Hospitality Business Development

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Hospitality Business Development

Hospitality Business Development

“A recession is a scary time for many business owners, especially restaurateurs, and while no-one wants to see closures, for the quick-thinking establishment, these troublesome times could prove a great opportunity to seize new clientele from competitors” (“Hospitality”, Mar/Apr 2009, p. 16).

As with other businesses hospitality operations including hotels, restaurants, pub and bar businesses are now facing very tough trading conditions. Their operation environment that is being hard hit by the effects of an economic slowdown and the credit crunch. Britain is approaching a sink into recession in the current year with a contradiction of economic output in both the third and fourth quarters (Seager, 2008).

Paris based Organisation for Economic Cooperation and Development released its latest set of economic forecasts. According to the report, ongoing effects of the credit crunch and a weakening housing market will cause the British economy (claimed to be the worlds fifth largest) to shrink by 0.3 percent in second quarter and by 0.4 percent in the October to December period. According to the shadow chancellor George Osborne (cited in Seager, 2008).

 "Not only is the British economy predicted to shrink in the next two quarters, but it is also the only economy not predicted by the OECD to see a recovery this year. All of our major competitors are predicted to see at least some growth by the end of the year."

This statement thus defines that the service industry faces tough trading conditions. It has resulted in a business slow down affecting various factors. According to e-hotelier (2008), the UK hotel market reported a 9 per cent fall in profit in the month of October 2008. Higher costs and a shrinking pool of demand resulted in low profit.

The sample of 509 UK branded hotels reported a 3.2 per cent point drop in average occupancy to 77.4 per cent.

"For most UK hoteliers the effects of the economic downturn were clearly felt in October. With fewer guests and higher operational costs, pressure on profitability was inevitable,"

Jonathan Langston, managing director, TRI Hospitality Consulting (cited in e-hotelier 2008).

On the other hand some city markets behaved differently around the trend by increasing both average room rate and profit due to local events. Liverpool's European Capital of Culture status made it a popular leisure destination during the half-term break, and a series of major football events kept demand high. As a result average occupancy rose by 1.9 percent. In Newcastle, the great north run helped daily income before fixed charges increased by 6 per cent to 44.32 pounds per available room (e-hotelier 2008).

Inter Continental hotels group, the world's largest hotel company recently warned that the recession would affect its pipeline of new developments. The downturn hit the hotel sector as leisure and business travellers cut back on their travel plans and developers struggled to complete openings (Lau 2008). 

According to Blitz (2008), Marriott, one of the worlds leading hotel operators became the first company to warn that a pipeline of new openings could ...
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