Essay \"Ibis budget operations analysis\" - grade 64 PDF

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Ibis Budget Operations Analysis...

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Birmingham Business School

Student ID Number: 1615881 Programme of Study: BSc Chemical Engineering Module: Operations Management 07 24869 Assignment Title: Ibis Budget Operations Analysis Date and Time of Submission: 04/Jan/2015 at 16:00 Word Count: 3236 words (excluding this sheet, tables and references)

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1. Introduction: Ibis Budget Hotels and Budget Hotels Definition In this paper it will be analysed the operations management of the Ibis Budget hotels, that belongs to the Ibis Hotel family (Ibis megabrand), owned by AccorHotels Group. The Group is a multinational corporation that is organized in two divisions, one of them is HotelSevices that focus to operate and franchise the 3,700 hotels and 480,000 that are currently under the Group’s brands (Accor, 2014). The other division is HotelInvest that manages the ownership and investment of the 1,400 hotels the company owns or manages leases (Accor, 2014). As a result of this division, HotelServices controls the operations of Ibis Buget hotels that will be further analysed in this paper. Accor in 2014 set strategic goals to the HotelSevices segment, in the report they state that they aim to “maximize fees, speed up CRM and loyalty-building drives, shift the group deeper into the digital realm, and roll out a strategy in each segment to bolster the Group’s brands” (Accor, 2014). The Ibis Hotels, considered by Accor one of their economy brands, were a solo brand, when in 2011 Ibis Budget and Ibis Style were incorporated by the company (Accor, 2014). Before known as Etap Hotels, Ibis Bugdet is a budget segmentation of Ibis brand that, as mentioned, is already an economy brand (Thompson, 2011). As a consequence Ibis Budget has more inexpensive prices than the other Ibis brands. In Table 1, extracted from Accor’s 2014 registration document and annual financial report, it is presented the company’s hotels portfolio by brand and region at 31 December of 2014. Table 1: Accor’s portfolio by brand and region at 31 December 2014 (Accor, 2014) Europe (excl. France and Mediterranean)

France

Brand

Asia-Pacific

Latin America and the Caribbean

Rooms

Mediterranean Middle East Africa

Hotels

Rooms

North America

Hotels

Rooms

Hotels

Rooms

Hotels

Rooms

Hotels

Rooms

Hotels

Softel

11

1,509

17

4,292

41

12,051

9

1,666

27

6,444

8

2,611

113*

28,573

Pullman

13

3,692

14

3,485

51

14,462

4

1,086

11

3,228

-

-

93

25,953

Mgallery

20

1,434

9

1,240

24

2,573

3

291

15

1,544

-

-

71

7,082

Novotel

113

15,412

109

21,561

111

26,550

19

3,267

54

10,325

8

2,105

414

79,220

Suite Novotel

19

2,199

8

1,158

-

-

-

-

4

497

-

.-

31

3,854

Mercure

226

22,080

264

33,974

144

22,744

71

10,361

70

9,517

-

-

775

59,676

Adagio

29

3,568

9

1,029

-

-

8

654

4

537

-

-

50

5,788

Other Luxury, upscale and midscale

1

51

6

957

22

2,761

1

385

3

376

-

-

33

4,530

432

49,945

436

67,696

393

81,141

115

17,710

188

32,468

16

4176

1,580

235,676

Ibis

383

33,690

258

34,947

139

25,151

124

18,170

127

17,051

-

-

1,031

129,009

Ibis Styles

141

9,920

62

5,735

54

7,437

6

748

14

1,260

-

277

25,100

Ibis Budget

324

25,074

141

15,578

30

3,540

19

4,627

23

2,203

-

537

51,022

Adagio Access

44

4,383

2

270

-

-

-

-

-

HotelF1

238

17,906

-

-

-

-

-

-

-

Formule 1

-

-

3

191

5

739

-

-

-

Economy

1,130

90,973

466

56,721

228

36,867

149

23,545

164

20,514

Total

1,562

140,918

902

124,417

621

111,008

264

41,255

352

52982

-

Hotels

Total

-

Rooms

-

-

46

4,653

-

-

238

17,906

-

-

8

930

-

-

2,137

228,620

16

4716

3,717

482,296

It is possible to observe that most of Accor’s hotels and rooms are in the Economy group, indicating that the company has an expertise in managing this sector. The region with most hotels is France, the country where the company has originated, followed by Europe (except France and Mediterranean) and Asia-Pacific. In the case of Ibis Budget the average number of rooms per Ibis Budget hotel is 95.

