the business of hotels

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The Business of Hotels

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By the same authors

S. Medlik

Britain – Workshop or Service Centre to the World?

The British Hotel and Catering Industry

Dictionary of Travel, Tourism and Hospitality

Europeans on Holiday

Higher Education and Research in Tourism in Western Europe

Historical Development of Tourism (with A.J. Burkart)

Holiday Surveys Examined

The Management of Tourism (with A.J. Burkart eds)

Managing Tourism (ed.)

A Manual of Hotel Reception (with J.R.S. Beavis)

Paying Guests

Profile of the Hotel and Catering Industry (with D.W. Airey)

Tourism and Productivity

Tourism Employment in Wales

Tourism: Past, Present and Future (with A.J. Burkart)

Trends in Tourism: World Experience and England’s Prospects

Trends in World Tourism

Understanding Tourism

Your Manpower (with J. Denton)

H. Ingram

Developing Hospitality Properties and Facilities (with J. Ransley eds)

Operational Techniques for the Hospitality Industry (with N. Johns and D. Lee-Ross)

Strategic Management (with R.Teare)

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The Business of HotelsFourth Edition

S. Medlik and H. Ingram

11112345678910111112345678920111123456789301111234567894041111 OXFORD AUCKLAND BOSTON JOHANNESBURG MELBOURNE NEW DELHI

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Butterworth-Heinemann Linacre House, Jordan Hill, Oxford OX2 8DP225 Wildwood Avenue, Woburn, MA 01801-2041A division of Reed Educational and Professional Publishing Ltd

First published 1980Reprinted 1985, 1986, 1987 (twice)Second edition 1989Reprinted 1990, 1991, 1993Third edition 1994Reprinted 1995, 1996, 1997, 1998, 1999, 2000 Fourth edition 2000

© S. Medlik 1980, 1989, 1994© S. Medlik and H. Ingram 2000

All rights reserved. No part of this publication may be reproduced in any material form (including photocopying or storing in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, England W1P 0LP. Applications for the copyright holder’s written permission to reproduce any part of this publication should be addressed to the publishers

British Library Cataloguing in Publication DataMedlik, S. (Slavoj), 1928–

The business of hotels. – 4th ed.1. Hotel managementI. Title II. Ingram, Hadyn647.9´4´068

ISBN 0 7506 4115 0

Printed and bound in Great Britain

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Contents

List of Tables ix

List of Figures xi

Preface to the First Edition xiii

Preface to the Fourth Edition xvii

PART I THE CONCEPTS OF HOTELS AND HOSPITALITY 1

1 Staying Away from Home 3

The Importance of Hotels – Travel and Hotels – Two Centuries ofHotelkeeping – Hotels in the Total Accommodation Market – HotelLocation – Types of Hotels – A Review So Far

2 Hotel Products and Markets 13

The Hotel as a Total Market Concept – Hotel Facilities and Servicesas Products – Hotel Accommodation Markets – Hotel Catering Markets– Sources of Hotel Demand – Hotel Market Areas – Hotel MarketSegmentation – Buying and Paying for Hotel Services – HotelMarketing Orientation

3 Hotel Policies, Philosophies and Strategies 25

Objectives and Policies – General and Sectional Policies – PolicyFormulation, Communication and Review – Hotel Philosophies – HotelPlans and Strategies – The Framework of Hotel Management

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PART II THE STRUCTURE OF THE HOTEL INDUSTRY 37

4 The Small Hotel 39

Products and Markets – Ownership and Finance – Organization andStaffing – Accounting and Control – The Future of the Small Hotel –Consortia

5 Hotel Groups 50

Hotel Group Operations – Advantages of Groups – Problems of Groups– Scope for Centralization – A Concentrated Hotel Group: an Illustration– A Dispersed Hotel Group: an Illustration

6 International Hotel Operations 63

Products – Markets – Ownership and Finance – Organization andGeneral Approach

PART III THE HOTEL AND ITS FUNCTIONS: GUESTSERVICES 77

7 Rooms and Beds 79

Room Sales – Mail and Other Guest Services – Uniformed Services– Hotel Housekeeping – Organization and Staffing – Accounting andControl

8 Food and Drink 89

The Food Cycle – The Beverage Cycle – Hotel Restaurants – HotelBars – Room Service – Functions – Food and Beverage SupportServices – Organization and Staffing – Accounting and Control

9 Miscellaneous Guest Services 102

Guest Telephones – Guest Laundry – Rentals and Concessions – OtherSources of Income – Accounting and Control

PART IV HOTEL SUPPORT SERVICES 111

10 Marketing 113

From Production to Sales to Marketing – The Marketing Concept –Special Features of Hotel Marketing – The Marketing Cycle – MarketingResources – Yield and Quality Management – Hotels in the Total TouristProduct

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Contents

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11 Property Ownership and Management 127

Property Ownership – Property Operation and Maintenance – FacilitiesManagement – Energy – Hotels and the Environment

12 Finance and Accounts 135

The Hotel Balance Sheet – Balance Sheet Ratios and Analysis – TheHotel Profit and Loss Statement – Profit and Loss Ratios and Analysis– Hotel Operating Profit – Balance Sheet and Profit and LossRelationships

PART V PEOPLE AND PROCEDURES 147

13 Hotel Organization 149

Rooms – Food and Beverages – Miscellaneous Guest Services – HotelSupport Services – The Management Structure – Organization Structureof a Large Hotel: an Illustration – Accounting and Control – InformationTechnology in Hotels

14 Hotel Staffing 163

Determinants of Hotel Staffing – Hotel Products and Staffing –Organization of the Human Resource Function – Organization ofTraining – Functions of the Training Division

15 Performance in Hotels 171

Criteria of Performance – Financial Perspective – Internal BusinessPerspective – Innovation and Learning Perspective – CustomerPerspective – Some Ways to Higher Productivity

APPENDICES 183A Travel and Hotels in the United Kingdom in the 1990s 185B Travel and Hotels in America in the 1990s 187C Global Capacity of Hotels and Similar Establishments, 1995 189D Hotel Occupancies in Selected Countries 1994, 1995, 1996 191E Leading Hotel Groups World-wide 192F Leading Hotel Groups in Europe 194G Leading Hotel Consortia 196H Horwath International Reports 197I Select List of Hotel and Related Organizations 199J Select List of Hotel Periodicals 202K Suggested Further Reading 205

Select Bibliography 209Index 214

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Contents

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Tables

1 Accommodation profile of selected European countries, 1995 8

2 Social grade definitions 213 Leading hotel management companies 524 Leading hotel franchising companies 535 Composition of hotel revenue in main regions 666 Composition of hotel revenue in selected European

countries 677 Composition of hotel markets in main regions 678 Advance reservations in hotels in main regions 689 Method of payment for hotel services in main regions 68

10 Charge/credit card hotel sales in main regions 6911 Room sales as a ratio of hotel revenue in main regions 8012 Rooms payroll and related expenses ratios to sales in

Europe and Africa 8613 Room sales, expenses and profit ratios in selected

European countries 8614 Room occupancies and average rates in selected European

countries 8715 Double occupancies in selected cities and regions 8816 Food and beverage sales as a ratio of hotel revenue in

main regions 9017 Food and beverage payroll and related expenses ratios

to sales in Europe and Africa 9918 Food and beverage sales, expenses and profit ratios in

selected European countries 10019 Miscellaneous sales and income as a ratio of hotel

revenue in selected regions 104

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20 Telecommunications income, expenses and profit ratios in hotels in selected European countries 109

21 Guest services offered by hotels in main regions 11822 Use of promotional tools by hotels in main regions 12023 Marketing expenses as a ratio of hotel sales in main

regions 12124 Marketing expenses as a ratio of hotel sales in selected

European countries 12225 Room occupancies, discounts and yield in selected cities 12426 Property operation and maintenance costs as a ratio of

hotel sales in main regions 13027 Property operation and maintenance expenses as a ratio

of hotel sales in selected European countries 13028 Energy costs as a ratio of hotel sales in selected areas of

Europe 13229 Energy costs as a ratio of hotel sales in selected countries

and regions 13230 Balance sheet as at 31 December 0000 13631 Profit and loss summary operating statement for the year to

31 December 0000 13932 Profit and loss summary operating statement for the year to

31 December 0000 showing profit levels 14133 Ratios of costs, expenses and profit margins to departmental

sales and to hotel revenue 14234 Hotel operating profit as a ratio of hotel sales in main

regions 14335 Hotel operating profit as a ratio of hotel sales in selected

countries 14436 Administrative and general expenses as a ratio of hotel

sales in main regions 16037 Administrative and general expenses as a ratio of hotel

sales in selected European countries 16138 Schedule of human resource responsibilities in a group

of hotels 16739 Schedule of training responsibilities in a group of hotels 16940 Employees per room in hotels in selected European cities 17541 Employees per room in hotels in selected African and

Middle Eastern cities 17542 Sales and payroll in hotels in main regions 176

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Tables

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Figures

1 Three phases of travel 52 The hotel as a market concept 143 Principal parties in the hotel business 274 Organization chart of a small hotel 445 Leading European hotel groups by country of head office 516 Organization chart of a concentrated hotel group 607 Organization chart of a dispersed hotel group 618 World’s leading hotel groups by extent of international

coverage 649 Organization chart of Marriott International Lodging, June

1999 7310 Organization chart of Le Méridien Hotels & Resorts, June 1999 7411 The food cycle 9112 Food and beverage ratios in European hotels, 1997 10013 Miscellaneous sales and income in hotels, 1997 10314 The marketing cycle 12015 Marketing expenses in hotels, 1997 12216 Property operation and maintenance costs in hotels, 1997 13117 Hotel operating profit, 1997 14418 Organization chart of a large hotel 15919 Organization of the human resource function of a group

of hotels 16620 Organization of the training function in a group of hotels 16821 The hotel as a systems model 17222 Kaplan and Norton’s (1992) balanced scorecard 17323 Forte Hotels comment slip, 1999 17824 Extract from a guest satisfaction survey from Marriott Hotels,

1999 179

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Preface to the First Edition

In business and management literature some authors have approached theirsubject through the study of work, notably Frederick Winslow Taylor and theGilbreths. Others, for example, Henri Fayol and Peter Drucker, did so throughthe analysis of managerial experience. The third and most recent influence hasbeen writers such as Frederick Herzberg and Douglas McGregor who broughtknowledge to bear from behavioural sciences on management thought. Thereare few examples of these three schools in the literature of hotel management.

Hotels have been seen by most as a rather specialized type of business.They attracted many successful entrepreneurs and managers, but both havebeen too busy making a success of their hotels to write about them. Theacademics and consultants concerned with hotels rarely took on the task ofexplaining the hotel business to a wider public other than lecturing about it,writing articles in the press or reports for their clients.

The large and growing volume of books on hotels appears to have taken several distinct directions. There are books devoted to the skills and techniquesof particular hotel activities such as hotel reception, housekeeping, food and drinkservice and especially food preparation. Others are concerned with accounting,marketing, personnel management, maintenance and other specialist functions ofthe hotel. There are also several economic and historical studies of the industry.Most of these and the few dealing more or less comprehensively with the hotel asa whole almost invariably embrace catering activities outside hotels, rather thanconcentrating on hotels. Indeed few books on hotel management have been published anywhere since Lucius Boomer’s classic Hotel Management* first

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*Boomer, L. (1925) Hotel Management – Principles and Practice, Harper & Brothers,New York and London. In this author’s view subsequent revised editions in 1931 and1938 did not match what the President of the Hotel Waldorf Astoria Corporation, NewYork, wrote himself for the first edition.

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appeared more than fifty years ago. In the same period only limited progress hasbeen made in the translation of business and management theory from manufac-turing to service industries generally and to hotels in particular. This is particu-larly striking in view of the growth of hotels and of education and training forhotel management in the intervening decades.

An hotel is a business with its own products and markets, technology andmethods, which does not lend itself to easy analysis. It offers several distinctproducts in varying combinations for sale to many markets. It combinesproduction and sale under one roof. It is in close and intimate contact withits customers who consume hotel products at the point of sale. It has a highcapital to sales ratio, yet it tends to be labour-intensive. Therefore, in manyrespects a meaningful treatment of hotel activity calls for recognition andexplanation of these and other realities, rather than an adaptation of generaltheories to the hotel business.

This book has no ambitions to replace general business and managementreading for the hotelier nor to include between two covers all that enters intothe business of hotelkeeping. It is an attempt to fill a gap felt for some timeby students, teachers and practitioners, for a book describing the hotel as abusiness. In this the approach has been to provide a simple and reasonablycomprehensive outline rather than a detailed treatment of some or all aspectsof the hotel business in depth. Suggestions for further reading on particularaspects are made for each of the fifteen chapters of the book; material usedin writing it and other relevant literature is listed in the bibliography.

The supporting reading suggested for use as an extension of this book andthe bibliography are confined to one hundred sources, in the main to thoseavailable as separate publications, and, with some exceptions, published inBritain. Much more reading material related to each chapter of the book isavailable in the form of articles in journals, papers presented at conferences,and in what has been published otherwise in one form or another both inBritain and elsewhere. It is suggested that teachers are in the best positionto produce their own collateral reading lists with the desired focus andemphasis for their own courses and students. Likewise, those in other coun-tries can decide whether to draw on the suggested further reading andbibliography included in this book, or to substitute material known to them,or perhaps adopt a combination of the two approaches.

For the student and teacher of hotel management the whole book and eachof its chapters is, therefore, intended to provide a framework, within which the hotel business may be examined in such depth as may be required by particular courses, with or without the use of other supporting material. For

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the practitioner – the owner, director or manager – the book may help to organize and formalize what they have learnt in a less systematic way by experience and also perhaps contribute to a more balanced view of their business. Newcomers to the hotel business and others with a professional interest in understanding it should find the book a suitable introduction to itsworking.

The specialist reader will soon note that often only one chapter is devotedto his or her own field, for example, to marketing, finance and accounts, and to staffing, although on closer examination it becomes apparent thatneither these three topics nor others are confined to particular chapters. Infact, if any aspects tend to dominate the text, they are markets, money and people, in the belief that hotels have to pay particular attention to them in order to ensure sustained viability, within the total framework of their operations.

Most readers will discover what will seem to them important omissions.Legal considerations, which increasingly affect the hotel business, are largelyomitted, because they differ from one country to another and because theyare adequately documented elsewhere. Technical considerations receive scantattention for similar reasons, and because their applicability also varies greatlyaccording to the size and type of business, for meaningful treatment here.Other aspects, of significance only to a small minority of hotel operations,are also neglected.

Many people have influenced the writing of this book and its contents, andsometimes that influence goes back for many years. The first was John Fuller,then Head of Department at Battersea Polytechnic, who was responsible formy entry into the hotel business, for making it possible for me to get to knowit, and to become fascinated by it in the 1950s. The second was A.H. Jones ofGrosvenor House, who directed that hotel for nearly thirty years, the last tenof which coincided with the first ten years of my professional involvement withhotels, and who was among the first in Britain to typify the role of an hotel-man as a businessman and a leader in his industry. The third was Dean HowardB. Meek, founder of the Cornell University School of Hotel Administration,who had a greater impact on future generations of hotelmen than most, and inthe process also on hotel management education and training. The fourth wasLord Crowther, who as chairman of Trust Houses brought his many skills tobear on a large corporate hotel organization and on its role in the industry andin the economy in the 1960s and early 1970s. Last, but not least, I am indebtedto Dr D.M.A. Leggett, first Vice-Chancellor of the University of Surrey, whomade it possible, though his help and encouragement, for hotel managementstudies to become established in a university.

