ELEMENT 1: Develop understanding of hotel terminologies and

the business of lodging

1.1 Identifying terms used in the industry

Introduction

Lodging is an industry of rapid transformation. The inns of old evolved from

private homes located along the traveler’s route. Today’s hotel is often a
point of destination even as it serves its traditional role of accommodating
those in transit. Yesterday’s tavern offered meals with the family. Dining
today is a created experience in design, décor, and menu. Early inns
were indistinguishable from their neighbor’s homes. Today’s edifice is a
sharp contrast in style and packaging.

The early concept of “just serving guest” of what they need has changed
dramatically and the industry has been in the forefront of massive
development in the landscape of tourist destinations around the world.

Jargons are language used for a particular group such as the hospitality
industry and are very common in all types of lodging properties. The
knowledge of such terminologies help industry practitioners communicate
with their colleagues in terms of operating and managing the day-to-day
activities involved in the property.

Common Hotel Terminologies

account balance The difference between the debit (charge) and credit
(payment) values of the guest bill.

account receivable A company, organization, or individual, registered or

not, who has an outstanding bill with the hotel.


acknowledgment Notice of a confirmed reservation by telephone, fax,

email, letter, postcard, or preprinted form.
ADR See average daily rate.


adjoining rooms Rooms that abut along the corridor but do not connect
through private doors; cf. connecting rooms.


advance deposit A deposit furnished by the guest on a room reservation

that the hotel is holding.

affiliated hotel One of a chain, franchise, or referral system, the

membership of which provides special advantages, particularly a national
reservations system.

afternoon tea A light snack comprising delicate sandwiches and small

sweets served with tea, or even sherry; cf. high tea.


All-inclusive Plan that includes all hotel services: room, food, beverages,
entertainment for one price.


allowance A reduction to the folio, as an adjustment either for

unsatisfactory service or for a posting error. Also called a rebate.

amenities Literally any extra product or service found in the hotel. A

swimming pool, concierge desk, health spa, and so on are all technically
known as amenities. However, this term is used primarily for in-room guest
products: as soap, shampoo, suntan lotion, mouthwash, and the like.

arrival time The hour which the guest specifies as the time that he or she
will arrive to claim the reservation.

attrition The failure of a convention group to fill its reserved block of rooms.

authorization code (1) Response from a credit-card issuer that approves

the credit-card transaction and provides a numbered code referral if
problems arise; (2) a code for entry to a computer program.

available rooms The number of guest rooms the hotel has for sale— either
the total in the hotel or the number unoccupied on a given day.

average daily rate (ADR) The average daily rate paid by guests;
computed by dividing room revenue by the number of rooms occupied.
More recently called sales per occupied room.

back to back (1) A sequence of consecutive group departures and

arrivals usually arranged by tour operators so that rooms are never
vacant; (2) a floor plan design that brings the piping of adjacent baths
into a common shaft.

Bell captain (1) The supervisor of the bell persons and other uniformed
service personnel; (2) a proprietary in-room vending machine.

best available A reservation requesting (or a confirmation promising) the

best room available or the best room to open prior to arrival; cf. available
basis only.

B folio The second folio (the individual’s folio) used with a master account.

blanket reservation A block of rooms held for a particular group, with

individual members requesting assignments from that block.

block (1) A number of rooms reserved for one group; (2) a restriction
placed in the room rack to limit the clerk’s discretion in assigning the
room.

book To sell hotel space, either to a person or to a group needing a block

of rooms.

cabana A room on the beach (or by the pool) separated from the main
house; may even be furnished as a sleeping room.

cancellation A guest’s request to the hotel to void a reservation previously

made.

cancellation number Coded number provided by the hotel or central

reservations office to a guest who cancels a reservation.

cashier’s drop A depository located in the front-desk area where others

can witness cashiers depositing their turn-ins.

cashier’s report The cash turn-in form completed by a departmental

cashier at the close of the watch.

cash paid-outs Monies disbursed for guests, either advances or loans, and
charged to their accounts like other departmental services.

central reservations system (CRS) The sophisticated hardware and

software used by a central reservations office to accurately track and
manage reservation requests for member properties.
chargeback Credit-card charges refused by the credit-card company.

check-in All the procedures involved in receiving the guest and

completing the registration sequence.


check-out All the procedures involved in the departure of the guest and
the settlement of the account.


city ledger An accounts receivable ledger of nonregistered guests.

class The quality of hotel, with average daily rate the usual criterion.

closeout hour Also called close of the day.

close of the day An arbitrary hour that management designates to

separate the records of one day from those of the next.

comp Short for “complimentary” accommodations—and occasionally

food and beverage—furnished without charge.

company-made (reservation) A reservation guaranteed by the arriving

guest’s company.

concession A hotel tenant (concessionaire) whose facilities and services

are often indistinguishable from those owned and operated by the hotel.

confirmed reservation The hotel’s acknowledgment, maybe in writing, to

the guest’s reservation request.

connecting rooms Adjoining rooms with direct, private access, making use
of the corridor unnecessary.

credit An accounting term that indicates a decrease in the account

receivable; the opposite of debit.

cutoff date The date on which unsold rooms from within a convention’s
block of reserved rooms are released for sale.

day rate A reduced charge for occupancy of less than overnight; used
when the party arrives and departs the same day. Also called part day
rate or use rate.

debit An accounting term that indicates an increase in the account

receivable; the opposite of credit.
departure Check-out.

deposit reservation See advance deposit.

did not stay (DNS) Means the guest left almost immediately after
registering.

double (1) A bed approximately 54 by 75 inches; (2) the rate charged for
two persons occupying one room; (3) a room with a double bed.

double occupancy (1) Room occupancy by two persons; (2) a ratio

relating the number of rooms double occupied to the number of rooms
sold.

downgrade Move a reservation or registered guest to a lesser

accommodation or class of service; cf. upgrade.

downtime That time span during which the computer is inoperative

because of malfunction or preemptive operations.

duvet A bed comforter, much like a large pillow, filled with feathers in a
washable cover.

early arrival A guest who arrives a day or two earlier than the reservation
calls for.

emergency key (E-key) One key that opens all guest rooms, including
those locked from within, even those with the room key still in the lock; also
called the great grandmaster.

express check-out Mechanical or electronic methods of check-out that

expedite departures and eliminates the need to stop at the desk; also
called zip-out.

extra meals An American plan charge made for dining room service over
and above that to which the guest is entitled.

