Part 3

Read the documents provided in Part 3 of the 'Materials'.

Analyse the resources and capabilities of the company and how they might contribute to a position of sustainable competitive advantage. Refer to the theories and frameworks presented in Weeks 9, 10 and 11 and apply them to the company in the Materials.

GUIDANCE

Part 3

. Considering the company's activity in the UK Hotel industry and using the skills you developed in Week 9, trace the resources and capabilities profile of the company. You may demonstrate these by using a diagram similar to the one used in Activities 9.6 and 9.7. Discuss how resources underpin capabilities (relevant examples can be found inSection 5).

Once you have identified the relevant resources and capabilities, use one of the frameworks presented in Week 10 to appraise them (VRIO framework or value chain) and to discuss how resources and capabilities underpin competitive advantage of the case company (Refer to: (a) sections4.1,4.2,6.1,6.2and6.3in developing your appraisal and (b) the discussion on the resources and capabilities appraisal during 'TMA 02 preparation - Part B' tutorial). To demonstrate the application of the framework of your choice, you may use relevant diagram(s) (offered in PowerPoint) fromSections 4.1and6.2.

Finally, develop your answer further by selecting one of the topics in Week 11 that is relevant to your argument. Choose the most relevant topic from: capabilities development (Section 1), dynamic capabilities (Section 2) or functional strategies that the company can adopt to enhance its competitive advantage (Section 3).

Materials

Part 3

1 Our business model

Our unique ownership business model provides us with a competitive advantage in a challenging market, and has enabled us to become the number one hotel operator in the UK, and to expand our presence in Germany.

Our unique vertically integrated model sets us apart

Ourvertically integrated model, which combines the ownership of property, hotel operations, brand,and inventory distribution has enabled Premier Inn to grow at a significantly faster pace than competitors, delivera consistently superior customer experience and generate a strong return on capital for shareholders over thelast 15 years.

Source: Whitbread (2022c).

Our operating model drives competitive advantage

Premier Inn's unique operating model provides a clear competitive advantage, enabling the delivery of a winning customer proposition that will have a strong appeal to customers in both the current and post pandemic environments. The key components of the model that drive our competitive advantage, combined with our strong brand and direct distribution, are (Whitbread, 2022c):

Scale advantage:Our vertically integrated model provides increased control of network planning and property development aspects of our hotel operations. This means we can efficiently access locations where we see opportunities to expand, which has enabled Premier Inn to almost double its number of rooms in the UK since 2010 to become the UK's largest hotel network. We therefore have more hotels in locations where our customers want to stay, and we are able to drive economies of scale to keep unit costs low and by rationalising management overheads.

Operational control:Ownership of all aspects of our hotel operations ensures greater control over the customer experience, resulting in a high quality offering delivered on a relentlessly consistent basis throughout the estate. The offering is also continually evolving through innovative new products such as hub and Premier Plus. The operating model delivers best-in-class operational performance, as evidenced by high staff retention levels and the very high customer satisfaction scores the business regularly achieves. All of our hotels have a bar and restaurant, either within the hotel or next door. Our restaurant offering, including the promise of a good value cooked breakfast, form a core part of our overall customer proposition, helping drive higher RevPAR in our hotels.

Property flexibility:A willingness to be flexible with respect to freehold or leasehold acquisitions ensures new sites are in the best locations and have the optimal size and format. Ownership of around 60% of the hotel estate gives Premier Inn control over the initial development of the hotel, and subsequently how it is maintained, extended, or re-developed. Further opportunities remain to optimise the network by individual asset, as well as more broadly through catchment optimisation creating a more optimal portfolio of assets. Whitbread's asset-backed balance sheet also supports a strong financial covenant, which means that in competitive bid situations for new leasehold developments, Premier Inn is often the preferred tenant and can secure more favourable lease and rental terms. Our freehold ownership reduces earnings volatility in the current downturn and provides Whitbread with a flexible source of funding in the event of further cash requirements for investments or to further protect our liquidity. These components combine to deliver a winning customer proposition, providing the customer with more choice, value for money, outstanding product quality, excellent customer service and consistently high hygiene standards. Going forward, this offering positions us very well to take market share, as customers are likely to seek value, quality, and the familiarity of their most trusted brands.

Source: Whitbread (2021; 2022c).

Our strengths & opportunities

A structurally advantageous market combined with our strong and agile businessmodel makesus best-placed to capitalise on the recovery opportunity and reinforce our market leading position.

ENHANCED STRUCTURAL OPPORTUNITIES

Market supply contraction accelerating PI (PI: profitability index) market share gains and growth.

