Class Notes for Introduction to Hospitality, 7th Edition
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Online Instructor’s Manual
to accompany
Introduction to Hospitality, 7e
Introduction to Hospitality
Management, 5e
John R. Walker
to accompany
Introduction to Hospitality, 7e
Introduction to Hospitality
Management, 5e
John R. Walker
Table of Contents
PART I: THE HOSPITALITY INDUSTRY AND TOURISM
1. Welcome to the Hospitality Industry 1
2. Tourism 13
PART II: LODGING
3. The Hotel Business 28
4. Rooms Division Operations 43
5. Food and Beverage Operations 54
PART III: RESTAURANTS, MANAGER SERVICES AND BEVERAGES
6. Restaurant Business 70
7. Restaurant Operations 82
8. Managed Services 98
9. Beverages 110
PART IV: RECREATION, THEME PARKS, CLUBS AND GAMING
ENTERTAINMENT
10. Recreation, Theme Parks and Clubs 129
11. Gaming Entertainment 147
PART V: ASSEMBLIES AND EVENT MANAGEMENT
12. Meetings, Conventions, Expositions 161
13. Special Events 178
PART VI: MANAGERIAL AREAS OF THE HOSPITALITY INDUSTRY
14. Leadership and Management 190
15. Planning 198
16. Organizing 209
17. Communicating and Decision-Making 218
18. Control 231
PART I: THE HOSPITALITY INDUSTRY AND TOURISM
1. Welcome to the Hospitality Industry 1
2. Tourism 13
PART II: LODGING
3. The Hotel Business 28
4. Rooms Division Operations 43
5. Food and Beverage Operations 54
PART III: RESTAURANTS, MANAGER SERVICES AND BEVERAGES
6. Restaurant Business 70
7. Restaurant Operations 82
8. Managed Services 98
9. Beverages 110
PART IV: RECREATION, THEME PARKS, CLUBS AND GAMING
ENTERTAINMENT
10. Recreation, Theme Parks and Clubs 129
11. Gaming Entertainment 147
PART V: ASSEMBLIES AND EVENT MANAGEMENT
12. Meetings, Conventions, Expositions 161
13. Special Events 178
PART VI: MANAGERIAL AREAS OF THE HOSPITALITY INDUSTRY
14. Leadership and Management 190
15. Planning 198
16. Organizing 209
17. Communicating and Decision-Making 218
18. Control 231
Table of Contents
PART I: THE HOSPITALITY INDUSTRY AND TOURISM
1. Welcome to the Hospitality Industry 1
2. Tourism 13
PART II: LODGING
3. The Hotel Business 28
4. Rooms Division Operations 43
5. Food and Beverage Operations 54
PART III: RESTAURANTS, MANAGER SERVICES AND BEVERAGES
6. Restaurant Business 70
7. Restaurant Operations 82
8. Managed Services 98
9. Beverages 110
PART IV: RECREATION, THEME PARKS, CLUBS AND GAMING
ENTERTAINMENT
10. Recreation, Theme Parks and Clubs 129
11. Gaming Entertainment 147
PART V: ASSEMBLIES AND EVENT MANAGEMENT
12. Meetings, Conventions, Expositions 161
13. Special Events 178
PART VI: MANAGERIAL AREAS OF THE HOSPITALITY INDUSTRY
14. Leadership and Management 190
15. Planning 198
16. Organizing 209
17. Communicating and Decision-Making 218
18. Control 231
PART I: THE HOSPITALITY INDUSTRY AND TOURISM
1. Welcome to the Hospitality Industry 1
2. Tourism 13
PART II: LODGING
3. The Hotel Business 28
4. Rooms Division Operations 43
5. Food and Beverage Operations 54
PART III: RESTAURANTS, MANAGER SERVICES AND BEVERAGES
6. Restaurant Business 70
7. Restaurant Operations 82
8. Managed Services 98
9. Beverages 110
PART IV: RECREATION, THEME PARKS, CLUBS AND GAMING
ENTERTAINMENT
10. Recreation, Theme Parks and Clubs 129
11. Gaming Entertainment 147
PART V: ASSEMBLIES AND EVENT MANAGEMENT
12. Meetings, Conventions, Expositions 161
13. Special Events 178
PART VI: MANAGERIAL AREAS OF THE HOSPITALITY INDUSTRY
14. Leadership and Management 190
15. Planning 198
16. Organizing 209
17. Communicating and Decision-Making 218
18. Control 231
Chapter One
Introducing Hospitality
I. Chapter Objectives
After reading and studying this chapter, you should be able to:
1. Discuss the history of hospitality through the ages
2. Describe the characteristics of the hospitality industry.
3. Explain corporate philosophy and Total Quality Management
4. Discuss the many facets of service and why it has become such an important part
of the hospitality industry.
5. Suggest ways to improve service.
6. Discuss current trends in the hospitality industry
II. Key Teaching Elements/Chapter Outline/Lecture Suggestions
Page Object.
Prelude
A short introduction to the hospitality industry 4 1
Hospitality Through the Ages
The word hospitality comes from hospice, an old French term meaning
“to provide care/shelter for travelers.”
Hospice de Beaune in Burgundy, France was established as a refuge for
the poor in 1443 and still exists today. The sale of wine from its estates
every November determines the prices for the next year’s Burgundy
wines.
4 1
Ancient Times
The Sumerians (what is now Iraq) were the first to record elements of
hospitality as they provided locals and travelers taverns where they
served beer, food, and provided a place to stay.
Between 4,000 and 2,000 B.C.E., early civilizations in Europe, China,
Egypt, and India all had some elements of hospitality offerings, such as
taverns and inns along the roadside.
4 1
Greece and Rome
The Code of Hammurabi (circa 1700 B.C.E) made mention of tavern
owners responsibilities. Increased travel made some form of overnight
accommodations necessary and taverns and inns sprang up everywhere.
By the time Marco Polo traveled to the Far East, there were 10,000 inns
with the best in China.
5 1
Introducing Hospitality
I. Chapter Objectives
After reading and studying this chapter, you should be able to:
1. Discuss the history of hospitality through the ages
2. Describe the characteristics of the hospitality industry.
3. Explain corporate philosophy and Total Quality Management
4. Discuss the many facets of service and why it has become such an important part
of the hospitality industry.
5. Suggest ways to improve service.
6. Discuss current trends in the hospitality industry
II. Key Teaching Elements/Chapter Outline/Lecture Suggestions
Page Object.
Prelude
A short introduction to the hospitality industry 4 1
Hospitality Through the Ages
The word hospitality comes from hospice, an old French term meaning
“to provide care/shelter for travelers.”
Hospice de Beaune in Burgundy, France was established as a refuge for
the poor in 1443 and still exists today. The sale of wine from its estates
every November determines the prices for the next year’s Burgundy
wines.
4 1
Ancient Times
The Sumerians (what is now Iraq) were the first to record elements of
hospitality as they provided locals and travelers taverns where they
served beer, food, and provided a place to stay.
Between 4,000 and 2,000 B.C.E., early civilizations in Europe, China,
Egypt, and India all had some elements of hospitality offerings, such as
taverns and inns along the roadside.
4 1
Greece and Rome
The Code of Hammurabi (circa 1700 B.C.E) made mention of tavern
owners responsibilities. Increased travel made some form of overnight
accommodations necessary and taverns and inns sprang up everywhere.
By the time Marco Polo traveled to the Far East, there were 10,000 inns
with the best in China.
5 1
Medieval Times
Charlemagne established rest houses for pilgrims in the eighth century
and innkeepers in Florence, Italy formed a successful guild in 1282 that
had 86 members by 1290.
A stagecoach journey from London to Bath took three days with
several stopovers at inns or taverns called ‘post houses.’
In the late sixteenth century, a type of tavern for commoners called an
‘ordinary’ were serving food for a fixed price. The food was ‘ordinary’
and there was no choice in the meal plan.
5 1
Coffee Houses
Coffee and tea became popular in the 16th century and coffeehouses
became a way of life.
With water being dangerous, these flavored drinks became popular
very quickly.
6 1
The New World
The “ordinary’ as taverns were called in the early days of the American
colonies, were gathering places for residents, hold meetings, and
conduct business. The tavern was an important part of the new world.
George Washington used the Frauncis Tavern as his Revolutionary War
headquarters and it still operates today.
Even future presidents owned and operated taverns as the new colonies
were being established.
The French Revolution
7 1
The French revolution changed the course of culinary history as it was
nobility that employed most of the country’s chefs. With the
elimination (literally) of the noble class, French chefs began the
immigration to other countries and especially to the Americas.
Thomas Jefferson installed a French chef in the White House, which
influenced interest in French cooking in the new colonies.
Many of the immigrant chefs found New Orleans and changed the
culinary direction of the region with their style of cooking.
7 1
The Nineteenth Century
In 1856, Antoine Carême published La Cuisine Classique detailing
numerous dishes and sauces. This led to the re-invention of the
restaurant and its classic fare. By 1848, a hierarchy of eating places
existed in New York City. There was a restaurant, level of service and
price for everyone.
8 1
The Twentieth Century
Several restaurant chains began in the 1900’s, including the classic
White Castle with its sparse décor yet popular menu. In 1959 the Four
Seasons opened as the first elegant American restaurant that was not
9 1
Charlemagne established rest houses for pilgrims in the eighth century
and innkeepers in Florence, Italy formed a successful guild in 1282 that
had 86 members by 1290.
A stagecoach journey from London to Bath took three days with
several stopovers at inns or taverns called ‘post houses.’
In the late sixteenth century, a type of tavern for commoners called an
‘ordinary’ were serving food for a fixed price. The food was ‘ordinary’
and there was no choice in the meal plan.
5 1
Coffee Houses
Coffee and tea became popular in the 16th century and coffeehouses
became a way of life.
With water being dangerous, these flavored drinks became popular
very quickly.
6 1
The New World
The “ordinary’ as taverns were called in the early days of the American
colonies, were gathering places for residents, hold meetings, and
conduct business. The tavern was an important part of the new world.
George Washington used the Frauncis Tavern as his Revolutionary War
headquarters and it still operates today.
Even future presidents owned and operated taverns as the new colonies
were being established.
The French Revolution
7 1
The French revolution changed the course of culinary history as it was
nobility that employed most of the country’s chefs. With the
elimination (literally) of the noble class, French chefs began the
immigration to other countries and especially to the Americas.
Thomas Jefferson installed a French chef in the White House, which
influenced interest in French cooking in the new colonies.
Many of the immigrant chefs found New Orleans and changed the
culinary direction of the region with their style of cooking.
7 1
The Nineteenth Century
In 1856, Antoine Carême published La Cuisine Classique detailing
numerous dishes and sauces. This led to the re-invention of the
restaurant and its classic fare. By 1848, a hierarchy of eating places
existed in New York City. There was a restaurant, level of service and
price for everyone.
8 1
The Twentieth Century
Several restaurant chains began in the 1900’s, including the classic
White Castle with its sparse décor yet popular menu. In 1959 the Four
Seasons opened as the first elegant American restaurant that was not
9 1
French in style.
Following World War II, America took to the road and expanded
rapidly with hotels, motels, fast food, and coffee shops. With the
expansion of air transportation, hotels and restaurants sprang up to meet
the needs of the expanding nation.
In the 1980’s, hospitality, travel, and tourism continued to increase
dramatically. The baby boomers began to exert influence through their
buying power. Distant exotic destinations and resorts became more
accessible.
The Twenty-First Century
The hospitality industry continues to mature with increased market
segmentation and consolidation. More people are traveling, especially
from and to China, Brazil, and India.
The recession slowed the industry, but as we emerge from it
occupancies are up along with revenue per available room. Now
companies are driving the margins to squeeze out a reasonable profit.
10 1
Welcome to You, the Future Hospitality Industry Leaders!
The hospitality industry is one of the most fascinating, fun, and
stimulating to work in, plus you get paid quite well and have excellent
advancement opportunities.
The hospitality industry is one where it does not take long before
advancement opportunities come along. A degree plus experience
enables almost anyone with the service spirit to enjoy success.
One of the reasons that Marriott International is so successful is given
by Jim Collins writing in the forward of Bill Marriott’s book The Spirit
to Serve: Marriott’s Way. He writes that Marriott has timeless core
values and enduring purpose…including the belief that people are
number one…”take care of Marriott people and they will take care of
the guests.” People with a service spirit are happy to do something
extra to make the guest’s experience memorable. As one human
resource director says, “Creating memorable experiences for others and
being an Ambassador of the world, adding warmth and caring.”