F.I.T. Foreign independent tour, but has come to mean free independent
tour, a traveler who is not group affiliated; by extension, frequent
independent traveler, or full inclusive tour; cf. D.I.T.

flat rate (1) See run-of-the-house rate; (2) same price for single or double
occupancy.

floor key See master key.

floor (release) limit The maximum amount of charges permitted a credit-

card user at a given property without clearance; the limit is established for
the property, not for the user.

folio See guest bill; also called an account card.


force majeure (forz mazhoer) An unexpected and disruptive event that

frees parties from contractual obligations; an act of God.

forecast A future projection of estimated business volume.

forfeited deposit A deposit reservation kept by the hotel when a no-show

fails to cancel the reservation; also called a lost deposit.

franchise (1) An independently owned hotel or motel that appears to be

part of a chain and pays a fee for that right and for the right to
participate in the chain’s advertising and reservation systems; (2) the
chain’s right (its franchise) to sell such permission; or the permission itself, or
both.

franchisee One who buys a franchise.

franchisor One who sells a franchise.

front of the house (1) The area of the hotel visible to guests in contrast to
the back of the house, which is not in the public view; (2) all of the
functions that are part of the front office.

full day The measure of a chargeable day for accounting purposes; three
meals for an AP hotel, overnight for an EP.

full house Means 100% occupancy, all guest rooms sold; cf. perfect fill.

full service Means a complete line of hotel services and departments are
provided, in contrast to a limited-service property.

ghost card Nonexistent credit card or credit-card charges not supported

by a signature.
global distribution system (GDS) The hardware, software, and computer
lines over which travel agents, airlines, online subscription networks, and
others access central reservations systems and individual property
management systems.

grandmaster One key that opens all guest rooms except those locked
from within; see also emergency key.

gratuity A tip given to an employee by a guest, sometimes willingly and

sometimes automatically added to the charges; see also plus, plus.

graveyard A work shift beginning about midnight.

group A number of persons with whom the hotel deals (reservation, billing,
etc.) as if they were one party.

guaranteed rate The assurance of a fixed rate regardless of the hotel’s

occupancy, often given in consideration of a large number of room
nights per year pledged by a company.

guaranteed reservation Payment for the room is promised even if the

occupant fails to arrive.

guest account See guest bill.

guest bill An accounting statement used to record and display the

charges and payments made by registered guests (accounts receivable)
during their hotel stay. Also known as folio or account card.

guest check The bill presented to patrons of the dining rooms and bars
and, when signed, often used as the departmental voucher.

guest history A record of the guest’s visits, including rooms assigned, rates
paid, special needs, credit rating, and personal information; used to
provide better guest service and better marketing approaches.

guest ledger All the guest bills owed by registered guests (accounts
receivable) and maintained in the front office, in contrast to the group of
city-ledger bills (nonregistered guests) maintained in the accounting or
back office.

handicap(ped) room A guest room furnished with special devices and

built large enough to accommodate guests with physical handicaps.
H

hard copy Computer term for material that has been printed rather than
merely displayed.

Hard goods Guest-room furniture: beds, chairs, and soon;

high tea A fairly substantial late afternoon or early evening meal; cf.
afternoon tea.

holdover See overstay.

Hollywood bed Twin beds joined by a common headboard.

hospitality suite (room) A facility used for entertaining, usually at

conventions, trade shows, and similar meetings.

hostel An inexpensive but supervised facility with limited services catering

to young travelers on foot or bicycle; cf. Elderhostel.

hotelier Innkeeper or hotelkeeper.

hotel manager Hotel executive responsible for the front of the house,
including front office, housekeeping, and uniformed services; also called
rooms manager, house manager, or guest-services manager.

hotel operating hours Twenty-four hours per day; 7 days per week; 365
days per year.

hotel rep See rep(resentative).


hot list A list of lost or stolen credit cards furnished to hotels and other
retailers by credit-card companies.


house A synonym for hotel, as in house bank, house count, house laundry;
see also property.

house call Telephone call made to the outside of the hotel by a member
of the staff doing company business; not subject to a posting charge, as
guest calls are.

house count The number of registered guests; cf. room count.

housekeeper’s report A report on the status of guest rooms, prepared by

the linen room and used by the front desk to verify the accuracy of the
room rack.
house laundry A hotel-operated facility, usually on premises, in contrast to
an outside laundry that contracts with the hotel to handle house and/or
guest laundry.

house rooms Guest rooms set aside for hotel use and excluded, therefore,
from available rooms.

HVAC Acronym for heating, ventilation, and air-conditioning.

ideal average room rate This formula assumes a hotel sells an equal
number of rooms from both the least expensive upward and from the
most expensive downward. The resulting average rate is a theoretical
benchmark against which to compare actual operating results.

inclusive terms (1) Phrase that is sometimes used in Europe to designate

the American plan; (2) indicates that a price quote includes tax and
gratuity.

independent A property with no chain or franchise affiliation, although

one proprietor might own several such properties.

information rack An alphabetic listing of registered guests with a room

number cross-reference.

in-house On the premises, such as an in-house laundry or guest

in-season rate A resort’s maximum rate, charged when the demand is

heaviest, as it is during the middle of the summer or winter; cf. off-season
rate, low season, shoulder.

Inside call A telephone call that remains within the hotel; cf. outside call.

interface Computer term designating the ability of one computer to

communicate with another; see HITIS.

International Association of Travel Agents (IATA) A professional affiliation

which both lobbies on behalf of the travel industry and identifies/verifies
legitimate travel agents to other vendors.

