Smart Hostels Exquisite. A Business Plan for the Introduction of a New Brand


Project Report, 2018
13 Pages, Grade: 5.50

Excerpt

Table of Contents

Chapter 1. Introduction

Chapter 2. The Development plan

Chapter 3. Feasibility of the new product/service

Chapter 4. The sustainability of the new product/service

Chapter 5. Factors that limit the development of the product/service within the hospitality industry

Chapter 6. Conclusions

References

Executive summary

That business plan has as its purpose to show the possibilities for the development of hostels, combining heath and eco-friendly design with amazing social atmosphere. The brand chosen is named Smart Hostels Exquisite; within its rooms natural materials will be used, as well as big windows allowing the sun light to enter effortlessly will be installed. The newly renovated hostels will offer its visitors, not only perfect location but also accommodation in 4 and 6 mixed dormitories and private rooms; the latter will be opened and locked via key cards or smart phones. Finally, their focus will not only be on the exquisite design but also on the social aspect of hostels. Great part of the cultural events will take place in the former hostel lobbies now redesigned as stylish libraries, making the mere project more feasible than ever.

Chapter 1. Introduction

Nowadays, hostel sector is regarded as vibrant, characterized by vast majority of competitors. Simply put, basic significator of this is the fact that hostel chains have started to target customers beyond their previously defined level (HVS, 2014), so the need of change in the product and services offered is obvious. Additionally, the millennials generation, regarded as the basic hostel customers are often described as price-sensitive and looking for luxury (Mohn, 2016). Similarly, the present report aims to outline the prospect for change in one of the major hostel chains in London – Smart Hostels. Their current situation is associated with central London location, offering accommodation in mixed sex and female quads, as well as in twin rooms with bathroom (Smart Hostels, 2018). However, their two basic competitive advantages are the price and the entertainment provided in the form of social interaction; namely, insufficient in the competitive hospitality industry (HVS, 2014).

In this regards, the huge impact of the agents such as Airbnb, Wimdu and Onefinestay allowing easy bookings and tax transparency facilitating the control of the quality and the monitoring of finance has been shown. In turn, the latter means growth of the options, connected with the online usage of CRM technologies (HVS, 2014). Consequently hostel industry strives to show that the exquisite design, as well as the social aspect of hostels is what matters; namely, feasibility of the existing and the new product of the hostels have been investigated, as well as complete analysis of the limitations, standing in front of the product has been made.

Chapter 2. The Development plan

The hosteling industry has a history of more than a century ago. Initially, started in Germany, later on founded its implication in the International Youth Hostel Federation, the idea has flourished in the United States and Europe (Hostelworld, 2018). In its essence, the hosteling as an industry at the same time provides place for accommodation gives the customer a chance to meet other travelers, to socialize successfully with them and in turn this makes the experience unique.

Nowadays, most hostels offer to their guests accommodation in huge dorms, designed for 4 up to 16 people, enabling them to pay the cheapest price possible; some hostels also offer only female dorms and even rooms with own bathroom and privacy. For example, Freehand Miami rooms offers room types as Super 8, having 4 beds at most, shared quad and private quad with 2 beds at most, one room of the type private king with one bed and bungalows with only one bed (HVS,2014). However, the sector has matured since 1909 and it is no longer regarded as an alternative for people having price as their main criteria. Despite the widely accepted notion hostels around the world have managed to achieve quality and to offer it to customers of that segment (HVS, 2014). In addition, few trends shaping the industry, could be outlined:

- There are more operators on the market than ever before; in this regards, hostel chains need prompt and apt to the modern challenges development, so as to be able to react in a swift manner to the surrounding environment (HVS, 2014);
- Characteristic of the successful hostel brand is its recognizability; in turn it attracts confidence on part of strategic investors. Simply put, any hostel chain need to be recognizable in order to continue attracting the various segments (HVS, 2014);
- Online representation for huge part of hostel operators; the latter allows usage of advantages such as superb marketing and systems based on cost (HVS, 2014);
- Hostel sector is regarded as vibrant, characterized by vast majority of competitors; basic significator of this is the fact that hostel chains have started to target customers beyond their previously defined level (HVS, 2014);
- Famous hostels ‘brands expansion in need of augmenting shareholders value. For example, that tendency has led to the emergence of Moxy concept in Europe and Motel One’s movement on the market of the United Kingdom (HVS, 2014);
- Huge impact of the agents such as Airbnb, Wimdu and Onefinestay allowing easy bookings and tax transparency facilitating the control of the quality and the monitoring of finance. In turn, the latter means growth of the options, connected with the online usage of CRM technologies (HVS, 2014);

