1. The Modern Hotel Industry
Chapter 2

2. Patterns in the Lodging Industry
Product
Market
Ownership
Management
The four patterns are actually interlaced. Change in one invariably impacts another.

3. New Product Patterns Segmentation Brand Brand Equity
The lodging industry uses segmentation to mean different products, hotel types.
Brand
Customer recognition defines a brand: recognition of the name and logo.
Brand Equity
The inherent value that the shopper’s recognition gives to the brand.

4. A Segmented Industry
Page 34

5. New Product Segments Economy (Budget, or Limited-Service) Hotels
Amenities and Amenity Creep
An amenity is a special extra used to distinguish the property from its competitors.
The history of the industry’s ever-improving levels of service is the story of amenity creep.
How Budgets Compete
Forgo some amenities
Smaller rooms

6. New Product Segments cont’d
All-Suite Hotels
Appeal is 2 rooms for the price of one.
Extended Stay
Original concept of the all-suite hotel
Have higher occupancies and lower ADRs
Corporate Housing
Exempt from local room taxes
Permitted in areas not zoned for hotels

7. Mixed Use Projects and Other Hotel Segments
Apartments, hotels, resorts, condos, shopping marts & business towers merge into one development=mixed-use concept
Casino/Hotels
Different focus from traditional hotels: gaming revenue is the major income producer, not room sale.
Becoming lodging’s dominant segment

8. Mixed Use Projects and Other Hotel Segments cont’d
Conference Centers
Highly specialized facilities designed for meetings and conferences
Rates are bundled: guest rooms, meeting rooms, food, drinks and equipment
Spas
Essence of the spa experience is health
Seven spa types: club, cruise-ship, day, destination, medical, mineral springs, resort/hotel

9. New Market Patterns Marketing to the Individual Guest Guest Profiles
Knowing guests in various circumstances, developing profiles, enables hoteliers to manage a variety of market segments
Business/Leisure Travelers
All guests display some degree of elasticity

10. Marketing to the Individual Guest cont’d
The International Guest
World Tourism Organization (WTO) forecasts 102 million visitors to the US by 2020.
Preferred Guest Programs
Guests earn points with hotel chains.
Nonguest Buyers
Are intermediaries who buy guest rooms.

11. Marketing to the Group Tourist/Leisure Visitors The Tour Package
The wholesaler (nonguest buyer) handles the mass movement of leisure travelers.
They buy at wholesale prices because they buy in quantity
The Inclusive Tour (IT) Package
Involve financial risks (air & land transportation) outside the hotel’s control

12. Marketing to the Group cont’d
Business/Commercial Groups
SMURF = societies, medical, university, religious, fraternal organizations
Conventions
Trade Shows
The Single Entity
Incentive Tours

13. New Ownership Patterns
The State of Industry
Turmoil & Churning
Income tax laws changed in the 1970’s
Churning = rapid buying and selling
A Consolidating Industry
Consolidation promises economies of scale, larger marketing & distribution networks for the chains.

14. Ownership & Financing Alternatives
Individual Ownership
Real Estate Investment Trusts (REITS)
Public companies that raise capital through the sale of stock
Condos & Timeshares
Condos are real estate purchases, time shares are not.

15. New Management Patterns
Hotel Chains
75% of all hotels are under the flag of chains.
insert Exhibit 2-14

16. Hotel Chains cont’d Parties to the Deal Developer Financier
Ownership (equity)
Management company

17. Management Contracts & Management Companies
Agreement between the hotel owner & a management company
Management companies
Grew important because of 3 different events
Great Depression
Oil Embargo of 1973
Banking system collapse of 1980’s

18. Management Contracts & Companies cont’d
Leasing (Renting)
Are popular when times are good
Franchising
Franchise fees have almost doubled during the past 20 years.
They now represent 9% to 10% of room sales – some 8% of sales from all sources

19. Summary Hotelkeeping opens the 21st century at the peak of its cycle.
The 21st century will build on the dynamic changes in products, markets, financing and operations that continue to reshape this ancient industry.