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2 Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: Pearson Education Limited 2014 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6 10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN 10: ISBN 10: ISBN 13: ISBN 13: British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Printed in the United States of America

3 TRENDS in HOTEL DEVELOPMENT Capacity control: This refers to who will control the sale of inventories of hotel rooms, airline seats, auto rentals, and tickets to attractions. Presently, owners of these assets are in control of their sale and distribution, but increasingly control is falling into the hands of those who own and manage global reservation systems and/or negotiate for large buying groups. Factors involved in the outcome will be telecommunications, software, available satellite capacity, governmental regulations, limited capital, and the travel distribution network. Safety and security: Important aspects of safety and security include terrorism, the growing disparity between the haves and have nots in the world, diminishing financial resources, infrastructure problems, health issues, the stability of governments, and personal security. Assets and capital: The issues concerning assets and capital include rationing of private capital and rationing of funds deployed by governments. Technology: An example of the growing use of expert systems (a basic form of artificial intelligence) would be making standard operating procedures available online, 24 hours a day, and establishing yield management systems designed to make pricing decisions. Other examples include the smart hotel room and communications ports to make virtual office environments for business travelers; and the impact of technology on the structure of corporate offices and individual hotels. New management: The complex forces of capacity control, safety and security, capital movement, and technology issues will require a future management that can adapt to rapid-paced change across all the traditional functions of management. Globalization: A number of U.S. and Canadian chains have developed and are continuing to develop hotels around the world. International companies are also investing in the North American hotel industry. Consolidation: As the industry matures, corporations are either acquiring or merging with each other. Diversification within segments of the lodging industry: The economy segment now has low-, medium-, and high-end properties. The extended-stay market has a similar spread of properties, as do all the other hotel classifications. Rapid growth in vacation ownership: Vacation ownership is the fastest-growing segment of the lodging industry and is likely to continue growing as the baby boomers enter their fifties and sixties. An increase in the number of spas and the treatments offered: Wellness is in increasing demand as guests seek release from the stresses of a fast-paced lifestyle. Gaming: Several new casino hotels are opening. An increasing number of condotels and hotels are being developed as multiuse, meaning hotels with residences (condominiums), spas, and recreational facilities. There are increasing sustainable practices in the lodging sector. To Flag or Not to Flag and if So, Which Flag? Amanda and Jason Smith are contemplating turning their inn into a franchise. The 75-room Cozy Inn is located in a picturesque New England town, clearly accessible from the turnpike. The inn has just been refurbished, and the fresh paint and attractive landscaping adds to its presentation. The Cozy Inn s year-round occupancy is 58 percent, which is about 10 percentage points below the national average. The average daily rate is $78. The Cozy Inn s guests are a mix of business travelers, who are mostly from companies at a nearby business park; a few retirees traveling for pleasure; an occasional bus tour; and some sports teams. The Smiths have asked several franchise corporations to submit their best offers. The best one indicates that the cost of a franchise application fee is $20,000, there is a 2 percent revenue-marketing fee, and a reservation fee of $4 per room booked by the Central Reservation System (CRS). DISCUSSION QUESTIONS 1. What would you do in the Smiths situation? Make assumptions if needed. 2. What terms and conditions of a franchise agreement would be acceptable to you? 3. What additional information would you need to know if you were in the Smiths situation? CASE STUDY 101

