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This is the industry that includes leisure, food, beverages and accommodation services for all types of business in which we can include bars, restaurants hotels, and all types of hospitality services. The amount spent by overseas visitors to the UK fell by 20.2% during March 2010 to £955m, compared with £1.34b during the same month of 2009, according to the Government’s latest Overseas Travel and Tourism figures. The number of overseas visits to the UK dropped by 7% to 2.15 million during this period, compared with 2.31 million in October 2009.Visitor numbers declined from all parts of the globe. Trips from Europe dropped by 7.8% to 1.71 million, while visits from North America and other parts of the world were down by 6.4% and 2.7% respectively. The Overseas Travel and Tourism figures are published each month and quarter by the government’s National Statistics Office. They are based on the International Passenger Survey, a random sample of more than 250,000 interviews carried out each year with passengers entering or leaving the UK through the main airports, seaports and the Channel Tunnel. These interviews represent one in every 500 passengers.
Below we can see comparison between two years for month of March accordingly
visits to the UK
UK tourists’ trips
in the UK
As we can see above the there was a 7 % reduction in overseas visitors to UK compared to January and February which was + 3.5 % and +1.5% accordingly.
The London hotels market is bouncing back from the depths of recession, but a recovery in the provincial sector is still too early to call. That’s the picture provided by TRI Hospitality Consulting’s latest review of the UK chain hotels market for March 2010.Overall gross operating profit per available room (Goppar) in the UK jumped 8.3% for the month, although this masked a much higher climb of 17.6% in London, compared to a fall of 2.5% in the provinces. Meanwhile overall occupancy performance was up 3% to 69.3% in the month. The average room rate climbed marginally by 0.8% to £87.88, while total revenues per available room (Trevpar) climbed 2.9% to £106.22.The London market looked most sprightly, with a 3.6% rise in occupancy, 5.5% growth in the average room rate, and 10.4% growth in revpar compared to March 2009.There were also positive signs in the provincial market, with TRI pointing to a slowdown in the rate of decline in provincial room rates, thanks to stabilising commercial rates. But TRI managing director Jonathan Langston warned that it was still to early to say whether the provinces were starting to recover. “While the level of decline in average room rate performance is reducing it is still difficult to predict whether provincial hotel market performance is reaching its low point or if there are still tough trading conditions ahead”.
Demand related to hospitality:
“The basic function of hospitality is to establish a relationship or to promote exchange of goods and services, both material and symbolic, between those who give hospitality (hosts) and those who receive it (guests)… One of the principal functions of any act of hospitality…is to consolidate the recognition that hosts and guests share the same moral universe orâ€¦to enable the construction of a moral universe to which both host and guest agree to belong”. (Lashley and Morrison (eds.), 2000:19)
Principles and practice of palliative care and supportive oncology By Ann M. Berger, John L. Shuster, Jamie H. Von Roenn
Factors affecting Demand of Hotel Industry
Demand of Corporate business meeting:
Governments are not more concentrating on the inflow of business class visitors in uk specially in London which is growing like an international business market for different types of visitors around the globe. They should know that one business tourist is equivalent o three leisure tourist in terms of employment and economic terms and bring around 3.2bn £ only in London. AS the business meetings have grown from a small to a large scale industry and due to the nature of the business , face to face meetings are more important rather than just making a deal through a third party . Uk has grown at the top in which London shows that the trips of the industrialists have increased by 50% in the last 10 years since 2004 .According to the MIA (Meeting Industry Association) the conference held in Uk have increased particular in London by 60% , 30% Birmingham and 27% Manchester . But according to MIA London is failing to attract the customers due to lack of facilities and this effects the economy all over the uk, which can be overcome by building some event /meeting venues. Investment in an International Conference Centre (ICC) in London would help meet this need and support London and the UK’s position as a major visitor destination. Investments made for business tourist can nourish the whole economy structure of uk because different business acquisition will bring different types of work placements and will boost the economy. Also this business customer’s work as an ambassador for the UK in their home country where they will share the undefined experience of business which can work as a huge gateway for business in UK.
TRI hospitality, ICC
British Association of Conference Destinations, British Conference Venues Survey 2004, 2004
Demand for accessible rooms for aged and disable people
A huge demand of accessible rooms for the aged and disable people are very less compared to other countries because there are more people travelling to and from UK , due to lackness of rooms this sector of customers do not dare to travel and visit Uk . But fortunately there would be a great demand of this types of rooms for Olympic and Paralympics Games which are going to be conducted in 2012 next to next year. There would be a requirement for a particular group of people who will be trained to guide and take care of the disabled people in hotel industry. Geographical situation predict there will be more need of accessible rooms in future. If Uk do not prove itself best for providing best facilities related to the demand of accessible rooms compared to other destinations , it will lose its value in terms of good customer service .it has to take care of supply and demand of this rooms in future.
