Park Inn Hotel TP-103993

Hospitality Management 1

Park Inn Hotel

Name of the student

Name of the course

Name of the instructor


Contents

Introduction......................................................................................................................................3

PEST Analysis.................................................................................................................................3

Political Influence.................................................................................................................4

Economic Influence..............................................................................................................4

Social Influences...................................................................................................................4

Technology Factor................................................................................................................5

SWOT Analysis...............................................................................................................................5

Strengths...............................................................................................................................5

Weaknesses...........................................................................................................................6

Opportunities........................................................................................................................6

Threats..................................................................................................................................7

Porter’s Five Forces Analysis..........................................................................................................7

Buyer’s Bargaining Power...........................................................................................................7

Suppliers’ Bargaining Power.......................................................................................................8

Competitive Rivalry.....................................................................................................................8


Threat of Substitutes....................................................................................................................9

Threat of New Entrants..............................................................................................................10

Opportunities in UK’s Hospitality Industry..................................................................................11

Comparative Advantage................................................................................................................11

Start-up Costs for the Planned Change Process.............................................................................12

Assumptions...............................................................................................................................13

Start-Up Funding...........................................................................................................................14

Assumptions...............................................................................................................................15

Action Plan....................................................................................................................................15

Segmentation and Targeting..........................................................................................................16

Demographic Segmentation................................................................................................16

Behavioral Segmentation....................................................................................................16

Conclusion.....................................................................................................................................17

List of References..........................................................................................................................18


Introduction

Park Inn is a mid-market hospitality brand in UK, having its operations and businesses expanded

in more than 32 other countries of the world. The hotel is famous for its friendly and cozy

hospitality services provided to the customers at the most competitive prices in the hospitality

industry. The hotel space provides comfortable accommodation, hygienic rooms, facilitating

services and a tussle free hotel experience. Having around 140 hotels at more than 100

destinations across Europe, Asia and America, Park Inn hotel and restaurants focus on providing

a colorful and attractive environment to the customers, and at the same time, serves customers

with delicious continental and local food (Park Inn 2011).

Park Inn hotel is now considering the option of expanding its UK’s business by renovating and

expanding the space in its Park Inn Heathrow London location. For this reason, a detailed

strategic report containing PEST analysis of UK’s hospitality industry along with Porter’s five

forces analysis and SWOT analysis of UK’s hospitality industry are presented so that the

management can decide about the possible hurdles that might arise during the change process. In

addition, the strategic analysis would also help the management to identify the financial and

human resource requirements of the project and design the activities according to these

requirements.

PEST Analysis

Pest analysis will assist in determining the political, economical, social and technological

environment in UK’s hospitality industry (Bensoussan and Fleisher 2008, Henry 2008).


Political Influence

Being a democratic country, people enjoy the power of electing their favorite personals and

creating an environment, where they are free to practice their social values and fulfill the basic

necessities of life. The elected PM of the country strives to make business environment friendly

and facilitating for organizations and design a framework that helps the government to provide

incentives to the businesses in the country (Centeral Intelligence Agency 2011).

Economic Influence

The economy of UK has flourished over the years due to the abundance of natural resources and

internationally established businesses that cater customer bases around the globe. UK’s GDP is

considered to be one of the five largest economies in the world and the increasing per capita

income of citizens indicates that the country will continue to be an investor friendly destination

where the purchasing power of people allows businesses to flourish and offer innovative and

unique products and services (Centeral Intelligence Agency 2011).

Social Influences

UK’s hospitality industry is at maturity level as acquiring hotel accommodation has become an

integral part of tourists, business personals and ordinary citizens’ life. UK’s hospitality

consumers are willing to pay any amount to acquire a room space and enjoy state of the art hotel

services. The entrance of foreign HOTEL CHAINS has escalated this desire in UK’s hospitality

consumers to buy quality hotel services and products. The increasing competition in the

hospitality industry has lead to a situation, where the UK’s hospitality consumers become more

brand conscious now (Barrows and Bosselman 1999).


Technology Factor

UK’s business environment is supportive for research and development which results in unique

and innovative products and services presented to the customers. In hospitality industry, the use

of technologically driven products and services has increased to reduce the time gap and the

hassle in delivering the products and services. Use of technology has also helped hotels to raise

the service standards and quality of the products offered to customers.

SWOT Analysis

Park Inn Hotel does possess strengths that will help them to succeed in the lucrative UK’s

hospitality sector. A SWOT analysis will help us to highlight they key strengths, weaknesses,

opportunities and threats to Park Inn Hotel in UK (Griffin 2007).

