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Chapter 4 The Hotel Business. After Reading and Studying This Chapter, You Should Be Able to:. Define the following terms: hotel franchising, partnerships, leasing, syndicates, and management contracts Classify hotels by type, location and price Explain vertical integration

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after reading and studying this chapter you should be able to
After Reading and Studying This Chapter, You Should Be Able to:
  • Define the following terms: hotel franchising, partnerships, leasing, syndicates, and management contracts
  • Classify hotels by type, location and price
  • Explain vertical integration
  • Name some prestigious and unusual hotels
  • Describe the effects of a global economy on the hotel industry
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
trends in franchising
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
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
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 andDisadvantages 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
Management Contracts
  • Contract
    • The Players
      • Owner - financial responsibility
      • Management company - operational responsibility
    • Fee structure
    • Trend toward expansion of contract provisions
hotel rating services
Hotel Rating Services
  • Rating Services
    • AAA
      • American Automobile Association
      • Diamond Award
    • Mobil Travel Guide
      • Five Star Award
ways to classify hotels
Ways to Classify Hotels
  • Classifying Hotels
    • Location
    • Types of services offered
    • Market price levels
location
Location
  • Center city hotels
  • Resort hotels
  • Airport hotels
  • Freeway hotels
  • Casino hotels
  • Full service
  • Convention
  • Economy
  • Extended stay
  • Bed and breakfast
hotels by price segment
Hotels by Price Segment
  • Budget - $29-$39
  • Economy - $40 - $60
  • Mid-price - $60 - $100
  • Up scale - $100 - $200
  • Luxury - $140 - $450
  • All-suites - $95 - $175
city center hotels
City Center Hotels
  • Public transportation available for business or leisure
  • Range of accommodations and services
  • Typically have a signature restaurant
resorts
Resorts…
  • Originally began due to 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
More on Resorts
  • “Captured Clientele”
  • Food service is unique
  • Diversified marketing mix
    • Children
    • Groups
    • Eco-tourism
vacation ownership
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 ownership20
Vacation Ownership
  • 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
  • Fixed or floating times
  • Example
    • www.rci.com
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
freeway hotels
Freeway Hotels
  • Prominent in the 1950s
  • Easy access to roadways
  • Park outside the room entrance
  • Example
    • Motel 6
    • www.motel6.com
casinos
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
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
full service hotels
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
Economy/Budget Hotels
  • 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
  • Also considered budget hotels
  • Clean rooms
  • Reasonably sized and furnished
  • Continental breakfast
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
      • www.embassy-suites.com
bed and breakfasts
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
Vertical Integration
  • Lodging companies meeting the needs of several types of guests based on price, facilities and amenities
  • Choice hotels which have several chains that meet its diverse clientele
      • Luxury - Clarion
      • Mid-scale - Quality Inn/Suites
      • Budget - Comfort Inn
      • Economy - Sleep Inn
  • www.hotelchoice.com
marketing consortiums
Marketing Consortiums
  • 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
the best hotels
The Best Hotels
  • Some previous winners:
    • Oriental Hotel in Bangkok, Thailand
    • Regent of Hong Kong
    • Bell-Air of Los Angeles
unusual hotels
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
Trends
  • Capacity control
  • Safety and security
  • Assets and capital
  • Technology
  • New management
  • Globalization