SIC 7011 Hotels and Motels

SIC 7011

This industry comprises commercial establishments known to the public as hotels, motor hotels, motels, or tourist courts, primarily engaged in providing lodging, or lodging and meals, for the general public. Hotels that are operated by membership organizations and open to the general public are included in this industry. Hotels operated by organizations for their members only are classified in SIC 7041: Organization Hotels and Lodging Houses, on Membership basis. Apartment hotels are classified in SIC 6513: Operators of Apartment Buildings; rooming and boarding houses are classified in SIC 7021: Rooming and Boarding Houses; and sporting and recreational camps are classified in SIC 7032: Sporting and Recreational Camps.

NAICS CODE(S)

721110

Hotels (except Casino Hotels) and Motels

721120

Casino Hotels

721191

Bed and Breakfast Inns

721199

All Other Traveler Accommodations

INDUSTRY SNAPSHOT

The hotel and motel industry played a vital role in the development of trade, commerce, and travel in the United States. In supplying everything from a cheap night's accommodation on the road to meeting and convention spaces and coordination for large corporate events, the remarkably diverse services that American hotels provide have made the hotel industry significant. According to the American Hotel & Lodging Association (AH&LA), the industry's revenues total over $105 billion annually in the mid-2000s.

In the United States, there are 4.4 million rooms at approximately 47,600 properties. About 38 percent of properties and 33 percent of rooms are at suburban locations, and another 38 percent of properties and 30 percent of rooms are situated along highways. The rest are located in cities (11 percent of properties; 16 percent of rooms), near airports (7 percent of properties; 10 percent of rroms), and at resort sites (5 percent of properties; 11 percent of rooms). The room supply is rising most significantly in suburban areas, and new construction is focused primarily on limited-service facilities—an increasingly popular option for cost-conscious travelers not inclined to frequent more elaborate full-service properties.

The AH&LA reports 52 percent of hotel guests are traveling on business and 48 percent are traveling for leisure. The typical business traveler is male (71 percent), between the ages of 35 and 54 (53 percent), and holds a managerial position (50 percent). Forty percent of business travelers stay for one night; 24 percent, two nights; and 36 percent, three or more nights. The average room rented for leisure is occupied by two adults (52 percent) between the ages of 35 and 54 (45 percent). Forty-seven percent of leisure travelers stay one night; 26 percent, two night; and 27 percent, three or more nights.

In recent years, modest gains in occupancy and the average room rate have resulted in higher revenues and profits for all types of hotels. According to the AH&LA, the industry reached record profitability in 1998, grossing $20.9 billion in pretax profits, up from a loss of $5.7 billion in 1990. Likewise, industry revenues increased from $62.8 billion in 1990 to $93.1 billion in 1998. In 2000 the industry recorded its most profitable year ever, as profit levels reached $24 billion. However, in 2001 economic conditions took a turn for the worse, and the terrorist attacks of September 11 that year severely affected both leisure and business travel. Profits fell drastically, declining 33 percent to $16.1 billion. Amidst these conditions, new hotel construction declined considerably. After suffering significant losses in revenue during the early 2000s, the industry began to turn around during the second half of 2003, with growth continuing through 2005. During the summer of 2005, room occupancy rates once again reached pre-2001 levels.

ORGANIZATION AND STRUCTURE

Most analysts classify the industry into full- and limited-service enterprises. Full-service hotels constitute the majority of all properties, although this ratio is dwindling. Typically, they are large properties—averaging about 280 rooms—that often generate about 30 percent of their operating income from food, beverage, and such services as restaurants, room service, and meeting spaces. Limited-service hotels, by contrast, are smaller establishments—averaging about 130 rooms—that do not offer food and beverage services or extra facilities. They rely on room sales for nearly 95 percent of their revenue base.

Vast differences exist in the expenditures that each type of hotel incurs for various services, including room maintenance, food and beverages, and telephones. These costs can diminish profit margins considerably in years with low occupancy rates, especially given that hotels must also keep room rates low in such years to compete for a reduced number of customers. Full-service hotels with significant departmental expenses have, in general, been hurt far more by the oversupply of the industry. Their occupancy rates have not been markedly different from those of limited-service hotels, but room rates have been kept far too low to pay for the cost of servicing them.

All-suite hotels came to prominence in the late-1980s and, because their segment's demand for growth remains healthy, continue to capture attention. Such hotels—most of which are branches of specific brand chains—conventionally offer consumers both a living and a bedroom area. While most all-suites offer both food and beverage services, this is not always the case. Indeed, limited-service all-suites often report substantially more attractive profit margins—again, as a result of much lower departmental expenses—and have subsequently attracted increasing interest. Their occupancy rates have been higher than those of their full-service counterparts, relative to the rest of the industry, without a tremendous drop-off in room rates.

Resorts, hotels with gambling facilities, and conference/convention center hotels represent three smaller but important industry categories. Like all-suites, their demand growth and occupancy rates have generally been higher than the average and will probably remain so, simply because they are so capital intensive to build and maintain. Casino hotels have grown in popularity due to the expansion of legalized gambling, and the convention center has become a popular component of efforts to reinvigorate urban infrastructure.

The casino segment of the hotel industry currently remains clustered in Las Vegas and Atlantic City, although some states have passed riverboat gambling laws, which led to numerous hotel/casino establishments springing up in the mid-2000s along major waterways, such as the Mississippi River. In Las Vegas several new spectacular destination resorts, such as the Luxor and the Bellagio, were constructed in the 1990s. In contrast to convention center hotels and resort hotels, most hotels with gambling ventures tend to offer low room rates; the gambling activity of the hotel patrons is thus central to the establishment's success. In recent years, the gaming industry has attempted to market its lodging to entire families.

The resort phenomenon is also highly regional and, inasmuch as they have had to become more price competitive, resort hotels perhaps rely more on overall regional promotion than anything else. The South Atlantic (primarily Florida) has grown into the country's most lively resort region. Even after a number of years of steady growth, its occupancy rates are still the highest of any region in the country, regularly upwards of 75 percent...