Chapter 1 The Hotel Industry

The hotel industry cycles with the economy. Generally building during booming times and putting old hotels out of business during slower times. There is an estimated 65,000 hotels in the United States today The worth of all US hotel properties is $1 trillion making each room worth about $250,000.

How Hotels Count and Measure Occupancy- measures the economic health of the hotel industry, reflecting supply and demand. Occupancy is calculated each night by how many rooms are rented. Occupancy is calculated by dividing the number of rooms sold by the number of rooms available

Sales per occupied room- the quality of the business is measured by rate each guest is paying. This is also known as the Average Daily Rate (ADR). This is calculated by the number of room sales in dollars by the number of rooms sold.

RevPar (Revenue Per Available Room)- Balances demand and price. Measures the revenue per room relative to the total room inventory available. This is calculated by dividing the room revenue by the number of rooms available for sale.

Double Occupancy- Any room in which there is more than one guest. This formula is often incorrect, it can say that the hotel is at full occupancy because there are more people in each room. Break-Even Point- Neither profit or loss. Break-even points are expressed as a percentage of occupancy.

Characteristics of the Hotel Industry Perishability- Vacant rooms are perishable. There is NO way to sell the unoccupied room from last night. Location- There is no way to move a hotel room, meaning that good marketing and sales mean a lot to hotels in uneven neighborhoods. Fixed Supply- Just like location, supply is fixed as well. What you see is what you have.

High Operating Costs- High fixed costs and very labor intensive. Seasonality- Week days are busier for most hotels, whereas resorts are busier on the weekends. Lodging has changed drastically over the years, from private homes to what we know today. The industry still offers the same basic accommodations shelter, food and hospitality.

Classifications Size: The number of rooms the hotel has to offer determines the size of the hotel. Small: 100 or less rooms Medium: rooms Large: 300 or more rooms

Class(determined by): Average Daily Rate- the higher the room rate= higher class hotel. Limited Service or Full Service- some hotels offer a clean room and a bed to sleep in while others offer room service and newspapers delivered to your door. Number of Employees- number of employees per guest room. Limited service hotels may have.25 housekeepers per room while full service may have one housekeeper per room.

Rating System- Worldwide rating systems and U.S. rating systems. U.S. System- AAA and Mobil are the most widely known.

Type of Hotel: Commercial or transient, serve short term visitors. Business persons are the main market. Residential- permanent residency has different legal rights and responsibilities. Resort- serve social guests and group conventions.

Hotel Plan European Plan- room rate includes room accommodations only. Meals are charged at menu prices. American Plan- room rates include room and all three meals. Often popular for bed and breakfasts.

Variations on Themes Bed and Breakfast- guests take rooms with private families. Boutique Hotels- small inns used as the prototype but offer the amenities of fine hotels. Trophy Hotels- hotels that add to an owner’s reputation, acquired just to claim ownership.