Chapter 1 Hotel Industry Overview Professional Career Opportunities

Chapter 1: Hotel Industry Overview & Professional Career Opportunities Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is Part of Tourism Industry: Tourism Industry Figure 1. 1: Segments in the Tourism Industry Hospitality Lodging Operation Retail (Shopping) Stores Transportation Services Destination (Activity) Sites F&B Operations Tourism industry is third largest retail industry following automotive & food stores nation’s largest service industry one of the nation’s largest employers Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is Part of Tourism Industry: Lodging (Hotel) Sector Lodging properties are a segment within tourism industry Figure 1. 2: Range of lodging property alternatives Destination resorts Full-service hotels Hotel Operations Management, 1/e Hayes/Ninemeier Limitedservice hotels Sleeping rooms © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is Part of Tourism Industry: A Brief History of Hotels Figure 1. 3 : Highlights in the modern history of the US hotel industry 1900 Fewer than 10, 000 hotels 750, 000 to 850, 000 rooms 1910 10, 000 U. S. hotels One million rooms 300, 000 employees Average size: 60 -75 rooms 1920 Occupancy: 85% Hotel construction reaches an all-time peak as thousands of rooms are added along the new state and federal highways Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is Part of Tourism Industry: A Brief History of Hotels (continued…. ) Figure 1. 3 : Highlights in the modern history of the US hotel industry 1930 Occupancy: 65% AHA’s Hotel Red Booklists 20, 000 hotels 1940 Occupancy: 64% Average room rate: $3. 21 1950 Occupancy: 80% Typical hotel: 17 rooms Average room rate: $5. 91 1960 Hotel Operations Management, 1/e Hayes/Ninemeier Occupancy: 67% $3 billion in sales Typical hotel rooms: 2, 400, 450 Typical hotel: 39 rooms, independent and locally owned Average room rate: $5. 91 © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is Part of Tourism Industry: A Brief History of Hotels (continued…. ) Figure 1. 3 : Highlights in the modern history of the US hotel industry 1970 Occupancy: 65% $8 billion in sales Total hotel rooms: 1, 627, 473 Average room rate: $19. 83 1980 Occupancy: 70% $25. 9 billion in sales Total hotel rooms: 2, 068, 377 Average room rate: $45. 44 Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is Part of Tourism Industry: A Brief History of Hotels (continued…) Figure 1. 3 : Highlights in the modern history of the US hotel industry 1990 Occupancy: 64% $60. 7 billion in sales Total hotel rooms: 3, 065, 685 45, 020 properties Average room rate: $58. 70 2000 Occupancy: 63% $97 billion in sales Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations Figure 1. 4: 2000 Property / Room Breakdown By location Urban Suburban Highway Airport Resort Property Rooms 10. 2% 33. 6% 42. 2% 7. 7% 6. 3% 16. 0% 30. 4% 31. 0% 10. 2% 12. 4% 13. 8% 26. 9% 34. 1% 16. 2% 9. 0% 3. 3% 18. 1% 27. 3% 25. 3% 26. 0% 51. 5% 33. 5% 10. 9% 2. 8% 1. 3% 22. 5% 35. 1% 21. 3% 9. 9% 11. 2% By rate Under $30 - $44. 99 $45 - $59. 99 $60 - $85 Over $85 By size Under 75 rooms 75 – 149 rooms 150 – 299 rooms 300 – 500 rooms Over 500 rooms Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Typical Lodging Guests Figure 1. 5: Typical lodging guests 28. 8% are transient business travelers 25. 3% are attending a conference/group meeting 24. 6% are on vacation 21. 8% are traveling for other reasons (for example, personal, family, or special event) Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Characteristics Emphasis on safety, cleanliness & service - Guests also consider “intangible” aspects of the purchase decision Inseparability of manufacture & sales - A room exists & is sold at the same site Perishability - If a room is not rented on a specific date, the revenue is lost forever Repetitiveness - Some operating procedures are routines Labor Intensive - Much of a hotel’s daily work involves employees providing services Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview Largest hotel affiliations Figure 1. 6: Top 5 lodging brands Brands Rooms Properties 1. CENDANT CORPOPRATION 554, 834 6, 540 2. BASS HOTELS&RESORTS, INC. 481, 482 3, 030 3. MARRIOTT INTERNATIONAL 374, 010 1, 846 4. CHOICE HOTELS INTERNATIONAL 337, 226 4, 219 5. HILTON HOTELS CORPORATION 333, 110 1, 910 These five represent some 28 % (14, 884 / 53, 500 properties) of all domestic properties, & 42 % (1, 708, 617 / 4, 100, 000 rooms) of all rooms. The majority of these brands do not “own” their hotels, but hotel owners elect to affiliate with the brand, for a fee. Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview (continued…. ) Hotel ownership / management Single-unit property not affiliated with any brand Single-unit properties affiliated with a brand Multi-unit properties affiliated with the same brand Multi-unit properties affiliated with different brands Multi-unit properties operated by the brand or others Multi-unit properties owned by the brand Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview (continued…. ) Figure 1. 7: Hotel Ownership / Management Alternatives Hotel property Affiliation Ownership Franchise Independent Operation Independent Franchise company (Franchisor) Franchise Management company (Franchisor) Hotel Operations Management, 1/e Hayes/Ninemeier Non-Franchise Independent Management company © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Organizational Structures Small Hotel (75 rooms) Figure 1. 8: Organizational Chart for Small (75 Rooms), limited-service hotel Bookkeeper /Accountant Manager Custodial personnel Hotel Operations Management, 1/e Hayes/Ninemeier Housekeeping personnel © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Organizational Structures (continued…. ) Large Hotel (350 rooms) Figure 1. 