Hospitality Today
Introduction to Restaurant and Hotel Industry
RHM 175
Chapter 6
Understanding the World of Hotels
Competencies:
1. Briefly describe the dynamic hotel industry, and summarize information about important hotel guest segments. 2. Describe center-city, resort, suburban, highway, and airport hotels, including their services and facilities, and summarize their historical development. 3. Explain various ways hotels can be owned and operated, distinguish chain hotels from independent hotels, and explain how hotels can be categorized by price. 4. Describe the following hotel categories: all-suite hotels, conference centers, timeshare properties, condominium hotels, and seniors housing. 5. Outline the following steps in developing and planning new hotels: site selection, the feasibility study, and financing.
Hotels:
A Dynamic Industry
The demand for hotels is affected as the economic fortunes of countries, regions, and cities rise and fall. Hotel brand names that are popular today may not be around in the next decade.
Hotels:
A Dynamic Industry
The hotel industry is a global industry. InterContinental Hotels, headquartered in London, operates hotels in 100 countries and territories; the French company Accor has hotels in 92 countries;
Marriott International has hotels in 67 countries;
U.S. Based Starwood Hotels & Resorts has hotels in 95 countries.
Hotels:
A Dynamic Industry
Industry Trends
– 1960’s, New locations fueled expansion – 1970’s, Competition made each hotel stand out on their own – 1980’s, Pampering fueled change – 1990’s, Quality Service fueled change
Hotels:
A Dynamic Industry
Hotel Guests – who are the customers?
1. Corporate individuals – usually stay 1 to 2 nights about 3 to 7 times per year. – Factors that determine the hotels they choose:
• • • • • • Location Previous experience with the hotel Price/Value Previous experience with the hotel chain Reputation of the hotel Room Rate
Hotels:
A Dynamic Industry
• 29% of business travelers use a travel agent • 59% use the Internet or an online service such as Travelocity or Expedia. • They take advantage of spas, wireless internet, printing services, copying, faxing, etc. • Recognition and special treatment
Hotels:
A Dynamic Industry
Hotel Guests – who are the customers?
2. Corporate groups - Travel purely for business purposes - They prefer intimate meeting rooms
Hotels:
A Dynamic Industry
Hotel Guests – who are the customers?
3. Convention and association groups - Their group size sets them apart - Usually plan these meetings years in advance
Hotels:
A Dynamic Industry
Hotel Guests – who are the customers?
4. Leisure travelers - Rooms are reserved for one or more adults and possibly one or more children - Usually travel during peak seasons, leisure travelers usually pay high rates
Hotels:
A Dynamic Industry
Hotel Guests – who are the customers?
5. Long-term stay/relocation guest - families relocating to an area and requiring lodging until permanent housing can be found. - Rooms are usually twice the size of an average hotel room and typically contains a living area, a bedroom, extra closet space, and a small kitchen.
Hotels:
A Dynamic Industry
Hotel Guests – who are the customers?
6. Airline-related guests - airplane crew members take advantage of this - usually booked in blocks at rock-bottom prices
Hotels:
A Dynamic Industry
Hotel Guests – who are the customers?
7. Government and military travelers - employee are reimbursed on fixed per diem allowances, which means they only receive a certain amount for lodging expenses no matter what they have to pay for a room.
Hotels:
A Dynamic Industry
Hotel Guests – who are the customers?
8. Regional getaway guests -
Hotels:
– – – – – – – – –
A Dynamic Industry
Hotel Guests – who are the customers?
Corporate individuals Corporate groups Convention and association groups Leisure travelers Long-term stay/relocation guests Airline-related guests Government and military travelers Regional getaway guests Guest mix
Hotels:
– – – – – – – – –
A Dynamic Industry
Hotel Guests – who are the customers?
Corporate individuals Corporate groups Convention and association groups Leisure travelers Long-term stay/relocation guests Airline-related guests Government and military travelers Regional getaway guests Guest mix
Hotels:
London
A Dynamic Industry
Hotel Categories – Location
• Center – city – New York, Chicago, Los Angeles, • Resort – Vacation spots because of their climate, scenery, recreational attractions, or historic interest • Suburban – smaller hotels (250 – 500 rooms), chain affiliated, have sports and health facilities
Hotels:
A Dynamic Industry
Hotel Categories – Location
• Highway – can be seen from the highway; parking space is plentiful; atmosphere is informal; most are franchised; depend mainly on commercial traffic. • Airport – guest rooms near airports;
Hotels:
A Dynamic Industry
Hotel Categories – Ownership
Six different ways hotels can be owned and operated: 1. Independently owned and operated. 2. Independently owned but leased to an operator. 3. Owned by a single entity or group that has hired a hotel management company to operate the business. 4. Owned and operated by a chain. 5. Owned by an independent investor or group and operated in a chain. 6. Owned by an individual or group and operated as a franchise of a chain.