Strengths

The financials and the brand image all over the world will help Park Inn to successfully

enter and flourish in the hospitality market of UK.

The wide variety of products and services available at Park Inn Hotel will catch the eyes

of UK’s mature hospitality market.

Park Inn Hotel’s strong and powerful social image and customer oriented social

marketing strategies will help it to survive in the strict business environment of UK.

Use of environment friendly ingredients and service attributes will be an additional plus

point for Park Inn Hotel to establish itself as people’s brand in the country.

The awareness level among the target market about the eco friendly products and the

benefits of acquiring Park Inn’s services and products will also help the hotel to uplift its

market image in the UK hospitality market (Athiyaman and Robertson 1995).


Weaknesses

Imitations of Park Inn’s services and products are widely available in the UK hospitality

market, which damage the company’s image and the standards of quality it has

maintained.

There are number of other major players, local and international, in UK’s hospitality

industry offering same products and services as the Park Inn Hotel, so the organization

will have to bring differentiated products in the market (Athiyaman and Robertson 1995).

Opportunities

As the large portion of UK’s population is middle aged and belong to a business and

working class, they use hospitality services heavily. This fact will be an opportunity for

Park Inn Hotel to enter the market and grab the attraction of the target population of UK.

As the usage of hospitality services and products is increasing among local citizens, Park

Inn will have a chance to capture market share of local customers, because the hotel

offers a wide range of products that are especially produced for local customers.

Day by day changing consumer trends and the exposure of customers to media has

escalated the desire in consumers to acquire hotel services in the target market to enjoy

luxury, cozy environment, parties, festivals and delicious food.

Due to the increasing demand of hospitality products and services in UK, it is expected

that the purchasing of these products is going to get doubled in coming years (Athiyaman

and Robertson 1995).


Threats

The availability of sub standard substitutes of Park Inn’s services and products also

affects original product’s image.

Porter’s Five Forces Analysis

Porter’s five forces analysis is a framework which helps a business or individual to assess the

macro environment surrounding an organization or an industry (Hill and Jones 2009, Grant

2005).

Buyer’s Bargaining Power

There are number of hospitality brands offering same products and services which imply

that the switching costs are lower and the hospitality organizations have to set a

competitive price in order to retain customers.

There is huge demand for hospitality services and products presently and expected to

increase in future, which requires producers to provide discounts and incentives to the

customers.

Due to the customers’ expectations to maintain their status symbol and their increasing

purchasing power, increasing demand for hospitality services requires manufacturers to

be flexible in pricing.

There are number of other organizations involved in providing hotel services and

products to customers, therefore; the bargaining power of buyers is stronger in this

segment of luxury goods industry.


Suppliers’ Bargaining Power

Organizations involved in hospitality business produces large number of services and

products due to the ever increasing demand which requires them to acquire mass

quantities of raw material for the production of such services and products.

There are large numbers of suppliers in the market who can provide raw material which

imply that sellers switching costs to other suppliers are lower.

Suppliers’ total sales depend heavily upon the purchases made by the organizations in

hospitality business, which weakens their pricing and bargaining ability.

In addition, there is a constant threat from the manufacturers’ side that they might

integrate backward and start producing raw material themselves which requires suppliers

to be flexible in their pricing.

Competitive Rivalry

Different organizations involved in providing quality hospitality services in different

regions of UK are facing wild competition.

The hospitality industry of UK caters the needs of seasonal customers who tend to buy

these products and services for special events.

Although, the demand is growing steadily which requires the manufacturers to market

their products ahead of their competitors.

Biggest problem is the size of business that rivals possess. Almost all the hospitality

organizations are of equal size and capable of competing their rivals on higher grounds.


The increasing number of producers of the hospitality services and product leaves

customers with little choice and hence, the customers buy anything cheaper and

standardized.

Few of the low scale hospitality organizations has formed alliance with large scale

producers of such commodities in other industries in order to acquire financial and

functional assistance which has helped them to compete with the leading hotel and

restaurant chains in UK.

Here, the role of intermediaries cannot be neglected, as one or two manufacturers of

hospitality services are supplying their goods to the same distributor and acquiring raw

material from the same supplier. In this scenario, organizations provide incentives and

commit wild strategies to acquire the best suppliers and distributors in the industry.

Threat of Substitutes

In the hospitality industry of UK, substitutes of higher quality are readily available.

New products and services are emerging as well which creates a constant threat for the

hospitality organizations in UK.

Price wise, these substitutes are gaining significant attention of the market place.

The switching costs are also nominal which compel customers to use these substitutes

instead of high priced and traditional hotel services.