Source: company data

Both UK and German markets are highly fragmented with a high percentage of independent hotel players

Both markets are characterised by long-term migration from independents to budget branded hotels, driven by demand weakness and structural cost pressure

The impact of COVID-19 is expected to accelerate the decline of independents further, giving Premier Inn an even bigger opportunity to gain market share

BUDGET MODEL IS STRUCTURALLY ADVANTAGED

Budget hotel sector is higher growth and outperforms in downturns

The UK budget branded sector has grown faster than the rest of the hotel market since 2009

The German hotel market is highly fragmented with the largest operator only having c2% market share. Our aim is to become the clear no 1. budget operator in Germany.

BROAD CUSTOMER REACH

Flexible model caters to a wide range of customer types

Premier Inn's customer base is driven by domestic travellers seeking short stays (1 - 2 nights) for both business and leisure

This broad reach not only covers a wide range of customers and markets, but also makes us more resilient as we're not reliant on one particular area of the market

The German market is larger than the UK and also has higher levels of domestic travel for both business and leisure, making this a highly attractive market in which to replicate our successful UK business model

STRONG HOTEL BRAND

We have standout customer brand scores in the UK hotel market and expect customers to rely more on their most trusted brands as they seek to travel again

As our presence grows in Germany, we are working hard to replicate the success we have in the UK and grow the Premier Inn brand. We believe this can be achieved through delivering our outstanding customer proposition

BEST-IN-CLASS OPERATIONS

Competitive advantage driving a winning customer proposition (details provided in an earlier section).

DIRECT DIGITAL DISTRIBUTION

Cost efficient and provides ownership of the customer relationship

We have market leading direct digital distribution in the UK with only 1% of sales going through online travel agents (OTAs)

We have market leading direct digital distribution in the UK with only 1% of sales going through online travel agents (OTAs)

This approach enables us to own the relationship with the customer and invest in more effective direct and digital marketing

LEAN AND AGILE COST MODEL

Right-sized cost base enables superior value for money offering

We have a strong track record of material cost savings helped by our unique operating model where we retain control over all of our operations

Our model also helped our rapid and decisive action during the pandemic.

FINANCIAL FLEXIBILITY

Strong balance sheet provides offensive and defensive flexibility

We have a strong balance sheet with low leverage and access to significant levels of liquidity allowing us to continue to invest when others may be constrained

The strength of our balance sheet is underpinned by our freehold estate and provides us with flexibility to optimise our estate.

Source: Whitbread (2022f).

Rest easy from booking to bed

The 'Rest Easy' integrated marketing campaign launched in April (2021) will help deliver front-of-mind consideration with existing and new customers (Whitbread, 2021).

This is how you can rest easy with Premier Inn:

Our rates

We're everywhere

A great night's sleep

Totally family friendly

Premier Inn CleanProtect^TM

We're a Force for Good

Tuck into tasty food

Source: Whitbread (2022g).

Book with confidence

When travel plans areuncertain,we allwantto be as flexible as we can - and that's true for us, as well as our guests.

Ournew rates, withimproved flexibility,give you more choiceif your plans suddenly change.And, by booking directly with us you can manage your booking from start to finish. All online, allthe time.

Our flexible rates

Plans change and you never know when you might have to postpone that long weekend away.Our new rates (flex, semin-flex, advance, standard) give you more options, so you can choose what's right for your stay.You can choose a ratewith hassle-free cancellations.Or if you just need aback-upplanwe have rates which you can move up to1pm on the day you're due to arrive.

We're everywhere

From Northamptonto Southend, East Kilbride toHaverfordwest, with over 800 hotels across the UK, we're wherever you need to be.And you can be sure that wherever you stay with us you'll get the warmest of welcomes.

Book direct

We're keep-things-simple kind of people at Premier Inn and we don't like middle men getting in the way. Booking directly with us, and only with us, means you'll get the best price, can manage your booking online, and we'll be there to help you every step of the way.

Source: Whitbread (2022h).

Stay with confidence

Our teams have always been committed to making your stay an enjoyable one. We've been working very hard to make sure your stay with us is a safe as possible, while still giving you the Premier Inn comfort you love.

We have introduced Premier Inn CleanProtect^TM- our enhanced cleaning regime. And behind the scenes our teams have worked tirelessly to support our communities through this difficult time.

See below how we're doing everything we can to make sure you stay with confidence.

Source: Whitbread (2022i).

Premier Inn CleanProtect^TM- our new enhanced hygiene promise

The safety and wellbeing of our guests and team has always been incredibly important to us. To make sure we keep everyone safe, we have a rigorous, daily cleaning regime across all our UK & Ireland hotels - an enhanced hygiene promise we call Premier Inn CleanProtect^TM.