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In my day-to-day work I benefited a great deal from discussion and some-times joint authorship with several of my colleagues at the University ofSurrey: John Beavis in hotel reception, John Burkart and Victor Middletonin marketing, Roger Doswell in hotel planning; Philip Nailon in several direc-tions.

Three lesser-known books influenced this one in particular: G. Campbell-Smith’s Marketing of the Meal Experience,* through its translation of themarketing concept; D.A. Fearn’s The Practice of General Management –Catering Applications,† through some of the thoughts on managementexpressed in it; and L.S. Fenton and N.A. Fowler and their contributors’Hotel Accounts and their Audit,‡ through the ideas it provided on the approachand structure of this book.

Several people read through drafts of chapters and commented on them,in particular Michael Nightingale and Geoff Parkinson, as well as others whoprefer not to be named.

As an author I cannot claim that any of those mentioned would agreecompletely with what appears in these pages, and wish to stress that anyshortcomings in this volume are entirely my own. But I remain very muchindebted to all those whose influence I have acknowledged and also to otherswhose contribution may have gone unrecorded.Guildford 1978 S. Medlik

*University of Surrey, 1967.†Macdonald, 1971.‡The Institute of Chartered Accountants in England and Wales, 1978.

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Preface to the FourthEdition

The first edition of this book was written in the late 1970s. Since it was firstpublished in 1980, it has gone into two more editions and has been reprinteda number of times.

The third edition represented a departure from the first two, following apublisher’s survey of lecturers known to use the book in their teaching anda similar number of ‘non-users’, seeking their comments. What respondentsliked most about the book was reinforced and their multiple suggestions forimprovement were incorporated. Statistics and other information were updatedand extended to portray the hotel business world-wide in the early 1990s.

This fourth edition was prepared with Hadyn Ingram, lecturer at theUniversity of Surrey and a practising hotelier, who undertook most of therevision. It owes much to his influence. Whilst the five parts and 15 chap-ters have been retained, their sequence has changed from hotel concepts andthe hotel industry structure to the hotel and its functions – guest services,support activities, people and procedures, as shown in the diagram below.

Within this structure a major aim has been to show the hotel business inthe late 1990s and most statistics refer to those years. All but a few of thetables of the third edition have been updated or replaced by new ones. Charts,diagrams and shaded entries highlight significant data, concepts, compar-isons, quotes and extracts from various sources. The main text is supplementedby 11 appendices.

Suggestions for further reading for each chapter and the list of books areagain confined to 100 sources mainly published in the United Kingdom, buthave been completely revised to reflect a major output of new titles in the1990s.

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We wish to record our appreciation to those who in one way and anotherinfluenced our thinking about hotels and this book, and to express the hopethat the new edition may serve the needs of students, teachers and practi-tioners as well as the earlier editions appear to have done. We are alsoindebted to Horwath International and to Pannell Kerr Forster for the dataprovided in their reports and to the following organizations and individualswho helped in various ways:

Accor Group (Gilles Honegger)Forte Hotels (Margaret Erstad) and White Hart Hotel, SalisburyHorwath International (Martin Gerty)HotelsMarriott HotelsPannell Kerr Forster Management Consultants (Jenny Burns)Royal Garden Hotel, London (Graham Bamford)TRI Hospitality Consulting (Trevor Ward)Whitbread Hotels (Alan Parker and Jane Neil)

Guildford 1999 S. MedlikH. Ingram

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Preface to the Fourth Edition

The concepts of hotels and

hospitality

The structure of thehotel industry

The hotel andits functions

Supportservices

Guestservices

People andprocedures

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Part

IThe Concepts of

Hotels and Hospitality

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For the greater part of each year most people liveat home. Although they may go to work, shop-ping, visiting friends and relatives, and take partin other social and leisure activities, their homesare where they normally return each day andwhere they spend the night. But many of themalso increasingly stay away from home, on busi-ness or on holiday or for other reasons, through-out the year. Many of them stay in hotels.

Walking through a town, there are the shops,offices, workshops, restaurants, and a whole hostof other places of work, entertainment and recre-ation. On a drive through the country can be seen factories, farms, petrol stations. Withoutgoing too far in the town or in the country, onebuilding emerges sooner or later from the rest –an hotel.

The people one meets in the town and in thecountry may be residents or visitors. The placesthey frequent often serve primarily the needs ofthe resident population, but in many areas towhich visitors go in large numbers, many of thefacilities and amenities are provided mainly forvisitors. One of them invariably owes its origin

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1Staying Away

from Home


to visitors – the hotel. To a greater or lesser extent, hotel restaurants, barsand other hotel facilities may also serve the local population, but the primaryfunction of an hotel is to accommodate those away from home and to supplythem with their basic needs.

It is the basic function of the hotel, which makes it quite distinct fromother types of business, and to which its other functions are supplementary.Where others provide accommodation, meals and refreshments for those awayfrom home – such as hospitals or boarding schools, or hostels – their primarypurpose – whether treatment or education or something else – is different.Also in practice it is not difficult to draw a line between the provision ofaccommodation by hotels and the letting of accommodation on a tenancybasis, but more difficult between hotels and guest houses and similar estab-lishments, which share the basic function of the hotel. However, it is sufficientfor our purposes to describe an hotel as an establishment providing for rewardaccommodation, food and drink for travellers and temporary residents, andusually also meals and refreshments and sometimes other facilities for other users.

The Importance of Hotels

Hotels play an important role in most countries by providing facilities forthe transaction of business, for meetings and conferences, for recreation and entertainment. In that sense hotels are as essential to economies andsocieties as are adequate transport, communication and retail distributionsystems for various goods and services. Through their facilities hotelscontribute to the total output of goods and services, which makes up thematerial well-being of nations and communities.

In many areas hotels are important attractions for visitors who bring tothem spending power and who tend to spend at a higher rate than they do when they are at home. Through visitor spending hotels thus oftencontribute significantly to local economies both directly, and indirectlythrough the subsequent diffusion of the visitor expenditure to other recipi-ents in the community.

In areas receiving foreign visitors, hotels are often important foreigncurrency earners and in this way may contribute significantly to their coun-tries’ balance of payments. In countries with limited export possibilities,hotels may be one of the few sources of foreign currency earnings.

Hotels are important employers of labour. Thousands of jobs are providedby hotels in the many occupations that make up the hotel industries in most

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4


countries; many others in the industry are self-employed and proprietors ofsmaller hotels. The role of hotels as employers is particularly important inareas with few alternative sources of employment, where they contribute toregional development.

Hotels are also important outlets for the products of other industries. Inthe building and modernization of hotels business is provided for the construc-tion industry and related trades. Equipment, furniture and furnishings aresupplied to hotels by a wide range of manufacturers. Food, drink and otherconsumables are among the most significant daily hotel purchases from farmers,fishermen, food and drink suppliers, and from gas, electricity and watercompanies. In addition to those engaged directly in hotels, much indirectemployment is, therefore, generated by hotels for those employed in industriessupplying them.

Last but not least, hotels are an important source of amenities for localresidents. Their restaurants, bars and other facilities often attract much localcustom and many hotels have become social centres of their communities.

Travel and Hotels

Staying away from home is a function of travel and three main phases maybe distinguished in the development of travel in the northern hemisphere(Figure 1).

Until about the middle of the nineteenth century most journeys were under-taken for business and vocational reasons, by road, by people travelling mainlyin their own countries. The volume of travel was relatively small, confinedto a small fraction of the population in any country, and most of those who

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Staying Away from Home

5

Figure 1 Three phases of travel


did travel, did so by coach. Inns and similar hostelries along the highwaysand in the principal towns provided the means of accommodation well intothe nineteenth century.

Between about 1850 and about 1950 a growing proportion of travellerswent away from home for other than business reasons, and holidays camegradually to represent an important reason for a journey. For a hundred yearsor so, the railway and the steamship dominated passenger transportation, andthe new means of transport gave an impetus to travel between countries andbetween continents. Although the first hotels date from the eighteenth century,their growth on any scale occurred only in the nineteenth century, when first the railway and later the steamship created sufficiently large markets tomake the larger hotel possible. Hotels together with guest houses and boardinghouses dominated the accommodation market in this period.

By about the middle of the twentieth century in most developed countriesof the world (a little earlier in North America and a little later in Europe) awhole cycle was completed and most traffic returned to the road, with themotor car increasingly providing the main means of passenger transporta-tion. Almost concurrently, the aircraft took over unmistakably both from therailways and from shipping as the principal means of long-distance passengertransport. On many routes holiday traffic came to match and often greatlyexceed other traffic. A growing volume of travel away from home becameinternational. Hotels entered into competition with new forms of accommo-dation – holiday centres and holiday villages in Europe, motels in NorthAmerica, and various self-catering facilities for those on holiday.

Two Centuries of Hotelkeeping

Hotels are some two hundred years old. The word ‘hotel’ itself came intouse in England with the introduction in London, after 1760, of the kind ofestablishment then common in Paris, called an ‘hôtel garni’ or a large house,in which apartments were let by the day, week or month. Its appearancesignified a departure from the customary method of accommodating guestsin inns and similar hostelries, into something more luxurious and even osten-tatious. Hotels with managers, receptionists and uniformed staff arrivedgenerally only at the beginning of the nineteenth century and until the middleof that century their development was relatively slow. The absence of goodinns in Scotland to some extent accelerated the arrival of the hotel there; bythe end of the eighteenth century, Edinburgh, for example, had several hotelswhere the traveller could get elegant and comfortable rooms. Hotels are alsoknown to have made much progress in other parts of Europe in the closing

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6


years of the eighteenth and early years of the nineteenth century, where atthat time originated the idea of a resort hotel.

In North America early accommodation for travellers followed a similarpattern as in England, with most inns originating in converted houses, butby the turn of the eighteenth century several cities on the eastern seaboardhad purpose-built hotels and in the first half of the nineteenth century hotelbuilding spread across America to the Pacific Coast. The evolution frominnkeeping to hotelkeeping, therefore, proceeded almost in parallel in theOld and in the New Worlds and the rise of the hotel industries on both sidesof the Atlantic had probably more in common than is generally recognized.What America might have lacked in history and tradition, it more than madeup in pioneering spirit, in intense rivalry between cities and entrepreneurs,and in the sheer size and growth of the travel market.

In the nineteenth century, hotels became firmly established not only as centres of commercial hospitality for travellers, but often also as importantsocial centres of their communities. Their building, management and operationbecame specialized activities, with their own styles and methods. The twentiethcentury brought about growing specialization and increased sophistication in the hotel industries of most countries, as well as their growth and expansion. But the growth and the diversity of hotel operations have been also matched by the growth and diversity of competition in the total accommodation market.

What happened to travel and hotels in the United Kingdom and the UnitedStates in the 1990s is described in Appendices A and B.

Hotels in the Total Accommodation Market

In any country the demand for accommodation away from home is gener-ated by residents travelling in their own country and by foreign visitors. Indeveloped countries most travel tends to be by the residents for leisurepurposes. In developing countries most travel by residents is on business,but these countries also often receive many leisure visitors from abroad.

Information about accommodation facilities in individual countries essen-tially reflects the designations used for them by the countries concerned and the coverage of various types in the available statistics. Only very broadinter-country comparisons are possible. One source is the annual report ofthe Tourism Committee of the Organisation for Economic Co-operation and Development (OECD), which distinguishes between beds available inhotels and similar establishments, and in what is described as supplementaryaccommodation.

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The ratio of beds in hotels and similar establishments to beds in supple-mentary accommodation gives an indication of the relative importance of thehotel sector in the total accommodation market of individual countries, as shownin Table 1. In most countries the accommodation profile tends to reflect the relative importance of foreign and domestic users, of leisure and business travel,and of other influences. In many countries hotels and similar establishmentsappear to be minority providers of accommodation for those away from home.

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Table 1 Accommodation profile of selected European countries, 1995

Hotels and similar Supplementary Ratio of beds establishmentsa accommodationb

Austria 57 43Belgium 16 84Czech Republic 56 44France 28 72Germany 52 48Hungary 52 48Netherlands 18 82Portugal 43 57Spain 48 52Sweden 68 32

Ratio of nights spent By domesticin all establishments By foreign visitors visitors

Austria 74 26Belgium 42 58Czech Republic 41 59France 36 64Germany 11 89Hungary 61 39Netherlands 32 68Portugal 61 39Spain 60 40Sweden 21 79

a For most countries, hotels and similar establishments include hotels, motels, inns and boardinghouses.b Supplementary accommodation includes variously youth hostels, holiday villages, rented rooms,houses and flats, camping and caravan sites.

Source: Based on Organisation for Economic Co-operation and Development, Tourism Policyand International Tourism in OECD Countries, 1997


� According to the World Tourism Organization (WTO), the globalcapacity of hotels and similar establishments approached 12.7 millionrooms in the mid 1990s.

� Well over one-half of the total European capacity is located in fivecountries – Italy, Germany, France, Spain and the United Kingdom.

� United States, Mexico and Canada combined account for more thanthree-quarters of the rooms in the Americas.

� China has more than one-quarter and, together with Japan, Thailandand Australia, more than two-thirds of the capacity of East Asia andthe Pacific.

� The remaining global regions – Africa, Middle East and South Asia– combined have only 6 per cent of the total world capacity.

Appendix C

Hotel Location

Hotel services are supplied to their buyers direct in person; they are consumedat the point of sale, and they are also produced there. Hotel services must,therefore, be provided where the demand exists and the market is the domi-nant influence on hotel location. In fact, location is part of the hotel product.In turn, location is the key influence on the viability of the business, so much so that a prominent entrepreneur could have said with conviction andwith much justification that there are only three rules for success in the hotelbusiness: location, location, location.

We have seen earlier that from the early days all accommodation unitsfollowed transport modes. Inns and other hostelries were situated along the roads and at destinations, serving transit and terminal traffic. The rapidspread of railways marked the emergence of railway hotels in the nineteenthcentury. In the twentieth century motor transport created a new demand for accommodation along the highways and the modern motel and motorhotel have been distinctive responses to the new impetus of the motor car.A similar but less pronounced influence was passenger shipping, which stimulated hotel development in ports, and more recently air transport, whichbrought about a major growth of hotels in the vicinity of airports and airterminals.

Secondly, although this is closely related to transport, many hotels arelocated to serve first and foremost holiday markets. In their areas of highestconcentration, holiday visitors are accommodated in hotels in localities where

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the resident population may represent only a small proportion of those presentat the time, as is the case in many resorts.

The third major influence on hotel location is the location of economicactivity, and of industry and commerce in particular. Whilst again not separ-able from transport development, industrial and commercial activities createdemand for transit and terminal accommodation in industrial and commer-cial centres, in locations not frequented by holiday visitors.

Different segments of the travel market give rise to distinctive patterns of demand for hotel accommodation and often distinctive types of hotels. Inbusiness and industrial centres hotels normally achieve their highest occu-pancies on weekdays and in resorts in the main holiday seasons; their facilitiesand services reflect the requirements of businessmen and of holiday visitorsrespectively. Between these clearly defined segments come other towns andareas, such as busy commercial centres with historical or other attractions forvisitors, which may achieve a more even weekly and annual pattern of business.