10 1, 2
The National Restaurant Association (NRA) forecasts a need for
thousands of supervisors and managers in the hospitality and tourism
industry.
13 1, 2
Following World War II, America took to the road and expanded
rapidly with hotels, motels, fast food, and coffee shops. With the
expansion of air transportation, hotels and restaurants sprang up to meet
the needs of the expanding nation.
In the 1980’s, hospitality, travel, and tourism continued to increase
dramatically. The baby boomers began to exert influence through their
buying power. Distant exotic destinations and resorts became more
accessible.
The Twenty-First Century
The hospitality industry continues to mature with increased market
segmentation and consolidation. More people are traveling, especially
from and to China, Brazil, and India.
The recession slowed the industry, but as we emerge from it
occupancies are up along with revenue per available room. Now
companies are driving the margins to squeeze out a reasonable profit.
10 1
Welcome to You, the Future Hospitality Industry Leaders!
The hospitality industry is one of the most fascinating, fun, and
stimulating to work in, plus you get paid quite well and have excellent
advancement opportunities.
The hospitality industry is one where it does not take long before
advancement opportunities come along. A degree plus experience
enables almost anyone with the service spirit to enjoy success.
One of the reasons that Marriott International is so successful is given
by Jim Collins writing in the forward of Bill Marriott’s book The Spirit
to Serve: Marriott’s Way. He writes that Marriott has timeless core
values and enduring purpose…including the belief that people are
number one…”take care of Marriott people and they will take care of
the guests.” People with a service spirit are happy to do something
extra to make the guest’s experience memorable. As one human
resource director says, “Creating memorable experiences for others and
being an Ambassador of the world, adding warmth and caring.”
10 1, 2
The National Restaurant Association (NRA) forecasts a need for
thousands of supervisors and managers in the hospitality and tourism
industry.
13 1, 2
Loading page 6...
The Pineapple Tradition
The pineapple is a symbol of welcome, friendship, and hospitality.
Imported from the West Indies, pineapples were often served to royal
families and the elite.
14 1, 2
The Interrelated Nature of Hospitality and Tourism
The hospitality and tourism industry is the largest and fastest growing
industry in the world. An exciting aspect is that the industry comprises
so many different professions.
14 1,2,6
Common dynamics in this diverse industry include the delivery of
services and products and the customer-guest impressions of them.
14 1, 2
Whether in direct contact with a guest (front of the house) or working
behind the scenes (back of the house), the most challenging aspect of
working in the industry is creating powerful impressions that have the
ability to affect the human experience.
14 1, 2
People who provide services to travelers have the responsibility of
representing their communities, creating memorable experiences, and
meeting the needs and wants of people away from home.
15 1, 2
Restaurants fill the biological need to eat as well as the need to
socialize and to be entertained.
16 1, 2
In managed services, foodservices are provided to institutional clients,
meeting the needs of the guests as well as the client itself.
Studies show that as many as 57 percent of consumers now use the
Internet to book their travel, a percentage that vastly changes the
landscape of the hospitality industry. In fact, technology could be the
thin line between a successful business and bankruptcy for many
organizations.
Restaurants use more than 30 different technology applications to
provide faster, more cost efficient and productive business operations
for guests and staff.
Many studies already showed that high-speed Internet is one of the
most important in-room amenities that enable guest satisfaction in a
hotel.
17 1, 2
Characteristics of the Hospitality Industry
Open 365 days a year, twenty-four hours a day, the hospitality industry
tends to work longer hours than most other industries. Those in senior
positions can expect to work 10-12 hours a day regardless of the time
19 2
The pineapple is a symbol of welcome, friendship, and hospitality.
Imported from the West Indies, pineapples were often served to royal
families and the elite.
14 1, 2
The Interrelated Nature of Hospitality and Tourism
The hospitality and tourism industry is the largest and fastest growing
industry in the world. An exciting aspect is that the industry comprises
so many different professions.
14 1,2,6
Common dynamics in this diverse industry include the delivery of
services and products and the customer-guest impressions of them.
14 1, 2
Whether in direct contact with a guest (front of the house) or working
behind the scenes (back of the house), the most challenging aspect of
working in the industry is creating powerful impressions that have the
ability to affect the human experience.
14 1, 2
People who provide services to travelers have the responsibility of
representing their communities, creating memorable experiences, and
meeting the needs and wants of people away from home.
15 1, 2
Restaurants fill the biological need to eat as well as the need to
socialize and to be entertained.
16 1, 2
In managed services, foodservices are provided to institutional clients,
meeting the needs of the guests as well as the client itself.
Studies show that as many as 57 percent of consumers now use the
Internet to book their travel, a percentage that vastly changes the
landscape of the hospitality industry. In fact, technology could be the
thin line between a successful business and bankruptcy for many
organizations.
Restaurants use more than 30 different technology applications to
provide faster, more cost efficient and productive business operations
for guests and staff.
Many studies already showed that high-speed Internet is one of the
most important in-room amenities that enable guest satisfaction in a
hotel.
17 1, 2
Characteristics of the Hospitality Industry
Open 365 days a year, twenty-four hours a day, the hospitality industry
tends to work longer hours than most other industries. Those in senior
positions can expect to work 10-12 hours a day regardless of the time
19 2
Loading page 7...
or day.
Due to the industry running twenty-four hours a day, it relies heavily on
shift work. Essentially there are four shifts including 11 p.m. to 7:30
a.m., known as the graveyard shift.
19 2
Hospitality industries are in the business of providing guest satisfaction
at a price. The difficulty here is that the product is intangible; that is,
the consumption and production occur at the same time making them
inseparable. This helps explain why the product is also perishable; that
is, a room or meal not sold tonight cannot be saved and sold tomorrow.
19 2
The other unique characteristic of this industry is the perishability of
our product. For example, we have 1,400 guest rooms in inventory that
are available to sell, but we only sell 1,200 rooms. What happens with
the 200 unsold guest rooms? Nothing! We have permanently lost the
revenue from these rooms.
One other unique characteristic of the hospitality industry to consider is
the variability inherent within those that produce and consume. For
instance, on the production side of the equation, each employee has
different levels of skill, knowledge, ability, and passion for what they
do and therefore we often see variability in the quality of work. And the
same holds true for the guest!
In the hospitality industry, we are in business to make a return on
investment for owners and/or shareholders and society. People invest
money for us to run a business, and they expect a fair return on their
investment.
19 2
Careers
There are hundreds of career options for you to consider, and it’s fine if
you are not yet sure which one is for you. The text will explore careers
in lodging, foodservice, recreation, and special events to name a few.
20 2
Hospitality Industry Philosophy
We have seen a change in current corporate philosophy. It used to be
that corporate philosophy focused on the manager’s ability to plan,
organize, implement, and measure performance. Today there is a more
stringent shift toward managers’ counseling associates, giving them
resources, and helping them to develop and think for themselves. This
shift has proven effective in that it promotes empowerment, and strong
ties to Total Quality Management (TQM). Major changes include
increased corporate ethics, morals, fairness, and equality.
23 2, 3
Due to the industry running twenty-four hours a day, it relies heavily on
shift work. Essentially there are four shifts including 11 p.m. to 7:30
a.m., known as the graveyard shift.
19 2
Hospitality industries are in the business of providing guest satisfaction
at a price. The difficulty here is that the product is intangible; that is,
the consumption and production occur at the same time making them
inseparable. This helps explain why the product is also perishable; that
is, a room or meal not sold tonight cannot be saved and sold tomorrow.
19 2
The other unique characteristic of this industry is the perishability of
our product. For example, we have 1,400 guest rooms in inventory that
are available to sell, but we only sell 1,200 rooms. What happens with
the 200 unsold guest rooms? Nothing! We have permanently lost the
revenue from these rooms.
One other unique characteristic of the hospitality industry to consider is
the variability inherent within those that produce and consume. For
instance, on the production side of the equation, each employee has
different levels of skill, knowledge, ability, and passion for what they
do and therefore we often see variability in the quality of work. And the
same holds true for the guest!
In the hospitality industry, we are in business to make a return on
investment for owners and/or shareholders and society. People invest
money for us to run a business, and they expect a fair return on their
investment.
19 2
Careers
There are hundreds of career options for you to consider, and it’s fine if
you are not yet sure which one is for you. The text will explore careers
in lodging, foodservice, recreation, and special events to name a few.
20 2
Hospitality Industry Philosophy
We have seen a change in current corporate philosophy. It used to be
that corporate philosophy focused on the manager’s ability to plan,
organize, implement, and measure performance. Today there is a more
stringent shift toward managers’ counseling associates, giving them
resources, and helping them to develop and think for themselves. This
shift has proven effective in that it promotes empowerment, and strong
ties to Total Quality Management (TQM). Major changes include
increased corporate ethics, morals, fairness, and equality.
23 2, 3
Loading page 8...
Service Philosophy Is a Way of Life
“Spirit to serve” comes from deep-rooted values. Service should be a
commitment to continuous improvement and overcoming adversity.
Our culture influences the way we treat associates, guests, and the
community, and that affects the success of everyone.
Sustainable Hospitality
24 2, 3
The concept of sustainability involves “development that meets the
needs of the present without compromising the ability of future
generations to meet their own needs.”
Sustainability is the ability to achieve ongoing economic prosperity
while protecting the natural resources of the planet and maintaining an
ideal quality of life for its people and future generations.
24 2,3,6
Success in Service
To achieve success, exceptional service is required. The satisfaction of
external customers ultimately measures a company’s success since they
are the people who are willing to pay for its services. To ensure
success, one must also ensure guest loyalty.
25 2, 4
Given that approximately 70 percent of the U.S. and Canadian
economies and an increasing percentage of other countries’ are engaged
in service industries, it is critical to offer guests exceptional service.
25 2, 4
This is the age of service, and the hospitality industry is getting
revamped because guest expectations have increased and the realization
is that “we buy loyalty with service.”
A guest is anyone who receives or benefits from the output of
someone’s work.
25 2, 4
For success in service, it is necessary to focus on the guest, understand
the role of the guest-contact employee, weave a service culture,
promote high-touch instead of high-tech, and thrive on change.
Guest loyalty is the key.
25 2,3,4
Moments of Truth
Every hospitality organization encounters hundreds of moments of
truth (guest encounters) every day. Service commitment is a total
organizational approach that makes quality of service as perceived by
the customer.
28 3, 4, 5
“Spirit to serve” comes from deep-rooted values. Service should be a
commitment to continuous improvement and overcoming adversity.
Our culture influences the way we treat associates, guests, and the
community, and that affects the success of everyone.
Sustainable Hospitality
24 2, 3
The concept of sustainability involves “development that meets the
needs of the present without compromising the ability of future
generations to meet their own needs.”
Sustainability is the ability to achieve ongoing economic prosperity
while protecting the natural resources of the planet and maintaining an
ideal quality of life for its people and future generations.
24 2,3,6
Success in Service
To achieve success, exceptional service is required. The satisfaction of
external customers ultimately measures a company’s success since they
are the people who are willing to pay for its services. To ensure
success, one must also ensure guest loyalty.
25 2, 4
Given that approximately 70 percent of the U.S. and Canadian
economies and an increasing percentage of other countries’ are engaged
in service industries, it is critical to offer guests exceptional service.
25 2, 4
This is the age of service, and the hospitality industry is getting
revamped because guest expectations have increased and the realization
is that “we buy loyalty with service.”
A guest is anyone who receives or benefits from the output of
someone’s work.
25 2, 4
For success in service, it is necessary to focus on the guest, understand
the role of the guest-contact employee, weave a service culture,
promote high-touch instead of high-tech, and thrive on change.
Guest loyalty is the key.
25 2,3,4
Moments of Truth
Every hospitality organization encounters hundreds of moments of
truth (guest encounters) every day. Service commitment is a total
organizational approach that makes quality of service as perceived by
the customer.
28 3, 4, 5
Loading page 9...
The Focus on Service
Giving great service is a very difficult task; few businesses give enough
priority to training associates in how to provide service. The
Educational Foundation of the National Restaurant Association (NRA)
developed programs to enhance hospitality students’ professional
development. One of their courses is Foodservice Leadership.
Guest service is a central focus of hospitality. It is what hospitality is
all about—what we do. Our job, first and foremost, is to enhance the
lives of those people (guests, passengers, etc.) to whom we are
dedicated to serve. Our job is to make the lives of others better in a
small way or big way; it makes no difference.
Quality guest service requires that we understand our guest’s needs.
The guest needs to feel welcome, comfortable, and they need to feel
important.
