Lodging Industry Comprehensive Notes

Industry Scope and Segments

  • The lodging sector is part of the Tourism Industry; other segments include Hospitality, Retail (Shopping), Stores, Transportation Services, Destination (Activity) Sites.

  • Lodging is part of the Tourism Industry; lodging operations and F&B (Food & Beverage) operations are components; Figure 1.1 illustrates Segments in the Tourism Industry.

  • The lodging sector is described as the nation’s largest service industry with notable economic impact:

    • Annual revenue: 957.4 billion957.4\ \text{billion}

    • Annual growth (2017–2022): −3.9%-3.9\%

    • Employment impact: one of the nation’s largest employers, wages paid: 181.3 billion181.3\ \text{billion} (2022)

    • Number of businesses: 435,000435{,}000

Demand Drivers

Hotel & Motels Segmentation

1900: A Brief Modern History of US Hotels (timeline highlights)

  • 1910

    • Fewer than 10,000 hotels

    • Rooms: 750,000 to 850,000750{,}000 \text{ to } 850{,}000

    • Hotels: approximately 10,00010{,}000 in the U.S.

    • Total rooms: about 1,000,0001{,}000{,}000

    • Employees: around 300,000300{,}000

    • Average hotel size: 60–75 rooms60 \text{–} 75\text{ rooms}

  • 1920

    • Occupancy: 85%85\%

    • Hotel construction peaks with thousands of rooms added along new state/federal highways

  • 1930

    • Occupancy: 65%65\%

    • AHA’s Hotel Red Book lists 20,00020{,}000 hotels

  • 1940

    • Occupancy: 64%64\%

    • Average room rate: $3.21\$3.21

  • 1950

    • Occupancy: 80%80\%

    • Typical hotel: 17 rooms17\text{ rooms}

    • Average room rate: $5.91\$5.91

  • 1960

    • Occupancy: 67%67\%

    • Sales: $3 billion\$3\text{ billion}

    • Total hotel rooms: 2,400,4502{,}400{,}450

    • Typical hotel: 39 rooms39\text{ rooms}; independent and locally owned

    • Average room rate: $5.91\$5.91

  • 1970

    • Occupancy: 65%65\%

    • Sales: $8 billion\$8\text{ billion}

    • Total hotel rooms: 1,627,4731{,}627{,}473

    • Average room rate: $19.83\$19.83

  • 1980

    • Occupancy: 70%70\%

    • Sales: $25.9 billion\$25.9\text{ billion}

    • Total hotel rooms: 2,068,3772{,}068{,}377

    • Average room rate: $45.44\$45.44

  • 1990; 2000–2010

    • 1990: Occupancy: 60%60\%, Sales: $97 billion\$97\text{ billion}, Average room rate: $81–$107\$81 \text{–} \$107

    • 2000–2010: Occupancy: 64%64\%, Sales: $60.7 billion\$60.7\text{ billion}, Total hotel rooms: 3,065,6853{,}065{,}685, Properties: about 45,02045{,}020, Average room rate: $58.70\$58.70

Notable Figures in Hotel History

  • Ellsworth Statler (1863–1928) & Statler Hotel

    • Motto: “the guest is always right”

  • César Ritz (1850–1918) & the Ritz Hotel

    • Described as “king of hoteliers and hotelier to kings”

The Marriott Empire

  • Emphasis on the men behind the Marriott enterprise; slide title indicates leadership behind Marriott, but no specific names/details provided in transcript.

Lodging: Tangible vs. Intangible Attributes

  • Guests consider both physical attributes and service quality when making a purchase decision.

Lodging Industry Characteristics

  • Location: Importance of location to hotels

  • Perishability: If a room is not rented on a date, the revenue is lost forever

  • Repetitiveness: Some operating procedures are routine

  • Labor Intensive: Much daily work involves employee-provided services

  • Seasonality: Cyclical nature of hotel business

  • Fixed supply but varying demand: Fixed number of rooms cannot change with demand

Size and ADR (by size, by class, and by plan)

  • By size (number of available rooms):

    • Mega: > 1{,}000

    • Large: > 300

    • Mid-size: 100–300

    • Small: < 100

  • By class – ADR (Average Daily Rate):

    • Deluxe/Luxury (Above $600\$600 per night) – Examples: Fairmont, Four Seasons, Park Hayat, Ritz-Carlton, Mandarin Oriental

    • Upper upscale (Around $400\$400) – Le Meridien; Sofitel, W hotels

    • Upscale (Around $300\$300) – Hayatt, Marriott, Omni

    • Mid price with food (Around $100\$100) – Four Points, Hilton Garden Inn, Best Western

    • Mid price without food (Around $80\$80) – Amerisuites, Hampton Inn, La Quinta

    • Economy (Around $60\$60) – Red Roof Inn, Super 8

    • Budget (Around $50\$50) – Econolodge, Microtel

  • By type of hotel – Commercial / transient; Residential; Extended-stay / all-suite; Resorts & mega resorts

  • By Plan – European; Continental (continental breakfast); American; Modified American

Complimentary Breakfast

  • Currently 62% of hotels in the U.S. offer complimentary breakfast

    • 81% among economy hotels

    • 96% among midscale hotels

    • 80% among upper upscale hotels

  • The average cost of breakfast in a hotel is around $13.90\$13.90

  • 84% of U.S. travelers say a free breakfast is important to them

Leading hotel companies worldwide (as of August 2021) by number of guestrooms

  • Presentation shows leading companies by guestroom count; specific numbers are in the transcript’s figure/table but not reproduced here

