A history of the founders of the hotel industry provides an opportunity to reflect upon plishments in real estate development coupled with his hotel management. Results 15 - 30 Hotel Management and Operations PDF - Ebook download as PDF File .pdf), Text File .txt) or read book online. management. Library of Congress Cataloging-in-Publication Data: Hotel management and .. It is my great good fortune that my files created in Adobe PDF or PageMaker for.
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The art of public speaking / Stephen Lucas. i 10th ed. p. cm. sequently, one of the first tasks in any public speaking hotel management and operations. Hotel operations are chiefly concerned with providing accommodation, food and drink services. This requires managers to have a good understanding of room. PDF | On Mar 14, , Radhika Kapur and others published Hospitality Management.
Profit levels for Irish hotels are now higher than levels achieved at the peak of the market in Occupancy levels increased by 3. The 5-star market and larger hotels also benefitted from an increase in demand which allowed these hotels to yield a higher average room rate and stronger profit levels. Please see an overview of the hotel results here pdf. Aiden Murphy , a partner with Crowe, has overseen the production of the Annual Hotel Industry Survey for the last 18 years. He notes that the profit levels within the hotel sector is now at a sufficient level to support the development of new hotel builds in Dublin and extensions to hotels outside Dublin. The Dublin hotel sector is dealing with capacity issues and new room supply is required to deal with increasing demand levels.
Rebranding is a complicated process that must be accomplished within critical time frames to coincide with marketing, financial, and operational variables. Tom Dupar is a seasoned veteran at this fascinating and important activity and has participated in rebranding operations around the world. His essay on the intricacies of rebranding was a mainstay in the previous edition of this book.
Todays economic circumstances are different, and Dupars business has changed its focus to opening new major projects. His piece serves as a useful companion to that of John Dew, and the two should be read together, with an eye toward comparing Dews smaller project focus and Dupars large projects. Section 1. Once the province of high-end hotels and resorts, the idea of being pampered in a spa has been added to the service mix in many more modest hotels and resorts. While the big-name spas at five-star properties still set the standard for pampering and pricing, the comfort of personal service in less lavish spas seems to appeal to the modern traveler as well.
Peter Andersons overview of the spa industry provides insights into this fascinating service product. In addition to products, building, and rebranding, I have also chosen to include in the section two recently reviewed and studied ideas that may or may not be adopted across the industry.
At the end of this section are a number of suggested readings for the student who would like to gain more in-depth knowledge about the hospitality industry as a whole and specific historical antecedents. In particular, the books by Hilton and Jarman look closely at the intermachinations of the establishment by two early pioneers of the industry, one of whom, Conrad Hilton, lives on in an international, publicly traded company operated by one of his sons.
Statlers contributions to the modern hotel business are legendary in that he is generally credited with founding and operating the first commercial hotel concept that recognized the realities of the early business traveler at the beginning of the twentieth century.
The suggested articles are drawn from recently published historic overviews of the hotel side of the hospitality industry in the United States. They also highlight other major forces in the development of the modern hotel business. The sign on the fence states that a new hotel is being built with a planned opening date of spring If you have ever wondered just how that hotel was created, you may have wondered about some or all of the following questions: How did someone select that particular vacant lot?
Who actually creates a new hotel? Who owns it? Where did they get the money to build it? How long does the process take from idea to grand opening day? Who selects the architect, the engineers, and the interior designer? Who manages the myriad details that go into the development of a new hotel? Who will manage the hotel once its open? We hope to address these and other questions you may have in this chapter.
Depending on the business structure selected, the developer often puts his or her personal wealth at risk when engaging in a hotel project. The developer, along with a small staff of people, networks with commercial real estate agents on the lookout for a suitable hotel site. Depending on the type of hotel to be developed, a site of at least two to four acres is required for comparison, an acre is roughly the size of a football field.