Service and Total Quality Management
29 3, 4, 5
In the area of service, TQM is a participatory process that empowers all
levels of employees to work in groups to establish guest service
expectations and determine the best way to meet or exceed those
expectations. TQM works best when managers are also good leaders.
The difference between TQM and quality control (QC) is that QC
focuses on error detection, while TQM focuses on error prevention.
29 2, 3, 4
The Disney Approach to Guest Service
The Disney mission statement is “We create happiness.”
Disney’s commitment to service means they understand their product
and the meaning of the brand, they look at the business from the guests’
perspective, and they consider it their responsibility to create an
exceptional experience for each guest.
New managers are provided technical training, guests are asked to take
surveys, and encouraging cast members to be innovative in their daily
approach are all models used by Disney to provide guest services above
and beyond what is expected.
34 1, 3, 4,
5
Career Paths
The career path of most individuals is not necessarily in a straight line.
The path is often a combination of paths such as food and beverage,
rooms division, marketing, human resources, or finance and
accounting. Progression from department to department earns you the
experience necessary for the next step.
38 2, 6
Giving great service is a very difficult task; few businesses give enough
priority to training associates in how to provide service. The
Educational Foundation of the National Restaurant Association (NRA)
developed programs to enhance hospitality students’ professional
development. One of their courses is Foodservice Leadership.
Guest service is a central focus of hospitality. It is what hospitality is
all about—what we do. Our job, first and foremost, is to enhance the
lives of those people (guests, passengers, etc.) to whom we are
dedicated to serve. Our job is to make the lives of others better in a
small way or big way; it makes no difference.
Quality guest service requires that we understand our guest’s needs.
The guest needs to feel welcome, comfortable, and they need to feel
important.
Service and Total Quality Management
29 3, 4, 5
In the area of service, TQM is a participatory process that empowers all
levels of employees to work in groups to establish guest service
expectations and determine the best way to meet or exceed those
expectations. TQM works best when managers are also good leaders.
The difference between TQM and quality control (QC) is that QC
focuses on error detection, while TQM focuses on error prevention.
29 2, 3, 4
The Disney Approach to Guest Service
The Disney mission statement is “We create happiness.”
Disney’s commitment to service means they understand their product
and the meaning of the brand, they look at the business from the guests’
perspective, and they consider it their responsibility to create an
exceptional experience for each guest.
New managers are provided technical training, guests are asked to take
surveys, and encouraging cast members to be innovative in their daily
approach are all models used by Disney to provide guest services above
and beyond what is expected.
34 1, 3, 4,
5
Career Paths
The career path of most individuals is not necessarily in a straight line.
The path is often a combination of paths such as food and beverage,
rooms division, marketing, human resources, or finance and
accounting. Progression from department to department earns you the
experience necessary for the next step.
38 2, 6
Loading page 10...
Career Goals
If you are not sure of which career path to pursue, that’s OK. Now is
the time to explore the industry to gain the information you need to
decide which career path to follow. A great way to do this is through
internships and work experience.
39 2, 6
Is the Hospitality Industry for You?
We also know that it is an exciting and dynamic industry with growth
potential, especially when the economy is strong. In the hospitality
industry we are often working when others are at leisure.
Ensuring that guests receive outstanding service is a goal of hospitality
corporations.
The personal characteristics, qualities, skills, and abilities you’ll need
are honesty, hard work, being a team player, being prepared to work
long hours spread over various shifts, the ability to cope with stress,
good decision-making skills, good communication skills, being
dedicated to exceptional service, and having a passion and desire to
exceed guest expectations.
Recruiters look for service-oriented people, who “walk their talk,”
meaning they do what they say they’re going to do. Good work
experience, involvement in on-campus and professional organizations,
a positive attitude, a good grade point average—all show a commitment
to an individual’s studies.
39 2
Self-Assessment and Personal Philosophy
The purpose of completing a self-assessment is to measure our current
strengths and weaknesses and to determine what we need to improve on
if we are going to reach our goals. Self-assessment helps establish
where we are now and shows us the links to where we want to go, our
goals.
Your philosophy is your beliefs and the way you treat others and your
work. It will determine who you are and what you stand for.
40 4, 5
Now is the Time to Get Involved
For your own enjoyment and personal growth and development, it is
very important to get involved with on-campus and professional
hospitality and tourism organizations and participate in the organization
of events. Recruiters notice the difference between students who have
become involved with various organizations and students who have
not, and they take that into consideration when assessing candidates for
positions with companies.
40 4, 5
If you are not sure of which career path to pursue, that’s OK. Now is
the time to explore the industry to gain the information you need to
decide which career path to follow. A great way to do this is through
internships and work experience.
39 2, 6
Is the Hospitality Industry for You?
We also know that it is an exciting and dynamic industry with growth
potential, especially when the economy is strong. In the hospitality
industry we are often working when others are at leisure.
Ensuring that guests receive outstanding service is a goal of hospitality
corporations.
The personal characteristics, qualities, skills, and abilities you’ll need
are honesty, hard work, being a team player, being prepared to work
long hours spread over various shifts, the ability to cope with stress,
good decision-making skills, good communication skills, being
dedicated to exceptional service, and having a passion and desire to
exceed guest expectations.
Recruiters look for service-oriented people, who “walk their talk,”
meaning they do what they say they’re going to do. Good work
experience, involvement in on-campus and professional organizations,
a positive attitude, a good grade point average—all show a commitment
to an individual’s studies.
39 2
Self-Assessment and Personal Philosophy
The purpose of completing a self-assessment is to measure our current
strengths and weaknesses and to determine what we need to improve on
if we are going to reach our goals. Self-assessment helps establish
where we are now and shows us the links to where we want to go, our
goals.
Your philosophy is your beliefs and the way you treat others and your
work. It will determine who you are and what you stand for.
40 4, 5
Now is the Time to Get Involved
For your own enjoyment and personal growth and development, it is
very important to get involved with on-campus and professional
hospitality and tourism organizations and participate in the organization
of events. Recruiters notice the difference between students who have
become involved with various organizations and students who have
not, and they take that into consideration when assessing candidates for
positions with companies.
40 4, 5
Loading page 11...
Professional Organizations
Becoming a student member in hospitality related organizations show
your commitment to your career and become a basis for recruiters to
see your professional attitude.
41 4, 5, 6
Trends in Hospitality and Tourism
Major trends in the hospitality industry include Globalization, Health,
Safety and Security, Diversity and changing Demographics, Service,
Technology, Sustainability and Green Travel, Legal issues, Travel with
a Purpose, and Social Media and Mobile.
41 2, 6
III. Teaching Techniques/Classroom Exercises
Note: The content of these exercises is such that they may also be used as essay
questions.
Exercise One:
Have students describe the Hospitality Industry. Their descriptions should include
industry characteristics and scope, including travel, lodging, foodservice, and recreation.
Exercise Two:
Have students research and discuss the corporate philosophy of a company of
their choice, preferably one in the hospitality industry. Be sure to include things such as
corporate culture, missions, goals, objectives, and strategies.
Exercise Three:
Over the past several years, there have been numerous mergers and acquisitions
throughout the hospitality industry. An appreciation of “who owns what” and the
company growth pattern can help readers understand how integrated the industry is.
Check Your Knowledge, p. 20
1) Question: Identify and explain two differences between the hospitality business
and other business sectors.
Answer: Hospitality businesses are open 365 days a year and 24 hours a day. The
hospitality industry depends heavily on shift work. (p. 19)
Other characteristics are the constant strive for outstanding guest service, the
intangibility, and the perishability of the product.
2) Question: List and describe the four shifts in the hospitality industry.
Answer: Morning Shift: 7 a.m. – 3 p.m. This is the early shift and may begin an
hour or so earlier or later but typically runs 8 hours.
Mid Shift: 10 a.m. – 7:00 p.m. Great for experience and is typically covered by
those who need minimum supervision such as supervisors. This shift requires
Becoming a student member in hospitality related organizations show
your commitment to your career and become a basis for recruiters to
see your professional attitude.
41 4, 5, 6
Trends in Hospitality and Tourism
Major trends in the hospitality industry include Globalization, Health,
Safety and Security, Diversity and changing Demographics, Service,
Technology, Sustainability and Green Travel, Legal issues, Travel with
a Purpose, and Social Media and Mobile.
41 2, 6
III. Teaching Techniques/Classroom Exercises
Note: The content of these exercises is such that they may also be used as essay
questions.
Exercise One:
Have students describe the Hospitality Industry. Their descriptions should include
industry characteristics and scope, including travel, lodging, foodservice, and recreation.
Exercise Two:
Have students research and discuss the corporate philosophy of a company of
their choice, preferably one in the hospitality industry. Be sure to include things such as
corporate culture, missions, goals, objectives, and strategies.
Exercise Three:
Over the past several years, there have been numerous mergers and acquisitions
throughout the hospitality industry. An appreciation of “who owns what” and the
company growth pattern can help readers understand how integrated the industry is.
Check Your Knowledge, p. 20
1) Question: Identify and explain two differences between the hospitality business
and other business sectors.
Answer: Hospitality businesses are open 365 days a year and 24 hours a day. The
hospitality industry depends heavily on shift work. (p. 19)
Other characteristics are the constant strive for outstanding guest service, the
intangibility, and the perishability of the product.
2) Question: List and describe the four shifts in the hospitality industry.
Answer: Morning Shift: 7 a.m. – 3 p.m. This is the early shift and may begin an
hour or so earlier or later but typically runs 8 hours.
Mid Shift: 10 a.m. – 7:00 p.m. Great for experience and is typically covered by
those who need minimum supervision such as supervisors. This shift requires
Loading page 12...
coordination with morning shift and evening shift.
Evening Shift: 3 p.m. – 11:30 p.m. Particularly common with hotels and food and
beverage employees.
Graveyard Shift: 11 p.m. – 7:30 a.m. Commonly known as the night audit, this
shift often involves several accounting functions that are best done during slower
business times and operations. (page 19)
3) Question: Identify some of the highlighted characteristics of the hospitality
industry.
Answer: The hospitality business produces guest satisfaction, an intangible, and
its product is perishable. (page 19)
Check Your Knowledge, p. 24
1) Question: Describe Marriott’s “Spirit to Serve”
Answer: It is the “Marriott Way” serving the associates, the customer, and the
community. These are the cornerstone for all Marriott associates who strive to
fulfill the values that originate from deep inside the people themselves; they are
authentic, bone-deep, and passionately held. These values drive Marriot culture.
(page 24)
2) Question: Define the term corporate philosophy and how it is currently
understood, especially in the hospitality industry.
Answer: Corporate philosophy embraces the values of the organization, including
ethics, morals, fairness, and equality. (page 23)
3) Question: What is sustainability, and how does it relate to the hospitality
industry?
Answer: Sustainability is the ability to achieve ongoing economic prosperity
while protecting the natural resources of the planet and maintaining an ideal
quality of life for its people and future generations. (page 24)
Check Your Knowledge, p. 28
1) Question: Explain why service in the hospitality industry is so important. Give an
example from your own experience as a guest, if possible.
Answer: It is critical to offer guests exceptional service. This is the age of service,
and the hospitality industry is getting revamped because guest expectations have
increased and the realization is that “we buy loyalty with service.”
Student answers will vary.
2) Question: List the five things required for success in service.
Answer: Focus on the guest, understand the role of the guest-contact employee,
weave a service culture into education and training systems, emphasize high-
Evening Shift: 3 p.m. – 11:30 p.m. Particularly common with hotels and food and
beverage employees.
Graveyard Shift: 11 p.m. – 7:30 a.m. Commonly known as the night audit, this
shift often involves several accounting functions that are best done during slower
business times and operations. (page 19)
3) Question: Identify some of the highlighted characteristics of the hospitality
industry.
Answer: The hospitality business produces guest satisfaction, an intangible, and
its product is perishable. (page 19)
Check Your Knowledge, p. 24
1) Question: Describe Marriott’s “Spirit to Serve”
Answer: It is the “Marriott Way” serving the associates, the customer, and the
community. These are the cornerstone for all Marriott associates who strive to
fulfill the values that originate from deep inside the people themselves; they are
authentic, bone-deep, and passionately held. These values drive Marriot culture.
(page 24)
2) Question: Define the term corporate philosophy and how it is currently
understood, especially in the hospitality industry.
Answer: Corporate philosophy embraces the values of the organization, including
ethics, morals, fairness, and equality. (page 23)
3) Question: What is sustainability, and how does it relate to the hospitality
industry?
