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The Hotel Business Development and Classification

©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

History of Hotels in the United States

• Hotels… – City Hotel • 1st hotel • Opened in 1794 – Tremont House • Opened in Boston in 1829 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

History of Hotels in the United States

• Hotels (cont.)… – Transportation changed course • Rail travel – Development of resort properties • Highway travel – Development of motels • Air travel – Airport hotel locations ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Franchising

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

©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Benefits and Disadvantages 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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Other Forms of Development

• Development… – Partnership – Leasing – Syndicates ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Management Contract

• Contract… – The Players • Owner - financial responsibility • Management company - operational responsibility – Fee structure – Trend toward expansion of contract provisions ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Financial Management and 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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Real Estate Investment Trust (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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

REIT’s

• REIT (cont.)… – Examples • Patriot American Hospitality – http://www.patriotamerican.com

• Starwood Lodging Trust – http://www.starwoodlodging.com

©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Hotel Rating Services

• Rating Services… – AAA • American Automobile Association • Diamond Award – Mobil Travel Guide • Five Star Award ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Ways to Classify Hotels

• Classifying Hotels … – Location – Types of services offered – Market price levels ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Location

• Location… – Center city hotels – Resort hotels – Airport hotels – Freeway hotels – Casino hotels ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Center City Hotels • City Center…

– Public transportation available for business or leisure – Range of accommodations and services – Typically have a signature restaurant ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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

©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Resort Hotels

• Resorts (cont.)… – “Captured Clientele” – Food service is unique – Diversified marketing mix • Children • Groups • Eco-tourism ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Vacation Ownership • Ownership (cont.)…

– Fixed or floating times – Example • http://www.rci.com/home.html

©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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

©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Levels of Service Luxury

• Luxury… – Finest of accommodations – Concierge – 24 hour room service ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Levels of Service Luxury

• Luxury (cont.)… – Examples • Four Seasons – http://www.fshr.com

• Ritz Carlton – http://www.ritzcarlton.com

©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Level of Service Full 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

©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Level of Service Economy

• Economy/Budget (cont.)… – Also considered budget hotels – Clean rooms – Reasonably sized and furnished – Continental breakfast ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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

©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Levels of Service Others

• 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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Hotel Integration Vertical

• Vertical… – Lodging companies meeting the needs of several types of guests based on price, facilities, and amenities ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Hotel Integration Vertical

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

©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Best and Biggest Hotels

• Hotels… – Some previous winners – Oriental Hotel in Bangkok, Thailand – Regent of Hong Kong – Bell-Air of Los Angeles ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Most Unusual Hotels

• Unusual Hotels… – Ice Hotel in Swedish Lapland – The Treetops Hotel in Kenya – Underwater Hotel in Australia ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Most Unusual Hotels

• Unusual Hotels (cont.)… – Capsule Hotel in Japan – The Burj Al Arab in Dubai ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

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 ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Trends in Hotel Development

• Trends… – Capacity control – Safety and security – Assets and capital – Technology – New management – Globalization ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker

Trends in Hotel Development

• Trends (cont.)… – Consolidation – Diversification within segments – Rapid growth in vacation ownership – Increase in spas – Gaming ©2004 Pearson Education, Inc.

Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker