Environmental Analysis Of Premier Inn: SWOT And PESTEL Analysis

Introduction to Premier Inn

Premier Inn is UK’s largest hotel managing brand and handles around 800 hotels and approximately 75,000 rooms across UK and some part of Ireland.  The high-quality customer service Premier Inn provides has made it possible for the brand to open its hotels at almost every part of the UK.  Their guests always leave the hotel with utmost satisfaction as they get to enjoy luxurious rooms with pillows of choice, free Wi-Fi, TVs, bars and restaurants that offers delicious food and drinks. The company was first established by Whitbread for travel purposes only, after the success, Whitbread decided to merge the company with Travel Inn, which is the current business, and named it Premier Inn, this business alone contributes to 70% of Whitbread’s total earnings. Premier inn has shared its success by partnering with charity runners; however, the arrival of Covid has also left this business unsteady in many aspects (Premier Inn, 2021).  This study will throw a light on the environmental analysis of the company, that is, SWOT analysis and PESTEL analysis and the amendments occurred due to Covid.  The study will cover the topics related to organizational structure of Premier Inn followed by a brief conclusion of the entire study at the end.

Organizational structure of a company/business reflects how activities are performed in order to achieve the set goals of an organization. The hierarchal organizational structure of premier inn is famous in the UK (Meyer , 2017). The command of chain for Premier Inn travels from top to bottom. The protocol of status quo is managed by the manager of Premier Inn.  There are rules and regulations that staff members are required to follow to maintain the image of Premier Inn, and these rules are controlled by the chief executive officer of the company. The organizational structure of Premier Inn is tall which means that each hotel’s main operations are handled by their managers and have a large network of support groups (Bodolica et al., 2018). The legal documents and information on Premier Inn are available to staff members as they are provided with the intranet of the company. The organizational structure of Premier Inn is functional and depending upon the skills of the staffs, premier inn is able to weigh the cons and pros of functional organizational structure. Practicing tall organizational structure comes with its own sets of pros and cons (EConsultancy, 2017). Tall structure divides work equally; therefore, the chances of promotion are higher. As there are divisions of employees, the communication quality between the managers and staff members is poor.  Premier Inn hotels have to spend extra money for maintaining the different positions of the employees; which is a huge disadvantage (WhitBread, 2021).

The business environment of a company shows the surrounding where the functions and operations of the company takes place (Craig & Campbell, 2012).

Strength and weakness covers the internal factors of the hotels while opportunities and threats cover the external factors (Sarsby, 2016).  

Strengths of Premier Inn

• Fastest growing brand in UK with more than 75,000 rooms and 800 hotels. Earned awards for providing high-quality services.
• The earning of the hotels have been more than satisfactory, however, the pandemic has changed the course of working for the Inn. The shutdown has caused the hotels to lose millions. One plus point for the inn is that they have their hotels set up in almost every part of the UK, therefore, the company was able to run at places where lockdown was not implemented(Frost, 2021).
• The bookings were full during the summers; however, it fell down to 30% around January due to the announcement of lockdown in the states. . Whitbread pulled a very smart marketing strategy to gain back the lost customers; the hotels used the voice of the comedian Lenny Henry to promote the luxuries they added to their hotels.

Weakness of Premier Inn

• The never-ending competition for the inn means small margins, which could create more problems during the pandemic as the profit rate will drop significantly.
• The brand is known as an economical hotel brand which might force us to perceive it as a low quality service brand. This image might stop customers to trust the hotels during the case of the pandemic(PremierInn Group, 2013).

Opportunities of Premier Inn

• The shortage of workers at hospitality industry due to pandemic has given Whitbread the opportunity to raise room rates up to 8%.
• Around 30% staffs dropped out during the lockdown period, which was a bad news for the company; however, Premier Inn decided to use the money that was there salary to add luxurious items in their rooms to entice customers(Premier Inn, 2021).

