Evaluation Of The Degree Of Sustainability Of Travelodge Hotel
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Table of Contents
1.0 Introduction............................................................................................................4
1.1 Background to the study........................................................................................4
1.2 Travelodge company profile..................................................................................5
1.3 Problem statement.................................................................................................5
1.4 Aims and objectives...............................................................................................7
1.5 Research questions...............................................................................................7
1.6 Significance of the study........................................................................................7
1.7 Limitations of the study..........................................................................................8
1.8 Conceptual framework...........................................................................................8
2.0 Literature review..................................................................................................12
2.1 Introduction..........................................................................................................12
2.2 Sustainability........................................................................................................12
2.3 Dimensions of sustainability................................................................................15
2.3.1 Environmental dimension.................................................................................15
2.3.2 Economic dimension.........................................................................................18
2.3.3 Social dimension...............................................................................................19
2.4 Rationale of sustainability and the limitations in its implementation....................20
2.5 Conclusion...........................................................................................................23
3.0 Methodology........................................................................................................25
3.1 Introduction..........................................................................................................25
3.2 Research design and justification........................................................................25
3.3 Data collection......................................................................................................26
3.4 Data analysis and presentation...........................................................................26
4.0Results and Discussion........................................................................................28
4.1 Introduction..........................................................................................................28
4.2 Results and analysis............................................................................................28
4.2.1 Financial sustainability at Travelodge...............................................................33
4.2.2 Social and environmental dimension................................................................38
5.0 Summary of Findings, conclusion and recommendations...................................38
5.1 Introduction..........................................................................................................40
5.2 Summary of main findings...................................................................................40
5.3 Conclusion...........................................................................................................41
5.4 Recommendations...............................................................................................41
5.4.1 Customer Relationship Management...............................................................41
5.4.2 Diversity............................................................................................................42
5.4.3 Financial management.....................................................................................42
5.4.4 Corporate social responsibility..........................................................................43
Reference List
1.0 Introduction
1.1 Background to the study
Hotel managers are under pressure to ensure that their organisations achieve profitable growth. To achieve this goal, the hotels management teams have a responsibility to develop sufficient understanding on the issues affecting the industry and their subsequent implication on the industry’s long term performance. One of the fundamental issues that hotel managers should be concerned with relates to sustainability. Jauhari (2013) affirms that sustainability has become a major driver in organisation’s quest to attain long term performance. Moreover, sustainability can result in significant improvement in organisations financial performance. Sustainability entails the attempt by organisations to establish a balance between the social, environmental, and economic dimensions in the making decisions relating to the organisation’s short term and long term operations.
Jauhari (2013) contends that sustainability should no longer be perceived as a necessity but a critical factor in the success of every industry. Thus, industry players have a duty to pay serious attention to the concept of sustainability. Hoteliers are increasingly appreciating the importance of integrating sustainability as a critical dimension in their strategic management practices. The rationale of integrating sustainability is to promote the organisation’s long term survival. Jones, Hillier and Comfort (2014) argue that achieving sustainability is complex because it entails adopting a multidimensional approach in managing an organisation’s operations. Therefore, it is imperative for organisations’ managers to adopt a holistic approach in their management processes. This chapter is organised into different sections that include a brief profile of the company under investigation [Travelodge Hotel], statement of the problem illustrating the gaps in the firm’s sustainability, the research aims and objectives, the research questions guiding the study, the significance and limitations of the study.
1.2 Travelodge company profile
Travelodge Hotel Limited is a well established private limited company in the United Kingdom. The firm provides accommodation services to business and leisure travellers in Spain, the United Kingdom, and Ireland through its chain of budget hotel outlets. The hotel has been in operation in the hospitality industry for three decades since its inception in 1985. The hotel chain is comprised of 3 hotels in Spain, 11 hotels in Ireland and 456 hotels in the UK in addition to other outlets in other international markets. The hotel’s operations are facilitated by a workforce of 6,000 employees. To attain operational efficiency, Travelodge has implemented Information Communication Technology systems to facilitate online booking and payment for hotel services. Currently, Travelodge ranks as the 2nd largest firm in the UK budget hotel sector.