4 Career Information A variety of career opportunities are directly and indirectly related to hotel development and classification. Some examples include: Working in the corporate offices to develop hotels or searching out locations, negotiating the deals, and organizing the construction or alterations. This involves knowledge of operations plus expertise in marketing, feasibility studies (to find out if the planned hotel will be profitable), finance, and planning. Similarly, consulting firms like Pannel Kew Foster (PKF) have interesting positions for consultants who provide specialized services in feasibility studies, marketing expertise, human resources, accounting, and finance due diligence (a check to ensure that the proposed cost of a property is reasonable). Working for a consulting firm usually requires a master s degree plus operational experience and an area of specialty. AAA and Mobile both have inspectors who check hotel standards. Inspectors are required to travel and write detailed reports on the properties at which they stay. Suppliers to the industry: These companies manufacture or distribute and sell all the furnishings, furniture, and equipment (FF&E). A visit to a trade show may be an eye-opener as to the number of suppliers in the hospitality industry. It is a good idea to explore, as many career paths as possible. Ask questions about lifestyle, career challenges and, yes, salaries. Map out your path to see where you want to be in 5, 10, 15, and even 20 years from now. Good advice comes from Jim McManemon, general manager, The Ritz Carlton, Sarasota, Florida: It is important to have a love of people, as there is so much interaction with them. I also suggest working in the industry to gain experience. Actually, it is a good idea to work in various departments while going to school so you can either join a management training program or take a supervisory or assistant management position upon graduation. Work hard, be a leader, and set an example for the people working with you. Chris Bryant, Guest Services Manager, Grand Hyatt Tampa Bay, Florida. Summary 1. Improved transportation has changed the nature of the hotel industry from small, independently owned inns to big hotel and lodging chains, operated by using concepts such as franchising and management contracts. 2. Hotels can be classified according to location (city center, resort, airport, freeway), types of services offered (casino, convention), and price (luxury, midscale, budget, and economy). Hotels are rated by Mobil and AAA awards (five-star or fivediamond rankings). 3. Vacation ownership offers consumers the opportunity to purchase fully furnished vacation accommodations, similar to condominiums, sold in a variety of forms, such as weekly intervals or pointbased systems, for only a percentage of the cost of full ownership. According to the WTO, time-shares are one of the fastest-growing sectors of the travel and tourism industry. 4. Every part of the world offers leisure and business travelers a choice of unusual or conservative accommodations that cater to the personal ideas of vacation or business trips. 5. The future of tourism involves international expansion and foreign investment, often in combination with airlines and with the goal of improving economic conditions in developing countries. It is further influenced by increased globalization, as evidenced by such agreements as NAFTA. KEY WORDS AND CONCEPTS Franchising Management contracts Real estate investment trust (REIT) Vacation ownership 102

5 REVIEW QUESTIONS 1. What are the advantages of (a) management contracts and (b) franchising? Discuss their impacts on the development of the hotel industry. 2. Explain how hotels cater to the needs of business and leisure travelers in reference to the following concepts: (a) resorts and (b) airport hotels. 3. Explain what vacation ownership is. What are the different types of timeshare programs available for purchase? INTERNET EXERCISES 1. Organization: Hilton Hotels Web site: Summary: Hilton Hotels Corporation and Hilton International, a subsidiary of Hilton Group PLC, have a worldwide alliance to market Hilton. Hilton is recognized as one of the world s best-known hotel brands. Collectively, Hilton offers more than 2,500 hotels in more than 50 countries, truly a major player in the hospitality industry. a. What are the different hotel brands that can be franchised through Hilton Hotels Corporation? b. What are your views on Hilton s portfolio and franchising options? Click on the Franchise Development icon. Now click on All HHC Franchise Brands. 2. Organization: HOTELS Magazine Web site: Summary: HOTELS magazine is a publication that offers vast amounts of information on the hospitality industry with up-to-date industry news, corporate trends, and nationwide developments. a. What are some of the top headlines currently being reported in the industry? b. Click on the Hotels Giants icon. Browse through the Corporate Rankings and Industry Leaders. List the top five hotel corporations and note how many rooms each one has. APPLY YOUR KNOWLEDGE 1. From a career perspective, what are the advantages and disadvantages of each type of hotel? SUGGESTED ACTIVITY 1. Identify which kind of hotel you would like to work at and give some reasons why. 2. Go to Eco Guru at /ecoguru. panda. org/ #calculator/ comparison and calculate your footprint. What other things can we do to decrease our footprint? ENDNOTES 1. Tom Fletcher s New York Architecture, com, retrieved March 7, 2. Wyndham Worldwide, www. wyndhamworldwide.com/about/, retrieved March 9, 3. Choice Hotels International, www. choicehotels.com/ires/en-us/html/ AboutChoiceHotels?sid=F4dTM. 0Jp6Sg5CQ.3, retrieved March 9, 4. Intercontinental Hotels Group, retrieved March 10, 5. American Hotel and Association, aspx?id=3448, retrieved March 12, 6. American Automobile Association Newsroom, Main/Default.asp?CategoryID=9& SubCategoryID=22&ContentID=88, retrieved March 12, 7. Personal correspondence with Dr. Cihan Cobanoglu, August 21, 8. Travel Assist, /travelassist. com/ mag/ a88. html, retrieved March 12, 9 RCI, RCIW_index?body=RCIW_AboutUs, retrieved March 9, 10. Jeannie Realston, Inn of Thin Air, American Way, October 15, N.C. Division of Pollution Prevention and Environmental Assistance (DP- PEA), Hotel/Motel Waste Reduction: Facilities Management, www. p2pays.org/ref/14/13910.pdf retrieved March 12, 12. Ibid. 13. Ibid. 103

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7 Operations From Chapter 5 of Exploring the Hospitality Industry, Second Edition, John R. Walker, Josielyn T. Walker. Copyright 2012 by Pearson Education, Inc. Published by Pearson Prentice Hall. All rights reserved. 105