Types of Hotels

The rich variety of hotels can be seen from the many terms in use to denoteparticular types. Hotels are referred to as luxury, resort, commercial, resi-dential, transit and in many other ways. Each of these terms may give anindication of standard or location, or particular type of guest who makes upmost of the market of a particular hotel, but it does not describe adequatelyits main characteristics. These can be seen only when a combination of termsis applied to an hotel, each of which describes a particular hotel accordingto certain criteria. It is helpful to appreciate at this stage what the main typesof hotels are, by adopting particular criteria for classifying them, withoutnecessarily attaching precise meanings to them.

� Thus according to location hotels are in cities and in large and smalltowns, in inland, coastal and mountain resorts, and in the country.

� According to the actual position of the hotel in its location it may be inthe city or town centre or in the suburbs, along the beach of a coastalresort, along the highway.

� By reference to its relationship with particular means of transport thereare motels and motor hotels, railway hotels, airport hotels (the terms alsoindicating location).

� According to the purpose of visit and the main reason for their guests’stay, hotels may become known as business hotels, holiday hotels, conven-tion hotels, tourist hotels.

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� Where there is a pronounced tendency to a short or long duration ofguests’ stay, it may be an important hotel characteristic, so that the hotelbecomes a transit or a residential hotel.

� According to the range of its facilities and services an hotel may be opento residents and non-residents, or it may restrict itself to providingovernight accommodation and at most offering breakfast to its guests, andbe an ‘hôtel garni’ or apartment hotel.

� Whether an hotel holds a licence for the sale of alcoholic liquor or not,is an important dimension in the range of available hotel services, andthe distinction between licensed and unlicensed hotels is, therefore, ofrelevance in describing an hotel in most countries.

� There is no universal agreement on how hotels should be describedaccording to size, but by reference to their room or bed capacities wenormally apply the term small hotel to one with a small amount of sleepingaccommodation, the term large hotel to one with several hundred beds orbedrooms, and the term medium-sized hotel to one somewhere betweenthe two, according to the size structure of the hotel industry in a partic-ular country.

� Whatever the criteria used in hotel guides and in classification and gradingsystems in existence in many countries, normally at least four or fiveclasses or grades have been found necessary to distinguish adequately inthe standards of hotels and these have found some currency among hotelusers. The extremes of luxury and basic standards, sometimes denoted by five stars and one star respectively are not difficult concepts; the mid-point on any such scale denotes the average without any particularclaims to merit. The intervening points are then standards above averagebut falling short of luxury (quality hotels) and standards above basic(economy).

� Last but not least comes the ownership and management. Individuallyowned independent hotels, which may be managed by the proprietor orby a salaried manager, have to be distinguished from chain or group hotels,invariably owned by a company. Independent hotels may belong to anhotel consortium or cooperative. A company may operate its hotels underdirect management or under a franchise agreement.

The above distinctions enable a particular hotel to be described in broadterms, concisely, comprehensively and meaningfully, for example:

� Terminus Hotel is a medium-sized, economy, town-centre, unlicensed hotel,owned and managed by a small company, catering mainly for touristsvisiting the historic town and the surrounding countryside.

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� Hotel Excelsior is a large, independent, luxury hotel on the main promenadeof the coastal resort, with holiday visitors as its main market.

� The Crossroads Hotel is a small, licensed, quality transit motor hotel,operated as a franchise, on the outskirts of the city, which serves mainlytravelling businessmen and tourists.

A Review So Far

In this chapter hotels are described as businesses of commercial hospitality,which play an important role in many of the economies and societies in whichthey operate. Three phases are distinguished in the evolution of travel andaccommodation away from home and the development of hotels is traced totheir beginnings some two hundred years ago. However, hotels are not the onlyproviders of accommodation and compete with others in the accommodationmarket. Their location has been determined by developments in transport, holidays and economic activity. These and other influences have given rise todifferent types of hotels, which can be described in terms of their principalcharacteristics. In the next chapter they are viewed in terms of their productsand markets.

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13

The aim of this chapter1 is to outline the facilitiesand services provided by hotels, who are the people who use hotels, why they use hotels, andwhat influences their choice of particular hotels.In providing answers to these questions, we canformulate a conceptual model of an hotel, whichattempts to explain in simple terms how partic-ular hotel products meet the needs of particularhotel markets, and establish a basis for a moredetailed examination of the hotel business in subsequent chapters.

The Hotel as a Total Market Concept

From the point of view of its users, an hotel isan institution of commercial hospitality, whichoffers its facilities and services for sale, individ-ually or in various combinations, and this conceptis made up of several elements, as shown inFigure 2.

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2Hotel Products

and Markets

1This chapter reflects in particular the work of RogerDoswell as Kobler Research Fellow at the Universityof Surrey in the late 1960s.


Its location places the hotel geographically in or near a particular city, town or village; within a given area, location denotes accessibility and the convenience this represents, attractiveness of surroundings and the appeal thisrepresents, freedom from noise and other nuisances, or otherwise.

Its facilities, which include bedrooms, restaurants, bars, function rooms,meeting rooms and recreation facilities such as tennis courts and swimmingpools, represent a repertoire of facilities for the use of its customers, andthese may be differentiated in type, size and in other ways.

Its service comprises the availability and extent of particular hotel servicesprovided through its facilities; the style and quality of all these in such terms asformality and informality, degree of personal attention, and speed and efficiency.

Its image may be defined as the way in which the hotel portrays itself topeople and the way in which it is perceived as portraying itself by them. Itis a by-product of its location, facilities and service, but it is enhanced bysuch factors as its name, appearance, atmosphere; its associations – by whostays there and who eats there; by what it says about itself and what otherpeople say about it.

Its price expresses the value given by the hotel through its location, facil-ities, service and image, and the satisfaction derived by its users from theseelements of the hotel concept.

The individual elements assume greater or lesser importance for differentpeople. One person may regard location as paramount and be prepared to

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Figure 2 The hotel as a market concept


accept basic facilities and service for an overnight stay, ignoring the image,as long as the price is within a limit to which he or she is willing to go.

Another may be more concerned with the image of the hotel, its facilitiesand service. However, all the five elements are related to each other, and ina situation of choice most hotel users tend either to accept or reject an hotelas a whole, that is the total concept.

There are varying degrees of adaptability and flexibility in the total hotelconcept, ranging from the complete fixity of its location to the relative flex-ibility of price, with facilities, service and image lending themselves to someadaptation in particular circumstances with time.

An hotel cannot be all things to all people. The market feasibility studyfor an individual hotel project must aim at identifying the segment of themarket to be served. The needs of that particular segment must beserved through the entire market package and complete harmony andcongruity must be achieved. An hotel which endeavours to satisfy amixture of market segments will encounter difficulties; for example, anhotel restaurant appealing to and attracting a completely differentmarket segment to that for accommodation. In cases where an hoteldevelops mixed images for its various facilities . . . the total image . . .will tend to find the lowest level amongst the range of different images.

Roger Doswell, Towards an Integrated Approach to Hotel Planning

Hotel Facilities and Services as Products

In the early days of innkeeping, travellers often had to bring their own food to places where they stayed for the night – a bed for the night was the onlyproduct offered. But soon most establishments extended their hospitality toproviding at least some food and refreshments. Today many apartment hotels,‘hôtels garnis’ and motels confine their facilities to sleeping accommodation,with little or no catering provision. But the typical hotel as we know it today, normally provides not only accommodation, but also food and drink,and sometimes other facilities and services, and makes them available not only to its residents but also to non-residents. This is the concept that will bedeveloped in this chapter and in later parts of this book. Although the rangeof hotel facilities and services may extend as far as to cater for all or most

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Hotel Products and Markets

15


needs of their customers, however long their stay, and for an hotel to becomea self-contained community with its own shops, entertainments and recreationfacilities, it is helpful at this stage to describe the hotel concept in a simplerform, by including only the main customer needs typically met by most hotels.

The main customer demand in most hotels is for sleeping accommodation,food and drink, and for food and drink for organized groups. These fourrequirements then relate to accommodation, restaurants, bars and functions, asthe principal hotel products.

Sleeping accommodation is provided for hotel residents alone. Restaurantsand bars meet the requirements of hotel residents and non-residents alike,even though separate facilities may be sometimes provided for them.Functions are best seen as a separate hotel product bought by organizedgroups; these groups may be resident in the hotel as, for example, partici-pants in a residential conference, or be non-residents, such as a local clubor society, or the group may combine the two.

The total hotel concept – of location, facilities, service, image and price –can be, therefore, sub-divided according to the needs of the customer and theparticular facilities brought into play to meet them. The cluster of elements ofthe total hotel concept is then related to each particular hotel product. Eachhotel product contains the elements of the location, facilities, services, imageand price, to meet a particular customer need or set of needs. The first approachto the segmentation of the hotel market is, therefore, taken by dividing hotelusers according to the products bought. Corresponding to each hotel productthere are the buyers of that product who constitute a market for it.

Hotel Accommodation Markets

Hotel users who are buyers of overnight accommodation may be classifiedaccording to the main purpose of their visit to a particular location into threemain categories as holiday, business and other users.

Holiday users include a variety of leisure travel as the main reason fortheir stay in hotels, ranging from short stays in a particular location on theway to somewhere else to weekend and longer stays when the location repre-sents the end of a journey. Their demand for hotel accommodation tends tobe resort-oriented, seasonal and sensitive to price because they often pay outof their own pocket.

Business users are employees and others travelling in the course of theirwork, people visiting exhibitions, trade fairs, or coming together as members

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of professional and commercial organizations for meetings and conferences.Their demand for hotel accommodation tends to be town- and city-oriented,non-seasonal and less price-sensitive, except in the case of some event attrac-tions such as conferences and exhibitions, which may be usefully regardedas a separate category.

Other hotel users comprise visitors to a particular location for a varietyof reasons other than holiday or business, e.g. those attending such familyoccasions as weddings, parents visiting educational institutions, visitors tospecial events, and common interest groups meeting for other than businessand vocational reasons, relocating families and individuals seeking perma-nent accommodation in an area and staying temporarily in an hotel, peopleliving in an hotel permanently. The characteristics of this type of demandare more varied than those of the first and second group, and it is, there-fore, often desirable to sub-divide it further for practical purposes.

Within and between the three main groups, which comprise the total marketfor hotel accommodation, there are several distinctions important to indi-vidual hotels. We have noted already that some hotel users generate demandfor transit and short-stay accommodation, others are terminal visitors with alonger average stay. Also, for example, much business demand is generatedby a relatively small number of travellers who are frequent hotel users; mostholiday and other demand comes from a very large number of people whouse hotels only occasionally. Moreover, business users often book accom-modation at short notice, whilst holiday and other users tend to do so longerin advance. And in all three groups some people are individual hotel users,and others stay in hotels in groups.

Hotel Catering Markets

Hotel restaurants, bars and function rooms may be conveniently groupedtogether as its food and beverage or catering facilities, and the meals andrefreshments they provide as the hotel food and beverage or catering products. Corresponding to them there are again buyers of these productswho constitute the hotel catering markets and who may be classified in variousways. For our purposes there is a basic distinction between the demand exercised by hotel residents, by non-residents and by organized groups.

The first category of users of hotel restaurants and bars is related to thebasic function of the hotel in providing overnight sleeping accommodation,and consists of hotel residents, whom we have classified earlier as holiday,business and other users. Their use of hotel catering facilities tends to be

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influenced by the reason for their hotel stay and by the terms on which theystay. Breakfast is their common hotel purchase, but otherwise hotel residentsmay have their meals in their hotel or elsewhere, and they are more likelyto be hotel restaurant or bar customers in the evenings than at midday.

The second category are non-residents, individually or in small groups,when eating out. They may, in fact, be staying at other hotels or accommo-dation establishments or with friends or relatives or be day visitors to thearea, for holiday, business or other reasons. Alternatively they are local resi-dents, for whom the hotel restaurants and bars represent outlets for mealsand refreshments, as a leisure activity or as part of their business activities.This category tends to represent important hotel users at midday as well asin the evenings, particularly at weekends.

The third category of users of hotel catering facilities are organized groupswho make advance arrangements for functions at the hotel, which may callfor separate facilities and organizational arrangements. They include localclubs, societies, business and professional groups, as well as participants inmeetings and conferences originating from outside the area.

Hotel catering products represent a greater diversity than its accommoda-tion products and it is often correspondingly more difficult to classify themand the markets for them in practice. Moreover, hotels are not alone insupplying them. In the market for meals and refreshments for individualsand groups an hotel competes not only with other hotels, but also with restaur-ants outside hotels, pubs and clubs, to name but a few other types of outlet.Therefore, catering in hotels is a separate hotel function, with its own objec-tives, policies and strategies, and with its own organization.

Sources of Hotel Demand

For most people the use of hotels represents what is known as derived demandbecause few stay or eat in an hotel for its own sake; their primary reasonsfor doing so lie in their reasons for visiting an area or for spending theirtime there in particular ways. When describing hotel accommodation andcatering markets we have seen that hotel users have different degrees offreedom and choice as to whether they buy hotel services or not. Some havefew or no alternatives; for them only hotels provide the facilities and serviceswhich they require in a particular area in pursuit of their business, vocationaland other interests; the incidence of their hotel usage arises to a great extentfrom their working circumstances. For many others the use of hotels is amatter of choice; they do so in their pursuit of leisure and recreation; for

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them hotel usage involves a discretionary use of their time and money. This distinction helps us identify the demand-generating sources for hotelsin a given area, which are of three main types – institutional, recreationaland transit.

Institutional sources include industrial and commercial enterprises, educa-tional institutions, government establishments and other organizations in theprivate and public sector, whose activities are involved in the economic lifeof the community and in its administration. These institutions generatedemand for hotels through their own visitors and their other requirementsfor hotel facilities and services.

Recreational sources include historical, scenic and other site attractionsand event attractions, which generate demand for hotels from tourists; localevents and activities in the social and cultural life of the community, whichgenerate demand from clubs, societies and other organizations; happeningsof significance to individuals and families.

The third source of demand stems from individuals and groups with nointrinsic reason for spending time in a particular locality, other than beingon the way somewhere else and the need to break a journey. This source ofdemand is closely related to particular forms of transport, it expresses itselfon highways, at ports and at airports, and may be described as transit.

It will be readily apparent that this view of demand-generating sources forhotels is closely related to several aspects of the hotel business consideredearlier – for example, to the three-fold classification of the hotel accommo-dation market into holiday, business and other users; to the three maininfluences on hotel location – travel, holidays and economic activity; and tothe types of hotel distinguished in Chapter 1. By adopting in each case asomewhat different viewpoint, it is possible to highlight the interdependencebetween the location, markets and products of hotels.

Hotel Market Areas

We can define an hotel market in several ways – by reference to the peoplewho buy hotel services, as a network of dealings between the hotel and itsusers, or as an area which an hotel serves. In the first two approaches hotelusers may come from within the area, from various parts of the country andfrom abroad; we then refer to the local, domestic and foreign markets, andsubdivide them in appropriate ways. In the third approach described belowwe view the hotel market area as a physical area served by the hotel.

