Research proposal

Title: Financial analysis of hospitality sector in UK

1|Page
Table of Contents
Introduction................................................................................................................................3

Background.............................................................................................................................3

Problem statement..................................................................................................................3

Significance............................................................................................................................3

Literature review........................................................................................................................4

UK hospitality industry..........................................................................................................4

Economic contribution of hospitality industry.......................................................................5

Financial analysis...................................................................................................................6

Research methodology...............................................................................................................7

Research question...................................................................................................................7

Research design......................................................................................................................8

Data collection........................................................................................................................8

Analysis..................................................................................................................................9

Ethical consideration..................................................................................................................9

Project plan & Skill analysis......................................................................................................9

Summary and future plans.......................................................................................................11

Bibliography.............................................................................................................................12

2|Page
Introduction

This is a research proposal written with the objective of understanding financial scenario of

hospitality industry in UK. As hospitality include wide range of services, this paper narrow

its focus only on hotel industry. This proposal include information on research objectives,

significant, brief of literature review, tentative research plan, method of data collection and

analysis, ethical consideration, plan of action and future expectations.

Background

Financial analysis is a measuring tool to evaluate business performance over a certain period

of time and its impact on economic system. It includes both accounting and non-accounting

information to deal with business problems. It aims toward critical analysis of financial data

with the help of other information to work on future plans and policies. Tourism industry is

developed in 20th century, it is no longer associated with mere accommodation, and rather it

delivers experience and became a stimulant to people movement from one place to another.

Hotel industry play significant role in economic and social contribution in a region. This is a

research proposal written with the objective of understanding financial scenario of hospitality

industry in UK. As hospitality include wide range of services, this paper narrow its focus

only on hotel industry.

Problem statement

Key problem is to understand various financing methods and models to evaluate industrial

performance and future growth.

Significance

This paper will help in evaluating overall performance of hospitality sector in UK region. It

includes analysis on demand and supply side of industry, weather there is sales and customers

3|Page
in this industry or not. Further, it focus on evaluating source of funds, resource allocation,

revenue model, financial analysis using ratios for selected industry. Though there are several

participants in hospitality industry such as hotels, airlines, restaurant, amusement sector; this

paper will focus on hotel sector only. Key benefits from analysis include evaluation of

profitability of establishment, evaluating liquidity of establishment, help in forecasting future

industry growth, financial control and assessment of managerial competencies.

Literature review

UK hospitality industry

UK is situated in European continent; it is highly popular tourist destination due to its natural

beauty and monuments with historical significance. Tourism industry is highly fragmented

with presence of several small scale businesses. Hospitality industry includes several sub

industries such as food business, accommodation service, tourism etc.

According to British hospitality association, there are 1, 27, 000 businesses approximately

involved in hospitality sector, and it provides employment to 3.2 million people [ CITATION

inv19 \l 1033 ]. There are 22,000 large, medium and small scale hotel and guest houses,

contributing 19 percent in total national income. It is the third largest private sector in UK, it

generate £130 billion of economic activity. Government pay consideration towards growth of

this industry through policies, promoting investments etc. Hotel industry is among major

economic contributor with 3.6 percent of UK GDP. It was performing well in market. Due

to weak pounds value, there is rising tourism in UK market. Analyst states annual growth of

3.4 percent in the year 2018-19 and 2 percent in 2019-20.

According to analysis conducted by PWC, London is the most visited region in UK, it is

expected that in year 2019-20 there will be 1.4 percent growth in Average daily rate. There

4|Page
will be weaker demand in other regions, with marginal occupancy decline by -0.1%.

Different games such as Netball World Cup in Liverpool, 2019 Manchester International

Festival and UEFA Euro 2020 football championships will help in increasing demand in

hospitality industry [ CITATION www19 \l 1033 ].

Hospitality industry face adverse consequences of Brexit, there is rising complexity and long

lasting impact on economic growth. Different challenges encountered by hospitality industry

due to Brexit include workforce pressure as substantial amount of EU workforce is employed

in the region, industry is highly dependent on immigrant labours, there is rising cost of

recruitment and slow hiring [ CITATION Fer18 \l 1033 ]. Further, it also encounters several

external factors such as rising rents, inflation pressure, operating cost. There is unnecessary

regulatory and innovation challenges imposed leading to uncertainty in business growth

[ CITATION Lat19 \l 1033 ].

Economic contribution of hospitality industry

Different types of economic impact of hospitality industry include direct and indirect

influence. Direct impact factors include employment, business activities. Indirect impact

include supported activities such as purchasing goods and suppliers, foods and beverages,

agriculture, advertising, market research and communication. Induced impact includes

activities supported as employees in industry as it have impact on their domestic supply

chain.

