Magoosh GRE

A report to the Board of Directors at Ennismore Capital Regarding the Expansion Idea at Hoxton Hotel

| January 20, 2017

Abstract

The hotel industry has gained more popularity over the recent decades in most parts across the globe. London, like other cities has manifested stiff competition among different hotels in offering high quality services, including meals and accommodation to both local and international customers.Hoxton has been a top ranking hotel in London, with some of the surveys ranking it the best for three consecutive years. The hotel is under the management of enthusiastic and goal-oriented team (Ennismore Capital), characterised by the constant ambition to grow into a larger hotel industry. Having proposed the expansion idea to the Hoxton Manager, there is need to conduct a critical review of the idea and render the most informed recommendation to warrant the implementation of the expansion idea. This paper therefore outlines a report to the Board of Directors at Ennismore Capital regarding the expansion idea at Hoxton Hotel, in which the strategic analysis of the hotel, internal analysis through a resource audit and core competency analysis, and the application of Ansoff’s matrix are covered. The report gives concludes by proposing a local expansion of the hotel in the UK, and summarises the recommendations to the board.

Introduction

The Hoxton Hotel is owned and managed by the Ennismore Capital. From recent surveys conducted in the United Kingdom, The Hoxton Hotel has been ranked as one of the leading hotels in London (Agencies, 2013). For example, one of the surveys and ranking by the Guardian Newspaper had ranked Hoxton Hotel as the best in the UK for three consecutive years. The ranking by the Guardian Newspaper focused on the professionals from the creative industries such as Design, Computing, as well as Fashion. The constant growth and development of the hotel, which has since its foundation, led to its modern top ranking can be attributed to the enthusiastic, goal oriented and successful management body. For instance, the Ennismore Capital have a current plan of expansion, in which they aim at either local expansion within the UK, or internationally in the same hotel business, or through further diversification into related sectors. In order to facilitate proper decision making regarding the multi-million pound expansion idea by the Ennismore Capital, there is need for a strategic analysis of Hoxton Hotel, together with an examination and evaluation of the strategic choices that are open to it. This report details the required strategic analysis of the hotel, which constitutes the current strategic position of The Hoxton Hotel in terms of the external environment it faces. This is achieved through a PESTEL analysis, business trends and level of overall competitive rivalry in the hotel industry. It covers the internal analysis through a resource audit and core competency analysis for The Hoxton Hotel. The report advices the Board of Directors on the expansion idea through the application of Ansoff’s matrix, and proposes the organic method of growth.

Current Strategic Position of the Hoxton Hotel

Strategic business position refers to the process in which a business distinguishes its products and services from those of its competitors, and as such, identifies which market niche to occupy. Strategic positioning is one of the most vital benefits associated with proper business planning. The importance of proper business planning in developing an advantageous strategic position is vital, especially in the face advancing technology (Field, 2013).  The Hoxton Hotel has overrecent years, acquired a leading position among the hotels found in the United Kingdom. The study by the Guardian newspaper relied on the nature of the products and services offered by the hotel, with major back-ups from the customer testimonials. The customer testimonials, among other sources of information contributed to the hotel’s leading rank ion offering meals and accommodation services. The strategic position of a business becomes contingent when it manifests its uniqueness in products and services offered, as well as its verifiable value (Vignali, 2014). In order to determine critical analysis of the current strategic position of The Hoxton Hotel in terms of the external environment, it is necessary to conduct a PESTEL analysis, and the current industry trends, in tandem with the overall competitive rivalry.

The PESTEL Analysis

The PESTEL analysis is a common framework in the United Kingdom, used to evaluate the external environment of different business. The framework consists of different factors affecting businesses, ranging from Political, Environmental, Social, Technological, Economic as well as the Legal aspects (Glykas, 2013). For instance, the political factors involve factors that determine the level of involvement by the UK government. The government may influence the operations of the business through an introduction of new tax policies. The business, upon compliance, experiences a new era in its revenue, which affects its competitive advantage. The government’s stability, press freedom policies, trade union regulations, consumer protection policies, as well as the level of corruption also defines a business’ external environment (Glykas, 2013). In addition to the political factors, economic factors also determine the overall performance of a nation’s economy, which bears a direct impact on the profitability of any business. For instance, inflation trends in the economy determine the pricing policy of hotel prices for their meals and accommodation services. Moreover, there are socio-economic factors, which involve the prevailing cultural and demographic trends on marketing. The technological aspect of the framework consider the level of innovations and their application in sales, marketing as well as delivery of goods and services within the business industry (Glykas, 2013).

