CW1: Competitor Analysis By Ian Adams 21028547
Word count: 2217 11.11.2013
Table of Contents Introduction to the Budget Hotel market ....................................................................... 1 Who are the potential competitors ................................................................................ 1 In-depth look into selected competitors ......................................................................... 2 Threats to market and Client......................................................................................... 2 Emerging competition .................................................................................................. 3 Vulnerable Competitors in the market place .................................................................. 4 Competitors meeting the needs of consumers ................................................................ 4 Conclusions and recommendations ............................................................................... 5 Appendix 1 ......................................................................................................................................... 7 Appendix 2 ......................................................................................................................................... 7 Appendix 3 ......................................................................................................................................... 9 Appendix 4 ....................................................................................................................................... 10 Appendix 5 ....................................................................................................................................... 10 Appendix 6 – Porters Five Forces ....................................................................................................... 11 Appendix 7 – Competitor identification .............................................................................................. 12 Appendix 8 – Cross Comparison of selected competitors..................................................................... 13 Appendix 9 ....................................................................................................................................... 15 Appendix 10 – Strategic groups .......................................................................................................... 15
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Ian Adams - 21028547
Introduction to the Budget Hotel market With the summer 2012 Olympic games the hotel industry has seen a jump in investment and development with a focus on London, however the UK as a whole has had further developments. ‘Around 3,300 new rooms are expected to open in the UK by the end of 2013 and a further 15,000 during 2014’ (AM:PM Hotels 2013) This shows how aggressive the UK hotel industry will be for the next several years to come. Whitbread is the leading budget hotel operator in the UK, thanks to the Premier Inn brand, which has reported strong growth in recent years outperforming competitors. Patrick Dempsey, Managing director at Whitbread hotels and restaurants, said 'Hub will work in tandem with Premier Inn, appealing to more price-sensitive customers seeking quality accommodation in the heart of a city. Travel accommodation grows by 2% in 2012 to reach £13 billion. Appendix 2 (Euromonitor 2013)
Who are the potential competitors The hotel industry is split into a number of levels qualities in service. As seen in Appendix 1 There is 16 main independent or hotel holding groups that own the UK top hotel brands. Appendix 7 This chart shows how the different groups will have hotel brand within different markets. For example Wyndham Worldwide has brands in categories from Economy to high-end luxury and then substitutes like selfcatering cottage holiday market leader with brands including Blakes. This expanding out lets them have greater power in the accommodation sector. Direct competition – With this emerging market there are only a number of hotels that offer the same product and service at this price point within key locations. In-Direct competition – These hotel brands are attracting a different consumer looking for a higher service accommodation, this falls such categories like luxury and Extended stay these fulfil a different need. But still are an option when looking key city locations like London. Substitutes – Are services that are further away from the hotel experience. This might be at hostels, campsites. Where the experience is fulfilling a different need. Appendix 4 Covers UK wise substitutes however most of them will not apply as competition as the ‘Hub’ will be targeting inner city centre locations. The greatest threat to the Hub, will be the big hotel groups.
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In-depth look into selected competitors From Appendix 5 is it seen that Whitbread plc has 11.1% Hilton Hotels Corp had 8.8%, InterContinental Hotels 6.8%, Accor UK LTD 6.0% and Travelodge had 6.0. I have selected these they have the largest parentage of Hotel national brand in 2012. Hilton was not chosen has their portfolio is towards the Luxury to focused service brands while the other groups either cater for the wider spectrum of strategic groups. Appendix 9 Shows steps have been used to show how strategic groups have been categorized. (Hooley 2007) Accor is a good example of a company that had a number of brands within different strategic groups appealing a wider range of consumers. From the very low spending consumer with its Ibis to the luxury hotel brands Sofitel. According to Mintel 2013 Accor has ‘ plans to create a ‘megabrand’ economy hotel range, converting all Etap hotels into Ibis Budget and All Seasons into Ibis Styles hotels.’ Could this show the shift towards the more price conscious consumers. Travelodge being one of Primer inns largest direct competitors for the inner city being the ‘biggest hotel band, 59 hotels 7,633 room in the capital. Travelodge is developing a nasional revamp of 80% of all their rooms by Autumn 2014. GoldenTree Assest Management, Avenue Capital Group and Goldman Sachs that own the company have invested £233 million as a commitment to expand to 14 hotels during the 2013 period. (Mintel 2013) InterContinental Hotels Group also known as IHG and is a global hotel business with nine preferred Brands. With over 4,600 hotels (ihgplc 2013) From Appendix 10 Accor the hotel brands are spread out to cover a larger audience base. This trend found from a number of hotel groups, this could be because of economic pressures hotels are lowing their prices to compete against the lower prices hotels.