This property must be zoned by the city for a hotel, be visible from a freeway or major street arterial, and have city approval for such construction activities as curb cuts, lefthand turn lanes, and delivery truck access.
Commercial realtors offer sites for the developers consideration that include maps, aerial photos, and proof of hotel zoning. Sometimes the developer views potential sites by driving around the neighborhood within five miles of the site or touring multiple sites by helicopter, noting where the potential guests live and work and where potential competing hotels are located.
The price per square foot of the land is considered. The higher the cost of land, the higher the rates the hotel will need to charge. Is the price too high for the average daily rate ADR in this particular market? Is it too low? Or is it acceptable? This is determined when the hotel financial pro forma budget document is created.
Companies offer hotel feasibility studies for a fee and are experts in a particular market, or developers may use the consulting group of one of the major public accounting firms.
The company retained to do the feasibility study can spend up to several months gathering detailed data to see if, in their opinion, it makes economic sense to build the hotel. Their conclusion offers an objective thirdparty opinion as to whether the project is feasible, hence the term feasibility study.
Licensed Best Western, Guest Suites, etc. Ten-year Projection Occupancy projection by year ADR by year Estimated cash generated for debt Estimated cash generated for distribution to investors Estimated cash-on-cash return after-tax income divided by equity invested Overall projected yield Projected internal rate of return Net present value of the project over each of the next ten years Once the feasibility study is completed, the developer is prepared to move forward with the project.
Often, at this stage of the process, the developer downloads an option on the land to tie it up until the remaining development steps can be completedand to prevent the competition from downloading it. The development company charges a fee, approximately 3 percent of the total project cost, for this service.
Consideration must also be given to the brands already represented in the target market that may be available for franchise. The franchise company is approached and a franchise is requested, with the feasibility study offered as backup for the request. The next step is for the franchise company to conduct an impact study of the market. This considers such matters as possible negative impact on existing hotels that carry the franchisers flag. A major consideration is the best franchise brand for the market segment to be served.
Each franchise company has different Because the final product of this process is a building the operator has to run as a hotel, the architects experience in designing hotels, his or her experience with the prototypical drawings of the franchise selected, the fee, and his or her on-time record must be considered. Architect fees can run up to 5 percent of the total project cost but are often negotiated down, if the project is big enough. The firms experience and record on similar projects are critical.
The architect does not have to operate the hotel when it is completed. The developer wants the architect to design a hotel that will be easy to operate and maintain. Again, experience in building the hotel type is important. It is hoped that the general contractor has learned from any mistakes made in building similar hotels. The general contractor and architect often bid the project as a team; this helps the developer determine the final cost.
Often, up to a 10 percent contingency cost that allows for unforeseen circumstances is built into the project bidding process. The developer, on behalf of the owning entity, then approaches a number of lending institutions. The lending institutions analyze the deal and offer a proposed term sheet that answers all of the borrowers questions.
This allows the borrowers to select the lending institution with which they wish to work. The lender then commissions an appraisal of the project by an independent appraisal company such as Hospitality Valuation Services HVS. Based on the appraisal, the lender issues a loan commitment for the project that usually offers up to 60 percent of the project cost. The balance must be raised as equity from investors.
The sum of these constitutes the total cost of the project for purposes of securing financing. With this information, the ten-year operating pro forma budget is updated to reflect actual costs.
Its now time to go to the money markets for construction financing. To pursue these, the developer prepares an offering solicitation document that meets current securities and exchange law. The nature of this document depends on the type of business entity that was formed. For limited partnerships or limited liability companies, a private placement offering circular and project description is prepared.
For S or C corporations, stock offerings are prepared for sale consistent with applicable federal and state securities laws. The developer now contacts money sources that have risk capital available to invest. Based on their study and evaluation of the reports, documents, and studies detailed above, they decide whether or not to offer funding to the developer. Once the loan is secured, the equity raised, and the building permit issued by the city, the land download option is exercised and the download is completed.
