The Hotel Business Development and Classification

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The Hotel Business Development and Classification
C H A P T E R
C H A P T E R
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History of Hotels in theUnited States

• Hotels
• City Hotel
• 1st hotel
• Opened in 1794
• Tremont House
• Opened in Boston in 1829

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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

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Franchising

• 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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Franchising

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

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Benefits for Franchisee

• Benefits
• Set of plans and specifications for building
• National advertising
• Centralized reservation system
• Participation in volume purchasing discounts
• Listing in the franchisors directory

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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

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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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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

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Other Forms ofDevelopment

• Development
• Partnership
• Leasing
• Syndicates

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Management Contract

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

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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

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Real Estate InvestmentTrust (REIT)

• REIT
• Existed since early 1960s
• Publicly traded
• Investors like REITs
• Do not pay corporate income tax
• REITs must distribute 95 of net income to
  shareholders
• Traded as stocks

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REITs

• REIT (cont.)
• Examples
• Patriot American Hospitality
• http//www.patriotamerican.com
• Starwood Lodging Trust
• http//www.starwoodlodging.com

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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

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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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Location

• Location
• Center city hotels
• Resort hotels
• Airport hotels
• Freeway hotels
• Casino hotels

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Center City Hotels

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

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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

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Resort Hotels

• Resorts (cont.)
• Captured Clientele
• Food service is unique
• Diversified marketing mix
• Children
• Groups
• Eco-tourism

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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

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Vacation Ownership

• Ownership (cont.)
• 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

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Vacation Ownership

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

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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

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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

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Characteristics of Casinos

• 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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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

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Levels of Service Luxury

• Luxury
• Finest of accommodations
• Concierge
• 24 hour room service

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Levels of Service Luxury

• Luxury (cont.)
• Examples
• Four Seasons
• http//www.fshr.com
• Ritz Carlton
• http//www.ritzcarlton.com

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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

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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

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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

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Level of ServiceEconomy

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

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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

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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

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Hotel IntegrationVertical

• Vertical
• Lodging companies meeting the needs of several
  types of guests based on price, facilities, and
  amenities

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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

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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

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Best and Biggest Hotels

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

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Most Unusual Hotels

• Unusual Hotels
• Ice Hotel in Swedish Lapland
• The Treetops Hotel in Kenya
• Underwater Hotel in Australia

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Most Unusual Hotels

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

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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

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Trends in Hotel Development

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

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Trends in Hotel Development

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