Meridien Report 3

UNDERGRADUATE ASSIGNMENT COVER SHEET
2013/14 ACADEMIC YEAR
Individual Assignment
‘I confirm that the submitted work is my own work and that I have clearly identified
and fully acknowledged all material that is entitled to be attributed to others (whether
published or unpublished) using the reference system set out in the programme
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penalised.’
FAMILY NAME: HAGGER FIRST NAME: BEN
URN: 6264819
PROGRAMME: IHTM
MODULE NAME: The Hospitality Business
MODULE CONVENOR: Peter Alcott
TITLE OF ASSIGNMENT: Le Meridien Hotel Report Analysis
WORD COUNT: 2197

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Contents
1.0-Introduction ..................................................................................................................................2
2.0-Hotel Ownership and Contracts....................................................................................................2
3.0-The Market ...................................................................................................................................3
3.1-International Guests .................................................................................................................3
3.2-Location ....................................................................................................................................4
4.0-Parts of the Hotel Managed Differently........................................................................................5
5.0-Number of Staff............................................................................................................................6
5.1-Staff Turnover..........................................................................................................................6
6.0-Service Offerings, Revenue Streams and Value...........................................................................7
6.1-Room.........................................................................................................................................7
6.2-Restaurant. ...............................................................................................................................7
6.3-Entertainment and Leisure Facilities.........................................................................................8
7.0-My Thoughts.................................................................................................................................9
8.0-Conclusion..................................................................................................................................10
9.0-Reference List.............................................................................................................................11
10.0-Appendices ...............................................................................................................................14
Appendix 1.....................................................................................................................................14
Appendix 2.....................................................................................................................................15

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1.0-Introduction
This report critically analyses, through the use of models and theories, the operations and
workings of the Le Méridien Piccadilly hotel. The Le Méridien Piccadilly is a five-star hotel
based in Piccadilly, London, holding two-hundred-and-eighty guest rooms, offering five
different band types. The aspects being looked into include hotel ownership, the market,
staff, main revenue centres and my thoughts of the hotel. From the report it will conclude
why the Le Méridien does certain things, and why they are crucial towards a successful
operation.
2.0-Hotel Ownership and Contracts
The hotel building is owned by Host Hotels and Resorts, a real estate investment trust;
however, it is operated by Starwood Hotels and Resorts (who owns nine brands as shown in
Figure 1), under the Le Méridien brand through a management contract, widely referred to as
a hybrid mode of contract (Chen and Dimou, 2005). This benefits Starwood tremendously, as
they have to invest less initially, which reduces the barriers to entry (Harris, 1995). Moreover,
without management contracts existing, Starwood may not have had the funds to buy the
hotel all together. Unfortunately, as stated by Chon (2006), through this contract, Starwood
would only retain some profits, as a percentage would go back to Host Hotels and Resorts;
though, this would encourage Le Méridien to increase revenue, perhaps leading to an
improved service. Also, Starwood may lose finances made on the building appreciation
(Cunill, 2006); however this can serve as a benefit during times of depreciation. Lastly,
Starwood are under a long-term lease agreement, which, as stated by Inkson and Minnaert
(2012) means that they cannot remove the hotel from their portfolio until the lease is up;
nonetheless, it does give Starwood certainty that they are in ownership of the property for a
long period.
Figure 1: Starwood brands. Source: (StarwoodHotels, 2014a).

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3.0-The Market
Seventy per-cent of Le Méridien Piccadilly's guests are loyal, visiting Starwood
establishments over twenty-five times per year based on their loyalty programme, see
Appendix 1. Corporate guests act as their largest pool throughout the year, generally staying
four nights during the week, with more leisure guests staying on the weekend. As the hotel
sees a mix of guest types, it's important that they tailor their service to certain needs (Jones et
al., 2008). Figure 2 shows the array of potential guest types. Starwood pride themselves on
being the leading company worldwide for customisation, which is seen by Mei et al. (1999)
as a necessity due to their broad array of clients and needs. If Starwood didn't make any effort
to customise their product, the hotel would appeal to fewer demographics and geographics,
which could potentially affect their occupancy rates.
Figure 2: Customer Segmentation. Source: Adapted from (Ball et. al., 2003).
3.1-International Guests
There are one-hundred-and-twenty-five Le Méridien branded hotels across the world, see
Appendix 2, and many guests use the brand internationally as well as domestically. Having an
international brand can be difficult, as shown through the Cultural Web in Figure 3, due to
different countries having different cultural norms; however, Starwood emphasises the
importance of their nine brands having their own identity. For example, somebody using Le
Méridien in India should be able to go to Le Méridien Piccadilly and notice many similarities.
As stated, it can be hard to keep uniformity; nonetheless, there are arrangements in place to
keep the feeling consistent. For instance, in all Le Méridien hotels, there is a unique scent,
LM01, so all Le Méridien hotels smell the same, keeping with their brand identity. Moreover,
the design of the hotels are similar, going for the classical and sophisticated look. On the
HOTEL
GUEST
S

