Travel Accommodation in UK

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Travel Accommodation in the United Kingdom

Dissertation Writing Help in  Travel Accommodation in  UK

Headlines

·         Outlets number 72,800 in 2007 with sales reaching £15.4 billion, up 1% in current value over 2006

·         Independent hotels have shown the strongest growth over the review period with a CAGR of 1.4% in terms of outlet growth

·         Branded budget hotels continued to expand strongly at the expense of unbranded low cost accommodation

·         Travel accommodation is predicted to show minimal growth over the forecast period with a CAGR of 0.4% in terms of constant value growth

Trends

·         In 2007, the number of accommodation establishments declined for third successive year to below 73,000. Rooms and beds meanwhile declined since 2002, with the average number of rooms per hotel declining slightly from 60 in 2002 to 58 in 2007. The decline in UK domestic tourism has impacted the accomodation sector and therefore demand is lower throughout the year

·         Since 2001, sales per outlet generally increased, although the progression was not smooth from one year to the next. In 2007, sales per outlet rose to £212,000, with a current value increase of 2% from 2006. However, sales growth kept pace with inflation and hence there was no constant value growth in average sales during the year.

·         Campsites and hostels, which saw current value growth in excess of 25% in 2006, slowed down to single-digit growth in 2007. For campsites, the slowdown was due to lower demand linked to the summer weather of 2007, which was particularly poor with above average rainfall. In contrast, hostel outlet numbers fell by around 30 during the year, which affected revenue. Hostels which are traditionally seen as one of the cheapest accommodation options are facing competition from the rise in budget hotels who may be offering more up-market accommodation at similar prices. The hostels may also been unable to compete on price as they do not possess the economic benefits providing by a large hotel chain.

Hotels

·         The largest growth was seen in budget hotels towards the end of the review period, comprising chains such as Travelodge, Premier Travel Inn and Holiday Inn Express. This growth coincides with the beginning of the credit crunch with hotel guests seeking outlets which are not expensive. In September 2007, budget hotels was reported to have turnover of around £1.1 billion with 85,000 rooms at its disposal. The overwhelming majority, over 84,000, are part of chains. Budget hotels is characterised by a relatively low room rate of around £50 but with above average occupancy for hotels of 70%. Thus, the revPAR for budget hotels was around £35 in 2007.

·         There was a continued disparity in revPAR between London and the rest of the UK. For the first nine months of 2007, revPAR in London was £104, while Edinburgh was second highest at £70, according to a Hotelbenchmark survey. Several cities reported revPAR of £41 or lower, including Leeds, Nottingham, Sheffield and Swindon. The main cause behind the lower revPARs in these cities was relatively weak room occupancy of below 70%.

·         Figures for the fourth quarter of 2007 show that 46% of hotel bookings for major brands made electronically were made via the hotel’s own website, 14% through third party operators such as Expedia and 39% through travel agents’ reservation systems, such as Galileo and Sabre. Compared to a year earlier, there was an increase in bookings directly with the hotels, entirely at the expense of travel agents. Customers are becoming increasingly independent when making hotel bookings and prefer to book directly to obtain the best price. Often internet bookings will provide discount rates.

·         There was little expansion of hotels in beach and coastal locations and indeed hotel numbers have declined in all rating categories with the exception of 4 star hotels. The poor summer weather of 2007 is likely to have assisted in this decline with many tourists seeking a beach holiday abroad instead of the UK. In constrast, growth of hotels in cultural locations, almost excusively city-based, has been relatively strong, with all categories showing an increase in number except the 4 star rating. London, Manchester, Liverpool, Newcastle-upon-Tyne and Edinburgh all saw investment with short city-breaks remaining popular for inbound and domestic tourists. Countryside and mountain hotels have also shown growth in all rating categories except for 5 star.