Threats to market and Client Following on from the last section, the current hotel groups are large, very powerful within their strategic groups. These groups have their Luxury brands, if they broke into this pod/budget hotel market it may tarnish their brands. For example Hampton by Hilton, have they evaluated/predicted the long term brand equity. Travelodge will be one of the largest competitors as their portfolio is catching up to Premier inn, Travelodge hotels the largest number of rooms in London. These brands on the other hand cant be as flexible as the Pod hotel model, the quick cheap to setup, change and adapt isn’t possible with current economy hotels as they are built for the purpose.
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Main threats to the Hub is price and location, this promotes problems such as even low profit margins because the consumer is looking for even better deals within the economic climate. Some 74% of hotel guests book their hotel online, while just over half (54%) book directly online and 17% book via OTA websites. (Mintel 2013) If price cannot be dropped other elements of the marketing mix will have to win over the consumer like location, added promotions like free breakfast will have to win the consumer over. Location is key, with property prices within city centers increases hotels are looking for the best locations to beat competition,
Emerging competition With a very competitive landscape within the budget hotel industry from UK hotel groups are not the only brands that are braking into the pod hotel market. For example Tune Hotels owned privately by Tony Fernandes Malaysian entrepreneur. Tune Hotels opened its third and fourth hotel in London in the summer of 2012. Tune Hotels differentiates itself from other hotels by charging a very low room rate and allowing guests to add additional services at an extra charge. The chain introduced new hotels in Paddington and King’s Cross which it promoted by offering some of the rooms for only £9.00 per night. This kind of business model undercuts the current market. (Euromonitor 2013) Marriott American Maryland owned has partnered up with well-known IKEA to launch MOXY also a Pod hotel “designed to capture the rapidly emerging millennial traveller.” With design centric qualities with matching price point. However the difference between Tune and Hub to MOXY is that its first will open near an airport rather than in a city centre. YOtel founded by Simon Woodroffe and Gerard Greene with major investor IFA (International Financial Advisors) Hotels & Resorts, this pod hotel has also targeted UK airports after their opening of a inner city New work hotel. Other brands that fit the same criteria CitizenM Qbic, Z Hotels all focusing on either inner city areas or airports fulfilling these needs of the same business commuters, as these are the long-term costumers. These hotels all share some common ground; they are small, clean, comfortable, very affordable, covenant, customisable, offer food and drink, quirky design, technology supported and now community based. They try to stand out within this quite boring market. These companies know that review sites will make or break individual hotels, so making sure these small pod rooms do exactly what they need. As seen from Appendix 4 the substitutes that have expanding over last five years considerably are ‘private accommodation’ this could be because of the 2012 Olympics during that summer period.