To sum up, the new trends in the hostel industry are oriented towards mitigating any losses and establishing business concepts more in connection with the millennials generation and new visitors segments. However, the potential of the hostel industry might be determined by regarding it in the following aspects:

PORTER’S 5 FORCES HOSTEL INDUSTRY

New Entrants ‘Threat

Hostel industry basic requires high capital costs in order to be entered, as well as the most well-planned resource usage. It must be noted that the prime size for a hotel in capital cities such as London is 500 rooms (Hostelworld, 2018). In addition, the belonging to a famous hostel chain is definitely a marketing benefit (HVS, 2014). Hence, two of the most important factors are the superb hostel location and the value of the service it provides to its customers. Also, great opportunity for the hostel industry in capital cities will be the cross-selling of other related to accommodation services such as food and beverage. Therefore, the growth of the hostels in capital cities is limited by the number of available strategic locations, as well as to access to suitable distribution. So, the entry barrier for new entrants is high.

Substitute products threat

In regard to potential threat of substitute products we must note that there is no major threat of such. For example, a hostel chain will have powerful customers only in case its management elaborates marketing strategy so as to attract them. Also, it is not vulnerable to intense competition as any products competes in different market (HVS, 2014).

Bargaining power of suppliers

The only important suppliers for the hosteling industry are its employees; however, the qualified and well-trained staff is in great demand in hostels not only in Britain, but all over the world (HVS, 2014). Hence, the hostels compete for professionals in the area; namely, the two basic requirements a hostel to possess strategic advantage are the prices and the well-trained staff, providing its customers with utmost care.

Bargaining power of buyers

In regard to the hostels their visitors are highly unlikely to buy them, as it requires substantial investment (HVS, 2014); except in the cases of low-cost airlines. Hence, the threat of the bargaining power of buyers is low. However, in case where group guests are the target the low profit margins are not always troublesome. Thus, the bargaining power of buyers is different in the industry so it does not pose a significant threat.

Jockeying for position among current competitors

Competition in hostel industry is high due to the fixed costs, especially in major cities; great pressures are related to the holiday and seasonal discounts. However, exit from the industry might happen due to economic and strategic factors (HVS, 2014).

SWOT ANALYSIS HOSTEL MARKET UK

STRENGHTS

1. Strong brands;
2. United Kingdom is preferred destination for business and leisure (HVS,2013);
3. Each hostel chain is offering distinguishing product (HVS, 2014);

WEAKNESSES

1. Strong brands suffer in adaptability;
2. Hostel industry relates to the whole economy that in turn makes the sector vulnerable in time of economic breakdown;
3. VAT (GOV.UK, 2018);

OPPORTUNITIES

1. Boost in revenue from non-residents (HVS, 2013);
2. Opportunity for extra growth (HVS, 2013);
3. Development of the low-cost hostel sector (HVS, 2013);

THREATS

1. Alternative accommodation, provided by web sites such as Airbnb (HVS, 2014);
2. Highly competitive prices on travel overseas.

Chapter 3. Feasibility of the new product/service

BALANCE SHEET SMART HOSTELS EXQUISITE

illustration not visible in this excerpt

INCOME STATEMENT

SMART HOSTELS EXQUISITE

illustration not visible in this excerpt

In fact, the price of each of the double rooms will be £ 39.98, while each of the hostels has at its guests’ disposal 40 rooms. So, the initial bank loan of £ 200,000 for each of the hostels will be repaid in less than five months’ time, even at 30% occupancy. Worth mentioning is the fact that Smart Hostels Exquisite shareholders will place in the venture £ 1 500 000 per each hostel. The cost of the tickets for the cultural events, taking place in the redesigned lobbies will start from £ 25 up to £ 70, depending on the type of the event; so even considering cultural happening two times per month at a minimum price of £ 25 per person for 30 people that makes an income of £ 1500 monthly.

[...]

Excerpt out of 13 pages

Details

Title
Smart Hostels Exquisite. A Business Plan for the Introduction of a New Brand
College
Anglia Ruskin University
Grade
5.50
Author
Year
2018
Pages
13
Catalog Number
V426766
ISBN (eBook)
9783668707849
ISBN (Book)
9783668707856
File size
547 KB
Language
English
Tags
smart, hostels, exquisite, business, plan, introductiopn, brand
Quote paper
Silvia Stamenova (Author), 2018, Smart Hostels Exquisite. A Business Plan for the Introduction of a New Brand, Munich, GRIN Verlag, https://www.grin.com/document/426766

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