Exam 1 Vocabulary
important events in 1910
10,000 hotels, 1 million rooms, 300,000 employees, average size - 60 to 75 rooms. Electricity is beginning to be installed in new hotels for cooking purposes, as well as for lighting. However, most hotels place candlesticks, new candles, and matches in every room-electric light bulb or not.
fees
1st tier companies: average base fees of 3.8% of gross revenue + incentive fees. 2nd tier companies: average base fees of 2.95% of gross revenue + incentive fees + upwards of 5% of room revenue to pay the franchise fee. Hotel owners may not have to pay a full franchise fee in addition to the base and incentive fees when using a 1st tier management company.
2nd-tier management companies
AKA independent operator, 3rd party management company, category 2 management company. Operate hotels for owners and do not use the management company's name as part of the hotel name. These companies also own hotel properties via franchise affiliation with multiple hotel brands for a high level of brand recognition. Hotel owners may select this type when obtaining branding.
The Tremont House
America's first 5-star hotel, opened in Boston in 1809 or 1829, amenities included single or double rooms; bellmen; reception area; front desk employees; locks on guestroom doors; free soap for guests; indoor plumbing facilities - cold running water; indoor toilets (8 water closets on ground floor), indoor baths (in the basement)
Steve Hood
Senior Vice President of Research for STR (Smith Travel Research). worked there for 15 yrs. Responsible for research-related activities, including special analyses and methodologies. He manages STR's relationships with the educational community. He currently serves as the Director of the SHARE Education Center.
Tour Operators
a company or individual that plans and markets travel packages. Create a full-service guided tour that includes transportation, hotel rooms, meals, activities, tour guide, language translator, etc. Profit source: volume purchase at discounted prices and mark-ups.
cross-functional teams
a group of employees from each department within the hospitality operation who work together to resolve operating problems
value
a judgment comparing what was received to the acquisition costs. quality of the experience divided by all costs.
commodity
a widely, commonly available and unspecialized product. Difficult or impossible to differentiate from similar products. Lowest price is the only deciding factor in the purchasing choice.
miscellaneous fees
accounting fee for using the brand's centralized accounting services. Centralized revenue management service fee. Training program fee. 3rd-party supplier fee for purchasing assistant or technical support. National/regional conference fee. Equipment rental fee.
right player in the market?
Successful track record in capturing and servicing the market segments is critical to the success of the hotel (ex., local markets, regional markets, etc.; hotel types: boutique, extended-stay, resort, etc.) 2nd tier management companies may be more nimble in reacting to local market and economic factors in certain markets.
reservation fee
collected to operate the brand's central reservation system and channels like: GDS, brand online reservations, OTAs, etc. Tied to the level of GRR and/or a fixed dollar amount per available room per month depending on the source of booking
disadvantages to hiring a hotel management company
conflict of interest between hotel owners and their employed management companies. The costs of management company errors are born by the owner (costs for brand promotion programs, purchasing, renovations, etc.). Management/leadership vacuum: generally the owner can't control selection of the on-site GM and other high level managers, talented GMs and managers leave frequently. Contractual restrictions: termination of the management contract, ownership transfer, etc.
6 ingredients in a quality service system
consider the guests being served, determine what our guests desire, develop procedures to determine what our guests want, train and empower staff, implement revised systems, and evaluate and modify delivery service systems
quality
consistent delivery of products and services according to expected standards
travel agents
important partners for hotel guest room reservations. Work on a commission basis for the hotel rooms/airline services. Traditional booking through them in a state of decline. Major customers: older customers, wealthy or frequent travelers, corporations, and international travelers. Use the Global Distribution System (GDS) which is a computer system that connects travel professionals worldwide who reserve rooms with hotels offering rooms for sale. With the GDS they are quickly able to identify all the hotels located in the city, select hotels with rooms available on the requested night, compare room rates charged by competing hotels, evaluate each hotel's location and features, make the reservation/payment, and receive a confirmation number.