Similarly, the legal aspect of the PESTEL framework affects both the internal and external business environment, owing to the hotel’s effort to comply with the legal policies enacted in the UK. The legal factors work in tandem with environmental aspect of the PESTEL framework, since there are various environmental policies enacted and enforced through legal terms. The hotel has an obligation to conduct its business in such a way that it complies with environmental sustainability policies enacted in the UK.

The table below outlines each of the factors in the PESTEL framework, and the effects of each factor on the current strategic position of the Hoxton Hotel.

Factor Impact on Hoxton Hotel
Political The UK government is currently getting involved in the hotel industry owing to the need to control security.

The UK government is also making further restrictions into the issuance of licences for hotel operations.

The Hoxton Hotel has a good business relationship with the UK government in tax payments, and through their ability to attract international markets

Economic The hotel accommodates international guests and hosts international conferences, which are dependent on the individual economies of foreign countries.

In some cases, the local markets do not supply adequate food, and the Hoxton Hotel imports beef and potatoes from other countries to meet the demands (Yang, Flynn & Anderson, 2014).

Socio-cultural The Hoxton Hotel enjoys a larger section of the UK population being of higher social class, who can afford the high prices offered for the meal and accommodation services provided.

The Hotel also offers the modern amenities and innovative technologies such as the wireless network, which is a hot cake for the up-coming generation. It therefore means that the younger generation form a promising class of customers for the hotel (Lazzeroni et.al, 2013).

Technological Technology has played a pivotal role in ensuring the competitive advantage for the Hoxton Hotel. This is because the hotel offers a wireless network in the rooms, which has acted an attractive feature for many customers (Yang, Flynn & Anderson, 2014).
Environmental The hotel has a public responsibility to ensure a sustainable use of the environment. There are policies which have a legal binding for the hotel, especially regarding waste disposal and management (Brigade, 2014).
Legal The Hoxton Hotel complies with all the labour policies in the UK, as well as international standards by scheduling manageable workloads for its staff (Hoque, 2013.

Key Industry Trends and Level of Overall Competitive Rivalry

Having emerged as a leading hotel in the United Kingdom for three consecutive years implies major achievements for the Hoxton Hotel. There are many factors which contributed to the hotel’s competitive advantage (Hulbert, Gilmore & Carson, 2013). For instance, surveys have indicated that Hoxton Hotel is one of the most popular with relatively lower rates. Compared to other major hotels in the UK, Hoxton offers lower prices for high quality services for not only delicious meals, but also the comfortable accommodation rooms. The lowly charged rooms include some of the publicity-garnering £1 per night, among other facilities that remain affordable to the customers.

In the hotel industry, the location of the business forms a critical aspect of its usefulness to the intended clients. This is because the accessibility depends on how far or close the facility is located from other public utilities, such as roads, hospitals, as well as other sources of entertainment, including natural features (Porter & Shaw, 2013). Considering the location of Hoxton Hotel in the United Kingdom, the hotel remains highly competitive for its Shoreditch location. The presence of the Shoreditch around the hotel acts as a point of attraction to many clients, who according to surveys, have affirmed that they experience a double benefit when they visit the hotel. Their double reward is owing to the fact that their stay in the Hoxton Hotel gives them an opportunity to enjoy the beautiful scenery at the hip Shoreditch.

The room design is also another significant factor that is responsible for the high competitive advantage. According to the reviews done by most customers in Hoxton and other hotels, the room design is a central factor, which determines the customers’ choice to stay in a hotel. Based on this knowledge, Hoxton Hotel has properly designed, physically attractive and more appealing to most customers’ accommodation demands. Their appealing nature is associated with the fact they have relatively more luxury, than what most customers’ often expect. For instance, customers have free access to milk in the fridges, various options for a cold snack, and well balanced diet during breakfast.

The rooms are supplied with a system of free wireless internet service. The customers who have laptops and other internet enabled devices have free access to the internet at an unlimited rate, for as long as they stay in Hoxton Hotel. Moreover, the hotel rooms have some of the most comfortable beds, with the bedding materials displaying high standards of hygiene. Customer reviews conclude that according to their assessment, they found no source of discomfort during their stay at the 4-star Hoxton (Ryan, 2013). These reviews from customers also recognise the high aesthetic value of the hotel environment, noting the 2VVV Golfs forming a snug at the Hoxton’s entrance. Despite the strong competitive rivalry from the other hotels in the UK, Hoxton banks on its less costly products and services, the beautiful scenery located around the hotel, among other luxurious services including the free wireless internet offered in the rooms to maintain itself at the top of competition (Ryan, 2013).

