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C
H
A The Hotel Business Development History of Hotels
in the United States
and Classification
P
T
E
R
• City Hotel (NYC)
4
• 1st hotel (73 rooms + meeting rooms - social center)

• Opened in 1794

• Tremont House (1st class service)

• Opened in Boston in 1829

Hotel Ownership & Development

History of Hotels
in the United States
Franchising
*****Transportation changed course*****
• Allows for a company to expand rapidly
• Rail travel
n Development of resort properties • Uses other people’s money (franchisee)

• Franchisor
• Highway travel
n Development of motels • The company

• Over 180 franchised hotel brands in North

• Air travel
America today
n Airport hotel locations

Franchising Benefits for “Franchisee”

Examples (p. 124)

• HFS - Hospitality Franchise Systems (Cendant/ Wyndham)

• Set of plans and specifications for building

• National advertising

• Centralized reservation system

• Participation in volume purchasing discounts

• Choice Hotels International http://www.hotelchoice.com
• Listing in the franchisor’s directory

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Benefits & Disadvantages

Disadvantages for the “Franchisee” for Franchisor

• Lack of operational power; must conform • Benefits…

• Increased market share/recognition
• Large fees
• Up-front fees
• Central reservations produces 17-26% of

reservations
• Disadvantages…
• Must meet standards as set by franchisor • Need to be careful in selection of franchisees

• Difficulty in maintaining control of standards

Franchising Trends Management Contract

The Players
Factors propelling franchise growth
•
• • Owner - financial responsibility
• Management company - operational responsibility
• Fresh looks (curb appeal)
• Fee structure (2 - 4.5% revenue)
• Location - off highways, airports, and suburbs

• Expansion in smaller cities • Trend toward expansion of contract provisions

• New markets - openings in proximity with golf

courses and other attractions

Financial Management & Profits Real Estate Investment Trust (REIT)

• Existed since early 1960s
• High degree of risk
• Publicly traded
• Cyclical nature of demand
• High degree of capital investment • Investors like REIT’s
• Do not pay corporate income tax

REIT’s must distribute 95% of net income to

Portfolio financing
•
•
shareholders
• Use of more than one location/market
• Traded as stocks (easier to get in / out)
• Cross collateralized/cross defaulted

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REIT’s (cont.)… Favorable Financing

• Examples • Affiliation with a quality franchisor

• Identification with a national chain through a

• Patriot American Hospitality
management contract
n Change to Wyndham International (after merger)
• A lease arrangement with a hotel operator
• Starwood Lodging Trust
n Change to Starwood Hotels and Resorts Trust
• Conventional first mortgage loans

• Lenders

Hotel Rating Services

• American Automobile Association

• 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

• Center city hotels • Public transportation available for

• Resort hotels business or leisure

• Airport hotels • Range of accommodations and services

• Freeway hotels • Typically have a signature restaurant

• Casino hotels

Resort Hotels Resort Hotels

• Originally began due to rail travel
• “Captured Clientele”
• Famous resorts
• Food service is unique
• Greenbrier in West Virginia

• http://www.greenbrier.com • Diversified marketing mix

• Hotel del Coronado in California • Children
• http://www.sddt.com/~coronado
• Groups
• Homestead in Virginia
• Eco-tourism
• http://www.thehomestead.com

Resort Hotels Vacation Ownership

• Resorts in Hawaii: • Fastest growing segment of travel industry
• Time share
• Four Seasons Lanai
• A condo that is owned
Click Here for Video
• Purchaser uses for a specific period of
• JW Marriott Ihilani time each year
• Vacation club
• Hilton Waikoloa Village • 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 • Fixed or floating times
at 3500 resorts in almost 90 countries
• Example
• Helps ensure purchaser today’s prices for tomorrow

• Yearly maintenance fees

OHANA Honolulu
Airport Hotels Airport Hotel Airport Hotel Registration Facility
• High occupancy due to location
• Business, group, and leisure
travelers
• Full service
• 200-600 rooms
• Convenient location
• Airport shuttle service
• Economical pricing

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Freeway Hotels & Motels Characteristics of Casino Hotels

• Prominent in the 1950s • Heavy growth segment

• Easy access to roadways • Low room rates

Subsidized food and beverage
Park outside the room entrance
•
•
• Themes are popular
• 500 plus guest rooms
• Variety of food operations
• Contains a gaming room

Major Trends in Casino Hotels 2. Levels of Service: Luxury

• Casino hotels are now marketing themselves as
business hotels • Finest of accommodations
• Amenities include business centers, travel
• Concierge
bureaus, and room service

• Move towards “family/friendly” hotels • 24 hour room service

• This increases the average stay and money spent
by families

Levels of Service: Luxury Level of Service: Full Service

• Examples: • Typically “Business Oriented”

• Multiple food and beverage outlets

• Meeting and convention services

• Chain representation
• Doubletree
• http://www.doubletreehotels.com

• Sheraton
• http://www.sheraton.com

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Convention Hotels Level of Service: Economy

Meet the needs of large groups
Also considered budget hotels
•
•
• 500 plus rooms

• Larger public areas to accommodate greater public • Clean rooms

demand
• Reasonably sized and furnished
• Banquet areas within and around the hotel

• High percentage of double occupancy • Continental breakfast

• Full Service oriented

Economy/Budget Hotels Level of Service: All Suite

• Represents 12% of total hotel rooms • Cater to guests for an extended

period
• Accomplished 37% of industry growth
• Reduction in rate based on
• Average room rate of $48.68
length of stay
• However, profit revenue is slow with an
• More “space” than typical hotel
annual rate of 1%

Levels of Service: Others

(Bed & Breakfast) Hotel Integration: Vertical

• A home away from home • Lodging companies meeting the needs of

• Accommodation with an owner who lives on several types of guests based on price,
premises facilities, and amenities
• Maintains a few rooms

• Offers breakfast

• Personable and quick service

Marriott video

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Hotel Integration: Vertical Marketing Consortium

• Also called Referral organizations
• Choice hotels which has several chains
• Numerous independent properties unite to compete with
that meet its diverse clientele the marketing power of chain operations
• Luxury - Clarion
• Similar benefits as franchises at a lower cost
• Mid-scale - Quality Inn/Suites
• Budget - Comfort Inn • Provides incentives for clients
• Economy - Sleep Inn

Best & Biggest Hotels Most Unusual Hotels

Malcolm Baldridge
National Quality Award
• Some previous winners
2x winner
• Ice Hotel in Swedish Lapland
http://www.icehotel.com/Winter/Home/

• Oriental Hotel in Bangkok, Thailand

• Regent of Hong Kong • The Treetops Hotel in Kenya

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

• Bel-Air of Los Angeles

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

Most Unusual Hotels International Perspective

• Capsule Hotel in Japan • Continued international development

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

• Due to increase in tourism

• Due to increase in trade and commerce

• The Burj Al Arab in Dubai • Globalization is the key to continued growth

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

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Trends in Hotel Development

• Consolidation (buy / merge)

• Diversification within segments (e.g. extended stay)

• Rapid growth in vacation ownership

• Increase in spas (wellness)