This report is a PEST analysis of Hampton Court Palace, a historical site and a key tourist destination in the UK. It uses both primary and secondary sources of information to conduct the analysis. Primary sources of information are government reports. The Hampton Court Palace website is also a major source of primary information. Secondary information is obtained from news items, industry reports, and peer-reviewed journals.
The study finds that factors in the external environment significantly influence the performance of tourist organisations. The report recommends that Hampton Court Palace should market itself as a destination that offers products and services that meet consumer needs and preferences to gain a competitive advantage in the tourism industry and achieve its performance goals. It should also focus on inbound visitors as domestic visitor spending falls due to a reduction in disposable income caused by a weak economy.
Table of Contents
1.0 Introduction. 4
2.0 Political Environment 4
3.0 Economic Environment 6
4.0 Social Environment 7
5.0 Technological Environment 9
6.0 Conclusion. 10
7.0 Recommendations. 10
References. 12
1.0 Introduction
The activities of organisations are not immune to external environmental factors that are often beyond their control. These factors can result in opportunities for growth and in some cases, create challenges that hinder organisations from achieving their goals. It is critical that managers understand how factors in the external environment are changing, and what these changes mean to the sustainability of the organisation. Conducting an analysis of the external business environment is an effective mechanism for identifying opportunities in the market and developing appropriate strategies for exploiting the existing opportunities (Jurevicius 2013). Such an analysis also helps organisations to develop mitigation strategies and ensure that risks in the business environment do not have a significant impact on the business in the event that they occur. The PEST framework examines the political, economic, social, and technological factors in the external environment and how these factors can impact on the activities of organisations. The framework is an important tool for conducting an analysis of the external environment to identify existing opportunities and risks.
This report conducts a PEST analysis of the Hampton Court Palace, an important tourism destination in the United Kingdom. The historical place hosts events and is an attractive destination for many travelers and locals interested in art, British history, and English culture. It aims to meet the needs and preferences of modern tourists by staging events and providing services that match their needs. While the Palace is a public property, it has been able to generate revenue used to maintain the grounds by charging entrance fees and hosting various events (Historic Royal Palaces 2018). It also uses funds obtained from charity to run its operations. The palace has also embraced new technology to enhance operational efficiency and improve the experiences of visitors. This report, therefore, examines how political, economic, social, and technological factors in the external environment affect the activities of the historical site and how it has been able to exploit resulting opportunities and mitigate risks.
2.0 Political Environment
The political environment is a critical external environment factor that affects the activities of organisations. The government regulates nearly every sector of the economy to ensure that consumers are protected. It also develops policies based on revenue needs. According to Yüksel (2012), these policies can increase or hinder growth in certain sectors due to the resulting business costs. The political environment is also a key factor that affects the activities of organisations because goodwill and transparency among public officers can determine the success or failure of various industries. Although organisations do not have control of political factors and how they impact on the business environment, they can still develop appropriate strategies to mitigate challenges and exploit existing opportunities.
The UK government policy allowing the Hampton Court Palace to be managed by Historical Royal Palaces, an independent charity, has played a significant role in ensuring that the palace has funds to run its operations. The palace does not receive funding from the government and is, therefore, not affected by the annual uncertainties of government budget (Historic Royal Palaces 2018). By privatising the management of some public institutions, the UK government has eliminated politics from the running of these organisations and shielded them from political uncertainties. The management structure of the Hampton Court Palace has, therefore, played an important role in its success over the years. It has been able to access funds and run its operations effectively. As a tourist destination, this has been an important factor for success. The management structure has improved service quality and increased product offerings. Visitors to the site can, therefore, enjoy a variety of services and events. The willingness of the UK government to privatise the management of some historical sites will significantly improve the performance of these destinations in the tourism industry.
Lack of government interference in the management of public institutions is also an important political factor that determines the success of historical sites such as the Hampton Court Palace. The goodwill displayed by the political class to let an independent charity manage the operations of the historical site has significantly contributed to its success. The Historical Royal Palaces charity organisation has done an excellent job running the palace because it does not have to constantly deal with politicians that are pursuing self-interests. The goodwill displayed is also a result of the constitutional and public expectations of public officers in the UK. As a developed democracy, the stability and efficiency of the UK government creates a conducive environment for business success.
The Hampton Court Place has taken advantage of the existing political environment to achieve excellent performance in the tourism industry. Political factors have generally favoured the historical palace and it has used the benefits to enhance sustainability. The palace can continue to be a key tourist destination as long as it is effectively managed. The current management structure, enabled by the existing government policies, have proved to be integral to the success of the tourist destination.
