Current and Future Trends in UK Hospitality Industry - Coursework Example

Current and Future Trends in UK Hospitality Industry List of Contents Introduction ‎ Sectors of the Hospitality Industry ‎2014 Quarterly Forecast for the Hotel Industry:‎ Effect of Economic Recession on Hotel Industry: Future Trends and Forecasts Main Players in the Hotel Industry‎ SWOT Analysis for the Hotel Industry PEST analysis:‎ Porters Five Forces Hospitality Industry – Linked with Tourism, Travel and Leisure Conclusion List of Figures Figure 1: Sectors of UK Hospitality Industry Figure 2: Fulltime and Part time Employees in UK hospitality sectors Figure 3: Workforce of UK hospitality Industry ‎ Figure 4: Labour Turnover Rate in UK Hospitality Industry Figure 5: Drivers and Growth Barriers to the UK Hospitality Industry Figure 6: Major Operators of UK Hospitality Industry ‎ Figure 7: SWOT Analysis of UK hospitality Industry Figure 8: Porter’s Five Force Figure 9: Hospitality and Tourism Interlinked Hotel Industry in the United Kingdom – Introduction The hospitality industry has been regarded as a key element and driving force behind the economic and social growth of the countries. It supports the sustainable growth of the countries across the globe. The hospitality industry in UK is the fifth largest industry and encompasses of wide range of services and organizations. It employs over 7% of the working population of United Kingdom engaging them in different 80 types of services in the sector. The hospitality industry plays a crucial role in the economic and social development across UK. In this report about the Hospitality and Hotel Industry of the United Kingdom we will discuss the position of the hotel industry today, and how it has emerged from a depression. We will also discuss the ongoing trends, economic factors and other external factors that will affect the hotel industry. Moreover, the report establishes link between hospitality sector and other sectors of the UK economy like travel, tourism and leisure. It has been unveiled that the hotel owners in the United Kingdom are coming out of an approximately three year long economic depression, their revenue had declined significantly. The numbers of occupancies and the room rates have now increased according to the PwC. The four star brand hotels have increased as cutting down in budgets have forced the traveller who is conscious about its travelling cost live in low cost hotels, this has increased competition in the United Kingdom hotel industry due to an increase in the supply of hotels. According to PwC the number of occupancies in the region is estimated to rise to 71 percent, this level was last seen in 2007 and 2008. The rates will be best since 2009; the average daily rates this year might be up to £60. The main standard for the hotel industry regarding the revenue per available room will increase by 1.8 per cent next year to £43.44, this is not as good when compared to inflation however it shows some sign on stability in the hotel industry. There are 12,600 hotels in the United Kingdom with 633,000 rooms total; further 20,000 rooms are expected to open in about 200 hotels in 2013 and 2014. In the market for four star hotels there are many developments going on for example Starwood Hotels Aloft which is opening in Liverpool. (Blitz, 2013) Sectors of the Hospitality Industry The hospitality industry does not merely comprises of hotels and resturants but there are varies range of services and organizations types included in this industry. There are mainly 12 different sectors of this industry. Figure 1: Sectors of UK Hospitality Industry All of these sector offer wide range of employment opportunities and considerable proportion of the UK workforce is engaged in providing different services in these sectors. These sector not only provide full time employment but lot of people are employed as part time workers in these sectors of the UK hospitality industry. The breakdown of full time and part time workers employees in different sectors of the hospitality industry is as follow Figure 2: Fulltime and Part time Employees in UK hospitality sectors (Source: People 1st Analysis of Labour Force Survey 2011, Office of National Statistics) The hospitality industry is of immense importance to the country, it is a necessary part of every growing economy. Since it employs a major considerable proportion of the workforce of the country, the economic contribution of the sector is also significant and according to estimated, the hospitality sector has 2.5% share in the UK total income whereas this share is high in many of the part of UK (The Pearson School, 2014). Over the last ten years, there has been significant increase in the contribution of the hospitality sector to the UK economic growth. The contribution of the sector was £18,059m in 1998 that became £30,049m in 2007 indicating