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Vulnerable Competitors in the market place
What makes competitors vulnerable will be price as customers are using apps or price comparison sites to find the better deals. Tiffany Phillips, writing for Self-Catering-Breaks News "reported there was a price war going on between UK "mid-range" hotels. The major focus was winning over a recessionimpacted, reduced-in-size group of travellers. Big names involved in the price war included Travelodge, Express by Holiday Inn, and Premier Inn.� (WARC 2011) From this war the consumer expectation is lower prices, brands within the mid-scale may lose identify within this market if it turns into a two tiered industry. AM:PM, HotStats states there are 27,565 bedrooms in the active pipeline, the majority of which are in the budget sector 54%. Development projects on the three star market continue to decline, with only 3% of the active pipeline in this space. Investors appear to favour either four star, full service or budget, limited service hotels. (Hotel online 2013) The brands that may fall to this vulnerability will be Easyhotel During the Olympic games the value sales of luxury and mid-priced hotels grew further in 2012 at the expense of unrated and economy hotels. Luxury hotels had a value share of 29%, while midprice hotels held a value share of 33%. Luxury and mid-price hotels flourished during the Games as most spectators opted for high-end hotels during their stay. (Euromonitor 2013)
Competitors meeting the needs of consumers With (Mintel 2013) reporting that overnight domestic leisure stays are shorter to one- to three-night brakes. With an uncertain economic further and on average hourly rages falling by 5.5% and a summer of Olympics traveling and taking shorter national brakes in England have become more popular. These small brakes away need to be accommodated by hotels, offering more deals, more experienced based packages linked to current events and changing trends. The direct competitors like Premier Inn, Travelodge, Ibis (including Budget and Styles), Holiday Inn Express, Hampton by Hilton, Ramada Encore, Days Inn and Campanile. Possibly also easyHotel and in future Moxy. For the most part they all of these hotels provide a standard hotel service and at a price point that consumers can find value from. Value is what the consumers are looking for and how the competitors are showing this value is questionable, the Hub will have the upper hand being high quality at a much lower price, also the convenience of location and ease of checking in and out. The Hub brand has been made with the community to provide a service that the consumer wants. This will reflect in long term reviews on
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price comparison sites and positive word of month. This is the new way of business, especially when needing to different within a busy market place. Reading through LinkedIn hotel discussions groups it is about covering the basics, like providing WIFI, ensuring that staff is trained to give feedback. However being more active on social media for example to solve issues quicker can be fixed before they become bad reviews.
Conclusions and recommendations Overall Whitbread Company has had a successful number of years across its sectors. With the hotel industry the key opportunities are the rapid expansion in the UK marketing over the coming years. Also could look into other markets by looking to Middle East and India for growth to compete with more of the global competitors. Marriott International open six hotels in Asia Marriott expects to more than double in size in Asia through 2016. (Hotel management 2013) The threats risks of a triple-dip recession in the UK, which could dent demand for leisure travel from UK residents. Any renewed crisis in the eurozone, such as a debt default by Greece, could see a fall in European visitors to the UK. However commented by HVS London director Tim Smith. "We are now confident enough to say that the recession in the UK's hotel sector is effectively now over based on year on year growth to both revenue and profitability. Performance has been strong in the regions, with hotels in Aberdeen, Bath, Belfast and Edinburgh recording double digit RevPAR increases in Q3," Performance in Q3 has been particularly strong, with all but two cities reviewed showing RevPAR (rooms revenue per available room) gains, with an average of 8% increases. This converts to a profit rise of 3% year-on-year. (hotel-online 2013) Also shortly two major international sporting events over the coming years - the 2014 Commonwealth Games in Glasgow and the 2015 Rugby World Cup at various locations around the country. These events are likely to result in large numbers of participants and spectators travelling to the United Kingdom. This could be a good opportunity for a marketing strategy, partners for the event, data collection. (United Kingdom Tourism Report - Q4 2013 Page 7) With the UK being the center of the business world because of the desirable time zone the business travelers will pick up after their recent dip. Partners might be key to success for example Hilton continued its partnership with Barclays in 2012 in which users of Barclay credit cards can gain points and win free night stays at participating Hilton hotels worldwide. This gives extra value to staying with a hotel brand to another.
