Capacity of Hospitality Market

Aim and Objectives

Aim: To understand and evaluate capacity of UK hospitality market after London Olympics. A case study of Hilton Liverpool hotel

Objectives:

• To assess the impact on hospitality market of UK after London Olympics.
• To critically evaluate the capacity of UK hospitality market after London Olympics.
• To analyze impact of Olympic Games on business of Hilton Liverpool hotel.

LITERATURE REVIEW

Understanding capacity of hospitality market

Hospitality market covers a broad category of fields within the service industry. This includes event planning, lodging, theme parks, cruise line, hotels, resorts, motels etc. it also comprises of the cafes, nightclubs, pubs and public houses, restaurants and bars. As per the views of Humphreys and Prokopowicz 2007, capacity is the capability of a market in terms of supporting the changes in demand. Capacity of hospitality market is concerned with the number of hotels, motels, resorts, cafes, night clubs, restaurants etc (Humphreys and Prokopowicz, 2007). The number of tourists that these places can hold is representative of their capacity. UK hospitality market consists of a spectrum of business across hotels, pubs and restaurants. It also includes travels and tourism, sport and leisure and gaming (Hospitality and leisure, 2014).

Dependent on consumer confidence and business sentiment there is increasing pressure on the hospitality market of the UK to deliver innovation, value and quality. As per the views of Pillay and Bass 2008, one of the key trends in the UK is related to expansion of the budget hotel sector (Pillay and Bass, 2008). Overall hotels sector of the UK has observed increase in room supply, especially in London. However, the main concern for the UK hospitality market is the easiness with which it will absorb the additional capacity.

Pullman and Rodgers 2010 assert that capacity of a hotel can be evaluated in terms of customers receiving good service without delays (Pullman and Rodgers, 2010). This especially implies for the pubs, restaurants and hotels of UK hospitality market. However, Chen, Kim and Kim, 2005 argue that while understanding the capacity of hotel, considerations must include time, labor, equipment and facility (Chen, Kim and Kim, 2005). The workforce that a particular hotel has to attend to the guests represents its capacity. Various equipments that are present in the rooms and other areas of a hotel also demonstrate the capability of a hotel to serve the guests. This implies, that an increase in the number of guests should be related in the form of increased capacity in terms of equipments for serving them in the best possible manner. Additional workforce showcases enhanced capacity of a hotel to attend to the tourist arriving at the destination. Hotels respond to the increased number of tourists by increasing their number of rooms. Additional rooms and suites are added. These add to the capacity of the hotel to entertain guests. More restaurant table are arranged which are capable of serving an additional number of people.

UK hospitality sector after London Olympics

Hospitality sector of UK is one of the major contributors in the growth and development of nation in terms of economy. From the last so many years the capacity of this market has increased and the major impact on this sector was seen after London Olympics of year 2012 (Pappas, 2014). Hospitality industry has been found to be influenced from the economic conditions of country which determines the expenditure of people on leisure and tourism activities. UK is one of the fastest growing industries in terms of leisure, hospitality, and travel and tourism sector. London Olympics was one of the major achievements of country. Successful completion of this event has also facilitated the economy of the nation. Millions of visitors both domestic as well as overseas visitors has visited the country and it makes direct impact on the experience of people.

Evaluation of the capacity of UK hospitality market

According to Bertschi and Pott, there have been various additions in the luxury hotels in London after Olympics in 2012. As airport arrivals have been increasing since Olympics, significant growth has been demonstrated by the airports. Heathrow airport operates at 98 per cent capacity (Bertschi and Pott, 2014). UK hospitality market is increasing in terms of expansion and additional runways at the airports. Major airports such as Gatwick airport and Mayor Boris Johnson are under expansion. The luxury hotel market of the UK also saw addition of several new hotels after London Olympics. 160 rooms were opened in the Café Royal Hotel in December 2012 near Piccadilly Circus. In hotel London Edition, which Marriott’s lifestyle brand, 173 rooms opened in September 2013 in the North Oxford Street. The capacity of Rosewood Hotel also increased with the opening of 306 rooms in October 2013 in Holborn. After extensive renovation, two established luxury hotels were recently reopened (Wills, 2013).

Having experienced a considerable increase in the new supply after London Olympics, the UK hospitality market has shown tremendous increase in its capacity. The potential for upgrading the existing upper scale hotels was well recognized (Li, Blake and Thomas, 2013). Various upscale hotels were converted into luxury ones. Certain other projects were undertaken that focused on smaller and more boutique developments. These included Admiralty Arch, the Beaumont Hotel, Andre Balazs’ Chiltern Firehouse and Firmdale’s latest project. Capacity of UK hospitality market can also be understood in terms of food and beverage section. In order to adjust the capacity as per the increased demand, different approaches were followed by the hotels in the food and beverage section (Prayag and et.al., 2013). The hotels that earlier did not focus on large meetings and events are now directed towards extensive banqueting facilities.