growth of 62% in ten years (People 1st Sector Summary, 2011). The success of the tourism strategy depends on its quality of hospitality. The main factors that outline the hospitality and hotel industry are the economy, laws, social changes, and changes in technology. There is now a higher demand for customer service and high quality products. The hospitality industry bears the problems of shortages in skills, for example shortage of chefs and cooks, waiters, staff for running the bar. The hospitality industry sectors offer variety of jobs to the people across UK that have been explained in the following chart Figure 3: Workforce of UK hospitality Industry (Source: State of the Nation Report 2013) There is also lack of skills in the areas of communication, customer care, food preparation and cooking. There is a difficulty in engaging and keeping a hold of the staff and one needs to make sure they are suitable for the job. An increase in the supply of qualified workers, improving the skills of already employed workers, and encourage the staff by giving them rewards for their hard work, all of these strategies will help in improving the quality of the hotel and hospitality industry. According to the Hospitality Training Foundation stated that almost 1.5 million people are employed in the hospitality sector in the United Kingdom in 2001. The result of these gaps in skills frequently leads to businesses not achieving their goals. Other issues that cause these problems are lack of recruitment, retention and the negative image of the industry (Council, 2005) The main reason for the shortage of skill is due to the fact that not enough skilled people in the market, with appropriate knowledge and qualifications. The high number of foreigners working in the industry is one of the main reasons for the lack of communication. Small and medium sized businesses in the hospitality sector that have still not invested in the IT system are losing the edge, and staying behind in the competition. Due to the lack of training culture in the sector, not many young people are attracted enough to stay in this industry for a long period of time. If they saw the option of developing their skills and progressing in their careers they would be more motivated to work in this sector. Another problem is the low wages that does not attract many employees. Pay levels are not steady in the hospitality sector (Council, 2005). The following tables illustrates the labour turn over in the different sectors of the UK hospitality industry. Figure 4: Labout Turnover Rate in UK Hospitality Industry (Source: State of the Nation Report 2013) 2014 Quarterly Forecast for the Hotel Industry In the list of United Kingdom’s hotels there are many new entrants ready to enter the hotel industry. Approximately 3,920 new rooms will be added in the country, 45 percent of these rooms will be of 4 star hotels, 37 percent will consist of budget, 11 percent from these will be 5 star hotels, 5 percent of these rooms will be apartments and 2 percent are going to be 3 star hotels. After London, Edinburgh will have the highest number of new rooms, after Edinburgh will be Liverpool and Glasgow. Forecast regarding the GDP expect a 2.8 percent increase in this year and 2.4 percent in the year 2015, due to this unemployment may decrease, from 1.1 million in 2014 to 1 million in 2015. The chain hotels who are very concerned about their style and are high tech mostly aim at the clientele, who is experienced, technologically advanced and people who are conscious about their style. The new hotel apartments in London are very luxurious and are aimed at taking over the share of the four and three star hotels. (Hood, 2014) Effect of Economic Recession on Hotel Industry Economic recession entails many rigorous challenges on any kind of business. Due to a drop in the occupancy rate and number of tourists the United Kingdom hotel industry has faced unpleasant circumstances. Demand for the hotel industry is drawn from businesses and tourists whose spending ability depends on the economic situation of the country. How much profits a hotel will make highly depends on the efficient business techniques. Fixed costs such as wages of the employees, utility bills, provisions of various facilities etc. are very high in the hotel industry. Large hotels enjoy the benefit of the economies of scale, this will help them to increase their capital which will further promote the hotels name in the market. Small hotels can provide customers with specific services and facilities which will help them differentiate themselves from the other hotels in the market, thus it will increase their competitive position in the market. During the period of recession hotels are required to apply strong management policies. (Dozier, 2010) Due to recession in the economy consumers will now have less disposable income to