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Chapter 1:Hotel Industry

Overview & Professional Career Opportunities

Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall

Upper Saddle River, NJ 07458

third largest retail industry following automotive & food storesnation’s largest service industryone of the nation’s largest employers

Tourism Industry

Hospitality Retail (Shopping) Stores

Transportation Services

Destination (Activity) Sites

Lodging is Part of Tourism Industry:Tourism Industry

Lodging Operation

F&B Operations

Tourism industry is

Figure 1.1: Segments in the Tourism Industry



Lodging is Part of Tourism Industry:Lodging (Hotel) Sector

Lodging properties are a segment within tourism industry

Figure 1.2: Range of lodging property alternatives

Destination resorts

Full-service hotels

Limited-service hotels

Sleeping rooms



1900

Lodging is Part of Tourism Industry:A Brief History of Hotels

Figure 1.3 : Highlights in the modern history of the US hotel industry

1910

Fewer than 10,000 hotels

750,000 to 850,000 rooms

10,000 U.S. hotels

One million rooms

300,000 employees

Average size: 60-75 rooms

1920

Occupancy: 85%

Hotel construction reaches an all-time peak as thousands of rooms are added along the new state and federal highways



1930Occupancy: 65%

AHA’s Hotel Red Booklists 20,000 hotels

Lodging is Part of Tourism Industry:A Brief History of Hotels (continued….)

1940Occupancy: 64%

Average room rate: $3.21

1950Occupancy: 80%

Typical hotel: 17 rooms


1960

Occupancy: 67%

$3 billion in sales

Typical hotel rooms: 2,400,450

Typical hotel: 39 rooms, independent and locally owned





Lodging is Part of Tourism Industry:A Brief History of Hotels (continued….)

1970

Occupancy: 65%

$8 billion in sales

Total hotel rooms: 1,627,473


1980

Occupancy: 70%

$25.9 billion in sales






Lodging is Part of Tourism Industry:A Brief History of Hotels (continued…)

1990

2000Occupancy: 63%

$97 billion in sales

Occupancy: 64%

$60.7 billion in sales


45,020 properties





Close Look at Lodging Organizations

Figure 1.4: 2000 Property / Room Breakdown

By location Property Rooms Urban Suburban Highway Airport Resort

10.2%33.6%42.2%7.7%6.3%

16.0%30.4%31.0%10.2%12.4%

By rate Under $30 $30 - $44.99 $45 - $59.99 $60 - $85 Over $85

13.8%26.9%34.1%16.2%9.0%

3.3%18.1%27.3%25.3%26.0%

By size Under 75 rooms 75 – 149 rooms 150 – 299 rooms 300 – 500 rooms Over 500 rooms

51.5%33.5%10.9%2.8%1.3%

22.5%35.1%21.3%9.9%

11.2%



Close Look at Lodging Organizations: Typical Lodging Guests

Figure 1.5: Typical lodging guests

28.8% are transient business travelers

25.3% are attending a conference/group meeting

24.6% are on vacation

21.8%are traveling for other reasons (for example, personal, family, or special event)



Emphasis on safety, cleanliness & service- Guests also consider “intangible” aspects of the purchase decision

Close Look at Lodging Organizations: Lodging Industry Characteristics

Inseparability of manufacture & sales- A room exists & is sold at the same site

Perishability- If a room is not rented on a specific date, the revenue is lost forever

Repetitiveness- Some operating procedures are routines

Labor Intensive- Much of a hotel’s daily work involves employees providing services



Close Look at Lodging Organizations: Lodging Industry Overview

Largest hotel affiliations

Brands Rooms Properties

1. CENDANT CORPOPRATION 554,834 6,540

2. BASS HOTELS&RESORTS, INC. 481,482 3,030

3. MARRIOTT INTERNATIONAL 374,010 1,846

4. CHOICE HOTELS INTERNATIONAL 337,226 4,219

5.HILTON HOTELS CORPORATION 333,110 1,910

These five represent some 28 % (14,884 / 53,500 properties) of all domestic properties, & 42 % (1,708,617 / 4,100,000 rooms) of all rooms. The majority of these brands do not “own” their hotels, but hotel owners elect to affiliate with the brand, for a fee.

Figure 1.6: Top 5 lodging brands



Single-unit property not affiliated with any brand

Single-unit properties affiliated with a brand

Multi-unit properties affiliated with the same brand

Multi-unit properties affiliated with the same brand

Multi-unit properties affiliated with different brands

Multi-unit properties operated by the brand or others

Multi-unit properties owned by the brand

Hotel ownership / management

Close Look at Lodging Organizations: Lodging Industry Overview (continued….)




