Case study option two - Travelodge

Introduction
Travelodge is a hotel brand that offers budget accommodations in the hospitality industry. Due to
Covid-19, the company initially struggled to survive, comparable to every other business in the
hospitality industry. As the pandemic's nature necessitated social distancing, travel restrictions
had become the norm worldwide. As a result, businesses that rely on in-person interactions were
hit harder, like Travelodge itself.

When leading through changes, a leader needs to construct a strategy to acknowledge

organisational strengths and weaknesses (Whittington et al., 2020). A strategy gives
stakeholders, especially employees, direction (Whittington et al., 2020). The chief executive of
Travelodge, Craig Bonnar, revealed the company's expansion plans. Hence, the business's overall
strategy is expanding across the UK but also possibly in mainland Europe and Spain. However,
is it viable to expand business during an economic catastrophe?

In this discussion, the company's strategic options to achieve the mentioned goal of growth will
be addressed, taking into account the internal and external challenges and opportunities. The
indicated will ultimately evaluate the strategic options viability. The discussion will also include
references to relevant theories and concepts.
Challenges and Opportunities
SWOT analysis is a strategic management approach that explores the external and internal
factors that affect a business (Kelly, 2009). The acronym stands for strengths, weaknesses,
opportunities, and threats (Kelly, 2009). This tool will be utilised to identify the challenges and
opportunities Travelodge has faced or is facing. Hence, recognising the business’s overall
position.

Firstly, the strength of Travelodge includes the high-demand business offering given the external
economic environment. As Bonnar quotes, “Travelodge guests split equally between those
staying for leisure and businesses”. Covid-19 has resulted in lower consumer expenditure on
discretionary goods and services as the pandemic’s nature makes the future uncertain (Davahli et
al., 2020). Thus, business sales dropped leading to cost cuts and even redundancies (Davahli et
al., 2020). In other words, the hospitality industry experienced a demand and supply side
disequilibrium (Davahli et al., 2020). Conversely, when there is a need to book accommodation,
business travellers choose budget hotels over premium hotels due to reduced travel costs from
employers. Conjointly, hybrid workers who require to temporarily stay in the city prefer the
same. Leisure travellers, on the other hand, are inclined to travel locally initially due to closed
international borders and subsequently because it is relatively cheaper (Davahli et al., 2020).
This has given rise to staycations which was amplified after the “Freedom Day” in UK in july
19th as Bonnar quotes the hotel chains as “Staycation champions”. This demand rise is proven
by Travelodge’s strong financial position, as revenue increased by nearly 10% compared to 2019
to £229.5 million.

Moreover, the company’s business customers include government officials and a range of FTSE
100 firms. Bonnar is discreet in naming them, reflecting on the solid and long-lasting
relationship with customers. This also showcases the company’s diverse customer base, which is
an asset to the company.

Secondly, weaknesses of Travelodge include the CVA restructuring, which refers to company
voluntary arrangements (CVA) (Pandit et al., 2000). This method allows a corporation to resolve
debts by merely paying a part of what it owes to creditors (Pandit et al., 2000). Shareholders are
more willing to invest in companies that offer a favourable investment return (Pandit et al.,
2000). However, being the first to conduct a CVA makes Travelodge appear less appealing to
public investors, especially in light of the pandemic, reducing their prospective profits.
Moreover, Travelodge lost revenue due to Covid-19. The booking cancellations and Christmas
parties being infeasible due to the mass gathering restrictions contributed to this.
Thirdly, opportunities for Travelodge include the possibility of a “cost of living catastrophe due
to soaring household bills and major tax hikes”. As mentioned in the strength element of the
SWOT analysis, the already existing trend of budget hotels being in high demand will be
amplified as people will have less money to spend.

Also, retailers are going bust due to covid especially with the removal of government support.
These business shutdowns means high streets are under pressure. Travelodge is taking advantage
of this opportunity through the high street growth plan. Also, expanding to international markets
like mainland Europe is an opportunity with more consumers, revenues, profits, and credibility.

Fourthly, Travelodge’s threats include the permanent impacts of Covid-19 in our lives, like zoom
calls becoming the norm for business meetings. As Craig Bonnar himself discussed Travelodges
strategy through zoom call rather than Chiltern Firehouse restaurant when the pandemic hit. This
could also be the case for business customers. On the other hand, the growth and demand in the
budget hotel business might attract more competition in the already existing competitive market.
Strategic Option 1&2
Travelodge’s primary strategy has been growth, a plan to expand the company’s size and value.
As Bonnar quotes, “2022 will be a year of growth”. To begin with, Ansoff Matrix will be applied
to theorise the outlook of strategic options. This strategic planning tool assists in devising
strategies for future business growth through strategic choices classification and resultantly
evaluating risk (Dawes, 2018). In the case of Travelodge, the Ansoff matrix components, market
penetration, and market development are relevant.

Market penetration is regarded to be a low-risk strategy (Dawes, 2018). To grow the company’s
overall market share, a company will use market penetration to raise the sales volume of its
current products in its existing markets (Dawes, 2018). Travelodge is set to expand with seven
new hotels opening in the UK in 2022, with a further plan of expansion in 2023 with 15 to 20
sites which was the target pre-pandemic. Hence, this expansion is the extended strategy for
market saturation in the product life cycle (Kotler and Keller, 2016). Moreover, in conjunction
with shareholders, the company plans to spend up to £70 million on maintenance and upgrading
hotels. This is also known as organic growth, expanding through location utilising its resources
and capabilities (Whittington et al., 2020). On the other hand, Market development is a high-risk
strategy with high potential returns (Dawes, 2018). This means selling existing products to new
markets and constructing global brand recognition (Dawes, 2018). Travelodge plans to expand to
mainland Europe for which research has started on 250 to 300 locations.

