Situational and Pestle Analysis of Travelodge Hotel - Case Study Example

The paper "Situational and Pestle Analysis of Travelodge Hotel" is a perfect example of a case study on marketing. The dynamics in structure, management, and external environment are some of the aspects that significantly influence the operations of firms. These are key factors that determine the performance of an organization. The difference in market performance amongst different firms is a direct outcome of the build-up and systems that vary from one company to another. The hotel industry is evidently lucrative, and it has attracted several investors especially in London and Great Britain (Pahl and Richter, 2009: 97). Among other organizations, Travelodge has been a key player in the hotel and restaurant industry in the United Kingdom. The situational factors have either favored or disfavoured its operations and it is essential to critically evaluate them.

Travelodge is a relatively large firm that is extensively entrenched in the hotel industry in the UK and beyond. However, its existence has been challenged by various issues that have hugely threatened its market performance and sustenance. One major challenge that Travelodge has faced, over time, is financial problems that sometimes shrink the profit margins as a result of the high technological costs incurred in a bid to provide highly sophisticated services. Many firms in the industry competitively work to outdo each other and technology has been identified to provide a competitive advantage. For this reason, Travelodge has been actively engaged in innovation thereby raising its operational costs.

The nature of a market in which a company is operating is a huge determinant in the performance of a business organization. In the last one and a half-decade, the UK market has had an increased number of players that have forced many competitors to devise ways of sustaining themselves in the industry. Travelodge understands this, and it has similarly worked round the clock to lure customers to its facilities. Currently, it holds a market share of 25%. The company majorly provides its services to two major segments; family and business clients.

PESTLE Analysis

Political Environment

The influence of politics in a business cannot be overlooked. Laws and regulations that governments create are capable of either promoting or undermining business operations, and Travelodge is no exception. While Travelodge is a private enterprise there is close supervision that the government oversees to ensure the company operates within the legal framework. The UK is a free market, and this situation has increased the number of competitors in the hotel industry (Roy, 2009: 155).

Economic Environment

London as a market is highly crowded, and there exist various players such as Premier Inn among others which actively compete with Travelodge in hospitality. The prices offered for the same services in this market are dissimilar, and this makes the competition extremely high. For example, Travelodge and Premier Inn prices fluctuate constantly in order to outdo each other. Additionally, the rise in VAT to 20% hugely affected the financial situation of Travelodge (Miller, Vandome, and Mcbrewster, 2011: 171).

Social Environment

Travelodge has been favored by several social events such as the 2012 Olympics that saw many foreigners seeking hotel services. Consequently, the geographical location of the hotel is such that it is close to social facilities such as beaches.

Technology and Legal Environment

Travelodge, owing to the high competition it faces has sought to market itself through the internet. It invests a great deal in the latest technology that can enable it to access and attract a large customer base. The legal dimension of Travelodge is taken care of by the legal officers that represent the company, and it strives to abide by the law (Paul, Cadle, and Yeates, 2014: 123).

Michael Porter’s Five Forces

The threat of New Entry

Owing to the nature of the UK market as a ‘free entry’, industry players are much more threatened by the likely entry of many competitors who can lower the sales and eventual profit.

Supply Power

There is low power of suppliers to regulate prices is averagely low since supply is moderately high. Travelodge has low command in price setting (Roy, 2009: 101).

Demand Power

To a considerable extent, price is regulated by the demand on the market. Seasons with low demand record low prices.

Competitive Rivalry

The industry Travelodge is in is extremely competitive and players are actively engaged in outdoing each other.

Threat of Substitution

One remarkable thing with the industry is that there is no threat to substitution probably owing to the unique nature of services offered by the hotel industry.

Conclusion

The success of Travelodge, as seen, is highly regulated by external factors that seem to work to its disfavor. A large proportion of its external environmental factors such as competition put it on the brink, and it should major on technological advancement as seen so as to improve its market share and eventual performance. The industry as analyzed by both models has high competition and only those firms that deploy effective strategies will succeed.