Accommodation Operation Management

Handout No. 1

HISTORY OF THE ACCOMMODATION OR LODGING INDUSTRY

The lodging industry developed because of the need to provide accommodations for travelers.
The early reference to the inn is found in the Bible, when Joseph, Christ foster father, was told,
“There is no mom at the inn During the height of the Industrial Revolution in the 1700s and
1500s, there was a greater demand for accommodation as people migrated to the cities to
work. In the next 200 years, the lodging industry was influence by the development of road
transport. Coach service was established by innkeepers to attract business. The inn was used
not only as a boarding house but also as a building office, waiting place, eating establishment,
and as center of the town’s social activities:

• With the rapid development of the railways in the 1820s and 1830s, a different kind of
hotel developed. In Europe, large hotels were built next to or across the downtown railroad
station.

• With the construction of highways and expressways, the lodging industry responded to
the needs of the motorist. Thus, the motor hotel or motel emerged.
• After World War II, advances in air transportation led to the increased number of
travelers who demanded more and more hotel space.
• Although the hotel industry was booming, several small, family-owned hotels could not
complete with the fast-growing chains Ellsworth Statler was the first hotel chain pioneer in the
United States, Hotels bearing his name had been built in buffalo Cleveland, St. Louis, Detroit,
Boston, and New York.
• In the History of the deluxe hotels, the most famous name is that of Hilton Corporation.
Conrad Hilton built an empire that include the Waldolf Astoria in New York and the largest hotel
in the United States, Conrad Hilton Hotel in Chicago with 3000 rooms. Among the first-class
hotels, the fastest growing group was the Sheraton chain founded by Ernest Henderson. The
chain is now owned by international Telephone and Telegraph Company (ITTI). In 1952,
Kemmons Wilson founded the Holiday Inn chain and its concept of clean, comfortable, and
reasonably priced accommodations for the ordinary travelers.
• Hotels changed in appearance as extra features were added such as glass-covered
elevators, atrium lobbies, a variety of restaurants and bars, function meeting rooms, and a full
array of recreational opportunities. The atrium concept hotels, introduced by architect John
Portman, boosted the popularity of Hyatt.

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TYPES OF ACCOMMODATION
Accommodation can be classified into various types; the most popular of which are the following:

1. Hotels can be 10 room boarding house or a building that has a thousand or more rooms,
convention and meeting facilities, recreation facilitation such as swimming pools and tennis courts, 24-
hour room service, with several restaurants and bars and various types of entertainment. Hotels have
been designed and built to mote almost any kind of budget or comfort level that the traveling public
might want.

2. Motels or Motor Hotels- Normally, motels only offer rooms only and free parking to guests.
These are often found along busy highways and cater primary to transient and cost-conscious travelers.

3. Resort Hotels- Resort hotels are intended for vacation travelers. These hotels range from budget
to luxury and can accommodate these travelers and even more amenities, shops, and recreation
opportunities.

4. Pension- Pensions are found principally in Europe. These are usually family-owned
accommodation facilities. In German spooling parts of Europe, a pension is also called Gasthaus
Pensions and Gasthaus usually offer continental breakfast but do not have facilities for other meals.
Pensions are known for their informal family atmosphere.

5. Paradors. Paradors are unique to Spain. These are generally old castles, convents, or
monasteries that have been converted into hotels by the government and are operated by the
government.

6. Condominium Hotels- Condominium Hotels are a recent innovation. These are often hotels with
apartments (condominiums) instead of basic rooms. The condominium units are sold by the hotel
developers to individuals who are given a title to the physical real estate. The individual owners then
contract the developer or a management company to operate the hotel and rent the space to visiting
tourists. The individual owners have the right to stay in their own units during specific periods of the
year with a reduced room rate. The developers or management company receives a fee for managing
and renting our the units. The resulting profit is shared among the individual unit owners. Condominium
hotels generally appeal to families because of the apartments.

7. Campgrounds- Camping is a popular form of overnight accommodation in both Europe and

North America. In North America, there are at present more than 20,000 campgrounds, some of which
are owned by hotels. Campgrounds usually appeal to families who travel in recreational vehicles RVs,
Campgrounds and RVs stopping spots are often found in government parks and forests.

8. Bed and Breakfast-Bed and Breakfast is a form of lodging which originated in Europe. This form
of accommodation provides a bed for the night and breakfast the next day. It was only in the 1970s that
the idea was brought to the United States Retired and semiretired people with large houses have
contributed much to the growth of these establishments.

