Franchising
Quickly expands your company by using other people's money instead of your own.
Franchisor (owner of the company)
Grants rights to use trademarks, logos, and proven operating systems and procedures.
Franchisee
Signs a contract to operate the hotel/restaurant, etc. under the guidelines of the franchisor. Has the financial backing, but lacks expertise and recognition.
What year did franchising begin, and with which hotel?
1907 with the Ritz Carlton
Midprice family hotel created by Kemmons Wilson in 1957
Holiday Inn
the 60s, 70s and 80s.
Primary growth of hotels came in these decades
Trends of Franchising
Fresh looks, location, expansion to smaller cities, foreign expansion
Average Agreement fees (between franchisor and franchisee)
3-4% of room revenue fees
Benefits of Franchising (benefits of the franchisee)
Standard set of plans
National advertising
Central reservation system
Volume Discount pricing
Lower fees by credit card companies
Drawbacks of Franchising
High Fees.
Central reservation system only account for 17-26% of reservations.
Must maintain franchise standards.
Pros for the Franchise Company
Increased market share and recognition.
Franchise fees are typically 3-4% of room revenue.
Up-front fees
Cons of the Franchise Company
They need to be careful choosing partners.
Difficult-to-maintain standards.
Management Contracts
responsible for the hotel industry's rapid growth since the 1970s.
Requires little up-front financing
Real Estate and phsyical plant are owned by different entities
Management Fee
Typically 2 to 4.5% of gross revenue
Why do people prefer Management Contracts?
Less capital is tied up in managing properties as opposed to owning properties.
Real Estate Investment Trusts
Around since the 1960s.
Investors don't pay corporate income tax.
Investors required to distribute at least 95% of net income to shareholders.
Trade as stocks (easier to get in and out of)
True/False: The US has a formal government classification of hotels.
False: they do not.
American Automobile Association(AAA) and Forbes Travel Guide
Two organizations that rate hotels (based on diamond and star ratings)
Ways to classify hotels
Location.
Price.
Level of Service
City Center Hotels
Meet the needs of business and leisure travelers
Airport Hotels
Full-service hotels built near airports. (200-600 rooms)
Freeway / Interstate Hotels /Motels
Convenient place with limited amenities
Casino Hotels
Make more money from gaming than from rooms
Conference and Convention Hotels
Provides facilities for guests attending meetings
Full Service Hotels
Lodging facilities with food and beverage outlets, room service, and bell staff in addition to upgraded rooms
Economy/Budget Hotels
offer clean, reasonably sized rooms with no frills
Extended Stay Hotels
A moderately priced, limited-service hotel marketing to guests desiring accommodation for extended time periods (generally one week or longer). Gives 25% more space than regular hotels.
Mixed Use Development
development that combines housing and businesses in one area. Include permanent residences.
Bed & Breakfast
Owner lives on property and provides accommodations and breakfast
Resorts
Inclusive and diversified in accommodations
Vacation Ownership
Timeshares. One-time purchase price plus annual maintenance fees.
Fastest growing sectors of the travel industry
The EU and NAFTA
account for 508 million consumers.
Trends in Hotel Development
Safety and security
Technology
Globalization
Consolidation
Diversification
Gaming
Increased number of spas
Sustainable practices