Answer: Sustainability is the ability to achieve ongoing economic prosperity
while protecting the natural resources of the planet and maintaining an ideal
quality of life for its people and future generations. (page 24)
Check Your Knowledge, p. 28
1) Question: Explain why service in the hospitality industry is so important. Give an
example from your own experience as a guest, if possible.
Answer: It is critical to offer guests exceptional service. This is the age of service,
and the hospitality industry is getting revamped because guest expectations have
increased and the realization is that “we buy loyalty with service.”
Student answers will vary.
2) Question: List the five things required for success in service.
Answer: Focus on the guest, understand the role of the guest-contact employee,
weave a service culture into education and training systems, emphasize high-
Loading page 13...
touch as well as high-tech, and thrive on change – constantly improve the guest
experience.
3) Question: What is a moment of truth?
Answer: A “moment of truth” involves face-to-face or physical encounters with
service. A moment of truth occurs between the customer and the service provider.
Check Your Knowledge, p. 33
1) Question: What is the Malcolm Baldrige National Quality Award?
Answer: The Malcolm Baldrige National Quality Award is the highest level of
national recognition for quality that a U.S. company can receive. The award
promotes an understanding of quality excellence, greater awareness of quality on
a critical competitive element, and the sharing of quality information and
strategies. The Ritz-Carlton Hotel Company has won this award on two occasions
– both in 1993 and 1999 for groundbreaking levels of service.
2) Question: Explain Total Quality Management.
Answer: TQM is a participatory process that empowers all levels of employees to
work in groups to establish guest service expectations and determine the best way
to meet or exceed these expectations.
3) Question: List several ways a leader can empower employees.
Answer: Empowerment is a feeling of partnership in which employees feel
responsible for their jobs and have a stake in the organization’s success. Managers
can empower employees by doing the following: take risks, delegate, foster a
learning environment, share information and encourage self-expression, involve
employees in defining their own vision, and be thorough and patient with
employees.
IV. Answers to Chapter 1 Review Questions
1) The satisfaction of customers ultimately measures a company’s success, since they are the
people who are willing to pay for its service. A key objective of service is to create guest
loyalty – keep them happy during their stay and they will keep coming back.
2) A mission statement is a short statement of central purposes, strategies, and values of
a company. It should answer the question, “What business are we in?” Some
mission statements are very simple: “To WOW the guests.”
Moment of Truth is a term coined by Jan Carlson of Scandinavian Airline System.
They are guest encounters and an approach that makes the quality of service, as
perceived by the customer, the number one driving force for the operation of the
business. Every hospitality organization has thousands of moments of truth every day.
This challenges employees to maintain their quality service. Service commitment is a
total organizational approach that makes the quality of service, as perceived by the
experience.
3) Question: What is a moment of truth?
Answer: A “moment of truth” involves face-to-face or physical encounters with
service. A moment of truth occurs between the customer and the service provider.
Check Your Knowledge, p. 33
1) Question: What is the Malcolm Baldrige National Quality Award?
Answer: The Malcolm Baldrige National Quality Award is the highest level of
national recognition for quality that a U.S. company can receive. The award
promotes an understanding of quality excellence, greater awareness of quality on
a critical competitive element, and the sharing of quality information and
strategies. The Ritz-Carlton Hotel Company has won this award on two occasions
– both in 1993 and 1999 for groundbreaking levels of service.
2) Question: Explain Total Quality Management.
Answer: TQM is a participatory process that empowers all levels of employees to
work in groups to establish guest service expectations and determine the best way
to meet or exceed these expectations.
3) Question: List several ways a leader can empower employees.
Answer: Empowerment is a feeling of partnership in which employees feel
responsible for their jobs and have a stake in the organization’s success. Managers
can empower employees by doing the following: take risks, delegate, foster a
learning environment, share information and encourage self-expression, involve
employees in defining their own vision, and be thorough and patient with
employees.
IV. Answers to Chapter 1 Review Questions
1) The satisfaction of customers ultimately measures a company’s success, since they are the
people who are willing to pay for its service. A key objective of service is to create guest
loyalty – keep them happy during their stay and they will keep coming back.
2) A mission statement is a short statement of central purposes, strategies, and values of
a company. It should answer the question, “What business are we in?” Some
mission statements are very simple: “To WOW the guests.”
Moment of Truth is a term coined by Jan Carlson of Scandinavian Airline System.
They are guest encounters and an approach that makes the quality of service, as
perceived by the customer, the number one driving force for the operation of the
business. Every hospitality organization has thousands of moments of truth every day.
This challenges employees to maintain their quality service. Service commitment is a
total organizational approach that makes the quality of service, as perceived by the
Loading page 14...
customer, the number one driving force for the operation of the business.
3) The Disney service model:
It begins with a Smile.
Make Eye contact and use body language.
Respect and welcome all guests.
Value the magic.
Initiate guest contact.
Create service solutions.
End with a “thank you.”
4) The Ritz-Carlton Hotel won the Malcolm Baldrige National Quality Award for its
principles of quality service commitment to guests. The Gold Standards of these core
values include three steps of service:
A warm and sincere greeting.
Anticipation and compliance with guests’ needs.
A fond farewell, using guests’ names if and when possible.
5) Pages 41 to 44 lists several of the more prominent trends facing the industry today.
Answers will vary.
V. Mini-Case Discussion Question Answers
Being Promoted From Within
1. Students will have various answers. The likely cause is the previous relationship
with their new supervisor. Familiarity might allow the staff to believe that they are
immune to supervision with their ‘friend’ in charge.
2. Tom should assess the current challenges with the staff and meet with them to
discuss (or require) their cooperation in compliance. It’s time that Tom takes charge.
3. Perhaps tell Tom that he could maintain a ‘friendly’ relationship with his co-
workers, but as a supervisor he could no longer be ‘friends.’
3) The Disney service model:
It begins with a Smile.
Make Eye contact and use body language.
Respect and welcome all guests.
Value the magic.
Initiate guest contact.
Create service solutions.
End with a “thank you.”
4) The Ritz-Carlton Hotel won the Malcolm Baldrige National Quality Award for its
principles of quality service commitment to guests. The Gold Standards of these core
values include three steps of service:
A warm and sincere greeting.
Anticipation and compliance with guests’ needs.
A fond farewell, using guests’ names if and when possible.
5) Pages 41 to 44 lists several of the more prominent trends facing the industry today.
Answers will vary.
V. Mini-Case Discussion Question Answers
Being Promoted From Within
1. Students will have various answers. The likely cause is the previous relationship
with their new supervisor. Familiarity might allow the staff to believe that they are
immune to supervision with their ‘friend’ in charge.
2. Tom should assess the current challenges with the staff and meet with them to
discuss (or require) their cooperation in compliance. It’s time that Tom takes charge.
3. Perhaps tell Tom that he could maintain a ‘friendly’ relationship with his co-
workers, but as a supervisor he could no longer be ‘friends.’
Loading page 15...
Chapter Two
The Hotel Business
I. Chapter Objectives
After reading and studying this chapter, the student should be able to do the following:
1. Describe hotel ownership and development via hotel franchising and
management contracts.
2. Explain the diamond rating classification of hotels.
2. Classify hotels by rating system type, location, and price.
3. Discuss the concept and growth of vacation ownership
4. Discuss sustainable/green lodging.
5. Identify trends influencing the hotel business.
II. Key Teaching Elements/Chapter Outline/Lecture Suggestions
Hotel Development and Ownership Page Object.
The lodging industry is a more than $155 billion industry that
includes approximately 53,000 properties with almost five million
guestrooms. Franchising and management contracts are the two main
driving forces in the development and operation of the hotel business.
54 1
Franchising
Franchising in the hospitality industry is a concept that allows a
company to expand more quickly by using other people’s money,
rather than acquiring its own financing.
56 1
Under a franchise agreement, the company or franchisor grants
certain rights – for example, the right to use the company trademark,
operating procedures, reservation systems, marketing know-how,
purchasing discounts, etc. – for a fee. In return, the franchisee agrees
to operate the restaurant, hotel, etc., within guidelines set by the
franchisor.
56 1
Holiday Inn, Ritz-Carlton, and Howard Johnson’s all grew in the
1950s and 1960s through franchising. One of the key factors that led
to the success of Holiday Inn was that they were the first company to
enter the mid-price range and that they were located near important
freeway intersections and in the suburbs. Budget hotel properties
(Motel 6, Days Inn) grew during this time period.
56 1
Franchising was the primary growth and development strategy of
hotels and motels during the 1960s through the 1980s. Challenges to
the franchise arrangement include the maintenance of quality
57 1, 2
The Hotel Business
I. Chapter Objectives
After reading and studying this chapter, the student should be able to do the following:
1. Describe hotel ownership and development via hotel franchising and
management contracts.
2. Explain the diamond rating classification of hotels.
2. Classify hotels by rating system type, location, and price.
3. Discuss the concept and growth of vacation ownership
4. Discuss sustainable/green lodging.
5. Identify trends influencing the hotel business.
II. Key Teaching Elements/Chapter Outline/Lecture Suggestions
Hotel Development and Ownership Page Object.
The lodging industry is a more than $155 billion industry that
includes approximately 53,000 properties with almost five million
guestrooms. Franchising and management contracts are the two main
driving forces in the development and operation of the hotel business.
54 1
Franchising
Franchising in the hospitality industry is a concept that allows a
company to expand more quickly by using other people’s money,
rather than acquiring its own financing.
56 1
Under a franchise agreement, the company or franchisor grants
certain rights – for example, the right to use the company trademark,
operating procedures, reservation systems, marketing know-how,
purchasing discounts, etc. – for a fee. In return, the franchisee agrees
to operate the restaurant, hotel, etc., within guidelines set by the
franchisor.
56 1
Holiday Inn, Ritz-Carlton, and Howard Johnson’s all grew in the
1950s and 1960s through franchising. One of the key factors that led
to the success of Holiday Inn was that they were the first company to
enter the mid-price range and that they were located near important
freeway intersections and in the suburbs. Budget hotel properties
(Motel 6, Days Inn) grew during this time period.
56 1
Franchising was the primary growth and development strategy of
hotels and motels during the 1960s through the 1980s. Challenges to
the franchise arrangement include the maintenance of quality
57 1, 2
Loading page 16...
standards and the financial stability of the franchisee. Franchise fees
can vary tremendously and are often negotiated between the
franchiser and the franchisee. The average agreement is 3% to 4% of
room revenue.
Franchising presents both benefits and drawbacks. Careful
consideration should be given to these factors.
57, 58 1
Is There a Franchise in Your Future?
It is predicted that more than half of retail sales in the U.S. (including
restaurants) will soon be transacted through franchised units. There
are jobs working directly for a franchiser, a franchisee, or you might
buy a franchise yourself.
58 1
Many franchisors own their own units that they use to test new
operational or marketing ideas and to demonstrate the viability of the
business to potential franchisees.
59 1
Many of the mistakes that a new entrepreneur may make have already
been overcome by your franchisor. The company might provide cash
flow. The company might also provide other support services at little
or no cost, such as marketing and advertising, site selection,
construction plans, assistance with financing, and so on. All this
assistance leads to a second key reason for buying a franchise—
reducing your risk of failure.
59 1
Franchising does have some disadvantages. As a franchisee, your
freedom is somewhat restricted. You must operate within the
constraints set out by your franchise agreement and the operational
standards manual.
59 1
Referral Associations
A marketing consortium or referral organization is a group of
independent properties that refer businesses to one another. The
benefit of this arrangement is that independent hotel operations are
able to compete with chain operations. Hotels with a referral
association share a centralized reservation system (CRS) and a
common image, logo, or advertising slogan.
61 1
Management Contracts
Management contracts have helped stimulate the growth of the hotel
industry since the 1970s. They are popular because little or no up-
front financing or equity is involved.
62 1
The management contract usually allows for the hotel company to
manage the property for a period of years. In return, the company
62 1
can vary tremendously and are often negotiated between the
franchiser and the franchisee. The average agreement is 3% to 4% of
room revenue.
Franchising presents both benefits and drawbacks. Careful
consideration should be given to these factors.
57, 58 1
Is There a Franchise in Your Future?
It is predicted that more than half of retail sales in the U.S. (including
restaurants) will soon be transacted through franchised units. There
are jobs working directly for a franchiser, a franchisee, or you might
buy a franchise yourself.
58 1
Many franchisors own their own units that they use to test new
operational or marketing ideas and to demonstrate the viability of the
business to potential franchisees.
