that nearly 16.5 million people stayed in Travelodge in the previous year (2012). It is worth mentioning that about 90 per cent reservations are made through the website of Travelodge, thus attracting more than 1.1 million visitors per week (Travelodge, 2013). Travelodge is the smartest choice for leisure and business travels. It consistently offers the customers with great value of hotels depending on their choice to reside. It is interesting to highlight that nearly 80 per cent of the Travelodge hotels are located in famous holiday hot spots, towns and city centres. It has a range of hotel designs comprising of budget built hotels, office conversions, acquirement of the present hotels, grade II listed building and co-partnerships with leading super markets, pubs and retailers among others. Travelodge was set to build further 14 hotels with 1,742 rooms at an expense of 141.5 million pounds. With respect to the UK locations, four major hotels are London including Bethnal Green, Vauxhall, Hounslow and Walthamstow. The other hotels of Travelodge which are at the door of starting by 2013 will be located at the two major cities of Spain i.e. in Madrid and Barcelona. The inaugurations of hotels in these cities will double the room stock of Travelodge to 700 in Spain (Travelodge, 2013). A key part of the investment of Travelodge largely relies on the new room brands which had been created by taking into account the comfort and preferences of the customers of Travelodge. In January 2013, Travelodge made an announcement of investing 223 million pound that would further help the company to grow and expand its business. The cash investment of the hotel would enhance the sustainable growth of the company and would strengthen the company’s brand offerings. This will also ensure that the customers are delivered with the best value in the market place. It has also been ascertained that by the end of 2013, Travelodge will make considerable investment on the renovation of 50 per cent of all the rooms acquired by the company. Furthermore, the company intended to incorporate the new room designs in almost 90 per cent of the estates of Travel Lodge by the end of autumn, 2014. Thus for the next 18 months more than 50 rooms on an average would be refurnished (Travelodge, 2013). As per the latest Budget Hotel Reports of 2010 a total of 54 new budget hotels were inaugurated in the year 2012 with more than 5,446 new rooms. Travelodge is the fastest growing budget hotel chain in the UK for the ended year 2012 wherein more than 3,883 rooms were added to its portfolio. Regardless the tremendous growth rate, the company is encountered with intense competition from its major rival Premier Inn. Correspondingly, 27 per cent market share in the hospitality and hotel industry of the UK is held by Travelodge while large market share of 37 per cent is being dominated by Premier Inn. On the other hand Holiday Inn, the third largest brand saw decline in its market share to 11 per cent despite adding 540 rooms to the estate (Paskin, 2011). Review of Measures taken by Company in Response to Economic Downturn The hospitality industry had estimated an average turnover of around 90 billion pounds. , the hotel and hospitality industry alone offers jobs to 2.44 million people who represent about 8 per cent of the total employment in the country. This has made the hospitality industry the fifth largest contributor to the UK economy. The hospitality industry is estimated to directly contribute 34 billion dollars in terms of tax revenue to the treasury which comprised of the other categories of excise duty, VAT on sales, corporation tax, national insurance contributions and income tax among others. It is worth mentioning that this contribution is equivalent to 6 per cent of the total annual tax receipts of Exchequer. Apparently, 4.2 per cent of the total investment of the UK economy is contributed by the hospitality sector alone. This investment made have facilitated in creation of 61,000 jobs with 39,000 of it being in the activities of construction and other related activities. The share as well as the level of investment is expected to expand the overtime and the contribution of the hospitality industry towards the national economy is expected to rise in the later years (Oxford Economics, 2010). The impact of the economic down turn on the business of Travelodge has been computed by a large burden of debt and exclusive lease arrangements. Travelodge had been restructuring plans to tackle the unsustainable leases of which the majority of the peaks were agreed prior to the year 2008. The company with the help of its leaders is expected to reshape the debts as well as the operational structure (KPMG, 2012). It has been recognized that almost all the sectors including hospitality and hotel chain sector were significantly impacted by the economic downturn. In order to deal with these economic uncertainties Travelodge had formulated several strategies to attract tourists both nationally and internationally. The company was also determined towards sustainable growth of the country’s economy and in this course it created employment opportunities for the individual within the country. The first step that was taken by Travelodge was to move tourism higher up in the government agenda. It intended to move the industry under the Department for Business, Skills and Innovation (DBIS) instead of the Department of Culture Media & Sports. The primary motive behind such steps was to ensure that DBIS would take the responsibility to set up a nationwide policy which would include recital targets as well as enhanced cooperation across the industries. Another step advocated by Travelodge was to create a united tourism working party with the Scottish Government, Mayor of London and North Ireland assembly. Moreover the company also emphasized on developing dedicated plan along with regional tourism fund to assists the national tourism board so that the board can devise effective strategies where the investments in the regional tourism could be effective in developing the strongest outcomes. The company also suggested DBIS to assess the areas of county tourism that enjoying additional allowances and grants in capital expenditure in order to make investments in the new projects by reducing the level of grants and allowances. The company also advocated