9. Tourist Inns- Tourist inns are lodging establishment that cater to transients. Those do not
normally meet the minimum requirements of an economy hotel.

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10. Apartment-Hotels (Apartels)- Apartment Hotel are building which contain several independent
and furnished or semi-furnished apartments. These are leased to tourists and travelers on a long-term
basis and offer basic services to its tenant, similar to hotels.

11. Health Spas- Health spas are hotels and resorts which cater to people who go to spas or mineral
springs for medical treatment or weight reduction. The idea of visiting health spas originated in Europe.
The Romans and the Greeks visited the spas as early as the first century. The spas became the center of
the social life of the English, the French, and the Germans during the seventeenth and later centuries at
present, several health spas in Europe offer modern techniques such as medically supervised
rejuvenation programs which include supervised diets and rigorous exercises to shed fat and reduce
weight.

12. Private Homes- The private home is the earliest form of overnight lodging for travelers it
provides lodging to tourists who cannot be accommodated in hotels and motels during peak vacation
periods.

13. Time Sharing - Time-sharing is a more recent unique type of accommodation. It started in Europe
in the1960s when people found it difficult to make reservation every year in popular hotels during
summer.

• Time – Sharing is the selling of vacation lodging, usually condominium, for a specific week or
weeks over a given number of years. The resort would rent the units during the time when the owner
was not in residence, thus providing an income to help with the payments. Time-Sharing began in the
United States in the early 1970s when all prices increased Florida developers, unable to sell tour whole
unit condominiums, decided to adapt them to time-sharing.

14. Hostels-Hostels provide basic amenities such as a bunk bed and a commonly shared toilet and
bathroom. The traveler provides his or her own bedding. Hostels appeal prima ry to young travelers.

The idea of a hostel was conceived in 1909 by an elementary school teacher in Germany who wanted to
provide low-cost overnight lodging to travelers throughout Europe. In 1830. There were more than 2,000
youth hostels that were established in Germany. In 1934, the first hostel was established in the United
States. At present, hostels are run by individuals or nonprofit organizations. A few are run by the national
organization.

CLASSIFICATION OF HOTELS

These are different ways of classifying hotels, such as location, type of guest, and price.
According to location, hotels may be center-city, suburban, airport, or highway based on guest
typo, hotels are classified as commercial, convening, or resort. According to price, hotels are
categorized as economy, standard, first class or deluxe.

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RATING SYSTEM
A number of independent rating guides have been published by individuals, automobile
associations, and travel organizations using various combinations of star, dots, and alphabetical
indicators. Most rating system are based on the quality of the physical structure, furnishing
maintenance, house looping, and overall service. Experience individuals inspect the hotels and
restaurants every year. Many are regional field representatives who submit detailed reports to
the appropriate office. The raters are not known by the establishment being rated.
The following are used to rate hotels, motels, inns, resorts, and guests ranches;
1. 1-Star-Good, better than average.

2. 2-Star Very Good

3. 3-Star Excellent

4. 4-Star Outstanding, and

5. 5-Star- One of the best in the country

ORGANIZATION OF THE LODGING INDUSTRY

A hotel organization can be large and complex A typical hotel has seven major division, namely
personnel, engineering and maintenance, accounting, security, food and beverage, marketing
and sales, and room division. Each division to run by its own derision head.

1. Personnel Division-roommate new employees and administers policies and employee

benefits for the company.
2. Engineering and maintenance Division-makes this necessary repairs and implements
the hotels energy management program.
3. Accounting Division-handing the financial activates of the operation which include
payments of bills, sending mat statements, payroll, and compiling monthly income
statements.
4. Security Division-provides protection for both employer and guest.

5. Food and beverage Division-is responsible for the food and beverages that are served.
6. Marketing and Sales Division-la responsible for selling the room and food service it is
involved in advertising, development of promotional materials, and marketing direct contacts
with prospective clients.
7. Room Division – In responsible for the front desk, telephone, reservations, and
housekeeping department.

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Management Methods. Traditionally, hotels are operated by the people who own the property.
In some cases, the operator may lease the hotel from the owner and then manage it. In order
cases, special arrangements are made such as franchising and management contracts.
Franchising-Hotels that are franchised are usually owned and operated by the same person or
company. The hotel operator or franchisee signs a contract with the franchisor to maintain
certain operating standard and to use the franchise name.
The hotel or motel.