Developed in partnership with Diversey, a global leading cleaning and hygiene product supplier for the healthcare and hospitality industries, our promise seeks to give you extra peace of mind so you can book and stay with confidence.

Checking-in and social distancing

Minimising contact at reception with protective screens and keeping social distancing measures in place.

Hygiene and anti-viral sanitising spray.

More frequent cleaning of high-touch areas with Diversey-approved disinfectants. We're paying special attention to air conditioning and heating controls, TV remotes, door handles and desks.

Housekeeping

Unlike other hotel brands, we employ every single member of our 9,000 -strong housekeeping team directly, meaning we're able to ensure they continue to have the highest standards in cleanliness and hygiene training to thePremier Inn CleanProtect^TMpromise.

Bed linen and towels.

Laundering all our linen and towels at over 60C to thermally disinfect at high temperatures. We've also placed spare pillows in an anti-tamper zip-up bag, for extra peace of mind.

Protective equipment for our teams.

Providing all our team members with protective equipment.

A generous serving of safety.

You can relax knowing that enhanced cleaning regimes are in place throughout our restaurants. Every table is cleaned between visits, menus are sanitised after each use and contactless payment is in place.

Source: Whitbread (2022j).

A good night's sleep

Our beds are quite simply the best - we know it, and many of you have told us too.We now wash all our linen at over 60 degrees and use disinfectant detergent.Pluswe've removed all extra pillows from the rooms, but just ask if you need one. Sowhatever is going on in the world, you know when you hit the hay on one of our Hypnos beds you're going to get a great night's sleep.

Our teams are a Force for Good

Our teams are our greatest assets. Each one of them is employed directly by uswhich is why we can keep our standards so high. They are there for you whenever you needthemand they make us proud every day.

Source: Whitbread (2022i).

Premier Inn is getting Plugged Inn

In 2021, we're excited to be introducing the GeniePoint Network of high-powered electric vehicle chargers at Premier Inn hotels across the country.

Launching at almost 300 sites over the next three years, these handy chargepoints for electric cars are easy to use - all you'll need to do is download the GeniePoint app, locate your nearest Premier Inn hotel with points installed, and get charging! The GeniePoint Network is one of the UK's fastest growing and most reliable high-powered charger networks. It is continually expanding, rolling out new electric chargepoints across the country to keep up with the demand by EV drivers and local businesses.

Source: Whitbread (2022k).

Our Premier Inn mobile apps

Carry more than 800 hotels in your pocket. Our apps such as App Store and Google Play make searching and booking a room or a meal even speedier. Log in, store your details and see your booking details at a glance. And remember, you'll findthe same great rates onwww.premierinn.com

Speedy Check-In

We have installed speedy check-in kiosks at some of our larger hotels to improve your check-in experience; they are designed to reduce the time it takes you to check-in, get your room key and start enjoying your Premier Inn stay.

What information will I need to check-in?

The kiosks will recognise you with two pieces of information; the name the reservation was made for, the post code from your reservation or your reservation number. All of this information can be found on your booking confirmation email.

We have team members on hand 24 hours a day to help guests using our speedy check-in kiosks. If you need to amend your reservation on arrival please speak to a member of the team in reception who will be happy to assist.

Source: Whitbread (2022m).

References for Part 3

Whitbread (2022f)Why invest?Available at:https://www.whitbread.co.uk/investors/why-invest/(Accessed: 2 March 2022)

Whitbread (2022g)Reast easy: from booking to bedAvailable at:https://www.premierinn.com/gb/en/resteasy.html(Accessed: 30 March 2022)

Whitbread (2022h)Book with confidenceAvailable at:https://www.premierinn.com/gb/en/why/book-with-confidence.html(Accessed: 1 April 2022)

Whitbread (2022i)Stay with confidenceAvailable at:https://www.premierinn.com/gb/en/why/stay-with-confidence.html(Accessed: 1 April 2022)

Whitbread (2022j)Premier Inn CleanProtect - our new enhanced hygiene promiseAvailable at:https://www.premierinn.com/gb/en/why/stay-with-confidence.html(Accessed: 1 April 2022)

Whitbread (2022k)Premier Inn is getting Plugged InnAvailable at:https://www.premierinn.com/gb/en/why/electric-charging.html(Accessed: 3 April 2022)

Whitbread (2022l) OurPremier Inn mobile appsAvailable at: https://www.premierinn.com/gb/en/why/apps.html (Accessed: 4 April 2022)

Whitbread (2022m) Speedy check-in Available at: https://www.premierinn.com/gb/en/faq/speedy-check-in.html (Accessed: 4 April 2022)