Chapter 4 The Hotel Business

1. Chapter 4The Hotel Business

2. After Reading and Studying This Chapter, You Should Be Able to: • Describe hotel ownership and development via franchising and management contracts • Classify hotels by type, location, and price • Discuss the concept and growth of vacation ownership • Name some prestigious and unusual hotels

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 Largest Corporate Chains

5. Figure 4-2Top 10 Largest 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 • The players: • Owner—financial responsibility • Management company—operational responsibility • Fee structure • Trend toward expansion of contract provisions

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

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

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

14. Hotels by Price Segment • Budget: $29–$39 • Economy: $40–$60 • Mid-price: $60–$100 • Upscale: $100–$200 • Luxury: $140–$450 • All-suites: $95–$175

15. Resorts • Originated because of 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

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

17. 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

18. Vacation Ownership (cont.) • Estimated that 2 million households own vacation intervals at 3,500 resorts in almost 90 countries • Helps ensure purchaser today’s prices for tomorrow • Yearly maintenance fees • Fixed or floating times • Example: • www.rci.com

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

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

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

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

23. 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)

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

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

26. 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

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

28. Referral Organizations • Numerous independent properties unite to compete with the marketing power of chain operations • Similar benefits as franchises, at a lower cost • Provide incentives for clients

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

30. 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

31. Capacity control Safety and security Assets and capital Technology New management Globalization Consolidation Gaming Diversification within segments Rapid growth in vacation ownership Increase in number of spas and treatments offered Increase in development of multi-use hotels Trends