The impact and pressure of 2012 Olympics:
As we all know that 2012 Olympics will be a major event in uk after a recession and also the best event to recover from the negative impacts of recession there is a huge pressure on the government to do their best .from the current condition it is very much visible that there is great demand of international tourist out of which it is , surprising that uk is also preferred destination fro aged and disable people . Keeping this in mind, future demand of overall all tourist segments, ascertains the demands for distinctive type of rooms in future. It is predicted that every Olympics has attracted vast number of people from different types of counties with different background. Keeping in mind all this factors, it determines the types of demand uk would be facing in future ahead. Also apart from normal guests special types of rooms would also be expected for sports mans
Emerging and future trends of budget hotels
Due to a huge investment in construction of budget hotels like Travel lodge , Park Inn which has proved to be the best for traveller in supplying small rooms , has caused a bad impact on the 3 star service hotels by Thistle and Marriott . It is possible that a situation could occur in the short- to medium-term where hotel grading and quality/service provision at the budget end of the market, could become blurred to some buyers. Basically small names and good service provide by this small hotels can increase a demand of hotel rooms not only for international customers, but also local customers will prefer to pay a cheap rate if they book a hotel few months ago.
Demand due to International competitiveness
Based on Deloitte ranking and Comparing London (uk) with other cities in Europe like Paris, Geneva ,Berlin ,Amsterdam .London has posted the second highest occupancy after Amsterdam while in the room rates it has reduced the average rate per room by 3.5% .Also the occupancy rate of hotels in uk has increased from 2.9% to 60.6% in some territories . As a result of this lag, occupancy will drive revPAR growth this year, which is expected to rise 5.3% – only a one percentage point revision on the models previous predictions. The model also expects that London would make a double digit growth by 10.4%.
Demand Curve For Any hospitality Industry
AS we can see in the hotel industry curve, D1 is the maturity stage represents the peak level of occupancy, while D2 shows the decrease in the level of occupancy and D3 shows an increase in level of occupancy related to the demand of hotel industry in the past few years. The demand goes up and down according to the current situation in an particular region. Now we can see that the occupancy rate in the uk will go high due to Olympics games in 2012, which will be determined by D3. Also the tourist ratio compared to other European countries, UK has grown a lot more than normal due to budget hotels especially in London where the occupancy rate is the highest.Shifts in the Demand Curve Caused by Changes in the Conditions of Demand
Strategies in an hospitality organisation.
Whatever the economic downturn may be going on there should be one truth which endures hospitality industry is that there is always a room for the improvement to the guest experience. In times like volcanic eruption and small calamities improving the guest experience is a worth investment because this seeds of loyalty will blossom into a strong relationship when the spending freezes. When it comes in real world of competition and differentiation, customers will think about all the aspects related to service , price where to spend the time and money . So gain the competitive benefit proper strategies are necessary to focus on. From the theoretical point of view Michael porters generic strategy suites the hospitality organisation in a most appropriate way. The various generic strategies propped by Michael porters in 1985 in his book Competitive Advantage: Creating and Sustaining Superior Performance. Were based on “Cost Leadership” (no frills), “Differentiation” (creating uniquely desirable products and services) and “Focus” (offering a specialized service in a niche market). He then subdivided the Focus strategy into two parts: “Cost Focus” and “Differentiation Focus”.
Overall Cost Leadership Strategy: There are basically two ways of gaining competitive advantage using this strategy.
Increasing profits by reducing costs, while charging industry-average prices.
Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you’ve reduced costs compared to the competitors.
Cost leadership means having the lowest per unit (ie the average) cost in the industry compared with your rival which means that the profit will be definitely low but compared to rival much more higher. Sometimes lowest among some rivals means firm can enjoy pricing power and high profits. The cost leadership depends upon market structure where your hotel is and what other competitors are there with you in the same segment of market. It is called an defendable strategy because it defends the firm against the buyers and suppliers which competitors may not be able to do. To achieve a low cost position requires the following skills as follows large fund capital investment in new technology, continuing the investment to maintain a low cost advantage, process innovation, monitoring of labour to cut cost, and tight control overhead. Once achieved, the low-cost. Position provides high margins which can be reinvested new projects and modern facilities in order to maintain cost leadership. Such reinvestment may well be a prerequisite to sustaining a low-cost position.
For an e.g.: Hotels like Premiere Inn, Travel Lodge have a very low cost rooms which attracts the international customers towards them because some traveller do not want to waste money on renting a deluxe suite, so in this manner the particular segment of market is captured by such small hotel groups which make profit on low prices comparing to the giant hotels which charge a massive amount for the same service.