Hotels:
1.
A Dynamic Industry
Hotel Categories – Ownership
Independent hotel – not connected with any established hotel company and is owned by an individual or group of investors. Management Company – contracts with hotel owners to operate their hotels. Hotel chain – a group of affiliated hotels. Franchise – authorization granted to use a hotel chain’s trademark. Referral system – independent properties or small chains that have grouped together for common marketing purposes. (Calling a 1-800 number and reserving a room across the country)
2. 3. 4. 5.
Hotels:
A Dynamic Industry
Hotel Categories – Chain Hotels account for a large
percentage of the world’s hotel room inventory. Top 25 Hotel Chains See Exhibit 1 on Page 159
Hotels:
A Dynamic Industry
Hotel Categories
– Independent Hotels are sometimes hard to identify from the chain hotels.
Hotels:
Price
•
A Dynamic Industry
•
•
Another way of categorizing – or segmenting - hotels is by the prices they charge. Hotels provide a variety of experiences at a variety of price Hotel chains create several different brands or hotel names that offer different benefits and charge different prices.
Hotels:
Price
1. 2. 3.
A Dynamic Industry
The broad categories:
Limited service – economy and budget
• Motel 6, Holiday Inn, La Quinta, Days Inn
Mid-price – full-service and limited-service
•
•
Hampton Inn, Sheraton Inns, Holiday Inn Select
Hyatt, Hilton, Marriott, Four Seasons, Ritz-Carlton
First-class/luxury
See Exhibit 2
Page 163
See next slide
Marriott Conference Center
Ritz-Carlton Club
J.W. Marriott
Hotels:
– – –
A Dynamic Industry
Other Hotel Categories 1. All-Suite Hotels –
two connected hotel rooms for approximately the price of one. Developed during the 1980s Developed for extended-stay travelers
Example: Embassy Suites and Residence Inn by Marriott
Hotels:
–
A Dynamic Industry
Other Hotel Categories 2. Conference Centers –
–
• • • •
Exclusively book conferences, executive meetings, and training seminars. Four General Classifications:
Executive conference centers Corporate-owned conference centers Resort conference centers College and university centers
Example: American Express, IBM, Chase Manhattan Bank, Duke, Columbia, Universities of Virginia and Pennsylvannia
Hotels:
A Dynamic Industry
Other Hotel Categories 3. Timeshare Properties –
– – – – Created by times of inflation Began in the Swiss Alps in the 1960s Came to the United States in the 1970s See Exhibit 4 Page 173 for owners
Example: Beach Condominiums, Chalets
Hotels:
A Dynamic Industry
Other Hotel Categories 4. Seniors Housing –
– – – – Independent-living units Congregate communities Assisted-living facilities Continuing-care retirement communities
Developing and Planning New Hotels
A. Site Selection B. A feasibility study C. Financing is arranged
Developing and Planning New Hotels
A. Site Selection
1. Convenient to the central business district, the financial district, the entertainment district, or a major convention hall. Should be accessible by public transportation. Zoning ordinances Parking requirements
2. 3. 4.
Developing and Planning New Hotels
B. Feasibility Study
1. 2. 3. 4. 5. Determines to size and scope of potential guests Helps negotiate contracts Guide planners and architects Operating and Marketing plans Prepare initial capital and operating budget
• • • • • • Market area characteristics Site and area evaluation Competition analysis Demand analysis Proposed facilities and services Financial estimates
Developing and Planning New Hotels
C. Financing
Hard Costs 1. The land in which the hotel will be built 2. The building 3. Furniture, Fixtures, and Equipment Soft Costs 1. Architectural fees 2. Pre-opening expenses 3. Financing costs
See page 180-181 for Hotel Industry Financial Rewards/Benefits
Developing and Planning New Hotels
C. Financing
Permanent Financing Loans
– Long-term mortgage loans – traditionally no longer than 25 years
Construction Financing Loan
– – Short-term loans Only received during the construction process