Strategic Analysis (SWOT, PESTEL, Porter) of Premier Inn (Whitbread Plc)

Introduction
1. Premier Inn

The Whitbread PLC story began in 1742 when Samuel Whitbread opened his first brewery. In 1750, Whitbread PLC moved to premises in Chiswell Street, London and was the first purpose-built mass-production brewery in Britain. Whitbread PLC became a well-known brand name in the brewery industry until 2001 when Whitbread PLC sold its breweries and left the pubs and bars business. Whitbread PLC had diversified in a variety of different industries including wines, spirits and nightclubs but decided to refocus its business on its leading growth areas, hotels and restaurants (Whitbread Co, 2011).
Premier Inn is one of the major brands of Whitbread PLC (Other Brands Include: Costa Coffee, Taybarns, Brewers Fayre, Table Table and Beefeater Grill). Premier Inn is the UK’s largest hotel brand with occupancy rates of over 80% in more than 590 budget hotels with over 43,000. Premier Inns’ location is paramount to its success as most are found along major roads and in regional towns and cities. Premier Inns’ brand promise is to give you ‘a good sleep, night after night after night – consistently do the extra-ordinary’ (Premier Inn Website, 2011).
Premier Inn is an award winning hotel chain and has geographical spread to facilitate 75% of the UK population in a radius of five miles. Premier Inn’s bedrooms all have an attached bathroom, TV with Free view, and Wi-Fi internet access. All hotels comprises of a bar and restaurant, either inside the building, or next to it, offering and serving a wide range of dishes. All these facilities and services are offered at a very cheap price starting from just ?29 per night (terms and conditions apply).
They are also expanding their hotel chains internationally. In this regard Premier Inn have opened one hotel in Dubai and two in India. This is just the start of expanding geograp[hical spread around the world.
1.1 Mission and Vision
“We want to make our hospitality brands the best they can be by focussing on our customers and giving them just what they want”
1.2 Premier Inn Standards
Offer 100% money back guarantee of quality room to customers
Comfortable surrounding
Friendly servic
They call it “Good Night Guarantee”
1.3 Future Plans
Big expansion plan of adding another 55,000 rooms by 2014 to cement the current position as the UK’s biggest hotel chain
Aiming and planning to be the biggest budget hotel chain in London by 2012
Planning to open more hotels in overseas
1.4 Management Board
Premier Inn brand is management by an independent Management Board which consists of highly professional executives teams.
1.5 Customers Insight
In 2009-10 Premier Inn initiated a program to understand the customer more effectively and vigilantly. They have evolved their strategy on customer feedback. The deep insight in customer’s feedback provides them to initiate their programs more efficiently which leads them to winning and retaining customers. They hold regular Focus Group meeting to explore thought and feelings of customers. Their customer feedback program mainly includes:
Premier Inn Guest Satisfaction Survey: The biggest in Europe
Premier Offers with rooms from ?29: Inspired by our customers
Brand standards: Maintain consistency across our Hotels and Restaurants
Using YouGov Brand Index to compare performance with other leading brands
(Premier Inn, 2011)
1.6 Corporate Responsibility
Premier Inn is committed to Corporate Responsibility Programs “Good Together”. They are continuously building their values. They have long history of community development programs. The corporate responsibility is an integral part of their businesses. The corporate responsibility of Premier Inn is focused on six priority areas (i.e. Environment, People, Sourcing, Health, Community and Customers). They keep devising a more committed strategy across these areas.
2. PESTLE Analysis
There are certain factors in macro-environment that could affect decision making and strategies of organizations. Sudden Changes in Tax, Imposition of Laws, Increasing or Reducing Trade Barriers, Cultural & Demographic Changes and Changes in Political Environment & Government Policy are some of the key examples of macro environment. These changes could bring certain positives as well as negatives for every business. PESTEL (Political, Economic, Social, Technological, Environmental and Legal) Analysis is a tool which is widely used by business managers for analysis of these critical factors. It is very helpful for development of strategic decision making. The Premier Inn’s PESTLE Analysis below critically evaluates and identifies different strategic in a competitive and dynamic environment.
