Hotel Business Development

9/18/2009

C H A P T E R

History of Hotels in the United States

The Hotel Business Development and Classification •

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City Hotel •

1st hotel (73 rooms + meeting rooms - social center)

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Opened in 1794

Tremont House •

History of Hotels in the United States

Rail travel n

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Development of resort properties

Highway travel n

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Allows for a company to expand rapidly

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Uses other people’s money (franchisee)

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Franchisor

Development of motels

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Air travel n

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HFS - Hospitality Franchise Systems (Cendant/ Wyndham)

Over 180 franchised hotel brands in North

Benefits for “Franchisee”

Examples (p. 124) •

The company

America today

Airport hotel locations

Franchising

Opened in Boston in 1829

Franchising

• •

(1st class service)

Hotel Ownership & Development

*****Transportation changed course***** •

(NYC)

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Set of plans and specifications for building

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National advertising

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Centralized reservation system

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Participation in volume purchasing discounts

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Listing in the franchisor’s directory

Choice Hotels International http://www.hotelchoice.com

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Benefits & Disadvantages for Franchisor

Disadvantages for the “Franchisee” •

Lack of operational power; must conform

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Large fees

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Central reservations produces 17-26% of

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reservations •

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Factors propelling franchise growth

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Increased market share/recognition

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Up-front fees

Disadvantages…

Must meet standards as set by franchisor

Franchising Trends •

Benefits…

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Need to be careful in selection of franchisees

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Difficulty in maintaining control of standards

Management Contract The Players

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Owner - financial responsibility Management company - operational responsibility

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Fresh looks (curb appeal) Location - off highways, airports, and suburbs

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Fee structure (2 - 4.5% revenue)

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Expansion in smaller cities

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Trend toward expansion of contract provisions

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New markets - openings in proximity with golf courses and other attractions

Financial Management & Profits •

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•

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Existed since early 1960s

Cyclical nature of demand

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Publicly traded

High degree of capital investment

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Investors like REIT’s

High degree of risk •

Portfolio financing •

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Real Estate Investment Trust (REIT)

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Do not pay corporate income tax

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REIT’s must distribute 95% of net income to shareholders

Use of more than one location/market Cross collateralized/cross defaulted

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Traded as stocks (easier to get in / out)

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REIT’s (cont.)… •

Favorable Financing

Examples •

Patriot American Hospitality n

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Affiliation with a quality franchisor

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Identification with a national chain through a management contract

Change to Wyndham International (after merger)

Starwood Lodging Trust n

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Change to Starwood Hotels and Resorts Trust

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A lease arrangement with a hotel operator

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Conventional first mortgage loans

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Lenders

Hotel Rating Services

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American Automobile Association

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Diamond Award

Mobil Travel Guide •

Five Star Award p. 133

Ways to Classify Hotels 1.

Location

(city center, airport,

freeway motels…) 2.

Types of services offered (luxury, full service, economy)

3.

Market price levels

(budget,

midprice, upscale…)

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1.Location

Center City Hotels Public transportation available for

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Center city hotels

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Resort hotels

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Airport hotels

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Range of accommodations and services

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Freeway hotels

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Typically have a signature restaurant

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Casino hotels

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business or leisure

Resort Hotels •

Originally began due to rail travel

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Famous resorts •

“Captured Clientele”

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Food service is unique

http://www.greenbrier.com

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Diversified marketing mix

Hotel del Coronado in California •

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Greenbrier in West Virginia •

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Resort Hotels

http://www.thehomestead.com

Resort Hotels Resorts in Hawaii: •

Children

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Groups

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Eco-tourism

Homestead in Virginia •

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http://www.sddt.com/~coronado

Four Seasons Lanai

Vacation Ownership •

Fastest growing segment of travel industry

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Time share • •

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JW Marriott Ihilani

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Hilton Waikoloa Village

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A condo that is owned Purchaser uses for a specific period of time each year

Click Here for Video

Vacation club •

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Purchase points that entitle purchaser to use of facility Not real estate based

