2 Patterns in the Lodging Industry ProductMarketOwnershipManagementThe four patterns are actually interlaced. Change in one invariably impacts another.
3 New Product Patterns Segmentation Brand Brand Equity The lodging industry uses segmentation to mean different products, hotel types.BrandCustomer recognition defines a brand: recognition of the name and logo.Brand EquityThe inherent value that the shopper’s recognition gives to the brand.
5 New Product Segments Economy (Budget, or Limited-Service) Hotels Amenities and Amenity CreepAn amenity is a special extra used to distinguish the property from its competitors.The history of the industry’s ever-improving levels of service is the story of amenity creep.How Budgets CompeteForgo some amenitiesSmaller rooms
6 New Product Segments cont’d All-Suite HotelsAppeal is 2 rooms for the price of one.Extended StayOriginal concept of the all-suite hotelHave higher occupancies and lower ADRsCorporate HousingExempt from local room taxesPermitted in areas not zoned for hotels
7 Mixed Use Projects and Other Hotel Segments Apartments, hotels, resorts, condos, shopping marts & business towers merge into one development=mixed-use conceptCasino/HotelsDifferent focus from traditional hotels: gaming revenue is the major income producer, not room sale.Becoming lodging’s dominant segment
8 Mixed Use Projects and Other Hotel Segments cont’d Conference CentersHighly specialized facilities designed for meetings and conferencesRates are bundled: guest rooms, meeting rooms, food, drinks and equipmentSpasEssence of the spa experience is healthSeven spa types: club, cruise-ship, day, destination, medical, mineral springs, resort/hotel
9 New Market Patterns Marketing to the Individual Guest Guest Profiles Knowing guests in various circumstances, developing profiles, enables hoteliers to manage a variety of market segmentsBusiness/Leisure TravelersAll guests display some degree of elasticity
10 Marketing to the Individual Guest cont’d The International GuestWorld Tourism Organization (WTO) forecasts 102 million visitors to the US by 2020.Preferred Guest ProgramsGuests earn points with hotel chains.Nonguest BuyersAre intermediaries who buy guest rooms.
11 Marketing to the Group Tourist/Leisure Visitors The Tour Package The wholesaler (nonguest buyer) handles the mass movement of leisure travelers.They buy at wholesale prices because they buy in quantityThe Inclusive Tour (IT) PackageInvolve financial risks (air & land transportation) outside the hotel’s control
12 Marketing to the Group cont’d Business/Commercial GroupsSMURF = societies, medical, university, religious, fraternal organizationsConventionsTrade ShowsThe Single EntityIncentive Tours
13 New Ownership Patterns The State of IndustryTurmoil & ChurningIncome tax laws changed in the 1970’sChurning = rapid buying and sellingA Consolidating IndustryConsolidation promises economies of scale, larger marketing & distribution networks for the chains.
14 Ownership & Financing Alternatives Individual OwnershipReal Estate Investment Trusts (REITS)Public companies that raise capital through the sale of stockCondos & TimesharesCondos are real estate purchases, time shares are not.
15 New Management Patterns Hotel Chains75% of all hotels are under the flag of chains.insert Exhibit 2-14
16 Hotel Chains cont’d Parties to the Deal Developer Financier Ownership (equity)Management company
17 Management Contracts & Management Companies Agreement between the hotel owner & a management companyManagement companiesGrew important because of 3 different eventsGreat DepressionOil Embargo of 1973Banking system collapse of 1980’s
18 Management Contracts & Companies cont’d Leasing (Renting)Are popular when times are goodFranchisingFranchise fees have almost doubled during the past 20 years.They now represent 9% to 10% of room sales – some 8% of sales from all sources
19 Summary Hotelkeeping opens the 21st century at the peak of its cycle. The 21st century will build on the dynamic changes in products, markets, financing and operations that continue to reshape this ancient industry.