Who can be a hotel owner?
individuals, individuals in partnership, corporations, government entities, and REIT's
franchise fees
initial fee + continuing fees + miscellaneous fees
lender expectation
lenders are more comfortable with funding projects operated by companies recognized for their operational success. 1st tier companies generally meet these expectations more easily
profitability
management companies may provide good services and products (effectiveness), but... "can the management company make revenue?" Generate reasonable profits through cost control abilities
flexibility in contract terms and negotiation
management companies typically prefer to extend the initial term as long as possible; hotel owners prefer to have shorter terms or exit terms. 1st tier management companies are less flexible regarding the contract terminations; they require 10 to 30 years. 2nd tier management companies are less restrictive: more willing to accept shorter contract terms (3 to 15 years). Average length of initial contract terms (with renewal term)
AAA Diamond Rating
most widely recognized system by American Automobile Association since 1937. Covers the U.S., Canada, Mexico, and the Caribbean. Reviews 30,000+ lodging properties each year (hotels, resorts, historic inns, B&B's, cottages, lodges, etc.). Properties must meet a minimum of 34 basic operating criteria based on cleanliness, comfort, and hospitality. 120 5-Diamond lodgings (0.4% of 28,000 approved hotels); 1,548 4-Diamond lodgings (5.9%).
hotel quality of services and facilities
no governmental rating system in U.S. 2 organizations perform facility inspection and service inspection to rate lodging properties in U.S. (AAA Diamond Rating and Forbes Travel Guide)
independent hotels
not affiliated with a specific chain or brand; have no relationship to other hotels regarding policies, procedures, marketing, or financial obligations. They are managed or owned by individuals or 2nd tier management companies.
occupancy rate
number of rooms sold divided by number of rooms available times 100. Measures "how well did we sell rooms relative to the number of rooms that could have been sold?" (quantity of the hotel's sales). The proportion of rooms sold to rooms available during a designated period (day, week, month, quarter, year, etc.). The percentage of supply that demand accounts for during a specific time period.
important events in 2010
occupancy (forecast): 55.5%, average room rate (forecast): $93, recovery for the hotel industry is forecasted to be slow but steady for the next 5 years.
important events in 2000's
occupancy: 63%, $97 billion in sales. 2000: Hilton unveils plans for the first luxury hotel in space. 2001: September 11 destruction of the World Trade Center in New York causes city occupancy rates to plummet. 2002: travel industry slowly recovers from terrorist attacks amid heightened airport security. 2004: in-room high-speed internet (HIS) access becomes a necessary amenity to attract business travelers. 2005: condo-hotels forecasted to be the hotel model of the future. 2009: onset of the "Great Recession" causes RevPAR to decline 15% to 20% nationally; market for condo-hotel rooms collapses.
important events in 1940's
occupancy: 64%, average room rate: $3.21. 1940: air-conditioning and "air-cooling" become prevalent. 1945: Sheraton is the first hotel corporation to be listed on the New York Stock Exchange. 1946: Westin debuts first guest credit card; the first casino hotel, the Flamingo, debuts in Las Vegas. 1947: Westin establishes Hoteltype, the first hotel reservation system; New York City's Roosevelt Hotel installs television sets in all guest rooms. 1949: Hilton becomes the first international hotel chain with the opening of the Caribe Hilton in San Juan, Puerto Rico.
important events in 1970's
occupancy: 65%, $8 billion in sales, total hotel rooms: 1,627,473, average room rate: $19.83. 1970: Hilton becomes the first billion dollar lodging and food-service company and the first to enter the Las Vegas market. 1973: The Sheraton-Anaheim is the first to offer free in-room movies. 1974: the energy crisis hits the industry, hotels dim exterior signs, cut heat to unoccupied rooms, and ask guests to conserve electricity. 1975: Four Seasons is the first hotel company to offer in-room amenities such as name-brand shampoo; Hyatt introduces an industry first when it opens a concierge club level that provides the ultimate in VIP service; Cecil B. Day (Day's Inn) establishes the first seniors' program.