rising funding for apprenticeship of hospitality that would derive jobs as well as enhance growth in the hospitality sector (Travelodge, 2013). In addition to above recommendation made by the company to DBIS, the company also implemented strategies such as expanding and building new hotels at different locations in the country. The company believed that such opening of new hotels will automatically generate revenue for the company in the gloomy economic environment of the country. Correspondingly, the company referred this strategy as ‘IDeaS New Hotels Success Service Package (NHSSP)’. The company also optimizes its pricing strategy in order to attract more and more visitors towards its hotels. The strategy of NHASSP has enabled the company to enhance its profitability and has significantly aided the company to generate revenue ahead of its rivals. In order to mitigate the problem of financial crisis the company also implemented company voluntary arrangement (CVA). CVA is a legal agreement that facilitates a company to write-off few of its debts. The company has undertaken this measure due to its increasing debt burden and mounting lease arrangement (Integrated Decisions & Systems, Inc, 2013). Nonetheless, it can be argued that Travelodge implemented all the possible revenue management measures and practices to reduce the adverse implication of economic downturn. Review and Evaluation of the Key Social Factors that Influenced the Growth of the Business and Development of Hospitality, Leisure and Tourism The hospitality industry is primarily dominated by Travelodge and Premier Inn which together occupies a large portion of total share of hospitality market. The industry expanded by about 10 per cent per annum that was the fastest growing sector in the hotel industry. The growth was largely monopolized by Premier Inn and Travelodge that operated approximately 80 per cent of all the new bedrooms that were developed for the preceding four years. Despite the economic recession, the budget hotel attained impressive growth of 35% during the recession time. The market share of branded budget hotel like Travelodge has augmented from 12% in 2007 to 16% in the year 2011. Travelodge had largely focused on the strategy of diversification and has largely doubled the size of the estate in the last 6 years. It had focused on the growth of city centres in order to rebalance the portfolio from the roadside locations. In the present day scenario, about 62 per cent of the rooms of Travelodge are located in the major towns with 18 per cent being in London alone (Barrows, Powers, & Reynolds, 2009). During the recession the disposable income of the people in the UK has dramatically fallen. Almost all the regions in the UK witnessed radical reduction in the disposable income. The declining disposable income of the people has significantly influenced the growth rate of the hospitality industry. Due to the fall in the employment rate, the income of the people has also dropped significantly. Contextually, people have more leisure time but were lacking the sufficient amount required to take advantage of leisure time (Office of National Statistics, 2012). In order to deal with the declining disposable income and increasing leisure time, the hospitality industry in the UK concentrated on optimizing the pricing strategies in order to attract the people towards the hospitality services. The transportation costs in the UK have depicted a rise considerably to 5.6 % which has radically affected the bus, boat and railway transport services (BBC, 2013). At the same time the hike in the transportation costs has immensely affected the hospitality industry. In this course, the hospitality industry are striving to make the hotel charges reasonable so that despite the rise in the fare customers are attracted towards availing the services offered by the hospitality industry. It has been ascertained that customer needs and expectations tends to change at a regular interval. In the current market, customers are more concerned about the quality as well as price of the services they intends to avail. In order to effectively meet the changing customer needs and preferences, the hospitality industry in the UK is constantly involved in monitoring the market in order to track the changing trends. The hospitality industry in the UK are striving offer better quality services at reasonable prices. The hospitality industry in the UK is significantly concerned towards design, comfort and quality services. The constant advancement in the technology and the increasing operational costs has immensely influence the hospitality industry in the UK. Correspondingly, the hospitality industry in the UK is widely involved in implementing energy efficient technologies and solar panels in control the increasing cost of operation (Economic and Social Research Council, 2012). Almost all the sectors of the business are now revealing their concern towards the environment. In this context hospitality industry in the UK is widely engaged in water management and energy conservations among others. Examination of the Internal Resources Used to Support the Business There has been a drastic improvement in the development of the budget hotel sector. Travelodge had been seeking for financial assistance as it has been sinking under mounting debt and increasing costs. Travelodge had a bank borrowing of about 500 million pounds and revenue of about 335 million pounds. The budget hotel operator was distorted under the financial strain of making repayment of 1.1 billion pounds on borrowings. The company with the assistance from the shareholders and the lenders tried to reshape the debt and the operational structures to a model that would be more suitable in the impoverished times. As a part of the diverse financial restructuring 235 million pounds were written off and 71 million pounds would be repaid that would bring the borrowing to 329 million pounds. The company had also been given time to pay off the underwritten debts at a comparatively lower rate of interest. The financial restructuring comprising of CVA would leave Travelodge in a much stronger position and would thereby ensure long term sustainable improvement for the future (The Guardian, 2012). The marketing strategies of Travelodge can be ascertained to be highly data driven and it largely relies on