59 1
Many of the mistakes that a new entrepreneur may make have already
been overcome by your franchisor. The company might provide cash
flow. The company might also provide other support services at little
or no cost, such as marketing and advertising, site selection,
construction plans, assistance with financing, and so on. All this
assistance leads to a second key reason for buying a franchise—
reducing your risk of failure.
59 1
Franchising does have some disadvantages. As a franchisee, your
freedom is somewhat restricted. You must operate within the
constraints set out by your franchise agreement and the operational
standards manual.
59 1
Referral Associations
A marketing consortium or referral organization is a group of
independent properties that refer businesses to one another. The
benefit of this arrangement is that independent hotel operations are
able to compete with chain operations. Hotels with a referral
association share a centralized reservation system (CRS) and a
common image, logo, or advertising slogan.
61 1
Management Contracts
Management contracts have helped stimulate the growth of the hotel
industry since the 1970s. They are popular because little or no up-
front financing or equity is involved.
62 1
The management contract usually allows for the hotel company to
manage the property for a period of years. In return, the company
62 1
Loading page 17...
receives a management fee determined as a percentage of gross or net
operating profits. Today, many contracts are for a percentage of sales
and a percentage of operating profit. This is normally 2 + 2 percent.
Hotel companies have increasingly entered into management
contracts because less capital is “tied up” in managing the properties
than is required in owning properties.
63 1
Today, hotel management companies exist in an extremely
competitive environment. They have discovered that the hotel
business, like most others, has changed and they are adapting
accordingly. Today’s hotel owners are demanding better bottom-line
results and reduced fees. Management companies are seeking
sustainability and a bigger share of the business.
63 1
Real Estate Investment Trust (REIT)
A REIT must have at least 75 percent of its assets in real estate.
Today, about 300 REITs, with a combined market value of $70
billion, are publicly traded. Investors like them because they do not
pay corporate income tax and instead are required to distribute at
least 95 percent of net income to shareholders. In addition, because
they trade as stocks, they are much easier to get into or out of than are
limited partnerships or the direct ownership of properties.
63 1
Hotel Development
Hotel ownership and development is very capital intensive. New
hotels are built as a business venture by a developer, and because the
developer expects to make a fair return on the (substantial)
investment, a feasibility study is done to assess the viability of the
project. The feasibility study determines the degree to which the
proposed hotel project would be financially successful.
65 1
One of the most important documents is a Summary Operating
Statement, which details revenues and expenses for a period.
65 1
Close to 70 percent of a hotel’s revenue and most of the profit comes
from the sale of rooms. About 26 percent of revenue comes from
food and beverage sales.
65 1
There are two views on new hotels versus remodeled hotels as far as
room rates and profits are concerned. It is often difficult for a new
property to make a profit for a few years because of the higher cost of
construction and the need to become known and to gain a good
market share. On the other hand, a remodeled hotel has the cost of
remodeling to pay for plus higher operating costs for energy and
maintenance, so the two options tend to cancel each other out.
65 1
operating profits. Today, many contracts are for a percentage of sales
and a percentage of operating profit. This is normally 2 + 2 percent.
Hotel companies have increasingly entered into management
contracts because less capital is “tied up” in managing the properties
than is required in owning properties.
63 1
Today, hotel management companies exist in an extremely
competitive environment. They have discovered that the hotel
business, like most others, has changed and they are adapting
accordingly. Today’s hotel owners are demanding better bottom-line
results and reduced fees. Management companies are seeking
sustainability and a bigger share of the business.
63 1
Real Estate Investment Trust (REIT)
A REIT must have at least 75 percent of its assets in real estate.
Today, about 300 REITs, with a combined market value of $70
billion, are publicly traded. Investors like them because they do not
pay corporate income tax and instead are required to distribute at
least 95 percent of net income to shareholders. In addition, because
they trade as stocks, they are much easier to get into or out of than are
limited partnerships or the direct ownership of properties.
63 1
Hotel Development
Hotel ownership and development is very capital intensive. New
hotels are built as a business venture by a developer, and because the
developer expects to make a fair return on the (substantial)
investment, a feasibility study is done to assess the viability of the
project. The feasibility study determines the degree to which the
proposed hotel project would be financially successful.
65 1
One of the most important documents is a Summary Operating
Statement, which details revenues and expenses for a period.
65 1
Close to 70 percent of a hotel’s revenue and most of the profit comes
from the sale of rooms. About 26 percent of revenue comes from
food and beverage sales.
65 1
There are two views on new hotels versus remodeled hotels as far as
room rates and profits are concerned. It is often difficult for a new
property to make a profit for a few years because of the higher cost of
construction and the need to become known and to gain a good
market share. On the other hand, a remodeled hotel has the cost of
remodeling to pay for plus higher operating costs for energy and
maintenance, so the two options tend to cancel each other out.
65 1
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Older hotels are generally renovated about every seven years. This is
because they become dated and would otherwise lose market share,
which equals profit. Older hotels have an advantage over new ones—
or should have an advantage as a result of positive recognition in the
market.
65 1
The Economic Impact of Hotels
Hotels provide substantial direct and indirect economic impact to the
communities in which they are located. For direct impact, consider a
hotel that has an average of 240 guests a night who spend $250 at the
hotel and in restaurants and stores in the community. That would
mean $240 x $250 x 365 days = $21.9 million a year infused into the
local economy.
67 1
The indirect impact comes from the ripple effect, which we describe
in the tourism chapter; this is where money is spent by the employees
(wages and salaries) of the hotel in the community. It is also money
used by the hotel to purchase all the items to service the guests.
Communities also benefit from the Transient Occupancy Tax (TOT),
otherwise known as the bed tax.
68 1
Classification of Hotels and Lodging Properties
According to the American Hotel and Lodging Association (AHLA),
in 2013 the U.S. lodging industry consists of 52,887 hotels and
motels, with a total of 4,926,543 million rooms and $163 billion in
sales.
The Lodging Industry
69 1
Hotels may be classified in several ways and may have one or more
affiliations. For instance, hotels may be classified using the Smith
Travel Research (STR) hotel classification system, the Forbes Travel
Guide Five-Star rating process, and the American Automobile
Association (AAA) Five-Diamond award system. Smith Travel,
Forbes, and AAA have all expanded their rating practices outside the
United States.
69 2
Hotel Affiliations
A hotel may have multiple affiliations including being part of a chain,
parent company, operation (such as corporation, franchise, or
independent), management company, owner, asset management
company, and/or a member of a membership or marketing group.
69 3
because they become dated and would otherwise lose market share,
which equals profit. Older hotels have an advantage over new ones—
or should have an advantage as a result of positive recognition in the
market.
65 1
The Economic Impact of Hotels
Hotels provide substantial direct and indirect economic impact to the
communities in which they are located. For direct impact, consider a
hotel that has an average of 240 guests a night who spend $250 at the
hotel and in restaurants and stores in the community. That would
mean $240 x $250 x 365 days = $21.9 million a year infused into the
local economy.
67 1
The indirect impact comes from the ripple effect, which we describe
in the tourism chapter; this is where money is spent by the employees
(wages and salaries) of the hotel in the community. It is also money
used by the hotel to purchase all the items to service the guests.
Communities also benefit from the Transient Occupancy Tax (TOT),
otherwise known as the bed tax.
68 1
Classification of Hotels and Lodging Properties
According to the American Hotel and Lodging Association (AHLA),
in 2013 the U.S. lodging industry consists of 52,887 hotels and
motels, with a total of 4,926,543 million rooms and $163 billion in
sales.
The Lodging Industry
69 1
Hotels may be classified in several ways and may have one or more
affiliations. For instance, hotels may be classified using the Smith
Travel Research (STR) hotel classification system, the Forbes Travel
Guide Five-Star rating process, and the American Automobile
Association (AAA) Five-Diamond award system. Smith Travel,
Forbes, and AAA have all expanded their rating practices outside the
United States.
69 2
Hotel Affiliations
A hotel may have multiple affiliations including being part of a chain,
parent company, operation (such as corporation, franchise, or
independent), management company, owner, asset management
company, and/or a member of a membership or marketing group.
69 3
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Hotels may also be classified as corporate, franchise, or independent.
A corporate hotel is a chain hotel owned or managed by the chain or
parent company. A franchise hotel is a chain hotel run by a third
party, where the chain receives some sort of franchise fee. An
independent hotel is not affiliated with a chain or parent company.
Hotels may also be affiliated with a management company that
operates the hotel on behalf of another party.
Hotels may also be affiliated with one or more membership and
marketing groups that provide various benefits, such as marketing
assistance and reservation services.
Hotels may now be classified as a quasi-chain. Quasi-chains have
recently come into existence and are basically a cross between a
chain and a marketing group for independent hotels.
70 3
Hotel Classification by Rating System: AAA and Forbes
The AAA has been inspecting and rating the nation’s hotels since
1977. About three percent of the 59,000 (29,000 hotels and 30,000
restaurants) properties inspected annually throughout the United
States, Canada, and Mexico earn the five-diamond award, which is
the association’s highest award for excellence. In 2013, the five-
diamond award was bestowed on 124 lodging establishments in the
United States, Canada, the Caribbean, and Mexico
71 2
Similar to the system used by AAA, Forbes Travel Guide classifies
hotels using a five-star rating system. Out of the 50,000 hotels in the
United States, Forbes rates and recommends about 8,000 properties a
year. Of those, only a few dozen earn the five-star rating.
The hotel industry also classifies hotels by location or features
and benefits. A hotel may be located in an urban or city center,
suburban, airport, interstate or freeway, resort, small town/rural,
casino, full-service, extended-stay, all-suite, convention, or bed and
breakfast.
72 2
City center and Suburban Hotels
City center hotels meet the needs of business and leisure travelers.
They offer a range of accommodations and services.
75 3
They offer a signature restaurant, coffee shop, or an equivalent
recognized name restaurant; a lounge; a named bar; meeting and
convention rooms; a ballroom; and possibly a fancy night spot.
75 3
A corporate hotel is a chain hotel owned or managed by the chain or
parent company. A franchise hotel is a chain hotel run by a third
party, where the chain receives some sort of franchise fee. An
independent hotel is not affiliated with a chain or parent company.
Hotels may also be affiliated with a management company that
operates the hotel on behalf of another party.
Hotels may also be affiliated with one or more membership and
marketing groups that provide various benefits, such as marketing
assistance and reservation services.
Hotels may now be classified as a quasi-chain. Quasi-chains have
recently come into existence and are basically a cross between a
chain and a marketing group for independent hotels.
70 3
Hotel Classification by Rating System: AAA and Forbes
The AAA has been inspecting and rating the nation’s hotels since
1977. About three percent of the 59,000 (29,000 hotels and 30,000
restaurants) properties inspected annually throughout the United
States, Canada, and Mexico earn the five-diamond award, which is
the association’s highest award for excellence. In 2013, the five-
diamond award was bestowed on 124 lodging establishments in the
United States, Canada, the Caribbean, and Mexico
71 2
Similar to the system used by AAA, Forbes Travel Guide classifies
hotels using a five-star rating system. Out of the 50,000 hotels in the
United States, Forbes rates and recommends about 8,000 properties a
year. Of those, only a few dozen earn the five-star rating.
The hotel industry also classifies hotels by location or features
and benefits. A hotel may be located in an urban or city center,
suburban, airport, interstate or freeway, resort, small town/rural,
casino, full-service, extended-stay, all-suite, convention, or bed and
breakfast.
72 2
City center and Suburban Hotels
City center hotels meet the needs of business and leisure travelers.
They offer a range of accommodations and services.
75 3
They offer a signature restaurant, coffee shop, or an equivalent
recognized name restaurant; a lounge; a named bar; meeting and
convention rooms; a ballroom; and possibly a fancy night spot.
75 3
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Resort Hotels
Resort hotels developed initially with the growth of rail travel, In the
late 1800s, luxury resort hotels were developed to accommodate the
clientele that the railways brought.
75 3
Many resorts began as seasonal ventures, but with the increase of air
and automobile travel, many resorts have become year-round
destinations.
77 3
Today, there are numerous resort hotel properties that cater to the
needs of many segments of the population. Some resorts are family
friendly, whereas others seek to create a quiet get-away for the adult.
Many resorts actively work to attract conventions and conferences to
increase occupancy, especially in the off-season.
To increase occupancies, resorts have diversified their marketing mix
to include conventions, business meetings, sales meetings, incentive
groups, sporting events, additional sporting and recreational facilities,
spas, adventure tourism, ecotourism, and more.
Because guests are cocooned in the resort, they expect to be
pampered. This requires an attentive, well-trained staff; hiring,
training, and retaining a competent staff present a challenge in some
remote areas and in developing countries.