spend, the accommodation charges will have an effect on the customer’s behaviour, and also the spending ability of the tourists. This will also have an effect on the hotels revenue. The hotels are needed to consider the consumer’s requirements as the consumers are focused on getting a comfortable place to stay. Some hotels started cutting down their costs by using a different type of bed sheet. (Dozier, 2010) During the recession there will be a decrease in the global business background and high exchange rate fluctuations; this will lead to a fall in the number of customers. This will further reduce profit margins that are earned on the basis of the tourism industry. Banks will also not be able to give credit to the hotels for managerial purposes which will force them to cut down their costs. Recession in the United Kingdom reduced the number of international events that took place in the country and the pound was devalued. From 2007 to 2008 the occupancy rate reduced by 2.5 percent to 73.9 percent. However the hotel industry managed to carry on during the tough period of economic recession. It used efficient business and managerial policies to face the challenges that were imposed upon them. (Dozier, 2010) Future Trends and Forecasts Keeping in view the growth and economic contribution of the hospitality sector over the last 10 years, it could be forecasted that the industry is going to flourish and its contribution to the total economic growth will also significantly increase. The industry has many drives towards sustainable growth but at the same time it has been facing some very important challenges that act as growth barriers to the industry. These are illustrated below Figure 5: Drivers and Growth Barriers to the UK Hospitality Industry (Source: State of the Nation Report 2013) Main Players in the Hotel Industry: The top six UK hotel groups include "Whitbread, IHG, Travelodge, Accor, Hilton and Marriott -- added more than 5,000 rooms to their portfolios in 2013. These hotels represent growth of almost 3% of the total hospitality sector. The major players of the UK hospitality sectors are listed below Figure 6: Major Operators of UK Hospitality Industry (Source: Alan, David and Gareth, 2014, p54) Some of the popular operators of UK hospitality industry and their growth is explained below Radisson Blu Edwardian Hotels UK: Radisson Blu Edwardian Hotels are a chain of luxurious hotels in the United Kingdom. They provide luxurious services, each room is designed with individuality and latest technology. It consists of stylish restaurants and bars, and they make sure their customers are satisfied with their stay. They have received Two Star Sustainability Champion position for the second year in 2013. This award praised Radisson Blu Edwardian for its promise to local and seasonal requirements as they keep changing on a daily basis. It has staff policies of which examples are given. Radisson Blu Edwardian offers a vast range of healthy eating options for its guests. Regarding the environmental concern, the SRA has noted the hotels vow towards sinking its waste, energy and consumption of water. (Edwardian Hotels) Premier Inn: It is a British budget hotel chain, and the largest hotel brand in the United Kingdom, with more than 650 hotels which have over 50,000 rooms. Premier Inn runs in many different locations such as city centres and airports. (BBC News) Best Western: Best Western is said to be the major hotel chain the United Kingdom which is owned independently. It has over 280 hotels, which range from 2 star to 3 star hotels. It opened in the United Kingdom in 1967. SWOT Analysis for the Hotel Industry In tourism, Hotel industry is the most important factor. It is the backbone of the tourism sector, if affects the existence of tourists in any areas. If there are no hotels tourists won’t be able to stay in that place. In the SWOT analysis strength, weakness, opportunity and threats are identifies. SWOT analysis is very important in is assessing whether the hotel industry is doing well or not. The SWOT analysis identifies the weaknesses of the business and the hotels can improve on these problems and make sure the same mistakes do not happen again. Every place has different strengths and weaknesses. (startupbizhub,2014) The following table will tell us about different examples regarding the steps involved in the SWOT analysis. Strength: The high rate of employment turnover and the increasing contribution of hospitality industry to the overall economic growth is the major strength of the UK hospitality sector. It affirms that the industry is progressing in the right direction and more and more people are getting involved in different sectors and services associated with the hospitality industry. An example of strength in the SWOT analysis is the size of the ‎hotel. Profit of the hotel can be high if the number of