According to the latest report of Visit Britain, it was found that after the games inbound tourism has increased and in year 2013, 32.8 million visitors has visited the UK (Trends, 2014). The report also published that country will attract 40 million visitors in 2020 has Olympic Games has made huge impact on the travel and tourists destinations of the world. According to report of PWC, for the year 2012 the occupancy rate in hotel industry was 71.8% in UK (Ups and downs, 2014). There was an increment of 2.7% of growth in occupancy rate of Hotel industry. On the other side the publication of Hospitality and Catering, 2013 has achieved the growth rate of 1.8% and this growth will continue till next five years that is 2018. According to Thorn, 2013, the author has detailed in his study that hospitality sector and tourism industry has influenced after the performance of such legacy sports event at global level (Thorns, 2013). Capacity of hospitality industry in terms holidays, visitor’s attractions, traveling and tourists services etc. has increased. In the current hospitality market of UK, the industry has achieved the positive impact after the Olympic Games. Performance of hospitality industry also has enriched in terms of employment, number of hospitality services, salaries and in many other sectors.

According to Laing and Frost 2010, capacity of hospitality market is evaluated with its ability of retaining the existing employees (Laing and Frost, 2010). Increased influx of tourists as a result of London Olympics required hospitality market to increase its capacity by retaining the existing employees. With the existing employees being retained, the hotel organizations are able to maintain their capacity. Retaining the employees helps the hotels in increasing their capacity in terms of large workforce and new employees keep on adding to the existing ones. Hospitality market of UK has very well maintained its capacity. Various hospitality organizations such as restaurant, travel and tourism businesses, hotels, theatres etc. have adopted strategies that helped in retaining the employees to serve the enhanced number of tourists that come to UK after London Olympics (Song and et.al., 2012).

According to Thomas and Wood 2014, hotels respond to the increased tourists by increasing their capacity with additional rooms and seating arrangements (Thomas and Wood, 2014). Hotel organizations, which form an important part of the UK hospitality market, have very well responded to the impact that London Olympic games. These have increased their capacity in terms of number of rooms. In a way, London Olympic Games have boosted the performance of hospitality market. Jacobs states that more than 12,000 new rooms were added in London itself (Jacobs, 2012). However, Brandt asserts that increase in rooms also led to slower revenue growth. This is because the addition of new rooms is unable to match the decline in the rates of visitors as compared to the rates during Olympics (Brandt, 2012). Although, the influx of tourists has increased if compared to the time before Olympics. But it is less than the rate at which the tourists visited UK during Olympics. Hence, the capacity has increased and serves well the increased number of tourists to the UK. According to the study by Royal Bank of Scotland, room supply increased around 1 per cent in the UK in 2013. Of the 7000 new rooms added in 2012, budget hotels accounted for almost 70 per cent of them. Apart from that, more than 5, 000 new rooms are due for completion in 2014. These will further add to the capacity of the UK hospitality market. With the 2012 London Olympics, the spotlight has been turned onto East London. As a result of this, significant hotel development has taken place (Stylidis and et.al., 2014). This includes development of new boutique hotels in the newly gentrified area accompanied by complementary offerings in the form of restaurants, bars and retail outlets.

As per the study by Royal Bank of Scotland (RBS) on the hospitality sector of UK, it can be inferred that in the year 2013 the growth of this industry was a bit slow. But this industry has recovered its growth in year 2014 and after 2008 occupancy rate in hotel sector has increased. Despites in enhancement of occupancy rate, there was also increased in capacity of average daily rate and revenue per available room. In 2012, nearly about 18000 rooms were added in the hotel sector which was also the highest continuing supply of rooms in this industry (UK Hotel Sector 2014, 2014). Growth of hospitality industry has also affected from the economic turndown of 2008 and which has made greater impact on the business of hotel industry. Impact of this economic slowdown remains for the three to four years and has slowdown the growth rate of industry. Some of the major hotel groups of this industry depend upon the economy of the nation and any impact on the economy of the country also affects on the business of their industry. On comparing the data of hospitality industry of year 2012 with year 2013, it was found that occupancy rate of hotels were increased from 73.5% to 75.3% and also the revenue of hotels were increased (UK Hotel Sector 2014, 2014). This shows about the impact of Olympic games on the business of the hospitality sector.