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For hotel accommodation it is necessary to identify all the institutionaland recreational sources of demand, which may be served by a particularhotel. The area drawn in this way round the hotel may extend from its imme-diate vicinity to a radius of several miles or more. How far it does extenddepends on the geographical distribution of the demand-generating sources,the mode of transport used by the hotel users of each source, and the avail-ability of other facilities in the area. The head office of a large firm, auniversity, an historic castle and a town which is a festival centre, may beall within a market area of an hotel, if the hotel is reasonably accessiblefrom these points, and if its location at least matches the location of otherhotels. The market area may coincide for a number of hotels within closeproximity of each other, which offer a similar concept in terms of facilities,service, image and price. On the periphery the market area for an hotel mayoverlap with the market areas of other hotels some distance away. At periodsof peak demand it may extend further than at times of low demand. Fortransit the accommodation market area is related to the journeys undertakenthrough the area – their origin and destination, the method of transportation,the time of day, the time of year and other circumstances of the journeys.

For hotel catering services the market area depends on market density – theavailability of spending power within an area, as well as on the accessibilityof the hotel to the different sources of demand, and on the availability of othercatering services in the area. In this there is a close analogy with the conceptof a catchment area for other retail outlets, as far as the resident population isconcerned. How far do people go from where they live to do their shopping?The distance may vary according to the purchase they are to make. Similarlythere may be a smaller market area for hotel lunches than for hotel dinnersand functions, because close proximity to the hotel may be a more importantconsideration for a midday meal than for an evening out.

Hotel Market Segmentation

The market for hotel products may be divided into several components orsegments and this enables individual hotels to identify their actual and poten-tial users according to various criteria. Segmentation then provides a basisfor the marketing of hotel products, for paying close attention to the require-ments of different users, and for monitoring the performance in the marketschosen by an hotel.

Earlier in this chapter we divided hotel users, according to the productbought by them, into buyers of accommodation, food, drink and functions.

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We divided the accommodation market, according to the reasons for theusers’ stay, into holiday, business and other users, and the hotel cateringmarket into hotel residents, non-residents and functions. According to theorigin of demand, we also identified institutional, recreational and transitsources of demand. Another basis for segmentation is the needs of hotelusers and the means they have to pay for their satisfaction, by dividing themaccording to their socio-economic characteristics. Socio-economic classifi-cations seek to group people according to their occupation and employmentstatus. For example, the British Joint Industry Committee for NationalReadership Surveys (JICNARS) defines social grades as shown in Table 2.

The grades may be applied to hotel users and to the grades of hotels postu-lated in Chapter 1. Social grade A might be expected to stay in luxury andquality hotels, B in medium hotels, C in economy hotels. However, this isan oversimplification, because the same people may interchange betweensegments according to the circumstances in which they find themselves. Abusinessman on an expense account may stay in a quality hotel, but travel-ling for pleasure with his family he may stay in a lower grade hotel. Moreover,the incidence of hotel usage among D and E groups is minimal. Nevertheless,segmentation by socio-economic criteria is an important approach to marketsegmentation. For some purposes, age, family composition, life cycle stageor other criteria may be more appropriate.

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Table 2 Social grade definitions

Social grade Social status Head of household’s occupation

A Upper middle class Higher managerial, administrative or professional

B Middle class Intermediate managerial, administrative or professional

C1 Lower middle class Supervisory or clerical, and junior managerial, administrative or professional

C2 Skilled working class Skilled manual workers

D Working class Semi- and unskilled manual workers

E Those at the lowest State pensioners or widows (no other level of subsistence earner), casual or lowest grade workers

Source: Joint Industry Committee for National Readership Surveys, 1970


A concomitant of market segmentation is product branding, with a view todifferentiating an hotel from others in the minds of buyers, long establishedin other consumer industries. Some hotel groups have focused on branded seg-ments distinguished by levels of service; examples include Holiday Inn upmar-ket Crowne Plaza, core brand Holiday Inn and limited service Garden Court.Other brands have been created by grouping similar operations, such as FortePosthouses, Whitbread Travel Inns and Accor’s Novotel brands.

Branding: Attempts by hotel companies to create and deliver newproducts to the customer. Often thought of as levels of service such asbudget, economy, luxury and business class hotels. Each product isassociated with specific products and services to differentiate it fromthe competition. Brands are available in several of these segments aswell.

Core business management: The recognition of doing one or a fewthings well underpins this method. Firms have divested themselvesof peripheral business units in order to concentrate on the corebusiness of hotel management.

Michael Olsen, Into the New Millennium

Buying and Paying for Hotel Services

It is important to understand how a buying decision is made, who makes itand who pays for the hotel services bought.

The buying decision itself may be basically of two kinds – deliberate orimpulsive. Before embarking on journeys, business people may ask secre-taries to reserve hotel rooms in the towns they are to visit for specified nights.A family may arrive at their choice of holiday hotel after a scrutiny of hotelguides. A society may make several enquiries before choosing the venue fortheir annual dinner dance. These are deliberate buying decisions made withsome advance planning and with advance reservations. A tourist looking forsomewhere to stay when travelling by car, or on arrival at the railway stationor airport, is likely to make an impulse decision, in much the same way asa couple walking through the streets of a town and ‘discovering’ a restaurantwhich appears to be to their liking. Purchases of hotel products are bothdeliberate and impulse purchases and most hotels respond to both, althoughdifferent operational policies and procedures normally apply to each.

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Many people make their own arrangements for travelling and for stayingin hotels. However, many hotel bookings are made by people who do it forothers: the personal assistant for the boss, the travel agent for the client, thebusiness travel department of a large company for its employees. In thesecircumstances it is important to know who the buying agent is and wherethat person is located, if the knowledge derived from the analysis of the hoteldemand-generating sources is to be applied to bringing about sales. Mosthotels can no longer hope to fill their beds, restaurants and bars by simplywaiting for the guest.

According to the source of payment for hotel services, hotel users are alsoof two basic kinds – those who pay themselves and those whose hotel billsare covered or reimbursed for them. Most leisure use of hotels representspersonal expenditure out of disposable incomes, the bulk of business use ofhotels in the wide sense is paid for directly or indirectly by third parties –employers and other agencies on behalf of the guest. Although many busi-ness users have no fixed limits as to the charges they incur in hotels, manytend to observe what they and their organizations regard as acceptable. Theunderstanding of these practices is important to hotels too. The decision onthe market segments to be catered for is closely related to decisions onpricing and we have seen that price is an integral element of each hotel’stotal concept.

Hotel Marketing Orientation

Hotels serve people and their success depends on how well they serve themin places where they wish to be served. This is only a way of stating in thesimplest of terms the application to hotel operations of the marketing concept,which is concerned with the consumer as a starting point in the conduct ofbusiness.

The marketing concept is beginning to be understood by hoteliers. Althoughsome continue to regard sales and marketing as synonymous, most hotels nolonger operate in the seller’s market and even massive sales effort is notlikely to generate a sustained high volume of business, if consumer needsare not genuinely met in the planning, design and subsequent operation ofan hotel.

The basic hotel concept outlined at the beginning of this chapter stressesthe view of the hotel, as it is seen by the hotel user rather than the hoteloperator, as a business to meet the needs of hotel users. Some of these needsare basic and physical, such as sleeping in clean beds or eating wholesome

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meals; others, such as those met by the image of the hotel, are acquiredneeds, which reflect what a person aims to be as an individual. A successfulhotel must seek to meet both sets of needs.

So that an hotel can meet the needs of hotel users, individual hotel serviceshave to be seen as hotel products sold to particular markets. An hotel cannotbe all things to all people. Each hotel has to achieve a match between itsparticular products and particular market segments, i.e. groups of people withmore or less similar characteristics and requirements for hotel services. Inthis there is a difference between the hotel accommodation and catering prod-ucts, in that each may to some extent cater for different markets. But thisdifference only reinforces the need for harmony in the total hotel concept.In order to achieve the match between hotel products and markets, there isa need for a careful analysis of the sources of demand for hotel services inthe market area served by the hotel and an understanding of how hotelservices are bought and paid for.

From this model of an hotel a translation can be made to particular oper-ations. This takes the form of hotel policies, philosophies and strategies,which are discussed in the next chapter. The role and scope of the marketingfunction in hotels is considered in Chapter 10.

It appears that the point of interaction with the information highwaywill move into the marketing domain. Marketing managers will haveto know how to buy and sell their way onto the information highway.They will be required to recognize, interact with, and use theresources of those who own or manage the information systems dri-ving its evolution.


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25

‘I am an owner of the leading hotel in aprovincial town, which has been in myfamily for three generations. We cater for businessmen staying in the town, local business and professional peopleusing our restaurant and bar, and varioussocieties and other organizations holdingfunctions in our banqueting room. We are well known for the quality of what we provide, our prices reflect this, and our main objective is to maintain andenhance our position and profitabilityagainst increasing competition, especiallyfor lunch and dinner business. We aim toretain the loyalty of our customers through personal service, our staff bybeing the best hotel employer in the town, and our suppliers by giving them a fair deal.’

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3Hotel Policies,

Philosophies andStrategies


‘We are in business to provide a chain of economy motels for low-spending tourists, business people with modest allowances, andother travellers with limited budgets, who look for basic facilities atlow prices. To achieve profitability in this market, our motels are onlyin locations where we can achieve high occupancies in most parts ofthe year and throughout most weeks of the year – where a high levelof demand is generated by a combination of tourist, business and othertraffic. They are located outside town centres where land values arelow, they are purpose built for maximum efficiency, and they providesimple standards of facilities with minimum service. Through this typeof operation we are aiming to meet a real market need with a high andstable volume of demand, and to provide manifestly good value formoney with low operating costs, while generating a high level ofprofit for our company.’

‘Our company operates quality resort hotels with good road and railaccess from London and the Home Counties, and specializes in long-holiday visitors in the summer and smaller conferences at othertimes of the year. We have grown to our present size by acquiring suitable properties in the locations we have chosen, modernizing them,and promoting them vigorously in our markets We intend to continuegrowing in this way, financing further growth significantly from ourown resources, as we have done from the outset. In doing this, weshall aim to give our guests hotels meeting their particular requirements, provide our employees and the resorts in which weoperate with year-round employment, and earn for our shareholders areturn at least comparable to what they could obtain in similar typesof business.’

Objectives and Policies

The three statements provide in varying degrees of formality and precise-ness examples of how three different operators see themselves in the hotelbusiness. They say who is involved in the business as owner (a sole traderin one case and a company in the other two); where it operates (location)and what facilities and services (products) it supplies; who are its main

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26


customers (markets). Beyond this there are further indications of what thebusinesses are striving to achieve (profitability, growth, customer andemployee satisfaction, and in some cases also other aims). The statementsalso include some mention of the rationale of the approach adopted and ofthe means employed to achieve what they set out to do. These are someanswers to the question ‘What is the purpose of our hotel business?’ andrepresent broad objectives of the three firms.

In seeking to explain why thousands earn their living by owning and oper-ating hotels, it is tempting to say that they do it to earn a profit. But this isan oversimplification. From the point of view of the community and of hotelcustomers, the purpose of an hotel is to provide certain facilities and servicesto its users. From the point of view of its employees an hotel is a source ofemployment. From the point of view of its owners an hotel provides a returnon their investment. These are very disparate purposes, and viewing them inthis way recognizes that there is not one but at least three main parties tothe hotel business, each with one or more primary objectives.

Expressed in purely financial terms, customers may have a particularinterest in low prices, employees in high wages, owners in high profits. Buteach party has a wider concern in its participation in the hotel business.Hotel customers, for example, are also concerned with the quality of facil-ities and services, hotel employees with working conditions, hotel ownerswith the security of their investment and with other satisfactions they mayderive from their role.

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Hotel Policies, Philosophies and Strategies

27

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Part

IIThe Structure of the

Hotel Industry


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Whether measured by the scale of investment,turnover, number of rooms or beds, numbersemployed, or by other criteria, in most countriesa large proportion of hotels are small businesses.In this chapter small hotels are described with aview to providing a simple profile of their maindistinguishing characteristics.

Hotel ownership offers considerable attractionsto people willing to invest money, time and effortin building up a business. It offers economic independence in a business that provides a meansof livelihood in an activity full of human interestand it offers scope for individual flair. As with other small-unit industries, such as agriculture,building and retailing, there are good chances of setting up one’s own business in the hotel industry. Since many individuals enter the industrywith modest capital and to a great extent use their own financial resources, they tend to do so on a small scale and their hotels remain small.

The nature of the hotel business also helps toexplain the importance of the small hotel, becauseit is concerned with providing personal services.Its size is limited by the size of the market andby the extent of competition. Many markets forhotel services are small and many small markets

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4The Small Hotel


are served by more than one hotel. Moreover, size is not a requirement ofa viable hotel operation, as it is in some other industries.

Most hotels provide more than one product – rooms, meals and refresh-ments and sometimes also other services – and they do so in variouscombinations. It is, therefore, less than satisfactory to define a small hotelfor our purposes in terms of a particular room or bed capacity. Such othercriteria, as a given level of investment or sales, mean different things in rela-tion to hotels of different standards and price levels, and their values changewith time. In this chapter the small hotel is, therefore, seen as an establish-ment which is owner-managed through the personal involvement of theproprietor in the day-to-day conduct of the business. This is not the casewith all small hotels, but the concept has certain meaningful characteristicsas regards ownership and management of the hotel generally, and its financing,organization, staffing and control in particular.

A small hotel defined in this way often has more than minimal capitalinvested in it, employs non-family labour and is perceived as a business byits owners. This distinguishes the small hotel discussed here from, forexample, a private household providing some holiday accommodation, or abed and breakfast establishment letting a few bedrooms, without differenti-ating too sharply between the small hotel and the larger guest house.

Products and Markets

Independent owner-managed hotels have commonly up to twenty or thirtyrooms and less than twice that number of beds, a restaurant or a diningroom, and a bar, and sometimes also offer a few other guest facilities andservices. Their main distinguishing features are the range and scale of thefacilities and services.

Rooms may, but need not necessarily, represent the largest single sourceof hotel revenue. Some small hotels have relatively extensive restaurant andbar facilities in relation to their room capacity, when they serve local resi-dents and others as well as hotel residents. But in many small hotels thesefacilities are often used primarily by hotel residents, with restricted mealtimes and fixed meal charges; hotel residents’ bars then usually take the formof lounge bars. Telephone, newspapers and guest laundry are the main andoften the only services provided by small hotels, in addition to sleepingaccommodation, food and drink. If the hotel caters at all for functions, theyare likely to be small meetings, parties and such family occasions as weddingreceptions.

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The products of the small hotel relate to its markets, which are likely to bemore specialized in a large city with a variety of hotels than in a small townwhere the hotel may be one of only a few small hotels or the only hotel servingthe town. Because of its size, the users of small hotels are individuals and families rather than groups, and few small hotels can accommodate such organized groups as coach tours, which require a minimum room capacity,although some may cater for their meals and refreshments. Like all hotels, if it is open to non-residents, in its catering markets the small hotel is usually incompetition not only with other hotels, but also with restaurants, pubs andclubs, and other types of outlet for meals and refreshments.

There is an important difference in the way large and small hotels seek tomatch their markets and products. Large hotel operators increasingly assess theirmarkets, formulate operations to meet apparent market needs, and set out to sell their hotel products to identified market segments by employing promotionon a large scale. Small hotels tend to approach their markets less formally andmore intuitively from their detailed knowledge of their guests’ requirements,based on their close contact with them. They tend to adjust their services more readily to the known preferences of their guests and to rely for selling their products more on personal recommendation and repeat visits than on systematic promotion. However, this is a broad generalization: large successfulhotels do, of course, pay a great deal of attention to the reactions of their guestsand even small hotels can rarely be successful without active promotion.

