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Hotel Industry in the UK and Premier Inn Report

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Updated: Sep 15th, 2021

Introduction

Hotel industry

The service industry in the global economy is the fastest expanding sector compared to the manufacturing and other sectors of the economy. A major player in this industry is the hotel service. With the increase in travel for business and leisure, it has come to the attention of investors that the hotel industry is posed for mammoth gains if the opportunities are fully exploited.[1] These opportunities that come along with the most basic function of a hotel as an eating house are accommodation/lodging, conference facilities, among many other tailor-made offers made to suit a particular target market. Conforming to the market need is the most relevant issue at the moment as the early 1990’s were characterized by rapid expansion without taking into account the needs of the customers. However the approach has since changed with the hotels realizing that further expansion programs are no longer turning out huge profits as it was earlier. A more market-oriented approach was thus adopted. This paper discusses the various models that hotels have adopted in a bid to increase and enhance their performance as compared to other businesses in the world. One of the best examples that can guide us in making this analysis is the Premier Inn chain hotel in the UK

Premier inn

This is one of the largest hotel chains under Whitbread Plc in the UK. With over 500 hotels in and out of the UK, the hotel is very popular with many people.

According to the Whitbread report, 75% of UK residents live within a five miles radius of a Premier Inn hotel. The hotel has in the recent past opened branches in the Republic of Ireland, Northern Ireland, Dubai and another one pending opening in India.

The hotel began operations 20 years ago as Travel Inn where it instantly became a household name famous for maintaining the same look in all the rooms something adopted from Travel Lodge a competitor in this industry. With acquisition of Premier Lodge in 2004, the chain changed its name to Premier Travel Inn. As a result, the tradition of having all the rooms similar was in some way undermined though not to a great extent. This was because the new acquisition did not maintain the same look in all the rooms as Premier Inn did.

In 2007, the hotel chain set to reposition itself in the market by changing its brand name through shedding the word ”Travel” in its name to retain Premier Inn. The management attributed the change of name as a measure to help customers differentiate the hotel from the main competitor’s Travel Lodge.[2] Competition is not facilitated by the similarities in names as also how the management individually handles its operations and customer’s needs. This is important given the size of the hotel and the staff involved which is expected to be above 50 000 with the opening of 400 pending new outlets. An effective interaction of management and service quality provision is paramount in ensuring the hotel survives in this competitive industry.

Analysis

Leisure and tourism businesses from hotel services to restaurants, casinos and travel agencies are at the moment experiencing decreased business as the world economy is on the slide following the slackening of the US economy which has an overriding factor in all the economies something that is very evident at the moment.

Several factors are affecting the operation of a hotel business like Premier Inn. The growing competition in the hospitality industry as well as the economic downturn affects its external environment while its internal environment is affected by its marketing strategy and its organizational structure for its being a network of hotels. It would thus be most appropriate that we conduct a SWOT analysis test on the hotel chain to have an exclusive view of the workings of the hotel. The test allows us to identify the strengths, weaknesses, opportunities, and threats facing the company.[3]

SWOT Analysis

Strengths

Whitbread, being a hotel group whose interest cover different regions and categories have more stable cash flow prospects.

It has a portfolio of hotels meeting demands for upscale, mid-scale and economy lodging, covering a wider market segment. It has also the Beefeaters, Costa and Brewers Fayer brand names which are standardized for the lower and middle-class segment.

It is also engaged in many business activities and acquisitions that make more profit for the company. International experience; diversified portfolio, great locations for many of its hotels and superior customer services are also the strengths of Premier.[4]

Financial resource is also one of its strengths; The Whitbread Plc. announced that the entire group had registered 11% growth in sales in the first half of the financial year in December last year. Premier inn contributed 73% of this growth thereby showing its significance and strength in sales as a single entity.

The hotel has unique offers for their clients.

Weaknesses

Currently, the weakness of the hotel chain can be seen from its being the operator of many hotel brands. Potential conflicts from some of the owners and operators may arise.

Being a hotel chain and part of a larger group, Premier Inn is also a very capital-intensive business with its fixed costs higher than other businesses. This can cause problems when the demand in hotels declines.

Premier Inn has failed to take advantage of vertical integration which reduces production and operation costs instead of concentrating on horizontal integration which tends to reduce competition.

Opportunities

With its experience in operations, there are more opportunities in spreading operations over different regions as it did in Asia by opening a hotel in Dubai.