1.3 Problem statement
Despite the firm’s strong presence in the UK, Ireland and Spain markets, Travelodge has over the past few years experienced significant challenges that might negatively impact its sustainability. One of the critical dimensions of sustainability entails the financial dimension. Travelodge’s financial stability has dwindled significantly in the last five years. This has arisen from the firm’s overreliance on credit finance to facilitate its operations. By the end of December 2010, Travelodge’s total finance cost on bank loan was estimate to be £ 39.4 4million and an additional £51.9 million on Eurobond (Thomas, 2012).
One of the factors that led to increase in the financial cost relates to the inflation caused by the payment in kind note [PiK] that was issued in 2006 upon its acquisition by the Dubai International Capital [DIC]. Thomas (2012) asserts that ‘the £ 50 million PiK note charges interests at 11% above LIBOR and has already grown in value to £ 78 million’ (para.5). The acquisition by the Dubai International Capital was partly financed through a $ 478 million loan from Permira. By 2012, the loan had grown to $517 million. The hotel has not been able to successfully generate sufficient revenue to repay the loan. In an effort to overcome the financial difficulty within the firm, Travelodge entered into a debt swap agreement with two New York Hedge Funds and Goldman Sachs. The agreement provides the two hedge funds [Avenue Capital Group and Golden Tree Asset] and Goldman Sachs the capacity to control the hotel’s operations. The hotel’s management team is of the view that this move will successfully pull out the firm from the current debt burden (Cave, 2015).
The firm’s inability to generate sufficient cash flow might limit the hotel’s capability to achieve long term sustainability. Over the past few years, Travelodgge has experienced reduction in its financial performance. The firm has implemented different measures in an effort to restore its economic performance. Despite the measures that the firm is implementing, the effectiveness and efficiency with which the firm can attain sustainability might be hindered by its over-focus on the financial dimension of sustainability.
Despite moving out of the debt burden, the hotel must devise effective strategies and practices that will ensure that it attains sustainable competitive advantage in the changing hotel industry. Moreover, the hotel’s approach in achieving long term sustainability through the financial restructuring efforts is skewed. Additionally, financial restructuring does not mean that the firm will achieve sustainable competitive advantage. These aspects indicate that the hotel has not fully appreciated the value of entrenching a holistic approach in managing sustainability. However, if the hotel is to achieve long term sustainability, then adopting a balanced approach in managing sustainability is fundamental. The firm’s management team should consider sustainability as a key success factor. Failure to establish a balanced approach might adversely impact Travelodge’s long term competitiveness.
1.4 Aims and objectives
The aim of this study is to investigate the sustainability of Travelodge Hotel. To achieve this goal, the study will be based on the objectives outlined below.
- To investigate the commitment of Travelodge management team in establishing a holistic approach in achieving sustainability.
- To examine the gaps in Travelodge approach in managing sustainability.
- To recommend on the fundamental adjustments that Travelodge management team should consider in improving its sustainability.
1.5 Research questions
The following research questions will be taken into account in order to ensure that the above objectives are successfully attained.
- To what extent is Travelodge committed in establishing a holistic approach in achieving sustainability?
- What are the major gaps in Travelodge approach in managing sustainability?
- What are the fundamental aspects that Travelodge should consider in adjusting its approach in managing sustainability?
1.6 Significance of the study
The study’s findings will be of significant value in Travelodge quest to achieve competitive advantage in an industry that is currently characterised by a high rate of growth and change. First, the study will provide the hotel’s management team insight on the fundamental aspects of sustainability that should be entrenched. This goal will be achieved through evaluation of the best practices in achieving sustainability. Thus, the study will enable Travelodge to effectively restructure its operation by establishing a balance on the environmental, economic, and social components of sustainability.
