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Hotel Breaks Division

Hotel Breaks Division. Mark Wray 17 September 2004 Nick Cust . O verview. Market leader in UK leisure short breaks (£190 average transaction value) Superbreak, Hotelbreaks, Luxury Hotel Collection brands Complete range: UK/London/Theatre/Airport European Cities/Beach

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Hotel Breaks Division

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  1. Hotel Breaks Division Mark Wray 17 September 2004 Nick Cust

  2. Overview • Market leader in UK leisure short breaks (£190 average transaction value) • Superbreak, Hotelbreaks, Luxury Hotel Collection brands • Complete range: • UK/London/Theatre/Airport • European Cities/Beach • Wide spread of: • Destinations • Prices • Availability

  3. Customers • Core ABC1 customer base (35 – 65) • Holidays getting shorter – more frequent • Domestic  over 90% of sales • Europe  increasing faster (old  new destinations) • Leisure customer focussed on destinations (not branded hotels)

  4. Balanced Product/Distribution2004 - Revenues Direct Mail 17% Internet 30% Retail Agent 50% Third Party 3% DISTRIBUTION PRODUCT

  5. Broad Product Portfolio UK (1600 hotels) Rail inclusive Theatre breaks Theme park packages Golf Events Airport (take off/touch down) Europe & Beyond (1725 hotels) City & beach Apartments/ self catering Excursions Mini cruise breaks Europe and - USA - Caribbean - Dubai - Far & away

  6. Key Business Features Year ending 30/09/03% Sales 100 Cost of Sales <70> Revenue Margin 30 Commission Costs (av) <10> Gross Margin 20 Overheads <9> Operating Profit11 • Driven by sales • Fixed revenue margin • Commitment free • Payment by results distribution channels • Low fixed costs • High variable costs • Economies of scale • Negative working capital

  7. A Business for All Seasons • Year round profitability • Flexible model • Limited capex • Cash generative • A solid business: • Multi channel • Multi product

  8. Organisation & Structure • 300 Full/Part time staff in York • Open 8.00 am – 11.00 pm 7 days a week • 12 regionally based retail sales managers • 3 London based business development executives

  9. An Experienced & Committed Team INTERNET David Ranby (4) Internet Marketing Manager DIRECT MAIL Andrew Talbot (6) Marketing Manager BRAND DEVELOPMENT Ray Jones (7) Brand Development Director RETAIL TRADE Ian Mounser (16) Sales Director Joint Managing Directors Mark Wray (20) Nick Cust (19) FINANCE/ADMIN Julie Platts (7) Financial Controller RESERVATIONS/ OPERATIONS Frank Regan (12) Operations Director PRODUCT Karen Lloyd (4) Hotel Contracting Manager INFORMATION PROVISION Julie Snowden (4) Marketing Services Manager (Years with business in brackets)

  10. Background to Trading • Demand • Supply • Distribution • Acquisitions • Organic growth Balance of Profit Delivery/Investment in Future

  11. 2004 Trading £’m TURNOVER (as at 7/9/04) • All distribution channels moving forward • Positive impact of Bridge/LTS acquisition • Faster growth in direct/internet • New European Beach initiative

  12. 2004 Trading OPERATING PROFIT £’m- • Managing growth • Expandable business model • Improving margins – 9.8%  11.3% (1999 – 2003) • Continuing investment for the future (Before goodwill amortisation, impairment and exceptional costs)

  13. Plans/Prospects for 2005 • Fundamental strategy of distribution/business development equilibrium • A challenging environment: • Customer spend • General Election • London as a growth driver • But: • Resilient business • Momentum • Ongoing availability opportunities • And: • Focus on costs • Investment/profit

  14. Distribution - Retail • Share of rack • 80% market share • Agent website/Viewdata • Increased European penetration

  15. Distribution - Direct • Nature of channel • Cost effective reheating/retention • Large UK/growing European databases

  16. Distribution - Internet • Over 3500 UK and European hotels available • Search engine optimisation • Affiliate programmes • Hotelnet – cost effective Pay Per Click advertising

  17. Distribution – Third Party Partnerships • W H Smith • Ticketmaster • Credit Cards • Visit London • GNER • National Trust • Legoland

  18. Product & Business Development(2005) • Hotel Groups: • Von Essen • Increasing Lodge presence • Activity Days Out • P&O Mini Cruises • Intra European: • Visit London • Via Superbreak Internet

  19. Strategy - Distribution • Complementary but interdependent channels • Retail distribution remains important: • Vertical operators • Independent business model • Customer acquisition: • Payment by results • Cost effective • Balanced and growing • Huge potential in direct market

  20. Strategy – Hotel Partnerships [1] • Hotel cycle • Availability and price • Continued contracting in all categories : 1–5 star • London continues to move eastwards • An empty room is a revenue opportunity lost forever

  21. Strategy – Hotel Partnerships [2] • Longstanding but widespread • Leisure customer focussed • Access to retail trade and large customer databases • Complies with best price guarantee • And, we are increasing our value proposition through: • Electronic freesale • Electronic invoicing • Connectivity • Benefit to hotel and our cost base

  22. Strategy – Hotel Partnerships [3] • Hotels want more distribution: • Recognise their limitations • Payment by results formula • Year round/UK wide delivery • 3 largest hotel groups – only 20% of turnover • Hilton only became largest through break up of Forte • Hotel industry remains fragmented • Leisure customers paying out of taxed income • WANT CHOICE (VALUE & LOCATION) NOT BRAND DRIVEN

  23. Strategy - Summary • Long term approach to suppliers • Technological development – to benefit strategic partnerships and costs • Maintenance of retail distribution strength and market leadership • Profitable Internet distribution • Maintaining low risk fundamentals, e.g. direct marketing strategy • Pursuing ongoing organic and opportunistic acquisition growth

  24. Strategy - Competition Retail: • Dominant for UK short breaks • Growing for European Accommodation Only Direct Mail: • Consistent management of database Internet: • Highly fragmented • Another distribution channel

  25. Strategy – Business Development • Incremental add-ons to product & distribution • Distribution partners • Build customer loyalty awareness through service standards & value

  26. Core Fundamentals [1] • Growth sector • Market share growth opportunities • Wide range of distribution channels • Quality/value product range at sustainable margins • Management team

  27. Core Fundamentals [2] • Proven financial model: • Profitable • Flexible cost base • Low capex • Cash generative • High R.O.C.E. • A business which works at all parts of the hotel cycle

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