Chapter 1 The Hotel Industry Overview and Professional Career Opportunities

Lodging Is Part of the Tourism Industry: The Tourism Industry Segments in the Tourism Industry Tourism Industry Hospitality Retail (Shopping) Stores Transportation Services Destination (Activity) Sites Lodging Operations F&B Operations Tourism industry is: The third largest retail industry, following automotive and food stores The nation’s largest service industry One of the nation’s largest employers Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging Is Part of the Tourism Industry: Lodging (Hotel) Sector Lodging properties are a segment within the tourism industry. Range of Lodging Property Alternatives Destination Resorts Full-Service Hotels Limited-Service Hotels Sleeping Rooms Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging Is Part of the Tourism Industry: A Brief History of Hotels Highlights in the Modern History of the U.S. Hotel Industry 1900 Fewer than 10,000 hotels 750,000 to 850,000 rooms 1910 10,000 U.S. hotels 1 million rooms 300,000 employees Average size: 60–75 rooms 1920 Occupancy: 85% Hotel construction reaches an all-time peak as thousands of rooms are added along the new state and federal highways Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging Is Part of the Tourism Industry: A Brief History of Hotels (cont.) Highlights in the Modern History of the U.S. Hotel Industry (cont.) 1930 Occupancy: 65% AHA’s Hotel Red Book lists 20,000 hotels 1930 1940 Occupancy: 64% Average room rate: $3.21 1950 Occupancy: 80% Typical hotel: 17 rooms Average room rate: $5.91 1960 Occupancy: 67% $3 billion in sales Total hotel rooms: 2,400,450 Typical hotel: 39 rooms, independent and locally owned Average room rate: $9.99 Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging Is Part of the Tourism Industry: A Brief History of Hotels (cont.) Highlights in the Modern History of the U.S. Hotel Industry (cont.) 1970 Occupancy: 65% $8 billion in sales Total hotel rooms: 1,627,473 Average room rate: $19.83 1980 Occupancy: 70% $25.9 billion in sales Total hotel rooms: 2,068,377 Average room rate: $45.44 Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging Is Part of the Tourism Industry: A Brief History of Hotels (cont.) Highlights in the Modern History of the U.S. Hotel Industry (cont.) 1990 Occupancy: 64% $60.7 billion in sales Total hotel rooms: 3,065,685 45,020 properties Average room rate: $58.70 2000 Occupancy: 63% $97 billion in sales Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations 2003 U.S. Property/Room Breakdown By Location Property Rooms Airport Suburban Urban Highway Resort 3,239 18,476 5,408 18,312 2,149 444,860 1,490,970 716,485 1,296,279 467,102 By Rate Under $30 $30–$44.99 $45–$59.99 $60–$85 Over $85 853 7,862 16,680 14,334 7,855 50,642 499,350 1,102,845 1,393,633 1,369,196 By Size Under 75 rooms 75–149 rooms 150–299 rooms 300–500 rooms Over 500 rooms 27,379 14,297 4,305 1,094 509 1,144,753 1,523,999 860,983 407,038 478,923 Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Typical Lodging Guests Typical Lodging Guests in 2003: 52% traveled for business 48% traveled for pleasure Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Characteristics Emphasis on Safety, Cleanliness, and Service – Guests also consider “intangible” aspects of the purchase decision. Inseparability of Manufacture and Sales – A room exists and is sold at the same site. Perishability – If a guest room is not rented on a specific date, the revenue is lost forever. Repetitiveness – Some operating procedures are routine. Labor Intensive – Much of a hotel’s daily work involves employees providing services. Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview World’s Largest Hotel Groups Hotel Group Rooms Properties 1. InterContinental Hotel Group 534,202 3,540 2. Cendant Corporation 520,860 6,396 3. Marriott International 478,000 2,600 4. Accor 463,427 3,973 5. Choice Hotels International 403,806 4,977 Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview (cont.) World’s Largest Hotel Brands Brands Rooms Properties 1. Best Western 309,236 4,114 2. Holiday Inn 278,787 1,484 3. Comfort Inn & Suites 182,038 2,415 4. Marriott Hotels Resort 179,519 490 5. Days Inn of America 153,701 1,872 Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview (cont.) Largest Hotel Organizations in the United States Organization Rooms Properties 1. Cendant Corporation 439,279 5,622 2. Marriott International, Inc. 380,218 2,238 3. Hilton Hotels Corporation 357,332 2,184 4. InterContinental Hotel Group 337,643 2,523 5. Choice Hotels International, Inc. 313,982 3,891 Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview (cont.) Hotel Ownership/Management Single-unit property not affiliated with any brand Single-unit properties affiliated with a brand Multiunit properties affiliated with the same brand Multiunit properties affiliated with different brands Multiunit properties operated by the brand or others Multiunit properties owned by the brand Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview (cont.) Hotel Ownership/Management Alternatives Hotel Property Franchise Non-Franchise Affiliation Franchise Company (Franchisor) Independent Ownership Franchise Company (Franchisor) Independent Operation Management Company Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview (cont.) GM / Rooms Division M. / Front Office M. / Controller / Executive Housekeeper / Catering M. / Executive Steward / F&B M. / Banquet M. / Chef / Executive Chef / Food Production M. / Pastry Chef / Sous Chef / Room Service M. / F&B Controller / Restaurant M. / Beverage M. / Purchasing Director / Human Resources M. / Credit M. / Executive Assistant M. / Convention M. / Sales and Marketing M. / Auditor / Director of Security / Convention Services Director / Resident M. / Chief Engineer Typical Multiunit Positions: Area GM / Regional GM / Director of Training / Vice President, Finance / Vice President, Real Estate / Director of