When considering the viability of Travelodge’s mentioned strategic options, market penetration
implementation is feasible with the established brand recognition in the UK. However, due to
cross-cultural differences, market development must adhere to quality, pricing, or service
benchmarks. Hence, inadequate market research on the respective market might threaten
Travelodge’s strategic move. The viability of this strategy relies on adaptability stemming from
the strategic leadership of Craig Bonnar. This is pivotal to influencing others to volunteer work
toward strategic growth when leading through a change (Whittington et al., 2020). Bonnar is a
former executive at the value supermarket chain, Asda. Reflecting on past performance can
provide a basis for future growth planning (Whittington et al., 2020). This is relevant because
ASDA and Travelodge’s offerings have similar consumer perceptions. However, the company
already has franchises in Spain which show they have experience in international strategic
management increasing the success probability of the strategic options.
Strategic Option 3
A strategic alliance is an agreement between firms to collaborate on a mutually advantageous
initiative while maintaining the individual company's independence (Tjemkes et al., 2017). The
council is planning to construct a 70-room hotel in Braintree, Essex. Travelodge and retailer
M&S. will share the mixed-use lease in the location. The strategic alliance will allow the
organisations to achieve economies of scale but also share risks and costs (Tjemkes et al., 2017).
However, While Travelodge is a budget brand , M&S is a luxury brand. A customer who
purchases from M&S might not want to stay in Travelodge. Hence, the criticisms of this strategic
alliance question the viability of the strategic option. However, the positives definitely outweigh
the negatives making this strategic alliance a viable strategic option.

Strategic Option 4
Travelodge utilises the sliding scale of prices whereby guests pay an average of £45 per room
according to demand. This is the changeable pricing of goods or services dependent on the
consumer’s ability to pay (Banton, 2021). As a budget hotel, the company targets consumers who
can pay a minimum for a stay. Hence, the pricing taps into expanding the customer base to all
income ranges, allowing the business to maximise revenue (Banton, 2021). As mentioned,
Travelodge has a diverse target market. Thus, it can be presumed that the pricing strategy allows
Travelodge to recoup revenue lost from the initial outbreak of the pandemic. Alternatively, the
pricing is a versatile, dynamic option for new markets (Banton, 2021). Hence, this complements
the expansion plans of Travelodge. This creates a starting point for the customer and Travelodge
to explore an economically empowered connection (Banton, 2021).

In contrast, the sliding scale of prices is often criticised due to the potential of overworking to
recoup lost revenue (Banton, 2021). Moreover, there is a potential to devalue services, which
contradicts Bonnar’s claim that Travelodge offers equal value to competing hotels like Premier
Inn (Banton, 2021). The sliding scale of pricing may make consumers perceive otherwise.
Alternative pricing strategies, such as competitive pricing, may support such claims. While it is a
viable strategic option to maximise revenue leading to growth, it contradicts the business claim
of the offering. This reflects that the strategy is viable but to an extent. For example, marketing
could be used to advertise Travelodge’s high service quality to eliminate the contradiction.

Conclusion
Strategic options 1 and 3 took advantage of the opportunities and threats, making them viable. In
contrast, strategic option 4 wasn’t because there are better alternatives, and strategic option 2
requires considering other factors to be viable. Subsequently, Travelodge’s growth strategy has
been partially successful. However, the bottom line is that strategic management enables a
business to achieve its goals through resource and capability management.
1644 words
References
- Banton, C. (2021). Sliding scale fees, Investopedia. Investopedia. Available at:
https://www.investopedia.com/terms/s/sliding-scale.asp (Accessed: January 17, 2023).

- Dawes, J. (2018). “The Ansoff Matrix: A legendary tool, but with two logical problems,”
SSRN Electronic Journal [Preprint]. Available at: https://doi.org/10.2139/ssrn.3130530.
- Davahli, M.R. et al. (2020). “The hospitality industry in the face of the COVID-19
pandemic: Current Topics and Research Methods,” International Journal of
Environmental Research and Public Health, 17(20), p. 7366. Available at:
https://doi.org/10.3390/ijerph17207366.
- Kelly, P. (2009). International Business and Management. London: Cengage Learning.
- Kotler, P. and Keller, K. (2016). Marketing Management. 15th ed. Harlow: Pearson
Education Ltd.

- Pandit, N.R. et al. (2000). “Corporate rescue: Empirical evidence on company voluntary
arrangements and small firms,” Journal of Small Business and Enterprise Development,
7(3), pp. 241–254. Available at: https://doi.org/10.1108/eum0000000006846.
- Tjemkes, B., Vos, P. and Burgers, K. (2017). Strategic Alliance Management. 2nd edn.
London: Routledge.

- Whittington, R. et al. (2020). Exploring strategy. 12th edn. Harlow: Pearson Education
Limited.
Section B (50 marks).
1. A.D. Chandler in 1962 declared ‘structure follows strategy’ a basic principle of business. With
support from examples and reference to relevant theories, concepts and literature, how important
is having the right organisational structure in executing a successful strategy?

Intro - 150 words - thesis statement

For - business example to support that - 600 words - factory type businesses - Centralised

Against - business example to support that - 600 words - tech companies like Google -
Decentralised

Conclusion - 150 words