Sales of substitute are increasing at a rapid pace which is resulting in heavy investments

from high street hotels and restaurants to keep customers intact with the purchase of their

products and services.

Beside the emergence of substitutes, fake copies are also introduced in the market.


These fake copies of branded hospitality services provide customers with cheaper goods

of same standards but lower quality.

Those who cannot afford to buy a branded hotel accommodation may rely on buying a

fake copy of that hospitality service.

Threat of New Entrants

A number of organizations engaged in other business are diversifying their businesses

and entering the hospitality industry by offering their differentiated products that cater the

needs of customers looking for quality and luxurious hospitality services.

Entry barriers, on the other hand are also low. This is due to the reason most of the

entrants are already established in their respective fields and they can bear the costs

involved in producing hospitality services and products.

In addition, there are hotels and restaurants that are expanding the scope of their

businesses and has started producing other luxury services within the same industry.

Due to the high profits potential, new entrants see this industry as a resort where they can

make fortune.

Government in UK is supporting small scale hospitality organizations to establish their

businesses and integrate forward by entering into businesses in which they have

expertise. It is evident that large number of small and medium size manufacturers of

hospitality products and services is entering into the industry.


Opportunities in UK’s Hospitality Industry

This is a general perception that people in UK love and enjoy hospitality services and products.

The hospitality sector of UK has been growing at a phenomenal rate and considered to be one of

the most lucrative industry in the country due to the increasing number of incoming tourists and

business professionals. The purchasing power of people in UK is increasing day by day because

of the economic reforms by the government. Due to this, people spend open heartedly on

acquiring luxurious hotel accommodations (Boella 2003).

Comparative Advantage

UK is considered to be one of the richest countries of the world in the production of raw material

needed by almost any industry. The quality raw material available in the UK market would make

it less costly for Park Inn to produce and deliver the products and services within the country.

Secondly, importing the raw material from outside UK will be costly, so availability of raw

material will cut down that cost as well. The abundance of raw material helps UK to earn

valuable foreign reserves by exporting goods.

Another comparative advantage, that businesses in UK enjoys, is the availability of skilled and

qualified labor. UK has enough man power to supply to businesses and the abundance of man

power is highest in UK, due to the reason that a large n umber of Asian and African immigrants

comes to UK for earning money, than those countries with which UK have trade terms.

Despite of the fact that UK’s market is labor intensive, as discussed in above lines, trade experts

call UK’s hospitality market as capital intensive one. The reason is that the items, in which UK

earn most of the foreign reserve by exporting, are capital intensive manufactured items.


UK, for last decade, has been a resort for sporting activities and tourism. It was estimated in

2009, that nearly 900,000 tourists visit UK every month. The boost in tourism industry will also

be fruitful for the Park Inn, as the tourists love to stay in a hotel that offers cozy and colorful

environment.

UK’s reach to other markets in its neighbor, U.S and major European markets makes it a

lucrative destination to conduct business in. After getting established in UK, Park Inn will have a

chance to enter the markets of other African nations like Uganda, Nigeria, Costa Rica and

Kenya, who are considered as other major economies in African continent and emerging

economies in Asia.

Start-up Costs for the Planned Change Process

For renovation and expansion of the Park Inn Hotel at Heathrow London, the following

expenditures are expected to incur:

Start-up Requirements £

Renovation costs 400,000*

Fulfilling the legal requirements 120,000

Developing the expansion plan 20,000

Insurance of the change process and activities 7,000,000

Hiring of Architecture and Engineers 10,000

Acquiring Raw Material 1,500,000

Miscellaneous 500,000


Rent of Machinery hired 120,000

Payments made to workers 75,000

Total Start-up Expenses 9,745,000

Start-up Assets Cash Required 3,000,000

Start-up Inventory 7,500,000*

Other Current Assets 500,000

Long-term Assets 2,000,000

Total Assets 13,000,000

Total Requirements 22,745,000

Assumptions

1. Renovation costs are one off payment.

2. Inventory level is required by Park Inn Hotel.

3. Miscellaneous expenses are based on the marketing researcher’s estimations.

Start-Up Funding

Different possible sources of funds are available for meeting the startup requirements in the

UK’s financial sector. The following table surmises how these requirements could be met by the

new Tesco store in UK.