2.1 Political
Positive and pragmatic collaboration with UK Government has brought Hospitality Industry into key success area of economic development in UK. Hospitality is the UK’s fifth largest industry, directly employing more than 2.4 m people and contributing over ?34bn in gross tax revenues. As the generator of eight per cent of total employment, the industry is ahead of the financial services, transport and communications, and constructions sectors.
Prime Minister David Cameron has recognised that tourism is one of five ‘big-ticket’ industries of the future and one that the government ‘should get behind’ especially as for every 0.5% increase in the UK’s share of the global tourism can add ?2.7b to the economy and create 50,000 jobs. He set down two objectives for UK tourism: to recapture a position within the top five tourism destinations in the world measured in terms of inbound revenue (we have slipped to seventh place in recent years); and secondly, to increase to 50 per cent (from 36 per cent currently) the proportion of UK residents’ domestic tourism spend. The Prime Minister also stated that government support for businesses would be focussed on ‘high growth industries’ and ‘working strategically to strengthen them’ (06 January, 2011).
Establishment of regional growth fund for hospitality industry is also a major sign of expected growth in the sector. Hospitality could generate 236,000 net additional jobs across the UK by 2015 bringing the total number employed by the British Hospitality Industry to 2.76 million (British Hospitality Association 2011).
The budget hotel sector has been one of the greatest success stories in the UK hospitality industry over the last 10-15 years, and continues to be so; “The budget hotel sector is still the fastest growing hotel sector in the UK” (Deloitte & Touche, 2000, p. 3). It is estimated that UK budget hotel sector is going to be more than double in size in next 20 years and will account for more than a quarter of the overall hotel market by 2027 (Kerstin Kuhn, 12 December 2007).
The UK budget hotel market has also broken the ?1b barrier for the first time in 2006, new research has revealed. Analyst firm Mintel found the market grew 38% between 2002 and 2006, three times as much as the overall UK hotel market (worth ?11.2b) which increased by only 12% over the same period.
The current growth in supply and market volume has increased considerably as leading operators are engaged in a frantic scramble for market dominance. World over tourism and hospitality sector is generating more and more profits.
The current economic recession could be a major cause of concern for hospitality sector. The economic recession has hurt the people from all walks of life and forcing them to be more careful in spending. People have to make choices before spending each penny. However due to government’s substantial reduction in interest rates helped to minimise further rises in unemployment during 2009 (Euromonitor, 2010). As a result of these measures it is considered that spending power of consumers going to increase steadily.
This is a very encouraging factor for Premier Inn for expansion of their budget hotel chains. With this growing demand of the sector they are making tremendous expansion of their businesses. Currently Premier Inn is the UK’s largest and fastest-growing budget hotel chain, with over 590 budget hotels and more than 43,000 rooms across the UK and Ireland. They have big expansion plans and aim to add another 55,000 rooms by 2014. They are also expanding their outreach across the globe by establishing their hotels in Dubai and India. They have established three hotels in Dubai and one in India at Whitefields, Bangalore, with another due to open in Delhi in 2011.
2.2 Social
The social circles and changing life styles & living standards has brought many social and cultural changes around the world. As the living costs are increasing, people prefer low cost products/services accompanied with highest standard of value for money. These social changes are bringing different thought patterns. These social changes also influencing the hospitality sector around the world. Following are certain key thinking patterns which are influencing consumer’s behaviour in decision makings.
Preferences to strong branded products
High value for money
Easy accessibility
Responsiveness to customer demands
Extensive geographic coverage of the hotel network
Online and centralized reservation systems
Variables room rates
Security
Quality standards
Discount and promotion offer for repeat business
Customer feedback
Premier Inn is focused on customer satisfactions and keeping revitalizing there business strategy with changing social values and customer preferences. They offer to their customers a 100% money-back guarantee of a good quality room, comfortable surroundings and friendly service (Whitbread Co). They are committed to understand their customers better than anyone else.
2.3 Technological
Technology is one of the variables that could directly influence the business operations. The operations of hospitability does not involves high level of technology and the focus of technology is budget hotel sector is directly linked with availability of electrical appliances and availability of IT services for comfort of customers. The use of latest development in IT helps in maintain smooth functioning for hotel chains across the region. It also helps them to develop centralized supply chain management systems.