3.0 Economic Environment
The economic environment focuses on the prevailing macroeconomic conditions and how they impact on the performance of an organisation. An organisation does not have control over the economic environmental factors (Yüksel 2012). However, it can exploit the opportunities presented and develop strategies aimed at mitigating challenges. The economic environment is especially important for organisations in the tourism industry because it determines visitor numbers and the cost of doing business. Tough economic conditions have a negative impact on the performance of organisations in any industry unless mitigation strategies are developed and effectively implemented.
The UK tourism industry has a positive economic outlook because of increased visitor spending. In 2017, visitor spending in the UK increased by £872 million (Cox 2018). According to data released by the National tourism agency, visitors spent an additional £20 for every £1 invested in the sector during the 2016/2017 financial year. The figures also coincide with an increase in inbound tourists. VisitBritain also forecasts that 2018 will record a total of 41.7 million inbound tourists, a 4.4% increase on the 2017 figures. On visitor spending, the UK is projected to record an increase of 6.8% in visitor spending (VisitBritain 2018). While the rate is slower compared to the rate recorded in 2017, it is similar to the 2013-2016 period. Spending is expected to be stable due to a low inflation rate. An increase in visitor numbers and spending presents Hampton Court Palace with growth opportunities in the tourism sector. The positive economic conditions mean that the palace can record an increase in revenue generation due to an increase in visitor numbers and spending. However, it must market itself as a destination that offers products and services that meet consumer needs and preferences to gain a competitive advantage in the tourism industry and achieve its performance goals. Intense rivalry in the sector has made it necessary for tourist organisations to effectively market themselves to benefit from the positive economic environment.
The performance of Hampton Court Palace is also significantly determined the overall performance of the UK economy. A strong performance of the economy often results in an increase in consumer spending and household consumption. While the UK economy recorded a much faster growth rate in the first and second quarter than projected, data shows that household consumption is subdued (Partington 2018). Business investment also dropped in the first quarter of the financial year. It is an indication that overall the UK economy remains weak. The uncertainty caused by Brexit has further cast a negative outlook on the future growth prospects of the economy. The UK tourism industry may, therefore, have to focus on inbound visitors as domestic visitor spending falls due to a reduction in disposable income caused by a weak economy.
The economic environment, therefore, significantly influences the performance of tourism sector organisations. The Hampton Court Palace should focus on attracting foreign visitors to achieve its revenue targets because projections show that inbound visitor spending will increase in 2018.
4.0 Social Environment
The social environment focuses on the interaction between an organisation and its customers. Social factors affect consumer needs and preferences and, therefore, influence their purchasing decisions (Thornton, Ribeiro-Soriano and Urbano 2011). The Hampton Court Palace must respond to changing consumer needs to achieve its performance targets. Understanding consumer psychology plays a vital role in developing customer-oriented strategies that enhance consumer satisfaction and improve organisational performance. Consumer-oriented strategies are crucial success factors in a highly competitive sector such as the UK tourism industry. The Hamptons Court Palace must continuously review changes in visitor trends and respond accordingly.
Changing lifestyles have led many Britons to prefer tourist destinations that enable them to escape their busy schedules and spend quality time with their loved ones. A large number of travelers consider distraction/escapism as a crucial motivator for their holidays (Barclayscorporate.com 2018). They seek destinations that enable them to take a break from their busy lifestyles and relax as they have fun. Many visitors are also looking to travel to places where they can spend time with loved ones and friends. Others consider educational and fitness activities as important travel motivators. These differences indicate that tourism organisations must understand their target market and develop products and services that match the needs and preferences of clients in the identified market segment. The Hampton Court Palace has designed products and services that cater to its target market. For visitors that require relaxation and to escape from their busy lifestyles, the palace offers products that enable them to relax in the summer sun and have fun. It is, however, important to note that the palace is not an ideal place for travelers looking for peace and quiet. Such visitors would be better off visiting tourist destinations in the countryside where they can relax peacefully as they enjoy their holidays. The palace is more suited for visitors that prefer to places buzzing with life. The Hampton Court Palace also stages events that enable visitors to have new experiences and spend quality time with loved ones. As a destination flowing with history, it is an ideal place for visitors traveling for educational purposes.
Tourism organisations should also consider areas in which visitors spend money to exploit existing benefits and achieve performance objectives (Williams and Shaw 2013). The Barclays 2008 corporate report shows that both domestic and international tourists spend much of their budget on accommodation, shopping, and eating out. Tourist organisations should, therefore, move to develop products and services that enable them to benefit from key areas of consumer spending. In this regard, the Hampton Court Palace has ensured that visitors to the site can enjoy meals at their own convenience. Visitors can choose to eat at The Tiltyard Café, The Privy Kitchen Café, or the Fountain Court Café. This enhances their experience and increases revenue generation for the palace.
