Travelodge Hotel - Assignment Example

Travelodge Contents Travelodge 3 Extended Marketing Mix 3 Processes 3 People 3 Physical Evidence 4 Service Failure Risk 4 Satisfaction Management Issues 5 Service Recovery Strategies 6 Further Changes 6 Competitive Strategy Analysis 7 Selected Pricing Strategy 7 Positioning Strategy 8 Most Appropriate Strategy 8 Reference List 10 Travelodge Travelodge was the first budget hotel of U.K. The first branch of the company was opened in 1985, in the A38, Barton, Needle wood (Travelodge, 2014). After inception, Travelodge expanded the scale and scope of its business operations at a significant rate. Over time, the organization has opened more than 500 hotels branches in the U.K. The company had opened up its business as a roadside hotel chain in the U.K. and is now known as the most highly recognized budget hotel brand of the country (Travelodge, 2014). The degree of business rivalry within the restaurant industry of the U.K. has considerably increased over time. The companies conducting business in this industry face monopolistic threats of market rivalry (Kitchen, 1999). In order to sustain its leading position in the long run and experience steady growth rate in business, Travelodge needs to upgrade its existing marketing strategies and hence enhance its core competencies in business. Extended Marketing Mix Processes Travelodge encourages high portfolio investments in its business. The company tries to attract investments for diversifying its brand offerings and providing superior quality of services to its customers. The hotel constantly tries to improve the interior designing of its hotel rooms. The hotel branches of the company are located in the popular holiday spots and busy city locations of the U.K. The company owns several hotels through co-partnership contracts with popular pubs, retailing firms and supermarkets of the country. In 2013, the Travelodge has decided to open up its business branches in Madrid and Barcelona. The restaurant brand of the hotel, Bar Cafe, sells high quality food and beverages to its visitors. Beef burger and fish & chips are the most popular food items sold by the company. Travelodge utilizes modern cooking equipments and becomes highly innovative to launch food products in the market (Kuratko, 2013). The company can introduce a new organic food and beverage menu in its restaurants. Research studies show that the proportion of organic food lovers is significantly increasing in the market of market (Jeffes, 2008). The newly launched organic food range of Travelodge will be preferred by the health conscious consumers in the market. People Travelodge recruits more than 6000 workers from the U.K., Spain and Ireland. The existing workforce of the organization is highly trained and skilful at their work. The company could not achieve significant productivity gains in business without the hard work of its efficient human capital. Travelodge shares specialized partnership with local employment associations of the U.K. and proclaims to lower the youth employment level of the country. It has also launched special apprenticeship programmes for college students of the U.K. It also offers specialized e-learning facilities to its newly recruited employs. In order to make its staff more productive and attentive at work, Travelodge provides adequate promotional facilities to its employees. However in the long run, apart from professional growth scopes, Travelodge should provide special incentive, awards and rewards to its sincere employees. Such things will help to enhance their motivation level at work (Jeffes, 2008). Motivation will help to bridge the gap between their ability to work and willingness to work. Moreover the organization can also recruit highly skilled workers from well known hospitality institutes of Europe (Jeffes, 2008). The organization should recruited diversified workers for ensuring greater yield at workplace. Physical Evidence Travelodge shares two images in the market, intrinsic and extrinsic image (Jeffes, 2008). The extrinsic image of the organization is its brand value in the market. Travelodge is known as a popular budget hotel brand in the U.K. The company offers good quality products and services at reasonable prices in the market. The economic offerings of Travelodge have become popular in the U.K. after the recession of 2008. Figure 1: Business Logo (Source: Travelodge, 2014) The above picture shows the standardized business logo of the company. The hotel tries to improve its intrinsic physical image by maintaining well decorated ambiance across all its business branches (Wood, 2012). This is because; the buying intensions of the consumers are highly dependent on the internal ambiance of the hotel. In the long run, Travelodge can augment its brand value by promoting its organizational offerings in the market. These promotional activities can be conducted through the modern communication means such as internet (Kotler and Keller, 2006). Furthermore, interesting catchphrases can help to improve the market position of Travelodge in the near future. Service Failure Risk Consumers have often reported that the rooms of the hotel lack internal heating facility. It is also reported that the food served by some branches of the hotel are not fresh and healthy. Research report states that the biggest problem faced by Travelodge is regarding its wireless internet connection facility. Some visitors claim that the hotel has no internet connection networks and hence does not facilitate adequate means of communication. Moreover some potential buyers claim that the services provided by Travelodge’s employees are not adequately efficient and prompt. Travelodge is facing high debt burdens in business. In 2006, a debt worth £1.1bn of the organization was fuelled by the famous private equity based organization of Gulf state, Dubai International Capital (DIC) (Wood, 2012). Most of its financial problems are seized by Goldman Sachs, Avenue Capital and Golden Tree Asset Management (Wood, 2012). However these lenders have strictly recommended Travelodge to undertake specialized cost cutting measures in business. The hotel is instructed to shut down its 150 of its worst performing business branches (Wood, 2012). Research reports claimed that the organization would cut more than 2000 jobs previously created by it, for ensuring this initiative. This news has adversely affected the brand value of