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The Hotel Business Development and Classification

C H A P T E R. C H A P T E R. The Hotel Business Development and Classification. 3. History of Hotels in the United States. Hotels… City Hotel 1st hotel Opened in 1794 Tremont House Opened in Boston in 1829. History of Hotels in the United States. Hotels (cont.)…

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The Hotel Business Development and Classification

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  1. C H A P T E R C H A P T E R The Hotel Business Development and Classification 3

  2. History of Hotels in theUnited States • Hotels… • City Hotel • 1st hotel • Opened in 1794 • Tremont House • Opened in Boston in 1829

  3. History of Hotels in theUnited States • Hotels (cont.)… • Transportation changed course • Rail travel • Development of resort properties • Highway travel • Development of motels • Air travel • Airport hotel locations

  4. Franchising • 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

  5. Franchising • Franchising (cont.)… • Examples • HFS - Hospitality Franchise Systems • Choice Hotels International • http://www.hotelchoice.com

  6. Benefits for Franchisee • Benefits… • Set of plans and specifications for building • National advertising • Centralized reservation system • Participation in volume purchasing discounts • Listing in the franchisor’s directory

  7. Disadvantage for the Franchisee • Disadvantages… • Lack of operational power; must conform • Large fees • Central reservations produces 17-26% of reservations • Must meet standards as set by franchisor

  8. 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

  9. Franchising Trends • Trends… • Factors propelling franchise growth • Fresh looks (curb appeal) • Location - off highways, airports, and suburbs • Expansion in smaller cities • New markets - openings in proximity with golf courses and other attractions

  10. Other Forms ofDevelopment • Development… • Partnership • Leasing • Syndicates

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

  12. Financial Managementand Profits • Management and Profits… • High degree of risk • Cyclical nature of demand • High degree of capital investment • Portfolio financing • Use of more than one location/market • Cross collateralized/cross defaulted

  13. Real Estate InvestmentTrust (REIT) • REIT… • Existed since early 1960s • Publicly traded • Investors like REIT’s • Do not pay corporate income tax • REIT’s must distribute 95% of net income to shareholders • Traded as stocks

  14. REIT’s • REIT (cont.)… • Examples • Patriot American Hospitality • http://www.patriotamerican.com • Starwood Lodging Trust • http://www.starwoodlodging.com

  15. Favorable Financing • Financing… • Affiliation with a quality franchisor • Identification with a national chain through a management contract • A lease arrangement with a hotel operator • Conventional first mortgage loans • Lenders

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

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

  18. Location • Location… • Center city hotels • Resort hotels • Airport hotels • Freeway hotels • Casino hotels

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

  20. Resort Hotels • Resorts… • Originally began due to rail travel • Famous resorts • Greenbrier in West Virginia • http://www.greenbrier.com • Hotel del Coronado in California • http://www.sddt.com/~coronado • Homestead in Virginia • http://www.thehomestead.com

  21. Resort Hotels • Resorts (cont.)… • “Captured Clientele” • Food service is unique • Diversified marketing mix • Children • Groups • Eco-tourism

  22. Vacation Ownership • 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

  23. Vacation Ownership • Ownership (cont.)… • 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

  24. Vacation Ownership • Ownership (cont.)… • Fixed or floating times • Example • http://www.rci.com/home.html

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

  26. Freeway Hotels and Motels • Freeway… • Prominent in the 1950s • Easy access to roadways • Park outside the room entrance • Example • Motel 6 • http://www.motel6.com

  27. Characteristics of Casino’s • 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

  28. Major Trends in Casino Hotels • Casino Trends… • Casino hotels are now marketing themselves as business hotels • Amenities include business centers, travel bureaus, and room service • Move towards “family/friendly” hotels • This increases the average stay and money spent by families

  29. Levels of Service Luxury • Luxury… • Finest of accommodations • Concierge • 24 hour room service

  30. Levels of Service Luxury • Luxury (cont.)… • Examples • Four Seasons • http://www.fshr.com • Ritz Carlton • http://www.ritzcarlton.com

  31. Convention Hotels • 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

  32. Level of ServiceFull Service • Full Service… • Typically “Business Oriented” • Multiple food and beverage outlets • Meeting and convention services • Chain representation • Doubletree • http://www.doubletreehotels.com • Sheraton • http://www.sheraton.com

  33. Economy/Budget Hotels • Economy/Budget … • 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

  34. Level of ServiceEconomy • Economy/Budget (cont.)… • Also considered budget hotels • Clean rooms • Reasonably sized and furnished • Continental breakfast

  35. Level of Service All Suite • 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 • http://www.embassy-suites.com

  36. Levels of ServiceOthers • 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

  37. Hotel IntegrationVertical • Vertical… • Lodging companies meeting the needs of several types of guests based on price, facilities, and amenities

  38. Hotel IntegrationVertical • Vertical (cont.)… • Choice hotels which has several chains that meet its diverse clientele • Luxury - Clarion • Mid-scale - Quality Inn/Suites • Budget - Comfort Inn • Economy - Sleep Inn • http://www.hotelchoice.com

  39. Marketing Consortium • Consortium… • 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

  40. Best and Biggest Hotels • Hotels… • Some previous winners • Oriental Hotel in Bangkok, Thailand • Regent of Hong Kong • Bell-Air of Los Angeles

  41. Most Unusual Hotels • Unusual Hotels… • Ice Hotel in Swedish Lapland • The Treetops Hotel in Kenya • Underwater Hotel in Australia

  42. Most Unusual Hotels • Unusual Hotels (cont.)… • Capsule Hotel in Japan • The Burj Al Arab in Dubai

  43. International Perspective • Perspective… • Continued international development • Due to increase in tourism • Due to increase in trade and commerce • Globalization is the key to continued growth

  44. Trends in Hotel Development • Trends… • Capacity control • Safety and security • Assets and capital • Technology • New management • Globalization

  45. Trends in Hotel Development • Trends (cont.)… • Consolidation • Diversification within segments • Rapid growth in vacation ownership • Increase in spas • Gaming

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