important events in 1930's
occupancy: 65%, AHA's Hotel Red Book lists 20,000 hotels, typical hotel: 46 rooms, average room rate: $5.60. 1930: 4 out of 5 hotels in the U.S. go into receivership. 1933: due to the Great Depression, hotels post the lowest average occupancy rate on record (51%), construction grinds to a halt. 1934: The Hotel Statler in Detroit is the first to have a central system to "air-condition" every public room.
important events in 1960's
occupancy: 67%, $3 billion in sales,total hotel rooms: 2,400,450, typical hotel: 39 rooms, independent and locally owned, average room rate: $9.99. Early 1960's: Siegas introduces the first true minibar. 1964: Travelodge debuts wheelchair - accessible rooms. 1966: Inter-Continental introduces retractable drying lines in guest showers, business lounges, ice and vending machines in guest corridors, and street entrances to hotel restaurants. 1967: The Atlanta Hyatt Regency opens, featuring a 21-story atrium and changing the course of upscale hotel design. 1969: Westin is the first hotel chain to implement 24-hour room service.
real estate investment trusts (REIT)
public stock issuing investment companies. Designed to facilitate investment in real estate. Enable small investors to combine their funds. Pays little or no corporate income taxes.
price of hotel
rack rate - regular rate/no discount. $49 to $69: economy/budget, $69 to $125: mid-priced/scale hotels with limited service, $125 to $250: mid-priced/scale hotels with full service, $250 to $450: first-class/luxury hotels. Prices vary by location, reservation sources, economic situation, etc.
5 dimensions of service quality
reliability: ability to perform the promised service dependably and accurately; responsiveness: willingness to help customers and provide prompt service; empathy: caring, individualized attention the firm provides its customers; assurance: knowledge and courtesy of employees and their ability to convey trust and confidence; tangibles: appearance of the physical surroundings and facilities, equipment, personnel
marketing/advertising fee
represent for brandwide national and regional advertising via media. Development and distribution of a franchise directory. Marketing activities for specific groups and segments. 1-5% of the room revenue.
key factors to consider when hiring a hotel management company
right player in the market?, profitability, fees, lender expectation, and flexibility in contract terms and negotiation
revenue per available room (RevPAR)
room revenue divided by number of rooms available. Also calculated by ADR times occupancy rate. Indicates the average revenue generated by each guest room available during a specific time period. Most used equation. Gives the clearest picture of the effectiveness of hotel operations than ADR or occupancy alone.
average daily rate (ADR)
room revenue divided by number of rooms sold. Measures the average selling price of a room sold during a specific time period. A measure of the average rate paid for rooms sold during a specific time period. Indicates how expensive guest rooms are in the hotel and revenue generated by each room sold. Measures quality of a hotel's room sales.
management contract
specifies management fees (base fees-ranges from 1-7% of gross revenue) and some portion of profits based on financial performance (incentive fees-10-20% of gross operating profit).
The Hotel Statler
the first business hotel in the U.S., opened in Buffalo NY in 1908; each room had a private bathroom; full length mirrors; telephones; radio receptions with individual headsets (1927); central A/C (1934)
City Hotel
the first hotel, opened on Broadway NYC in 1792
why a hotel owner hires a hotel management company
the owners do not want to involve in the day-to-day operation of the property. The owners want to change the hotel from a lower (higher) quality to a higher (lower) one. The owner's hotel is in a severely depressed market (when occupancy rates and/or ADR are far below their historic levels). The hotel's GM resigns unexpectedly. The owners take over a hotel that went bankrupt (repression).
service
the process of helping guests by addressing their wants and needs
benchmarking
the search for best practices and an understanding about how they are achieved in efforts to determine how well a hospitality organization is doing
STR
the source for premium global data benchmarking, analytics and marketplace insights. The data we provide is confidential, reliable, accurate and actionable. Our comprehensive solutions, analytics, and unrivaled marketplace insights are built to fuel our clients' growth and help them make better business decisions. Have developed a number of vital benchmarking performance solutions, establishing market trend transparency and attracting investment capital to the sector.