Lodging Ownership and Management Alternatives

  • Hotel property ownership/management options include:

    • Franchise company (Franchisor) ownership

    • Independent ownership

    • Independent operation

    • Franchise company (Franchisor) affiliation/management

    • Management company affiliation

    • Non-Franchise ownership/operation

Hotel Organizational Structures

  • Small (75 rooms), limited-service hotel – Typical organizational chart:

    • Manager

    • Housekeeping Manager & Staff

    • Front Office Manager & Staff

    • Bookkeeper / Accountant

    • Maintenance Manager & Staff

  • Large (350 rooms), full-service hotel – Organizational chart:

    • General Manager (G.M.) / Administrative assistant

    • Assistant G.M.

    • Controller

    • F&B Director

    • HR Manager

    • Director of Sales & Marketing

    • Front Office Manager

    • Executive Housekeeper

    • Chief Engineer

Hotel Departments: Line vs Staff; Revenue Centers vs Cost Centers

  • Line departments (directly responsible for revenues): Front Office, Food & Beverage

  • Line departments also responsible for property operations: Housekeeping, Maintenance & Engineering, Security

  • Staff departments provide technical, supportive assistance to line decision-makers: Human Resources, Accounting

  • Responsibilities include making recommendations to line decision-makers (but not decision-making authority for line): HR, Accounting

  • Revenue centers: departments that generate revenue (e.g., Front Office, F&B, also revenue from telephone services, space rental, parking, vending, golf)

  • Cost centers: departments that incur costs to support revenue centers (e.g., Housekeeping, Maintenance, Accounting, HR, Security)

Traveler Profiles

  • Business Travelers:

    • 63% male

    • 50% between ages 35–54

    • 56% employed in professional or managerial positions

    • 78% travel solo

    • 95% make reservations ahead of time

    • Typical business traveler: household income $127,000\$127{,}000; spends $147\$147 per night

  • Leisure Travelers:

    • 57% travel with a companion (two adults)

    • 39% are aged 35–54 and another 39% are 55 or older

    • 80% travel by automobile

    • 93% make reservations ahead of time

    • Average household income $99,000\$99{,}000; typical nightly spend $131\$131

Current Issues Confronting Hoteliers

  • Overbuilt problem: Hoteliers should reduce costs without sacrificing quality; avoid reducing service/product quality

  • Strategies to address labor and efficiency:

    • Reduce turnover levels

    • Increase productivity

    • Recruit from non-traditional labor markets (labor shortages)

  • Operating issues: Cost containment; increased competition

  • Brand overlap: More brands make it harder for consumers to differentiate; marketing challenge

  • Amenity creep: More amenities raise costs and may appeal to a small market subsector; online room booking increases competitiveness

  • Market segmentation: Focus on highly defined, smaller traveler segments

Guestroom Innovations and Technology

  • Innovations include:

    • Smart technology, robots, automatic sensors

    • Interactive reservation systems to secure preferred room rates

    • Data mining to analyze guest data and predict behavior for better marketing decisions

    • Yield management to match demand with room rates

  • Broader category: Technological issues shaping guestroom experience and revenue

Economic Globalization and the Lodging Industry

  • Core idea: “As goes the economy, so goes the lodging industry”

  • Global economic conditions influence the financial success of lodging organizations at the local, state, national, and global levels

Fun Facts

  • Global ADR and RevPAR by region:

    • Middle East and Africa have the highest ADR and RevPAR: ADR≈149.02,RevPAR≈91.79 USDADR \approx 149.02, RevPAR \approx 91.79\textrm{ USD}

    • Asia has the lowest ADR and RevPAR: ADR≈100.46,RevPAR≈69.34 USDADR \approx 100.46, RevPAR \approx 69.34\textrm{ USD}

  • Domestic activity: about 4.8 million4.8\text{ million} guests stay in hotels across the country each night

More Fun Facts (Additional market context)

  • There are 54,000+54{,}000+ lodging properties in the USA representing over 5,000,0005{,}000{,}000 guestrooms

  • There are 467467 casino hotels in the US; gaming tables and slot machines account for 65.5%65.5\% of revenue; accommodations typically account for 11.9%11.9\% of revenue

  • There are 17,00017{,}000 Bed and Breakfasts (B&Bs) in the US; they typically have between 4 and 11 rooms, average of 6; 79% of owners reside on site; average room rate $150\$150

  • There are 2,3002{,}300 airport hotels in the US with 322,000322{,}000 rooms available each night and an available inventory of 115,000,000115{,}000{,}000 room nights

Assignment – Millennial & Gen Z Hotels

  • Example concepts/brands targeting Millennials & Gen Z:

    • Moxy by Marriott

    • Radisson Red

    • Arlo Hotels

    • Canopy by Hilton

    • Tempo by Hilton

    • Curio Collection by Hilton

    • Aloft by Marriott

    • Even Hotels by IHG

As of Nov 2023: Top Management Companies in the World – (optional)

  • Management Company data (as of Nov 2023) includes many global operators with varying numbers of properties and rooms; see transcript for the full table

Management Companies and Owners – (optional)

  • A broader overview of ownership and management structures across the industry; reinforces the distinction between franchised, independent, management-company-affiliated, and ownership models