the use of the digital era strategies. The main business tool of Travelodge is the organizational website www. Travelodge.co.uk. Travelodge uses a yield approach of management that is very much similar to that of the airlines. With the help of the online booking systems the rooms are allocated in advance on the basis of advanced payment. However, Travelodge uses the traditional selected conventional techniques to draw the customers to its website. They are also dependent on the email suggestions to its databases. The databases include the customers and the latest prospects that are occupied to register on their website. Travelodge also uses surveys as a major tool for sales promotion (Advance Tourism, 2010). Travelodge employs more than 6000 staff in its different locations including the UK, Spain and Ireland. Travelodge intends to provide every employee within the company with equal opportunities wherein every employee is able to develop their careers. In order to facilitate increased service quality and enhance the skills of its employees the company has undertaken several measures. In this context, the company has launched few crucial programs such as hotel management apprenticeship programs and 12 weeks training programs at regular intervals (Travelodge, 2013; Markwell, 2009). Future Trends to be Adapted by Hospitality and Other Relevant Sectors It has been ascertained that there exists a considerable opportunities for the hospitality industry to exploit and expand the business profitably. However, it is crucial that the hospitality industry in the UK are capable of making effective decision as well as strategies to avail the potential opportunities. In this course, it can be stated that human resource is a crucial factor for the success of the hospitality industry. It is paramount important that hospitality industry in the UK is more concerned towards the satisfaction of employees as well as customers, It is owing to the fact the there exists a direct relationship with employee satisfaction and customer satisfaction. Furthermore, providing adequate opportunities for growth and development of employees will guarantee the quality delivery of services. At the same time it is crucial for the hospitality industry to provide training and development programs to its employees at regular interval and appreciate their works. It is worth mentioning that retaining the employees are more beneficial for the company than hiring new employees. In this context, the hospitality industry should strive to reduce the employee turnover rate to a great extent. It is also crucial for the company to constantly track the changing pattern of the customers at the market. This will facilitate the hospitality industry to frame strategies according to the needs and expectations of the customers and thereby attracting more visitors towards its service (British Hospitality Association, 2011). It is equally important that the hospitality industry constantly involved in adapting new and innovative technologies in order to reduce its operational costs and ensure sustainable future growth (Ministry of Tourism, 2006). In the year 2011, the hotel sector of United Kingdom has experienced steep growth. It also had a considerable growth of spending in Europe in the same year. This was as a consequence of the sturdy growth in London with the other sectors of UK faring comparatively less well. The growth has been largely driven by tourists not only from Europe but from other countries as well. Despite the growth in the hospitality industry in the UK, it is paramount important for the industry to make significant investment in promotional as well as creating new tourists destinations to attract more and more customers both at national level as well as internationally. It is also important for hospitality industry and other sector such as transportation to put collaborated effort to increase and promote the tourism in the country. Alongside, the government should also ease in providing tourist visa and formulate strategies (British Hospitality Association, 2011). Conclusion It has been ascertained that there exists a numerous opportunities to be exploited by the hospitality industry in the UK. However, it is crucial that the hospitality industry in the UK is more conscious towards making effective decisions and strategies. More specifically, the strategies framed by the hospitality industry should be customer oriented. It is equally important for the industry to monitor the changes in the customer needs and preferences for ensuring efficiency of the strategies. At the same time it is important for the hospitality industry to provide growth and development opportunities to employees. The employees should be offered with adequate training and development programs at regular interval. It is due to the fact the employee satisfaction is directly related with the customer satisfaction. The satisfied employees will be motivated to deliver quality services to the customers which will facilitate the customers to derive the high satisfaction level. In addition to this, the hospitality industry should also involve in extensive promotion of tourism and creating new tourists destinations. The primary intention of the industry should be to attract both national and international tourists (Annual Business Inquiry, 2009). It is paramount that the government of the nation also firmly involve in formulating strategies that support and promote tourism within the country. The government should ease process of issuing tourist visa. Nonetheless, there should be collaborated effort amid hospitability industry and other sectors such as transportation to promote tourism in the country. All these factors shall contribute towards attaining sustainable growth in the future for hospitality industry and other industries like transportation as well (Ernst & Young, 2012). References Annual Business Inquiry, 2009. Economic Performance. Executive Summary. . [Online] Available at: http://www.oph.fi/download/145178_State_of_the_Nation_2011.pdf [Accessed August 08, 2013]. Advance Tourism, 2010. Travelodge UK. Tourism Reference Paper. [Online] Available at: http://www.advancetourism.com.au/files/JU8N8QN5PV/JB_Travelodge_UK.pdf [Accessed August 08, 2013]. British Hospitality Association, 2011. Hospitality. 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