Internet telephony Telephone capability on Internet access; also called

VoIP, Voice over Internet Protocol.
J

joiner A guest who joins another guest or party already registered.

junior suite One large room, sometimes with a half partition, furnished as
both a parlor and a bedroom.

king An extra-long, extra-wide bed at least 78 by 82 inches.

kiosk An information site (originally a booth) that may be staffed, but

more likely provides access to the hotel’s property management system
for self-registration and self-check-out.

lanai A Hawaiian term for “veranda”; a room with a porch or balcony,

usually overlooking gardens or water.

late arrival A guest with a reservation who expects to arrive after the
cutoff hour and so notifies the hotel.

late charge A departmental charge that arrives at the front office for
billing after the guest has checked out.

late check-out A departing guest who remains beyond the check-out

hour with permission of the desk and thus without charge.

limited service A hotel or motel that provides little or no services other

than the room; a budget hotel (motel); cf. full service.

linen closet A storage closet for linens and other housekeeping supplies
usually located conveniently along the corridor for the use of the
housekeeping staff.

linen room The housekeeper’s office and the center of operations for that
department, including the storage of linens and uniforms.

lockout (1) Denying the guest access to the room, usually because of an
unpaid bill; (2) a key of that name.

log A record of activities maintained by several operating departments.

lost and found An area, usually under the housekeeper’s jurisdiction, for
the control and storage of lost-and-found items.
low season See off-season rate.

maid’s report A status-of-rooms report prepared by individual room

attendants and consolidated with other reports by the linen room into the
housekeeper’s report.

mail and key rack An antiquated piece of front-office equipment where

both guest mail and room keys were stored by room number.

maitre d’ The shortened form of maitre d’hôtel, the headwaiter.

market mix The variety and percentage distribution of hotel guests—

conventioneer, tourist, businessperson, and so on.


market niche Identifiable, but often poorly served, subset of a market.

master account One folio prepared for a group (convention, company,

tour) on which all group charges are accumulated.

master key One key controlling several pass keys and opening all the
guests rooms on one floor; also called a floor key.

master franchise A franchisee’s right to resell pieces of the franchise to

other franchisees.

menu An array of function choices displayed to the computer user, who

selects the appropriate function.

message lamp A light on the telephone, used to notify an occupant that

the telephone system has a message to relay.

mom-and-pop A small, family-owned business with limited capitalization in

which the family, rather than paid employees, furnishes the bulk of the
labor.

moment of truth A popular term describing the interaction between a

guest and a member of the staff, when all of the advertising and
representations made by the hotel come down to the quality of the
service delivered at that moment.

morning call A wake-up call made by the telephone operator or

automatically by the property management system at the guest’s
request.
move-in date The date that a group, convention, or trade show arrives to
begin preparing for their meeting or exhibit; cf. move-out date.

move-out date The date that a group, convention, or trade show vacates
the property after a meeting or exhibit; cf. move-in date.

Murphy bed A standard bed that folds or swings into a wall or cabinet in a
closet-like fashion; trademarked.

night audit A daily reconciliation, which is completed during the

graveyard shift, of both accounts receivable and incomes from the
operating departments.

night auditor The person or persons responsible for the night audit.

night auditor’s report An interim report of accounts receivable, room

statistics, and incomes earned; prepared by the night auditor for the
general manager.

night bird Euphemism for prostitute.


night clerk’s report Another name for the room count sheet.

no reservation (NR) See walk-in.


no-show A reservation that fails to arrive.

occupancy (percentage of occupancy, occupancy percentage) A ratio

relating the number of rooms sold (room count) to the number of rooms
available for sale.

occupied (1) A room that is sold or taken and is not available for sale; (2)
someone is physically in the room at this time.

ocean front A front room with an exposure facing directly on the ocean;
cf. ocean view.

ocean view Other than a front room, but with some view of the ocean; cf.
ocean front.

off line See batch processing.


off premises Not on the property; cf. in-house.

off-season rate A reduced room rate charged by resort hotels when
demand is lowest; cf. in-season rate, shoulder.

on change The status of a room recently vacated but not yet available
for new occupants.

online (computer) Computer facilities hooked directly to input and output

devices for instantaneous communication; cf. batch processing.

open credit Credit based only on a guest’s signature.

out of inventory (OOI) A significant problem has removed this room from
availability. Whereas out of order (OOO) rooms are usually available in
only a matter of hours, OOI rooms may be unavailable for days or weeks.

out of order (OOO) The room is not available for sale because of some
planned or unexpected temporary shutdown of facilities.

outside call A telephone call from outside the hotel; a call that terminates
outside the hotel; cf. inside call.

outside laundry (valet) A non-hotel laundry or valet service contracted by

the hotel in order to offer a full line of services; cf. house laundry.

outside room A room on the perimeter of the building facing outward with
an exposure more desirable than that of an inside room.

over or short A discrepancy between the cash on hand and the amount
that should be on hand.

overbooking Committing more rooms to possible guest occupancy than

are actually available.

override (1) Extra commission above standard percentage to encourage

or reward quantity bookings; (2) process by which the operator bypasses
certain limits built into the computer program.

overstay A guest who remains beyond the expiration of the anticipated

stay.

package A number of services (transportation, room, food,

entertainment) normally purchased separately but put together and
marketed at a reduced price made possible by volume and breakage.
paid in advance A room charge that is collected prior to occupancy,
which is the usual procedure when a guest has light baggage; with some
motels, it is standard procedure for every guest.

paid-outs See cash paid-outs.

party Front-office term that references either the individual guest (“Who’s
the party in room 100?”) or several members of the group (“When will your
party arrive?”).

penthouse Accommodations, almost always suites, located on the top

floor of the hotel, theoretically on the roof.

percentage of occupancy See occupancy.

perfect fill Occupancy of 100%, with every room actually occupied; cf. full
house in which 100% occupancy might reflect guaranteed reservations
that didn’t actually show.

permanent guest A resident of long-term duration whose stay may or may

not be formalized with a lease.

PMS Property Management System.


point-of-sale (POS) terminal An electronic “cash register” providing on-line

communications to the property management system from remote sales
locations, in contrast to an input device at the front office.

projection See forecast scheduling.

property Another way to reference a hotel; includes physical facilities and

personnel.

property management system (PMS) A hotel’s, that is a property’s, basic

computer installation designed for a variety of functions in both the back
office and front office.

published rate The full rack rate quoted or published for public
information; the rate quoted without discounts.

quad Accommodations for four persons; see also twin–double.

quality of the reservation Differentiates reservations on how likely they are

to be honored by the guest: paid in advance reservation vs. guar- anteed
reservation vs. 6 pm cutoff hour, and so on.

queen An extra-long, extra-wide bed, about 80 to 85 inches long by 60

inches wide; see California length; see king.

quote To state the cost of an item, room rates in particular.

rack rate The full rate, without discounts, that one quotes as a room
charge; so called because the room rack is the source of the information.

rate The charge made by a hotel for its rooms.


rate cutting A reduction in rate that attracts business away from

competitors rather than creating new customers or new markets.

registered, not assigned (RNA) The guest has registered, but is awaiting
assignment to a specific room until space becomes available; see on
change.

register(ing), registration (1) Indication (completing and signing the

registration card) by a new arrival of intent to become a guest; (2)
register: the name for a book that served at one time as the registration
record; obsolete.