Travelodge in the market. Even so, it has made its apprenticeship programmes less effective in the market. Thousands of jobseekers hoped to experience employability with the help of these schemes. Furthermore, the company is planning to shut down some of its hotel branches because the landlords of those buildings are not lowering the rents of their offered spaces (Misopoulos, et al., 2014). Under such circumstances, it is likely that the job attrition rate faced by the company will significantly increase in the long run. This is because; the satisfaction level of the existing workers of Travelodge will decline under such volatile business conditions. Such problems are adversely influence the service quality and productivity levels of the workers of the company. The new investment promises of Travelodge are becoming less effective due to such financial risks within its business. Apart from financial risks, Travelodge is also facing increased threats of market rivalry. Other budget hotels of the U.K. such as IBIS, Village Hotel and Premier Inn are taking over the market shares of Travelodge at present (Wood, 2012). Travelodge needs to enhance the quality of its service and product offerings, for sustaining its business position in the long run. Thus financial and competition risks, coupled with inferior quality of services are lowering the brand value of Travelodge in the market. Customer Satisfaction Management Issues After the emergence of the global financial crisis in 2008, the aggregate employability and per person disposable income thresholds of the European countries have considerably declined (Wood, 2012). The consumers of these economies have become more rational after the crisis. They prefer to create demand for less expensive products or services in the market. The consumers of the U.K. do not compromise with the quality of products or services offered to them at lower prices. Travelodge has achieved significant growth and popularity because it provides affordable hospitality services to the consumers. However some consumers are not satisfied with the service and product quality offered by the company. Many visitors criticize about the quality of dinning and lodging services offered by the hotel (Wood, 2012). The consumers are also not satisfied with the poor internet communication facilities provided by the authorities of Travelodge. Such factors have lowered the satisfaction and utility level of the consumers of Travelodge. Such factors indicate the issues faced by the customer satisfaction management system of Travelodge. Service Recovery Strategies Scarce resource allocation efficiency and business optimality cannot be experienced by Travelodge without maximization the utility levels of its consumers. Due to some intrinsic commercial issues, Travelodge is losing its business competency in the market. The company has adopted few recovery strategies for resolving the service related problems faced by its business. These strategies refer to the actions undertaken by a service contributor for rectifying the issues of service offerings. These strategies of applied by the company are not equivalent to its customer complaint management initiatives. Travelodge has decided to improve the quality of its services through gap analysis technique. According to this technique, the marketing officials of the company are first comparing the expected and actual standards of each service type (Senior and Morphew, 1990). The rectification measures for each service are determined after evaluating its performance gap. The company has created a participatory working ambiance in its workplace at present. By encouraging a participatory work culture, Travelodge considers the innovative business ideas of its senior officials. It has also introduced a specialized demand forecasting business segment that intends to quantify the future unexpected rises in demand for its products and services in the market. The skill set of the existing service officials of the organization are improved by conducting specialized training sessions in regular intervals. Moreover the workforce management officials of the company are conducting knowledge sharing sessions for its employees, through which they can enhance the quality of their service offerings (Senior and Morphew, 1990). The overall service culture of Travelodge is improved with the specialized entrepreneurial skills of its senior service providing officials. These officials are transformational leaders and helps in improving the quality the motivational level of the junior employees of Travelodge. Further Changes The service management system of Travelodge is undertaking strategic initiatives for rectifying the service relating issues in its business. However there are some productive ways through which the company should enhance the quality of its services. The company should provide greater importance on its service quality but not quantity (Dewett, Whittier and Williams, 2007). Travelodge has planned extraordinary growth strategies for its business. Some research reports state that the progressing strategies of the organization cannot be sustained by its existing infrastructure and financial resources (Thomas, Shaw and Page, 2011). The company is lowering its existing manpower subjected to extensive financial crisis. However reduction in the strength of manpower does not necessarily ensure service quality degradation. Travelodge should keep highly specialized and knowledgeable workers within its business. The productivity of a smaller strength of workforce might often be higher than the same for a larger proportion of less efficient workforce (Senior and Morphew, 1990). The hotel authorities should maintain an individualistic organizational culture. Through which it should provide greater empowerment to its sincere workers. The company should promptly respond to the external market uncertainties and challenges. Travelodge should maintain a strong social networking site for its business. Through internet media, the company can communicate with a wider strength of potential customers. The company can trade its products and services cost effectively through internet media. These additional initiatives will help to resolve the service and business issues of Travelodge more effectively in the long run. Competitive Strategy Analysis Selected Pricing Strategy Travelodge is a well known budget hotel of the hospitality industry of the