(property) owner companies
there are many companies that own multiple hotels. There are 24 owner companies in the U.S. and 46 owner companies worldwide with 10,000 rooms or more. Owner companies may own hotels from a variety of different hotel chains (Host Hotels, Ashford Hospitality Trust, Felcor Lodging Trust). Some hotel chains or parent companies own their hotels (Extended Stay America, G6 Hospitality LLC-Motel 6 and Studio 6, MGM Resorts-MGM Grand, Bellagio, Luxor, NY-NY, etc.)
franchisee
those who buy, under specific terms and conditions, the right to use a brand name for a fixed period of time and at an agreed upon price
franchisor
those who manage the brand and sell the right to use the brand and sell the right to use the brand name (i.e., parent or brand companies)
why owners operate hotels
to meet the needs of the traveling public, to meet the hotel owner's desired return on investment (ROI).
Difference between travel agents and tour operators
tour operators: producers/developers, travel agents: sellers
Hotel Operators
type of hotel owner. Individuals or companies that both own and manage the hotel. Can be individuals and their family members. Responsible for the management of the hotel they own.
Investors
type of hotel owner. Typically not active in the management of the hotel. Investors can be an individual, a corporation, or a governmental entity who wants to acquire a hotel for its own purposes.
initial fee
up-front payment upon submission of the franchise application or signing the agreement to affiliate with the brand. Covers the franchisors cost of: application processing, feasibility studies, evaluation of operation plans and layout, property inspections during the construction, pre-opening services. Fully or partially (80-95%) refundable if the application is rejected. A minimum $ amount based on the hotel's room count.
continuing fees
usually paid periodically (monthly) over the term of the agreement. Major source of revenue for franchisor. Royalty fee. Represents compensation for the use of the brand's trade name, service marks and associated logos, goodwill, and other franchise services. Tied to the level of room revenue generated by the hotel.
parent companies
ex.: Marriott International (Renaissance, Ritz-Carlton), Hilton Worldwide (Hampton Inn, Hilton), InterContinental Hotels Group (Holiday Inn, Holiday Inn Express), Starwood Hotels and Resorts (Sheraton, Aloft), Hyatt Hotels Corp., Choice Hotels Int'l, etc. Consist of multiple brands/chains. Often they have a variety of different types of brands/chains (ex., Marriott International has the Autograph Collection-Boutique Hotel, Gaylord Entertainment-Convention Hotel, Marriott and Marriott Conference Center-Conference Hotel, Residence Inn-extended stay, and Fairfield Inn-limited service hotel). May have a range of high-end, middle, and low-end brands. Some concentrate in 1 segment.
word of mouth
favorable or unfavorable comments which are made when previous guests of a hospitality operation tell others about their experiences.
important events in 1900's
fewer than 10,000 hotels, 750,000 to 850,000 rooms. 1900: typical first-class hotel offers steam heat, gas burners, electric call bells, baths and toilet closets on all floors, billiard and sample rooms, barbershops, and carriage houses. 1904: New York City's St. Regis Hotel provides individually controlled heating and cooling units in each guest room. 1908: The Hotel Statler chain begins in Buffalo, all guest rooms have private baths, full-length mirrors, telephones, serving as the model for hotel construction for the next 40 years.