rooms it has ‎are high. Reputation of the hotel can also be considered as a ‎strength, for example if a hotel is five star this rating will tell us that ‎the hotel has an exceptional reputation, this will attract more guests ‎and will allow the hotel to charge higher rates for the rooms and ‎other services. Secondary services like first-class conference rooms ‎will also be a plus point for the hotel as it can increase its profits by ‎having conferences other functions like wedding held in the hotel. ‎Well trained staff is also strength for any hotel, this will make the ‎customers happy and make them want to come back to the same ‎place. ‎ Weakness All the characteristics that make the hotel at risk are considered as weaknesses in the SWOT analysis. This can include qualities like poor corporate customs and low management skills. A hotel with poor management skills will not have an excellent reputation in the market due to which the hotel will start losing customers. Customers will also be displeased with poor customer service and not want to come again. The UK hospitality industry has been facing the issues of unavailability of skilled workforce as per the requirements of the sector. The trained staff is often difficult to find for many of the hotels and other organizations of the sector. Opportunity Opportunities in the SWOT analysis consist of factors like encouraging government policies. The location of the hotel is also an opportunity for the hotel to attract more customers, if it is located in an area like Central London it will attract more customers as it a place full of tourists and is easily accessible. The growth of the industry is supported by arrangement of different international event in UK due to which more people come here and the business of the UK hospitality sector went on increasing. Threats Things that threaten the existence of the hotel will be included in the threats in a SWOT analysis. For example if there is high pressure of competition, if a hotel is located in an area where there are a lot of other competing hotels this will influence the profit margin of the hotel. When there are many hotels, customers have a lot of choices, thus the hotel will not have full occupancy. In short, high competition and easy entry to the market are important threats being faced by the hospitality sector ok UK. Figure 7: SWOT Analysis of UK hospitality Industry PEST analysis PEST analysis is another analysis that is conducted by the hotel management to identify the hotels strengths and weaknesses regarding the location of the hotel. This type of analysis is vital because there a lot of issues regarding the environment that need to be addressed which are outside the owner’s control. It includes the analysis of political, economic, sociological and technical factors. 1st Step: The first step in the PEST analysis is calculating the pressure of the political system. This should assess if the local politicians have an open attitude towards the business owners or imposing strict laws for them. 2nd Step: Economic conditions should also be kept in mind, if the hotel has clients with high disposable income it will bring them high levels of profits. 3rd Step: The sociological aspects also play a big part in the PEST analysis. This can include the changes in population and religious stance. 4th Step: . The last step in the PEST analysis will be to assess the technical capabilities in the region. Entrepreneurs need to make sure that they can achieve all the technical goals the wish to achieve . PESTLE analysis could also be carried out by hotels which include the analysis of legal and environmental factors of the region. (B & Hughes, 2014) Porter’s Five Forces Porter determined 5 forces that operate mutually to establish the nature of competition inside an industry. Figure 8: Porter’s Five Force Porters Five Forces Threat of new entries in the market: if new entrepreneurs enter the industry, competition will increase and the market share will be divided. If there is existence of high barriers to entry new entries in the industry will be low. Bargaining power that the suppliers have: if the businesses suppliers have bargaining powers they will be able to sell their commodities at higher rates. They will also compress the industries profits. Bargaining power that customers have: if the customers are powerful it will enable them to put pressure which will pull the prices down, or increase the quantity in the same price. Small number of customers will allow them to put more pressure on the business. Risk of substitute product: if there are a high number of substitutes available in the hotel industry, the price the hotels can charge will be limited which will thus reduce their profits. Scale of competitive challenge: powerful competition in the industry will push hotels to start price wars and invest in improvement and