Then the month construction process begins. If the architects plans work as intended, if the general contractor has no problems with subcontractors, unions, or permits, if all the furnishings, fixtures, and equipment arrive on time, if the weather cooperates, and if the employment market is such that human resources are sufficient to open a hotel, then congratulations! The hotel will open on time. Often even before the construction activity commences, the owning entity selects an appropriate management company to manage the pre-opening, marketing and sales, selection and training of the opening staff, preparation of the operating budget, and day-to-day operations once the hotel is opened.
Management companies charge 35 percent of revenue for this service. In recent years, management companies have charged 34 percent of revenue and 23 percent of gross operating profit so they can be measured and evaluated on both sales and profitability.
The franchise company may offer to provide management services to franchisees. Marriott International, Inc. Independent management companies manage the remaining hotels under long-term management contracts of up to ten years duration, often with several five-year renewal options.
It has been described in a step-by-step process, but in reality, many of the steps are carried out concurrently to save time and money. Nevertheless, the hotel development process takes about three years from original concep- Section 1.
Only after the project is approved and all financing is in place can the developer start to recover upfront costs and collect development fees. Hotel development with its component parts of hotel feasibility studies, hotel appraisal, hotel real estate finance, and hotel management are all among the career opportunities available to hotel and restaurant administration graduates.
The land was previously contaminated with industrial pollutants that made the parcel unsafe for habitation and construction. The City Development Commission used state, local, and federal grants to have the land decontaminated, created a master plan for the area, and then offered the parcel for sale and development.
The RFP was sent to many major hotel companies and commercial real estate brokers, asking prospective downloaders to submit a download price bid along with a statement of the downloaders development history and ability to develop a hotel of the type envisioned by the Commission. It listed a closing date by which all bids had to be submitted. An area commercial real estate broker contacted a hotel development and management company with a long history of developing and managing extended-stay hotels in the Pacific Northwest, including a property located in a similar setting to that being offered for sale.
The commercial realtor offered to represent the developer in negotiations with the City Development Commission, which would be paying the real estate commission on the sale. An agreement was reached with the commercial real estate broker to represent the downloader to the seller, and the developer went to work in preparing a proposal.
The developer conducted a feasibility study to see all of the conditions in the marketplace that would be encouraging or discouraging to this development project. Studies were conducted to estimate how many room-nights were being sold within a five-mile radius, how many extended-stay room-nights were available in the market, how many hotel rooms existed, and how many were being planned over the following five years.
That provided the basis for a ten-year revenue estimate. The City Development Commission awarded the project to the developer, and work began.
Thiseffort was successful in raising 40 percent ofthe total cost of the hotel in anticipation that alender would provide the remaining 60 percentin the form of a construction loan.
In additionto the priority return, investors could expect toparticipate in any future capital gain realizedshould the hotel be sold. The development company, continuingto function as agent for the owner, thensought a commercial bank to provide threeyearconstruction financing for the project. The size of the constructionloan was above the lending limits ofmost small regional banks.
The terms allowed the developer, asagent for the owner, to draw down the loanevery 30 days after providing proof thatfunds had been properly disbursed in theconstruction process. The loan documents setan interest rate and also required that theownership LLC seek a permanent mortgageprior to the three-year expiration date onthe construction loan. The development company then negotiatedwith and selected a general contractorwith significant hotel construction experiencewho acted on behalf of the developer, asagent for the owner.
The general contractorthen selected design-build subcontractors andan interior designer to select colors, fabrics,furniture, fixtures, and equipment to meet thehotel franchise design requirements. Building permits were applied for, andthe building design was presented to the CityDevelopment Commission for its approval,along with other groups with a stake in theappearance of the finished building in relationto the area and neighborhood.
With all ofthese approvals in place, construction commenced,and the hotel opened two years later. As a result, the hotel didnot achieve the projected occupancy or averagedaily rate during the three-year constructionloan period.