frequent traveler program fee
for use of guest rewards/incentive programs. Percentage of total or room revenue generated by program members staying at a hotel or a fixed dollar amount for each room occupied by a program member. Some brands require hotels to contribute a one-time participation fee
Forbes Travel Guide Star Rating
formerly Mobil Travel Guide since 1958. Inspect hotels, restaurants, and spas in 42 countries. Facility inspection for 1 to 3 star rating: cleanliness, physical condition, and service (800 standards). Incognito service evaluation for 4 and 5 star certification: physical facilities (architectural design), quality of amenities, guest experience, and desirable location. 175 5-star and 476 4-star lodgings in the U.S.
evaluation and modification of service delivery systems
get guest feedback (comment cards, surveys, etc.).
commoditization of lodging products and services
goods or services becoming simple. Example: generic pharmaceuticals, credit cards, etc.
1st-tier management companies
AKA brand operator or category 1 management companies. Parent companies (or brand companies) provide hotel services. Operate hotels for owners using the management company's trade name as the hotel brand. Use of on of these is most common among larger, full-service hotels.
representation companies
AKA consortiums. example: The Leading Hotels of the World (LWH).
limited-service hotels
aka select-service hotels, traditionally been referred to as motels or motor hotels before the early 1900s. Emphasize basic room accommodations and minimal guest amenities and public areas. Have no restaurant on the premises; instead offer breakfast, evening cocktail, lobby snack, vending machines, etc. Offer a very limited number of services; exercise room/swimming pool, business center, small meeting spaces, guest laundry, market pantry, etc. Typically offer free internet. Low operating costs. Sub-segments: budget (Motel 6, Super 8, EconoLodge, Sleep Inn, etc.), economy (Comfort Inn, Fairfield Inn, Holiday Inn Express, etc.), mid-scale without food and beverage (Hampton Inn, Holiday Inn, etc.), Upscale with limited-service or high-end limited service hotel (Hilton Garden Inn, Courtyard by Marriott, etc.) Major guests are budget-conscious business/ leisure travelers. Designed to cater to extended-stay travelers. Recently the sectors are growing faster than full-service hotels b/c: ease of development (lower starting capital, easy to finance, short construction timeline), ease of operations (limited number of amenities, no complete food and beverage services), high profitability (break-even at lower occupancy rates <50%), lower departmental operating/labor costs (22% vs. 33 to 35% in full-service hotels), higher operating profit margin (35 to 45% vs. 20 to 35% in full-service hotels)
franchise
an arrangement whereby 1 party allows another party to use its logo, brand name, operating systems, and resources in exchange for a fee
Online Travel Agents (OTAs)
an intermediary site that provides travel booking services on the internet. Types of booking models they use: Merchant model- discounted room rates are readily viewed (17-35% discount) and Opaque Rate model: room rates not seen by guests until they have successfully paid for a room; guests decide the rate they are willing to pay ("name your price" model). Charge hotels a fee for each room sold based on booking models.
Moments of Truth (MOT)
any and every time or episodes that a guest has an opportunity to form an impression about the hospitality organization or services.
size of hotel
based on physical room count of the hotel; small hotels: under 75 rooms, medium-sized hotels: 75 to 149 rooms, large hotels: 150 to 299 rooms, mega hotels: 300+ rooms.
important events in 1980's
occupancy: 70%, $25.9 billion in sales, total hotel rooms: 2,068,377, average room rate: $45.44. 1983: Westin is the first major hotel company to offer reservations and checkout using major credit cards, VingCard invents the optical electronic key card. 1984: Holiday Inn is the first to offer a centralized travel and commission plan; Choice Hotels introduces the concept of market segmentation and no-smoking rooms; Hampton Inn is the first to offer a set of amenities. 1986: Teledex Corporation introduces the first telephone designed specifically for hotel guest rooms.; Days Inn provides an interactive reservation capability connecting all hotels. 1988: extended-stay segment introduced with Marriott's Residence Inns and Holiday Corporation's Homewood Suites. 1989: Hyatt introduces a chainwide kids program for ages 3 to 12 and a business center at the Hyatt Regency Chicago; Hampton Inn is the first hotel chain to introduce the 100 percent satisfaction guarantee.