� Small hotels are not just smaller versions of large hotels. They are fundamentally different and are often ‘families’ first and businessessecond.

� The survival of small hotels located in disadvantaged areas has moreto do with the way the business partners organise their work andnon-work activities than the use of marketing skills.

Andy Lowe in Hospitality Management, Vol. 7, No. 3

Ownership and Finance

Traditionally, the small hotel has been owned by an individual or a family,and the common legal form of ownership has been an unincorporated firm,a sole trader or sometimes a partnership, but increasingly it is a privatecompany in order to obtain the advantages of limited liability. Although somesmall hotels are owned by those with other business interests, more often

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The Small Hotel

41


than not the establishment as a place of business, and the firm as a unit of ownership and ultimate control, which raises capital and employs andorganizes productive resources, coincide.

We will see in Chapter 12 that hotels require short-term, medium-termand long-term finance for particular purposes. The dependence of the smallhotel on one individual, the owner/manager, and the type of security avail-able for a loan, are among the factors that have tended to mitigate againstthe availability of external finance from lending institutions. It is commonfor small hotels to provide most of the finance of all three types from retainedprofits and from personal savings, sometimes drawn from the realization ofother assets, and the main external sources are bank overdrafts and loans.This applies not only to short-term requirements, but also to much fixedcapital expenditure. Much longer-term finance is drawn from private sourcesand from the financial involvement in the business of private individuals whoare prepared to lend. Some may become ‘sleeping’ partners or even direc-tors of private companies, usually confining their participation to theirfinancial stake, and leaving the day-to-day conduct of the business to theowner/manager, who is often the principal owner of the business. Smallhotels, therefore, tend to have a high proportion of ‘equity’ capital, contributedby one or more individuals, and a low proportion of loan capital, contributedby a limited number of sources open to them.

Income to owners of small hotels, unlike that of large ones, accrues infour different ways. In addition to the appreciation of land and buildings andannual profits, the two sources common to both, many owner/managers andtheir families derive a significant income in kind, because they live on thepremises, as well as any salaries they may pay themselves. It is often diffi-cult to differentiate clearly between profit as return on investment and theemoluments of the owners in the form of cash and non-cash benefits, whichthey derive as a reward for managing the hotel. However, there is much tobe said for attempting this at least annually, in order to assess the profitabilityof the business meaningfully. Using purely financial criteria, the true compar-ison is what the capital invested in the hotel could earn if invested elsewhere,and what the owners themselves could earn elsewhere for a comparable effort.

Organization and Staffing

In large hotels ownership and management are normally separate functions,both conceptually and in practice. The business is owned by shareholders.The top management is entrusted by them to directors who in turn dele-gate the day-to-day conduct of the business to operational management.

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A managing director may provide a link between the top and operationalmanagement, and according to the size of the business there may be severallevels of operational management. The operation is divided into departments,in which employees perform more or less distinct tasks, and there may beline managers as well as specialists.

In the small hotel the owner/manager is an entrepreneur who normallycombines not only ownership and management but often also the functionsof top and operational management in one person. Whatever the legal form of ownership, it is this person who undertakes the investment and thefinancing of the hotel, decides the objectives and the policies, and is respon-sible for planning, direction, organization, staffing and control.

The owner/manager may turn outside for advice and help – and usually does– on accounts and finance, architecture and design, business promotion, law,maintenance of equipment and services, and on other matters, but he or shetends to be to a great extent their own marketer, buyer, human resource man-ager, as well as the one who organizes and coordinates the hotel facilities andservices generally, and who represents the hotel to the outside world.

The scale of operation has two main implications for its organization andstaffing: limited departmentalization and the likelihood that it can be super-vised without, or with no more than one, intervening level. This may beillustrated with an organization chart of a small hotel with some twentyemployees shown in Figure 4.

In this hotel two people assist the owner in the office and the others havespecific but quite wide ‘departmental’ responsibilities. The office is the nervecentre of the hotel, in which are brought together all the central functionsof the hotel, including accounts, purchasing, sales promotion and generaladministration The general assistant has a part in all these directions, as wellas in assisting the owner with the overall coordination of the business, butdoes not have a direct authority over those involved in the six main opera-tional areas. Although each of these has a person in charge, because of theirsize, these areas represent sections rather than departments in the normalsense of the word.

It is possible to see in this illustration how the division of work may bereduced still further in a small hotel, so that the owner may actually super-vise all employees directly. One office may deal with wages, suppliers’invoices and most other clerical tasks, as well as with the reception of guests,their accounts and related guest services; food and drink may be served by the same waiters. The majority of employees may be interchangeable:

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The Small Hotel

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a bookkeeper/receptionist may assist in the bar and the dining room; a portermay attend to guests and their cars and luggage and also serve drinks in thelounge; a waitress may divide her working day between the bar, dining roomand the servicing of guest rooms. Such arrangements not only provide flex-ibility in the deployment of staff and reduce idle time, but may also improvestaff job satisfaction through a variety of work. On the other hand, to imitatethe large hotel by providing a wide range of services and a departmentalstructure can destroy the particular advantages the small hotel enjoys, withoutcorresponding benefits.

From the management viewpoint a small hotel operation calls for a breadthof knowledge and skills, which are rarely combined to a high degree in thesame person. It reduces the ability of managers to delegate, so that they areengaged almost continuously in the business and so that they perform dutiesundertaken by employees in larger hotels. The small hotel can avoid rigiddepartmental demarcations, but it can make only limited progress towardsspecialization, which, if utilized to the full, is conducive to a high degree ofexpertise and a high output per employee. In view of these factors, a smallhotel may provide much personal satisfaction for its owners and often alsofor those employed in it, but it can be expected to create little innovation interms of hotel organization and staffing.

Size has obvious implications for the design of structure. Size is nota simple variable, and it can be measured in different ways. The mostcommon indication of size is usually the number of bedrooms, perhapsassociated with the number of staff employed. In other cases, however,different factors such as the range of facilities . . . In a very small hotel,for example, with only six bedrooms and run by a husband and wifewith some family help, there is little need for a formal structure. Butwith increasing size and complexity of operations, a hotel may bedivided into distinct departments with defined tasks and responsibilities,more formalised relationship, and greater use of rules and standardisedprocedures.

Laurie Mullins, Hospitality Management

Accounting and Control

Most hotels, however small, keep some accounts, in order to have a recordof their transactions with their guests and suppliers, and in order to satisfy

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The Small Hotel

45


certain legal requirements. But for their control small hotels tend to rely onthe personal involvement and supervision of the proprietor, rather than ondetailed accounting and statistical records. A simplified approach to accountsis adequate and also cost-effective.

Three main basic accounting records satisfy most requirements of mostsmall hotels:

� A receipts and payments book records all cash transactions. In the courseof business sales accounts and invoices are filed separately and onlyrecorded in the book after payment has been received or made. At theend of the period unrecorded transactions such as outstanding salesaccounts, unpaid invoices, prepayments and accruals are taken into accountin preparing final accounts.

� A visitor’s tabular ledger with individual accounts for all resident guestsmay be extended to include separate accounts for functions, as well asfor total cash and credit sales in the restaurant and bar to customers usingthese facilities without taking up sleeping accommodation. In this waythe tabular ledger represents an analysed daily summary of all businessdone.

� A wages book, which includes all employee and related payments, providesa comprehensive record of all payroll transactions.

The proprietors of a small hotel tend to view each hotel product or depart-ment as an integral part of the whole and are more concerned with the overallprofitability of the hotel than with the relative profitability of its parts.However, different hotel services generate different profit margins, and evena simple breakdown of revenue and expenditure can provide a helpful analysisof performance and especially to:

� indicate the relative profitability of the different parts;� establish a basis for monitoring and comparison;� enable an assessment to be made of the effect of any changes introduced

in operation.

If the basic records are kept in an analysed form, the input data for ameaningful analysis of results are available without much additional effort.It is, therefore, quite easy even for small hotels to produce informativeaccounts, and to do so more than once a year, from the basic records outlinedabove. They are helped in this by the relatively small total volume of trans-actions, many of which are on a cash basis. What is realistic in most smallhotels, may be summarized as follows:

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� It is normally adequate to analyse income and certain expenses under no more than four headings: rooms, food, liquor and miscellaneous. Thelast category is residuary and covers what may be analysed into severalseparate minor operated departments in a large hotel, but is unlikely tobe very significant in a small hotel.

� An extended visitors’ ledger can provide analysed details of all revenue.� Cost of sales data for food and beverages can be derived from an analysed

receipts and payments book and adjusted for changes in stock levels, togive the gross profit. (Because room sales do not involve the sale of goods,there is no cost of sales for rooms, and miscellaneous sales are not likelyto be significant.)

� Each employee is allocated to the department in which he or she isprimarily employed, or an employee’s payroll cost may be divided betweenthe departments to which they contribute. The balance of profit after thededuction of cost of sales and payroll costs from sales is the net margin.

Although in a large hotel the analysis is taken further by deducting fromthe net margin those other expenses that can be allocated to a department,in order to arrive at the departmental operating profit it is not necessary toproceed beyond the net margin in a small hotel, because this stage tends toaccount for between a half and two-thirds of the total costs of most hotelsand gives a good indication of the profitability of individual hotel facilitiesand services. The analysed results produced in this way can then be comparedperiodically with the budget, with figures for the previous year, or with figuresfor the previous period, prepared on the same basis, to monitor the perfor-mance of the hotel.

For economic reasons apparently hotels became bigger and bigger. Oncethe developers had paid for the site and the infrastructure it becameeconomic sense to add as many rooms as possible. It did not, however,necessarily make behavioural sense from a guest’s point of view andthe developers of large hotels lost sight of the human need of being‘loved and wanted’. As we have all heard before, ‘in x hotel you feellike a number’. This complete ignoring of the needs of guests by devel-opers did, in fact, severely set back the standards of hotelkeeping . . .But what should be the hotel design of the future? Already in the USthere is a movement from the massive chain hotels of the sixties andseventies to smaller more personal hotels.

Peter Venison, Managing Hotels

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The Future of the Small Hotel

Small business faces particular problems in competition with large firms inmost industries, and the small hotel business is no exception. Its scope forexpansion is limited because it can marshal only limited investment capitalfrom its own cash flow and from external sources. Its resources allow busi-ness promotion only on a limited scale and it has to rely for most of its saleson individuals rather than groups. It represents a small buyer in the marketand cannot buy in bulk. It may lack management skills, cannot afford toemploy specialists, and offers limited career prospects for employees. Itsvolume of business is too small to secure a high degree of efficiency in itsoperations, and the limited range of its products makes it vulnerable toexternal pressures. In other words the small hotel is denied the advantagesof size, described in the next chapter in connection with hotel groups.

But the small hotel has few management problems of the large hotel andit often enjoys certain advantages because it is small. The owner/managercan market the hotel with a personal touch and individuality, and to generatea substantial volume of repeat business. He or she is also able to managethe hotel as an individual and to generate a personal loyalty in their employees.

The future of the small hotel, therefore, lies in concentrating on what itcan do best and what it alone can do, on the high-quality, individual andpersonal approach to hotelkeeping, in which the guests and employees findan alternative to the large unit and the large company, and which many ofthem may prefer. But the small hotel may also need to adapt some of theadvantages of the big one to its needs through cooperative action, and bydrawing on the assistance which is available to it. Three particular approacheshave been prominent in some countries:

1. One popular approach is the formation of hotel consortia or cooperativesof independent hotels and there are two main types: one is a local groupof independent competing hotels in a town or district. When mutual trustand confidence has been established among several hotels, this has led togroup marketing, purchasing and other forms of cooperation, securingsignificant economies for the participants. The other type is a consortiumof independent non-competing hotels widely distributed geographically.Their emphasis has been on marketing touring holidays by car and coachand on referral business, but also on common strategies in other direc-tions. To be effective most consortia have set up central offices withfull-time staff; these and their activities are financed by members’ subscrip-tions. (See section on consortia below.)

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2. The other main development has been the creation of advisory servicesfor small hotels by national hotel associations and by tourist boards. Theservice organized as a small team of consultants to give practical adviceand guidance to small hotel operators performs a similar role for the indi-vidual hotel as a management services department does in a largeorganization for its units or departments.

3. Small hotels can also benefit, more than large ones, from inter-hotelcomparison surveys, which enable them to compare or benchmark theirown performance with other hotels with similar characteristics, and toidentify particular operating weaknesses. Evidence from several countrieswith established surveys indicates that they have been a major stimulusto a critical approach to the examination of hotel operations and to improve-ments in efficiency.

Consortia

It has been demonstrated above that consortia can provide the small hotelwith greater visibility and the ability to market its product offering to a widerconsumer base. Appendix G shows that, among the leading internationalconsortia, REZsolutions lead the field with 1 500 000 rooms and 7 700 hotelsworldwide. The dominance of REZsolutions has been achieved through itstechnological ability, to the extent that they are able to lease their technologyto other consortia, especially those which specialize in luxury hotels. As withinternational hotel groups (Appendix E), the leading consortia of the worldare dominated by USA-based organizations, which account for ten of thetwenty-five, more than one-half of the hotels, and almost three-quarters ofthe rooms, shown in Appendix G. Although most hotel consortia are basedin Europe, which account for more than one-half of the total, they are onthe whole smaller than their American counterparts.

� REZsolutions Inc. is the largest hotel consortium world-wide.� Supranational Hotels is the largest hotel consortium based in Europe.� Flag Choice Hotels Group is the largest hotel consortium outside

Europe and North America.

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The traditional pattern of an hotel industry madeup of small and individually owned hotels hasbeen changing in many countries for many yearsand has come to resemble more closely that ofother industries, with a number of companiesenlarging their share of the market, the remainderbeing shared by a large number of smaller firms.The independently owned hotel may still be thedominant firm in the industry, but the growth ofthe industry has been increasingly associated withhotel groups. The increase in the size of hotelfirms has come about by firms building oracquiring hotels in different locations and placingthem under central management. The hotels maybe grouped within a restricted geographical areaor distributed widely within a country or evenbetween countries.

Appendix E shows that the world’s 50 leadinghotel groups account for more than four millionrooms and 30 000 hotels. The leading player is theCendant Corporation of New Jersey, USA, whichcan achieve huge economies of scale with itsproperty management systems and with morethan 500 000 rooms under franchise. AlthoughCendant commands the most rooms of any group,its operations are mostly based in the USA, with

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5Hotel Groups


fewer than 100 of its 6000 hotels outside North America. Nevertheless, US-based hotel groups dominate the world’s leading groups, with 30 of the totalof 50, and with more than 80 per cent of the hotels and of the room stock.However, although hotel groups in the USA operate the vast majority of roomsin the top groups, they do not necessarily expand beyond the home country.

Appendix F shows the 50 leading hotel groups with a head office in Europe,with a total approaching one million rooms in 7500 hotels. Nearly one-thirdof the total room capacity was provided by the leading European group,Accor, which operates market-segmented brands such as Sofitel, Novotel,Formule 1 and Ibis in 72 countries world-wide.

Although in the list of 50 the six hotel groups based in France operatemost of the hotel rooms, Figure 5 shows that by country of head office moregroups were based in Spain (11), England (10) and Germany (9).

