Hotel Industry Overview and Issues

third largest retail industry following automotive & food stores largest service industry one of the world’s largest employers Tourism Industry Hospitality Retail (Shopping) Stores Transportation Services Destination (Activity) Sites Lodging is Part of Tourism Industry: Tourism Industry Lodging Operation F&B Operations Tourism industry is

Lodging is Part of Tourism Industry: Lodging (Hotel) Sector Lodging properties are a segment within tourism industry Range of lodging property alternatives Destination resorts Full-service hotels Limited- service hotels Sleeping rooms

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)

Emphasis on safety, cleanliness & service - Guests also consider “intangible” aspects of the purchase decision Lodging Industry Characteristics 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 Organizational Structures Figure 1.8: Organizational Chart for Small (75 Rooms), limited-service hotel Small Hotel (75 rooms) Manager Custodial personnel Housekeeping personnel Bookkeeper /Accountant

Hotel Organizational Structures (continued….) Large Hotel (350 rooms) Figure 1.9: Organizational Chart for Large (350 rooms), full-service hotel G.M. Administrative assistant Assistant G.M. Controller F&B director H.R. Manager Director of sales & marketing Front office manager Executive housekeeper Chief engineer

Revenue 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 Cost center A hotel department which incurs costs in support of a revenue center - Marketing, maintenance, accounting, human resources, & security departments Revenue and cost centers Hotel Departments

Successful hotels greatly emphasize serving their guests to the best possible extent. Lodging is a Service Business 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. Facility Engineering & Maintenance Consistent delivery of quality of products and services to guests must be addressed first, rather than considering tactics to maximize revenue; minimizing costs comes next!

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? Questions that must be addressed to deliver quality service: Lodging is a Service Business (continued….)

Overbuilt problemHoteliers 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. Managers should implement procedures to: a) reduce turnover levels, b) increase productivity levels, c) recruit from non-traditional employee labor markets. Labor shortages Current Issues confronting Hoteliers: Operating Issues Cost containment Increased competition

Various amenities (e.g., business centers) increase costs for hotel owners yet sometimes appeal to only a small segment of the hotel’s market. Results in a more competitive selling environment for hoteliers (e.g., online room booking) The more the number of brands increase, the harder consumers find it to differentiate between them. Efforts to focus on a highly defined, smaller group of travelers. Market segmentation is increasing Current Issues confronting Hoteliers: Marketing Issues Brands overlap Increased sophistication of consumers Increased number of amenities

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 Recent technological innovations include: Current Issues confronting Hoteliers: Technological 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 Facility Engineering & Maintenance Economies of the world, the country, the state and the community play on the financial success of a lodging organization & the individual properties which comprise it. Current Issues confronting Hoteliers: Economic Issues