77 3
Airport Hotels
In general, airport hotels have high occupancy rates because of the
large number of travelers arriving and departing from major airports.
Some properties have added meeting space to cater to business people
who need to fly in, meet, and then fly out on a very tight schedule.
79 3
These hotels are usually full service and have 200 to 600 rooms. 79 3
Freeway and Interstate Hotels and Motels
Freeway hotels and motels grew most quickly in the 1950s and
1960s. They provided a convenient place to stay that was reasonably
priced with few frills.
80 3
They are smaller than most hotels—usually fewer than fifty rooms—
and are frequently mom-and-pop establishments or franchised (such
as Motel 6).
80 3
Casino Hotels
The casino hotel industry is now coming into the financial
mainstream, to the point that, as a significant segment of the
80 3
Resort hotels developed initially with the growth of rail travel, In the
late 1800s, luxury resort hotels were developed to accommodate the
clientele that the railways brought.
75 3
Many resorts began as seasonal ventures, but with the increase of air
and automobile travel, many resorts have become year-round
destinations.
77 3
Today, there are numerous resort hotel properties that cater to the
needs of many segments of the population. Some resorts are family
friendly, whereas others seek to create a quiet get-away for the adult.
Many resorts actively work to attract conventions and conferences to
increase occupancy, especially in the off-season.
To increase occupancies, resorts have diversified their marketing mix
to include conventions, business meetings, sales meetings, incentive
groups, sporting events, additional sporting and recreational facilities,
spas, adventure tourism, ecotourism, and more.
Because guests are cocooned in the resort, they expect to be
pampered. This requires an attentive, well-trained staff; hiring,
training, and retaining a competent staff present a challenge in some
remote areas and in developing countries.
77 3
Airport Hotels
In general, airport hotels have high occupancy rates because of the
large number of travelers arriving and departing from major airports.
Some properties have added meeting space to cater to business people
who need to fly in, meet, and then fly out on a very tight schedule.
79 3
These hotels are usually full service and have 200 to 600 rooms. 79 3
Freeway and Interstate Hotels and Motels
Freeway hotels and motels grew most quickly in the 1950s and
1960s. They provided a convenient place to stay that was reasonably
priced with few frills.
80 3
They are smaller than most hotels—usually fewer than fifty rooms—
and are frequently mom-and-pop establishments or franchised (such
as Motel 6).
80 3
Casino Hotels
The casino hotel industry is now coming into the financial
mainstream, to the point that, as a significant segment of the
80 3
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entertainment industry, it is reshaping the U.S. economy. The
entertainment and recreation sector has become a very important
engine for U.S. economic growth, providing a boost to consumer
spending, and thus creating tremendous prosperity for the industry.
One of the fastest-growing sectors of the entertainment field is
gaming
Larger casino hotels also attract conventions, which represent a
lucrative business. There are now more than 150 hotels on Native
American tribal land.
80 3
Conference and Convention Hotels
Convention hotels offer facilities that meet the needs of groups
attending and holding conventions. These facilities may include large
public areas and banquet facilities, a business center, a travel desk,
and an airport shuttle, as well as other amenities.
Convention hotels usually have a minimum of 300 guest rooms and a
minimum of 20,000 square feet of meeting space and larger public
areas to accommodate hundreds of people at any given time.
Convention hotels have many banquet areas within and around the
hotel complex.
Full-Service Hotels
81 3
Hotels may be classified by the degree of service offered: full-service,
economy, extended-stay, and all-suite hotels. Full-service hotels offer
a wide range of facilities, services, and amenities for both the
business and pleasure traveler. Examples: Hilton, Hyatt, Four
Seasons.
Most of the major North American cities have hotel chain
representation, such as Four Seasons, Hilton, InterContinental,
Choice, Hyatt, Marriott, Omni, Wyndham, Radisson, Loews, and
Starwood.
81 3
Economy/Budget Hotels
These properties provide clean, reasonably sized and furnished rooms
without “frills.” Economy hotels focus on selling beds. They do not
offer meals or meeting rooms, as a general rule.
82 3
Boutique Hotels
These hotels offer a different experience. They have a unique
architecture, style, décor, size, usually 25-125 rooms offering a high
level of personal service.
82 3
entertainment and recreation sector has become a very important
engine for U.S. economic growth, providing a boost to consumer
spending, and thus creating tremendous prosperity for the industry.
One of the fastest-growing sectors of the entertainment field is
gaming
Larger casino hotels also attract conventions, which represent a
lucrative business. There are now more than 150 hotels on Native
American tribal land.
80 3
Conference and Convention Hotels
Convention hotels offer facilities that meet the needs of groups
attending and holding conventions. These facilities may include large
public areas and banquet facilities, a business center, a travel desk,
and an airport shuttle, as well as other amenities.
Convention hotels usually have a minimum of 300 guest rooms and a
minimum of 20,000 square feet of meeting space and larger public
areas to accommodate hundreds of people at any given time.
Convention hotels have many banquet areas within and around the
hotel complex.
Full-Service Hotels
81 3
Hotels may be classified by the degree of service offered: full-service,
economy, extended-stay, and all-suite hotels. Full-service hotels offer
a wide range of facilities, services, and amenities for both the
business and pleasure traveler. Examples: Hilton, Hyatt, Four
Seasons.
Most of the major North American cities have hotel chain
representation, such as Four Seasons, Hilton, InterContinental,
Choice, Hyatt, Marriott, Omni, Wyndham, Radisson, Loews, and
Starwood.
81 3
Economy/Budget Hotels
These properties provide clean, reasonably sized and furnished rooms
without “frills.” Economy hotels focus on selling beds. They do not
offer meals or meeting rooms, as a general rule.
82 3
Boutique Hotels
These hotels offer a different experience. They have a unique
architecture, style, décor, size, usually 25-125 rooms offering a high
level of personal service.
82 3
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Extended-Stay Hotels and All-Suite Extended-Stay Hotels
These hotels provide accommodations to guests staying longer than 5
days. Rates are usually decreased based on the length of the stay.
Guests are usually a mix – professionals, business people, and
families that are relocating.
83 3
Extended-stay hotels offer full kitchen facilities and shopping
services or a convenience store on the premises.
84 3
All-suite hotels usually offer more space per room, for the same rate
as a regular hotel in the same price range. The additional space is
usually dedicated as a lounge or kitchenette, or both, within the room.
These hotels are attractive to guests who may be relocating, attending
training seminars, or are on work-related projects.
84 3
Condotels, Timeshare, and Mixed-Use Hotels
A combination of a hotel and condominium. Developers build a hotel
and sell it as condo units.
84 3, 4
This means that a hotel may also have residences; condos that people
use rather than renting like a condotel. They have spas and sports
facilities. Can be part of urban or resort development that might
include office buildings, etc.
85 3, 4
Bed and Breakfast Inns
Bed and breakfast operations offer variety in accommodation and in
cost. Although not all B&Bs are owner occupied, they provide an
alternative to the traditional lodging experience.
85 3
A true B&B is an accommodation with the owner, who lives on the
premises or nearby, providing a clean, attractive accommodation and
breakfast, usually a memorable one. There are an estimated 25,000
bed and breakfast places in the United States alone.
85 3
Best, Biggest, and Most Unusual Hotels and Chains
The largest hotel in the world is the Izmailovo Hotel in Moscow with
7,500 rooms, followed by the 7,372-room MGM Grand in Las Vegas
and the Venetian Hotel, also in Las Vegas, which has 7,117 rooms.
The Best Hotel Chains
86 3, 6
The Ritz-Carlton and Canadian-owned Four Seasons are rated the
highest quality chain hotels. The Ritz-Carlton Hotel Company has
received all the major awards the hospitality industry and leading
86 3, 6
These hotels provide accommodations to guests staying longer than 5
days. Rates are usually decreased based on the length of the stay.
Guests are usually a mix – professionals, business people, and
families that are relocating.
83 3
Extended-stay hotels offer full kitchen facilities and shopping
services or a convenience store on the premises.
84 3
All-suite hotels usually offer more space per room, for the same rate
as a regular hotel in the same price range. The additional space is
usually dedicated as a lounge or kitchenette, or both, within the room.
These hotels are attractive to guests who may be relocating, attending
training seminars, or are on work-related projects.
84 3
Condotels, Timeshare, and Mixed-Use Hotels
A combination of a hotel and condominium. Developers build a hotel
and sell it as condo units.
84 3, 4
This means that a hotel may also have residences; condos that people
use rather than renting like a condotel. They have spas and sports
facilities. Can be part of urban or resort development that might
include office buildings, etc.
85 3, 4
Bed and Breakfast Inns
Bed and breakfast operations offer variety in accommodation and in
cost. Although not all B&Bs are owner occupied, they provide an
alternative to the traditional lodging experience.
85 3
A true B&B is an accommodation with the owner, who lives on the
premises or nearby, providing a clean, attractive accommodation and
breakfast, usually a memorable one. There are an estimated 25,000
bed and breakfast places in the United States alone.
85 3
Best, Biggest, and Most Unusual Hotels and Chains
The largest hotel in the world is the Izmailovo Hotel in Moscow with
7,500 rooms, followed by the 7,372-room MGM Grand in Las Vegas
and the Venetian Hotel, also in Las Vegas, which has 7,117 rooms.
The Best Hotel Chains
86 3, 6
The Ritz-Carlton and Canadian-owned Four Seasons are rated the
highest quality chain hotels. The Ritz-Carlton Hotel Company has
received all the major awards the hospitality industry and leading
86 3, 6
Loading page 23...
consumer organizations can bestow. It has received the Malcolm
Baldrige National Quality Award from the U.S. Department of
Commerce.
The Most Unusual Hotels
Unusual hotels include The Treetops in Kenya, the Ice Hotel in
Swedish Lapland, and the underwater hotel at Great Barrier Reef.
88 3, 6
Timeshare, Vacation Ownership, and Fractional
Ownership
Vacation ownership is the fastest growing segment of the US travel
and tourism industry. A variation of the “time share” model is the
vacation club. Consumers earn points toward vacation benefits.
Flexibility is a key advantage of this type of program. Hotel
companies have found this segment of the industry to be extremely
lucrative. As a result, many leading hoteliers are entering into it.
Fees such as yearly maintenance fees are required in addition to
vacation ownership charges.
88 3, 4
Time share ownership lets owners save on the rising costs of vacation
accommodations over the long term, while providing the space and
flexibility to meet the needs of any size family or group. Vacation or
fractional ownership is a form of real estate ownership or right to use
a property in part. These types of properties are often resort or urban
condominiums, town homes, or single family homes, in which
multiple parties own and have rights to the property and amenities.
89 3, 4
Time shares also provide the possibility of worldwide travel by
means of ownership exchange. By locking in the purchase price of
accommodations, vacation ownership helps ensure future vacations at
today’s prices at luxurious resorts with amenities, service, and
ambience that rival any of the world’s top-rated vacation destinations.
Travel the World Through Exchange Vacations
90 3, 4
Through the international vacation exchange networks, owners can
trade their timeshare intervals for vacation time at comparable resorts
around the world. Most resorts are affiliated with an exchange
company that administers the exchange service for its members.
Typically, the exchange company directly solicits annual
membership. Owners individually elect to become members of the
affiliated exchange company. To exchange, the owner places his or
her interval into the exchange company’s pool of resorts and weeks
available for exchange and, in turn, chooses an available resort and
week from that pool.
90 4, 6
Baldrige National Quality Award from the U.S. Department of
Commerce.
The Most Unusual Hotels
Unusual hotels include The Treetops in Kenya, the Ice Hotel in
Swedish Lapland, and the underwater hotel at Great Barrier Reef.
88 3, 6
Timeshare, Vacation Ownership, and Fractional
Ownership
Vacation ownership is the fastest growing segment of the US travel
and tourism industry. A variation of the “time share” model is the
vacation club. Consumers earn points toward vacation benefits.
Flexibility is a key advantage of this type of program. Hotel
companies have found this segment of the industry to be extremely
lucrative. As a result, many leading hoteliers are entering into it.
Fees such as yearly maintenance fees are required in addition to
vacation ownership charges.
88 3, 4
Time share ownership lets owners save on the rising costs of vacation
accommodations over the long term, while providing the space and
flexibility to meet the needs of any size family or group. Vacation or
fractional ownership is a form of real estate ownership or right to use
a property in part. These types of properties are often resort or urban
condominiums, town homes, or single family homes, in which
multiple parties own and have rights to the property and amenities.