Capacity of hospitality industry has affected from the legacy of games and it was estimated that with the increase in number of visitors the amount contributed by this industry will also reached to billions of money. This industry also includes the tourism sector as in hospitality sector the number of visitors and guests are mostly the tourists only and increased in these numbers directly affect on the capacity of this sector. According to the report of Visit Britain, after 2012 London Olympic Games, In UK around 32.8 million oversea tourists and visitors have come (The big picture, 2014). When this information of year 2013 was compared with the previous year results that was 2012, it was found that the volume of tourism industry has increased with growth of 5.6% and also has reached with the business of £21.0 billion. From this it was concluded that number of tourists in terms of receipts has increased. On comparing the figures of entire UK for the year 2013, in terms of amount spend by visitors 54% of spending of inbound tourists was in London. Remaining 34% was from England, 8% from Scotland and 2% was from Wales. The legacy of Sport event has shows its impact in 2013 in terms of highest amount of money spends by inbound visitors (The big picture, 2014).

Study of RBS on the hospitality sector of UK also has examined that the number of visitors in country will increased by 600000 and it was expected that at the end of year 2014, the record of hospitality sector will be broken in terms of both visitors and also on the amount spend by them. On evaluating the data of 2012 of hotel industry in London, it was examined that around 70% new rooms were constructed in the budget segment hotels and 85% new rooms were increased in the brand hotels (UK Hotel Sector 2014, 2014). These data was particularly belongs to the London city only. Industry has planned for the long term growth and profitability by making the strategic plans. This plan considered the various factors which were in terms of leisure and business activities, competition and many other influencing factors.

CASE STUDY

Hospitality market of a destination is significantly affected by various events. Likewise, London Olympics significantly affected the hospitality market of UK. A spectrum of businesses is present in the hospitality market of UK. These include hotels, pubs, sport, leisure, gaming, restaurants etc. London Olympics were held in UK in the year 2012. This led to an increase in the capacity of hospitality market of the country (Chen and Lin, 2013). There were additions in the luxury hotels. Budget hotels also showed expansion. Capacity of hospitality market is concerned with being supportive of the increase in demand. This includes increase in the number of rooms in hotels, seating capacity in restaurants, increase in the hotel staff, equipment and facility.

In the UK, in 2013, 7659 rooms were added through new openings of various hotels. Also, 6, 552 rooms have been added through refurbishment. This has been as a result of the increased number of tourists to the country after London Olympics. It is for this, UK is apt to be chosen to analyze the impact of London Olympics of capacity of hospitality market. The present case study is about Hilton hotel. Hilton hotel added 40 rooms to its existing capacity. This was done as a response to the increased number of tourists that UK has to serve after winter Olympic Games were held in London. It is for this reason the case of this hotel has been studied (Wills, 2013).

Hilton hotel is an international chain which consists of full service hotels and resorts. This is the flagship brand of Hilton Worldwide. The hotel was founded by Conrad Hilton in 1919. The first hotel of Hilton was Mobley hotel which was opened in 1919 in Texas. Since then, the brand has expanded to 530 hotels in 78 countries including UK. The Hilton Liverpool hotel earlier had 215 guest rooms and suites. These offered views Chavasse Park or the famous Albert Docks. In this way, an unparallel location is possessed by Hilton hotel in the city centre (Welcome to the Hilton Liverpool hotel, 2014). Also, easy access is offered by the hotel to the shopping, fashion as well as cultural attractions. The essential features of the hotel are its modern amenities. Hilton Liverpool hotel also has some of the most stylish drinking and dining venues. The parking facilities of the hotel are situated at the heart of the Liverpool One leisure development.

After London Olympics, there was an increase in the number of tourists visiting UK. This led to the examination of the capacity of hospitality market of UK. As such, Hilton Liverpool hotel sensed the need to serve additional number of guests. This was efficiently done by the hotel which matched the increased in demand. While evaluating the hospitality market capacity of UK, the hotel has provided significant contribution in increasing the capacity. The hotel added 40 rooms to serve the increased number of guests with its exceptional service. Along with this, the seating arrangements had to be expanded for accommodating additional tourists. This was done by the hotel. It expanded its drinking and dining facilities so as to serve greater number of guests. To increase capacity, new equipments were installed by the hotel so that service could be provided to all the customers on time (Pappas, 2014). Along with increasing the physical capacity, Hilton Liverpool hotel also increased its labor. New staff was recruited to provide service to increased number of guests.

Hosting of an international event has made the hotel respond to the increased number of tourists. However, it will have to face the challenge of supporting the cost of additional facilities when the number of tourists declines. Decrease in number will lead to underutilization of hotel capacity (Pan, 2007). This will have to be dealt with. However, this increase in capacity has brought numerous opportunities for the hotel. Hilton Liverpool hotel can well avail the opportunity of serving increased number of guests in future when any event happens. It will be able to attract the guests with the strength that it has ion terms of good facilities, service and workforce. Thus it can be concluded that increase in the number of tourist was very efficiently matched by Hilton Liverpool hotel with increased capacity. This has increased the overall capacity of hospitality market of UK.

