The Hotel market

A Sector ReviewRobert Berrisford

Tom CherrySally WetherallAilsa Gentles

UK hotel market– past five years– current standing

Hotel market In 1990’sFuture of hotel market?

Relevant Analytical tools

• Boston Matrix• Porters 5 Forces• PEST• SWOT• Stakeholder analysis• Directional Policy Matrix

UK Hotel market

UK hotel Industry 1996-2000

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Market Overview

60 Public and PrivateExpand through acquisitionsGrowing International brandsFranchised brands and budget hotelsMajor investment by big chains

UK Hotel market

UK hotel Market 2000 Granada Group plc

Whitbread plc

Hilton Group

Bass plc

Thistle Hotels plc

Queens Moat HousesLtd

other

Share of market

Granada (9%)• Forte, UK’s largest Hotel chain• Posthouse, Travelodge

Whitbread Hotel company (6%)• Marriott uk• Travel Inn

Six Continents (5%)• Holiday Inn• Intercontinental

Boston Matrix

HIGHGranada Group plc9% share, 3.9%

growth

Whitbread plc6.6% share,-0.7%

growth

LOWThistle Hotels plc4.5% share, 0.1%

growth

Hilton Group6.0% share,-8.1%

growth

MARKET SHARE

Porters 5 Forces

Competitive rivalry:4 main playersGranada GroupWhitbread plcHilton Group

Thistle Hotels

Potential entrants.Expensive to compete against the main players.Long time needed to establish a respectable name and build up customer loyalty

SuppliersMany suppliers for hotels so quality and price are key factors for hotels to consider when purchasing.

Supplier power is low in the hotel industry as the hotels are able to pick and choose from a large number of suppliers

BuyersLarge amount of buyers so price and quality has to be competitive to be attractive

SubstitutesMany hotels so there can be a lot of product-for-product substitution.Doing without also a form of substitution. Invest in video conferencing saving on air fares and time

Changes

Increased demand for Budget hotels• Increased small hotels

Middle sized (51-199 rooms) Maintained

Large increase in over 200 rooms• Overseas• Conference

Whitbread PLC

Whitbread plc profit 1996-2000

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Whitbread plc

Y2000 Turnover £3.0 Billion+ 0.3% on 1999

profit £256 Million- 15%

Bought Swallow £578 Million

Granada

Granada Group Profits 1996-2000

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Granada

1999 turnover £4.3 Billion• +6% on 1998

Profit £881 million• +14% on 1998

Largest branded chain Under Forte• Le Meridien, Posthouse, travelodge and Heritage.

Interests In UK TV among othersHotels + Restaurants 2/3 of revenue

PEST Analysis for hotels

Political/Legal• Monopolies Employment law

Economic Factors• Life cycles Recession Disposable

income

Sociocultural Factors• Lifestyle changes Population demographics

Attitudes

Technological• New developments Rates of obsolescence

Stakeholder analysis

Infrequent CustomersCasual/seasonal staff

Career staffSuppliersContractorsRegular Customers

Government Shareholders (PLC)Board of DirectorsBusiness Customers (airlines)

Directional policy matrix

Strong Average Weak

Strengths

The current UK market size is worth £10.3 billion.

Huge growth in large hotels doubling in Value between 1996 and 2000 (now worth £289.2 million)

Small hotels with less than 50 rooms form 92% of the market in terms of value.

Weaknesses

Future market uncertain after the events of September the 11th.

Business restricting travel expenses to cut costs

Technology advances in video conferencing

Opportunities

Population uncertainty about air travel encourages more UK holiday makers to holiday internally.

Increasing demand for budget style hotels.

Increasing demand for short break offers.

Threats

Numbers of foreign visitors have fallen dramatically causing severe financial worries particularly for London business orientated hotels.

Uncertain futureGlobal economic slowdown will hit

hospitality hardest.Business travelers all but disappeared.

Forecast

Forecast to grow by 16% to £12 Billion by 2005

Economic slowdown• little conferencing• more short breaks

Reduced International Travel• affect large hotels

1996-2000 V 2000-2004

UK hotel Industry 1996-2000 V 2000-2004

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2000-2004

Competitive Strategies In 90’s

Frequent Flier ProgramsCost containment, price discounting,

niche marketingrevenue maximizationdatabases for customer tracking

Future of UK Hotel Industry

Economic slowdown• large hotels• conferencing

Decreased air travel• Large hotels

Foot and Mouth• Small rural hotels

Really That Peachy?

Hotel forecast 2000-2013

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Future of UK Hotel Industry

End Of hotel Industry?Consolidate for next three yearsSpecialized conferencingNot a good time to enter market