1.7 Limitations of the study
The study will involve a case study on the operation of Travelodge Hotel. Furthermore, the study is based on secondary research by reviewing documented literature on sustainability. One of the critical limitations of relying on secondary research relates to the credibility of the sources of data. To overcome this limitation, it is ensured that the data is only gathered from credible sources. Another limitation of relying on secondary research in conducting the study relates to the large scope of the secondary data. However, this limitation has been overcome by ensuring that only the relevant sources are selected. The rationale of effective selection of the data sources is to improve efficiency in managing the time and cost required to successfully undertake the study.
1.8 Conceptual framework
According to Jones, Hillier and Comfort (2014), sustainability is not a new concept. Nevertheless, the concept has gained extensive attention over the recent past. Its relevance is highlighted by the fact that sustainability initiatives have become a common trend amongst governments, industries and investors. However, the link between sustainability and a firm’s economic performance remains being a major question (Singal, 2014). Jones, Hillier and Comfort (2014) affirm that the core purpose of sustainability is sustainable development, which entails an organisation’s capacity to successfully meet its current needs.
Traditionally, business managers were mainly concerned about maximising profit and wealth. However, achieving this goal has become challenging because of the intricate nature of the business environment. Subsequently, organisation managers have a duty to understand the relationship between the different components of sustainability that include the economic, social and environmental dimensions in order to achieve the overall objective.
The hospitality industry ranks amongst the most volatile industries due to the likely impact of instabilities arising from the external market. For example, the industry is affected by fluctuations in the rate of tourism. The United Nations World Tourism Organisation affirms that tourism development depends on the principles of economic, socio-cultural and environmental aspects (Sloan, Legrand & Chen 2013). Therefore, a suitable balance between the three dimensions must be promoted in order to guarantee the long-term sustainability of the tourism sector. According to Jones, Hillier and Comfort (2014), this will in turn have positive impact on the growth and development of the hospitality industry. This assertion further indicates that the success of the hotel industry is highly dependent on the success of the tourism industry. According to Choi and Ng (2011), the hoteliers’ capacity to exploit the benefits associated with growth in the rate of tourism is greatly dependent on how effective hoteliers have implemented strategies and policies that contribute to establishment of a balance between the three dimensions. Subsequently, hotel managers have a duty to entrench sustainable hotel operations that will not only benefit the firm but also other stakeholders. Achieving this goal requires the integration of the requisite resources, principles, and strategies.
Traditionally, organisations integrated the different concepts of sustainability separately. Considering the dynamic nature of the business environment, it is imperative for business leaders to understand the correlation between the three dimensions of sustainability (Choi & Ng, 2011). This research conceptualises that the attainment of sustainability will depend on the firm’s success in establishing a link between the three dimensions. The conceptual framework is based on the view that the firm’s long term performance will depend on how it manages the respective dimension.
The intersection of the three dimensions of sustainability in the Venn diagram above represents the point at which Travelodge will succeed in establishing a balanced approach to sustainability. The conceptual framework illustrates the interconnection between the diverse dimensions of sustainability. By establishing a link between the alternative dimensions, Travelodge’s long term performance will be improved considerably.
Chapter 2
2.0 Literature review
2.1 Introduction
Chapter 1 highlights sustainability as a critical aspect in organisations quest to achieve competitive advantage. This chapter entails a critical review of past literature on sustainability. The significance of this chapter is to undertake an extensive review on the foundations of sustainability. The chapter is organised into different sections. The first section entails an extensive review on the concept of sustainability. Secondly, the different dimensions of sustainability that include the economic, social and environmental dimensions are expounded.