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Bibliography IGH. (2012) Annual Review and Summary Financial Statement 2012 [online]. IGH. Available from:http://www.ihgplc.com/files/reports/ar2012/docs/IHG_Review_2012.pdf [20 November 2013] Gale Global Industry Overviews (2011) Hotels and Other Lodging Places [online]. London: Gale Global Industry Overviews: 2011. Available from: http://ow.ly/qQn6t [10 November 2013] Mintel (2013) Hotels – UK [online]. London: Mintel. Available from: http://academic.mintel.com/display/638280/?highlight=true [10 November 2013] Euromonitor International (2013) TRAVEL ACCOMMODATION IN THE UNITED KINGDOM [online]. London: Euromonitor International. Available from: http://ow.ly/qQlIc [10 November 2013] AM:PM. (2013) AM:PM Hotels [online]. Available from: http://www.ampmhotels.com/ [11 November 2013]. Hotel Management (2013) Marriott to reach 330 hotels in Asia in next three years [online]. Available from: http://www.hotelmanagement.net/marriott-international/marriott-to-reach-330-hotels-in-asia-in-nextthree-years-25636 [14 November 2013]. Euromonitor (2013) Whitbread Plc in Travel and Tourism. England: Euromonitor BMI (2013) United Kingdom Tourism Report - Q4 2013. England: Business Monitor International Mintel (2013) Hotels – UK [online]. London: Mintel. Available from: http://academic.mintel.com/display/638280/?highlight=true [10 November 2013] Hooley, Graham, J. Piercy, N. and Nicoulaud, B. (2007) Marketing Strategy and Competitive Positioning 4th Ed. United Kingdom: Pearson Education
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Appendix 1 Source: (BMI 2013)
Appendix 2 Whitbread - SWOT Analysis Strengths • •
Largest hotel operator in the UK. Dominant position in budget hotels.
Weaknesses • •
Concentrated on budget end of market, which limits scope to boost revenues. Company is not solely focused on hotel industry, with other interests in restaurants and bars.
Opportunities
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• •
Company has rapid expansion plans in the UK over the coming years. Company also looking to Middle East and India for growth.
Threats • •
Risk of a triple-dip recession in the UK, which could dent demand for leisure travel from UK residents. Any renewed crisis in the eurozone, such as a debt default by Greece, could see a fall in European visitors to the UK.
Company Overview Whitbread is the owner of Premier Inn, the UK's largest hotel brand. Premier Inn owns and operates 640 budget hotels and more than 50,000 rooms across the UK. Internationally, Premier Inn now has four hotels in the Middle East and two in India. Whitbread also owns non-hotel brands, including Costa Coffee, Beefeater and Table Table. It is a FTSE 100 company listed on the London Stock Exchange. Strategy Premier Inn is looking to expand across the UK and aims to have about 65,000 hotel rooms by 2016. This will underline Premier Inn's position as the largest hotel chain in the UK. In November 2012, Premier Inn opened its largest ever property, a 630-room hotel at London Gatwick Airport. Premier Inn aims to open a further nine hotels in London by the end of 2013. Premier has benefited from Travelodge's underinvestment, but Travelodge is fighting back under new ownership. The company will have to be careful of its reputation in the future as it found itself swept into the ongoing horsemeat scandal in England via its Beefeater brand. However, sales have not been affected. In July 2013, the company unveiled plans to open 40 'compact' hotels targeting customers looking for cheaper hotels in the budget spectrum. The first 'Hub by Premier Inn' establishment will open in London in the summer of 2014. Patrick Dempsey, managing director at Whitbread hotels and restaurants, said, 'Hub will work in tandem with Premier Inn, appealing to more price-sensitive customers seeking quality accommodation in the heart of a city. It will enable us to broaden our appeal and further strengthen our competitive edge.' The group, which has 650 hotels [it was 640 in the first paragraph of the overview] with 52,000 rooms in the UK, has devised a 'functional, but cool' concept that would sell rooms at a discount of about £15 or £20 to Premier Inn. Meanwhile, in August 2013, the company is building a 60-room Premier Inn on the site of Exeter town hall, and paid GBP1.24mn for the land. And a month earlier, the company's flagship Belfast hotel opened again after a GBP360,000 refit. This refit has been flagged up by the company as a sign of things to come, and they have a number of other refurbishments planned in the immediate future. (Euromonitor
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Appendix 3
(Mintel 2013)
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Appendix 4 – Substitutes compared to hotels
Appendix 5 - Hotel brand owners by market share 2008-2012
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Appendix 6 – Porters Five Forces
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Appendix 7 – Competitor identification
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Appendix 8 – Cross Comparison of selected competitors
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Appendix 9 – Defining a Strategic groups
Appendix 10 – Strategic groups
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