Chapter 4 The Hotel Business

Introduction to Hospitality, Fourth Edition John Walker

2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

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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Introduction to Hospitality, Fourth Edition John Walker

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
2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

Introduction to Hospitality, Fourth Edition John Walker

Figure 4-1

Franchised Hotels Among the Top 10 Corporate Chains

Introduction to Hospitality, Fourth Edition John Walker

2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

Figure 4-2

Top 10 Management Companies

Introduction to Hospitality, Fourth Edition John Walker

2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

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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Introduction to Hospitality, Fourth Edition John Walker

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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Introduction to Hospitality, Fourth Edition John Walker

Drawbacks

Lack of operational power; must conform High fees both to join and ongoing Central reservations produces 1726% of reservations Must meet standards as set by franchisor
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Introduction to Hospitality, Fourth Edition John Walker

Benefits and Disadvantages for Franchisor

Benefits

Disadvantages

Increased market share/recognition Up-front fees Need to be careful in selection of franchisees Difficulty in maintaining control of standards
2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

Introduction to Hospitality, Fourth Edition John Walker

Management Contracts

Contract

The Players
Owner - financial responsibility Management company - operational responsibility

Fee structure
Trend toward expansion of contract provisions
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Introduction to Hospitality, Fourth Edition John Walker

Hotel Rating Services

Rating Services

AAA
American Automobile Association Diamond Award

Mobil Travel Guide

Five Star Award

2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

Introduction to Hospitality, Fourth Edition John Walker

Ways to Classify Hotels

Classifying Hotels Location Types of services offered Market price levels

Introduction to Hospitality, Fourth Edition John Walker

2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

Figure 4-5

Hotel Rating Guide

Introduction to Hospitality, Fourth Edition John Walker

2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

Location

Introduction to Hospitality, Fourth Edition John Walker

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

2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

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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Introduction to Hospitality, Fourth Edition John Walker

City Center Hotels

Public transportation available for business or leisure Range of accommodations and services Typically have a signature restaurant
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Introduction to Hospitality, Fourth Edition John Walker

Resorts

Originally began due to rail travel Greenbrier in West Virginia

The Halekulani in Wikki, Hawaii The Ritz Carlton Kapalua in Maui, Hawaii

www.greenbrier.com

www.halekulani.com

Introduction to Hospitality, Fourth Edition John Walker

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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Introduction to Hospitality, Fourth Edition John Walker

Vacation Ownership

Fastest growing segment of travel industry Time share

Vacation club

A condo that is owned Purchaser uses for a specific period of time each year Purchase points that entitle purchaser to use of facility Not real estate based
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Introduction to Hospitality, Fourth Edition John Walker

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

Introduction to Hospitality, Fourth Edition John Walker

2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

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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Introduction to Hospitality, Fourth Edition John Walker

Freeway Hotels

Prominent in the 1950s Easy access to roadways Park outside the room entrance Example Motel 6

www.motel6.com

Introduction to Hospitality, Fourth Edition John Walker

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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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Introduction to Hospitality, Fourth Edition John Walker

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

Introduction to Hospitality, Fourth Edition John Walker

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Full-Service Hotels

Typically Business Oriented Multiple food and beverage outlets Meeting and convention services Chain representation

Doubletree

Sheraton

www.doubletreehotels.com
www.sheraton.com

Introduction to Hospitality, Fourth Edition John Walker

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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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Introduction to Hospitality, Fourth Edition John Walker

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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Introduction to Hospitality, Fourth Edition John Walker

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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Introduction to Hospitality, Fourth Edition John Walker

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

Vertical Integration

Introduction to Hospitality, Fourth Edition John Walker

www.hotelchoice.com

Luxury Mid-scale Budget Economy

Clarion Quality Inn/Suites Comfort Inn Sleep Inn

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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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Introduction to Hospitality, Fourth Edition John Walker

The Best Hotels

Some previous winners: Oriental Hotel in Bangkok, Thailand Regent of Hong Kong Bell-Air of Los Angeles
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Introduction to Hospitality, Fourth Edition John Walker

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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Introduction to Hospitality, Fourth Edition John Walker

Trends

Capacity control Safety and security Assets and capital Technology New management Globalization
2006 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ 07458

Introduction to Hospitality, Fourth Edition John Walker