(reg)istration card A form completed during registration to pro- vide the

hotel with information about the guest, including name and address, and
to provide the guest with information about the hotel, including legal
issues.

rep(resentative) Short for hotel representative: An agent under con- tract,

rather than an employee under salary, who represents the hotel in distant
cities or for special activities, chiefly marketing activities, but sometimes
gaming related.

reservation A mutual agreement between the guest and the hotel, the
former to take accommodations on a given date for a given period of
time, and the latter to furnish the same.

reservation rack A piece of front-office equipment, largely replaced by

the property management system, providing an alphabetic list of
anticipated arrivals with a summary of their needs, filed chronologically by
anticipated date of arrival.

residential hotel A hotel catering to long-stay guests who have made the
property their home and residence; see also permanent guest.

resident manager See hotel manager.

resort hotel A hotel that caters to vacationing guests by providing

recreational and entertainment facilities; usually a destination hotel.

RevPar Short for revenue per available room, a ratio of room revenue to
the number of available rooms.

road warrior Slang for a frequent traveler battling the hardships and
indignities of being on the road, that is, of traveling, for long periods of
time.

rollaway bed A portable utility bed approximately 30 by 72 inches; also

called a cot.

room charge sheet See room count sheet.


room count The number of occupied rooms; cf. house count.

room count sheet A permanent record of the room rack prepared nightly
and used to verify the accuracy of room statistics; also called a night
clerk’s report.

rooming (a guest) The entire procedure during which the desk greets,
registers, and assigns new arrivals, and the bell staff accompanies them to
their rooms (rooms them).

rooming slip A form issued by the desk to the bellperson during the
rooming procedure for guest identification, and left by the bellperson with
the guest to verify name, rate, and room number.

room inspection report A checklist of the condition of the guest room

prepared by the inspector when the room attendant has finished
cleaning.

room-night See guest day (night).

room rack A piece of front-office equipment, now replaced by the

property management system, in which each guest room is represented
by a metal pocket with colors and symbols to aid the room clerk in
identifying the accommodations.

room rack slip (card) A form prepared from the registration card
identifying the occupant of each room and filed in the pocket of the
room rack assigned to that guest; obsolete; cf. room rack.

rooms available See available rooms.


room service Food-and-beverage service provided in the privacy of the

guest room.

rooms ledger See guest ledger.

run-of-the-house rate A special group rate generally the midpoint of the

rack rate with a single, flat price applying to any room, suites excepted,
assigned on a best available basis.

safe deposit boxes Individual sections of the vault where guests store
valuables and cashiers keep house banks.

sales per occupied room See average daily rate.

sample room A guest room used to merchandise and display goods,

usually in combination with sleeping accommodations.

season rate See in-season rate.

segmentation The proliferation of many hotel types as the lodging industry

attempts to target its facilities to smaller and smaller market niches
(segments).

service charge A percentage (usually from 10 to 20%) added to the bill for
distribution to service employees in lieu of direct tipping; see also plus,
plus.

service elevators Back elevators for use by employees (room service,

housekeeping, maintenance, etc.) on hotel business and not readily
visible to the guests; cf. guest elevator.

share More than one person occupying the guest room.

single (1) A bed approximately 36 by 75 inches; (2) a room with

accommodations for one; (3) occupancy by one person; (4) the rate
charged for one person.

single supplement An extra charge over the tour package price assessed
for single occupancy when the total price was based on a double-
occupancy rate.
size The capacity of the hotel as measured by the number of guest rooms.

skip See skipper.

skipper A guest who departs surreptitiously, leaving an unpaid bill.

sleeper A departed guest whose record remains active, giving the

appearance of an occupied room.

sleep-out A room that is taken, occupied, and paid for but not slept in.

slide An error caused by a misplaced decimal, as when 36.20 is written

3.62.

smart card A credit card or other card containing a microprocessor

capable of interfacing with the PMS or other computer configurations.

SMERF Marketing reference to Society, Military, Educational, Religious, and

Fraternal organizations.

sofa bed A sofa with fixed back and arms that unfolds into a standard
single or double bed; also called a hide-a-bed.

soft goods Linens; cf. hard goods.


software The programs and routines that give instructions to the computer;
cf. hardware.


special attention (SPATT) A label assigned to important guests designated

for special treatment; see very important person.


split rate Division of the total room rate charge among the room’s several
occupants; see share.


star reservation Indicates the arrival of a very important person, SPATT.

stay See stay-over.

stay-over (1) Any guest who remains overnight; (2) an anticipated check-
out who fails to depart; also called holdover or overstay.

studio (1) A bed approximately 36 inches wide by 75 inches long without

headboard or footboard that serves as a sofa during the day; (2) the
room containing such a bed; cf. sofa bed.

suite A series of connecting rooms with one or more bedrooms and a

parlor; very large suites include additional rooms such as dining rooms; see
hospitality suite.

supper (1) A late-night meal; (2) the evening meal when midday service is
designated as dinner.

take down Cancel reservations that are without an advance deposit after
the cutoff hour; also called “dump”; cf: dump.

timeshare (1) A method of acquiring accommodations by which each

occupant purchases the right to use the facility (room or apartment) for a
specified period; an interval ownership; (2) term for users who share
computer facilities.

to-date Designates a cumulative amount; the sum of all figures in the

current period (usually monthly or annually) including the day or date in
question.

total quality management (TQM) A way to continuously improve

performance at every level of operation, in every functional area of an
organization, using all available human and capital resources. See also
quality assurance.

transfer (1) An accounting technique used to move a figure from one

form to another, usually between folios; (2) the movement of guests
and/or luggage from one point to another (e.g., from the airline terminal
to the hotel); see porterage.

transient guest A short-term guest; see transient hotel.

transient hotel A hotel catering to short-stay guests who sometimes stop

en route to other destinations; cf. destination hotel.

transmittal form The form provided by national credit-card companies for

recording and remitting non-electronic credit-card charges accumulated
by the hotel.

transposition A transcription error caused by reordering the sequence of

digits, as when 389 is written as 398.

turn away (1) To refuse walk-in business because rooms are unavailable;
(2) the guest so refused is a turn-away.

turn-downs An evening service rendered by the housekeeping

department, which replaces soiled bathroom linen and prepares the bed
for use.

