UK Hotel Industry’s Business Environment

Introduction

The political and economic environment of the United Kingdom presents all industries with both opportunities and challenges in the post-Brexit future. As the hotel industry is predominantly focused on catering to the inflow of tourists around the world, the detachment of the United Kingdom from the European Union can be either complicated for businesses or create new opportunities. Nevertheless, one of the first instantaneous possibilities for the hotel industry is the boost in international bookings of UK hotels (predominantly from the US and China) in the aftermath of the Brexit voting results. As reported by Fountain (2016), the hotel industry in York experienced an increase in international bookings: a 236% increase in bookings from the US. Following the logic of such increases, it is expected that the trend will continue due to the weakening of the pound sterling against other currencies that encourages more tourists to visit the United Kingdom. On the other hand, there is fear of the hotel industry being unable to hire enough personnel to cater to the increased demand for the UK hotels and restaurants expecting visitors from the US. Moreover, the emergence of travel restrictions between the EU and the UK can be challenging for the industry to bring skilled workers from the continent, as mentioned by Fountain (2016). Therefore, the hotel industry of the United Kingdom should be prepared to meet both challenges and opportunities to ensure stable growth and expansion despite the recent political and economic developments.

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PESTLE Analysis

PESTLE (Political, Economic, Social, Technological, Legal, and Environmental) analysis is a marketing tool used for gaining an understanding of the relationship between a business and the external environment that affects its operations. With regards to the hotel industry of the United Kingdom, it is crucial to analyze the six aspects of the external environment that have an impact on the way the industry operates.

Political

As mentioned at the beginning of the paper, Brexit and the distancing of the United Kingdom from the European Union will change the way the hotel industry of the country operates in the future. According to O’Carroll’s (2017) article in The Guardian, the shortage of British workers in the hotel and restaurant industry of the United Kingdom has reached a level so high, that the famous chain Pret a Manger will require up to ten years to replace the staff from the European Union after Brexit (as warned by the British Hospitality Association). To deal with this challenge, many Brits in the industry have resorted to accessing the low-skilled workforce from the Union to avoid bankruptcy (O’Carroll 2017). Moreover, even businesses that operate on a higher level of the hospitality industry face challenges associated with hiring experienced personnel. For instance, Keith Edwards, the Chief People & Development Officer at Soho House (hotels, clubs, and restaurants) reported that in the first weeks and months after the results of the Brexit referendum, it was becoming more complicated and more expensive to hire workers (cited in Mumford 2017).

Economic

Since the economy affects marketers, it is expected that the economic growth of the UK hospital industry will continue to slow down. With the weakness of the pound, and with the distancing of the United Kingdom from the European economic institutions. The economic environment includes taxation changes, inflation, and the exchange rate. For instance, when the Olympics took place in London, there was a significant increase in the development of the hospitality industry due to the growth of the occupancy rate. Since the economic situation is changing every day, there is a need for understanding the global economy and following the changes as they affect the spending power of both local and foreign consumers. As the cost of living in the UK increases, people are looking for better deals, so there is a direct relationship between the state of the country’s economy and how consumers are willing to spend on the hospitality industry.

Social

The analysis of the socio-cultural trends also affects the way the industry operates. Consumers’ lifestyles, popular culture trends, as well as demographic variables are all parts of the market. According to Simon Kemp (2016) from We Are Social, one of the most prominent social trends in the UK is the dominance of messengers such as Whatsapp and Facebook Messenger. As a result, the social rules are shifted in a particular direction: companies do not have an opportunity to track people’s private discussions and thus cannot determine their interests, mobile messengers are harder to advertise due to the limited opportunities for such apps, and there are new metrics of success. This trend ties in with another trend of evolution of communication. Therefore, the UK hospitality industry is dependent on the new ways in which customers communicate. Since there are fewer opportunities to track the demand and follow customers’ tastes, there is a tremendous challenge for the hospitality industry.

Technological

The technological aspect is directly linked to the social one since technologies have become heavily integrated into the society of the UK. Nevertheless, there are technological trends that directly relate to the hospitality industry. According to Huey (2013), software delivered as a service has become an irreplaceable part of hospitality companies’ operations with hotels placing a focus on cloud computing. Social media also have a profound impact on the industry; companies are becoming more concerned with developing an online presence to communicate with customers, promote services, and get feedback.

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Legal

Among the legal challenges that face the UK hospitality industry, liquor license, music, employment, management of operating agreements, and necessary clauses for providing products and services to guests are the most prominent. For instance, if a hotel is planning to serve alcoholic drinks, it must gain a liquor license. Regarding music, a hotel should pay a license fee for the copyrighted material.

Environmental

The impact of the environment on the UK hospitality industry can be both positive and negative. On the positive side, tourism is often structured around the natural environment, for example, a river or mountains. In this case, hotels are interested in preserving nature to attract more customers. On the downside, the hospitality industry contributes to waste issues.