The bank that had providedthe construction loan notified theowners that they did not wish to providepermanent financing under these circumstances. The owners were forced to conducta search for a new mortgage bank. This illustrates the risk that developersface when entering into a hotelproject.
However, as hotel values historically peakand decline on about a ten-year cycle, theowners look forward to the option of sellingthe hotel on the next peak, which will allowthem to capture the original projected returnthrough capital appreciation.
Hotel developmentand ownership is a high-risk, highrewardenterprise. Peter CassDramatic changes have affected the hotel industryover the past 30 years.
These changeshave had a disproportionately high bearingon the independent hotel owner, who, in theface of increasing pressure from large, wellfundedchains, struggles to maintain independenceand to compete on the basis ofdistinctive hospitality and character. Several organizations provide independenthotels and resorts with reservations andsales services. As competition has evolved andintensified, some of these organizations havemodified their structure and enhanced theirservices to meet the changing needs of independenthotels and competitive market dynamics.
Today,independent hotels may choosefrom among more than 20 such organizationsdelivering varying degrees of competitive advantageand ownership independence. Both the demographicand psychographic characteristicsof the global consumer market are growingand changing radically. This includes internal hoteloperating systems, revenue management,direct-to-consumer communications andbooking technology Internet , marketingtechnology customer databases , andtelecommunications and automated salessystems that enable central sales offices tobecome revenue producers.
Recognized brand names andbrand attributes are important in reachingdiverse customer segments and in creatingcustomer loyalty.
The managementand leveraging of multiple brandsuse similar technology platforms andshared sales and marketing infrastructuresto consolidate and direct consumerdemand.
Some established ways of doing business—long-term,high-fee management contractsand franchises, a focus on traditionaldistribution channels, and traditional hospitalityindustry marketing techniques—are nolonger effective in the new consumer-focusedmarket. More and more hospitality marketingbudgets are being directed toward technologyenabledcustomer booking and communication;this shift away from traditional hospitalitymarketing techniques is expected to evolve Section 1.
The independent hotel or resortand many small branded management companiesmay not be able to fund this requirement. However, this shift will not affect all independenthotels and resorts simultaneously. The first wave of change will hit the globalbusiness and city hotel market. This is primarilybecause of brand competition and the factthat the business travel distribution networkis more structured and driven by multinationalcorporations desiring lower and morepredictable costs.
The second wave will affectthe leisure market, and the changes could followquickly. Leisure travel content, includingpackaging on the Internet, will increase rapidlyas the presently fragmented leisure traveldistribution network becomes more unifiedand efficient through consolidation.
The emergence of e-commerce modes inthe hospitality industry is not eliminating theintermediary and empowering the individualproperty, as once thought; instead, it is creatingnew, more powerful intermediaries. Someof these evolve from the hospitality industry,while others are opportunistic e-commercecompanies. This pressure bolstered the proliferation ofthe management contract, whereby the chainoffers the hotel owner the rights to use itsbrand name and established facility and servicestandards as well as trained operationsmanagement and reservation and marketingservices—for a significant fee, usually a percentageof gross sales.
The pressure to growalso fostered the development of the franchiseconcept and franchise system in NorthAmerica. The franchise differs from the managementcontract in that the owner is responsiblefor operations, including meeting thefranchise standards.
The growth of management and franchisecontracts has been remarkable, and today, accordingto a recent study, 75 percent of thehotel rooms in North America are covered bysome form of branded franchise or professionalmanagement agreement Travel ResearchInternational, While these additional offerings leveragedlinkages to the global distribution systems andled to strong relationships with travel agents,the consumer was largely ignored, and the organizationsdid little to generate consumerbrand awareness.
In the United States, strong consumerbranded operators are attracting increasingamounts of capital to fund their growth at theexpense of unbranded operators PricewaterhouseCoopers, Lenders,believing that an established brand providedgreater economies of scale and established infrastructure,opted for the lower-risk alternative. As a result, the need for independenthotels to be associated with a clearly defined,trusted brand became more critical than ever.