2.2 Sustainability
Sustainability involves a corporate strategy aimed at promoting an organisation’s long term competitiveness, efficiency, performance and growth. Carcano (2013, p.38) defines corporate sustainability as ‘the satisfaction of the needs for direct and indirect stakeholders of companies shareholders, employees, customers, communities and without compromising the ability to satisfy the needs of future stakeholders’. The concept has gained considerable recognition in the investment, media and political circles. Investors and business leaders have over the past few decades been focused on formulating sustainability programmes and plans. This move has arisen from recognition of sustainability as a critical element in firm’s corporate strategies (Jones, Hillier & Comfort, 2014). Carcano (2013) affirms that sustainability offers companies a unique opportunity to improve their competitiveness, innovation and to generate bottom-line. This outcome is attained through growth in the level of revenue and decline in the cost of operation (Carcano, 2013).The significance of sustainability is further illustrated by the increase in the number of regulations and legislation relating to sustainability. Governments and regulatory authorities are increasingly pressurizing businesses to integrate measures of that contribute to sustainability (Stoner & Wankel, 2010). An ever growing number of firms are publicly demonstrating and emphasising their dedication to sustainability as a fundamental strategy in promoting a high competitive advantage. Therefore, sustainability has become an essential element in organisation’s effort to differentiate and strengthen their brand.
Despite the increased support on sustainability, the concept has come under extensive criticism by different scholars. Some critics argue that the concept of sustainability is only a cynical strategy aimed at appealing consumers due to growth in the level of consumer concern regarding social and consumer issues. The critics describe the concept of sustainability as ‘green consumerism’ (Neda, Tina & Barbara, 2012). Kahn (2010, p.48) emphasise that ‘green consumerism is an opportunity for corporations to turn the very crises that they generate through their accumulation of capital through the exploitation of nature into myriad streams of emergent profit and investment revenue’. Additionally, the critics argue that most of the efforts by organisations towards sustainability have failed to result into the desired outcome and hence they are not effective in addressing the problem of unsustainable consumption. Moreover, critics are of the opinion that the implementation of sustainability programmes increases the financial burden faced by an organisation. Thus, the concept of sustainability presents a dilemma to most organisations. The investments in financial sustainability might not necessarily pay-off either in the short term or in the long run (Jones, Hillier & Comfort 2014).
The achievement of sustainability demands organisations managers to integrate the social, economic and environmental dimensions in the corporate management process (Sloan, Legrand & Chen, 2013). The concept of sustainability is founded on the stakeholder theory. According to the theory, organisations should not only be concerned on achieving profitability. On the contrary, they should also be sensitive to the interests of other stakeholders such as customers, suppliers, and the wider society. Therefore, in the course of their operation, businesses are faced with the challenge of ensuring that the needs of the different stakeholder groups are satisfactorily met.
Sloan, Legrand and Chen (2013, p. 23) further emphasize that ‘improvements in the area of economic, environmental, and social performance may significantly help integrate concepts of sustainable development into business practice, and lead to sustainability’. However, achieving this outcome depends on an organisation’s efficiency in assessing the performance of the firm in respect to the three dimensions. Therefore, integration of effective key performance indicators should not be underestimated. The key performance indicators should form the basis upon which the organisations managers assess the firm’s progress in attaining the predetermined strategic sustainability objectives. On the basis of the key performance indicators, it will be possible for organisations management teams to successfully undertake effective strategic planning on how to prioritize and manage the economic, environmental and social components of sustainability.
A global survey conducted on 224 business leaders showed that 60% of the business leaders recognise environmental and social responsibility as a critical strategic management aspect (Muller & Pfleger, 2014). However, it is imperative for organisations to adopt the triple-bottom-line concept in promoting sustainability. The three pillars [economic, social and environmental] must be applied concurrently because they are complementary. Muller and Pfleger (2014) affirm that the three concepts are not interchangeable. The lack of inter-changeability underlines the existence of strong form of sustainability. On the contrary, weak sustainability argues that the different forms of capital, viz. human capital, manufactured capital and ecological capital can be sufficiently substituted (Muller & Pfleger ,2014). The aforementioned problem statement indicates the existence of challenges in Travelodge’s quest to achieve financial sustainability. The growth in the relevance of the concept of sustainability has arisen from different factors such as increase in resource scarcity, carbon emissions and unethical business practices. Moreover, different stakeholders are pressurizing businesses to integrate sustainability issues (Muller & Pfleger, 2014).
