The main aim of this report is to provide a brief description of the hospitality industry in UK along with its size, scope and diversity in order to convince the panel of potential investors to invest in the hospitality industry. My management consultancy firm was asked to produce a formal report focussing on the foreign business people to help them to decide whether to invest or not in particular sector of the industry for the coming London 2012 Olympic games. It will provide them a brief description of different ownership styles, management styles as well as organisational structure of several different sectors of the hospitality industry. Moreover, it will also provide the detail analysis of current trends, issues and recent developments within the industry. There are different sectors in the hospitality industry like hotels, restaurants, clubs and bars, contract catering, casinos etc. The particular sector that I am going to focus is the accommodation sector i.e. hotel and I am presenting the ideas that i have generated while doing the research.
Definition of hospitality industryâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦4
Scale, scope and diversityâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦…5
Changes in last 20 yearsâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦…8
Definition of hospitality industry
Hospitality industry is a very broad industry. It is not always easy to define the hospitality industry. There are different criteria of defining it. One of the ways of defining hospitality industry is by using Standard Industrial Classification (SIC) which was founded in United Kingdom in 1948.”It defined the hospitality industry under the 1968 classification, as Establishments (whether or not licensed for the sale of intoxicating liquors) providing meals, light refreshments, drink or accommodation”. (Jones, 2002).Hospitality industry is defined as” hotel, motels, inns or such businesses that provides transitional or short-term lodging, with or without food.”(Businessdictionary.com). Both definitions suggest that hospitality industry is the industry which provides food and accommodation to the guest. Hospitality industry is made up of two distinct services- provision of overnight accommodation for people staying away from home, and the provision of sustenance for people eating away from home or not preparing their own meals.” (Jones, 2002).
“British Hospitality: Trends & Developments 2010 which was published today has revealed that, despite the recession, the UK hotel industry is continuing to expand, with over 10,400 rooms opening in 2010 and a further 43,000 planned for the period 2011-2015.”(British Hospitality Association,14/11/2010).The hotel industry is flourishing every year. Moreover, the tourist coming to the UK especially London is never stopping.”The amount spent by overseas visitors to the UK rose by 15.9% during July 2010 to £1.96b, compared with £1.69b 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 increased by 4.9% to 3.24 million during this period, compared with 3.1 million in July 2010.”(Caterersearch.com).By looking at the figures above we can say that it is secure and safe to invest in the hotel industry.
There are various sectors in the accommodation where businessman can invest. They can invest in different types of chain hotels, business and conference hotel, budget hotels, boutique hotels, motels, lodges etc. They can invest in the existing property or build up hotels by themselves. If they invest in chain and popular hotels they may save the time and money for the advertisements and promotions. Budget hotels are also getting popular nowadays because of the low disposable income. People want to spend less money and get good facilities and service. Moreover, they can also construct a new hotel by themselves where they can be the sole owner and can have control over the profit and loss of the business. Business people can also buy the franchising license or do the management contracting.
Scale, scope and diversity
The hospitality is one of the largest and fastest growing industries in the world.” There are just over 46,000 hotels and guest houses in the UK, and the hotel industry remains a significant sector of the economy, with an annual turnover of around £40billion (Trends & Statistics, 2008, British Hospitality Association).”” The industry is made up of about 127,000 properties and employs a workforce of 1.6 million people.” (British Hospitality Association) It is very large and diverse industry. It is the third largest sector that provides employment.
The scope of the UK hospitality industry is very big. There are different commercial sector like hotels, restaurants, fast food outlets, takeaways, motels, hostels, pubs, clubs etc whereas the welfare sector like educational institutions, halls of residence, hospitals, old age homes, prisons etc. Many tourists are coming to the country every year as the London is popular city around the world. We can find many big hotels in London in order to accommodate large no. of tourists every night. Therefore large no. of workforce is required in order to run such hotels which create millions of jobs.
The hospitality industry is very diverse due to the innovation, ownership, classification and grading system, level of service, leisure facilities, future trends etc. There are different types of hotel which provide standard services to the guest. The hotel now not only provide the food and accommodation but also provides facilities like internet, gymnasium, swimming pool, sauna bath, Jacuzzi, night clubs, shops, hair and beauty salons, laundry, car parking, conference and meeting rooms etc. The ownership and classification of hotel grading system also make it diverse. There are different type of ownership and management style like sole owner, partnership, public limited company and private limited company. The grading system of hotel by rating with stars from 1 to 5 level according to the level of service they provide to their guest.