In the late s, independent hotels, particularlythose in Europe, began to face thedaunting costs of upgrading their technologicalinfrastructure and facilities to accommodatechanging consumer needs. Such upgradesas new property management systems, highspeedInternet access, two-line phones, inroomfaxes, and leisure and health facilitiesbecame critical to maintaining competitiveness.
As a result, these hotels becameincreasingly focused on leveraging greater returnsfrom their reservation affiliation. These relation-ships operated best in a market environmentthat was stable, somewhat homogeneous interms of demographic market segmentation,and where travel influencers played a dominantrole in transient business, group, andleisure travel.
Reservation affiliations aremost effective in regional hospitality marketsthat do not have multiple brand competitionand when the goals and objectives of thereservation organization are in alignmentwith the goals of the independent hotel owners.
A contributing element to the attractivenessof reservation affiliations has alwaysbeen the networking and camaraderie opportunitiesfor the professional management atindependent hotels.
Reservation affiliations focus on traditionalchannels of distribution. The new competitive playingfield is proprietary distribution channelsleveraged by consumer segmentation, e-commercetechnology and partners, and innovativecustomer management programs.
In the new technology-driven and consumer-empoweredglobal market, the strengthand effectiveness of reservation affiliationsare challenged by new market and operatingimperatives. The cost to compete againstchains will grow exponentially. As competitionintensifies, it is probable that local and regionalmarket share at independent hotels andresorts will be drawn off by local and regionallicensees of strong global brands.
Independenthotels, therefore, need to draw more nationaland international business to fill occupancygaps. This requirement runs counter to the establishedbusiness model and capabilities ofreservation affiliations.
The average room-night contribution ofreservations companies to affiliated inde- Section 1. At least four emerging factors are challengingthe effectiveness of traditional reservationorganizations The growing demographic and psychographiccomplexity of the global consumermarket requires significant newexpertise and resources in the area of segmentationand analysis. The emergence of consumer direct-bookingInternet technology requires significantnew and ongoing investment.
The new marketplace requires innovativeglobal brand management together withresources to establish and maintain abrand in the face of intense competition. To be competitive, a brand must attractnew development and must therefore bestrong enough to convince lenders tocommit to permanent financing.
Brandmanagement also includes loyalty programmanagement and the developmentof regional and global partners tostrengthen and extend the effectivenessof the brand. The corporate objectives and governancepolicies of traditional reservation organizationsare influenced by the need to growand meet shareholder profit requirements.
These goals for growth can be atodds with the goals and expectations of independenthotel and resort members. The traditional reservation affiliationsmust change not only their focus but alsotheir structure if they want to succeed in thisnew competitive world.
The traditional reservation organizationmust be prepared to respond to competitivechallenges by expanding resources and skillsnecessary to increase average room-nightcontribution to affiliated independent hotelsto 15 percent—an average growth per memberhotel of at least percent over presentperformance levels Preferred Research.
In response to this competitive environmentand the need for more cooperative andfocused business relationships, a new hospitalitybusiness structure is evolving for allscales of hotels: the branded distributioncompany.
This ownership structure creates atrue operating partnership and a sharing ofenergies toward the common goal of creatingvalue through increased brand awareness androom sales. Unlike a reservations and representationcompany, a branded distribution corporationowns and builds a branded distribution networkasset that, in turn, provides services asset out in the diagram below.
The sole focus isperformance for the affiliated independenthotels and resorts. Joining such an organization is appropriatefor independently owned and managedhotels and resorts that want to keep ownercontrol but require effective and low-cost Table 1. Above all, it promises the independenthotel awareness of, and access to, their targetconsumer and rapidly emerging technologythrough cooperative ownership.
Table 1. For example, a 9 or 10percent franchise fee in many casesequals 50 percent of gross profits. As aresult, conflicts can be avoided, and thebranded distribution contract can becompleted and signed in as few as 45 days.