89 3, 4
Time shares also provide the possibility of worldwide travel by
means of ownership exchange. By locking in the purchase price of
accommodations, vacation ownership helps ensure future vacations at
today’s prices at luxurious resorts with amenities, service, and
ambience that rival any of the world’s top-rated vacation destinations.
Travel the World Through Exchange Vacations
90 3, 4
Through the international vacation exchange networks, owners can
trade their timeshare intervals for vacation time at comparable resorts
around the world. Most resorts are affiliated with an exchange
company that administers the exchange service for its members.
Typically, the exchange company directly solicits annual
membership. Owners individually elect to become members of the
affiliated exchange company. To exchange, the owner places his or
her interval into the exchange company’s pool of resorts and weeks
available for exchange and, in turn, chooses an available resort and
week from that pool.
90 4, 6
Loading page 24...
International Perspective
The global economy is segmented into large trading blocks such as
the European Economic Community (EEC) and the North American
Free Trade Agreement (NAFTA). Such agreements reduce
limitations on the transfer of goods and labor. This can lead to
increased travel, tourism, commerce, and industry.
91 1, 6
Growth is expected to continue under the EEC and NAFTA. The
Pacific Rim is also growing dramatically in the realm of tourism. In
Asia, Hong Kong’s growth has been encouraged by booming
economies throughout Southeast Asia and the kind of tax system for
which supply-siders hunger. The Hong Kong government levies a flat
16.5 percent corporate tax, a 15 percent individual income tax, and no
tax on capital gains or dividends.
91 1, 6
In developing countries, once political stability has been established
and maintained, hotel and tourism development follows closely.
92 1, 6
Sustainable or Green Lodging
Developers are more environmentally conscious because it can cost
far more not only to build a lodging facility but also to run it if it is
not sustainable.
92 5
The cost of energy has increased so much in recent years that lodging
construction now incorporates ways of using natural lighting and
building energy efficient buildings.
92 5
Lighting can account for 30 to 40 percent of commercial electricity
consumption.
92 5
Water conservation is another method that can greatly reduce waste.
Today, many hotels are replacing showerheads, toilets, and faucets
with low-flow water devices.
93 5
Career Information 93
There area variety of options related to hotel development and
classification. Some examples would be working in corporate offices
or consulting firms. In any case, a variety of positions in hotels will
benefit the person wanting to go into management.
Trends in Hotel Development and Management
Topics include capacity control, safety and security, technology,
assets and capital, new management, globalization, consolidation,
diversification within segments of the lodging industry, rapid growth
in vacation ownership, increase in the number of spas and treatments,
94-95
The global economy is segmented into large trading blocks such as
the European Economic Community (EEC) and the North American
Free Trade Agreement (NAFTA). Such agreements reduce
limitations on the transfer of goods and labor. This can lead to
increased travel, tourism, commerce, and industry.
91 1, 6
Growth is expected to continue under the EEC and NAFTA. The
Pacific Rim is also growing dramatically in the realm of tourism. In
Asia, Hong Kong’s growth has been encouraged by booming
economies throughout Southeast Asia and the kind of tax system for
which supply-siders hunger. The Hong Kong government levies a flat
16.5 percent corporate tax, a 15 percent individual income tax, and no
tax on capital gains or dividends.
91 1, 6
In developing countries, once political stability has been established
and maintained, hotel and tourism development follows closely.
92 1, 6
Sustainable or Green Lodging
Developers are more environmentally conscious because it can cost
far more not only to build a lodging facility but also to run it if it is
not sustainable.
92 5
The cost of energy has increased so much in recent years that lodging
construction now incorporates ways of using natural lighting and
building energy efficient buildings.
92 5
Lighting can account for 30 to 40 percent of commercial electricity
consumption.
92 5
Water conservation is another method that can greatly reduce waste.
Today, many hotels are replacing showerheads, toilets, and faucets
with low-flow water devices.
93 5
Career Information 93
There area variety of options related to hotel development and
classification. Some examples would be working in corporate offices
or consulting firms. In any case, a variety of positions in hotels will
benefit the person wanting to go into management.
Trends in Hotel Development and Management
Topics include capacity control, safety and security, technology,
assets and capital, new management, globalization, consolidation,
diversification within segments of the lodging industry, rapid growth
in vacation ownership, increase in the number of spas and treatments,
94-95
Loading page 25...
gaming, mixed-use properties, sustainable lodging development, and
culinary selectiveness.
III. Teaching Techniques/Classroom Exercises
Note: The content of these exercises is such that they may also be used as essay
questions.
Exercise One:
Ask students to generate a list of hotels in the area using an Internet search site
such as Hotels.com. As needed, facilitate the list development by adding to the list
properties that they omit, such as Mom and Pop motel properties, residential hotel
properties, etc. Once a comprehensive list has been generated, ask students to classify
the hotel properties using the categories from the text. Through discussion, analyze the
list. Which hotel types are most prevalent? Why? Which are omitted from the list?
Why? Has the lodging industry in the area gone through changes in the past 20 years? 30
years? etc.? If so, why?
Exercise Two:
Send students on a scavenger hunt using the Internet. Have them search for
articles that highlight unusual worldwide hotel properties and/or important hoteliers, in
addition to those listed in the text. Have students share findings. This activity could
easily be turned into a contest, with “points” being earned for articles that are the most
unusual.
Exercise Three:
Have students identify which type of hotel they would like to work for and why.
Which type of hotel would they like to own? What characteristics make this hotel ideal
for their career?
Exercise Four:
Give students a specific list of hotels that have a broad range of classification.
Have students access websites or other sources to find information on the hotels. Most
hotel chain websites will offer details on specific hotels, including rates, amenities, and
services at each property. Using the text have students work independently to classify
each hotel. This can be used for a discussion and/or debate on how hotels are classified.
Check Your Knowledge, p. 63
1) Question: What main factor changed the nature of the hotel industry? What
impact does it have today?
Answer: Improved transportation has changed the nature of the hotel industry
from small, independently owned inns to big hotels and lodging chains operations
by such concepts as franchising and management contracts.
culinary selectiveness.
III. Teaching Techniques/Classroom Exercises
Note: The content of these exercises is such that they may also be used as essay
questions.
Exercise One:
Ask students to generate a list of hotels in the area using an Internet search site
such as Hotels.com. As needed, facilitate the list development by adding to the list
properties that they omit, such as Mom and Pop motel properties, residential hotel
properties, etc. Once a comprehensive list has been generated, ask students to classify
the hotel properties using the categories from the text. Through discussion, analyze the
list. Which hotel types are most prevalent? Why? Which are omitted from the list?
Why? Has the lodging industry in the area gone through changes in the past 20 years? 30
years? etc.? If so, why?
Exercise Two:
Send students on a scavenger hunt using the Internet. Have them search for
articles that highlight unusual worldwide hotel properties and/or important hoteliers, in
addition to those listed in the text. Have students share findings. This activity could
easily be turned into a contest, with “points” being earned for articles that are the most
unusual.
Exercise Three:
Have students identify which type of hotel they would like to work for and why.
Which type of hotel would they like to own? What characteristics make this hotel ideal
for their career?
Exercise Four:
Give students a specific list of hotels that have a broad range of classification.
Have students access websites or other sources to find information on the hotels. Most
hotel chain websites will offer details on specific hotels, including rates, amenities, and
services at each property. Using the text have students work independently to classify
each hotel. This can be used for a discussion and/or debate on how hotels are classified.
Check Your Knowledge, p. 63
1) Question: What main factor changed the nature of the hotel industry? What
impact does it have today?
Answer: Improved transportation has changed the nature of the hotel industry
from small, independently owned inns to big hotels and lodging chains operations
by such concepts as franchising and management contracts.
Loading page 26...
2) Question: What are some of the benefits and drawbacks to being a franchisee?
Answer: Benefits to the Franchisee are as follows:
A set of plans and specifications from which to build
National advertising
A centralized reservation system (CRS)
Participation in volume discounts for purchasing furnishings, fixtures, and
equipment
Listing in the franchisor’s directory
Low fee percentage charged by credit card companies
The drawbacks to the franchisee are as follows:
Franchisees must pay high fees, both to join and ongoing.
Central reservations generally produce between 17 and 26 percent of reservations.
Franchisees must conform to the franchisor’s agreement.
Franchisees must maintain all standards set by the franchisor.
The benefits to the franchise company are as follows:
Increased market share and recognition
Up-front fees
The drawbacks to the franchise company are as follows:
The need to be very careful in the selection of franchisees
Difficulty in maintaining control of standards
3) Question: In your own words, define franchising and management contracts.
Answer: Answers will vary but should be similar to text’s definitions.
Franchising is a concept that allows a company to expand quickly by allowing
qualified people to use the systems, marketing, and purchasing power of the
franchisor.
Management contracts are written agreements between an owner and an operator
of a hotel or motor inn by which the owner employs the operator as an agent
(employee) to assume full responsibility for operating and managing the property.
4) Question: Explain the nature of a referral association and some of the benefits
such an arrangement offers.
Answer: Very similar to franchising but without the cost. Hotels and motels with a
referral association share a CRS and a common image, logo, or advertising
slogan. In addition, referrals may offer group-buying discounts to members, as
well as management training and continuing education programs. Each
independent hotel refers guests to each of the other member hotels. Hotels and
motels pay an initial fee to join a referral association. Size and appearance
standards are less stringent than those in a franchise agreement; hence, guests may
find more variation between the facilities than between franchise members.
Check Your Knowledge, p. 69
1) Question: Explain a Real Estate Investment Trust (REIT).
Answer: REIT’s focus on specific sectors such as hotels, office buildings,
apartments, malls, and nursing homes. A REIT must have at least 75 percent of its
assets in real estate. Investors like them because they do not pay corporate income
Answer: Benefits to the Franchisee are as follows:
A set of plans and specifications from which to build
National advertising
A centralized reservation system (CRS)
Participation in volume discounts for purchasing furnishings, fixtures, and
equipment
Listing in the franchisor’s directory
Low fee percentage charged by credit card companies
The drawbacks to the franchisee are as follows:
Franchisees must pay high fees, both to join and ongoing.
Central reservations generally produce between 17 and 26 percent of reservations.
Franchisees must conform to the franchisor’s agreement.
Franchisees must maintain all standards set by the franchisor.
The benefits to the franchise company are as follows:
Increased market share and recognition
Up-front fees
The drawbacks to the franchise company are as follows:
The need to be very careful in the selection of franchisees
Difficulty in maintaining control of standards
3) Question: In your own words, define franchising and management contracts.
Answer: Answers will vary but should be similar to text’s definitions.
Franchising is a concept that allows a company to expand quickly by allowing
qualified people to use the systems, marketing, and purchasing power of the
franchisor.
Management contracts are written agreements between an owner and an operator
of a hotel or motor inn by which the owner employs the operator as an agent
(employee) to assume full responsibility for operating and managing the property.
4) Question: Explain the nature of a referral association and some of the benefits
such an arrangement offers.
Answer: Very similar to franchising but without the cost. Hotels and motels with a
referral association share a CRS and a common image, logo, or advertising
slogan. In addition, referrals may offer group-buying discounts to members, as
well as management training and continuing education programs. Each
independent hotel refers guests to each of the other member hotels. Hotels and
motels pay an initial fee to join a referral association. Size and appearance
standards are less stringent than those in a franchise agreement; hence, guests may
find more variation between the facilities than between franchise members.
Check Your Knowledge, p. 69
1) Question: Explain a Real Estate Investment Trust (REIT).
Answer: REIT’s focus on specific sectors such as hotels, office buildings,
apartments, malls, and nursing homes. A REIT must have at least 75 percent of its
assets in real estate. Investors like them because they do not pay corporate income
Loading page 27...
taxes. They are required to distribute at least 95 percent of net income to
shareholders. In addition, because they trade as stocks, they are much easier to get
into or out of than are limited partnerships or the direct ownership of properties.
2) Question: What is the difference between direct and indirect economic impact?
Answer: For direct impact, consider a hotel that has an average of 240 guests a
night, each of whom spends $250 at the hotel and in restaurants and stores in the
community per day. That would mean $240 $250
year infused into the local economy. The indirect impact comes from the ripple
effect, which we describe in the tourism chapter; this is where money is spent by
the employees (wages and salaries) of the hotel in the community. It is also
money used by the hotel to purchase all the items to service the guests.
Communities also benefit from the Transient Occupancy Tax (TOT), otherwise
known as the bed tax.
3) Question: Identify the two views with regard to new hotel versus remodeled hotel
development.