Food service is also one of the important facilities provided by the hotel. The facilities provided by the hotel depend upon the type of the hotel. There are one or many restaurants in a hotel. The restaurant provides different type of facilities like ala carte menu, buffet service, bar menu, catered service, room service etc. Nowadays we can usually find a restaurant in every hotel. Thus, food service is one of the important sectors of the hotel industry.
Another important sector of the hotel industry is entertainment. Different types of guest come to the hotel some of them are business people, leisure guest, holiday makers etc .Leisure guest and holiday makers are travelling fully for the purpose of entertainment. They want to utilise their holidays and enjoy a lot. Therefore, the hotel should provide entertainment facilities like night clubs, gymnasium, bars, themed parties, casinos, swimming pools, sauna and Jacuzzi, sports facilities etc. They should arrange the indoor activities so that the guests don’t need to go outside searching such facilities.
Organisational structure is the relationship between the people and different departments of an organisation. “Organisational structure is a formal system of job relationship that coordinates employees to achieve a company’s goals.” (Definition of Organisational Structure/eHow.com). “An organisational structure defines how job tasks are formally divided, grouped, and coordinated.” (Robbins, 2003, p. 425)
Different organisations have different organisational structure. Some organisations have tall structure whereas some have flat structures. Tall organisational structure is in mainly found in large organisations such as hotels which consists of different levels of staff from the managers to the workers whereas the flat organisational structure do not have many level of staff. For e.g. in a flat structure of a restaurant an owner can be the manager and the chef as well. The organisation is divided in two different parts front of the house and the back of the house. Front of the house are the departments like food and beverage, accommodation, conference and banqueting etc whereas back of the house are the departments like finance , food preparation areas, and the areas not seen by the guest.
In the accommodation sector you can find different types of ownership and the structure. Mostly two types of ownership are popular in the hospitality industry. They are sole ownership or the franchised. Sole ownership means opening hotel by you without taking any financial help from other except loans. The advantage of this type of organisation is that the owner have sole access to the profit and can make the hotel according to his ideas and concepts whereas the disadvantage is that you have to bear all the losses of the business and may not have full support as those of chain hotels. In this type of ownership the owner will have direct control over the business.
The hotel can be chain hotel or franchised and it can also be the partnership or limited companies. You can directly own a hotel in the chain or can get it be franchised. You can invest in a chain hotel where you can be a part of renowned chain whereas in franchise system of ownership you need to pay the franchisor a royalty fee in order to operate the business. In this type of ownership one can save the expense of marketing and promotions as it is already well known by the public. Moreover you will be also less affected by ups and downs in the business as you are part of a chain.
Both of the above mentioned ownership and management style is popular in the hotel industry. The solely owned hotel should be more promoted in the market as everybody does not know more about the hotel. They should try to be unique by offering wide range and standard services so that guest would be lured to come back again and refer it to other guests. On the other hand the chain hotel should try to maintain their standards as compared to the other chain hotels so that the guest would feel the same standard of service like in any other chain hotel.
Contemporary issues are the issues in relevance to the present time. The hospitality industry is facing many contemporary issues in today’s world. There are lot of managerial and operational issue in the hospitality industry. Some of the operating issues are standard operating procedure, food and safety, employee expectations, flexible working, socio- cultural issues, recruitment and retention, e-commerce etc whereas the managerial issue are key players in the hospitality industry, international aspects, marketing considerations, education and training providers, media issues etc.
One of the important managerial issues in the accommodation sector is to identify the key players in the industry. There are lot of big brands who are leading in the market. So, you need to identify who are the key players and see how they manage their organisation in order to achieve their goals and objectives. Therefore, in order to remain competitive with such organisations you need to focus on the marketing strategy and providing good service to the guest. You should monitor the things happening around the organisation and should manage the staff properly in order to increase the level of output. Today’s world is filled with competition so in order to be stable in the challenging world you should try to focus on the staff management because if the staff is happy then only the organisation can achieve their goal. The guest judge the hotel by the level of service they provide and the facilities they offer so it is very important to provide quality of service to the guest.