twin (1) A bed approximately 39 inches wide by 75 inches long to sleep a

single occupant; (2) a room with two such beds, twins.

twin-double (1) Two double beds; (2) a room with two such beds capable
of accommodating 4 persons; see quad.

understay A guest who leaves before the expiration of the anticipated

stay.

unoccupied (1) An unsold room; (2) a room that is occupied, but is

temporarily vacant, the guest is out.

upgrade Move a reservation or a currently registered guest to a better

accommodation or class of service; cf. downgrade.

upsell See sell up.


vacancy The hotel is not fully occupied, so there are rooms available for
sale.

very important person (VIP) A reservation or guest who warrants special

attention (SPATT) and handling.

voucher (1) The form used by the operating departments to notify the
front desk of charges incurred by a particular guest; (2) form furnished by
a travel agent as a receipt for a client’s advance reservation payment;
see coupon.

wake-up call See morning call.

walk (a guest) To turn away guests holding confirmed reservations due to

a lack of available rooms.

walk-in A guest without a reservation who requests and receives

accommodations.

walk-through A thorough examination of the property by a hotel

executive, franchise inspector, prospective buyer, and so on.
watch Another term for the work shift.


yield The product of occupancy times average daily rate.

yield management (1) Controlling room rates and restricting occupancy

in order to maximize gross revenue (yield) from all sources; (2) a
computerized program using artificial intelligence.

zero out To balance the guest bill as the guest checks out and makes
settlement.


zip-out See express check-out.



1.2 Understanding the business of lodging
THE TRADITIONAL HOTEL INDUSTRY

Over eons of time, wanderers and single travelers found security and
accommodations in trees and caves, castles and churches, homes and
estates. Greater political and economic freedom eventually increased
their numbers. Soon, the courtesy of friendly hosts gave way to
commercial enterprise. The hotel industry was born carrying this culture of
hospitality. So hospitality and hotels are related concepts, deriving from
the same Latin root. However, the word “hotel,” which comes from the
French hôtel, meaning large house, didn’t appear until the 18th century.

The hotel industry has flourished through the centuries by adapting to the
changing environment that marks human progress. These stages have
been labeled: The 18th century was the agricultural age; the 19th, the
industrial age; and the 20th century the age of service, including
medicine, education, and hotelkeeping. The 21st century opened with
that same service culture, but will likely close as the age of technology.
Innkeeping has started to adapt its hospitality heritage to the new age.
The shift translates into newer kinds of, but less personal, services.

How Hotels Count and Measure

Hotels are valued on a per-room cost, either the cost per room to build or
the resale price per room—called the per-key cost.

Occupancy, a measure of supply and demand, gauges the industry’s

economic health. While robust demand encourages construction of new
rooms, falling demand seals the fate of old hotels. At any given time, the
number of rooms available for sale reflects the mathematics of the old
and the new. During the upward cycle, more guests are buying, but fewer
rooms are available. Room rates rise. Just the opposite happens in a
downward cycle: There are fewer buyers and more rooms, so rates fall.
Customer demand is measured by the number of rooms occupied, also
called the number of rooms sold. Hoteliers count this figure every night.
Hoteliers also count the number of rooms in their hotels. Although the
number of rooms is just an estimate worldwide, hotel managers know their
own numbers. Whether for the world, the region, or the individual hotel,
that number is called the number of rooms available for sale.

The relationship (or ratio) between the number of rooms sold (demand)
and the number of rooms available (supply) measures the property’s
health. It is a closely watched value that asks, “How well did we sell rooms
relative to the number of rooms that could have been sold?” That big
mouthful has a shortcut called the percentage of occupancy, or
occupancy percentage, or just occupancy. The occupancy calculation
is a simple division. The number of rooms available for sale is divided into
the number of rooms sold.

Number of Rooms Available = Occupancy Percentage

Number of Rooms Sold

Occupancy can be computed by one hotel for one night, one month, or
one year.

Sales per occupied room. Occupancy measures quantity, that is, the
hotel’s share of the market. Sales per occupied room—also called
average daily rate (ADR)—measures quality.

Total Rooms Sales = Average Daily Rate

Total Rooms Sold

The health of the industry is reflected in both occupancy and price. Price,
ADR, ($) increases as occupancy (%) increases. The more rooms sold—
that is, the greater the demand— the higher the room rate. That’s
because lower-priced rooms sell first. Conversely, as occupancy falls, so
does the ADR. Supply and demand are at work.

Revpar (Revenue per available room). RevPar is an old industry standby

that once was called average rate per available room. RevPar (or
REVPAR) measures management’s ability to keep rates high even as
occupancy declines. Hoteliers are fond of saying, “hotels fill from the
bottom up,” meaning that guests elect lower rates when an empty house
allows it. Superior managers strive to keep rates high even as occupancy
dips within the cycle. Management does this using yield management.
RevPar reflects the revenue (sales) relative to the total rooms available for
sale. In contrast, ADR measures the revenue per room relative to the
number of rooms actually sold. (Remember, “rooms sales” and “room
revenue” are interchangeable terms.)

Total room sales = RevPar

Number of rooms available for sale

Break-even point. To break even is to have neither profit nor loss. Inflows
from revenues match exactly outflows from costs. Hotels have large fixed
costs including interest on debt payments, licenses, taxes, and fixed
salaries and wages. Reducing fixed costs drops the level of occupancy
needed to break even. Similarly, increasing sales from food, beverage,
spa, and so on reduces the pressure on room sales. Increasing RevPar also
contributes, provided the percentage of occupancy is maintained.

Break-even points are important, because there is no profit until that point
is reached. Once the point is reached, profits accumulate quickly. Each
sales dollar before the break-even point is used to pay off debt, pay
utilities, and pay the staff. Thereafter, each dollar contributes to profits
Characteristics of the Hotel Business

Several special characteristics limit management’s flexibility. While some

are lodging-only issues, some are found in other industries as well.

Perishability. Vacant rooms are perishable. The industry’s mantra is “an

unsold room tonight can never be sold again.” Unlike a can of fruit which
inventories on the grocer’s shelf, hotel rooms are time restricted. No way
to take last night’s empty room to meet an overflow tonight. Like empty
airline, theater, or arena seats, unsold hotel rooms cannot be stored,
cannot be saved, and cannot be used anew.