Also airlines like Ryanair and Easyjet which offers a very low price travel in Europe is a good example of cost leadership because these are the only airlines with a very low airfares .
Product differentiation strategy
This is the second most important strategy of differentiating the products .Differentiation means creating/supplying a unique product or service. The unique service or product provided should be very beneficial to the customers to run the strategy successfully. It is like creating your own market to some extent. There are different types of approaches related to differentiation like Brand Image, New Technology, Different design, etc .If this strategy is achieved , is a feasible strategy for returns above average in an industry ,because it creates a very unique defensible position for coping with the five competitive forces, even though in a different way than cost leadership. Differentiation provides against competitive rivalry because of brand loyalty by customers and resulting in low price. The customer loyalty and need for competitors to overcome this uniqueness will provide entry barriers. It also yields high margins to deal with supplier power, and it undoubtedly mitigates buyer power which results that buyers have very few options or alternatives and thereby less price sensitivity. Finally the organisation differentiates itself to achieve customer loyalty which should be better positioned compared to competitors. To maintain this strategy the firm should have strong marketing skills, creativity skills, and good cooperation with distribution channel, attract high skill customer service, unique taste, applied R & D, and less prominence on motivation based pay structure.
For an Eg: McDonald is differentiated by its very brand name and its worldwide famous Big Mac and Ronald McDonald. Subway differentiates itself by promoting “Freshly made sandwiches”. In this way each and every brand differentiates itself from other by creating their own image in the market by some or other ways like some punch lines e.g.: McDonald ” i’m lovin’ t “.Another example of product differentiation strategy is EAT Which differentiates its products by promoting itself as most environment friendly product as well its wrappers are claimed to be from 100 percent recycle paper .Also London Hilton differentiates itself by Galvin at windows restaurant, which is situated on the 28 th storey of London Hilton park lane
Focus or Niche Strategy
The final generic strategy is basically focusing on certain group, segment of the market or geographical market as with differentiation. Companies who use Focus strategies particularly concentrate on niche markets and, by understanding the dynamics of that market and the unique needs of customers in it, develop uniquely low cost or well-specified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers. This makes their particular market sector less attractive to competitor. As with broad market strategies, it is still essential to decide whether you will hunt Cost Leadership or Differentiation once you have selected a Focus strategy as your main approach: Focus is not normally enough on its own. Although the low cost and differentiation strategies are aimed at achieving their objectives industry wide, the entire focus strategy is built around serving a particular target very well, and each functional policy is developed with this in mind. The tactic rests on the basis that the firm is thus able to serve its narrow strategic target more effectively or efficiently than competitors who are competing more broadly. As a result, the firm achieves either differentiation from better meeting the needs of the particular target, or lower costs in serving this target, or both. Even though the focus strategy does not achieve low cost or discrimination from the perspective of the market as a whole, it does achieve one or both of these positions vis-a-vis its narrow market target. But when we are using Cost leadership Focus or Differentiation Focus the main aim should be how to gain profit from less investment and attract customers from different areas, by adding some extra bit into organisation to serve a particular segment of market.
Image differentiation strategy
An organisation can attain competitive benefit by distinguishing itself from competitors. Kotler expresses that, “It can differentiate along the lines of product, services, channels, people or image”.
Since possible costs are related with the option of distinguishing, the most efficient distinction or variation must be carefully chosen. Kotler identifies various factors that are worth considering when this choice is made when an organisation chooses to distinguish on the basis of image, he says the following: “A company or brand image should convey the product’s distinctive benefit and positioning. Developing a strong and distinctive image calls for creativity and hard work”.
Good creativity, is what McDonalds management have pride themselves by distinguishing the company and its identity .McDonald literature says that their products are of superior quality since the way they specially cultivate their products in their own farm and the way they treat their cattle, which is why their products delivers the best test of nature. IT says that the distinction comes through the best use highest quality of seeds in farm and a feeling of comfortability, their cattle gets from their specially designed cowsheds. .To others, this difference certainly make their image good to vegetarian lovers and certainly those who loves animal and also those shifting to organic products.
From these strategies we can see that, it is apparent that generic strategies of porter are very helpful for the organisation to select a strategy among these strategies which are more helpful and suitable for these organisations. As we saw in the strategies, niche strategy is not a one which is recommended for expensive and luxury properties ,as it is impossible for luxury groups to only focus on a a very small selected segment .On the other hand product differentiation ,image differentiation and cost leadership strategy are imperative focus for hospitality industry. Factors which are taken here are referenced from the report of mayor of London ,which helped me to understand ascertain the future demand of hotels.
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