Travelodge Hotel Limited (Essay Sample)
The analysis of Travelodge Hotel Limited that runs a chain of hotels in the United Kingdom, Ireland, and Spain. It provides services such as rooms for hire, cafes and restaurant rooms. The analysis is based on the impacts of economic aspects on the hotel such as the fiscal and monetary policies and the EU policies impacts.source..
Travelodge Hotel Limited runs a chain of hotels in the United Kingdom, Ireland, and Spain. It provides services such as rooms for hire, cafes and restaurant rooms. It has partnered with a number of other restaurant companies, supermarkets and retailers. Travelodge Hotels Limited was initially known as Travelrest Services Limited. Travelodge opened its first hotel business at BartonuderNeedwood in 1985 and has since grown from a roadside business into a popular hotel brand in the United Kingdom. It is, apparently, the largest hotel business in both Edinburgh and London (STREEVER 2007).
The impact of Economic Change and the Role of Government Spending on Travelodge
Travelodge Company has about 34 hotels in the Greater city of London in UK that provides more than 5,200 bedrooms for its customers. Travelodge is a vibrant business because of its ambitious goals. For instance, it had targeted, that by 2012, when the Olympic Games would be kicking on in London, it would have opened 18 more hotels in the city, and, this could have resulted to over 7,000 rooms. This would, in turn, make it the biggest hotel brand in London. The government of England is a major supporter of tourism since this is a major source of income to London capital city. Moreover, it is a source of jobs for the London residents as per to the Capital’s Employer Accord (STREEVER 2007).
With its 18 new openings in London by 2010, Travelodge has continued to employ its entry level employees in regard of the London’s Employer Accord. According to reliable sources, over 90% of Travelodge staff has been employed of its new business openings. Before the 2012 Olympic Games, the UK government chose to invest heavily in Travelodge to ensure that it is the biggest hotel business in London city. This was geared towards trapping of many tourists visitors expected to attend the Olympic Games. This was in line with the government policy of expanding tourism since it plays an important role in the development of London economy. Initially, Guy Parsons, the then Chief Executive of Travelodge said they had plans of opening about 52 hotels across the capital during the Olympic Games to ensure that the city visitors obtained high quality, low-cost accommodation. In London, tourism is a vital industry that provides over 250,000 jobs. Increased opening of new hotels mean that more jobs are created and the economy, thus, experience growth (ADAMS, & WEST, 1995).
Travelodge Company continues to be on the lead in the UK for the next few decades and has plans of adding over 40,000 extra rooms by the year 2020.
In the year 2012, when Olympics Games were held is thought as a successful year for UK hotels since they experienced improved sales and increased profits during the occasion. Besides that, we have other factors that directly affect the travel and hotel demand apart from Olympic visitor levels.
In 2010, the UK suffered a GDP contraction of about 0.6 % and much of this effect was from adverse weather. It is possible that UK economy may have experienced severe difficulties on growth due to rising government taxes and spending cuts that impacted on the consumer spending. The spending cuts imposed by the UK government has resulted to reduced customer spending as people would only want to spend if they knew they could earn more on a future date. The spending cuts and increased taxation has stifled the rapid growth of hotel since consumers have reduced in number due to their income cut and regulation (ADAMS, & WEST, 1995).
The UK government is planning an acute fiscal squeeze which will sum to about 113 billion pounds per year (equivalent to 6.3% of GDP of 2014/2015 financial year). 77 % of these will be achieved through spending cuts and the remaining 23% will be achieved through tax rise. With travel and hotel spending under severe pressure, public servants will travel less and others will resort to an alternative means of communication such as video and teleconferencing. This will make hotels less busy and, thus, reduce their sales and profits. As high levels of unemployment and inflation continues to bite as from 2010, this will pin down the consumer spending growth in next few years. This will impact on hotel operators as their sales will go down because few customers will spend (STREEVER 2007).
Travelodge rent reduction rescue deal could force the company to throw away about 50 hotels and this could potentially put to risk about 350 jobs. The hotel operator suffered financial strain as a result of repaying debts of 1.1 billion pounds when it had been taken over by a debt prone company namely Dubai International Capital (DIC) in 2006. Since then, Travelodge has been seized by Goldman Sachs, Golden Asset management two American funding Avenue. To restore the business back to its track, the business has been using the Company Voluntary Arrangement (CVA) which is legal way of the company writing off its debts. The economic down turn of Travelodge business is due to expensive lease arrangements and heavy burden of debts. But with the support of shareholders, landlords and lenders, the business is expe...
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