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 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. This approach involved offering various types of lodging facilities based on size, service and space. Another trend was 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.
Each year, the hotel industry has increased its marketing dollars for campaigns to attract more business and leisure travelers. A PKF Hospitality Research study reported that there was an additional 6.1 percent in marketing spending in 2004. Yet, travelers still left their destinations dissatisfied with the level of service received and their overall experience. It was a challenge for hospitality companies to get beyond creative campaigns and amazing promises to actually provide the quality of service that would generate return visits and positive word of mouth.
Hotel Interactive pointed out that, from a management perspective, resort hotels were a unique form of lodging. Their multiple offerings, such as several restaurants and shops, made them more complex to operate than typical hotels. They were also frequently located in remote locations. Consequentially, there were frequently challenges for managers to overcome. Those potential challenges included supply deliveries, utilities, transportation and weather. According to a PKF Hospitality Research study, room revenues at 53.7 percent comprised just over half of the total revenues at a sample size of 199 resorts averaging 366 rooms in 2005.
Lodging Econometrics announced the compilation and publication of the first ever comprehensive "Lodging Development Pipeline" with forecast for new hotel openings through 2009 and beyond for every country in Europe. The resource reported that there were 513 construction projects being actively pursued by developers including 93,669 rooms in the 40 countries throughout Europe. Approximately 59 percent of the total or 302 projects having 52,580 rooms, were already under construction. Another 74 projects with 13,380 rooms were scheduled to start construction in the next 12 months. An additional 137 projects with 26,989 rooms were in various stages of early planning.
According to TravelCLICK;'s 2006 fourth quarter and consolidated full-year eTRAK results, the hotel industry maintains steady growth while consumers continue to shop for their hotels online and book electronically. The Internet was believed to have accounted for 38.3 percent of 2006 brand hotel bookings. That estimate reflected a 20.2 percent growth rate compared to 2005.
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 many are 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 Moevenpick in Switzerland and Germany and opened a series of Moevenpick-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...
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