Threats of Premier Inn

• Due to the pandemic, the UK based brand faced a shortage of workers and to seek them back, the managers are offering bonuses to the employees of Irish hotels.  The brand now has to spend around $25 million to provide the bonus.
• To stop the current staffs from leaving the job, Premier Inn promised to increase their salaries by 20%.
• Overall, the pandemic has caused a huge financial loss for Premier Inn and its hotels and travel services as the fear of travelling has stopped people from using travel services(Reuters, 2021).

Political Factors

• Collaboration with the UK government has brought economic success for the hospitality industry of the Premier Inn. In 2016, ex-Prime Minister of UK recognized the traveling sector’s importance as it can increase UK’s share of global tourism.
• Government’s decision to decrease corporate tax has helped the hotels to experience a rise in their profit.
• However, the steady increase in VAT from 12.5% to 20% since 2011 has had a negative effect on the company’s demand to increase the price for profit.
• Brexit incident also had a negative impact on the brand as the inn used to rely on labors from European Union and now it is restricted due to Brexit.
• Premier inn may face disruption as the import cost is increased by the government.
• Government increased its vigilance and security system which helped the inn to continue serving foreign travellers without fearing terrorism(Evans, 2015).

Economic Factors

• Due to Brexit event, pound sterling experienced 20% reduction, this affects the cash flow and profit rate of the organization and this may create instability to hotel business.  This will also increase the costs of goods and commodities.
• Raising the costs of food and drinks due to depreciation may negatively affect the hospitality sector.  However, decrease in the sterling rate will attract tourists more, which is good for the sales of premier inn.
• Global market share of Inn may decline due to UK’s poor revenue rating.
• Premier inn should take advantage of the reduction of inflation rate to charge extra on services to get more in return.
• Skilled human resources is the pride of UK’s economy and the hotel takes advantage of it by using human resources to increase productivity(Travel Weekly, 2019).

Social Factors

• The high level of education in UK helps the inn to expand its business by using abilities, skills and expertise of the citizens. This way the hotel is able to provide high-quality services to the customers and improve their brand image and number of loyal customers.
• Media outlet also influences public opinion. Premier inn utilizes the outlets to understand the needs and lifestyle of the customers.
• Premier inn face challenges when it comes to customers with low income level as they cannot afford high-budget hotel like premier inn(FRUE, 2019).

Technological Factor

• With increase in the advancement of technology, customers are demanding the same services from premier inn. The hotel is facing challenges to meet the high expectations of the customers.
• The availability of social media is helping the inn to run smoothly as it is now able to advertise the hotels and ask reviews from the customers.
• The development of CRM tool has helped the hotel to build relationship with loyal customers(Haseeb et al., 2019).
• However, sometimes premier inn is unable to get reviews online due to server problems which may affect the reputation of the hotel.

Environmental Factors

• The government announced strict rules for elimination of waste and this may allow premier inn to take actions in favor of the movement and get appraisal of the customers in return.
• CSR activities are helping the inn to get resources easily.
• However, UK environmental teams are investigating businesses due to strict rules; this may add to the cost of premier inn’s businesses.

  Legal factors

• The inn may face problems due to Brexit’s legal issues. The hotel had to change its policies due to changes in data protection, contracts and employment legislation.
• Premier inn may face legal challenges as compliance responsibility is changed.
• However, the data protection act of 2018 is saving the hotel from facing the aftermath of data breaches(Reuters, 2021).
• Intellectual property legislation is helping the inn to protect the secrecy of its business.

Conclusion

From the overall analysis of the study, it can be concluded that Premier inn has been affected both negatively and positively due to the Brexit event. However, other initiatives taken by government have helped the business run smoothly. GDP growth, advancement of technology and education status also influences the business. The stable economy of UK helped the hotel to promote its luxurious services. Strong security has helped the businesses to expand its territory. Technology has brought high efficiency for the inn.  The hotel and its customers are closer than ever, even when geographically apart, due to advancement in technology.

Reference

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