Franchising Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Organizational Structures Small Hotel (75 Rooms) Organizational Chart for Small (75-Room), Limited-Service Hotel Manager Bookkeeper/Accountant Executive Housekeeper and Staff Front Office Manager and Staff Maintenance Chief and Staff Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Organizational Chart for Large (350-Room), Full-Service Hotel Close Look at Lodging Organizations: Hotel Organizational Structures (cont.) Large Hotel (350 Rooms) Organizational Chart for Large (350-Room), Full-Service Hotel Administrative Assistant Assistant to the GM GM Director of Sales & Marketing Front Office Manager F&B Director HR Manager Executive Housekeeper Chief Engineer Controller Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Organizational Structures (cont.) Line and Staff Departments Line Department Those directly involved in the “chain of command” Directly responsible for revenues – Front office and food/beverage Also responsible for property operations – Housekeeping, maintenance, and engineering Staff Department Providing technical, supportive assistance to support line decision makers Making recommendations to (but not decisions for) line decision makers – Purchasing, human relations, and accounting Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Organizational Structures (cont.) Revenue and Cost Centers Revenue Center A hotel department that generates revenue – Front office and food/beverage departments – Also revenues from telephone services, space rental, and fees from parking garages, vending machines, and golf courses Cost Center A hotel department that incurs costs in support of a revenue center – Marketing, maintenance, accounting, human resources, and security departments Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging Is a Service Business Successful hotels greatly emphasize serving their guests to the best possible extent. The brand name a hotel uses is not the most important factor in a hotel’s success. When hotels put guests’ needs first, they will do well. Facility Engineering & Maintenance Consistent delivery of quality products and services to guests must be addressed first, rather than considering tactics to maximize revenue; minimizing costs comes next! Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging Is a Service Business (cont.) Questions that must be addressed to deliver quality service: How will we demonstrate to our own staff members the need for high-quality guest service? How exactly will we evaluate the level of service quality being provided to our guests? What exactly are our service strategies and our service procedures? How will we train our staff about service concerns and the tactics to deliver service? How will we reinforce our service strategies? What can we do to emphasize service as a philosophy rather than as a program with a definite start and end time? What can we do to excel in the guests’ moments of truth? Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues Confronting Hoteliers: Operating Issues Labor Shortages Managers should implement procedures to a) reduce turnover levels, b) increase productivity levels, and c) recruit from nontraditional employee labor markets. Cost Containment Hoteliers should examine ways to reduce costs without impacting quality. An excessive emphasis on cutting service or product quality will ultimately result in reduced hotel revenue. Increased Competition Problem of hotel community being overbuilt. Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues Confronting Hoteliers: Marketing Issues Increased Market Segmentation Efforts to focus on a highly defined, smaller group of travelers. Brands Overlap The more the number of brands increase, the harder consumers find it to differentiate among them. Increased Sophistication of Consumers Results in a more competitive selling environment for hoteliers (e.g., online room booking). Increased Number of Amenities Various amenities (e.g., business centers) increase costs for hotel owners yet sometimes appeal to only a small segment of the hotel’s market. Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues Confronting Hoteliers: Technological Issues Recent technological innovations include: Interactive Reservation Systems – Allow potential guests to make reservations at preferred room rates in reduced time Guest Room Innovations – Two (or more) telephone lines enabling Internet access, interactive menu ordering for room service, electronic games, and guest room checkout Data Mining Technology – Analyzing guest- (and other) related data to make better marketing decisions Yield Management – Matching guest demand with room rates Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues Confronting Hoteliers: Economic Issues “As goes the economy, so goes the lodging industry” Impact of globalization on the lodging industry Lodging industry is an integral part of the tourism industry. – It is affected by the extent to which travelers, both within the country and worldwide, travel. Economies of the world, the country, the state, and the community have a significant influence on the financial success of a lodging organization and the individual properties that comprise it. Facility Engineering & Maintenance Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

How does one start to plan for a career in the lodging industry? Professional Career Opportunities in Lodging: Get Started with Career Planning How does one start to plan for a career in the lodging industry? Enrolling in and graduating from hospitality-related programs of study Working in a variety of lodging positions (including educational internships) Developing a career ladder for professional development within the lodging industry – Working with a mentor Talking with GMs at nearby hotels, industry leaders, and educators to obtain suggestions Hotel Operations Management, 2nd ed. ©2007 Pearson Education, Inc. Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458