Start-up Funding £


Start-up Expenses to Fund 4,354,200

Start-up Assets to Fund 3,000,000

Total Funding Required 7,354,200

Assets Non-cash Assets from Start-up 10,000,000

Cash Requirements from Start-up 3,000,000

Additional Cash Raised -

Cash Balance on Starting Date (3,000,000)

Total Assets 13,000,000

Liabilities and Capital Liabilities

Current Borrowing -

Long-term Liabilities 750,000

Accounts Payable (Outstanding Bills) -

Total Liabilities 750,000

Capital Planned Investment 1,490,800

Total Planned Investment 1,490,800

Loss at Start-up (Start-up Expenses) (1,340,800)

Total Capital 150,000

Total Capital and Liabilities 900,000

Total Funding 22,745,000


Assumptions

1. Loan is obtained for 15 years at an interest rate of 10.5% per year.

2. Capital planned investment is expected to be raised by the investors.

3. Additional capital is expected to be raised by the investors for expansion and renovation.

Action Plan

The proposed change plan is to renovate the interior and exterior outlook of Park Inn Hotel at

Heathrow, London, and at the same time, increasing t he accommodation space by building two

new floors which will help the hotel to increase the room space by around 35 double bed rooms,

15 single bed rooms and 10 Executive Suits. For this reason, a board meeting was held at the

company headquarters in which, the Business Development Head was handed over the

responsibility of looking after the whole change process as the head of the project. In addition to

these changes, Park Inn Hotel has also decided to change its marketing tactics and formulate a

marketing strategy stressing on efficient segmentation and targeting of the customer base.

The first and foremost task that the project head performed was to communicate the planned

change process to the customers and persuade them to agree with the management’s decision. In

this regard, to motivate and uplift the morals of the employees, special incentives and

remuneration packages were offered to the employees that will be granted to them once the

project is complete.


Segmentation and Targeting

Demographic Segmentation

Park Inn will demographically segment its target market on the bases of age, genders,

size and religion. For tourists, a different hospitality and marketing mix strategy will be

adopted. For locals, a different hospitality experience will be developed. Park Inn’s target

market will consist of business personals and tourists.

Behavioral Segmentation

Behavioral segmentation strategies will be based on the events and festivals that are

celebrated by customers in London. As we know that London is a tourist destination and

the financial hub of the country, tourists representing different nationalities and religion

arrive in the city. Every nation and religion in world has different festivals and events to

celebrate. So there will be a fusion of festivals that are celebrated in London. Keeping

this fact in view, Park Inn Hotel will also introduce marketing mix and service attributes

for customers who want to arrange events and celebrate festivals inside Park Inn Hotel

(Croft 1994).

Park Inn Hotel’s management will target the focused segment with the help of charity based

promotional activities, social media advertising and by forming alliances with air lines and

travelling agencies. Special incentives will be provided to travel agents who will be asked to

recommend Park Inn Hotel to their customers during their stay in London.


Conclusion

After a detailed analysis of UK’s business environment, especially for hospitality industry, this

paper provides a framework for applying the proposed changes and turning Park Inn Hotel into a

profitable hospitality organization. It h as been assessed and established that the hotel is already a

profitable entity and its global presence makes it a recognized name in hospitality industry, it can

be foreseen, that the implementation of planned changes would increase its business value and

help the company to compete successfully in the highly mature hospitality industry of UK.


List of References

Athiyaman, A. and Robertson, R., 1995. Strategic planning in large tourism firms: an empirical

analysis. Tourism Management, 16(3), pp.199-205.

Barrows, C. and Bosselman, R., 1999. Hospitality management education. NY: The Haworth

Press.

Bensoussan, B. and Fleisher, C., 2008. Analysis without paralysis: 10 tools to make better

strategic decisions. NY: FT Press.

Boella, J., 2003. Human resource management in the hospitality industry. Cheltenham: Nelson

Thornes LTD.

Centeral Intelligence Agency, 2011. United Kingdom. [Online] Available at: HYPERLINK

"https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html"

<https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html >[Accessed 30

November 2011].

Croft, M., 1994. Market segmentation: a step-by-step guide to profitable new business. London:

Routledge.

Grant, R., 2005. Contemporary strategy analysis. NJ: Wiley-Blackwell.

Griffin, R., 2007. Fundamentals of Management. NY: Cengage Learning.

Henry, A., 2008. Understanding Strategic Management. OX: Oxford University Press.


Hill, C. and Jones, G., 2009. Strategic Management Theory: An Integrated Approach. NY:

Cengage Learning.

Park Inn, 2011. About Park Inn by Radisson. [Online] Available at: HYPERLINK

"http://www.parkinn.com/about" <http://www.parkinn.com/about >[Accessed 5 December

2011].

Park Inn Hotel TP-103993

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Transcript of Park Inn Hotel TP-103993