Chapter 4 The Hotel Business

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Chapter 4The Hotel Business
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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

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Franchising

• Allows for a company to expand rapidly
• Uses other peoples money (franchisee)
• Franchisor
• The company
• Over 180 franchised hotel brands in North America
  today

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Figure 4-1Franchised Hotels Among the Top 10
Corporate Chains
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Figure 4-2Top 10 Management Companies
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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

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Benefits

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

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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

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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

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Management Contracts

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

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Hotel Rating Services

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

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Ways to Classify Hotels

• Classifying Hotels
• Location
• Types of services offered
• Market price levels

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Figure 4-5Hotel Rating Guide
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Location

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

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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

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City Center Hotels

• Public transportation available for business or
  leisure
• Range of accommodations and services
• Typically have a signature restaurant

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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

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More on Resorts

• Captured Clientele
• Food service is unique
• Diversified marketing mix
• Children
• Groups
• Eco-tourism

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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

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Vacation Ownership

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

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Airport Hotels

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

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Freeway Hotels

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

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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

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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

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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

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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

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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

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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

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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

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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

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The Best Hotels

• Some previous winners
• Oriental Hotel in Bangkok, Thailand
• Regent of Hong Kong
• Bell-Air of Los Angeles

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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

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Trends

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