CHAPTER 5

THE HOTEL
BUSINESS
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
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
FIGURE 4-1
FRANCHISED HOTELS AMONG THE TOP 10 LARGEST
CORPORATE CHAINS
FIGURE 4-2
TOP 10 LARGEST MANAGEMENT COMPANIES
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
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
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
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
MANAGEMENT CONTRACTS

 The players:
 Owner—financial
responsibility
 Management company—operational responsibility
 Fee structure
 Trend toward expansion of contract
provisions
HOTEL RATING SERVICES

 AAA:
 American Automobile Association
 Diamond Award
 Mobil Travel Guide:
 Five Star Award
WAYS TO CLASSIFY HOTELS

 Location
 Types of services offered
 Market price levels
LOCATION
 Center city hotels  Full service
 Resort hotels  Convention
 Airport hotels  Economy
 Freeway hotels  Extended stay
 Casino hotels  Bed and breakfast
HOTELS BY PRICE SEGMENT
 Budget: $29–$39
 Economy: $40–$60
 Mid-price: $60–$100
 Upscale: $100–$200
 Luxury: $140–$450
 All-suites: $95–$175
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
MORE ON RESORTS
 “Captured Clientele”
 Food service is unique
 Diversified marketing mix:
 Children
 Groups
 Eco-tourism
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
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
AIRPORT HOTELS
 High occupancy due to location
 Business, group, and leisure travelers
 Full service
 200–600 rooms
 Convenient location
 Airport shuttle service
 Economical pricing
FREEWAY HOTELS
 Prominent in the 1950s
 Easy access to roadways
 Park outside the room entrance
 Example:
 Motel 6 (www.motel6.com)
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
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
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)
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
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)
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
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
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
THE BEST HOTELS

 Some previous winners:

 Oriental Hotel in Bangkok,
Thailand
 Regent of Hong Kong
 Bel-Air of Los Angeles
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
TRENDS
 Diversification within
 Capacity control segments
 Safety and security  Rapid growth in
 Assets and capital vacation ownership
 Technology  Increase in number of
spas and treatments
 New management
offered
 Globalization  Increase in
 Consolidation development of multi-
 Gaming use hotels
LIST OF REFERENCES

 Walker , John R. 2007, Introduction to

Hospitality Management , Pearson
Education , South Asia.
 Seth, P.N. and S.S. Bhatt 1993, An
Introduction to Travel and Tourism , Sterling
Publisher Pvt Ltd, New Delhi.
 Tewari; R.(2010);Hotel Front Office, Oxford
University Press, India
THANK YOU!