Understanding the social environment is critical to the success of tourism organisations. The Hampton Court Palace can ensure long-term success by responding to changes in consumer tastes and preferences.
5.0 Technological Environment
Technology is a key factor in the tourism industry because most travelers and business organisations have embraced new technology. Technology influences how organisations in the tourism sector provide services to consumers. On the other hand, technological advancements have also influenced consumer tastes and preferences (Yüksel 2012). Tourist organisations must, therefore, move to invest in and implement new technology to enhance service quality and improve customer satisfaction. Technology also plays a pivotal role in improving operational efficiency and reducing the cost of doing business. In turn, organisations that effectively invest in technology realise improved profitability.
Hampton Court Palace has invested in technology to improve service quality and customer satisfaction. It has a user-friendly website that enables travelers to familiarise themselves with the destination before making an actual visit. A user-friendly website with useful content is an important marketing strategy. The organisation essentially advertises its products and services on the website. It has also taken into account changing consumer needs and preferences and provided an online shopping platform. Online shopping has become increasingly popular due to busy lifestyles that make it difficult for some buyers to visit brick and mortar stores to make purchases (Bridges and Florsheim 2008). By having an online shop, the palace is also seeking to cater to travelers that like to purchase souvenirs on their travels. As indicated, many consumers consider shopping as an important activity during their travels. A significant percentage of travelers, therefore, spend much its budget on shopping. Hampton Court Place also enables visitors to purchase tickets to the palace online. Such services result in a positive perception regarding service quality. Travelers are likely to continue visiting the palace because of the convenience provided by the ability to purchase tickets online.
Hamptons Court Palace has also modernised its facilities to improve visitor experience while preserving historical objects. For instance, Henry VIII’s kitchens are some of the few surviving places that showcase the fascinating history of the palace (Historic Royal Palaces 2018). They are popular with most visitors to the site. The management of the palace used new technology to bring the kitchens to life and enable visitors to experience life like it was during one of the most defining periods in British history. The use of technology to revive and preserve historical sites and items is a major breakthrough in cultural tourism. It improves the experience of visitors and generates revenue for tourist organisations. By continuously adopting new technology, tourist organisations can improve the experiences of visitors and improve their performance.
Technological factors, therefore, significantly influence the activities and performance of tourist organisations. Firms in the sector should embrace new technology to improve visitor experience and increase revenue generation. The long-term success of organisations in the tourism sector will be largely determined by their willingness to invest in technology to enhance operational efficiency and visitor experience.
6.0 Conclusion
This report shows that while organisations in the tourism sector have no control over factors in the external environment, they can develop strategies that exploit opportunities presented by these factors as they mitigate inherent risks. The PEST framework is an important tool for conducting an analysis of the external environment and determining how organisations can position themselves to succeed in the market. The PEST analysis shows that Hampton Court Palace can take advantage of the positive political environment to increase revenue generation. It can also develop effective marketing strategies that meet consumer needs and preferences based on factors in the social environment. Factors in the economic environment also influence the marketing strategies of the firm. The report further indicates that by embracing new technology, the organisation can enhance the visitor experience and improve operational efficiency to improve profitability.
7.0 Recommendations
Hampton Court Palace should market itself as a destination that offers products and services that meet consumer needs and preferences to gain a competitive advantage in the tourism industry and achieve its performance goals. Intense rivalry and social factors in the sector have made it necessary for tourist organisations to effectively market themselves to benefit from the positive economic environment.
The uncertainty caused by Brexit has cast a negative outlook on the future growth prospects of the UK economy. The Hampton Court Palace should, therefore, focus on inbound visitors as domestic visitor spending falls due to a reduction in disposable income caused by a weak economy. This will ensure that it achieves its revenue targets.
References
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Cox, J. (2018). UK visitor and tourism spend surged by £872m last year. The Independent. Available online at: https://www.independent.co.uk/news/business/news/uk-holiday-tourism-spending-uk-2016-increase-millions-a7990961.html (Accessed 7 Aug. 2018).
Historic Royal Palaces. (2018). Rediscover Hampton Court Palace’s famous Tudor Kitchens in 2018. Available online at: https://www.hrp.org.uk/media-and-press/press-releases-2018/rediscover-hampton-court-palace-s-famous-tudor-kitchens-in-2018/#gs.eS4gNVQ (Accessed 7 Aug. 2018).
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Thornton, P.H., Ribeiro-Soriano, D. and Urbano, D. (2011) ‘Socio-cultural factors and entrepreneurial activity: An overview’. International small business journal, 29(2), pp.105-118.
VisitBritain. (2018). 2018 inbound tourism forecast. Available online at: https://www.visitbritain.org/forecast (Accessed 7 Aug. 2018).
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