coming up with new products. Hospitality Industry – Linked with Tourism, Travel and Leisure The hospitality industry has been regarded as an active engine that supports the progression of other industries like travel, tourism and leisure. Tourism to and within UK is strongly linked with the performance of the hospitality sector because without the dynamic performance of hospitality sector it could never be possible for the UK tourism and leisure industry to enjoy thriving growth over the last decade that has eventually resulted in increase of its contribution to the UK economic growth by reaching to the point of £114bn. The hospitality industry feeds off leisure, travel and tourism because when there are more facilities provided by the hospitality sectors people are more likely to sepnd their disposable income by travelling holidays destinations whereas leisure industry also flourishes when people get more involved in different sports events, watching movies in theaters due to the availability of adequate hospitality services at these places. The link between hospitality industry and tourism and leisure is illustrated through the exhibition of the interconnected activities of these sectors. Figure 9: Hospitality and Tourism Interlinked (Source: British Hospitality Association 2011 Report) Conclusion In the United Kingdom the Hotel and Hospitality industry is very important for its GDP. It contributes a big part of the country’s GDP and also supports the growth and expansion of other sectors and industries like travel, tourism and leisure. United Kingdom is a country with many tourism destinations, thus it needs an effective hotel industry. For the past few years the hotel industry has been going through a depression, however now it is emerging out of that depression and is flourishing with a lot tourists in areas like London and Scotland. The rates per night are now once again increasing which will increase the profit margins of the hotel industry. However there are a number of skills that the hotel industry lacks. Hotels need to provide new employees with training regarding the specific skills that are required to run a hotel effectively. Employers need to create more opportunities which should be able to attract young people to make a career in the hotel industry. Economic recession in the United Kingdom had a very significant affect on the hotel industry. Due to the recession the profit margins of the hotel industry had declined. Output of the hotels was changed as the occupancy rates and the average room rates were decreased. To become successful in unfavourable economic position the hotels need to put together an effective business strategy and different objectives so that they can achieve maximum market share and profits can be maximized. References Alan, G., David, E. and Gareth, J. 2014‎. “Health report The UK hotel market 2013-14”. Caterer & Hotelkeeper. Vol. 203 Issue 4823, p54-5 Antony, J., Antony, F. J., & Ghosh, S. 2004. Evaluating service quality in a UK hotel chain: a case study. International Journal of Contemporary Hospitality Management, 16(6), 380-384. Atkinson, H., & Brown, J. B. 2001. Rethinking performance measures: assessing progress in UK hotels. International Journal of Contemporary Hospitality Management, 13(3), 128-136.\ B., J., & Hughes, M. 2014. PEST Analysis. WiseGeek. As accessed on May 8, 2014, from http://www.wisegeek.com/how-do-i-conduct-a-pest-analysis-of-a-hotel.htm Baum, T. 1990. Competencies for hotel management: industry expectations of education. International Journal of Contemporary Hospitality Management, 2(4). Blitz, R. 2013. UK hotels emerge from depression - FT.com. Financial Times. As accessed on May 8, 2014, from http://www.ft.com/intl/cms/s/0/a3e9b6f0-1968-11e3-83b9-00144feab7 Bohdanowicz, P., & Martinac, I. 2003. November). Attitudes towards sustainability in chain hotels-results of a european survey. In International Conference on Smart and Sustainable Built Environment. Brisbane, Austrália, 2003a. p. http://www.greenthehotels.com/eng/BohdanowiczMartinacSASBE2003.pdf Brotherton, B., & Shaw, J. 1996. Towards an identification and classification of critical success factors in UK hotels plc. International Journal of Hospitality Management, 15(2), 113-135. Callan, R. J. 1998. The critical incident technique in hospitality research: An illustration from the UK lodge sector. Tourism Management, 19(1), 93-98.from http://www.sciencedirect.com/science/article/pii/S0261517797000782 Carruthers, H. 2009. Using PEST analysis to improve business performance. In Practice (0263841X), 31(1). Collier, P., & Gregory, A. 1995. Strategic management accounting: a UK hotel sector case study. International Journal of Contemporary Hospitality Management, 7(1), 16-21. Council, L. 2005. Hospitality. In Workforce Development Strategy. London East: PDF. As accessed on May 7, 2014, from