Premier Inn: Key Strategic Issues, Porter’s Five Forces, and SWOT Analysis

PREMIER INN STRATEGIC ANALYSIS
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Premier Inn Strategic Analysis
Introduction
Premier Inn is a British hotel based in the United Kingdom and provides hospitality services. It is the largest U.K. hotel brand with more than 800 hotels and 72,000 rooms. It has other operating hotels in different locations worldwide, including airports, suburbs and city centres. The company was first started by Whitbread PLC as a brewery in 1847 and produced famous breweries in the States (Bower, 2018, p.20). In 1987, the company decided to venture into hotel services as Travel Inn. Whitbread bought Premier Lodge in 2004 and merged it with Travel Inn, and shortened it to "Premier Travel Inn". This resulted in an addition of 141 hostels. It continued growing in size, and at last, it sold some of its smaller hotels, those with less than 30 rooms, to Good Night Inns in less popular cities.
What makes the company more interesting is that the hub has allowed them to situate their hotels in high-value locations, thus attracting more customers. Since it considers that most of its customers are out for their leisure activities, it invests more in good night sleep and new technology than other traditional hotels. It offers an application whereby guests can regulate the room temperature via their phones (Tempest, 2008, p.9). Since most people spend more of their time on their smartphones, such an offer makes the company more reliable. Besides, the company spends most of its hard cash on developing new sites in newer locations. The hotel focuses on high income and middle-income earners who can are willing to pay their hotel prices. It segments its customers according to business players who book their hotels on business trips and leisure players who typically book their rooms for recreation purposes.
This research paper will entail external factors affecting Premier Inn strategic positioning in the hospitality industry, including the macro-environmentally factors and Porter five forces. It also includes the company's key strategic issues together with its SWOT analysis.
Macro-Environmental Factors Affecting the Strategic Company Positioning
Several factors affect the strategies implemented by an organization either positively or negatively. For instance, reduction or increase in trade barriers, sudden changes in the political atmosphere, and cultural differences could significantly impact the operations of an organization both positively and negatively. Most companies use PESTLE analysis to analyze such outstanding factors and is an important consideration when formulating strategies.
The government is deeply connected to the political aspect. The United Kingdom's government, in particular, has collaborated with the hospitality industry to elevate it into the fifth-largest industry in the country to have an extensive employment rate giving jobs to more than 2.4 million individuals. The hospitality industry also brings in about a 34billion euros in tax revenue. Tourism recognition from top political officials such as the prime minister as an industry of the future helps the government back the industry. There has been a regional growth fund for the hospitality industry. With these improvements, the premier inn organization can expand with growing demand for their services in the hospitality sector. As the fastest-growing hotel chain brand in the country, the company can serve to meet the growing demand.
The tremendous changes in peoples' living standards and lifestyles have resulted in significant cultural differences worldwide. These days majority of the consumers prefer cheaper goods and services accompanied by high-quality services that account for their money (Pádraig, 2017, p.46). Premier Inn Company is committed to understanding its customers through programs such as customer feedback. By this, it focuses on customer satisfaction by offering high-quality rooms with luxurious surroundings.
Technology is one of the most important factors to be considered when formulating business strategies as it keeps on changing from time to time. The integration of the latest Internet of Things has helped the smooth flow of business operations in the hospitality sector. More so, it is changing the marketing and advertising strategies of the company's products and services. With this, Premier Inn maintains an interactive webpage whereby the customer database is stored and retrieved online. They also offer online booking services and uses most applications to create awareness of their goods and services.
Most customers consider a company's social responsibility plan before deciding to buy from the company. They are positive towards an organization that cares about the environment and whose business operations helps in reducing the environmental pollution. Emphasis on Corporate Social Responsibility is one of Premier Inn's success factors. They have developed a "good strategy" strategy, which focuses on reducing the rate of carbon emission to the environment and getting at least 80% of the hotel waste diverted from landfills by 2022.