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contrary, Whitla et al. (2007) disagree, and believe hotels need a local flavour, not being over
standardised, and believe that this could actually reduce occupancy instead of increasing it.
Figure 3: Cultural Web. Source: (Johnson, 1992).
3.2-Location
As many of Le Méridien's clientele are business clients, Starwood decided to locate all of
their hotels in prime locations. Customers value different aspects of their visit more important
than others, see Figure 4; however, business clients see location as a high priority (Jones,
2002). Also, as concluded by Mak (2004), business travellers staying in high end
establishments view price as one of their lower priorities due to being less price-sensitive, so,
as long as the other factors are up to standard, their customers will see it as good value.
Without Le Méridien understanding their clientele bases needs, they may have focussed on a
less important aspect, again, leading to reduced occupancy.
Figure 4: The Hotel as a Market Concept. Source: (Medlik and Ingram, 2000).

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4.0-Parts of the Hotel Managed Differently
All aspects of the hotel are run together under the Rooms and F&B divisions, one exception
being the Revenue Management, which is managed externally, and oversees room prices and
occupancy rates. The team is based at the Park Lane Hotel, Piccadilly, overseeing five
Starwood hotels within London. Figure 5 demonstrates this configuration. This acts
beneficially to Starwood in a number of ways. Firstly, they can see which hotels are
performing the best and worst in the group; they can overbook hotels, as they can move
customers to a sister hotel; they can take bookings for a sister hotel if their hotel is fully
booked; and it helps reduce the payroll for the business as a whole, which can improve their
economies of scale. As proven by Amason (2011), this internal strength acts as a competitive
advantage for Starwood, as without it, they would be blind in how other hotels in the area
were performing. Additionally, as they can overbook and take reservations for sister hotels,
it increases the opportunity of receiving extra bookings, leading to increased revenue. When
analysing this on the Service Firm Lifecycle in Figure 6, it's likely that Starwood will stay in
the growth stage for a longer period due to this advantage. Furthermore, with Starwood
opening new hotels weekly, and having annual occupancy rates of over ninety per-cent, it
proves that this strategy is working for them.
Figure 5: Starwood, London Revenue Management Setup. Source: Adapted from (Tremblay,
1998).

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Figure 6: Service Firm Lifecycle. Source: Sasser, 1978 taken from (Jones et al. 2009).
5.0-Number of Staff
As of Monday 17th March, there were one-hundred-and-forty-eight members of staff;
however, this figure fluctuates frequently. A benefit of them having high room occupancy
throughout the year is that long term work contracts can be established, and seasonality isn't a
major influence.
5.1-Turnover
In the year 2012/13, staff turnover stood at thirty-six per-cent (Engelhardt, 2014). Staff at the
hotel have incentives such as discounted room rates and F&B discounts, valid at all Starwood
establishments, which is another benefit of Le Méridien being under the Starwood brand.
These incentives encourage individuals to apply to work for the hotel, but they also add to the
morale of the job and increase employee satisfaction. By analysing this on the Service Profit
Chain in Figure 7, having satisfied employees may lead to employee retention, increased
customer satisfaction, customer loyalty, increased revenue and increased profits. Moreover,
with a lower turnover, less time and money will be needed for staff training; thus, acting as a
huge benefit to Starwood. Average turnover rates in the hospitality business stand at
approximately thirty per-cent (TheHRDirector, 2013); therefore, Le Méridien Piccadilly's
turnover isn't out of the ordinary; although, they may want to question why they lost a third
of their staff last year, and act appropriately to reduce this figure for forthcoming years.

