HTM 133

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HTM 133

• Hotel Development Profit Structure

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Ways to Classify Hotels

• Location
• Types of services offered
• Market price levels

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Location

• Center city hotels
• Suburban
• Airport hotels
• Freeway hotels

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City Center Hotels

• Traveling public for business or leisure
• Range of accommodations and services
• Typically have a signature restaurant

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City Center
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Airport Hotels

• High occupancy due to location
• Business, group and leisure travelers
• Full service
• 200-600 rooms

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Freeway Hotels and Motels

• Prominent in the 1950s
• Easy access to roadways
• Park outside the room entrance
• Example Motel 6
• http//www.motel6.com

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Ways to Classify Hotels

• Location
• Types of services offered
• Market price levels

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Types of Services

• Corporate
• Resort
• All-Suite
• Casino
• Full Service
• Limited Service

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Resort Hotels

• Originally began due to rail travel
• Famous resorts
• Greenbrier in West Virginia
• http//www.greenbrier.com
• Hotel del Coronado in California
• http//www.sddt.com/coronado
• Homestead in Virginia
• http//www.thehomestead.com

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Resort Hotels

• Captured clientele
• Food service is unique
• Diversified marketing mix
• children
• groups
• ecotourism

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Resort Hotels
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Resorts
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Resorts
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Casinos

• Heavy growth segment
• Low room rates
• Subsidized food and beverage
• Themes are popular
• 500 guest rooms plus
• Variety of food operations
• Contains a gaming room

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Casino Hotels
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Casino Hotels
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All Suites
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Ways to Classify Hotels

• Location
• Types of services offered
• Market price levels

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Price Levels

• Luxury
• Mid Scale
• Economy / Budget

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Levels of Service Luxury

• Finest of accommodations
• Concierge
• 24 hour room service
• Examples
• Four Seasons
• http//www.fshr.com
• Ritz Carlton
• http//www.ritzcarlton.com

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Luxury Hotels
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Level of ServiceMid Level

• Typically Business oriented
• Multiple food beverage outlets
• Meeting and convention services
• Chain representation
• Doubletree
• http//www.doubletreehotels.com
• Sheraton
• http//www.sheraton.com

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Mid-Price
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Level of ServiceEconomy

• Also considered budget hotels
• Average rate is 30 to 50 per night
• Clean rooms
• Continental breakfast

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Economy Hotels
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Level of ServiceAll Suite

• Cater to guests for an extended period
• Reduction in rate based on length of stay
• More space than typical hotel
• Examples
• Embassy Suites
• http//www.embassy-suites.com

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Levels of ServiceOthers

• Bed and Breakfasts
• accommodation with an owner who lives on premises
• maintains a few rooms
• offers breakfast

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Most Unusual Hotels

• The Treetops Hotel in Kenya
• http//www.kenya-direct.com/html/treetp.htm
• Underwater Hotel in Australia
• Capsule Hotel in Japan
• Underground Hotel in Australia
• Ice Hotel in Sweden

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Ice Hotel
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Treetops Lodge
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Coober Pedy
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Capsule Hotel
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Vacation Ownership

• Time share
• Group Ownership / Shares
• Rights to use sell
• Benefits
• Guest locks in prices
• Developer takes profits sooner

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Players

• Ownership
• Brand
• Management

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Ownership

• Proprietorships
• Partnerships
• Joint Ventures
• Corporations

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Brand

• Independent
• Franchisor
• Franchisee

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Management

• Owner / Operator
• Brand Management Company
• Independent Management Company

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Franchising

• Allows for a company to expand rapidly
• Uses other peoples money(franchisee)

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Benefits for Franchisee

• Set of plans and specifications for building
• National advertising
• Centralized reservation system
• Participation in volume purchasing discounts
• Listing in the franchisors directory

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Disadvantage for the Franchisee

• Lack of operational power must conform
• Large fees
• Central reservations produces 17-26 of
  reservations
• Must meet standards as set by franchisor

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Benefits andDisadvantages for Franchisor

• Benefits
• increased market share/recognition
• up-front fees
• Disadvantages
• need to be careful in selection of franchisees
• difficulty in maintaining control of standards

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Management Contract

• owner - has financial responsibility
• management company - operational responsibility
• Fee structure
• of gross revenue
• of net profits

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Financial Managementand Profits

• High degree of risk
• cyclical nature of supply demand
• high degree of capital investment

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Favorable Financing

• Affiliation with a quality franchisor
• Identification with a national chain through a
  management contract
• A lease arrangement with a hotel operator
• Conventional first mortgage loans
• Lenders

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Pricing

• Hotel Location
• Room Location
• Room Quality Amenities
• Season
• Day of the Week
• Length of Stay

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Yield Management

• Willingness to Pay
• Probability
• Optimal Allocation

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International Perspective

• Continued international development
• due to increase in tourism
• due to increase in trade and commerce
• Globalization is key to continued growth

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Assignment

• Find hotel mgt company
• Web site address
• Company name
• of hotels managed
• Brand(s) managed
• Services offered