1. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker CHAPTERCHAPTER CHAPTERCHAPTER 3 The Hotel Business Development and Classification

2. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker History of Hotels in the United States Hotels… –City Hotel 1st hotel Opened in 1794 –Tremont House Opened in Boston in 1829

3. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker History of Hotels in the United States Hotels (cont.)… –Transportation changed course Rail travel –Development of resort properties Highway travel –Development of motels Air travel –Airport hotel locations

4. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Franchising 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

5. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Franchising Franchising (cont.)… –Examples HFS - Hospitality Franchise Systems –Choice Hotels International http://www.hotelchoice.com

6. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Benefits for Franchisee Benefits… –Set of plans and specifications for building –National advertising –Centralized reservation system –Participation in volume purchasing discounts –Listing in the franchisor’s directory

7. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Disadvantage for the Franchisee Disadvantages… –Lack of operational power; must conform –Large fees –Central reservations produces 17-26% of reservations –Must meet standards as set by franchisor

8. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker 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

9. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Franchising Trends Trends… –Factors propelling franchise growth Fresh looks (curb appeal) Location - off highways, airports, and suburbs Expansion in smaller cities New markets - openings in proximity with golf courses and other attractions

10. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Other Forms of Development Development… –Partnership –Leasing –Syndicates

11. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Management Contract Contract… –The Players Owner - financial responsibility Management company - operational responsibility –Fee structure –Trend toward expansion of contract provisions

12. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Financial Management and Profits Management and Profits… –High degree of risk Cyclical nature of demand High degree of capital investment –Portfolio financing Use of more than one location/market Cross collateralized/cross defaulted

13. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Real Estate Investment Trust (REIT) REIT… –Existed since early 1960s –Publicly traded –Investors like REIT’s Do not pay corporate income tax REIT’s must distribute 95% of net income to shareholders Traded as stocks

14. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker REIT’s REIT (cont.)… –Examples Patriot American Hospitality –http://www.patriotamerican.com Starwood Lodging Trust –http://www.starwoodlodging.com

15. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Favorable Financing Financing… –Affiliation with a quality franchisor –Identification with a national chain through a management contract –A lease arrangement with a hotel operator –Conventional first mortgage loans –Lenders

16. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Hotel Rating Services Rating Services… –AAA American Automobile Association Diamond Award –Mobil Travel Guide Five Star Award

17. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Ways to Classify Hotels Classifying Hotels … –Location –Types of services offered –Market price levels

18. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Location Location… –Center city hotels –Resort hotels –Airport hotels –Freeway hotels –Casino hotels

19. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Center City Hotels City Center… –Public transportation available for business or leisure –Range of accommodations and services –Typically have a signature restaurant

20. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Resort Hotels Resorts… –Originally began due to rail travel –Famous resorts Greenbrier in West Virginia –http://www.greenbrier.com Hotel del Coronado in California –http://www.sddt.com/~coronado Homestead in Virginia –http://www.thehomestead.com

21. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Resort Hotels Resorts (cont.)… –“Captured Clientele” –Food service is unique –Diversified marketing mix Children Groups Eco-tourism

22. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Vacation Ownership 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

23. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Vacation Ownership Ownership (cont.)… –Estimated that 2 million households own vacation intervals at 3500 resorts in almost 90 countries –Helps ensure purchaser today’s prices for tomorrow –Yearly maintenance fees

24. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Vacation Ownership Ownership (cont.)… –Fixed or floating times –Example http://www.rci.com/home.html

25. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Airport Hotels Airport Hotels… –High occupancy due to location –Business, group, and leisure travelers –Full service –200-600 rooms –Convenient location –Airport shuttle service –Economical pricing

26. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Freeway Hotels and Motels Freeway… –Prominent in the 1950s –Easy access to roadways –Park outside the room entrance –Example Motel 6 http://www.motel6.com

27. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Characteristics of Casino’s Casinos… –Heavy growth segment –Low room rates –Subsidized food and beverage –Themes are popular –500 plus guest rooms –Variety of food operations –Contains a gaming room

28. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Major Trends in Casino Hotels Casino Trends… –Casino hotels are now marketing themselves as business hotels Amenities include business centers, travel bureaus, and room service –Move towards “family/friendly” hotels This increases the average stay and money spent by families

29. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Levels of Service Luxury Luxury… –Finest of accommodations –Concierge –24 hour room service

30. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Levels of Service Luxury Luxury (cont.)… –Examples Four Seasons –http://www.fshr.com Ritz Carlton –http://www.ritzcarlton.com

31. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Convention Hotels Convention Hotels … –Meet the needs of large groups –500 plus rooms –Larger public areas to accommodate greater public demand –Banquet areas within and around the hotel –High percentage of double occupancy –Full Service oriented

32. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Level of Service Full Service Full Service… –Typically “Business Oriented” –Multiple food and beverage outlets –Meeting and convention services –Chain representation Doubletree –http://www.doubletreehotels.com Sheraton –http://www.sheraton.com

33. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Economy/Budget Hotels Economy/Budget … –Represents 12 percent of total hotel rooms –Accomplished 37 percent of industry growth –Average room rate of $48.68 –However, profit revenue is slow with an annual rate of 1 percent

34. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Level of Service Economy Economy/Budget (cont.)… –Also considered budget hotels –Clean rooms –Reasonably sized and furnished –Continental breakfast

35. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Level of Service All Suite All Suite… –Cater to guests for an extended period –Reduction in rate based on length of stay –More space than typical hotel –Examples Embassy Suites –http://www.embassy-suites.com

36. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Levels of Service Others 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

37. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Hotel Integration Vertical Vertical… –Lodging companies meeting the needs of several types of guests based on price, facilities, and amenities

38. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Hotel Integration Vertical Vertical (cont.)… –Choice hotels which has several chains that meet its diverse clientele Luxury -Clarion Mid-scale -Quality Inn/Suites Budget-Comfort Inn Economy-Sleep Inn –http://www.hotelchoice.com

39. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Marketing Consortium Consortium… –Also called referral organizations –Numerous independent properties unite to compete with the marketing power of chain operations –Similar benefits as franchises at a lower cost –Provides incentives for clients

40. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Best and Biggest Hotels Hotels… –Some previous winners –Oriental Hotel in Bangkok, Thailand –Regent of Hong Kong –Bell-Air of Los Angeles

41. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Most Unusual Hotels Unusual Hotels… –Ice Hotel in Swedish Lapland –The Treetops Hotel in Kenya –Underwater Hotel in Australia

42. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Most Unusual Hotels Unusual Hotels (cont.)… –Capsule Hotel in Japan –The Burj Al Arab in Dubai

43. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker International Perspective Perspective… –Continued international development Due to increase in tourism Due to increase in trade and commerce –Globalization is the key to continued growth

44. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Trends in Hotel Development Trends… –Capacity control –Safety and security –Assets and capital –Technology –New management –Globalization

45. ©2004 Pearson Education, Inc. Upper Saddle River, New Jersey 07458 Introduction to Hospitality Management, First Edition John Walker Trends in Hotel Development Trends (cont.)… –Consolidation –Diversification within segments –Rapid growth in vacation ownership –Increase in spas –Gaming