Location. According to Ellsworth Statler, who sold his Statler chain to Hilton,
“Location, location, location” are the three most important aspects of
[hotel] real estate. Good locations are not easy to acquire. Changing
neighborhoods and shifting demographics sometimes doom a hotel
whose original location was good. Unlike an airline seat, there is no way to
move the hotel room. A fixed location in an uneven neighborhood
requires astute management and a heavy dependence on marketing
and sales.

Fixed Supply. Just as the hotel’s location is fixed, so is its supply of rooms.
Airlines adjust to demand by adding or removing flights. Not so with hotels.
What you see is what you must manage.

High Operating Costs. Unlike manufacturing, which offsets high labor costs
with large capital investments, hotels are both capital- and labor-
intensive. The result is, in the jargon of the trade, a large nut. Large built-in
costs continue regardless of occupancy levels. Innkeeping’s break-even
hurdle is high.
Seasonality. Throwing away the key is a traditional practice when a new
hotel opens. The act signifies that the hotel never closes. Yet,
hotelkeeping is a very seasonal business. Cyclical dips hit commercial
hotels every seven days as they struggle to offset poor weekend
occupancy. The federal holiday law that extended weekends into
Mondays certainly didn’t help.

Traditional Classifications

The industry still delivers the basic accommodations of shelter, food, and
hospitality. It is the means of delivery that has changed. These variations
have been marked by shifting terminology: hostel, tavern, public house,
inn, guest house, hotel, resort, motel, motor lodge, motor inn, bed and
breakfast, and condo.

Changes notwithstanding, several traditional classifications have

withstood the test of time. They are size, class, type, and plan. These are
not definitive, objective measures. Nor are they self- exclusive. Hotels fall
into all categories or into just some. Each category impacts differently on
how managers manage.

Size

The number of rooms available for sale, the very same figure used in
occupancy computations is the standard measure of size. Measures such
as the number of employees or gross sales are simply not used. More
rooms may be advertised than are actually available. Older hotels have
rooms that are no longer saleable. Newer properties lose guest rooms to
unplanned offices and storage. As a rule, the older the hotel, the fewer
rooms available relative to total room count.

Hotels are grouped by size for financial reporting, for census and trade
association fees and recognition. Traditionally, large hotels are 300 rooms,
or more. Medium hotels are 100–300 rooms and small hotels are less than
100 rooms.

Class

The class of hotel is sensed as often as it is measured, but two yardsticks

quantify the appraisal: They are price (ADR) and rating systems.

Average Daily Rate. Delivering class, elegance, and service costs

money. Larger rooms, upgraded furnishings, and extra employees incur
larger financing costs, depreciation, energy, wages, and more. So too do
better levels of maintenance, 24-hour room service, saunas, and similar
extras. All must be recovered by higher rates. More than just a
generalization: The better the class of hotel the higher the rate. Driven by
inflation, ADR has been increasing industry-wide for decades. So a higher
room rate over time is not the measure. A higher rate relative to
competition is critical. Location, location, location also plays a role. Hotels
in small towns are different than their big-city counterparts.

Full-service to limited-service. Hotels are as diverse as the traveling

public that fills them. Responding to varied needs, the industry has
created a range of accommodations from the full-service high-rise to the
squat roadside inn. One group offers nothing more than a clean room
and a good mattress. Guests do not need swimming pools, closets, or
lobbies, goes that argument. This hotelier offers limited service at minimum
price. It does so with new language: Limited service is now “select
service,” or, better still, “focused service.”

One hundred eighty degrees away is the full-service, upscale

property. This hotel has superior facilities and a full complement of
services. Limited services means lobby vending machines or a nearby
restaurant servicing several properties in the area. Full service has a menu
of dining options and a range of extras: lounges, room service,
newspapers to the room, exercise facilities, and electronic support.
Expense-account travelers patronize full-service properties although
something less costly may do when the family travels.

Between the two lies the bulk of facilities. Services are added as
competition demands and costs allow. Services are pared as markets shift
and as acceptable self-service equipment appears.

Number of Employees Class as measured by full service or limited

service refers as much to the size of the staff as to the physical amenities.
Thus, the number of employees per guest room is another measure of
class;

No. of employees = No. of employees per guest room

No. of rooms available for sale

Budget properties, those without restaurants or amenities such as

bars or room service, operate with as few as 0.25 (one-fourth) employee
per guest room. An 80-room house might have as few as 20 employees.
There’s a limit to how small the staff can shrink. If the property wants the
legal benefits of being a hotel, common law requires it to be open 24
hours daily. Now add in staff days-off, plus a minimum housekeeping
crew, night security, someone for repairs and maintenance, and the total
grows.

Full-service hotels require more employees to staff a variety of

departments. All of them have bells, restaurants, turn-down service,
marketing, and pools. Still more staff is needed for properties with theaters,
acres of grounds, casinos, and 24-hour room service. The employee–
rooms ratio may jump then to 1.5. Thus, a 1,000-room hotel/casino
operating 24 hours could have 1,250–1,500 employees.

Rating systems. Room rates provide good guidance to the class of hotel
even when formal rating systems exist. Some rating systems have been
publicized; some have not. Some are government-run; some are not. Most
are standardized within the single country, but not so across borders.
Members of the World Tourism Organization have done much to
standardize their systems by adopting the WTO’s five recommended
classes. Deluxe or luxury class is at the top. First-class, which is not top-of-
the-line despite its name, comes next. Tourist class, sometimes called
economy or second class is actually third in line. Third and fourth class
(really the fourth and fifth ranks) usually have no private baths, no
centralized heat, not even carpeting.



One-star establishments should be clean and comfortable even as they

offer minimal services at mini- mal price. Rates should be comparable to
local competitors with similar accommodations. Service must be
courteous but may not be available around the clock. There is no
restaurant. Furniture and linens must be in good condition, but will not be
luxurious. Housekeeping and maintenance should set a good standard.



Two-star accommodations must meet the standards of one-star facilities

and include some, but not necessarily all, of the following: Better-quality
furniture, larger bedrooms, color TV in all rooms, direct-dial phones, and
perhaps, a swimming pool. Luxury will usually be lacking, but cleanliness,
maintenance, and comfort remain essential. The desk is open around the
clock.




Three-star properties include all of the facilities and services mentioned in

the preceding paragraph. Additional service personnel will be apparent.
Food service, especially at breakfast, is required. So is a swimming pool.
Upgrades in the bath should be apparent. Internet access available.
Electronic locking and security systems are in place. Three-star
establishment should offer a pleasant travel experience.