Figure 1.7: Hotel Ownership / Management Alternatives

Hotel property

Franchise company

(Franchisor)IndependentOwnership Independent

Franchise company

(Franchisor)IndependentOperation IndependentManagement

companyManagement

company

Franchise Non-FranchiseAffiliation



Close Look at Lodging Organizations: Hotel Organizational Structures

Figure 1.8: Organizational Chart for Small (75 Rooms), limited-service hotel

Small Hotel (75 rooms)

Manager

Custodial personnel

Housekeeping personnel

Bookkeeper/Accountant



Close Look at Lodging Organizations: Hotel Organizational Structures (continued….)

Large Hotel (350 rooms)

Figure 1.9: Organizational Chart for Large (350 rooms), full-service hotel

G.M.Administrative assistant

Assistant G.M.

Controller F&B director

H.R. Manager

Director of sales & marketing

Front office

manager

Executive housekeeper

Chief engineer



Line department

Those directly involved in the “chain of command”.Directly responsible for revenues - Front Office & Food / BeverageAlso responsible for property operations- Housekeeping, Maintenance, & Engineering

Staff department

Providing technical, supportive assistance to support line decision-makersMaking recommendations to (but not decisions for) line decision-makers- Purchasing, human relations, and accounting

Close Look at Lodging Organizations: Hotel Departments

Line & staff departments



Revenue center

A hotel department that generates revenue- Front office & food / beverage departments- Also revenues from telephone services, space rental and fees from parking garages, vending machines, and golf courses

Cost center

A hotel department which incurs costs in support of a revenue center- Marketing, maintenance, accounting, human resources, & security departments

Revenue and cost centers

Close Look at Lodging Organizations: Hotel Departments (continued….)



Successful hotels greatly emphasize serving their guests to the best possible extent.

Lodging is a Service Business

The brand name a hotel uses is not the most important factor in a hotel’s success.

When hotels put guests’ needs first, those hotels will do well.

Facility Engineering & Maintenance

Consistent delivery of quality of products and services to guests must be addressed first, rather than considering tactics to maximize revenue; minimizing costs comes next!



How will we show our staff and tell them about the need for high quality guest service?How exactly will we evaluate the level of service quality being provided to our guests?What exactly are our service strategies and our service procedures?How will we train our staff about service concerns and the tactics to deliver service?How will we reinforce our service strategies?What can we do to emphasize service as a philosophy rather than as a program with a definite start & end time?What can we do to excel in the guests’ moments of truth?

Questions that must be addressed to deliver quality service:

Lodging is a Service Business (continued….)



Overbuilt problem

Hoteliers should examine ways to reduce costs without impacting quality.An excessive emphasis on cutting service or product quality will ultimately result in reduced hotel revenue.

Managers should implement procedures to: a) reduce turnover levels, b) increase productivity levels, c) recruit from non-traditional employee labor markets.

Labor shortages

Current Issues confronting Hoteliers: Operating Issues

Cost containment

Increased competition



Various amenities (e.g., business centers) increase costs for hotel owners yet sometimes appeal to only a small segment of the hotel’s market.

Results in a more competitive selling environment for hoteliers (e.g., online room booking)

The more the number of brands increase, the harder consumers find it to differentiate between them.

Efforts to focus on a highly defined, smaller group of travelers.

Market segmentation is increasing

Current Issues confronting Hoteliers: Marketing Issues

Brands overlap

Increased sophistication of consumers

Increased number of amenities



Interactive reservation system- Allows potential guests to make reservations at preferred room rates in reduced timeGuestroom innovations- Two (or more) telephone lines enabling Internet access / interactive menu ordering for room service / electronic games and guestroom checkoutData mining technology- Analyzing guest- (and other) related data to make better marketing decisionsYield management- Matching guest demand with room rates

Recent technological innovations include:

Current Issues confronting Hoteliers: Technological Issues



“As goes the economy, so goes the lodging industry”

Impact of globalization on the lodging industry

Lodging industry is an integral part of the tourism industry

- It is affected by the extent to which travelers, both within the country and worldwide travel

Facility Engineering & Maintenance

Economies of the world, the country, the state and the community play on the financial success of a lodging organization & the individual properties which comprise it.

Current Issues confronting Hoteliers: Economic Issues



G.M / Rooms division M. / Front office M. / Controller / Executive housekeeper / Catering M. / Executive steward / F & B M. / Banquet M. / Chef / Executive chef / Food production M. / Pastry Chef / Sous chef / Room service M. / F & B controller / Restaurant M. / Beverage M. / Purchasing Director / Human Resource M. / Credit M. / Executive assistant M. / Convention M. / Marketing & sales M. / Auditor / Director of security / Convention services director / Resident M / Chief engineer

Typical Multi-Unit Positions: Area G.M. / Regional G.M. / Director of Training / Vice president, finance / Vice president, real estate / Director of franchising




Enrolling in and graduating from hospitality-related programs of studyWorking in a variety of lodging positions (including educational internships)Developing a career ladder for professional development within the lodging industry- Working with a mentorObtaining suggestions by talking with G.M.s at hotels nearby industry leaders and educators

How does one start to plan for a career in the lodging industry?

Professional Career Opportunities in Lodging: Get Started With Career Planning

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