The operational issue should also be taken into consideration in order to have an effective organisation. One of the most important operational issues in the accommodation sector is employee expectations. Staffs are the person responsible for the smooth operations of an organisation. Employee has lots of expectations from the management. They expect to receive their performance appraisal from their manager, to get trainings for their career development and growth, flexible working hours, good communication etc. They also want to have promotions and recognition for their hard work. So, it is an important contemporary issue. Therefore, for an organisation to be successful it needs to address the employee expectations.
Case study Ritz Carlton Hotel
“The Ritz–Carlton Hotel Company, L.L.C. was established in 1983 with the purchase of the Ritz-Carlton, Boston and the rights to the name “Ritz-Carlton”. The standards of service, dining and facilities of this Boston landmark serve as a benchmark for all Ritz-Carlton Hotel and resorts worldwide.” (Case Study of Ritz Carlton) Ritz Carlton is one of the best hotels in the world. Training is also one of the important employee expectations. Employee expects training programs from the employer in order to develop their career and get promotions in the near future. Ritz Carlton provides training to the employee in a systematic way. Firstly they analyse training needs, design training programs, develop training resources, implement training activities and evaluate training results. In this way they help the employee to develop their potential. The Ritz Carlton hotel has the lowest turnover rate as the employee expectations are met to the maximum extent.
Another important operational issue in the accommodation sector is the standard operating procedure.” A standard operating procedure is a companywide formalised structure to handle specific operational activities.” (operating procedure from ibis) .It helps to improve the quality and the speed of a particular operational procedure. For example booking of hotels can be done through internet. It will be easy for the guest to book the room on internet. They don’t need to waste their time by calling the hotel and asking the receptionist for all the details. It is will be also easy for them if they need to make any changes for their booking. Moreover, the receptionists also can utilise their time by doing other important work instead of handling the telephone calls. She can utilise that time by doing other important paperwork.
Changes in last 20 years
There have been tremendous changes in the accommodation sector in last 20 years. People have started spending more money in leisure travel and holidays. The innovation of budget airlines was also the main cause of people travelling from one place to another. It was very cheap to fly from one country to other. Moreover, the budget hotel also came into existence which provided facilities to the guest in cheaper rate. So, due to high disposable income people started to spend more money in the hospitality industry as a result of which it flourished significantly. The system of annual holidays also came into existence which gave people more time to spend holidays outside their country. The e-commerce was also introduced where people can book the hotel rooms through internet and make any changes in their bookings. They could find the information of the hotels and can choose the appropriate one. There was also the growth of large chain hotels and hospitality companies all across the world. There was emergence of quick service restaurants and the contract caterers such as garner merchant and compass. Moreover the big companies continue to become even larger through merger and acquisition. These all factors contributed to the significant changes in the hospitality industry.
There are various current trends present in the accommodation sector. People have been much conscious about their health as a result of which they are attracted to healthy eating or the organic food. Innovations in technology are also one of the current trends. Due to inventions of new technologies the life of people has become easier. The term globalisation has also created an impact upon the hospitality industry where people are thinking in the term of expanding their business all around the world like Accor groups. They are opening their hotel branches in most of the countries. Not only Accor most of the leading hospitality brands are expanding their business all around the world. Consumer spending is also one of the current trends. People are tending to spent more money as they have high level of disposable income. Making bookings through the website reservations is also the trend that contributes to flourish the hospitality industry. People can easily book the rooms in the hotels. The current trends have positive impact upon the hospitality industry.
The hospitality industry is composed of two factors. They are accommodation and sustenance. Accommodation is one of the important sectors of the hospitality industry. Millions of tourists come to London every year. So thousands of rooms are required to accommodate such tourists. Therefore, it is price worthy to invest in the accommodation sector. Moreover, the 2010 Olympics is also coming nearer which means large number of tourists will be coming to this place. As a result they need to build more hotels for the tourists. So the business people can invest in this sector which would be more fruitful.
On the other hand there are various contemporary issues facing the accommodation sector. We need to address the operational and managerial issues as soon as possible for the smooth functioning of the organisation. Managerial and operation issues are equally important and need to be solved as it may hamper the development of the organisation. Thus, the accommodation sector is a very important sector of the hospitality industry therefore it needs to get updated with the current trends going on in the modern world in order to be successful.