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Hotel Groups

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Spain

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Germany

France

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Greece

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11

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Figure 5 Leading European hotel groups by country of head office (based onHotels, July 1999)


Hotel Group Operations

The hotel groups normally operate hotels owned by them or leased by themfrom their owners to whom they pay a rental. Sometimes they manage hotelsas agents for the owners under management contracts, which provide for thepayment of expenses, management fees and/or the sharing of profits. Thegroups may also operate under franchise agreements, which allow one party(the franchisee) to sell a product designed, supplied and controlled by theother party (the franchisor), in return for a fee or a share of profits; in thisarrangement an hotel group may be in the role of a franchisor or in the roleof a multiple franchisee. What favours North America when ranking hotelcompanies is to a great extent the fact that much rapid company growthoccurs through management contracts and franchising, in both of which USbrands dominate, as shown in Tables 3 and 4.

The main purpose of this chapter is to describe the advantages and theproblems of hotel groups, the main issues facing them, and their approachto group operation. Hotel group operations under management contracts andunder franchise agreements have much in common with any group opera-tion, but both are based on particular agreements between the parties andintroduce elements specific to the relationship between them, which are quitedistinctive. This chapter is primarily concerned with hotel group operationsof hotels owned or leased by the group. Readers with a particular interestin management contracts and franchises are referred to texts on these busi-ness relationships listed in the suggested further reading for this chapter.

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Table 3 Leading hotel management companies

Managed Total %Company hotels hotels managed

Marriott International 870 1 686 52Société du Louvre 550 601 92Accor 368 2 666 14Tharaldson Enterprises 288 288 100Promus Hotel Corporation 277 1 337 21Red Roof Inns 256 295 87Bass Hotels & Resorts 216 2 738 8Sol Meliá 196 246 80Starwood Hotels & Restaurants 194 694 28Hyatt Hotels/Hyatt International 183 186 98

Source: Based on Hotels, July 1999


� Accor is the largest hotel group based in Europe.� The Cendant Corporation is the largest hotel group based in the

Americas.� Prince Hotels is the largest hotel group based in the Pacific Rim.

(Appendix E)

Advantages of Groups

The nature of the hotel business and the limits of many hotel markets providethe main explanations for the growth of hotel companies through groups.The advantages that may accrue to hotel groups are the resulting advantagesof size, known as economies of scale. Some of these, e.g. the technicaleconomies, may apply also to individual hotels, if they are large enough, buttheir full realization is open particularly to groups of hotels. Groups extendthe size to which an hotel firm may grow, economies of scale tend to accom-pany groups for a long time before pronounced managerial disadvantagesset in, and some of the economies, such as those of risk-spreading, are openonly to groups. Because economies of scale are available to groups ratherthan to single hotels, generally a higher profitability is attainable by a groupthan could be generated by the sum total of its hotels operated independently.The advantages of hotel groups may be summarized as follows.

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Table 4 Leading hotel franchising companies

Franchised Total %Company hotels hotels franchised

Cendant Corporation 5 978 5 978 100Choice Hotels International 3 670 3 670 100Bass Hotels & Resorts 2 438 2 738 89Promus Hotel Corporation 998 1 337 75Marriott International 753 1 686 45Carlson Hospitality Worldwide 532 548 97Accor 458 2 666 17Hotels & Compagnie 326 326 100Starwood Hotels & Resorts Worldwide 280 694 40US Franchise Systems 227 227 100



One of the main financial economies is the ability of the group to marshalcapital resources from its own cash flow and from external sources. A groupmay be able to borrow from lending institutions and to do so on favourableterms because it is big and because its hotels provide a good security to itslenders. This is of particular value in financing growth by adding furtherhotels to the group, in modernizing hotels, and in covering the initial periodof operation of new hotels before they become profitable. A group can alsodeploy its financial resources to advantage by balancing the working capitalrequirements of its hotels over a period of time and thereby alleviating thestrain on individual units caused by seasonality and other fluctuations inrevenue and in expenditure.

Because of its size a group can enjoy marketing economies. It can createa group image in the market, which may extend to a common name, facil-ities and standards throughout the group, and it can engage in promoting itshotels together. Individual hotels may to a greater or lesser extent specializeand provide facilities and services complementary to the other hotels, suchas conferences. Public relations, advertising and sales promotion can beundertaken with an impact for the whole group. Each hotel within the groupcan promote other hotels and generate business by onward reservations.

An hotel group has open to it economies of buying because it can buy inbulk and negotiate advantageous prices and terms with its suppliers of awide range of goods and services on behalf of the whole group. A largegroup can also benefit from central testing of products and from experi-menting with different products in its hotels before their use is extended tothe whole group.

Management costs need not keep pace with an increase in the volume ofbusiness and an hotel group can enjoy managerial economies. It can attracthigh-quality staff through the prospects it can offer within the group and theavailability of training schemes, and benefit from an interchange of staffbetween its hotels. It can also provide centralized services to its hotels andin these it can employ specialists with the time and skills to exploit theadvantages of group operation in such areas as finance, personnel, purchasingand marketing.

Various technical economies may arise with size in individual large hotelsbut also in groups, particularly when the hotels are concentrated geograph-ically within a limited area. The volume of business may then make it possibleto concentrate such operating facilities as central food production, maintenanceand laundry, when reductions in unit costs may be achieved as compared

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with providing the facilities in individual hotels or buying the services fromoutside firms.

Last but not least, there may be economies of risk-spreading, which enablegroups to reduce risk by product and geographical diversification. Hotels thatcater primarily for business and for holiday markets tend to have differentseasons; some may specialize in functions and others in conferences. Adecline in demand for a particular hotel may be offset by a high volume ofbusiness in another hotel, and thus even out the fluctuations for the groupas a whole, as we have seen above when considering the financial advan-tages of groups.

It can be seen that the advantages of scale that may accrue to hotel groupsarise from several sources: from the weight the group has in markets (whetherit is in its markets with customers or suppliers, or in the markets for produc-tive resources, in particular capital and labour); from providing certainservices to its hotels; and from operating them as a group. These sources ofeconomies are complementary. But before considering how they may beexploited and what issues they raise, it is necessary to consider the prob-lems hotel groups may experience.

Problems of Groups

The hotel group shares several main problems with any large organization,especially problems of communications, control and costs.

In order to operate as a group, the centre has to communicate policies,procedures and other matters to individual hotels, which in turn have tocommunicate information, requests and other matters to the centre. In aclosely integrated group individual hotels also have to keep in contact witheach other. Unless smooth lines of communication are established and main-tained, this can militate against the effectiveness of group operation and theattainment of the advantages. Action may be delayed and result in a loss ofrevenue or additional costs, in time and effort wasted in clearing up misun-derstandings, and in antagonism that may be generated.

Whatever the degree of central direction and monitoring of individual units,there is a need for some control to be exercised over the conduct of thehotels, to ensure group decisions being carried out and the accountability ofindividual hotels for their performance. Unless a clear and effective controlmechanism exists, hotels may act against the interests of the group and affectits performance as a whole. However, a complex control mechanism may

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As a hotel group expands there are opportunities for more make orbuy decisions to be taken. Some of the functions and goods which arebought in by different hotels could be more economically provided byinternal suppliers. For example, an estates department for a group ofhotels could employ not only general maintenance personnel but alsoa designer, electrician, plumber and carpenter. It must be said, however,that in the 1990s, groups of hotels are tending to look at ways ofoutsourcing skills rather than taking on more specialists.

Chin J., Barney W. and O’Sullivan H. Hotels: Financial Management and Reporting:

An Industry Accounting and Auditing Guide

The main problems encountered in group operations are where the linksbetween the individual hotels and the head office break down. Thismay be caused by differences in management style and culture betweenthe individual hotel and the group as a whole or it may be through a misunderstanding between the centre and the hotel about a specificpoint. This misunderstanding can sometimes be converted into outrighthostility on the part of the managers and staff in the hotels towardsthe group management personnel.



Expanding your hotel business may enable you to benefit fromeconomies of scale and spread risk. Many economies of scale open toa hotel company come through providing services from a central source.These functions typically include marketing, purchasing and accounts.In order for these benefits to be achieved it is important that you are sure that communication links between the centre and each hotel location are clear and relationships are good.



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generate disproportionate costs and affect the initiative and performance ofthe hotels as well as of the whole group.

A group operation gives rise to its own costs, through the need for commu-nication and control, and through the provision of central services to hotels.If the advantages of group operation are to be realized, it is clear that theseadditional costs have to be outweighed by the benefits which they bringabout, if the group is to produce higher profitability than the individual hotelswould if operated independently.

In addition to the quality of the group management, the extent of the aboveproblems depends on three main factors: the number of the hotels in the group,the geographical dispersal of the hotels, and the extent to which the variousaspects of the group operation are centralized. The less of each, the less likeli-hood of these problems being serious. But the smaller the group and the lesscentralization, the less also is the prospect of the advantages of group operationbeing realized. The problems arising from the number of hotels and their dispersal may be to some extent overcome by a district or regional structure, butthis in itself generates costs. The problems due to centralization can be overcomeonly by a careful evaluation of the advantages and drawbacks of alternativeapproaches, by management of high quality, or – by decentralization.

Scope for Centralization

A group management may adopt a mainly passive ownership role. At itsextreme this means the appointment of local managers who are expected toachieve results by their own initiative, with a minimum of central direction,support and supervision. In these circumstances the performance of the groupis made up of the more or less independent actions of individual hotels, witha loose monitoring by the owners directly or through a group manager, amanaging director, or even a company secretary, with little or no staff oftheir own. Outside specialists, such as professional stocktakers, may beemployed, and the company auditors may perform two roles – that of accoun-tants preparing the accounts of the group and that of auditors verifying theview of the business presented by the accounts; their work may include, ingreater or lesser depth, an operational audit.

However, in order to obtain the advantages of group operation, a morepositive group management approach is necessary. The group managementhas to formulate the objectives, policy and operational guidelines, evolvestrategies and plan on behalf of the group; it has to direct and coordinatethe separate units, and it has to control them financially and in other ways.

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The economies of scale do not accrue to the group automatically. Commonownership may bring about certain financial advantages, but to realize mostor all the advantages, decisions have to be taken on which functions of thegroup to centralize and on the extent of centralization of each. The majorissue for an hotel group is, therefore, how much to centralize, and the prin-cipal functions that offer scope for centralization are:

� accounting and finance;� human resource services;� purchasing;� sales and marketing;� technical services.

As we have seen, these are the areas in which the main economies ofscale lie, and the main influencing factors are the number of hotels and theirgeographical distribution. Different degrees of centralization are possible ineach function: even when centralization is effected, each function has to bedivided between the centre and the hotels; how much each does and the rela-tionship between the two are of crucial importance.

However decentralized the group approach may be to accounting andcontrol, such aspects as the preparation of the final accounts for the group(even if only as a consolidation of the accounts of individual hotels), capitalaccounts, cash management and detailed analysis of the financial perfor-mance of each hotel, are normally central functions. Beyond these moreobvious areas, the main possibilities for centralization arise, depending oncircumstances, in accounting for purchases (particularly where purchasing iscentralized), payroll (for some or all employees), and credit sales accounts(particularly with such large hotel users as business firms, tour operators andtravel agents), stocktaking and internal audit.

At a modest level a centralized human resource function is concerned withstaffing levels, salary and wage structure, and with employee records. Itnormally deals with recruitment, selection and placement, sometimes for allemployees, sometimes only with particular grades and categories, and othersare recruited and engaged locally. When the human resource function is more extensive and highly developed, it may cover all conditions of employ-ment, training and welfare, and also employee consultation, negotiation andindustrial relations generally.

As substantial economies may be achieved by centralized purchasing, fewgroup hotels buy all or most of their supplies directly from any supplier theychoose. The centralized purchasing function may be concerned with a varying

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range of supplies and essentially take one of three basic forms or a combi-nation of the three. In some instances, when the hotels are located in a limitedarea, supplies are bought for central stores, from which they are distributedto hotels. In the absence of central stores, orders may be placed centrallyagainst requisitions by hotels and delivered directly to hotels. The third formis the placing of orders by individual hotels against centrally negotiatedcontracts, with nominated suppliers who deliver directly to the hotels.

A wide scope for a group approach exists in sales and marketing, whereall or some of publicity, advertising and direct sales promotion may be central-ized, to project the desired image of the group and to generate sales,particularly from large hotel users. When the group is large enough, it canundertake its own market research or commission it from a specialized agency,package its own products and operate a centralized reservation service.Individual local promotion and a centralized approach are normally combinedby most groups as being complementary directions aimed at somewhat distinctmarkets.

There are several other operations, which may be carried out by individualhotels, or obtained from specialist suppliers, or provided to hotels in a groupas a central facility, if their volume is large enough and if the hotels areclose enough to be served centrally. These were earlier referred to as offeringscope for technical economies and can be located in one hotel serving othersor separately, e.g. various technical services.

A Concentrated Hotel Group: an Illustration

The aspects discussed in this chapter are illustrated first with an example ofan hotel group which operates 18 London hotels with a total of 3500 rooms,26 restaurants, 28 bars and almost 100 function rooms in these hotels, andwhich has some 3500 employees. The largest hotels have several hundredrooms and employ several hundred people, the smallest hotels have less thana hundred rooms and less than a hundred employees. The simplified orga-nization chart of the company is shown in Figure 6.

In this example the central functions of the group below board level andabove the level of an individual hotel, comprise 165 employees – more than100 accounted for by a large Estates Department, which employs directly awide range of maintenance staff.

Each general manager is concerned with certain central functions as wellas with individual hotel operations through an assistant general manager.

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Southern Region

Administration

Finance

Sales Promotion

General

Purchasing

Marketing

Public Relations

Western Region

Agency Sales

TrainingPersonnel

Engineering

Northern Region

Buildings

HumanResources

Hotels Controller

Board ofDirectors

TechnicalServices

Figure 7 Organization chart of a dispersed hotel group


Each hotel has a manager and, according to size, between one and threeassistant managers. All central functions are linked with the responsibilitiesof particular managers and assistant managers in the hotels.

The arrangements vary as between individual hotels. Normally the managerretains personal responsibility for public relations and for estate functions,in liaison with the corresponding central departments, and in all but thelargest hotels also for one or more other functions, in addition to the generalmanagement of the hotel. Each assistant manager has also one or more func-tional responsibilities in addition to assisting the hotel manager generally: inthe large hotels with more than one assistant manager, one may be respon-sible for sales, one for personnel and one for accounts and purchasing; inthe smaller hotels with one assistant manager, all the specialist functions aredivided between the manager and the assistant. The personnel function isnormally the main or the only responsibility of an assistant manager. Thisarrangement provides for a direct relationship between each central depart-ment and a designated individual in each hotel.

A Dispersed Hotel Group: an Illustration

Figure 7 represents an outline organization chart of a group of more than30 hotels distributed widely over most of England and Wales, with a headoffice in the Midlands. The hotels range in size from about 50 to about 120rooms, all of them have a restaurant and a bar, several have more than onerestaurant and more than one bar, and all hotels cater for small functions.The group employs some 2000 people.

There are two distinctive features of this organization structure: centraldepartments are grouped into four, bringing together related functions, andthe hotels are grouped into three regions, with 10–12 hotels in each region.The hotels controller, who reports to the Board of Directors, thus has sevensenior executives who report to him directly, four in respect of specialistcentral departments and three in respect of hotel operations.

Because of the wide geographical dispersal of the units, the central depart-ments provide broad policy guidelines and such support services to individualhotel managers as they may require. The regional controllers are concernedwith the enforcement of agreed targets and standards and with their moni-toring. But within these limits, individual managers are allowed relativelywide discretion in the operation of their hotels.