Answer: There are two views on new hotels versus remodeled hotels as far as
room rates and profits are concerned. It is often difficult for a new property to
make a profit for a few years because of the higher cost of construction and the
need to become known and to gain a good market share. On the other hand, a
remodeled hotel has the cost of remodeling to pay for plus higher operating costs
for energy and maintenance, so the two options tend to almost cancel each other
out.
Check Your Knowledge, p. 86
1) Question: What is the role of Smith Travel Research?
Answer: Smith Travel Research scale categorization is popular for the hotel
industry to classify hotels. Smith Travel uses a seven-scale categorization, with
six categories for chain hotels (e.g., economy, midscale, upper midscale, upscale,
upper upscale, and luxury) and one scale category for independent hotels. Smith
Travel Research focuses on hotel ADR rather than features or amenities when
positioning chains into a scale group.
2) Question: Identify the characteristics of one through five-diamond, as well as one
through five-star hotels.
Answer:
AAA properties:
One-diamond properties have simple roadside appeal and the basic lodging needs.
Two-diamond properties have average roadside appeal, with some landscaping
and a noticeable enhancement in interior décor.
Three diamonds carry a degree of sophistication through higher service and
comfort.
Four diamonds have excellent roadside appeal and service levels that give guests
what they need before they even ask for it.
Five-diamond properties have the highest service levels, sophistication, and
shareholders. In addition, because they trade as stocks, they are much easier to get
into or out of than are limited partnerships or the direct ownership of properties.
2) Question: What is the difference between direct and indirect economic impact?
Answer: For direct impact, consider a hotel that has an average of 240 guests a
night, each of whom spends $250 at the hotel and in restaurants and stores in the
community per day. That would mean $240 $250
year infused into the local economy. The indirect impact comes from the ripple
effect, which we describe in the tourism chapter; this is where money is spent by
the employees (wages and salaries) of the hotel in the community. It is also
money used by the hotel to purchase all the items to service the guests.
Communities also benefit from the Transient Occupancy Tax (TOT), otherwise
known as the bed tax.
3) Question: Identify the two views with regard to new hotel versus remodeled hotel
development.
Answer: There are two views on new hotels versus remodeled hotels as far as
room rates and profits are concerned. It is often difficult for a new property to
make a profit for a few years because of the higher cost of construction and the
need to become known and to gain a good market share. On the other hand, a
remodeled hotel has the cost of remodeling to pay for plus higher operating costs
for energy and maintenance, so the two options tend to almost cancel each other
out.
Check Your Knowledge, p. 86
1) Question: What is the role of Smith Travel Research?
Answer: Smith Travel Research scale categorization is popular for the hotel
industry to classify hotels. Smith Travel uses a seven-scale categorization, with
six categories for chain hotels (e.g., economy, midscale, upper midscale, upscale,
upper upscale, and luxury) and one scale category for independent hotels. Smith
Travel Research focuses on hotel ADR rather than features or amenities when
positioning chains into a scale group.
2) Question: Identify the characteristics of one through five-diamond, as well as one
through five-star hotels.
Answer:
AAA properties:
One-diamond properties have simple roadside appeal and the basic lodging needs.
Two-diamond properties have average roadside appeal, with some landscaping
and a noticeable enhancement in interior décor.
Three diamonds carry a degree of sophistication through higher service and
comfort.
Four diamonds have excellent roadside appeal and service levels that give guests
what they need before they even ask for it.
Five-diamond properties have the highest service levels, sophistication, and
Loading page 28...
offerings.
Forbes Travel Guide:
One-star hotels are limited-service hotels or inns that are considered clean,
comfortable, and reliable establishments.
Two-star hotels are considered clean, comfortable, and reliable establishments
that have expanded amenities, such as a full-service restaurant.
Three-star hotels are well-appointed establishments with enhanced amenities that
provide travelers with a strong sense of location, whether for style or function.
They may have a distinguishing style and ambience in both the public spaces and
guest rooms.
Four-star hotels provide a distinctive setting with many interesting and inviting
elements to enjoy throughout the property. Attention to detail is prominent from
design concept to quality of products provided. Staff are accommodating and take
pride in catering to the guest’s specific needs.
Five-star hotels are exceptional properties that provide a memorable experience
through virtually flawless service and the finest of amenities. Staff are intuitive,
engaging, and passionate and eagerly deliver service above and beyond the
guests’ expectations. The hotel was designed with the guest’s comfort in mind,
with particular attention paid to craftsmanship and quality of product.
3) Question: List the characteristics of each hotel segment highlighted.
Answer: Hotels are categorized several ways. They are listed under geographic
orientations, markets, locations, features, and price. Some of the classifications
are:
City Center and Suburban: May include luxury, first-class, full-service,
convention, midscale, economy, boutique, extended stay, corporate housing, and
all-suite hotels.
Resort: May include luxury, midscale, economy suites, condominium, timeshare,
convention, boutique, all-suite, all-inclusive, or a mixed-use hotel (e.g., includes a
full-service hotel, condominiums, homes, and fractional ownership/timeshare
units on property).
Airport: May include luxury, full-service, midscale, economy, and all-suite hotels.
Freeway: May include midscale, economy, and all-suite hotels.
Casino: May include luxury, upper upscale, and midscale hotels with an attached
casino operation.
Rural and Small Town: May include a mix of midscale, economy, and bed and
breakfast hotels.
Check Your Knowledge, page 95
1) Question: Explain timeshare, vacation, and fractional ownership
Answer: Timeshare is an “owned” suite that is rented out rather than a hotel room
that is rented out. Vacation or fractional ownership is a form of real estate
ownership or right to use a property in part. These types of properties are often
resort or urban condominiums, town homes, or single family homes, in which
multiple parties own and have rights to the property and amenities. Ownership
and access are designated in defined periods of time (e.g., one week, two weeks, a
Forbes Travel Guide:
One-star hotels are limited-service hotels or inns that are considered clean,
comfortable, and reliable establishments.
Two-star hotels are considered clean, comfortable, and reliable establishments
that have expanded amenities, such as a full-service restaurant.
Three-star hotels are well-appointed establishments with enhanced amenities that
provide travelers with a strong sense of location, whether for style or function.
They may have a distinguishing style and ambience in both the public spaces and
guest rooms.
Four-star hotels provide a distinctive setting with many interesting and inviting
elements to enjoy throughout the property. Attention to detail is prominent from
design concept to quality of products provided. Staff are accommodating and take
pride in catering to the guest’s specific needs.
Five-star hotels are exceptional properties that provide a memorable experience
through virtually flawless service and the finest of amenities. Staff are intuitive,
engaging, and passionate and eagerly deliver service above and beyond the
guests’ expectations. The hotel was designed with the guest’s comfort in mind,
with particular attention paid to craftsmanship and quality of product.
3) Question: List the characteristics of each hotel segment highlighted.
Answer: Hotels are categorized several ways. They are listed under geographic
orientations, markets, locations, features, and price. Some of the classifications
are:
City Center and Suburban: May include luxury, first-class, full-service,
convention, midscale, economy, boutique, extended stay, corporate housing, and
all-suite hotels.
Resort: May include luxury, midscale, economy suites, condominium, timeshare,
convention, boutique, all-suite, all-inclusive, or a mixed-use hotel (e.g., includes a
full-service hotel, condominiums, homes, and fractional ownership/timeshare
units on property).
Airport: May include luxury, full-service, midscale, economy, and all-suite hotels.
Freeway: May include midscale, economy, and all-suite hotels.
Casino: May include luxury, upper upscale, and midscale hotels with an attached
casino operation.
Rural and Small Town: May include a mix of midscale, economy, and bed and
breakfast hotels.
Check Your Knowledge, page 95
1) Question: Explain timeshare, vacation, and fractional ownership
Answer: Timeshare is an “owned” suite that is rented out rather than a hotel room
that is rented out. Vacation or fractional ownership is a form of real estate
ownership or right to use a property in part. These types of properties are often
resort or urban condominiums, town homes, or single family homes, in which
multiple parties own and have rights to the property and amenities. Ownership
and access are designated in defined periods of time (e.g., one week, two weeks, a
Loading page 29...
month, etc.), and the units may be owned forever or on a specified period of time
lease or right-to-use basis.
2) Question: Identify several sustainable or green lodging strategies.
Answer: There are eight steps you can take to start an effective, sustainable
lodging program including:
1. Organize a waste reduction team;
2. Conduct a waste assessment;
3. Establish waste reduction goals;
4. Secure recycling markets;
5. Set up a collection and storage system;
6. Buy recycled products.
7. Conserving energy through electricity consumption
8. Water conservation
See page 93 for the complete explanation.
3) Question: List and explain some trends in hotel development.
Answer: Some trends are; increased use of capacity control mechanisms,
enhanced safety and security programs, the continued increase of technology,
globalization, more consolidation in the industry, etc.
A comprehensive list is on pages 94 – 95.
IV. Answers to Chapter 2 Review Questions
1) a) Management contracts have the advantage of requiring little up-front financing and
usually allow the hotel company to manage the property for several years, whereby
the company receives a percentage of the net operating profit as a management fee.
This allows for the rapid expansion of the hotel market, especially since increased
competition among management companies has decreased the management contract
fees.
b) The concept of franchising allowed for the rapid expansion of hotels and motels.
Franchising allows franchisees to use the brand names and services of a franchisor in
exchange for a fee. This has the advantages of involving less up-front capital, a
centralized reservation system, national advertising, and increased market
recognition, but it also includes the challenges of maintenance of quality standards
and avoidance of financial failure on the part of the franchisee.
2) a) Resorts are usually located at exotic places with spectacular scenery, offering
relaxation and recreational activities. The Treetop hotel located in one of Kenya's
wild animal parks is architecturally built on the tops of trees, whereas the Cocoon
Hotel in Japan offers guests an affordable alternative space of about seven feet by
four feet with just a bed and television.
b) Airport hotels offer extended room service and restaurant hours to accommodate
early and late arriving and departing guests.
lease or right-to-use basis.
2) Question: Identify several sustainable or green lodging strategies.
Answer: There are eight steps you can take to start an effective, sustainable
lodging program including:
1. Organize a waste reduction team;
2. Conduct a waste assessment;
3. Establish waste reduction goals;
4. Secure recycling markets;
5. Set up a collection and storage system;
6. Buy recycled products.
7. Conserving energy through electricity consumption
8. Water conservation
See page 93 for the complete explanation.
3) Question: List and explain some trends in hotel development.
Answer: Some trends are; increased use of capacity control mechanisms,
enhanced safety and security programs, the continued increase of technology,
globalization, more consolidation in the industry, etc.
A comprehensive list is on pages 94 – 95.
IV. Answers to Chapter 2 Review Questions
1) a) Management contracts have the advantage of requiring little up-front financing and
usually allow the hotel company to manage the property for several years, whereby
the company receives a percentage of the net operating profit as a management fee.
This allows for the rapid expansion of the hotel market, especially since increased
competition among management companies has decreased the management contract
fees.
b) The concept of franchising allowed for the rapid expansion of hotels and motels.
Franchising allows franchisees to use the brand names and services of a franchisor in
exchange for a fee. This has the advantages of involving less up-front capital, a
centralized reservation system, national advertising, and increased market
recognition, but it also includes the challenges of maintenance of quality standards
and avoidance of financial failure on the part of the franchisee.
2) a) Resorts are usually located at exotic places with spectacular scenery, offering
relaxation and recreational activities. The Treetop hotel located in one of Kenya's
wild animal parks is architecturally built on the tops of trees, whereas the Cocoon
Hotel in Japan offers guests an affordable alternative space of about seven feet by
four feet with just a bed and television.
b) Airport hotels offer extended room service and restaurant hours to accommodate
early and late arriving and departing guests.
Loading page 30...
c) Vertical Integration is the trend of having properties in all segments of the market:
luxury, mid-scale, and economy.
3) Vacation ownership is more commonly known as time-sharing. Vacationers buy the
"right" to use a hotel room/condominium/cabin/apartment, etc., for a given amount of
time each year. The destination and the "unit" may be fixed or may be flexible.
Vacation clubs provide the greatest amount of flexibility as members can choose from
various member destinations.
luxury, mid-scale, and economy.
3) Vacation ownership is more commonly known as time-sharing. Vacationers buy the
"right" to use a hotel room/condominium/cabin/apartment, etc., for a given amount of
time each year. The destination and the "unit" may be fixed or may be flexible.
Vacation clubs provide the greatest amount of flexibility as members can choose from
various member destinations.
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