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Figure 7: Service Profit Chain. Source: (Heskett et al., 1997).
6.0-Service Offerings, Revenue Streams and Value
All services provided to guests are done in-house and nothing is outsourced. This is a major
benefit for Le Méridien, as they can have full control over who they hire; the quality of the
operations; and they retain all profits (Espino-Rodriguez and Padron-Robaina, 2005). Their
main sources of income are through their rooms, restaurant and bar, health club and concierge
services. Several of these will be analysed now.
6.1-Rooms
The rooms act as the largest revenue stream for the hotel, and they are split into five bands,
allowing for customer choice. As rooms range in price substantially from three-hundred to
eight-hundred pounds, it's even more important for the customer to be able to pick the room
that meets their needs. If there were only one room type, the hotel would appeal to less
customers, and being the main revenue stream, the hotel could potentially fail.
6.2-Restaurant
The hotel facilitates a main restaurant, 'Terrace Grill & Bar'. To consume there, a room
booking is not necessary. When analysing this decision on the Self-Reinforcing Service
Cycle in Figure 8, it proves how beneficial this decision was. As the Le Méridien offers an
excellent service, the customers perception of value would be high. This would likely
encourage the diners to return; and they would probably tell their friends and relatives about
the service which they received, which may persuade them to dine there too. The increase in
diners would reduce the operating and food costs due to better economies of scale, which

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would then see a margin increase on food purchased. From this revenue increase, the hotel
could improve the quality of the food for the same cost. As the quality would have improved,
the cycle could start again. Furthermore, with additional diners, there is a higher probability
of them staying for the night which would also increase occupancy. Without being able to
dine without a room, none of this would be obtainable.
Figure 8: The Self-Reinforcing Service Cycle. Source: (Jones et al. 2009).
6.3-Entertainment and Leisure Facilities
The pool, gym and spa are free for all guests, so they don't act as direct revenue streams;
however, as the Le Méridien is a high end establishment, as emphasised by Adekola and
Sergi (2007), customers tend to expect more. When analysing it on the Zone of Tolerance
Scale, see Figure 9, customers at such an establishment shouldn't just feel the service was
acceptable, they should feel delighted due to the price paid. At such a high price, if customers
are not delighted with their experience, they are unlikely to part with such money again, so
this is one complimentary service encouraging clients Zone of Tolerance to increase.
Nonetheless; not all clients staying at the hotel are interested in these facilities, so Le
Méridien is in partnership with The Tate Modern, where guests get complimentary entry.
This will help exacerbate the Zone of Tolerance of the customers, making them feel like they
are getting considerable value for money. In addition, due to differing room types, some
guests will undoubtedly pay more. Le Méridien understands that the guests staying in higher

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priced rooms should be given more as they will expect more, and business travellers would
not necessarily be interested in the aforementioned facilities (O'Fallon and Rutherford, 2011);
therefore, this is why high band room guests are entitled entry into the club lounge, which is
an extra bar and work area with complimentary drinks. Even though these facilities don't act
as a direct revenue stream, without them, it is highly likely that the hotel would receive less
repeat custom, so it still acts beneficially from a financial perspective.
Figure 9: Zone of Tolerance Scale. Source: (Johnston, 1994).
7.0-My Thoughts
My impression of the hotel was that it is worthy of its five-stars; however, to me, it didn't
have the complete feel of a five-star establishment. It was made known that they were not in
close competition with hotels such as the Savoy, as the service levels offered were very
different; although, when I get told a place is five-stars, I expect to get the best service, as
that's what five-stars is right? Nevertheless, all staff encountered were very friendly and eager
to please. One of the bedrooms I saw had maintenance issues; although, the room was not
being occupied that night, so this suggests that it may have been an isolated incident. I also
noticed a lack of bath in the en-suite which I would expect from a five-star establishment.
The breakfast for guests was buffet style, which again, I thought was a little inappropriate in
such an establishment as I would expect a waitered service. None-the-less, the cleanliness
throughout was second-to-none and the facilities provided were of an excellent standard.
Overall it was a nice hotel; however, for the price of the rooms and the lack of certain
amenities, it has put me off making a reservation.

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8.0-Conclusion
Throughout this report it has been made clear that everything which the Le Méridien does can
affect occupancy rates and revenue tremendously. It's clear that they know the ins and outs of
their target market, and know what they expect from their stay. It's excellent to see that they
know the true value of their guests, and try to tailor their services to meet individual needs.
By doing everything in-house has undoubtedly helped maximise their revenue and has also
helped increase their economies of scale. In conclusion, the Le Méridien are very good at
what they do, and it's clear that their customers agree with this through their rapid expansion.
The hotel wasn't for me, but it definitely appeals to their target market.