The branded distributioncompany receives no revenue if itdoes not deliver to the hotel or resort. This shared goal strengthens and energizesthe relationship between the twopartners. Instead, fundsare used to build and maintain an up-todateglobal distribution network and infrastructurecomposed of telecommunications,e-commerce functions, reservations software,data warehousing capability, and sales andmarketing.
The efficiency of the operation isassured by a focus that is almost entirely onthe most important part of this business relationship—thegeneration of brand awarenessand measurable room-night revenue for eachaffiliated hotel or resort. Unlike hard flags, which focus primarilyon hotel operations and asset managementsuch as the Marriott or the Westin, and reservationaffiliations, which focus on professionalcamaraderie and traditional distribution channelssuch as the Best Western, the branded distributioncompany is primarily marketfocused;its full attention is on customer andtravel influencer communication, relationshiptechnology, and revenue streams.
Note: Travelinfluencers are the intermediaries betweenconsumers and the travel product and includetravel agents, etc. It is often thecase that strategic asset management concernsconflict with day-to-day tactical operatingneeds. The same conflict can arise between theindependent owners of a hotel property, whoare focused on real estate concerns, and themanagement company they hire.
Such misunderstandingscan sour what should be a mutuallysupportive relationship. The fact thatmanagement contract fees are charged andcollected, even when the cash flow is negative,does not create owner confidence in the partner. A franchise relationship can cause a similarconflict and put a financial and operatingburden on an owner. The owners of property within a branded distributioncompany must relinquish a minimalamount of control and decision making,mainly in the areas of branding and qualityassurance.
In certain cases, member proper-ties may have to adopt and maintain specificquality standards. In addition, they may alsobe required to demonstrate their affiliationwith the branded distribution companythrough using its logo on marketing materialsas well as participating in e-commerce and inventorymanagement initiatives. Given the advances intechnology and the profitability pressures putupon chain hotels by shareholders, competitionfor customers is intensifying.
Keeping instep with competitive chain hotels presents asignificant challenge to independent owners. To address this, they currently have severaloptions outside of the branded distributioncompany, including representation firms,reservations services, flagged chains, and franchisemanagement companies.
However,given the economic, societal, and technologicaltrends that are dramatically changing thehospitality industry, several of which are analyzedin this book, many of these oldeconomyoptions can offer only short-termsolutions to long-term competitive pressures. A branded distribution company has aninherent advantage going into this new competitivearena. Its sole focus is on customeracquisition and management, achievedthrough the development of new technologies.
This competitive advantage extends tothe independent hotel aligned with a branded Section 1. By providing the independentowner with a global brand and thetechnology and expertise to acquire profitablenew customers, the branded distributioncompany enables the hotel managementto focus its attention on the delivery of exceptionalservice and profits to the owners.
Thisseparation of skills, expertise, resources, andoperating cultures in a cooperative businessrelationship provides a model and formulafor success. Independent hotels and resorts that alignthemselves with a branded distribution companywill not only continue to operate profitablyin the new global marketplace, but willalso flourish.
Opening a hotel is one of the most rewardingjobs in the hospitality industry despite its frustratingand exhausting aspects. Walk into any hotel, anywhere, and lookaround. Everything you see, hear, and feel,every detail, involved many people andcountless decisions. I have been an operationsproject manager OPM since and haveopened over 40 three-, four- and five-star hotelsaround the world.
From Guam to Malta,Berlin to St. Louis, each project has beenunique, each project has been the same, andeach has been professionally rewarding. The OPM is the third person hired, afterthe general manager and the director of marketing. The role of an OPM is to pull togetherthe visions of the architect, interior designer,owner, operator, and others. When these visionsare successfully melded, the hotel guest issatisfied, the owner makes money, and the architectand interior designer can add the projectto their list of successful accomplishments.
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