1. The Modern Hotel Industry
Chapter 2
The Modern Hotel Industry

2. 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

3. New Industry Patterns

4. 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

5. 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)

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

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

13. New Market Patterns

14. 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

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

16. 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

17. New Ownership Patterns

18. 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

19. 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

20. 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

21. 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

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

23. New Management Patterns

24. 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

25. 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

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

27. 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

28. 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

29. 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!

30. Q & A