Technology is largely influencing the marketing and promotion of the products. The way of communication is changing to web based techniques. Premier Inn is also maintaining a good look and interactive website in this regard. The online reservation facilitation services are available. They also maintain a database of customers and keep sending messages regarding new product offering and promotional campaign. Use of mobile is also providing a big platform for advertisement and awareness campaign.
2.4 Environmental
The care of environment and social responsibility are considered as the centre stage of customer’s preferences and expectations. Now-a-day customer are more vigilant and normally favours the organization who cares about environment and give due diligence to adopt business operations which help’s in reducing pollution and proper waste disposals.
The strong emphasis on Corporate Social Responsibility (CRS) is one of the major core competencies of Premier Inn. They have developed a strong CRS Strategy for “Good Together” and Whitbread way forward. In 2008 they have reviewed their corporate responsibility strategy and created “Good Together” programme. There objective of this strategy to reduce relative operational carbon emission 26% by 2020, get 80% of waste from hotels & restaurants diverted from landfill by February 2012 and reduce hotel and restaurant water consumption by 20% by 2020. Premier Inn’s approach to the environment is guided by their environment policy and energy policy, which contain a number of principles which they are required to comply.
They CSR mainly includes following six priority areas:
Environment
People
Sourcing
Health
Community
Customers
2.5 Legal
The minimum wage rate has been increased 15.5% by UK Government (Low Pay Commission Report National Minimum Wage, 2009) that would costs an increase in operating cost of budget hotels. This would increase cost of production which hampers the policy to offer competitive prices to customers.
To avoid legal issues and maintain high standard they have developed a Responsible Sourcing Policy, which defines the minimum standards and principles of cooperation that Premier Inn expect from suppliers, contractors and business partners. It also sets out commitment to work with suppliers, as necessary, to support the implementation of the Policy.
3. Porter’s Five Force Analysis
The study of forces which influences the decision making of organizations are always remain an integral part of strategic management. In this regard Porter’s Five Force Model is considered as the most potent and useful tool and is widely used by organizations. This model deals with external factors that influence the nature of completion and internal factors how firms compete effectively to be more profitable. Porter’s Five Force Model of Premier Inn is as follows:
Figure 1: Porter’s Five Force Model
3.1 Threat of New Entrants (Potential Entrants)
As the sector is growing rapidly and also Government is encouraging and facilitating the sector on priority basis so the threat of potential new entrants is very high
Huge capital investment is required for setting up a geographically spread budget hotel chain
Very difficult to be more competitive in hotel chain and hospitality business
High entry barriers due to maintain and supplying quality food to customers of hotels
Substitute products entry is high
Maintain customer satisfaction and comfort creates low room for substitute
As budget hotel sector falls in service sector, so customers bargaining power is very high
If customer comfort is highly prioritized with service quality remain standardised and have strong differentiations, than there is very low switching cost for customers otherwise buyers keep changing brands
Customers are attracted by low price with high quality standards
Eatable are compulsory part of hotels supplies and they are directly linked to customer health so they do not compromise on quality of products thus gives an opportunity to capitalize on quality to minimize bargaining power of customers.