DISCUSSION

In the year 2012, London hosted the Winter Olympic Games. As a result of the reputation that was built owing to the Olympic Games, record numbers of tourists were attracted to the UK. According to Thomas, more than one visitor was welcomed by Britain every single second in June 2013 (Thomas, 2013). Nearly 2.9 million visitors came to Britain. This was approximately a 12 per cent increase on previous year. The total number of overseas visitors was approximately 15 million in the first six months of the year 2013. This was a sign of tourism delivering growth across the economy. Hosting of Winter Olympic Games made it probable that there will be an opportunity for the hotels to entertain increased number of guests. As a result of this, efforts were made by various travel and tourism businesses to prepare themselves for the increased number of tourists so that they can make the best use of this opportunity.

Hilton Liverpool hotel opened 40 new rooms so that it can serve more guests than before. The dining facilities were also expanded by the hotel for the increased guests. This required purchasing additional furniture and equipments (Murphy, 2013). For catering to the varied needs of a large number of customers, there emerged the requirement of additional workforce. This made the hotel add new recruits to its existing staff. These have to be imparted training and skills. This was essentially needed so as to make them competent to work as per the standards at which the hotel had been operating since its foundation. Increasing the capacity also meant employing additional equipment in the hotel. The hotel staff had to work for extra time so that it could match the increase in demands of the tourists. While increasing the dining and drinking venues, more tables were added. Facility had to be adjusted for providing pleasure to enhanced number of guests. This included enhancement in the hotel premises and building (Ryan, Page and Aicken, 2005). Even the parking area was enlarged so as to accommodate greater number of vehicles.

Hilton Liverpool hotel presents an excellent example of the impact of London Olympics on the hospitality market of UK. It made dedicated efforts towards matching the rise in demand with its enhanced services and facilities. Capacity of UK hospitality market has thus increased after London Olympics (Prayag and et.al., 2013). This has not been on account of the additional rooms that were added by the luxury hotels such as Hilton Liverpool hotel. Budget hotels also increased their capacity so as to utilize the opportunity of increased number of tourists to the best. Apart from that, many new hotels opened so after London Olympics. This symbolized a good sign for the growth of UK hospitality market as well as economy. The hotels were able to generate substantial incomes with the increased capacity that was well utilized by the greater number of tourists. However, the tourists increased only due to the winter Olympic Games (Pappas, 2014). With the passage of time, the numbers of tourists have decreased considerably. This is the situation which the hotels may not have wondered about. With enhanced capacity to serve to an ever increasing number of tourists that came after London Olympics, hotels of London could now face issues related to underutilization of capacity. Although, the hospitality market was boosted with the increased capacity, considerable costs were incurred by hotels including Hilton Liverpool hotel. According to Nicholls, various hotels suffered great losses as they could not cover the costs (Nicholls, 2014).

As the buzz of the event subsides, hotels have to bear the costs of running the operations with under utilization of capacity (Fyall, Leask and Garrod, 2012). The additional rooms that were built by Hilton Liverpool hotel could not be utilized to their full capacity until and unless the number of tourists increases to the maximum as was seen during the first six months of 2013. As the number of tourists has fallen now, Hilton Liverpool hotel has to bear the cost of maintenance. Long terms costs have been incurred by the hotel which include construction of new rooms, recruiting additional staff and increasing the seating capacities of dining venues. Hotels like Hilton Liverpool had construction boom during the event. However, when the event is over, it will lead to a fall in demand for high end accommodation (Chen, Kim and Kim, 2005). This leads to too much surplus capacity. Also, a downward pressure is experienced on the room rates. Same is being experienced by the hotels of UK including Hilton Liverpool hotel. Although, Olympics have increased the capacity of hospitality market of UK but it may lead to bankruptcy of hotels that are not able to cover the costs.

Under utilization of capacity of hotels leads to reduced profitability. This may negatively impact the image of the hotel. It may be viewed by the other customers as being no longer busy. As such, the occupancy rates of the hotel may further reduce. The employees of hospitality market are badly affected by such situations. The additional staff that Hilton Liverpool hotel recruited is no longer required as the tourism demand has fallen. The hotel will also not pay salaries to the staff when it is already suffering from the issue of underutilization of capacity. This makes the hotels downsize their staff. Thus the capacity that was increased to match the increased number of tourists tries to return to its original state in whichever way it could. However, the increase in capacity of the hospitality market in the form of additional rooms in existing hotel, new hotels and increased seating capacity, can be beneficial in the situations when large number of tourists visit the country.

REFERENCES

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