2.3 Dimensions of sustainability
2.3.1 Environmental dimension
The environmental dimension of sustainability is concerned with an organisation’s impact on the ecosystem. Mignaqui (2014) affirms that environmental sustainability entails the integration of business practices that contribute to adequate protection of the natural resources. The contemporary business environment is currently undergoing remarkable transformation due to the high rate of climate change (Schwartz-Herion & Omran, 2015). One of the factors stimulating climate change entails increase in the rate of environmental degradation. Amongst the causes of environmental degradation includes waste and carbon emissions. Sloan, Legrand and Chen (2013, p. 23) argue that businesses must be concerned about their carbon footprint. This arises from the fact that increase in the rate of climate change destabilises economic activities and hence the consumers’ purchasing power. The ultimate effect is decline in the hotel’s capacity to generate revenue. According to Bohdanowicz, Simanic and Martinac (2005), the operations of firms within the hotel industry might contribute to remarkable increment in the rate of climate change. The hotel industry ranks amongst the largest users of consumer goods. Thus, their impact on the environment is considerable due to the high waste generation. Bohdanowicz, Simanic and Martinac (2005) affirm that the hotel industry has been insensitive to the degree of environmental degradation caused by their operations and services. However, the level of environmental awareness has increased remarkably amongst the general public. This has increased the level of criticism on the practices and operations of rims within the hotel industry. Thus, hoteliers must be concerned on understanding and mitigating their impact on the environment through effective management practices. Hoteliers should consider sustainability as a contemporary corporate issue.
The environmental dimension of sustainability has become a major concern for most organisations in the hotel industry. Despite the increased attention on the concept of sustainability within the contemporary hotel industry, the application of the strategy varies considerably across the industry players. A survey conducted on 10 of the leading hotel chains in the United States shows that 4 of the hotels undertake formal sustainability reporting while 6 of the hotels provide limited information on their approach to sustainability. Some of the leading hotels such as Marriott, Hilton, and Ramada [Wyndham Worldwide] have stipulated clear missions on how they intend to attain long term performance without negatively impacting the environment. Some of the hotels have outlined their commitment to managing diverse environmental issues such as greenhouse gas emissions, climate change, waste management, environmentally responsible sourcing, and energy and water conservation (Jones, Hillier & Comfort 2014).
In 2013, Hilton publicised its commitment to improve its water conservation by 10.2% and reduce its waste by 24.9%. The hotel further affirmed its focus on environmental stewardship (Bruns-Smith, Choy, Chong & Verma, 2015). In spite of the hotels’ affirmation of their strong commitment in entrenching sustainability, most of the hotels are only recognising of the complex and ardours nature of sustainability (Jones, Hillier & Comfort 2014).
To achieve these commitments, some hotels such as Hyatt have implemented systems aimed at tracking their performance with regard to attainment of the set sustainability targets. Similarly, the Wyndham Worldwide hotel recognises measuring its impact on the environment as the first step in mitigating its footprint. On its part, Marriot Hotel has formulated an integrated global environmental strategy that enables the hotel to manage energy and water efficiency. This indicates the existence of a trend whereby hotels are appreciating the importance of environmental protection in promoting their overall performance.
The resource-based theorists accentuate that profit oriented organisations invest a substantial amount of rare, valuable, inimitable and non-substitutable resources in the quest to gain sustainable competitive advantage. The theorists further contend that corporate social performance contributes to remarkable benefits to organisations such as reduced risks, higher revenue generation, reduced costs and high profits (Cortez & Cudia 2011). The implementation of environmental sustainability is currently being achieved through development of programmes aimed at protecting the environment. One of the approaches that organisations are focusing on entails efficient and effective resource utilisation. Furthermore, Bruns-Smith et al (2015) affirm that environmental sustainability is being implemented through avoidance of business practices that can contribute to environmental pollution.