Bargaining power of supplier are not so high
Strong linkages and support is required to maintain a good bargaining power with suppliers
Highly competitive industry
Price margin are low due to high competition
Switching cost of customers is low due to competition
Maintain quality and service is a major threat and cause of concern due to high competition
3.2 Threat of Substitute (Substitutes)
3.3 Bargaining Power of Customers (Buyers)
3.4 Bargaining Power of Suppliers (Suppliers)
3.5 Intensity of Competitive Rivalry (Competitors)
4. SWOT Analysis
The Strength, Weaknesses, Opportunities and Threats (SWOT) analysis of Premier Inn is as follows:
4.1 Strengths
Strong business base as Whitbread Business Group is doing business from last to centuries (i.e. from 1742)
Largest and fastest growing brand in UK, with 590 budget hotels and more than 43,000 rooms
Award winning hotel chain
More than 75% of the UK population lives within five miles of a Premier Inn
Brand recognition
High level of customer satisfaction and understanding
Huge network of supply and distribution
Dedicated and highly motivated team of professionals
Highly advanced customer reservation systems
Automated and technically advanced supply chain mechanism
Focused Customer Care and Corporate Social Responsibility
High values of money
Strong networking with all stakeholders
International expansion of business
Limited international expansion of business
More focused on UK market
Low marketing and promotional campaign
Limited value addition in product and services
Expansion of business in emerging international markets e.g. Middle East and South Asia
Exploring Franchising Opportunities for expansion of business at local as well as international horizons
Introducing customized business products for professionals
Entering into food catering and event management
Continued economic recession and global crises
High level of competition
Maintaining quality of services and comfort of customers
Maintain good relationship with suppliers
Increasing operating costs
4.2 Weaknesses
4.3 Opportunities
4.4 Threats
5. Critical Success Factors
Premier Inn should also focus on Critical Success Factors (CSFs) Model especially designed and developed for budget hotel operation’s in UK on the basis of customer research and survey’s. One of the model is as follows:
Figure 2: Critical Success Factors – Budget Hotel Operational Model
BY: Bob Brotherton
6. Conclusion and Alternate Strategy for Premier Inn
Premier Inn is the UK’s biggest hotel brand with occupancy rates of over 80%. Its locations are paramount to its success as most are found along major roads and in regional towns and cities. Premier Inns’ brand promise is to give you ‘a good sleep, night after night after night – consistently do the extra-ordinary’ (Whitbread Co, 2011).
The company has progressed through a well defined market growth strategy with centre of focus towards customers’ understanding. On the basis of above PESTLE, Porters Model and SWOT Analysis, Premierr Inn may consider to adopting following Market Growth Strategy for further expanding their businesses and becoming the brand leader in hospitality industry. The alternatives with respect to Anfos Growth Matrix for Premier Inn are suggested below:
Table 1: Alternate Strategy Rating Scales
Sr. No
StrategyTask/Actions Rating as per Criteria
Suitability
Acceptability
Feasibility
Total
1
Market DevelopmentExpanding business to South Asia, Middle East and EU Local Market (especially Suburb of EU Countries)5
5
5
15
2
Market DevelopmentExploring Franchising Agreements4
3
5
12
3
Market PenetrationSpecial Price Package for Off Seasonal Products4
4
4
12
4
Product DevelopmentIntroducing Specific Products to Target Parts of the Leisure and Business Markets4
3
3
10
5
Product DevelopmentIntroducing Event Management Related Products and Services3
4
2
9
Rating Scale: 1 for Minimum and 5 Maximum (Total Maximum Score 3X5=15)
7. Recommendation and Suggestion
As budget hotel industry is growing fast around the world and UK is considered as the market. The recession era is continued and customers purchasing powers are further decreasing. Theier spending pattrens are changibg and they are always looking for cheaper products with high quality. This phenomnenon provides an ample opportunity to Premier Inn for further expansion of their chain hotels and achieve their vision of becoming the leading budget hotel retail chain. In this regard they should adopt the Market Development Strategy with a focus to expanding their hotel chains in South Asia, Middle Esta and in EU Countries. following reasons:
It fits in mission and vision of Premier Inn as it is quite suitable, acceptable and feasible to initiate.
It would help to get benefit from the growing hospitality industry
The cost associated with this strategy would also not be high as they should have to explore franching offerings as well as investor’s are always interested to invest in growing sectors
UK Government is also facilitating and encouraging for hopitality industry expansion
In budget hotel segment South Asia market is un-tapped so there are ample opportunities for Market Development as a new entrant.
Mojority of South Asian countries are under devloped countries with majority of customer having low purchasing powres so budget hotel could fit in well in their income spending
Business expansion
Way forward for becoming leading budget hotel chain
Geographical spread for existing customers to obtain same services even when they are traveling outside UK
Enhancing Premier Inn brand’s loyalty
Will works as a word of mouth for attracting new customers
7.1 Objectives and Expected Results of Market Development
References
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