U.K. The average room rate of the hotel is £19 to £29 per day (Senior and Morphew, 1990). Thus the prices of the products and services offered by Travelodge are sold on the basis of economic pricing strategy. This is also known as the cost plus pricing strategy of an organization. Popular budget retailing firms such as WalMart implement similar pricing strategies in business (Dewett, Whittier and Williams, 2007). Under this regime, the brand value of a company is based on the pricing strategy. While using economic pricing strategy, companies like Travelodge make low investments for marketing activities. By selling products and services at economic prices, Travelodge aims to capture the market demand created by the price sensitive consumers. After the recession of 2008, the discretionary spending capabilities of the consumers of European countries have declined . By selling produce according to the economic pricing strategy, Travelodge captures a large share of market demand and maximizes its revenue in business. Travelodge claimed to experience an annual growth of 30% in terms of revenue, from 2006 to 2007. Double digit growth rate in sales could be experienced by the company with the essence of its economic pricing strategy (Dewett, Whittier and Williams, 2007). Low price is the primary competitive strategy adopted by the organization. The brand name of the company is popular in the market because of its economic pricing strategy. Positioning Strategy The market positioning strategy of Travelodge can be elaborated with the help of a perpetual mapping system. Figure 2: Positioning Map High Price Low Quality High Quality Low Price (Source: Author’s Creation) As shown in the above figure, Travelodge should claim to offer high quality products and services in the market at relatively lower prices. Most Appropriate Strategy The importance of pricing strategy in business is dependent on the type of market structure. The characteristic features of each type of market structure are different from that of the other. The specialized components of a market structure influence the output level and price schema of the organizations conducting business within it. A company can utilize different pricing strategies for trading its products in the market (Kapferer, 2012). However only the best or optimal pricing strategy helps in successfully increase the long run profit of an organization. Even so, the optimal pricing strategies of the companies should be changed according to the changes of the external business environment (Brotherton, 2004). Economic pricing strategy was the optimal strategy for Travelodge, during the recession of 2008. In order to sustain its competitive position in the market, Travelodge must bring about certain changes in its pricing policies. The above analysis has proved that the company is facing problems relating to service quality and features. Consumers often familiarize the quality of comfort products and services in terms of its prices in the market (Bunn and Guthrie, 2010). Some buyers perceive that the products traded at relatively lower prices in the market are not of superior quality. Such situations arise from extensive Veblen effect in the market (Kotler, 2008). Travelodge should establish competitive and premium pricing strategy in business. The company should offer its products and services at low prices but the prices should be competitive in nature (Kotler and Keller, 2006). Over time, the number of budget hotels has significantly increased in the U.K. hospitality industry. The switching costs of the consumers in the market are declining because of increasing number of service providers. In order to sustain its business position within such high threats of market rivalry, Travelodge must implement the competitive pricing strategy. However the organization should offer a premier range of products and hospitality services in the market. These products and services should be traded by the organization at expensive or premium prices (Hill and Jones, 2009). Through this, Travelodge will be able to capture the market demand created by the high income earners of the U.K. Furthermore, the per capita income level and unrestricted purchasing power of the consumers of the U.K. have increased at present, with the help of the austerity measures of the monetary and fiscal authorities . Thus, by selling its most luxuries services at premium prices, Travelodge can enhance its aggregate market share and enhance its brand value in the long run. Reference List Brotherton, B., 2004. Critical success factors in UK budget hotel operations. International Journal of Operations & Production Management, 24(9), pp. 944-969. Bunn, A. and Guthrie, R., 2010. In Vino Veritas: An overview of the legal issues relating to the use of alcohol in the workplace. Journal of Contemporary Issues in Business and Government, 16(2), pp. 1-29. Dewett, T., Whittier, N. C. and Williams, S. D., 2007. Internal Diffusion: The Conceptualizing Innovation Implementation. Competitiveness Review, 17(1), pp.8 – 25. Hill, C. and Jones, G., 2009. Strategic Management Theory: An Integrated Approach. Connecticut: Cengage Learning. Jeffes, C., 2008. Strategic management. London: Sage. Kapferer, J. N., 2012. The new strategic brand management: advanced insights and strategic thinking. Delhi: Kogan Page Publishers. Kitchen, P., 1999. Marketing communications: Principles and practice. London: International Thomson Business Press. Kotler, P. and Keller, K. L., 2006. Marketing management. New Jersey: Prentice Hall. Kotler, P., 2008. Principles of marketing. New Jersey: Prentice Hall. Kuratko, D., 2013. Entrepreneurship: Theory, process, and practice. Connecticut: Cengage Learning. Misopoulos, F., Mitic, M., Kapoulas, A. and Karapiperis, C., 2014. Uncovering customer service experiences with Twitter: the case of airline industry. Management Decision, 52(4), pp. 1-4. Senior, M. and Morphew, R., 1990. Competitive strategies in the budget hotel sector. International Journal of Contemporary Hospitality Management, 2(3), pp. 1-10. Thomas, R., Shaw, G. and Page, S. J., 2011. Understanding small firms in tourism: A perspective on research trends and challenges. Tourism Management, 32(5), pp. 963-976. Travelodge, 2014. Company information. [online] Available at: [Accessed 22 August 2014]. Wood, Z., 2012. Travelodge strikes rescue deal with landlords and sheds 49 hotels. The guardian, 17 Friday. Read More