The Effect of the External Environment

As the hospitality industry is affected by an array of challenges and external influences, it is important to understand how they affect hotels in the United Kingdom. With the current economic and political changes in the country (Brexit), and the expected inflow of customers from the United States and the East, UK hotels will experience competition. Since competition boosts progress, hotels will be likely to create new attractions and improve their services to attract more customers. As the cost of living increases and customers are trying to get cheaper hotels in which to stay, there will also be competition regarding the establishment of affordable prices to capture the audience. It is also important to mention that the lack of human resources to be employed in the UK hospitality industry can hurt the development of the sector – fewer workers employed, fewer opportunities there will be with regards to expansion and growth. Even though the demand for the skilled workforce will increase the opportunities for locals, the hotel industry in the UK was predominantly focused on the skilled workforce from the European Union, so it will be hard for employers to make a shift towards engaging a relatively different type of workforce into the hospitality industry.

Apart from the impact of the economic and political factors, technology and social trends will have a tremendous influence on the way the UK hotel industry operates. With the shift of the consumers towards instant messaging applications, marketers that promote the services of hotels are unable to monitor the conversations of potential customers the way they can do on social media such as Facebook, Instagram, or Twitter. This means that the hotel industry will be challenged by the emerging trend and will not have as many opportunities to see what customers need when it comes to choosing a good hotel. Technologies and the emergence of integrated platforms allowed users to be more flexible in the way they decide to communicate and look for the services of different businesses ranging from hotel rooms to airline tickets. To cater to the needs of customers, hotels will be likely to focus on developing an online presence that will be appealing to prospective customers.

The impact of the environmental and legal factors on the development of the hotel industry in the United Kingdom is far more concerned with the ethics involved in the operations of hotels. For instance, if a hotel plays copyrighted music or streams a movie without paying a fee, it will likely face legal challenges regarding the problem of copyright infringement. Moreover, there is imperative to act more socially responsible regarding the impact the hotel industry has on the environment (Worthington & Britton 2014). As society is becoming more concerned with the preservation of nature and natural resources, hotels that disregards the importance of caring for the environment will be much more likely to be criticized by the public that is fighting for the cause of a less polluted natural environment.

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The Most Impact on the Hotel Industry

The analysis of the macroeconomic factors showed that the political and social environment have the greatest impact on the development of the hotel industry in the United Kingdom. Because Brexit is a tremendous change to the way UK businesses will perform in the future, and because there are challenges with hiring personnel into the industry, many hotels in the country will likely experience a slow down in operations until they get used to the changes in the country. According to the Raconteur (2016) article, Brexit is one of the challenges that is currently weighing on the future of the hotel industry. On the other hand, is to look at the short to the medium-term impact of this political event, the drop in the value of the pound sterling made the country more attractive for foreign visitors that could have previously regarded the UK as an expensive travel destination. In particular, London will experience the most benefit, especially from the US travelers who have a ten percent discount on their tourist traveling.

The political environment will also benefit hotels around the country because of the revival of “staycations” with foreign travel becoming more expensive (Raconteur 2016). As the trend of staycations was seen at the beginning of the global financial crisis that significantly weakened the currency. Nevertheless, it is important to remember that not all demand emerges equally. While traveling for pleasure can increase, business travel (a more profitable area) is expected to experience more pressure. There is a strong correlation between the performance of hotels and the overall economic performance, and even though forecasts were not completely right, the operation of the industry is still weak.

As for the impact of the social environment, the hotel industry is expected to make adjustments to fit the current trends in the way society communicates and interacts with businesses. Determining the needs and demands of prospective customers will challenge marketers in the hotel industry since the community has made a shift towards private conversations during which brands cannot track social trends. This means that businesses should start investing in new ways of tracking trends and communicating with prospective customers. Therefore, there are far fewer opportunities for marketers to ‘buy their way into conversations in messenger applications’ (Kemp 2016). However, there is an opportunity for marketers to buy ad placements since the messaging platforms are seeking to monetize their audiences (Kemp 2016).

Conclusion

Apart from the shift in the way society communicates, there is also increased attention of the society to entrepreneurship, the fight for women’s rights, healthcare, the role of government in business, as well as social issues such as education and retirement. The hotel industry should also reflect the interests of society. For example, a hotel may offer vacation and staycation services to retired seniors from different countries.

Reference List

Huey, J 2013, Six technology trends revolutionising the UK hospitality industry. Web.

Kemp, S 2016, 10 social trends you need to know. Web.

Mumford, C 2017, Brexit’s repercussions on the hospitality sector. Web.

O’Carroll, L 2017, Replacing EU hospitality workers after Brexit ‘will take 10 years,’. Web.

Raconteur 2016, Brexit and the future of the hospitality industry. Web.

Worthington, I & Britton, C 2014, Business environment, 7th edn, Pearson Education, Harlow, UK.

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