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With the growth of international travel and ofhotel industries in the less developed countriesof the world, there has been a major growth ininternational hotel operations. In the broad sense,the term describes hotel groups that operate inmore than one country, but it is possible to distin-guish between two main types. One is representedby what are essentially national companies witha head office in a particular country, whichengage to a great extent in hotel operations inthat country and in other countries. The othertype is multinational companies established byairlines and other interests, which operate hotelsin different countries, and in whose case the loca-tion of the head office may not be of particularsignificance. The British owned group ForteHotels (Granada Group), with its head office inLondon, exemplifies the first type. AnotherBritish owned company, Bass Hotels and Resorts,with its head office in Atlanta, USA, and pres-ence in 95 countries represents the second type.Most of its hotel capacity consists of two majoracquisitions – Holiday Hospitality Corporation(Holiday Inn) and Intercontinental Hotels andResorts – in the 1990s.

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6International Hotel

Operations


For the first type, which may be described as a national company, inter-national operations offer scope for expansion outside their initial sphere ofoperations, often on more favourable terms than in their own countries, andfor further exploitation of economies of scale, particularly in finance,marketing and risk-spreading through geographical diversification. Multi-national companies seek similar advantages. When airlines participate ininternational hotel operations they bring together the two main componentsof the travel product – transportation and accommodation – thereby diversi-fying their products, as well as often seeking to safeguard their main business,the transportation of passengers, by providing accommodation at destinationsto which they take their passengers. Early examples included Trans WorldAirlines (Hilton International) and Pan American World Airways (Inter-Continental Hotels); they were followed by others, including Aer Lingus

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Bass Hotels & Resorts

Best Western International

Accor

Starwood Hotels & Resorts Worldwide

Carlson Hospitality Worldwide

Hilton International

Marriott International

Forte Hotels

Choice Hotels International

Club Méditerranée SA

Hyatt Hotels/Hyatt International

Sol Meliá

Four Seasons Hotels Inc.

Nikko Hotels International

Romantik Hotels

95

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0 10 20 30 40 50 60 70 80 90 100

Figure 8 World’s leading hotel groups by extent of international coverage(based on Hotels, July 1999)


(Copthorne Hotels), Air France (Méridien Hotels), Japan Airlines (NikkoHotels International), Swissair (Swissôtel).

To less developed countries international hotel companies bring manage-ment skills and expertise not available locally and help in opening upinternational markets. For developed countries international hotel operationsoffer opportunities for the export of skills and expertise, as well as of variousgoods and services.

Leading international hotel groups appear in Appendix E, where the 50largest account for more than 4 million rooms in 30 000 hotels. Figure 8shows the companies with the most extensive geographical coverage, i.e thosethat operate in most countries.

Companies engaged in international hotel operations face the basic prob-lems of any hotel group – communications, control and costs – discussed inChapter 5, and these are accentuated by distance, different languages anddifferent currencies involved. There are also other problems specific to them,which are discussed later in this chapter.

In this chapter international hotel operations are described in terms of theirdistinctive characteristics and approach, with illustrations from HorwathInternational reports in the late 1990s. Other variations international hotelcompanies may expect between regions and countries are shown in otherchapters in tables based on the same source. Although the reports are notspecifically concerned with international groups, they draw to a great extenton data of hotels of such groups, and provide meaningful illustrations ofdifferences between global regions and countries.

� The Cendant Corporation is the leading international hotel groupwith most rooms and hotels, all of them franchised.

� Bass Hotels & Resorts has hotels in more countries than any othergroup.

� Marriott International is the leading hotel management company.(Appendix E)

Products

An indication of the relative importance of hotel products may be obtainedby comparing the composition of hotel revenue in different regions and

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countries, as shown in Tables 5 and 6. Rooms represent the single mostimportant hotel product in all regions and countries except in Ireland, andin most of them rooms, food and beverages account for around 90 per centor more of the total revenue. Variations in the shares of particular productsin the total revenue reflect several influences: the range of products offered,relative prices of the products, and market and operating conditions of hotelsin different regions and countries.

Markets

Table 7 suggests major variations in the extent to which hotels in differentregions rely on business, holiday and other markets. In interpreting thesefigures it is important to bear in mind that they relate mainly to large firstclass hotels. But for international companies engaged in these markets, thefigures provide a simple market segmentation, which is important both intheir product formulation and promotion.

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Table 5 Composition of hotel revenue in main regionsa

Food and OtherRoomsb beveragec Telecommunicationsd incomee

(%) (%) (%) (%)

Total world 56.1 35.8 2.3 5.8Africa and the Middle East 50.8 35.5 5.7 8.0Asia 51.6 37.3 2.4 8.7Australia and New Zealand 60.1 34.0 2.7 3.2Europe 49.5 43.4 1.6 5.5North America 65.3 27.3 2.5 4.9South America 59.1 28.3 4.2 8.4

a All figures are arithmetic means.b Guest room revenue derived from the letting of guest rooms net of local taxes and breakfast. c Food and beverage revenue is derived from the sale of food (including coffee, tea and softdrinks), beverages (including beer, wine and liquors) and other income such as meeting roomrentals and cover or service charges.d Telecommunications revenue is derived from guest use of telephone, facsimile and telex andservice charges.e Other income represents income from rentals of space for business purposes and income generatedfrom sources not included elsewhere but excluding investment income.

Source: Based on Worldwide Hotel Industry, 1998


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Table 6 Composition of hotel revenue in selected European countriesa

Food and OtherRoomsb beveragec Telecommunicationsd incomee

(%) (%) (%) (%)

Austria 53.3 39.4 2.2 5.1France 64.0 30.1 2.0 3.9Germany 50.7 40.0 2.2 7.1Ireland 36.0 58.4 1.2 4.4Norway 47.8 45.2 0.6 6.4Portugal 56.6 32.4 2.0 9.0Switzerland 49.4 44.6 2.3 3.7United Kingdom 48.4 44.1 1.9 5.6

a All figures are arithmetic means.b Guest room revenue derived from the letting of guest rooms net of local taxes and breakfast.c Food and beverage revenue is derived from the sale of food (including coffee, tea and softdrinks), beverages (including beer, wine and liquors) and other income such as meeting roomrentals and cover or service charges.d Telecommunications revenue is derived from guest use of telephone, facsimile and telex andservice charges.e Other income represents income from rentals of space for business purposes and income fromsources not included elsewhere but excluding investment income.


Table 7 Composition of hotel markets in main regionsa

GO BT T/L TG MP AC Other(%) (%) (%) (%) (%) (%) (%)

Total world 2.2 28.5 34.1 17.7 10.1 2.7 4.7Africa and the Middle East 4.6 39.5 19.5 18.6 3.6 8.1 6.1Asia 2.1 35.7 27.8 17.9 5.9 2.7 7.9Australia and New Zealand 4.8 34.3 24.3 16.4 8.7 7.4 4.1Europe 1.0 26.1 37.6 18.6 11.2 1.8 3.7North America 5.0 21.3 42.9 10.7 11.8 2.6 5.7South America 2.1 45.2 20.5 12.0 11.5 4.4 4.3

a All figures are arithmetic means.GO, government officials; BT, business travellers; T/L, tourists/leisure; TG, tour groups; MP,meeting participants; AC, airline crew.



The great majority of hotel users reserve their accommodation in advance.Table 8 shows how the reservations are made in different regions andcountries. The operations of international groups account for a high propor-tion of reservations made through own reservations systems and throughtravel agents and tour operators, both of particular importance in the marketingof international hotels.

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Table 8 Advance reservations in hotels in main regionsa

DI ORS IRS TA TO HR TC WS/I(%) (%) (%) (%) (%) (%) (%) (%)

Total world 35.1 14.0 5.3 19.8 18.1 4.3 2.0 1.4Africa and the Middle East 31.8 12.2 7.2 23.6 16.5 4.2 2.7 1.8Asia 31.0 14.4 4.9 26.5 13.9 4.8 2.2 2.3Australia and New Zealand 38.9 12.7 5.4 20.9 14.6 4.2 2.9 0.4Europe 38.8 10.8 5.8 18.7 19.0 3.7 1.7 1.5North America 29.5 23.6 4.1 17.3 16.9 7.0 0.7 0.9South America 31.9 23.8 4.5 17.1 11.6 5.2 3.9 2.0

a All figures are arithmetic means.DI, direct enquiry; ORS, own reservation system; IRS, independent reservation system; TA,travel agents; TO, tour operators; HR, hotel representatives; TC, transportation company; WS/I,web site/ Internet.


Table 9 Method of payment for hotel services in main regionsa

Credit Other E- funds Cash card credit transfer Total(%) (%) (%) (%) (%)

All hotels 23.1 38.7 34.3 3.9 100.0Africa and the Middle East 20.9 32.7 43.7 2.7 100.0Asia 24.4 42.0 30.7 2.9 100.0Australia and New Zealand 21.7 41.0 35.2 2.1 100.0Europe 24.3 36.1 34.2 5.4 100.0North Americab 21.2 52.4 24.8 1.6 100.0Latin America/Caribbean 21.9 36.8 40.5 0.8 100.0

a All figures are arithmetic means.b Excluding USA.



As shown in Table 9, only a minority of hotel guests settle their accountsin cash; credit cards and other forms of credit predominate world-wide. Creditcards account for the highest proportion of payments in hotels in NorthAmerica, other forms of credit in Africa and the Middle East and in SouthAmerica.

Table 10 shows that four charge/credit cards – American Express, DinersClub, Mastercard/Eurocard, Visa – account for the bulk of card sales world-wide. With the exception of Australia and New Zealand, Visa predominatesin all regions.

. . . we see the world as divided into three holiday ‘lakes’: theMediterranean, the Caribbean, and the South China Sea. The majormarkets for tourism are to be found above and below these ‘lakes’.They are Western Europe, North America, and Japan/Australia. Theorientation of movements in the current phase is vertical – mainly fromthe north to south. There will also be a second phase, though we haveno means of determining the precise moment when it will start –perhaps towards the turn of the century. This phase will witness majorlateral movements of tourists from East to West and vice versa.

Gilbert Trigano, Club Méditerranée, in Tourism Management, Vol. 2, No. 2

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Table 10 Charge/credit card hotel sales in main regionsa

Mastercard/Amex Diners Eurocard Visa Other Total(%) (%) (%) (%) (%) (%)

All hotels 25.4 10.5 23.2 37.6 3.3 100.0Africa and the Middle East 31.8 5.9 18.5 40.5 3.3 100.0Asia 28.3 6.6 17.7 39.4 8.0 100.0Australia and New Zealand 32.6 17.7 17.6 27.3 4.8 100.0Europe 21.7 12.6 26.3 37.5 1.9 100.0North Americab 30.1 3.9 22.6 40.0 3.4 100.0Latin America/Caribbean 29.6 10.0 21.4 36.0 3.0 100.0

a All figures based on arithmetic means and show the percentage of revenue represented byeach card.b Excluding USA.



Ownership and Finance

Many if not most major hotels are not owned by the hotel operator; commonlya separate company is established to own each hotel. Typically each owningcompany has a major equity investor but there may be also one or moreminority equity investors and they may include the hotel operating company.The owning company may seek additional equity investors, if required, grantsand soft loans from governments and development agencies, and completethe project financing by raising loans from banks and other commercialsources of finance.

The owning company makes an agreement with the hotel operatingcompany, which may be for:

� a joint venture (when the operator is a full partner in the joint ownershipof the hotel with a joint participation in the financial outcome);

� a lease (when the operator takes temporary possession of the hotel for aspecified period of time for rent payment);

� a management contract (when the operator who may or may not be alsoan investor manages the hotel for an agreed remuneration);

� a franchise (which could mean that the operator takes a franchise from afranchisor).

Various forms of funding by local interests in the country of operation arecombined with external ‘national’ and ‘international’ financing. ‘National’financing of international hotel operations from sources outside the countryof operation takes four main forms:

� Operating companies with a head office in a particular country enter intoarrangements in other countries, which may include capital investment asexplained above. Examples include:

from the United Kingdom, Forte Hotels (Méridien) and Hilton Inter-national;

from the USA, Marriott International (Marriott, Courtyard, Ramada,Renaissance, Ritz Carlton, Fairfield Inn and Residence Inn), HyattHotels, Bass Hotels and Resorts (Crowne Plaza, Inter-Continental,Holiday Inns, Staybridge Suites and Forum), Starwood Hotels &Resorts (Sheraton, Westin and Four Points), Carlson Hospitality(Radisson), Choice Hotels International (Clarion, Comfort, RodewayInns, Econolodge and Mainstay Suites);

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from France, Accor (Sofitel, Novotel, Formule 1, Mercure, Etap,Coralia, Parthenon, Motel 6 and Red Roof Inns), Club Méditerranéeand Société du Louvre;

from Spain, Sol Meliá and Occidental Hotels;from Japan, JAL Hotels (Nikko), Prince Hotels and Tokyu Hotel Group

(Pan Pacific Hotels);from Hong Kong, Shangri-La Hotels and Resorts;from Germany, LTI International Hotels;from Canada, Four Seasons (Four Seasons and Regent).

� Private institutions such as commercial banks in Europe, North Americaand the Far East invest in hotels abroad. Examples include Barclays andHSBC Group from the UK; Goldman Sachs, JP Morgan, Chase Manhattanand Bankers Trust from the USA; Société Générale and Paribas fromFrance; Deutsche Bank from Germany; Bank of Tokyo-Mitsubishi andNomura from Japan. Funding by private institutions may be covered bya lender government’s export credit guarantee.

� Suppliers of goods and services, particularly construction companies, mayparticipate in, or arrange, equity or loan finance for projects abroad inorder to secure a substantial contract.

� Public and semi-public institutions are entrusted by governments to makegrants and extend credit, usually to developing countries, where the bene-ficiaries are normally governments but may also be private firms. TheCommonwealth Development Corporation channels overseas aid from theUK overseas aid budget to developing countries for a wide range oftourism-related projects including hotels. In France, the Caisse Centralede Coopération Economique, a public development bank, allocates partof French overseas aid to various developments including hotels. InGermany, Deutsche Finanzierungsgesellschaft für Beteiligungen inEntwicklungsländern is involved in financing hotels in association withcompanies from the European Community.

‘International’ financing of hotel operations takes place through:

� Multinational companies, which tend to set up separate companies indifferent countries and acquire a part interest in them.

� Inter-governmental organizations, such as the World Bank Group and someregional development banks, which lend to developing countries. InEurope, in addition to the European Investment Bank, an institution ofthe European Community, the European Bank for Reconstruction andDevelopment set up in 1990 assists the emerging democracies of Centraland Eastern Europe in their transition to market economies.

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The experience of several countries during the recession of the early l990semphasizes the need for funding to be supportable by trading profits, as pastlending against over-inflated capital values resulted in many hotels beingunable to service their debts.

Organization and General Approach

Each hotel in a particular country operates in its own environment with itsown markets and market conditions, operating conditions, customs and prac-tices; against the background of the country’s economic, political and socialsystems; with its own licensing, labour, tax and other laws. These environ-ments may be very different from each other and also from the environmentof the head office wherever it may be situated. The problems of an inter-national hotel group are, therefore, potentially and in practice, generated bythree sets of factors: by group operation, by differences between countries,and by the need to cope with the differences in the interests of the group asa whole.