Further, five key parameters that can be used to evaluate economic impact of hospitality

industry on UK market include Gross value contribution to gross domestic product, it help in

evaluating contribution made by each producer and industry in the segment. Second is

employment opportunities, be it temporary, permanent or seasonal provided by the industry.

Third is covering tax revenues from the industry. Fourth is in bound spending made by tourist

5|Page
on hospitality industry products and services in the market. Final is investment parameter that

is capital spending made by industry for its growth [ CITATION Oxf15 \l 1033 ].

Financial analysis

Finance is the heart of any company; profit making is the core objective of business. There

are several financial instruments and strategies that can be used to evaluate financial

performance of a company in comparison to industry performance. Financial ratio aims to

analyse value of financial variables relative to another value in a specific time period. It helps

in evaluating absolute value of relationship and its change in different time period. Ratio

analysis is used for several purposes, it helps in evaluating credit worthiness of company, its

operational effectiveness, investor consideration in terms of its performance, operating

income and expenditure, profit making. For the purpose of this study, details ratio analysis

will be conducted and each set of ratio is considered comprehensive [ CITATION Jaw17 \l

1033 ].

Number plays key role in business, it help in understanding the way business is performing

through its operation and compare its performance to set benchmark. Key financial

statements used for business analysis include profit and loss statement, it shows revenues,

expense and profit annually; another is balance sheet showing assets, liabilities and equity

with the business[ CITATION Cha07 \l 1033 ]. Third key document is cash flow statements that

help in understanding operational efficiency, cash and liquidity with the business. At

managerial level these figures help in forecasting future, implementing cost control and

preparing budget and strategic plans [ CITATION Ari16 \l 1033 ].

There are several types of ratios to analyse different financial perspectives. First are liquidity

ratios, it is calculated to evaluate cash conversion capacity of the company in short term to

pay off its credits. Primary objective of this ratio is firm readiness to convert assets into

6|Page
cash[ CITATION Bra17 \l 1033 ]. There are three key sub types to this ratio, it include current,

acid test ratio and cash ratio. Another is profitability ratio that aims towards profit evaluation

of the company, help in understanding return on investment based on its current resource

availability[ CITATION Cha07 \l 1033 ]. Several types of profitability ratio that can be calculated

include gross profit margin, net profit margin, return on assets and return on equity.

Operational ratio aims towards analysing revenues and expenses made by company and its

impact on total cost. Different types of operational ratios include receivable days, bills

payable days and inventory turnover. Debt is also crucial element evaluated using gearing

ratios; it helps in evaluating companies’ ability to repay its debt and meet short and long term

liabilities requirements [ CITATION Hen152 \l 1033 ]. Different sub ratios include interest

coverage ratio, debt to equity ratio. It examine leverage value of the company, expensive

fixed assets are financed with debt leading to higher gearing ratios. Another is market ratios

that aim to evaluate shareholder value, earning on share and future potential of the company.

Research methodology

After secondary data analysis, researcher will focus on gathering primary data from various

financial documents and analyse them. There will be use of both quantitative and qualitative

tools using excel tests. Research methodology is the key aspect of any research [ CITATION

Coo14 \l 1033 ]; it aims to evaluate the actual selected and implemented methodology in this

research.

Research question

This paper aims to evaluate impact of financial department in hospitality industry?

What are the appropriate analytical financing methods to evaluate hospitality performance?

What is the role of ratio in financial analysis?

7|Page
What all ratios can be used and analysed to evaluate performance of hospitality industry in

UK?

Research design

Research design helps in framing data collection plan. Here flexible data collection approach

is implemented. Inductive reasoning helps to move from specific observation to broader

generalization[ CITATION Kot09 \l 1033 ].

For the purpose of research analysis, top 5 hotels of UK market will be selected and data will

be collected. Here random sampling method will be implemented on five hotels basis of their

service quality, strategic plan, and market position. Selected hotels will be of same quality in

terms of their average financial data for last five years.

Data collection

Here both qualitative and quantitative tools will be implemented. Secondary data will be

included in literature review analysis through peer review articles, journals etc. here articles

on financial analysis on hospitality industry has been selected, with English as medium of

communication. Quantitative analysis aims to get direct key financial documents of the

companies; this method helps in collecting large pool of data in less time and cost[ CITATION

Cre03 \l 1033 ]. Numbers also help in providing clear picture with facts and proves. Further,

qualitative analysis will be adopted to get managerial perspectives from high level

management staff on financial scope of hospitality industry, their perspective on future

scenarios, issues and challenges. It will be done through direct interview method, one to one

approach with the help of fixed set of questions common to all participants.

