1. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Chapter 4 The Hotel Business

2. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition After Reading and Studying This Chapter, You Should Be Able to: Describe hotel ownership and development via franchising and management contracts Classify hotels by type, location, and price Discuss the concept and growth of vacation ownership Name some prestigious and unusual hotels

3. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Franchising Allows for a company to expand rapidly Uses other people’s money (franchisee) Franchisor:  The company Over 180 franchised hotel brands in North America today

4. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Figure 4-1 Franchised Hotels Among the Top 10 Largest Corporate Chains

5. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Figure 4-2 Top 10 Largest Management Companies

6. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Trends in Franchising Curb appeal (fresh looks) Location near highways, airports, and suburbs Expansion in smaller cities New markets in proximity to golf courses and other attractions Foreign expansion to increase brand awareness

7. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Benefits Set of plans and specifications for building National advertising Centralized reservation system Participation in volume purchasing discounts Listing in the franchisor’s directory Low fee percentage charged by credit card companies

8. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Drawbacks Lack of operational power; must conform High fees—both to join and ongoing Central reservations produces 17–26% of reservations Must meet standards as set by franchisor

9. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Benefits and Disadvantages for Franchisor Benefits:  Increased market share/recognition  Up-front fees Disadvantages:  Need to be careful in selection of franchisees  Difficulty in maintaining control of standards

10. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Management Contracts The players:  Owner—financial responsibility  Management company—operational responsibility Fee structure Trend toward expansion of contract provisions

11. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Hotel Rating Services AAA:  American Automobile Association  Diamond Award Mobil Travel Guide:  Five Star Award

12. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Ways to Classify Hotels Location Types of services offered Market price levels

13. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Location Center city hotels Resort hotels Airport hotels Freeway hotels Casino hotels Full service Convention Economy Extended stay Bed and breakfast

14. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Hotels by Price Segment Budget: $29–$39 Economy: $40–$60 Mid-price: $60–$100 Upscale: $100–$200 Luxury: $140–$450 All-suites: $95–$175

15. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Resorts Originated because of rail travel Greenbrier in West Virginia:  www.greenbrier.com The Halekulani in Wikki, Hawaii:  www.halekulani.com The Ritz Carlton Kapalua in Maui, Hawaii:  www.ritzcarlton.com

16. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition More on Resorts “Captured Clientele” Food service is unique Diversified marketing mix:  Children  Groups  Eco-tourism

17. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Vacation Ownership Fastest-growing segment of travel industry Time share:  A condo that is owned  Purchaser uses for a specific period of time each year Vacation club:  Purchase points that entitle purchaser to use of facility  Not real estate based

18. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Vacation Ownership (cont.) Estimated that 2 million households own vacation intervals at 3,500 resorts in almost 90 countries Helps ensure purchaser today’s prices for tomorrow Yearly maintenance fees Fixed or floating times Example:  www.rci.com

19. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Airport Hotels High occupancy due to location Business, group, and leisure travelers Full service 200–600 rooms Convenient location Airport shuttle service Economical pricing

20. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Freeway Hotels Prominent in the 1950s Easy access to roadways Park outside the room entrance Example:  Motel 6 (www.motel6.com)

21. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Casinos Heavy growth segment Low room rates Subsidized food and beverage Themes are popular More than 500 guest rooms Variety of food operations Contains a gaming room

22. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Convention Hotels Meet the needs of large groups More than 500 rooms Larger public areas to accommodate greater public demand Banquet areas within and around the hotel High percentage of double occupancy Full-service oriented

23. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Full-Service Hotels Typically “business oriented” Multiple food and beverage outlets Meeting and convention services Chain representation:  Doubletree (www.doubletreehotels.com)  Sheraton (www.sheraton.com)

24. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Economy/Budget Hotels Represents 12% of total hotel rooms Accomplished 37% of industry growth Average room rate of $48.68 However, profit revenue is slow, with an annual rate of 1% Also considered budget hotels Clean rooms Reasonably sized and furnished Continental breakfast

25. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition All-Suite Cater to guests for an extended period Reduction in rate based on length of stay More space than typical hotel Example:  Embassy Suites (www.embassy-suites.com)

26. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Bed and Breakfasts A home away from home Accommodation with an owner who lives on premises Maintains a few rooms Offers breakfast Personable and quick service

27. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Vertical Integration Lodging companies meeting the needs of several types of guests based on price, facilities, and amenities Choice hotels that have several chains that meet their diverse clientele: Luxury: Clarion Mid-scale: Quality Inn/Suites Budget: Comfort Inn Economy: Sleep Inn www.hotelchoice.com

28. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Referral Organizations Numerous independent properties unite to compete with the marketing power of chain operations Similar benefits as franchises, at a lower cost Provide incentives for clients

29. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition The Best Hotels Some previous winners:  Oriental Hotel in Bangkok, Thailand  Regent of Hong Kong  Bel-Air of Los Angeles

30. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Unusual Hotels Ice Hotel in Swedish Lapland The Treetops Hotel in Kenya Underwater Hotel in Australia Capsule Hotel in Japan The Burj Al Arab in Dubai

31. © 2007 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Walker: Introduction to Hospitality Management, 2 nd edition Trends Capacity control Safety and security Assets and capital Technology New management Globalization Consolidation Gaming Diversification within segments Rapid growth in vacation ownership Increase in number of spas and treatments offered Increase in development of multi-use hotels