Premier Inn has also established a name in hotel operations, so mergers and acquisitions not only in the hotel industry as well as in other businesses such as restaurants and travel will be easier for growth strategies.

Threats

Demands for hotel services will shrink further if the global and regional economic downturn persists. Geopolitical uncertainties such as terrorist attacks also contribute to threats in the hotel industry.

There is also a possibility of poor training in international units and shortage of skilled labor.

The advancements in information and communication technology allow businessmen to stay in the office than travel.

Businessmen prefer to visit their families during the weekends instead of staying at the hotels.

Unique offers

Premier inn has established some unique forms of service provision that puts it way ahead of competitors in this industry.

The hotel has managed to market itself not just as a hotel but rather a more comprehensive service provider with the hotel business as one of the major services on offer. This is what we would call, a package offer. To emphasize this principle, the most outlets are located within the same vicinity as franchise bars and eating places.

The hotel advertises its room rates to be priced at a minimum of £38 per night. This price however does not include any meals such as breakfast but is available upon payment of extra charges for it. The most distinct thing about their rooms is that they are priced as a room provided that the occupants of a single room do not exceed two adults and two kids. Such rooms are what they call family rooms. These family rooms are available with extra sleeping space but the same size as the others. Pull-out beds are made available in such rooms creating more sleeping areas but maintaining the same room measurements same as the other rooms. Cots for kids may be provided if necessary at no extra cost in these same family rooms. This is one of the largest selling points of the hotels since most travelers if not for business will travel as a family, thus this attempt to reduce the financial burden on traveling families has proved to be very popular

Days out offer

These are offers made to anyone for booking at any of the Premier Inn outlets. For any booking, customers get a voucher for two and free for kids tickets to over 800 brilliant attractions all around the UK. The voucher holder is then lucky to choose any of the attraction sites that he wishes to visit free of charge using the reference number on his hotel booking ticket.

Strategic operations and competencies

Premier Inn has met the 5 pillars of strategy needed in ensuring competency in the operation of the hotel industry[5].

Management competences for Premier Inn
Competency Descriptions Indicators
Leadership and planning recognition of threats, partnering with other players for mutual benefit Strategic business vision
Collaboration and partnerships
Savvy communication
Financial management think like a consumer and as an entrepreneur and apply the right processes to achieve so. Analytical thinking
Business acumen
Project planning & management
Marketing development Anticipating the needs and wishes of the customer and attending to them. Customer service orientation
Service portfolio management
Innovative service management
Information technicalities Employing of IT in identifying problems and information processing Technical resource planning
IT management
Strategic management Staff & employee training and management on proper service provision methods HR management
Appraisals and training
Performance measurements

For a company such as Premier planning ongoing multinational, strategy plays a key role considering the size and the diverse environments its operations take place in. As a service industry, the ability to meet the customer needs on a global basis is of growing strategic importance. Benchmarking what the customer wants and not what they believe is one of their marketing strategies. As part of their customer service, they introduced the family room concept at many of the hotels, to offer maximized sleeping space. As it grows, it also changes its corporate culture to adapt to the changing customer’s needs. Premier Inn, from having a corporate governance system to a more centralized organization as it continues to indulge in international expansion, matching its organization’s capabilities and competencies to the competitive conditions of the external environment. [6] For example, in their operations in Dubai, the management there consists of Dubai people in order to fully understand the culture, taste and preferences existing there. Part of Premier Inn’s strategy is to study first carefully the economic development of the location, the existing competition and the changing travel patterns in the region. When Premier Inn entered the Dubai market, it intended to establish a fully-fledged hotel like the Bristol one because competition in that area was not that tough. Research has shown otherwise that the region is also favored by the higher income earning individuals thus there are steps to tap into this market.

Services analysis in Premier

This is one of the few hotels that provide and live to the guarantee of their services. One of the famous ones is the good night guarantee. In this offer the company pledges not to disturb their clients at night. If it is not the case according to the customer then he/she gets a full refund of her/his money back. While many people might view a service guarantee program as purely an advertising strategy, customer reviews provide compelling evidence that this service guarantee program by Premier Inn has significantly shaped its quality strategy as a market leader. A service guarantee can exert positive influence on the motivation and vision of the staff and thus increase service quality and customer satisfaction. A service guarantee program can also provide the impetus for a firm to focus operations on the attainment of superior service quality through learning from service failures.

