Hotels and Other Lodging Places
SIC 7011
NAICS 721110
The hotel industry provides short-term lodging and related amenities to business and recreational travelers. Common formats include hotels, motels, and vacation resorts that integrate lodging with recreation. Many industry firms also host conferences and events.
The international lodging industry is a vital part of the travel and tourism trade and is one of the largest economic forces in the world. Accounting for 11 percent of the world's economic output and more than 250 million jobs, the hotel industry is the third-largest foreign currency earner. The World Travel and Tourism Council estimated that total worldwide travel and tourism revenues would reach US$7.9 trillion in 2005.
The industry is dominated by hotel chains, especially in the United States and Europe, although Asia saw a supply increase of 10 percent in 2003, the largest rise worldwide. Most of the world's largest hotel chains are based in the United States. Attempting to expand their customer base, hotel chains, led by Holiday Inn, turned to segmentation, offering various types of lodging facilities based on size, service, and space. Another trend has been the adoption of computer technology. Although the hotel industry once failed to fully comprehend the benefits of computerized operations, in recent years hotel companies have turned to technology to standardize operations, communicate among properties and the home office, and create more efficient and cost-effective operations. Centralized reservation systems have become critical to any large lodging chain.
According to a 2004 MKG Consulting survey, the world's top-ten hotel groups handle three-quarters of the global hotel market, which totaled approximately 4.6 million rooms. About 70 percent of these hotels are located in Europe and North America, according to the International Hotel Association.
The hotel industry continues to rely on both business and leisure travelers. Since the 1980s business travel has been the leading money-maker for hotels, providing nearly two-thirds of all sales. The robust business segment of the industry also gave rise to extended-stay hotels in the late 1990s that specifically targeted business travelers. Nonetheless, leisure travel increased during this period as well. In part, this shift resulted from changing demographics, especially in the United States, and from rising disposable incomes around the world as part of the global economic recovery.
The major types of hotels found throughout the world are full-service, economy, resort, all-suites, conference centers, and convention hotels. A full-service hotel generally provides a wide variety of facilities and amenities, such as food and beverage outlets, meeting rooms, and recreational activities. These types of hotels can be further classified as basic, upscale, or luxury. A basic property offers minimal expected services. Upscale hotels, such as the facilities operated by Hilton Hotels Corp. or ITT Sheraton Corp., have additional services and higher quality facilities, while luxury hotels, such as the Four Seasons and Ritz-Carlton, offer top-of-the-line service for a premium price.
Economy properties, such as Days Inn and La Quinta, provide comfortable rooms at low rates, but lack additional services. This type of hotel can be divided into two general groups: limited service and hard budget. Limited service hotels offer little or no food and beverage service and have marginal meeting facilities. Meanwhile, hard budget hotels, such as industry leader Motel 6, provide spartan accommodations at inexpensive prices.
Although relatively new, all-suite facilities have continued to report high occupancy rates. With 20 percent more space than a conventional hotel room, a suite is separated into a living area and a bedroom. These hotels have targeted both business travelers and weekend vacationers. A second type of all-suite property is the growing category of extended- and long-stay properties. Catering to guests who stay five days or longer, the extended-stay suite provides a full kitchen. Many properties offer a fitness center, executive work area, and grocery shopping services as well. Resort hotels provide recreational facilities and entertainment and are typically located in close proximity to established vacation spots.
Conference centers and convention hotels are often used by companies for specialized training classes. A conference center may offer a complete package of guest accommodations, meals, full-service meeting rooms, and staff. Some conference centers are operated by major corporations, while others are part of universities or operated by private companies. Convention hotels serve large groups such as trade shows and corporate annual meetings. These properties provide facilities and services geared to meet the specialized needs of large groups. These hotels typically have hundreds of guest rooms and a substantial amount of flexible meeting space.
The hotel industry—especially in the United States—has experienced substantial structural changes as a result of hotel segmentation and the consolidation of companies. As the industry tries to anticipate customer needs—whether the customer is a business traveler or budget-minded vacationer—hoteliers have divided lodging facilities along the line of price, service, and space. With U.S. companies leading international expansion, the usage of segmentation has spread to areas outside North America.
Lodging companies have found that segmentation has added to their growth. Since hoteliers have had little control over increasing demand, they instead have expanded their customer base by providing all levels of lodging managed by one parent company. Segmentation also has allowed companies to leverage corporate resources such as management experience, access to capital markets, and back-office operations.
Participation in the lodging industry has taken various forms. Companies may choose to own, manage, or franchise properties, and some combine all three. Franchising has been one of the most common ways for companies to expand internationally. Using a franchise agreement, the local hotel owner pays an initial fee and monthly royalty fees in exchange for the use of the chain name, logo, reservation system, and national advertising campaign. Franchised hotels can be found in nearly every country. Franchising has allowed companies to maintain their basic brand images while offering lodging services that fit the specific needs and desires of the local company.
Strategic alliances in the hospitality industry are a type of joint venture intended for a specific geographic region. For example, when Radisson Hotels International became interested in moving into international markets, the company allied itself with Mövenpick in Switzerland and Germany and opened a series of Mövenpick-Radisson hotels. In a strategic alliance, each partner brings its strongest assets to the venture. Usually, the U.S. partner will offer an internationally recognized brand name, a technologically advanced reservation system, and management expertise. The local partner contributes an understanding of local operations and labor, and authority to negotiate contracts with government suppliers.
International hotel owners and operators have expanded into the United States through direct investment in well-known U.S. hotels. This investment and acquisition strategy is used because the U.S. lodging industry is an extremely competitive market already full of well-established and commonly known brand-name hotels. Given this level of development, a substantial investment would be necessary for a new company to successfully enter the U.S. market with a new product line. One example of such foreign investment was the 1990 acquisition of Motel 6 by the French firm Accor SA.
Until the development of commerce and the standardization of a compact medium of financial exchange, the hotel remained a scant one-room inn, nothing more than an extra room sold to an infrequent traveler. However, by the present era the advent of money suddenly expanded the trading radius of the ancient world and brought about significant growth of travel.
The Industrial Revolution (1760) spurred the creation of the English inn. Located along coach trails, inns provided modest accommodations and food for stagecoach passengers. As roadways were built into the countryside, the famed English cottage was established. The first U.S. hotels were similar to their English counterparts and could be found on stagecoach trails and in seaport towns. These included inns of approved London style and were residences, some with additions built on. At their best, they were like an average well-kept home, but not much bigger.
As the United States expanded westward, the railroad created new population centers and new hotels, grand in size and service. When stock companies began to finance hotel construction, the industry moved from a small-time operation to big business, similar to the development of the railroads and industrial plants.
The first of the large-scale hotels built by a stock company was the City Hotel of New York, which was established in 1794. Compared...
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