8|Page
Analysis

To evaluate financial performance of hotel ratio and trend of hospitality industry will be

analysed. Further excel will be used for calculating ratio. General observation technique will

be used to evaluate interview responses.

Ethical consideration

Ethics play key role in conducted successful research, results must be useful for its readers,

and data must be included from recent times. Further during data collection, researcher must

ensure that free consent is taken from all participants regarding response given, they must be

informed regarding purpose of research and the way data will be used[ CITATION Cre03 \l

1033 ]. It can be done by ensuring all participants made signed an ethical consent form.

Further, researcher needs to maintain proper confidentiality of participant’s identity and

anonymity if required and requested. Privacy in primary data collection is important, it can be

ensured by keeping data collection method transparent.

Project plan & Skill analysis

Task Description Time required Skills required

Topic of various financial analytical skills

topics and selection of

one that interest most

and needs to be work

upon

9|Page
Dissertation proposal This requires 2 weeks Research, information

preparation of gathering, strategic

dissertation blue print. planning and time

While conducting management

student will complete

planning on procedure

to be followed to

complete this

dissertation
Collecting secondary Involves collection of 4 weeks Analytical skills

data secondary data from

journals and other

reliable sources,

understanding them

and bring out relevant

inference from the

same
Preparing literature Presenting all 1 week Writing skills

review secondary information

cumulatively
Planning for data Preparing 2 weeks Interpersonal and

collection questionnaire, fixing market researcher

appointment with skills

interviewers
Data collection Collecting raw data 4 weeks Interpersonal skills,

for primary research strategic approach,

analytical and

10 | P a g e
 communication skills
Data analysis Interpreting and 4 weeks Analytical skills

analysing collecting

information
Writing final Presenting all 2 weeks Writing skills

dissertation collected information

in presentable and

reader friendly form

and submission done, editing editing

Summary and future plans

This paper presents overview on the way this dissertation will be conducted. It aims to

understand financial position of hospitality industry in UK, with specific focus on hotel

industry. It will facilitate in understanding its demand, supply and future scope of business.

Further, this research can also be expanded to different industries related to hospitality to get

deeper perspective on the same.

11 | P a g e
Bibliography
Arif, T. M., Noor-E, K., & Anwar, S. M. (2016). Financial Statement and Competitiveness
Analysis: A Study on Tourism & Hospitality Industry in Bangladesh. International
journal of financial research , 80.

Bragg, S. M. (2017). Business Ratios Guidebook: Third Edition. New York: Accounting
Tools.

Chandra, P. (2007). Financial Management. New delhi: Tata McGraw-Hill Education.

Cooper, D., & Schindler, P. (2014). Business research methods. London: The McGraw-Hill.

Creswell, J. (2003). Research design: qualitative, quantitative and mixed methods. Oaks:
Sage Publications.

Falconer, S. (2014). Financial Services Management: A Qualitative Approach. London:

Ferris, K., Cameron, D., Jenkins, A., & Marson, J. (2018). The Consequences of the Brexit
Vote on Management Attitudes to Recruitment in the Hospitality Industry. Business
Law Review, 39(4), 110–119.

Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in Financial
Accounting. London: Pearson Higher Education AU.

investinuk.net. (2019). Hospitality & Tourism. Retrieved November 11, 2019, from
investinuk.net: http://www.investinuk.net/industry/hospitality-tourism/hospitality-
tourism

Jawabreh, O. A., Mahmoud, R. M., Alshatnaw, E., & Momani, E. A. (2017). Using Financial
Analysis Methods in the Hotel Sector for the Purposes of Planning and Monitoring
Case Study Al Zaitonia Hotel. International Journal of Economics and Financial
issues, 7(4), 162-173.

Kothari, C. R. (2009). Research Methodology: Methods and Techniques. New Delhi: New
Age International.

12 | P a g e
Lathan, R., Green, M., & Chagani, E. (2019). Brexit: Its Passing and Reverberations. Cornell
Real Estate Review, 58-63.

Ouyang, R. (2001). Basic Inquiry of Quantitative Research. Australia: Ezine articles.

Oxford Economics. (2015). The economic contribution of the UK hospitality industry.

Thomas, M. (2003). Blending qualitative & quantitative research methods in theses and
dissertations. California: Crowin Press,Inc.

www.pwc.co.uk. (2019). UK hotels forecast update for 2019 and 2020. Retrieved November
11, 2019, from www.pwc.co.uk: https://www.pwc.co.uk/industries/hospitality-
leisure/insights/uk-hotels-forecast-update-for-2019-and-2020.html

13 | P a g e