9: Organizational Chart for Large (350 rooms), full-service hotel Administrative assistant F&B Controller director G. M. Director H. R. of sales & Manager marketing Hotel Operations Management, 1/e Hayes/Ninemeier Assistant G. M. Front Executive office housekeeper manager Chief engineer © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Departments Line & staff departments Line department Staff department Those directly involved in the “chain of command”. Directly responsible for revenues - Front Office & Food / Beverage Also responsible for property operations - Housekeeping, Maintenance, & Engineering Providing technical, supportive assistance to support line decision-makers Making recommendations to (but not decisions for) line decision-makers - Purchasing, human relations, and accounting Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Departments (continued…. ) Revenue and cost centers Revenue center Cost center A hotel department that generates revenue - Front office & food / beverage departments - Also revenues from telephone services, space rental and fees from parking garages, vending machines, and golf courses A hotel department which incurs costs in support of a revenue center - Marketing, maintenance, accounting, human resources, & security departments Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is a Service Business Successful hotels greatly emphasize serving their guests to the best possible extent. The brand name a hotel uses is not the most important factor in a hotel’s success. When hotels put guests’ needs first, those hotels will do well. Consistent delivery of quality of products and services to guests Engineering & Maintenance must be addressed first, Facility rather than considering tactics to maximize revenue; minimizing costs comes next! Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is a Service Business (continued…. ) Questions that must be addressed to deliver quality service: How will we show our staff and tell them about the need for high quality guest service? How exactly will we evaluate the level of service quality being provided to our guests? What exactly are our service strategies and our service procedures? How will we train our staff about service concerns and the tactics to deliver service? How will we reinforce our service strategies? What can we do to emphasize service as a philosophy rather than as a program with a definite start & end time? What can we do to excel in the guests’ moments of truth? Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues confronting Hoteliers: Operating Issues Labor shortages Managers should implement procedures to: a) reduce turnover levels, b) increase productivity levels, c) recruit from non-traditional employee labor markets. Cost containment Hoteliers should examine ways to reduce costs without impacting quality. An excessive emphasis on cutting service or product quality will ultimately result in reduced hotel revenue. Increased competition Overbuilt problem Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues confronting Hoteliers: Marketing Issues Market segmentation is increasing Efforts to focus on a highly defined, smaller group of travelers. Brands overlap The more the number of brands increase, the harder consumers find it to differentiate between them. Increased sophistication of consumers Results in a more competitive selling environment for hoteliers (e. g. , online room booking) Increased number of amenities Various amenities (e. g. , business centers) increase costs for hotel owners yet sometimes appeal to only a small segment of the hotel’s market. Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues confronting Hoteliers: Technological Issues Recent technological innovations include: Interactive reservation system - Allows potential guests to make reservations at preferred room rates in reduced time Guestroom innovations - Two (or more) telephone lines enabling Internet access / interactive menu ordering for room service / electronic games and guestroom checkout Data mining technology - Analyzing guest- (and other) related data to make better marketing decisions Yield management - Matching guest demand with room rates Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues confronting Hoteliers: Economic Issues “As goes the economy, so goes the lodging industry” Impact of globalization on the lodging industry Lodging industry is an integral part of the tourism industry - It is affected by the extent to which travelers, both within the country and worldwide travel Economies of the world, the country, the state and the community Facility Engineering & Maintenance play on the financial success of a lodging organization & the individual properties which comprise it. Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview (continued…. ) G. M / Rooms division M. / Front office M. / Controller / Executive housekeeper / Catering M. / Executive steward / F & B M. / Banquet M. / Chef / Executive chef / Food production M. / Pastry Chef / Sous chef / Room service M. / F & B controller / Restaurant M. / Beverage M. / Purchasing Director / Human Resource M. / Credit M. / Executive assistant M. / Convention M. / Marketing & sales M. / Auditor / Director of security / Convention services director / Resident M / Chief engineer Typical Multi-Unit Positions: Area G. M. / Regional G. M. / Director of Training / Vice president, finance / Vice president, real estate / Director of franchising Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458

Professional Career Opportunities in Lodging: Get Started With Career Planning How does one start to plan for a career in the lodging industry? Enrolling in and graduating from hospitality-related programs of study Working in a variety of lodging positions (including educational internships) Developing a career ladder for professional development within the lodging industry - Working with a mentor Obtaining suggestions by talking with G. M. s at hotels nearby industry leaders and educators Hotel Operations Management, 1/e Hayes/Ninemeier © 2004 Pearson Education Pearson Prentice Hall Upper Saddle River, NJ 07458