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C H A P T E R The Hotel Business Development and Classification 3 ©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 Mid-scale Budget Economy - Clarion Quality Inn/Suites Comfort Inn 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