important events in 1950's
occupancy: 80%, typical hotel: 17 rooms, average room rate: $5.91. 1951: Hilton is the first chain to install television sets in all guest rooms. 1952: Kemmons Wilson opens his first Holiday Inn in Memphis, TN. 1954: Howard Dearing Johnson initiates the first lodging franchise, a motor lodge in Savannah, GA; Conrad Hilton's purchase of the Statler Hotel Company for $111 million is the largest real estate transaction in history. Mid-1950's: Atlas Hotels develops the first in-room coffee concept. 1957: J.W. Marriott opens his first hotel, The Twin Bridge Marriott Motor Hotel, in Arlington VA and Jay Pritzker buys his first hotel, the Hyatt House, located outside the Los Angeles Airport; Hilton offers direct-dial telephone service. 1958: Sheraton introduces Reservation, the industry's first automated electronic reservation system, and the first toll-free reservation number.
important events in 1920's
occupancy: 85%, hotel construction reaches an all-time high as rooms are added along the new state and federal highways. 1920: prohibition begins. 1922: The Treadway Company has some of the first management contracts on small college inns. 1925: the first roadside "motel" opens in San Luis Obispo, California for $2.50 a night. 1927: The Hotel Statler in Boston becomes the first hotel with radio reception, rooms are with individual headsets to receive broadcasts from a central control room. 1929: The Oakland Airport Hotel becomes the first of its kind in the country.
important events in 1990's
occupancy:64%, $60.7 billion in sales, total hotel rooms: 3,065,685, 45,020 properties, average room rate: $58.70. 1990: Loews Hotels' Good Neighbor Policy becomes the industry's first and most comprehensive community outreach program. 1991: Westin is the first hotel chain to provide in-room voice mail; industry sees record losses. 1992: industry breaks even financially after 6 consecutive years of losses. 1993: Radisson Hotels Worldwide is the first to introduce business-class rooms.1994: first online hotel catalog debuts-TravelWeb.com; Promus and Hyatt Hotels are the first chains to establish a site on the internet. 1995: Choice Hotels International and Promus become the first companies to offer guests "real-time" access to their central reservations system; Choice and Holiday Inn are the first to introduce online booking capability. 1999: Choice Hotels International is the first chain to test making in-room PCs a standard amenity for guests (they decide against it).
full-service hotels
offer complete food and beverage services (e.g., formal/casual dining restaurants, bars, lounges, room service, etc.). Offer high-quality guest services (e.g., luggage assistance, fully equipped business center, valet, etc.). Major guests: corporate and/or leisure travelers who are not sensitive to price. Sub-segments: deluxe/luxury (Four Seasons, Ritz-Carlton, etc.), luxury/upper upscale (Marriott, Hilton, Hyatt, etc.), upscale/upscale (Embassy Suites, DoubleTree, etc.), mid-scale with food and beverage/upper mid-scale (Holiday Inn, Courtyard by Marriott, etc.)
services offered by hotel management companies
operate the hotel for another party for a certain period of time (3-30 years). make a management contract.
advantages to hiring a hotel management company
operational expertise can be obtained. Management quality can be improved. Payment for services can be tied to performance. Future partnership opportunities can be enhanced.
franchise (3rd party management)
parent companies do not own these hotels nor provide management services; hotel owners or 2nd tier companies manage these hotels
franchise (brand company management)
parent companies do not own these hotels; they only provide management services for the hotel owners
brand company own property
parent company own and operate these hotels
soft brands
partnership with a chain
business travelers
persons who travel for business purposes. Business meetings, sales activities, training conventions, etc. 40% of hotel guests in the U.S.
leisure travelers
persons who travel for pleasure. Visiting new places, participating in leisure activities, shopping, sightseeing, etc. 60% of hotel guests in the U.S.