http://dera.ioe.ac.uk/11827/1/Hospitality_strategy.pdf Dale, C. 2000. The UK tour-operating industry: a competitive analysis. Journal of Vacation Marketing, 6(4), 357-367. Ejim, E., & Hindman, K. 2014. SWOT Analysis of Hotel. WiseGeek. As accessed on May 8, 2014, from http://www.wisegeek.com/how-do-i-conduct-a-swot-analysis-of-a-hotel.htm Friel, M. 1999. Marketing practice in small tourism and hospitality firms. International Journal of Tourism Research, 1(2), 97-109. Go, F. M., & Pine, R. 1995. Globalization strategy in the hotel industry. Routledge. Grundy, T. 2006. Rethinking and reinventing Michael Porters five forces model. Strategic Change, 15(5), 213-229. Harrington, D., & Akehurst, G. 1996. Service quality and business performance in the UK hotel industry. International Journal of Hospitality Management, 15(3), 283-298.from http://www.sciencedirect.com/science/article/pii/S0278431996000217 Hoque, K. 1999. Human resource management and performance in the UK hotel industry. British Journal of Industrial Relations, 37(3), 419-443. Hoque, K. 1999. New approaches to HRM in the UK hotel industry. Human Resource Management Journal, 9(2), 64-76.from http://onlinelibrary.wiley.com/doi/10.1111/j.1748-8583.1999.tb00197.x/full Hoque, K. 1999. New approaches to HRM in the UK hotel industry. Human Resource Management Journal, 9(2), 64-76. from http://onlinelibrary.wiley.com/doi/10.1111/j.1748-8583.1999.tb00197.x/full Jeffrey, D. 1983. Trends and fluctuations in the demand for hotel accommodation: a time series analysis of hotel occupancy rates in England by region and hotel category, 1976-82. Trends and fluctuations in the demand for hotel accommodation: a time series analysis of hotel occupancy rates in England by region and hotel category, 1976-82. Lewis, B. R., & McCann, P. 2004. Service failure and recovery: evidence from the hotel industry. International Journal of Contemporary Hospitality Management, 16(1), 6-17. Martin, L. M. 2004. E-innovation: internet impacts on small UK hospitality firms. International Journal of Contemporary Hospitality Management, 16(2), 82-90. McGunnigle, P. J., & Jameson, S. M. 2000. HRM in UK hotels: a focus on commitment. Employee Relations, 22(4), 403-422. Miklinska, M. 2013. November 21). The 10 best 5 star hotels in London - A Luxury Travel Blog. A Luxury Travel Blog RSS. As accessed on May 8, 2014, from http://www.aluxurytravelblog.com/2013/11/21/the-10-best-5-star-hotels-in-london/ Phillips, P. A. 1997. Trouble in the UK hotel sector?. International Journal of Contemporary Hospitality Management, 9(4), 149-154. Porter, M. E. 2008. The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.from http://iegites.s3.amazonaws.com/sites/4e8476903723a8512b000181/contents/content_instance/4f15bab63723a81f24000182/files/HBR_on_Strategy.pdf#page=25 Riley, J. 2012. Porters Five Forces Model: analysing industry structure. Porters Five Forces Model: analysing industry structure. As accessed on May 8, 2014, from http://www.tutor2u.net/business/strategy/porter_five_forces.htm Rutherford, D. G., & OFallon, M. J. 2006. Hotel management and operations. John Wiley &Sons.fromhttp://books.google.com.pk/books?hl=en&lr=&id=qrIDjEIXBfoC&oi=fnd&pg=PR11&dq=problems+in+hotel+management&ots=1yS_tppfkz&sig=ZfgAy4DMKRJsRvu3z4DVyYuLemQ#v=onepage&q=problems%20in%20hotel%20management&f=false Sargeant, A., & Mohamad, M. 1999. Business performance in the UK hotel sector-does it pay to be market oriented?. Service Industries Journal, 19(3), 42-59.from http://www.tandfonline.com/doi/abs/10.1080/02642069900000029 State of the Nation Report 2013. London: People First. http://www.people1st.co.uk/research/reports/state-of-the-nation-hospitality-and-tourism startupbizhub. 2014. SWOT Analysis of Hotel Industry. SWOT Analysis of Hotel Industry. As accessed on May 8, 2014, from http://www.startupbizhub.com/swot-analysis-of-hotel-industry.htm The Pearson School. 2011. The UK hospitality industry. Retrieved online from https://www.pearsonschoolsandfecolleges.co.uk/Secondary/Vocational/HospitalityandCatering/WJECGCSEHospitalityandCatering/Samples/Samplepages/WJECGCSEHospitalitySamplePages.pdf Ward, T. 1997. Hotel market trends in the UK. International Journal of Contemporary Hospitality Management, 9(7), 270-273. Wood, R. C. 1997. Working in hotels and catering. International Thomson Business Press. fromhttp://www.cabdirect.org/abstracts/19971805696.html;jsessionid=F1D0CD34E793A021EB69E81CCB7D3CF8 Yup Chung, K. 2000. Hotel management curriculum reform based on required competencies of hotel employees and career success in the hotel industry. Tourism Management, 21(5), 473-487. Radisson Blu Edwardian, (2014) RadissonBlu-Edwardian.com, http://www.radissonblu-edwardian.com/section/aboutus.responsibility/aboutus.sidemenus/subfour, 9 May 2014 BBC News. 2009. BBC News, http://news.bbc.co.uk/2/hi/business/8102287.stm, 9 May 2014 Read More