Many authors and hotel-related associations have defined what a Budget Hotel is, but due to the heterogeneity of the sector many definitions can be found. According to Projection (2000, cited in Jones 2002) budget hotels can be defined as the ones that offer 2 or 3 star accommodations at a 1 or 2 star tariffs, therefore reduced facilities and prices. In addition of this description Projection (2000, cited in Jones 2002) mentions that location is also a factor that distinguishes this sector from standard hotels and guest rooms. The Royal Automobile Club (RAC) stated that budget hotels, also called Lodges, aim to offer a lowcost overnight accommodation for travellers. The Automobile Association (AA), an association that with the Visit Britain tourist board standardized the star system in 2007 (Datar and Chowdhr, 2010), stated that budget hotels must some minimum standards: is necessary to make available siting area in the reception or foyer, all the facilities must be en suite and there must be a place (inside or near by the hotel) that provides light refreshments and breakfast (AA, 2000; cited in Jones, 2002). Nevertheless was also defined that it is optional porterage, the existence of a bar, writing facilities, room service and telephone inside the rooms (AA, 2000; cited in Jones, 2002). Although the definitions presented describe budget hotels, as mentioned before, the group is not homogenous. In order to position the hotels in groups that are more specific and relevant competitively, Carmouche (1989) elaborated an segmentation. The characteristics of each group were gathered by the author in one table, reproduced bellow. Table 2: Budget hotels segmentation extracted from Carmouche (1989) New-system “Budget” Hotels

Traditional “Budget" Hotels

Upper-tier "Budget" Hotels

Under £30 single tariff (majority under £25)

Average £40 single tariff.

Over £30 single tariff

No discounts available

Discounts available. Additional profit areas, conference, Few (if any) additional profit areas banqueting, etc. Minimal public areas Public areas. Conventional front and back-of-house Simplified front & back-of-house operations operations based on market level and size of unit. Vary in size - majority less than 50 Majority under 40 bedrooms bedrooms. Conversion of existing provision or additional Majority purpose new build F & B outlets. Some new build. May be of any classification up to and Identified as higher 1/2 stars classification including 3 stars Specific segmentation promotion, i.e. Less specific segmented promotion business, short break Restricted & limited product offering Flexible product/ service offering Standardised and branded outlets Unstandardized but corporately branded

Discounts available Additional profit areas - conference, banqueting, leisure Minimal public areas Reduced front and back-of-house operations Over 50 bedrooms, majority over 100 bedrooms Majority purpose new build Upper 2/3 stars classification Specific segmented promotion Flexible product/ service offering Standardised and branded outlets

The prices presented in this table are those found in the Budget Hotel market in 1989 and therefore must be adjusted for nowadays pricings. According to Carmouche (1989) the Ibis Hotels are classified as an Upper-tier “Budget” Hotel, and Formula 1, another budget brand from Accor, is classified as Newsystem. Considering the characteristics described on the table and the examples of classification given by the author, it is possible include Ibis Budget into the New-System group.

2. Critical Success Factors, Order Qualifiers and Competitors Comparison In his work, Brotherton (2004) based on the existing literature and implementing his own research identified and qualified the relevance and importance of critical success factors (CSFs) in UK budget hotels operation. Using a punctuation system Brotherton (2004) was able to order the main CSFs based in its relative importance. The classification is reproduced bellow Brotherton (2004): 1. ‘value for money accommodation’ 2. ‘consistent accommodation standards’ 3. ‘hygiene and cleanliness’ 4. ‘convenient locations’ 5. ‘quality standards’ 6. ‘warmth of guest welcome’ 7. ‘staff training' 8. ‘central sales/reservation system’ 9. ‘consistent service standards’ 10. ‘guest security’ 11. ‘efficiency of guest service’

Brotherton (2004) also identified the critical success factor dimensions, that summarised all the factors in two main groups. The first was Accessibility that encompasses the CSFs of convenient locations and central sales/reservation system. Performance was the second group, comprised by the following critical success factors: consistent accommodation standards, value for money accommodations, hygiene and cleanliness. It is important for a company have knowledge of its Critical Success Factors once the accomplishment of those will give advantages over the competitors resulting in winning a bigger market share (Brotherton, 2004). The same logic is applied when analysing the order losers, qualifiers, winners and delights (OLs, OQs, OWs and ODs respectively) of a sector, but the non-fulfilment of order losers and qualifiers may result in losing its already established market space (Slack, Chambers and Johnston, 2010). As a consequence, in order to Ibis Budget succeed over its competitors, the brand must aim to implement the CSFs and OLs, OQs, OWs, ODs. According to Wallace (2004) Budget Hotel Chains’ order qualifiers are Loyalty Cards, cleanliness and décor; order winners are central reservation, location (auto routes and restaurants) and the possible delight to be offered is price. In the present days (2015), based on Wallace (2004) is possible to establish the following: 

Order Loser: Lack of Security.



