HA100 : The Class : Lodging : Lodging : Lodging Management

Introduction to Lodging Management

We go far back in history to find the first references to the hospitality industry. If you are interested in some history, you should visit the "Hammurabi's Laws" site. (Hammurabi was a ruler in Babylon around 1800 BC.) There are hundreds of laws listed but if you use the "FIND" option under "EDIT" and plug in the word "inn" you should be able to find some interesting examples. Hammurabi's Laws But let's start off with the latest figures for the U.S. lodging industry:

• 47,000 properties, with 3.6 million rooms
• 67% of the hotels have 75 rooms or less, only 3% has 300 or more rooms
• Average room rate was $69.66, with a total of $75.4 billion in sales
• Average occupancy rate was 65.2%

This proves that this industry is indeed a huge industry, especially when you realize that rooms on cruise ships, campsites, pensions, etc. were not even included. (For more and more detailed information you have to check out the American Hotel & Motel Association's web page: American Hotel & Motel Association

To understand what the supply sector of the hospitality industry consists of, these hotels are categorized by location. These categories are listed below plus an example of each of them (either a picture or a connection to a web page). Please read the accompanying pages in the book (169-179).

1. City Center Hotels (pay close attention how this category developed over time)
   The Waldorf Astoria
2. Resort Hotels (keywords: destination, seasonality, business traveler trend) Hyatt Aruba
3. Suburban Hotels Courtyard Jackson
4. Highway Hotels and Motels Motel 6
5. Airport Hotels Miami International Airport Hotel
6. Newer forms, such as Conference Centers, All-Suite, and Market Segmented Chain Hotels

We are now moving into the most complicated part of this chapter: Hotel Business Organizational Structures. (Page 170). It is not uncommon that a hotel may be owned by one person, carries a franchise affiliation, and is actually managed and operated by a separate hotel management company. Sounds confusing? This chapter tries to explain in detail what, for instance, a franchise and a hotel management company stand for.

1. Most of the hotels in our country are independently owned, which means that they are not a chain, nor a franchise. Since these hotels are independent they have less name recognition, and are not affiliated with a broad reservation system. To overcome the disadvantages of that last issue, some hotels ally with a referral or marketing association (called consortia), such as Best Western. I would like you to visit Best Western's International Homepage, because I think that it is a great example of a true hospitality oriented page.

   BW Home Page.

2. Everybody in this class is probably familiar with chain hotels, Hilton, Marriott, and Holiday Inn, to name a few. A lot of these chains moved into the global world. Think of ITT Sheraton with hotels in more than 60 countries.

   A hotel chain operates hotels in several ways:

   • Corporate owns and operates its own hotels;
   • Corporate franchises hotels;
   • Corporate supplies management personnel

The word "franchise" needs some more explanation. It already existed around 1900 (Ritz Carlton), but what is it actually?

A franchise
is the authorization
given by a company to another company
to sell its products and services,
all this for a fee.

Advantages of a franchise:

The three biggest are:

You can use the name of the company
You can use its reservation system
You participate in their advertising

Other advantages:

You may receive assistance with site selection
You may receive help with construction
You may receive help with training
You may receive marketing assistance
You may receive assistance when buying fixtures and equipment.
There is ongoing support available.

So many good things, but what about the negatives? Of course, there are some, such as restrictive company policies, inadequate training, cost, and marketing programs you might not fancy.

Lodging Hospitality, a magazine on current hospitality related issues, publishes every year in December an article called the Franchise Fact File. This article lists:

• the kind of franchises that exist in the United States (you probably heard of Sleep Inns, but did you know that it was franchise of Choice Hotels International?):
• possible costs to become involved with a company.

In many cases, franchise companies dedicate a page (linked within their homepages) on franchise requirements, costs involved, etc.

3) Management Companies. There exist two types of management companies. One type was discussed above, they are chain affiliated. The others are independent and focus mainly on independent properties. What is happening? The owner of the hotel employs the management company as an agent who assumes full responsibility for operating and managing the property. As with a franchise agreement, there are positives and negatives and they are listed below:

	Advantages	Disadvantages
Owner:	Access to expertise.	$$$ burden.
	Freed from daily Responsibilities.
Company :	No financial risk.	Need an owner that is $$$ Healthy.
		Pressure to keep reputation Of company up.

DEMAND

The next parts of this chapter focus on the demand side and how to bring these travelers into your hotel through a sales force. Who's staying in all these lodging facilities? We want you to focus mostly on the travel end-user. (But make sure that you read the part on Intermediary Demand, page 192).

The travel end-user demand is usually split up by purpose of travel:

 

THE HOTEL SALES DEPARTMENT:
                                                        The link between supply and demand.

Hotel sales managers are minimarketers. They must perform all the basic steps of marketing to bring supply and customers together. Carefully read the four steps of this process as described on page 196 in your textbook.

Personal sales is only one part of the marketing mix. The sales department and the act of selling are considered part of promotion, and you will read much more about this issue in chapter 15 (Hospitality Marketing).

Go on to Assignment 1: Example of a Segmented Company
or
Go back to Lodging: History, Supply, Demand, and Structure

E-mail Lenka Hospodka or call (928) 523-2845 (Lenka Hospodka)

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