The Modern Hotel Industry Chapter 2 The Modern Hotel Industry

Chapter 2 Objectives New Industry Patterns New Market Patterns Segmentation, Brand, Image, Product New Market Patterns Marketing to Individuals versus Groups New Ownership Patterns State of Industry, Ownership and Financing New Management Patterns Chains, Management Companies

New Industry Patterns

New Industry Patterns Segmentation Brand Brand Equity Development of various brands to appeal to all consumers Targeting consumers with similar needs Brand Identification and recognition of Products Sometimes confusing to the consumers Brand Equity Value placed on the brand by the consumer

Top Hotel Brands/Chains United States Marriott / Starwood Hilton InterContinental Wyndham Choice Best Western Hyatt Four Seasons Accor (France) Sol Melia (Spain) Taj Group (India) InterContinental (UK)

PRODUCT Segmentation Economy Hotels Offers minimal services at low rates Smaller Rooms, Smaller Buildings Omit non-essential amenities such as a pool, meeting space, restaurants Standardized architecture 20 employees per 100 guestrooms

Product Segmentation (cont.) Amenity A special “extra” that was offered to differentiate from the competition Amenity Creep Continued evolution of amenities to meet the expectations of the guest Led to increased prices Hard Budgets Transit hotels for sort term use

Product Segmentation (cont.) All-Suite Hotels Two rooms for the price of one Separate living-sleeping accommodations Extended Stay Has kitchenettes Corporate Housing Apartment leasing Often eliminated hotel occupancy taxes

Product Segmentation (cont.) Mixed-Use Projects Elderhostel University with Hotel Dual Brand Two hotel types at one location transient and extend stay Casinos/Hotels Gaming revenues outweigh the room revenues

Product Segmentation (cont.) Mixed-Use Projects (cont.) Conference Centers Meeting Facilities with guestrooms Corporate Meeting Package (CPM) Bundles room, food, equipment Spas Resorts with Health component Fitness Centers Hotels with extensive fitness facilities

Hilton Worldwide Luxury Lifestyle Full-Service Focus-Serve Mixed-Use Waldorf Astoria Conrad Lifestyle Canopy Full-Service Hilton Curio Doubletree Embassy Suites Focus-Serve Hilton Garden Inn Hampton Tru by Hilton Mixed-Use Hilton Grand Vacations Extended Stay Homewood Suites Home2 Suites

Brand Equity 4 Criteria change recognition to equity Instant Identification Broad Distribution Consistent Quality Assured Level of Service

New Market Patterns

New Market Patterns Marketing to the Individual Guest The Guest Profile Business/Leisure Travelers International Guests Preferred Guest Programs (PGP) Loyalty Programs Non-guest Buyers Guest books through 3rd party

New Market Patterns (cont.) Elastic versus Inelastic Elastic When rates change, demand fluctuates Leisure Guests Inelastic When rates change, demand remains unchanged Business Travelers

New Market Patterns (cont.) Marketing to the Group Tourist / Leisure Visitors The Tour Package The Inclusive Tour Package Business / Commercial Groups MICE or SMERF Conventions Trade Shows The Single Entity (but part of a group) Incentive Tours

New Ownership Patterns

New Ownership Patterns The State of the Industry Turmoil cyclical ups and downs Churning rapid buying and selling Consolidation Large buying the small Globalization going worldwide

New Ownership Patterns (cont.) Individual Owner Single person or Family Equity comes from family or loans Crowdfunding Publically Funded by “buddies” Real Estate Investment Trusts (REIT) Public Company Raises capital through the selling of stock Pays no income tax if 90% of taxable income is paid to the shareholders

New Ownership Patterns (cont.) Condominiums & Timeshares Condo Ownership Real Estate purchase by the Owner Owner lets space via contract Condo Hotel Condos within a commercial hotel Permanent Resident Takes away from rentable hotel rooms

New Ownership Patterns (cont.) Condominiums & Timeshares (cont.) Timeshares Are not a Real-Estate Purchase Typically owned by the developer Guests buy the right to use the unit for a period of time Hotel Companies also have timeshares Hilton Grand Vacations Exchanges Company designed to help trade timeshares

New Ownership Patterns (cont.) Joint Ventures & Strategic Alliances Partnerships between legal entities Government investments Hotel corporations REITs Financial Institutions

New Management Patterns

New Management Patterns Hotel Chains Specific Brands with reputation Dominate in the U.S. 75% of hotels are chain affiliated Offers services to the hotel Recognition Site Selection Purchasing Advertising Reservations

New Management Patterns (cont.) Parties involved in the making of a Hotel Developer Acquires site, starts the planning Lender Loans the money or financial aid Owner Investor, Bears the Risk Management Company Runs the day to day operation of the hotel Franchisor Provides Brand recognition

New Management Patterns (cont.) Membership Organizations / Consortia Association of hotel members Hotel still maintains independence Joint efforts in advertising Common sales effort Reservation referrals

New Management Patterns (cont.) Management Contracts Contract between owner and management company Legal conditions each party must follow Management Companies Hired to handle the day to day operation of hotel Earns 3-5% of TOTAL Revenues plus incentives

New Management Patterns (cont.) Leasing/Renting Management Company will pay “rent” to owners to run the hotels day to day operation Occurs when times are good Franchising Seller is the Franchisor, Buyer is the Franchisee Franchisee buys the rights to use franchisor’s name, product, techniques and advertising Franchisee pays 5-10% of ROOM Revenues

New Management Patterns (cont.) Franchising (cont.) The Franchise Flag Name Recognition Contracts are difficult to cancel Some challenges but still a good way to go!

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