• the franchisee receives benefits such as extra business as a result of the franchisors national
or international advertisements, the use of the franchisors operating and accounting system,
and a line into the franchise chains reservation system. In return for these benefits, the
franchisee will pay a royalty and an advertising fee plus a percentage of annual room sales or a
specified number of dollars for each room sold.
Management Contracts

• Although the first management contract was signed in 1949 by the international, hotels,
it was only in the 1970s that management contrast became widespread.
• Under a management contract, the investment rent is transferred from the operator to
the property camera The management contract also allows hotel operating companies to widen
their investment base by increasing the number of room managed, thereby increasing the
profits developers who do not have experience in hotel management formally and large hotels
and then turn them over to hotel management International to expand rapidly around the
world The gun was due to its ability to get capable management team

Chain Accommodates Optus

• Most hotels and motels are part of a chin operation. This initial in the chain may all be owned
by one large company, be partly owned and partly franchised, or may all be franchised In any
case, the owning company or franchisor establishes the standards and operating polices to
which each individual unit must conform Becsam of the sim, chain operations often have the
potential to implement employee selection and training programs, to buy savor equipment and
harrutus in bulk, and to conduct mast research on such matters as guest room layouts and
productivity improves. All these benebus from chain marketing and a chain reservation system.

Hotel Terminology
• Room rates for hotels are quoted in terms of what meals are included in the price. European
Plan (EP) means that there are no meals included. This is the most commonly used room rate
quoted by North America hotels, American Plan (AP) means that breakfast, lunch, and dinner
are included in the quoted price. In Europe, AP is known as full pension. Meals are usually a
fixed menu with little or no choice. Modified American Plan (MAP) includes breakfast and

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 dinner but not lunch or breakfast and lunch but not dinner. In Europe, this is known as demi
pension.
• A continental breakfast is offered by most European hotels and is included in the

Room rate. In Europe, this type of plan is known as hotel gain or pension gain which consists of
rolls, coffee, and sometimes juice.

• The Bermuda Plan (BP) is offered by hotels in Bermuda and some other places. It includes
both a room and a full English or American type of breakfast. Bed and Breakfast hotels
operate on a Bermuda plan in Britain and the United States and on continental breakfast plan
in continental Europe

• Room Rates
The maximum rates that hotels charge for a room normally depend on the number of people
occupying it. Those rates are called rack rates. These are posted on the inside of the entrance
door of each guest room, the rack rate is not always the rate that is paid for a room. Hotels, like
airlines, have a system of discounted prices.
• The revenue that is not obtained for a guest room is gone and cannot be recovered
Thus, hotels offer discounted rates to special classes of people to encourage them to stay in the
hotel. For example, there are special rates for business travelers. Government employees,
airline employees, and other similar groups.
• For conventions and conferences, hotels complete with one another by offering the
lowest room rate: Profits on banquet meals and sales of liquor make up for the discounted
room rates.
Hotel Profitability

Rooms occupancy. A simple measure of a hotels profitability is its room occupancy. It is obtained
by dividing the number of rooms occupied by guests on any night by the number of rooms in
the hotel and by multiplying the result by the 100 to determine the occupancy on a percentage
basis. For instance, if a 125-room hotel has 75 rooms occupied on a particular right, its
occupancy will be:

75 x 100 / 125 = 60%

Occupancy can also be determined for a week, month, a year, or any other period of time. In
this case, the numerator is the number of rooms occupied for that period and the denominator
is the number of rooms available during that period, that is, the number of rooms in the hotel
times the number of days in the period. For example, if we want to know the occupancy for a

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week in a 125-room hotel in which 463 rooms were occupied during that week, the occupancy
percentage would be:

463/(125x7) =875 x 100 = 52.9%

During peak season, a hotel may have 100% occupancy or close to it. However, occupancy can
be very low at other times of the year. In general, hotels are considered profitable if they can
operate with an average annual occupancy of 65% or higher.

Double Occupancy Rooms

• Occupancy percentage is not usually the boost measure of marketing success for a hotel
because it does not show whether the revenue is being maximized. Whether a room is occupied
by one person or by two persons, the occupancy percentage will not change, but the revenue
obtained will be change. It is for this reason that hotels determine the occupancy and the
double occupancy rate which is the number of rooms occupied by more than one person.
• Double occupancy is determined by dividing the number of guests accommodated during a
certain period by the total number of guest rooms during that same period.

