5 essays
wanghanlun
week_3_lecture_notes1.pdf
HMD 101
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The Hotel Business
HMD 101
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HMD 101
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Chain Scale Segments Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Independent
HMD 101
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Branding Associating a product/service with concepts of
Status Price point Product quality Service Quality Value
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Flag = Brand The term “flag” refers to the hotel brand Name, graphic logo, positioning in market Flag in the hotel business is brand in any other Reflagging is a process involved brand change
Brand Decision Drivers Hotel target audience Marketing benefits Design and operating guidelines Costs associated with branding
HMD 101
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To Brand or Not to Brand Independent hotel
Maintain independence and individuality Brand affiliation
Power and convenience “Soft brands” offer a middle ground
Also called referral groups
Soft Brands - Referral Groups Preferred Hotel Group Leading Hotels of the World Small Luxury Hotels of the World Best Western Marriott Autograph Collection (Cosmopolitan) Hilton Curo Collection (SLS Las Vegas) Starwood Luxury Collection
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Choices Owner operate Franchise Management contract Brand management
Owner Operate Company has absolute control over the hotel and all of its operations Hotel property can appreciate or depreciation in value over time Ties up capital in real estate and limits ability to expand market position
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Franchise Company (franchisor) provides its brand to franchisee for ~12.5% of revenue Hotel appears on branded reservation system Fastest growth through franchising Places the brand into the hands of outsiders High risk and high reward
Management Contracting Owner contracts with a separate company to manage and operate the hotel Owner retains limited control of the operation through measurable performance standards Operator (contractor) provides supervision, expertise, policies and procedures and a track record of past performance
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Contract Terms Lengthy contracts ~20 years of more Base fee of ~3% of total revenue Incentives fees of ~15% of profits when cash flow exceeds an owner’s return on investment of ~10%
Asset Light Strategy Hotel brands manage or franchise out hotels to others who provide equity Real estate investment trusts (REIT) that specialize in hotel properties REITs by statute cannot manage their own properties
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Franchised Managed Owned
InterContinental 42 135 3
Kimpton Hotels 0 66 0
Crowne Plaza 251 150 0
Hotel Indigo 52 11 0
Holiday Inn 1,043 159 3
Holiday Inn Express 2,318 73 0
Staybridge Suites 187 29 0
Candlewood Suites 269 61 0
TOTAL 4,167 767 6
IHG Business Model
Hotel Business Key Performance
Indicators
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SpringHill Suites Deal Summit Hotel Properties is the owner Marriott is the franchisor Summit Hotel is the franchisee Interstate Hotels is the management contractor Summit hotels negotiated with Marriott and Interstate before buying the hotel property
Summit Hotel Properties Real estate investment trust (REIT) specializing in hotel properties Acquires and operates amenity-light midscale chain properties Owns 96 hotels with 7,010 rooms in 19 states
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Marriott International Worldwide franchisor and manager of a broad portfolio of hotels SpringHill Suites is a midscale all suite flag Demographic focus is business travelers
Interstate Hotels In the business of operating hotels owned by REITs such as Summit Hotel Properties Largest independent hotel management company in the United States Manages 335 hotels with 61,000 rooms in 39 states
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Three Data Points for Hotel KPIs Supply - rooms available Demand - rooms sold Revenue - revenue generated from room sales
Supply Rooms available - the number of rooms in a hotel multiplied by the days in the month
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Demand Rooms sold - number of rooms sold by a hotel Does not included comp rooms or “no shows”
Revenue Room revenue - total room revenue generated from the sale of rooms, includes service charges not resort fees
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Key Performance Indicators (KPIs) KPIs are calculated using supply, demand and revenue data
Occupancy - % Average Daily Rate (ADR) - $ Revenue per Available Room (RevPAR) -
$
Occupancy = Demand/Supply Definition - the percentage of available rooms that were sold during a specific time period Calculation - dividing the demand (number of rooms sold) by the supply (number of rooms available
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ADR = Revenue/Demand Definition - measure of the average rate paid for rooms sold during a specific time period Calculation - dividing the room revenue by the demand (rooms sold)
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RevPAR = Revenue/Supply Definition - measure of the revenue that is generated in terms of each room available Calculation - dividing the room revenue by the total number of rooms available
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ADR Compared to RevPAR RevPar will normally be lower than ADR because RevPar is affected by the amount of unoccupied rooms, while ADR only shows the average rate of rooms actually sold In what situation will RevPAR equal ADR?
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Dynamic Pricing Raising or lowering prices based on demand Airlines, hotels, rental car companies Key qualities
Fixed capacity Low variable costs A “product” that expires at a certain time
Revenue Management Work within parameters of dates, rates & space Sell the right: room, customer, time, place Goal is to maximize RevPAR Also known as yield management Santa Clara, California (San Francisco) February 7, 2016
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RevPAR Drivers Supply of hotel rooms in the market area Demand for hotel rooms in the market area Competitive position within the market area Level of service quality provided by property Cost per key of the property General economic environments
Smith Travel Research STAR Report Hotel analytics service provider Samples 70% of U.S. room supply Samples 45% of global room supply Smith Travel Accommodation Report (STAR)
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Analytics Customers Hotel companies - chains, parent companies, management companies, owners Hotels - GM bonuses driven by analytics Destination marketing organizations Developers, consultants, appraisers Accounting firms, financial institutions