Four-star and five-star properties make up less than 2% of the ratings! They
must be outstanding in every respect. Bedrooms should be extra large;
furniture of high quality; all of the essential and extra services (dining,
lounges, spas, laundry) should be offered at a stepped-up level. Personnel
must be well trained, courteous, groomed, and anxious to please. Rates
will reflect these superior standards. A stay in a four- star property should
be memorable. No place will be awarded four or five stars if there is a
pattern of complaints from customers, regardless of the luxury offered.



There are a very few five-star-award facilities. Those that reach this
pinnacle go beyond comfort and service to deserve the description “one
of the best in the country.” Superior restaurants are required, although
they may not be rated as highly as the accommodations. Twice-daily
maid service is standard; linens should be no less than 250 count. Rooms
will be large and accommodations and toiletries in the bath extra special.
Lobbies will be places of beauty, often furnished in antiques. Grounds
surrounding the building will be meticulously groomed and landscaped.
Guest will feel pampered.
 Worldwide. There are some 100 rating systems worldwide. Most of
them rank by using stars; others use coffee pots, alphabets, and even
feathers. Britain uses ticks for its holiday parks, which are upscale RV
(recreational vehicle) parks.

Europe’s system is the most developed. Its four- and five-star hotels have
restaurants and bars. Hotel garni means no restaurant but a continental
breakfast is usually served. That’s the usage in England as well as on the
Continent and both correspond to the U.S. phrase, “breakfast included.”

The Swiss and Mexican Hotel Associations are unique because they are
self-rating, private organizations. The Swiss use the World Trade
Organization’s (WTO) five classifications plus a luxury class termed “Gran
Tourism” or “Gran Especial.” The Irish Tourist Board takes a different
approach, listing the facilities available (e.g., elevator, air conditioning,
laundry) rather than grading them. Directories of the European
Community do the same and also classify by location:
seaside/countryside, small town/large city. European auto clubs go further
by distinguishing privately owned from government-run accommodations.

Italy finally adopted a one-to-five-star rating system but left enforcement

to individual regions. One of the rating criteria is room size: The minimum
size of a four-and five-star hotel room must be 15 square meters (155
square feet). Hotels will rate four- or five stars only if the staff has foreign
language capability.

Japanese traditional inns, ryokans, are rated according to their rooms and
baths and—of all things to Western values—gardens. These hotels offer
two meals, which are often taken in the uncluttered guest room that
opens onto those gardens. Korea has its own version of traditional,
budget-priced lodging called yogwans. Most have standard hotel
accommodations. Upscale yogwans have names that end in jang or
chang.

Type

Size and class, two of lodging’s four traditional classifications, have just
been discussed. Now we examine the third classification, types of hotels.
Type has three traditional subdivisions of its own: commercial hotels, resort
hotels, and residential hotels. As with so many other definitions in a
dynamic industry, there are sharp distinctions no longer.

Commercial Hotels. Commercial hotels, or transient hotels, make up

the largest category of American hotels. They service short-term, transient
(not permanent) visitors. Businesspersons are the chief market of
commercial houses. Large, commercial hotels are almost always full-
service properties.

Residential Hotels. Unlike the transient nature of the commercial

hotel guest, residential guests take permanent occupancy. This creates a
landlord–tenant relationship that differs in legal rights and responsibilities
from the traditional guest–innkeeper relationship. In some locales, the
room occupancy tax is not payable for residential (sometimes called
permanent) guests in a transient hotel.

Resort hotels. Transient hotels cater to commercial guests,

residential hotels to permanent guests, and resort hotels o social guests—
at least traditionally they did. Economics has forced resorts to lengthen
their summer or winter season to year-round operations. Groups and
conventions are booked at the expense of traditional social guest.
Commercial hotels retaliated by shifting markets and designs to lure
vacationing guests. As a result of these shifts, mixed-use properties
emerged, sometimes in residential areas as part of master-planned
communities. Many believe that the modified resort is the hotel of the
future. It is in keeping with social trends and compatible with the traits of
modern vacationers. Unlike the formality of the vacationer of an earlier
era, today’s leisure guest is a participant who seeks a host of activities.

The megaresort. Megaresorts are large, self-contained resorts.

Entertainment and recreational facilities are so numerous and so varied
that guests need not leave the property during their entire stay. That’s the
idea behind large casino/hotels trying to capture players.

Variations on the Theme

The hotel business is a dynamic one because it is run by clever hoteliers.

They innovate by modifying the standard into something different even as
the basic industry remains the same. Bed-and-breakfasts and boutique
hotels are two great examples.

Bed and BreakFast (B&B). B&Bs are modern versions of the 1930s
room- ing houses, once called tourist homes. It is a worldwide theme:
zimmer frei (room available) in Germany is minshuku in Japan. Guests take
beds with private families, who furnish camaraderie along with the
mandatory second “B,” breakfast. The lack of privacy—conversation at
breakfast and sometimes even a shared bath—forces the host and guests
into a level of intimacy that brings new friendships along with new
business.

Boutique hotels. Boutique hotels are the rage among the hip, the
chic, and the cool. So sometimes the pool-party buzz that they create
hides their true identity. They’re just hotels; hotels with niche appeal.
Attracting a defined customer/guest and using word-of-mouth and social
networking, rather than traditional advertising, contributes to the aura. It is
difficult to differentiate their basic services from any other hotel and the
distinction grows less evident as the major chains move rapidly into the
boutique world.

Boutique hotels have small inns as their prototypes, but they provide
the amenities of fine hotels. Although many now number in hundreds of
rooms, boutiques still remain fashionable because of their good urban
locations.

THE MODERN HOTEL INDUSTRY

The four patterns are actually interlaced. Changes in one pattern

invariably impact the other. New methods of financing may create new
management patterns, for example. Or, new products emerge when
driven by new markets. Recognizing that no one size fits all, lodging
executives began brand stretching, later called brand segmentation, as
one means of offsetting dips in the demand curve.

Segmentation, Brand, and Image

Segmentation. Upscale hotels moved vertically downward—that is,

stretched their brands—into midscale operations. Midscale chains moved both
upward and downward.