Competitive Landscape

·         The leader in the chained hotel sector in terms of value sales is Whitbread plc which owns Premier Inn showing a 5.6% share of the market. During 2007, Whitbread spent £13 million on a re-branding exercise to change its Premier Travel Inn brand to Premier Inn. According to Whitbread’s press release, the re-branding “will make it easier for consumers to remember, recognise more quickly the premier offering in the budget hotel sector and create clear blue water between the brand and its competitors.” The new name will eliminate customers’ confusion with Travelodge chain. The success of Premier Inn is based upon a strategy of convenience with 75% of the UK population apparently living within 5 miles of a Premier Inn.

·         Following close behind is the Intercontinental Group with the Holiday Inn, Holiday Inn Express and the Crown Plaza brands which has a 5.3% share in value terms. The group opened 11 new Holiday Inn hotels in 2007 as part of a rebranding exercise, as the hotels are all owned by Kew Green Hotel Ltd and formerly operated under the Courtyard by Marriot brand.

·         Travelodge, owned by Dubai International Capital, saw a strong year of growth in 2007. The UK expansion continued with the opening of 23 new hotels, with another 24 currently being built for 2008, and planning secured on another 42. The company was named the number one budget hotel brand in March 2008 by the BDRC (Business Development Research Consultants).

·         Health and wellness hotels saw a particularly vibrant 2007. 40 new outlets were opened and revenue increased from £440 million in 2006 to £510 million in 2007. This figure represents 3% of total turnover for UK travel accommodation, with average sales per outlet of around £1 million. This is almost five times the average for mainstream hotels.

·         A new entrant into UK hotels in 2007 was Barceló, which took on the operation of 20 hotels in September under a 45-year lease deal with owner Dawnay Shore Hotels. The company, which manages 160 hotels worldwide, plans to increase its portfolio to 40 hotels by 2010.

·         In luxury hotels, the first Wyndham hotel opened in the UK at Chelsea harbour in June 2007, having previously been branded as a Conrad outlet. As a consequence, the Conrad brand will disappear from the UK.

Prospects

·         Budget hotels are expected to grow by a further 38% in constant value terms during the forecast period, with sales reaching £1.5 billion by 2012 and this niche accounting for around 20% of all hotel rooms in the UK. This expansion is likely to take place at the expense of independent hotels and guesthouses, which compete in a similar price bracket to budget chains.

·         One of the main issues for travel accomodation in the UK is the continued attractions of low cost flights to other destinations in Europe and the domestic tourism market is not predicted to show growth over the forecast period. Whilst inbound tourists are increasing in number, more and more are coming from countries with a lower expected spending power than previous and this will also affect travel accomodation.

·         The entire travel accomodation secotr is expected to show a decline of 1% in CAGR over the forecast period in terms of volume of outlets, but a CAGR of 0.4% in term of value. In particular, self catering options such as camping and self-catering apartments are predicted to decline during this time as increasing numbers of customer opt for catered packages in hotels and guesthouses which appear to offer more value for money.

·         Travelodge, which operates some 320 hotels in the UK and plans to open a further 70,000 rooms by 2020, is offering finder’s fees of up to £150,000 to people who inform them of expansion opportunities to stimulate the chain’s development. The firm says it will “pay £500 per bedroom per transaction (up to a maximum of £150,000) to anyone introducing a development opportunity that we are not already aware of, which proceeds to an unconditional exchange of contracts” and has set up a dedicated website for this purpose.

·         Spa hotels are expected to continue to exhibit strong growth, although its impact will be much smaller than that of budget hotels. Spa outlet turnover is expected to grow to £638 million, accounting for 4% of total travel accommodation by 2012.

·         Based on evidence from Athens in 2004, demand for accommodation could decline in London during the Olympic Games if hoteliers attempt to introduce premium prices. However, as inbound and domestic tourists visit areas other than London and the Olympics Games cover less than three weeks of the year, the overall impact on travel accommodation will be very small. During the Olympic games, many private homes are expected to function unofficially as guest houses and bed & breakfast accommodation.

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