Order Qualifier: Loyalty cards, cleanliness, hygiene, front desk reception service (conformance), design, minimum facilities (to be defined) and easiness to perform booking.

Order Winner: Price, location (near places people usually want to spend one/few nights eg.



auto-routes, city centre, places that have shows and congresses) and offer extra facilities at the same price (e.g. tea and coffee facilities in the room, chairs in the room, shower not in the main room (privacy), availability to rent tablets, writing room, etc.). In order to compare Ibis Budget to its competitors it was studied a table provided by Which (2015) that contained a research that evaluated the Hotel Chains in the United Kingdom. In this research to be considered a hotel chain it was necessary to have at least 5 properties in the UK. The research was also subdivided in Large and Small hotel chains, but in this paper, for comparison reasons, the data was gathered in only one table (Table 3). The number of stars varies from 0 to 5 and have no connection with the star-rating system stablished by Visit Britain and AA (Which, 2015). Table 3: United Kingdom Hotel Chains Ranking extracted and adapted from Which (2015)

Prem ier Inn (1685)

£68

5

5

5

5

4

Customer Scores (stars) 4.15

Radisson - Blu Edwardian (37)

£149

5

5

5

5

3

3.75

26.75

Crowne Plaza (92)

£118

5

5

5

5

3

3.70

26.70

De s cription

Brand

(s tars )

Value for mone y (s tars )

Average Bathrooms Bedrooms Cleanliness matching re ality price paid (stars) (stars) (stars)

Overall Score 28.15

Radisson Blu (87)

£117

5

5

5

5

3

3.65

26.65

Q Hotels (80)

£107

5

5

5

4

3

3.65

25.65

Hampton by Hilton (61)

£79

5

5

4

4

4

3.60

25.60

Novotel (93)

£106

4

4

5

5

3

3.55

24.55

Marriott (157)

£111

5

5

4

4

3

3.35

24.35

DoubleTree by Hilton (85)

£116

5

4

5

4

3

3.30

24.30

Malmaison (33)

£123

4

4

5

4

3

3.85

23.85

Hotel Du Vin (33)

£152

4

4

5

4

3

3.75

23.75

£76

5

4

4

4

3

3.60

23.60

Hilton Hotels* (233)

£118

5

4

4

4

3

3.45

23.45

Macdonald (86)

£127

5

4

4

4

3

3.35

23.35

£94

4

4

4

4

3

3.40

22.40 21.75

Holiday Inn Express (296)

Holiday Inn (316) Hastings Hotels (44)

£128

4

4

4

3

3

3.75

This tle Hotels (61)

£116

4

3

4

4

3

3.15

21.15

£70

3

3

3

4

4

3.70

20.70

Old English Inns (39) Warner Leisure (36)

£128

3

3

4

4

3

3.65

20.65

Brend Hotels (37)

£100

3

3

4

4

3

3.60

20.60

Ibis (141)

£71

3

3

3

4

3

3.45

19.45

Crerar Hotels (42)

£80

3

3

4

3

3

3.20

19.20

Ramada** (34)

£85

3

3

3

3

4

3.10

19.10

£109

3

3

3

3

3

3.30

18.30

Fullers Hotels (33) Travelodge (691)

£53

2

3

3

3

4

3.25

18.25

Copthorne (39)

£94

3

3

3

3

3

3.25

18.25

Ibis Budget (58)

£49

2

3

3

3

4

3.10

18.10

Jurys Inn (66)

£80

3

3

3

3

3

3.05

18.05

The Hotel Collection (48)

£114

3

3

3

3

3

3.00

18.00

Mercure (150)

£94

3

3

3

3

3

2.95

17.95

Young's Hotels (40)

£105

3

3

3

3

3

2.75

17.75

Days Inn/Hotel (63)

£56

2

3

3

3

3

3.30

17.30