In recognition of the high-quality service and the hotel’s 100% customer guarantee it won the National Business Awards for Unique Customer Service Strategy in 2004. The awards are bestowed on companies that portray high levels of commercial success, innovation, and verifiable results in areas of customer satisfaction and financial performance.

As earlier said, Premier Inn does not shy away from putting its establishment along Highways in fear of contributing to driving under influence by serving alcoholic drinks to would-be motorists; the Inverness outlet is along B865 highway. Another aspect of strategic locations is having the hotels near major towns such as London and Oxford which has pride in hosting the hotels.

Service Provision in relation to theories

The management of the hotel chain has invested wisely in familiarizing the senior management with the required methods of management. In analyzing the hotel, we can be able to identify a few theories utilized by the management.

Choice modeling theory

The best way we can relate this theory and the hotel’s service is through the offering of free extra sleeping areas in some special rooms named family rooms. In this offer we find that the hotel management has been keen to identify the basic needs of the customers and as such introduce programs and services that will help in delivering the expected or even more than the customer’s expectation. The economist who introduced this theory, Daniel McFadden, focused on the need for service providers to research and predict on the choices of consumers and put them in place even before they enquired about them. In this case we see that Premier Inn sought to know the traveling trends of their target market and came out with the finding that some of them travel as family units and prefer to remain together hence the inception of the family rooms.

Another way we find the application of the above theory is by locating the hotels near major cities in anticipation of housing business people who would according to their findings require somewhere to rest during the weekends when business is low. To avoid discouraging the targeted business people from retreating to their homes during the weekends and encourage them to seek accommodation in the hotels the Premier Inn lowered the room cost during weekends.

Total Quality management in service provision

This theory came with the advent of the ISO grading or rather recognition of the performance of companies both in the hotel and other catering businesses. The Whitbread conglomerate has achieved the prestigious award in recognition of the high-quality level of service that they extend to all their customers in all their branded outlets more so the Premier Inn which is the largest entity in the group.

The management is definitely applying a combination of service management theories in regards to the pricing and offers only unique to the Premier Inn hotels. This is in line with findings and recommendations of TQM which calls for efficiency in all levels of management as way of life and philosophy for any business entity serious on making its mark in the market by seeking to improve on everything that the management and the staff engage in.[7]

Some of the areas that the hotel has managed to maintain high level of TQM are listed as follows.

l Service. Premier Inn meets the customer requirements by offering a wide range of services with some being new in the industry thus a display of their creativity,

l Administration. The growth and management of such a large chain of hotels that at the same time manages to churn such high profits. This could never be a reality without the employment of this theory in the operation.

l Reducing product and service costs. As a budget hotel the Premier Inn has made this observation from the word goon their operations.

l Demand flow manufacturing. The location and positioning of the hotels along highways and in major cities make the hotels very accessible to the target market[8]

The hotel sets service standards that corroborate the hotel’s objectives and mission. As a budget high-class hotel, Premier Inn faces the challenge of offering high-class services that match the pricing without compromising on any basic functions of a hotel but not just a hotel it maintains the trademark quality of all Premier Inn outlets.

A detailed standard level of service has to be maintained such as ensuring that all Premier Inn employees have be well-groomed with each wearing a visible tag showing his/her name, setting realistic and reasonable expectations for the hotel in ensuring that the current service program is not undermined by impossibilities in its execution. The hotels insist on this realistic expectations so that they can be delivered by the employees to the customers on a 100% basis rather than setting unrealistic standards hoping that the employees can manage to offer it at 80% or higher.

Service recovery theory

As is common with product warranty, service providers through the help of economists and business analysts have come to recognize the effect of the ”service warranty” on consumer satisfaction and the effect it has on improving future sales. This is however impossible in that the best that the service provider can do is refund the amount paid and at times compensate for the service if the consumer is not satisfied on genuine grounds. Premier Inn utilizes the findings of this theory by offering the 100% service guarantee if a customer does not have a comfortable overnight stay at the hotel.

The application of the above theories and strategies in the provision of services cannot be well executed if the employees are not an integral part of the process. The best way to go about is by giving the employees the power to be responsible of their actions in offering of the service as it also determines how they interact with the customers. Apart from that it also reduces the need for supervision thereby giving the management time and room to get involved in more productive roles. This process is what is known as empowerment process.