For example, if 463 rooms were occupied by 713 guest during a week, the double occupancy is
713/463 = 1.54
The 1.54 double occupancy ratio means that 54% of the rooms were double occupied.
Average Rate Per Room Occupied
• Another way of measuring maximization of revenue is the average rate per room occupied.
The average rate will increase if more expensive rooms are sold or if more rooms are double or
triple occupied. The average room rate is obtained by dividing the revenue for a period by the
number of rooms occupied during that period.

Average Daily Rate Per Guest

Another useful statistics is the average daily rate per guest. This is obtained by dividing total
room revenue for a period by the total number of guest accommodated during that period.

Average Length of stay

• To maximize revenue and increase room occupancy, hotels try to increase the length of stay of
customers through advertising and other marketing methods. If customers can be motivated to
stay an extra day or two, this will mean more revenue for the hotel.

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Breakeven Point
Hotels are often interested to know their breakeven point. It is that point at which business will
make neither a profit nor a loss. The equation for determining it is:

Fixed costs Contribution margin

Fired costs are those that stay the same regardless of the volume of business. Examples are
management salaries, interest, depreciation insurance, property taxes, mortgage payments,
amortization, and physical plant maintenance. Contribution margin is defined as the average
room less the variable costs of having a room occupied. Variable costs are those that change
according to the number of guests in a hotel. The variables costs for a hotel room are primary
the costs of housekeeping such as maid wages, linen, laundry, and supplies.

Accommodation Reservation
Many large hotels have computerized reservation system. However, despite those system,
overbooking still occurs. Overbooking is selling more rooms than the actual available rooms.
Hotels do it for a mason. If hotels book only to capacity, they will often end up with empty
rooms because of “no-show” or people who do not advisor that they want their reservation
cancelled. Hotels know from experience that there is a no-show percentage that can be
compensated by overbuilding. However, the numbers do not always work out correctly. The
result is disappointed customers and negative publicity.

• Hotels use different methods to avoid overbooking and reduce the no-show factor. One
method is for a hotel to advise the customers that it will honor a reservation only if the
customers arrive at a certain stipulated time. Another method is for the hotel will give the
customer a written document confirming that the reservation has been made. The hotel
guarantees that the room will be available, and the customers guarantees that the room will be
paid even if he or she does not show up,
Registration Cards

• Accommodation establishment use the guest registration card as a marketing tool. A

guest registration card provides information about the guests such as his or her name, address,
geographical origin, and other facts. This information can be used to produce a direct mail list
which is used for sending future promotional materials. The list can also be expanded to include
the names and addresses of clients who have made reservations, canceled them, and even
customers who made reservations but never arrived.

• The guest’s registration card information can also be used to produce a typical customer
profile the customer profile can be presented to different print or broadcast advertising media
which can then determine if the market they serve fits this profile. If it does, the establishment
may then be able to use that medium for its advertising.

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Hotels and Airlines
At present, there is a natural link between airline companies and hotels. This is due to the
changed nature of transportation. One of the first links was Pan Am which tied in with the
international Hotels in the 1940s.
According to lane (1994), there are three major reasons why airline company link with hotels.
These are:

1. Their desire to protect insisting business and develop future business increasing their profits.
2. The expectation that hotel ownership will boost tourism development in their home
countries; and
3. The desire to expand national culture.

Today, there are many airline-hotel links such as KLM Hilton International, air France and
Meridian Hotels, Air langus (Ireland) and Dunfey Hotels, and Japan Airlines and Nikko Hotels.
The links between hotels and airlines are not always formed by ownership or merger. They can
also be partial ownership or a working agreement.

Frequent Flyer Links

Many of the frequent flyer programs of airlines are also linked to hotel usage. This means that
airlines grant airline passengers extra mileage points for staying in participating hotels.
• Most Accommodation establishment promote their properties to members of the
Accommodation Promotion, Travel trade as well as to tour wholesalers and travel agencies.
They provide the travel trade with printed promotional literature and invite them as guests on
familiarization trips.
• Hotels use the direct mail approach to groups who would like to hold meetings,
conventions, or conferences in the hotel. For these groups, hotels often the incentive of lower
room rates for group bookings and make up the reduced revenue by means of additional sales
of meals and Alcoholic beverages.
• Accommodation establishment also use newspaper for promotion. They use the
business section of newspaper to reach the business travelers and the travel sector to reach the
vacation traveler. They also advertise on radios and televisions, on highways and airport
billboards, on city magazines or directories, and on telephone directors Majority of hotels
advertise in travel journals, travel and recreation magazines, and airline in-flight magazines.
• Some accommodation entities feature the hotels president or general manager in their
advertisement. They may also feature the chef in their restaurant advertising.

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