2.3.2 Economic dimension
The core goal of profit oriented organisations is to maximise profit. However, the attainment of this goal is dependent on an organisation’s efficiency in managing its operations. An organisation’s capacity to achieve sustainable profit is influenced by its success in promoting economic sustainability. Muller and Pfleger (2014) define economic sustainability as an organisation’s capacity to sustain economic production indefinitely. Despite the view of some scholars that sustainability programmes increases an organisations financial burden , the concept of economic sustainability is critical in enhancing an organisation’s capacity to cope with intense competition and hence its probability of attaining long term success (Muller & Pfleger 2014).
Cortez and Cudia (2011) affirm that a strong correlation exists between an organisations financial performance and sustainability. The sustainability practices undertaken by a firm has an influence on the shareholder value. For example, some of the technologies and environmental management practices incorporated by a firm such as revenue enhancement, quality improvement, reduction on business risk and cost reduction contribute to improvement in an organisation’s economic performance (Cortez & Cudia, 2011).
The global economy has over the past few decades been characterised by considerable reduction in organisation’s efficiency with regard to managing economic sustainability. This phenomenon is well illustrated by the remarkable decline in businesses life expectancy. Most industries have been characterised by increase in the rate of mergers, acquisition and bankruptcies. The acquisition of Travelodge by DCI is a strong indicator of the firm’s ineffectiveness in achieving economic sustainability. The increase in the rate of poor financial performance amongst firms that were previously listed in the major stock markets such as FTSE over the past decades illustrates the significance of organisations increasing their focus on the economic sustainability (Doane & MacGillivray, 2001). The existence of gaps in organisations efficiency in attaining economic sustainability is further underlined by the recent economic meltdown, which emanated from the collapse of major Wall Street financial institutions in 2008. This occurrence has led to remarkable improvement in the relevance of economic sustainability across the world. The decline in the level of economic sustainability within organisations has increased the consumers’ concern due to incidences of cases of job loss and hence affecting the consumers’ purchasing power negatively (Choi & Ng, 2011).
2.3.3 Social dimension
Social sustainability entails an organisation’s effort to establish a system that contributes to poverty alleviation. The theory of social sustainability postulates that a strong correlation exists between sustained natural resource utilisation and sustained poverty levels. Business organisations are major contributors to the social problems currently being experienced due to their continued resource utilisation (Basiago, 1999). The social sustainability theory further underlines the importance of organisations pursuing economic sustainability within the framework of social equity (Choi & Ng, 2011). Therefore, to achieve long term economic performance, organisations must optimise resource utilisation, promote equitable distribution of resources and prioritize resource allocation. Alternatively, Choi and Ng (2011, p. 270) affirms that ‘the social dimension of sustainability is concerned with the well being of people and communities as a non-ecological form of wealth’.
The social dimension of sustainability is mainly concerned with establishing equilibrium between the societal and personal needs and the capacity of the ecosystem to support the ecosystem. The relevance of social sustainability in the contemporary business environment is underlined by the increase in the number of scandals such as the Enron scandal (Choi & Ng, 2011). The Enron Scandal exemplifies the existence of gaps in organisations capacity to satisfy the stakeholder needs. Furthermore, the scandal underlines the existence of tension between the business and society interests. A global study conducted in 1999 showed that over 75% of consumers are concerned about organisations contribution towards the attainment of broader social goals. The increase in the relevance of social sustainability is underscored by the high rate at which organisations are incorporating the concept of Corporate Social Responsibility (CSR). The rationale of integrating CSR as an approach towards social responsibility is to promote the company’s brand reputation.
2.4 Rationale of sustainability and the limitations in its implementation
The global hotel industry has over the past decades undergone remarkable transformation. One of the aspects that illustrate the industry’s transformation entails the establishment of diverse hotel f