Empowerment process

Empowerment has of late in the business world become a buzzword with some managers who have no clue about it fearing anything to do with it as it contains the word power which they are afraid of losing in managing their organizations. Those in the know however, have been quick to embrace the term and its application in their respective organizations. What the term simply means is that it’s a process involving unleashing of human potential hidden in talents and skills and enhancing the human ability to nurture what is perceived to be good for the organization’s growth. At Premier Inn, the management trains the staff to judge a situation and give it their best shot in an attempt to find a solution carried out as per the training the management organizes for their staff. The freedom to think and be creative for an employee is highly dependent on one’s ability to trust one’s self, to trust others and be trusted. At Premier Inn basic trust is believed to come from the types of interactions experienced within the workplace especially between the junior and senior staff. Those who have acquired trust tend to be trustworthy and create accepting environments within the workplace that encourages the freedom of creativity necessary for an organization’s and customer satisfaction.[9]

Recommendations

The hotel at the moment is underutilizing the Costa coffee unit among its many affiliates. Though the management claims to be very professional in handling their operations there is no evidence of the use of some of the crucial management tools recommended for hotels. For example there is now ample evidence to show that the hotel uses Business Process management in their operation. This process aims at identifying a complete procedure of events traced from the source to the recipient/destination where the route and the manner in which it reaches the destination are carefully managed for customer satisfaction and efficiency of the organization.

Too much concentration on making a name than profits first- Though the giant hotel chain is in the right trend in making profits the other affiliates of the Whitbread are not doing the same thus sucking on the achievements of Premier Inn instead of them fending from their entities and support themselves. If only the Whitbread family could operate the hotels chain more independently, the organization is bound to earn better profits.

The management of the Premier Inn seems to have a very strong HR department which in my opinion is very frugal in their recruitment shown by the staff they have in all their outlets. However the problem exists with the management which the employees seem not comfortable with especially the class of supervisors.

Among the major problems afflicting the hotel is;

The consistent failure to adopt modern IT developments that make management easier, a good example is BPM systems being offered by Microsoft and Subsystems.

Conclusion

The challenges facing the hotel and the service industry are mostly arrived at due to the change in culture, fashion and technology. With the advent of the Internet it has become necessary for hotel owners to make the consideration of installing Internet connections in every room and necessarily those that are meant for businessmen. It thus poses a challenge to any hotelier about the need to keep on changing with times to suit the demand and to have an upper hand over his competitors. With the celebrity life and fascination reaching an all-time high it would be advisable for the hotels to introduce celebrity suites in their outlets. With their spending habits known to be very high compared to ordinary citizens, the hotels are bound to make a kill out of this venture. All in all the Premier Inn brand of hotels deserve commendation for maintaining the high level of service and fair pricing.

References

Evans James (2004). Total Quality: Management, Organization and Strategy 4th edition, London: South Western College.

Fretterrmann, David (2000). Foundations of Empowerment Evaluation, New York: Sage Publications.

Bob, B., (2000). Introduction to the UK hospitality industry: A comparative approach, London: Heinemann.

Broekhuis. M., (1999) International Journal of Quality & Reliability Management.

Michael, H. (2006). Five star service one star budget, London: Prentice Hall.

Prideaux, B., (2006). Managing tourism and hospitality services: Theory and international applications, London: OUP.

Rick Sturm et al (2000) Foundations of service level management, Washington: Sams.

Rutherford, D., (2006). Hotel management and operations 4th Ed, Boston: Wiley.

Russel Imrie (2001) Journal of vacation marketing; Independent mid-market UK hotels: Marketing strategies for an increasingly competitive environment.

Vol.7 No. 1 pg 63-74

Venison, J., (2005). 100 Tips for Hoteliers: What every successful hotel professional needs to know and do, New Jersey: Prentice Hall.

Premier Inn’s green push, Travel Trade Gazette UK & Ireland, 2008 p35.

Foonotes

  1. IMF 2004 Economic report.
  2. “Throat for throat is the way forward for giants” The Sun 2007, pg 14.
  3. Rutherford, D., (2006). Hotel management and operations 4th Ed, Boston: Wiley.
  4. Michael, H. (2006). Five star service one star budget, London: Prentice Hall.
  5. Michael, H. (2006). Five star service one star budget, London: Prentice Hall.
  6. Michael, H. (2006). Five star service one star budget, London: Prentice Hall.
  7. Rick Sturm et al (2000) Foundations of service level management, Washington: Sams.
  8. Evans James (2004). Total Quality: Management, Organization and Strategy 4th edition, London: SWC.
  9. Fretterrmann, David (2000). Foundations of Empowerment Evaluation, New York: Sage Publications.
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