Internal Analysis through a Resource Audit and Core Competency Analysis

In order to establish whether a business is strategically positioned to meet its objectives, it is a business requirement to conduct Internal Resource Audit (IRA), in which the management determines the available resources and how they can contribute to the achievement of the set goals of and objectives.

Clean External and Internal Environments

Since its foundation, the Hoxton Hotel has thrived on a good reputation for its cleanliness, both in the internal and the external environments. The high standards of hygiene that have formed the brand’s reputation have resulted into improved confidence among customers, who trust the safety of their meals as well. It is a common belief that clean environments have safe products for human consumption (Smith, 2013). This belief has been a primary motivating factor for even parents with younger children to use the facility for the available child friendly meal toys. Consequently, there has been a trend of increasing number of customers over the past years, which have led to an increase in revenue generation for the hotel.

Safe Foods

Hoxton Hotel has shown historical commitment to ensure that they serve safe meals and beverages to their customers (Smith, 2013). The process of ensuring safe foods and beverages at the hotel is a collaborative work between Hoxton and its suppliers, who take an active role in monitoring, tracking and testing different ingredients used in the production and processing of such food items (Smith, 2013). The food and beverage safety is a comprehensive process program in the hotel operations, that not only ensures food and beverage safety, but also all other promotional items. Based on critical analysis of the hotel’s safety standards, it is evident that Hoxton Hotel is in compliance with the government’s standards, and in some cases above them. The extra effort invested to ensure additional food safety is aimed at maximum consumer protection, as a core obligation of the business to the customers. Similarly, it is the responsibility of all the staff members to notify the relevant authorities in case of any safety issue, so as to maintain safe food as a resource (Smith, 2013).

The rooms at the Hoxton Hotel are comparable to the mothership at the Shoreditch.  The rooms designed to prioritise the customer’s comfort through adequate space. Just like stated in the above discussion, the rooms are among the most captivating facilities at Hoxton Hotel. With special designs to ensure customers’ comfort, they are spacious to permit free movement as necessary. In addition to the adequate space available, the rooms provide a refrigeration facility, which creates for storage of basic beverages and snacks (Smith, 2013). For instance, customers can always access the free milk provided in the fridge, other cold snacks as well as a variety of breakfast meals. Moreover, the rooms also incorporate an aspect of the modern technology, in which the management supply free internet connection to the customers through a wireless platform.

Application of the Ansoff’s Matrix

Based on their financial ability, the Ennismore Capital has £100 million for the expansion idea. Considering the level of risk, it is important to acquire a deeper comprehension of the existing markets and the new markets, as well as the new products and new ones. In the UK for example, there are many expansion ideas, each with a varying level of risk, depending on whether the idea involves the introduction of new products or use the existing ones. Similarly, the levels of risk also depend on whether the expansion involves operations with the current market, or entry into a new market (Gianos, 2013).

Hoxton Hotel has maintained a leading role in offering meals and accommodation services in the UK, and can boast of adequate knowledge in the sector. Furthermore, the business has involved the provision of one particular goods and services, during which the management has acquired all the basic and technical information required to run a successful business in the hotel industry. Having been located in the UK, the hotel also has a better understanding of the market structure and operations dynamics, including the requisite competitive advantage over their rival hotels within the region.

Conclusion

Based on the findings, it is evident that there is lower level of risk involved in an expansion idea, which involves opening new branches of the hotel, offering similar services in different parts of the country. On the other hand, there is higher level of risk involved in an expansion idea, in which the hotel has to penetrate new international markets, offering similar services, or introducing new products. Considering the Ennismore Capital’s concerns over the level of risks involved, it would be most appropriate for Hoxton Hotel to consider adopting a local expansion of the hotel offering similar services within the UK. While expanding the business within the UK, organic method of business growth would be the most appropriate. This is because the method involves minimum investment of external capital, since it relies on the existing business capital. Organic growth originates from the existing business, and has a higher chances of fast growth due to the fact Hoxton Hotel has ready market information and investment strategies.

Summary of Recommendations

The Hoxton Hotel has earned its place in the top ranking of hotels for offering satisfactory services to its clients during the course of the recent past. Plans of expansion by the management can be a source of its further advancement, or can lead to its decline in the hotel industry. In order to keep the business at a higher niche, it is important that the management consider a local expansion within the UK, by dealing in the same meals and accommodation services. This shall help in acquiring further stability and popularity in the native country, before further penetration into new markets across the borders. The Ennismore Capital should aim at minimum cost of the expansion, as a base of gaining a stronger investment base for a more advanced expansion in the future. This can be achieved through adoption of organic growth, which shall utilise the existing business resources such as ideas, market information and capital.

References

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