Chapter 4 The Hotel Business

1. Chapter 4The Hotel Business

2. After Reading and Studying This Chapter, You Should Be Able to: • Define the following terms: hotel franchising, partnerships, leasing, syndicates, and management contracts • Classify hotels by type, location and price • Explain vertical integration • Name some prestigious and unusual hotels • Describe the effects of a global economy on the hotel industry

3. Franchising • Allows for a company to expand rapidly • Uses other people’s money (franchisee) • Franchisor • The company • Over 180 franchised hotel brands in North America today

4. Figure 4-1Franchised Hotels Among the Top 10 Corporate Chains

5. Figure 4-2Top 10 Management Companies

6. Trends in Franchising • Curb appeal (fresh looks) • Location near highways, airports and suburbs • Expansion in smaller cities • New markets in proximity to golf courses and other attractions • Foreign expansion to increase brand awareness

7. Benefits • Set of plans and specifications for building • National advertising • Centralized reservation system • Participation in volume purchasing discounts • Listing in the franchisor’s directory • Low fee percentage charged by credit card companies

8. Drawbacks • Lack of operational power; must conform • High fees – both to join and ongoing • Central reservations produces 17-26% of reservations • Must meet standards as set by franchisor

9. Benefits andDisadvantages for Franchisor • Benefits • Increased market share/recognition • Up-front fees • Disadvantages • Need to be careful in selection of franchisees • Difficulty in maintaining control of standards

10. Management Contracts • Contract • The Players • Owner - financial responsibility • Management company - operational responsibility • Fee structure • Trend toward expansion of contract provisions

11. Hotel Rating Services • Rating Services • AAA • American Automobile Association • Diamond Award • Mobil Travel Guide • Five Star Award

12. Ways to Classify Hotels • Classifying Hotels • Location • Types of services offered • Market price levels

13. Figure 4-5Hotel Rating Guide

14. Location • Center city hotels • Resort hotels • Airport hotels • Freeway hotels • Casino hotels • Full service • Convention • Economy • Extended stay • Bed and breakfast

15. Hotels by Price Segment • Budget - $29-$39 • Economy - $40 - $60 • Mid-price - $60 - $100 • Up scale - $100 - $200 • Luxury - $140 - $450 • All-suites - $95 - $175

16. City Center Hotels • Public transportation available for business or leisure • Range of accommodations and services • Typically have a signature restaurant

17. Resorts… • Originally began due to rail travel • Greenbrier in West Virginia • www.greenbrier.com • The Halekulani in Wikki, Hawaii • www.halekulani.com • The Ritz Carlton Kapalua in Maui, Hawaii • www.ritzcarlton.com

18. More on Resorts • “Captured Clientele” • Food service is unique • Diversified marketing mix • Children • Groups • Eco-tourism

19. Vacation Ownership • Fastest growing segment of travel industry • Time share • A condo that is owned • Purchaser uses for a specific period of time each year • Vacation club • Purchase points that entitle purchaser to use of facility • Not real estate based

20. Vacation Ownership • Estimated that 2 million households own vacation intervals at 3500 resorts in almost 90 countries • Helps ensure purchaser today’s prices for tomorrow • Yearly maintenance fees • Fixed or floating times • Example • www.rci.com

21. Airport Hotels • High occupancy due to location • Business, group and leisure travelers • Full service • 200-600 rooms • Convenient location • Airport shuttle service • Economical pricing

22. Freeway Hotels • Prominent in the 1950s • Easy access to roadways • Park outside the room entrance • Example • Motel 6 • www.motel6.com

23. Casinos • Heavy growth segment • Low room rates • Subsidized food and beverage • Themes are popular • 500 plus guest rooms • Variety of food operations • Contains a gaming room

24. Convention Hotels • Meet the needs of large groups • 500 plus rooms • Larger public areas to accommodate greater public demand • Banquet areas within and around the hotel • High percentage of double occupancy • Full-service oriented

25. Full-Service Hotels • Typically “Business Oriented” • Multiple food and beverage outlets • Meeting and convention services • Chain representation • Doubletree • www.doubletreehotels.com • Sheraton • www.sheraton.com

26. Economy/Budget Hotels • Represents 12 percent of total hotel rooms • Accomplished 37 percent of industry growth • Average room rate of $48.68 • However, profit revenue is slow with an annual rate of 1 percent • Also considered budget hotels • Clean rooms • Reasonably sized and furnished • Continental breakfast

27. All-Suite • Cater to guests for an extended period • Reduction in rate based on length of stay • More space than typical hotel • Examples • Embassy Suites • www.embassy-suites.com

28. Bed and Breakfasts • A home away from home • Accommodation with an owner who lives on premises • Maintains a few rooms • Offers breakfast • Personable and quick service

29. Vertical Integration • Lodging companies meeting the needs of several types of guests based on price, facilities and amenities • Choice hotels which have several chains that meet its diverse clientele • Luxury - Clarion • Mid-scale - Quality Inn/Suites • Budget - Comfort Inn • Economy - Sleep Inn • www.hotelchoice.com

30. Marketing Consortiums • Also called referral organizations • Numerous independent properties unite to compete with the marketing power of chain operations • Similar benefits as franchises, at a lower cost • Provides incentives for clients

31. The Best Hotels • Some previous winners: • Oriental Hotel in Bangkok, Thailand • Regent of Hong Kong • Bell-Air of Los Angeles

32. Unusual Hotels • Ice Hotel in Swedish Lapland • The Treetops Hotel in Kenya • Underwater Hotel in Australia • Capsule Hotel in Japan • The Burj Al Arab in Dubai

33. Trends • Capacity control • Safety and security • Assets and capital • Technology • New management • Globalization