In the U.K., the minimum wage rate was recently increased by 15.5%, and this means that the cost of production for hotels would relatively increase, thus prompting most companies to double their prices. To avoid any legal mishandles with the government, Premier Inn has formulated a Responsible Sourcing Policy that defines the code of conduct and what is expected of their suppliers, business partners, and shareholders. It emphasizes the commitment to work with suppliers to enforce the policy.
Porter’s Five Forces
The study of the above forces remains an integral part of any organization as it has a significant impact on strategic decision making. This model considers both internal and external factors that influence a company’s competition. The Premier Inn Porter’s Five Forces Model is as highlighted below;
As the hospitality industry continues to grow enormously, the United States government warns Premier Inn against a threat of new entrants in the industry. New companies join an industry due to reduced production costs, limited trade barriers and increased demand. Therefore, this requires the organization to invest primarily in geographical spread budget and R&D costs. High entry barriers could also be imposed by providing quality meals for its hotel customers. Moreover, they should continue focusing on customer satisfaction as it limits room for substitutes. Also, offering their services and goods at a relatively affordable price could help increase switching costs, thus boosting customer loyalty and retention. Premier Inn should also set up enough capital to train and recruit a skilful workforce ready to offer quality services to its potential customers.
Furthermore, competition in the hospitality industry is evident due to new companies joining the market and product differentiation. The required growth rate of Premier Inn is relatively high at the rate at which the company is growing. The company maintains its competitive edge by increasing its customers switching costs by offering high-quality goods and services that meet the customers' demand. Also, due to high capital costs in the hospitality sector, Premier Inn strives to beat the competition by cutting the prices of their hotel services, especially on weekdays.
In addition, the hospitality sector could be facing minor bargaining power of suppliers. Premier Inn is mainly subjected to managing their trained staff and personnel since there is an increased demand for a skilful workforce. Acquiring such a trained workforce has become expensive over the past few years since they also demand high payment for their services. Hotel suppliers also have set prices and require the company to meet their demands regardless of the prevailing economic situation. Premier Inn cubs this by placing a policy in which their suppliers must set a maximum price to sell their raw materials. They are required to abide by this conduct regardless of the situation.
More so, when there is a high concentration of customers in the market, their bargaining power tends to be felt in the industry more than when there is low demand. The hotel industry's buyers bargaining power tends to be more superior when they are in groups than when there are individually. For instance, international airlines, convention organizers and tour operators have a significant influence over the prices of their goods and services. To handle this force, Premier Inn has focused on differentiating and offering unique services from their competitors. When there is a high peak of leisure activities and tourism, the company tends to lower its hotel room prices to attract new customers.
The hospitality industry faces the threat of substitute products from new and already existing companies. Each company is striving hard to survive in the market with the present competition. Therefore, it would continuously improve their goods and services and make them better than their competitors (Pádraig, 2017,p.77). For example, Premier Inn faces the threat of substitutes from hostels and motels. Customers who are price sensitive tend to opt to reside in those motels or even with their relatives; thus, the company should struggle to establish more attractive and comfortable rooms and offer cheaper services than those substitutes to continue surviving in the market. The two things a company in the hospitality industry can do to survive are differentiate their products and services and offer quality services dependent on appropriate staff.
Premier Inn Key Strategic Issues
The vertically integrated model incorporated in Premier Inn, which involves ownership of various hotels, brands and inventory disbursement, is a strategic issue that has enabled the company to grow tremendously over the years. Over the last 15 years, it has generated a strong return on capital for its shareholders, which maximizes their wealth (Rashid, 2018, p.23). This strategy has increased shareholder investment which ultimately increases their overall profitability. The individual private ownership of the company has provided Premier Inn with a competitive edge in a market full of competition. It has continued leading in the hotel industry in the U.K.
Furthermore, Premier Inn's operating strategy has continued giving it a clear competitive advantage over the years, enabling it to offer unique customer services that have a solid appeal to their customers during the current pandemic (Burke & Choi...