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Vacation Ownership •

Vacation Ownership

Estimated that 2 million households own vacation intervals at 3500 resorts in almost 90 countries

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Helps ensure purchaser today’s prices for tomorrow

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Yearly maintenance fees

Airport Hotels • •

OHANA Honolulu Airport Hotel

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Fixed or floating times

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Example

Airport Hotel Registration Facility

High occupancy due to location Business, group, and leisure travelers

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Full service

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200-600 rooms

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Convenient location

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Airport shuttle service

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Economical pricing

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Freeway Hotels & Motels

Characteristics of Casino Hotels

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Prominent in the 1950s

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Heavy growth segment

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Easy access to roadways

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Low room rates

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Park outside the room entrance

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Subsidized food and beverage

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Themes are popular

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500 plus guest rooms

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Variety of food operations

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Contains a gaming room

Major Trends in Casino Hotels •

Casino hotels are now marketing themselves as business hotels •

Move towards “family/friendly” hotels •

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Finest of accommodations

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Concierge

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24 hour room service

Amenities include business centers, travel bureaus, and room service

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2. Levels of Service: Luxury

This increases the average stay and money spent by families

Levels of Service: Luxury •

Examples:

Level of Service: Full Service •

Typically “Business Oriented”

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Multiple food and beverage outlets

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Meeting and convention services

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Chain representation •

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Doubletree • http://www.doubletreehotels.com Sheraton • http://www.sheraton.com

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Convention Hotels

Level of Service: Economy

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Meet the needs of large groups

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500 plus rooms

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Larger public areas to accommodate greater public demand

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Banquet areas within and around the hotel

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High percentage of double occupancy

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Full Service oriented

Economy/Budget Hotels

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Also considered budget hotels

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Clean rooms

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Reasonably sized and furnished

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Continental breakfast

Level of Service: All Suite

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Represents 12% of total hotel rooms

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Accomplished 37% of industry growth

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Average room rate of $48.68

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However, profit revenue is slow with an

Cater to guests for an extended

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period Reduction in rate based on

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length of stay More “space” than typical hotel

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annual rate of 1%

Levels of Service: Others (Bed & Breakfast)

Hotel Integration: Vertical

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A home away from home

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Accommodation with an owner who lives on

several types of guests based on price,

premises

facilities, and amenities

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Maintains a few rooms

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Offers breakfast

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Personable and quick service

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Lodging companies meeting the needs of

Marriott video

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Hotel Integration: Vertical •

Choice hotels which has several chains

that meet its diverse clientele • • • •

Luxury Mid-scale Budget Economy

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Clarion Quality Inn/Suites Comfort Inn Sleep Inn

Marketing Consortium •

Also called Referral organizations

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Numerous independent properties unite to compete with the marketing power of chain operations

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Similar benefits as franchises at a lower cost

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Provides incentives for clients

Best & Biggest Hotels •

Some previous winners

Most Unusual Hotels Malcolm Baldridge National Quality Award 2x winner

Ice Hotel in Swedish Lapland

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http://www.icehotel.com/Winter/Home/

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Oriental Hotel in Bangkok, Thailand

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Regent of Hong Kong

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Bel-Air of Los Angeles

The Treetops Hotel in Kenya

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http://www.aberdaresafarihotels.com/soft5.php?id=27

Underwater Hotels

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http://blog.hotelclub.com/top-five-underwater-hotels/

Most Unusual Hotels •

Capsule Hotel in Japan

International Perspective •

Continued international development

http://www.geobeats.com/videoclips/japan/tokyo/capsule-hotel

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The Burj Al Arab in Dubai

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Due to increase in tourism

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Due to increase in trade and commerce

Globalization is the key to continued growth

http://www.jumeirah.com/en/Hotels-and-Resorts/Destinations/Dubai/Burj-AlArab/The-Resort/Arrival-Experience/

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Trends in Hotel Development •

Consolidation

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Diversification within segments

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Rapid growth in vacation ownership

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Increase in spas

(buy / merge) (e.g. extended stay)

(wellness)

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