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9.0-Reference List
Works Cited:
Adekola, A. and Sergi, B. S. (2007) Global business management. Aldershot, England:
Ashgate. p.152.
Amason, A. C. (2011) Strategic management. New York: Routledge. p.53.
Chen, J. J. and Dimou, I. (2005) Expansion strategy of international hotel firms. Journal of
Business Research, Vol 58 (12), pp. 1730-1740.
Chon, K. S. (2012) The Growth Strategies of Hotel Chains. Hoboken: Taylor and Francis. pp.
142-143.
Cunill, O. M. (2006) The growth strategies of hotel chains. New York: Haworth Hospitality
Press. p.131.
Engelhardt, S. (2014) . [email].
Espino-Rodriguez, T. F. and Padron-Robaina, V. (2005) A resource-based view of
outsourcing and its implications for organizational performance in the hotel
sector. Tourism Management, Vol 26 (5), pp. 707-721.
Harris, P. J. (1995) Accounting and finance for the international hospitality industry. Oxford:
Butterworth-Heinemann. p.285.
Heskett, J. L., Sasser, W. E. and Hart, C. W. L. (1990) Service breakthroughs. New York:
Free Press. p.-.
Heskett, J., Sasser, W.E. and Schlesinger, L. (1997) The service profit chain. 1st ed. New
York: Free Press. p.9.
Inkson, C. and Minnaert, L. (2012) Tourism Management. London: Sage publications ltd.
p.105.
Johnson, G. (1992) Managing strategic change—strategy, culture and action. Long range
planning, Vol 25 (1), pp. 28-36.

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Johnston, R. (1994) The zone of tolerance: exploring the relationship between service
transactions and satisfaction with the overall service. International Journal of Service
Industry Management, Vol. 6(2), pp.46-61.
Jones, P. (2002) Introduction to hospitality operations: an indispensable guide to the industry.
2nd ed. Hampshire: Cengage Learning. p.27.
Jones, P., Lockwood, A. and Mogendorff, D. (2009) Management of Hospitality Operations.
3rd ed. Bedford: Cengage Learning, pp. 218-278.
Jones, D. L., Mak, B. and Sim, J. (2007) A new look at the antecedents and consequences of
relationship quality in the hotel service environment. Services Marketing Quarterly, Vol
28 (3), pp. 15-31.
Mak, J. (2004) Tourism and the economy. Honolulu: University of Hawai'i Press. p.151.
Medlik, S. & Ingram, H. (2000) The business of hotels. Great Britain: Elsevier Ltd.
Mei, A. W. O., Dean, A. M. and White, C. J. (1999) Analysing service quality in the
hospitality industry.Managing Service Quality, Vol 9 (2), pp. 136-143.
O'Fallon, M. and Rutherford, D. (2011) Hotel Management and Operations. 4th ed.
Hoboken, New Jersey: John Wiley & Sons Inc. p.326.
StarwoodHotels. (2014a) Starwood Hotels & Resorts Official Auto Club Site: AAA, CAA,
ARC Europe, AA, ADAC, ACA. [online] Available at:
http://www.starwoodhotels.com/preferredguest/autoclubs/brands.html [Accessed: 10 Apr
2014].
StarwoodHotels. (2014b) Starwood Hotels & Resorts. [online] Available at:
http://www.starwoodhotels.com/preferredguest/account/member_benefits/benefits_landin
g.html [Accessed: 10 Apr 2014].

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StarwoodHotels. (2014c) Starwood Hotels & Resorts. [online] Available at:
http://www.starwoodhotels.com/lemeridien/directory/hotels/all/map.html [Accessed: 10
Apr 2014].
TheHRDirector. (2013) Hospitality bucking economic trend - only magazine dedicated to HR
Directors. [online] Available at: http://www.thehrdirector.com/business-
news/pay_and_reward/hospitality-bucking-economic-trend-but-staff-turnover-high/
[Accessed: 10 Apr 2014].
Tremblay, P. (1998) The economic organization of tourism. Annals of tourism research, Vol.
25(4), pp.837-859.
Whitla, P., Walters, P. G. and Davies, H. (2007) Global strategies in the international hotel
industry.International Journal of Hospitality Management, Vol 26 (4), pp. 777-792.

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10.0-Appendices
Appendix 1
Starwood's Loyalty Programmes: Gold and Platinum benefits.
Source: (StarwoodHotels, 2014b).

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Appendix 2
Starwood Hotels Worldwide
Source: (StarwoodHotels, 2014c).

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