A Segmented Industry

Segmented by Activity Segmented by Markets

Casino hotel Business
Convention hotel Groups
Dude ranch Leisure

Segmented by Location Segmented by Structure

Airport High rise
Highway Low rise
Seaside Outside corridor
Segmented by Management Segmented by Ratings
Chain
 Five star
Management company Four star
Self-managed Three star

Segmented by Price (ADR)a

Deluxe
Midrange
Budget

Brand. Segmentation creates issues as well as solutions.

Identification of new products can be muddled by too many new
designs, new logos, and new promotions. Hoteliers realize that putting
together a group of like hotels—or even worse, unlike hotels—under one
name does not automatically create a brand.

A brand is defined by the customer’s recognition of the name and the

logo. To that end, hotel chains have poured advertising dollars into the
creation of new brands.

Brand equity. Brand equity is the inherent value that the shopper’s
recognition gives to the brand. There is equity (value) in the brand if that
recognition carries a positive image. There is no brand equity if guests
know the brand but will not stay. Branding is more about consistency than
about identification with the parent. Branding is more about quality than
about advertising. Branding is more about the chain’s personality than it is
about location. Branding is more about individualizing the experience
than it is about cluttering the landscape with numerous properties.

Price—in the lodging industry’s room rate—is the offset to brand equity.
With so many choices, buying decisions often depend on nothing more
than the quoted rate. When hotel rooms are viewed as a product rather
than as a service, they are characterized as a commodity.
New Product Patterns

Because of the ever-changing market needs and customer preferences

and the evolution of today’s modern traveler, the industry has ventured
into different ways of serving and satisfying the insatiable wants and
needs of its customers. Examples of different product patterns that
evolved through the years;

 Economy, budget or limited-service hotels

 All-suite hotels
 Extended-stay hotels
 Casino/hotels
 Conference centers
 Spa hotels
 Fitness Centers

New Management Patterns

The era of the small innkeeper/entrepreneur is waning. Costly and risky

enterprises facing intense competition require the management talent
and capital access that only large, public companies—hotel chains—can
provide.

Hotel Chains. Chains bring strengths in site selection, access to

capital, and economies of scale in purchasing, advertising, and
reservations. Chains attract the best management talent and provide the
consumer with brand recognition. Despite their importance, hotel chains
do not build hotel. Those who build may not own, and those who own
may not manage. So builders, lenders, and owners turn to the chain. Hotel
chains supply management talent. They can provide support to the other
four parties as well. Chain management helps with development,
sometimes holds a piece of the ownership equity, provides brand
recognition, identifies possible sites, and operates the reservation system.
 The Largest Hotel Chains In The World

1. Marriott International – $22bn

Surpassing all other hospitality chains, longstanding hospitality juggernaut

Marriott International operates in over 125 countries, franchising more
than 6,500 properties. The largest hospitality provider in the world, its vast
footprint has enabled it to gain a loyal following, as it seeks to put its
customers first whilst pursuing excellence across its 30 award-winning
brands. Negotiating competitive rates for customers worldwide, the
business acquired Starwood Hotels & Resorts in 2016 for $13bn, the largest-
ever acquisition of a hotel chain. Marriott remains committed to delivering
exceptional guest experiences, gaining 110mn combined loyalty
members across its three programs: Marriott Rewards, Starwood Preferred
Guest and The Ritz-Carlton Rewards.

2. Hilton Worldwide – $9.14bn

Founded in the early 20th century, Hilton Worldwide has become one of
the most famous hotel and resort companies in the world. Adopting a
franchise model, the business has 14 brands, situated in six continents.
Additionally, Hilton is set to open over 10 new hotels worldwide by the end
of 2018, highlighting its continual bid to unlock opportunities in new and
existing markets.

3. Best Western – $6bn (estimated)

Winning a multitude of awards and operating over 2,000 hotels in North

America alone, privately held hotel operator Best Western boasts 4,200
hotels and motels under its umbrella. With three innovative brands: Best
Western, Best Western Plus and Best Western Premier.
4. Hyatt Hotels Corporation – $4.69bn

Since going public in the 1960s, US based Hyatt Hotels Group has grown to
750 properties in 54 countries. The group is continuing to expand its
portfolio across Latin America and the Caribbean, and has recently
opened a number of new locations in Central and Latin America across
several of its key brands, such as Hyatt Place, Grand Hyatt and Hyatt
Centric. In total, the group has about 45,000 staff and total assets
amounting to $3.52bn, as of 2017.

5. AccorHotels – $2.24bn

The largest hotel chain based outside of the US, pioneer AccorHotels hosts
up to 500,000 guests each day across 25 hotel brands worldwide. In 2016,
the business merged with FRHI Hotels & Resorts, leading to the FRHI Global
Reservation Centre in Canada being rebranded as Accor Hotels Global
Reservations Centre. 27mn members form part of Accor’s attractive
loyalty program, Club AccorHotels, which caters to all customers
whatever their budget, with 4,530 hotels on offer. From affordable,
valuable comfort brands such as Ibis, to high-end luxury brands such as
Novotel and Raffles Hotels and Resorts, each brand houses its own vision
for operational excellence.

Consortia and membership organizations. Independent operators

are at a disadvantage, fighting the logos and reservation systems of their
chain-linked competitors. Battling back, they, too, have affiliated. Their
associations are looser, focusing chiefly on common logos, standards, and
reservations systems. There is some training and advice, but restrictions are
few and autonomy understood.
Reservation referrals are cooperating properties that organize to promote
the group. They have a national reservation system, joint advertising, and
a recognizable logo. This helps the single property compete but still
maintain its independence.

Management contracts. A management contract is an agreement

between a hotel owner and a management company. The contract is a
complex legal instrument by which the management company operates
the hotel within the conditions set down by the contract. For this, the
owner pays the management company a fee of between 2% and 4% of
revenues (not profits) plus incentives based on other values: 75%
occupancy, for example. Management companies may provide
preplanning advice if joined early in the process. Fees are paid whether
there are profits or not.

Management companies. Management companies lease (pay

rent) to owning companies for the right to run the hotel and keep the
profits. With management contracts, owners pay (hire) management
companies to manage; profit or loss remains with the owners.

Franchising. Franchising is not a new idea, nor is it unique to lodging.

Many industries franchise; hamburgers are probably the best known. A
franchise buyer (called the franchisee) pays for and acquires rights from a
seller (the franchisor). The franchisee may now use the franchisor’s name,
products, techniques, and advertising within a fixed geographic area.
Buying a franchise allows the franchisee to operate as an independent
entity but have the benefits of the chain. Those benefits come with costs.