Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 1 Overview of the Lodging Industry

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 2 Lodging as Part of the Travel and Tourism/Hospitality Industry Travel and Tourism Industry: All businesses that cater to the needs of the traveling public. Hospitality Industry: Refers primarily to businesses that provide lodging/accommodations and foodservices for people when they are away from their homes.

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 3 Lodging as Part of the Travel and Tourism/Hospitality Industry Three major segments of the Travel and Tourism Industry: –Hospitality (lodging) –Transportation services –Destination alternatives

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 4 Lodging as Part of the Travel and Tourism/Hospitality Industry Hospitality Industry includes: –Accommodations –Foodservices –Other hospitality operations

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 5 Classification of Hotels Hotels are commonly classified by: –Location –Rate –Size

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 6 Classification of Hotels Rack Rate: The price at which a hotel sells its rooms when no discounts of any kind are offered to the guest; often shortened to rack.

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 7 Classification of Hotels Hotels in any classification typically share several characteristics: –Emphasis on safety, cleanliness, and service –Inseparability of manufacture and sales –Perishability –Repetitiveness –Labor intensive

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 8 Classification of Hotels Business Travelers: Those who travel primarily for business reasons (often on an expense account to defray the reasonable travel costs that are incurred). Leisure Travelers: Those who travel primarily for personal reasons; these guests use private funds for travel expenses and are often sensitive to the prices charged.

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 9 Classification of Hotels Professional Association: A group of persons who affiliate to promote common interests. Trade Association: A group of persons who affiliate because of common business and/or industry concerns. Chapter (Association): A group that is a subset of an association; chapters are often formed on the basis of geography.

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 10 Organization of Hotels Organization Chart: A diagram depicting the departments in an organization along with (usually) the management and non- management positions within each department.

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 11 Organization of Hotels PBX (public broadcast exchange): The system within the hotel used to process incoming, internal, and outgoing telephone calls.

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 12 Hotel Ownership and Management Alternatives Hotel Chain: A group of hotels with the same brand name. Franchise: An arrangement whereby one party (the brand) allows another party (the hotel’s owners) to use its logo, name, systems, and resources in exchange for a fee.

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 13 Hotel Ownership and Management Alternatives Independent Operator: An entrepreneur who owns or operates one or a very few hospitality properties; sometimes referred to as a “mom and pop” property. Franchisor: One who manages the brand and sells the right to use the brand name. Real Estate Investment Trust (REIT): A public corporation that sells stock to raise money (capital) that is then used to purchase real estate, including hotels.

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 14 Hotel Ownership and Management Alternatives Joint Venture: Partnership comprised of organizations such as corporations, governments, and/or other entities that is formed to develop a lodging brand or property. Management Company: An organization that operates one or more hotels for a fee; also called a “contract company” or a “contract management company.”

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 15 Lodging Industry Challenges Types of challenges: –Operating –Marketing –Technological –Economic

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 16 Lodging Industry Challenges Operating issues: –Labor shortages –Cost containment –Increased competition

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 17 Lodging Industry Challenges Marketing issues: –Market segmentation and overlapping brands Market Segmentation: Efforts to focus on a highly defined (smaller) group of travelers. –Increased guest sophistication

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 18 Lodging Industry Challenges Technological issues: –Third-party wholesalers –Interactive reservation systems –Guest innovations –Data Mining: Using technology to analyze guest-related (and other) data to make better marketing decisions. –Yield Management: Demand forecasting systems designed to maximize revenue by holding rates high during times of high guest room demand and by decreasing room rates during times of lower guest room demand.

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 19 Lodging Industry Challenges Economic issues: –Dependence upon the nation’s economy Hotel Occupancy Rates: The ratio of guest rooms sold (including comps) to guest rooms available for sale in a given time period. Always expressed as a percentage. # Guest rooms Sold # Guest rooms Available

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 20 Lodging Industry Challenges Economic issues: –Globalization: The condition by which countries and communities within them throughout the world are becoming increasingly interrelated. –Safety and terrorism

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 21 Lodging Industry Challenges Full-service hotel challenges –Increased competition from limited-service hotels –CAT 5 Cable: Category five cable; the preferred cable quality to use when providing certain forms of high- speed Internet access to a standard computer. –Increased costs required to operate foodservices –Rising construction costs

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 22 Lodging Industry Challenges Full-service hotel challenges: Average Daily Rate (ADR): The average selling price of all guest rooms for a given time period. Total Room Revenue Total Number of Rooms Sold –Difficulties in developing a unified Internet marketing strategy

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 23 Lodging Industry Challenges Limited-service hotel challenges –Increased consumer expectations –Fewer profitable locations –Brand Proliferation: Over-saturation of the market with different brands. –Franchisor-franchisee conflicts

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 24 Lodging Industry Challenges Extended-stay hotel challenges –Too many hotels within segment RevPar: The average revenue generated by each guest room during a given time period. Occupancy % (x) ADR = RevPar –Over-reliance on corporate travel –Competing in a multi-competitor environment

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 25 Lodging Industry Challenges Convention hotels/conference center challenges: –High construction costs –Competition from nontraditional sources –Use of meeting technology Wi-Fi (Wireless Fidelity): An Internet access technology that does not utilize a building’s wiring system when providing users Internet access.

Woods et al., Professional Front Office Management © 2007 Pearson Education, Upper Saddle River, NJ All Rights Reserved. 26 Lodging Industry Challenges Resort/timeshare challenges: – Lagging productivity gains – Increased expectations about social/economic responsibilities – Transnational competition – Developing creative marketing/exchange programs