An hotel group which operates hotels within one country has a choice asto the extent of centralization to adopt, as discussed in Chapter 5. The lawsof particular countries may impose limits on the extent of centralization ofan international hotel group, quite apart from considerations of communi-cations, control and costs set by distance, language and currencies.

Different countries may impose different conditions on the funding of hotelprojects, import and export of capital, and the remittance of profits. In manycountries expatriate employees may be required in the more senior positionsbut such employment may be regulated by the governments concerned. Theimport of supplies of goods and services may be subject to foreign exchangeregulations. Budgets and accounts may have to be prepared and reported inlocal currencies and converted into a common currency for the group. Furtherproblems arise from such happenings as fluctuations in exchange rates. Theseconsiderations imply that a high degree of decentralization is normallyrequired to operate an international hotel company successfully. One groupof senior executives usually assumes responsibility for the central functionsand another group has territorial operational responsibilities, but some centralfunctions may be to a greater or lesser extent delegated to a regional level.

Two charts illustrate the approach of leading international hotel oper-ators (Figures 9 and 10) whose recent data are included in Appendices E and F.

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Marriott International is a leading world-wide hospitality company whoseheritage can be traced back to a small root beer stand opened in Washington,DC by J Willard Marriott in 1927. In 1998 Marriott International was launchedas a public company which has some 1700 units. The company operates andfranchises a broad portfolio of lodging brands around the world, with 328 300rooms and timeshare villas worldwide. Figure 9 shows the organization of the Marriott International Lodging structure under the President andManaging Director, responsible for units in 53 countries. Hotel GeneralManagers report to their regional Senior Vice Presidents, and are supportedby functional international staff shared by the regions.

In 1996, Forte Plc was acquired by Granada plc in a bitterly fought takeoverbattle. Each of the main brands (Le Méridien Hotels, Heritage Hotel,Posthouses and Travelodge Hotels) is headed by a Managing Director whoreports to the Forte Chief Executive. Figure 10 shows how the Le MéridienManaging Director is supported by a team of regional Managing Directors,as well as directors for such functions as finance, marketing, food andbeverage and information technology.

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Part

IIIThe Hotel and itsFunctions: Guest

Services


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The primary function of an hotel is to accom-modate those away from home, and sleepingaccommodation is the most distinctive hotelproduct. In most hotels room sales are the largestsingle source of hotel revenue and in many, moresales are generated by rooms than by all the otherservices combined. Room sales are invariablyalso the most profitable source of hotel revenue,which yield the highest profit margins andcontribute the main share of the hotel operatingprofit. Hotels contributing to annual reports ofHorwath International earned on average theproportions of their total revenue shown in Table11 from room sales in the late 1990s.

Three main hotel activities are earning theroom revenue: hotel reception, uniformed serv-ices and housekeeping. Each of them maycontribute also to a greater or lesser extent toother hotel activities, but their main functionsarise from the requirements of staying guests andthey provide the principal hotel services for them.It is, therefore, convenient to view hotel recep-tion, uniformed services and housekeepingtogether as components of the hotel accommo-dation function. In this chapter each is examinedin terms of its role in meeting the requirements

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7Rooms and Beds


of hotel guests, their organization and staffing, and accounting and control.This is followed by a similar approach to food and drink and to other hotelservices in subsequent chapters.

The three basic components of the accommodation function are presentin most hotels and are normally organized in separate departments. But theirorganization and staffing often differ in hotels of different sizes, types andstandards. In smaller hotels only a few people may be engaged in each andcover a wide range of duties; as the hotel increases in size, each activitymay be subdivided into separate departments or sections, in which thoseengaged in them perform more specialized tasks.

A transit city hotel with a short average length of stay calls for a some-what different approach from that of a resort hotel, which accommodatesguests for longer and often such regular periods as one or two weeks. Thereis also a relationship between prices, the range and quality of facilities andservices provided, and the way they are organized. For all these and otherreasons it is possible to describe the hotel activities related to the accom-modation of guests only in broad and general terms.

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Table 11 Room sales as a ratio of hotel revenue in main regionsa

1995 1996 1997(%) (%) (%)

Total world 57.4 59.2 56.1Africa and the Middle East 49.3 58.8 50.8Asia 53.8 57.3 51.6Australia and New Zealand 58.4b 59.1b 60.1Europe 50.3 50.9 49.5North America 65.6 66.6 65.3Latin America/Caribbean 57.2 58.8c 59.1d

a All figures are arithmetic means.b Excludes New Zealand.c Latin America only.d South America.Rooms revenue is derived from the letting of guest rooms net of local taxes and breakfast.

Source: Based on Worldwide Hotel Industry, 1996, 1997, 1998


Room Sales

A large proportion of hotel guests reserve their rooms from a few hours toseveral weeks or months before they actually arrive at the hotel. They mightdo so in person, by telephone, facsimile or e-mail, by letter, through travelagents, and in a growing number of cases through central reservations systems.Hotel reservations create a multitude of contractual relationships betweenthe hotel and its guests, which begin at the time each reservation is madeand continue until the departure of the guests or until their accounts aresettled after their stay. Advance reservations are an important responsibilityon the part of the hotel, both in the legal and in the business sense, and callfor a system that enables room reservations to be converted into room revenue.

When guests arrive in hotels, they are asked to register by providing thereceptionist with certain particulars about themselves. The hotel register, inwhich the particulars are entered, has two main functions. One is to satisfythe law, which makes the registration of hotel guests a legal requirement inmost countries. The second function is to provide an internal record of guests,from which data are obtained for other hotel records.

In most hotels room allocations of accommodation reserved in advanceare made before the guests’ arrival and only guests registering without aprevious reservation are allocated rooms on arrival, but in some hotels allroom allocations are made only when guests arrive. The registration androom allocation are then the starting point for guests’ stay and a signal forthe opening of their accounts, as well as for notifying uniformed staff, thehousekeeping department, telephonists, and others, of arrivals.

Several main records document the room sale in the reception office:

� reservation form or card standardizes the details of each booking, formsthe top sheet of any documents relating to it, and enables a speedy refer-ence to any individual case;

� reservation diary or daily arrival list records all bookings by date ofarrival and shows all arrivals for a particular day at a glance;

� reservation chart provides a visual record of all reservations for a periodand shows at a glance rooms reserved and those remaining to be sold;

� hotel register records all arrivals as they occur and gives details of allcurrent and past guests;

� reception or room status board shows all rooms by room number and floorand gives the current and projected status of all rooms on a particularday, with details of occupation;

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� guest index lists all current guests in alphabetical order with their roomnumbers and provides an additional quick point of reference in largerhotels.

Mail and Other Guest Services

A combined key and mail rack is a standard feature of most hotel receptionoffices and reflects two typical responsibilities of the office – room keys andguest mail. Arranged by room number and floor, it corresponds in layout tothe reception or room status board and is complementary to it.

In the course of a day’s business room keys are issued from the rack toarriving guests and to residents who call for them; keys are returned to therack by guests going out of the hotel or departing at the end of their stay.The rack is a point of reference regarding the occupation of rooms and thewhereabouts of guests.

Mail may arrive for guests before, during and after their stay at the hotel,and may consist of ordinary or registered mail, packets and parcels, cablesand telegrams, telex messages, facsimile transmissions, express mail andpersonal messages left for guests. Mail awaiting guests’ arrival should behanded to them when they are registering; mail arriving after a guest hasleft the hotel, should be forwarded. During the guest’s stay speed is theessence of facsimile transmissions, security is the essence of registered mail,bulkiness is the essence of parcels; each calls for standard procedures oftheir own. But the key and mail rack is the focus; it accommodates muchof the mail the guest collects when collecting the room key; it can serve toalert the receptionist to items, such as parcels or registered mail, stored else-where.

Three basic aids are, therefore, related and complementary in the provi-sion of key, mail and other guest services:

� guest index shows whether a particular person is resident and that person’sroom number;

� reception or room status board shows who is occupying a particular room;� key and mail rack indicates whether the guest is in the hotel and whether

there is any mail for that person.

In many hotels the reception office or a separate section of it also acts asa source of information to guests – about hotel facilities and services, aboutthe locality, about transport and other matters. In other hotels the keys, mail

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and information to guests are provided by uniformed staff, and there areusually good reasons for one or the other arrangement. But who does whatand to whom the guest can turn, should be made clear to the guest in termsof individual needs and requirements rather than in terms of the hotelorganization structure, particularly in larger hotels. Such notices as‘Reception’ and ‘Hall Porter’ have different connotations in different hotelsand are not necessarily self-explanatory even for experienced hotel users.Counters and sections of the front hall of the hotel clearly labelled‘Registration’, ‘Keys’, ‘Mail’, ‘Information’, ‘Guest Accounts’, and so on,are more meaningful to guests.

Uniformed Services

The second component of the accommodation function is uniformed services,which form an integral part of the front hall functions of the hotel and providea variety of personal services to guests.

Servicing arrivals and departures are the most common uniformedservices. The meeting and greeting of arriving guests, their luggage and theparking of their cars, are the first responsibilities, which extend from thehotel entrance and car park to the hotel bedrooms. On departure, guests,luggage and transportation are again their primary responsibilities. In an hotelwith a hundred departing guests in the morning, followed by a similar volumeof arrivals in the afternoon and evening, uniformed staff attend in a day’sbusiness to some two hundred people, handle several hundred pieces ofluggage, park several dozen cars, and arrange several dozen taxis. The guests,their luggage and their vehicles, therefore, play a major part in the provi-sion of uniformed services.

During the guest’s stay uniformed staff are often the main source of infor-mation about the hotel and the locality, and the guest’s main source of sucharrangements as theatre tickets, tours, car hire and other services. The hallporter’s desk or an enquiry counter in the front hall are then the informa-tion centres of hotels, which contribute much to the range of guest servicesand to their integration.

In some hotels other guest services may be provided by uniformed staff.Newspapers, as well as other small articles, may be supplied to guests byuniformed staff who may also act as messengers, lift operators and men’scloakroom attendants. In many hotels uniformed staff are the only people onduty during the night and particularly in smaller hotels maintain a wholerange of hotel services provided by other departments in day time: to receive

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and register late arrivals, to serve light refreshments, to operate the hotelswitchboard, to arrange early morning calls, as well as to clean public roomsand to ensure the security of the hotel.

The provision of uniformed services varies greatly between hotels ofdifferent sizes, types and standards, and their organization tends to be influ-enced by all these factors, as well as by established practices. As mentionedearlier, information to guests may be provided by the reception office or aspart of uniformed services or by both. The cleanliness of public rooms maybe the responsibility of uniformed staff, the housekeeping department, oroutside contractors. What hotel services are available during the night andby whom they are provided, is another source of variation. These differencesare legitimate, as long as they reflect the particular requirements of guestsand the particular circumstances of each hotel, and as long as the respectivefunctions are defined and understood by staff and made clear to guests wherethey affect them.

Hotel Housekeeping

The basic housekeeping function of the hotel is the servicing of guest rooms. In its scope, guest bedrooms may be the sole or main responsibilityof the hotel housekeeping department, but it may extend to other areas ofthe hotel.

Normally hotel guests spend at least one-third of their stay in their room.The design, layout, decor, furniture and furnishings of the hotel bedroom arefundamental to meeting their needs and in creating customer satisfaction,and these may be significantly influenced by the housekeeping department.The cleanliness and good order, the linen and other room supplies, and thesmooth functioning of the room are the focus of the department. This mayinclude other guest services, such as early morning teas, guest laundry, baby sitting and other personal services. The main housekeeping records aremade up of arrival and departure lists and notifications received from thereception office and the housekeeping department’s own room status report,together with separate records in respect of additional services provided bythe department.

The extension of the housekeeping function outside the hotel bedroomnormally includes the cleaning of bedroom floors and may include staircases,public cloakrooms and other public areas of the hotel. However, it is quitecommon for such public rooms as hotel lounges to be cleaned by uniformedstaff, for the responsibility for the men’s and women’s cloakrooms to be

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divided between uniformed staff and the housekeeping department, and forrestaurants and bars to be cleaned by the staff of those departments. Morerecently, hotels have been engaging outside contract firms for the cleaningof public rooms.

Other housekeeping services often include the provision of first aid toguests and staff, dealing with lost property, and floral arrangements throughoutthe hotel. When staff accommodation is provided by the hotel, it may beincluded as part of the head housekeeper’s responsibilities. Although in many countries hotels increasingly use outside laundries and dry cleaningfirms for their requirements, many hotels operate their own dry cleaning and laundry facilities. These ‘in-house’ facilities may be then organized as separate departments of the hotel or as sections of the housekeeping department.

This outline of the hotel housekeeping function illustrates three organiza-tional approaches. One seeks to integrate a number of related functions withina major housekeeping department. The second assigns certain functions tothe housekeeping department and others to other departments of the hotel,largely on the basis of physical areas. The third consists of ‘buying in’ certainservices from outside suppliers rather than operating them directly as hotelfacilities. The considerations involved are discussed further in Chapter 13 aspart of the examination of the total hotel organization and also in Chapter9 in connection with minor operated services.


The dimensions and characteristics of each hotel are the main determinantsof the organization and staffing of the accommodation function. These arediscussed further in the context of overall hotel organization in Chapter 13and hotel staffing in Chapter 14.

Differences in labour intensities between regions and countries are illus-trated in tables in this book showing numbers of employees drawn fromannual reports of Pannell Kerr Forster International in the late 1990s. Table12 shows that the ratios of rooms payroll and related expenses are low inhotels in Africa and the Middle East compared to hotels in Europe. Thisreflects differences in the cost of labour and other expenses, as well as salesvolumes and prices.

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86

Table 13 Room sales, expenses and profit ratios in selected European countriesa

Room Room Departmentalsalesb expensesc profit(%) (%) (%)

Austria 100.0 35.1 64.9France 100.0 33.8 66.2Germany 100.0 32.9 67.1Ireland 100.0 25.7 74.3Norway 100.0 27.7 72.3Portugal 100.0 32.9 67.1Switzerland 100.0 37.3 62.7United Kingdom 100.0 25.6 74.4

a All figures are arithmetic means.b Guest room revenue derived from the letting of guest rooms net of local taxes and breakfast.c Room payroll including salaries and wages and employee benefits of the personnel of therooms department plus expenses such as contract cleaning, guest transportation, laundry, oper-ating supplies, reservation fees, travel agent commission and uniforms.


Table 12 Rooms payroll and related expensesratiosa to salesb in Europe and Africa

1996 1997(%) (%)

Total Europe 17.5 16.5Northern Europe 17.7 16.5Eastern Europe 8.2 7.9Southern Europe 18.9 18.0

Total Africa 7.0 6.5Northern Africa 6.0 5.4Eastern Africa 7.7 7.4Southern Africa 10.5 10.6Western Africa 7.6 8.1

a All figures are arithmetic means.b Ratios are based on respective departmental revenues.

Source: Pannell Kerr Forster, Europe, Middle East andAfrica Trends, 1998



The financial performance of the hotel accommodation function is reflectedin the rooms department operating statement, which shows the revenue andexpenses of the department for a given period resulting in the departmentalprofit. These figures may then be compared with the budget or with the sameperiod of the previous year. Summary illustrations of ratios calculated fromoperating statements of hotels contributing to Horwath International reportsin the late 1990s are shown in Table 13. These indicate significant differ-ences between expenses and profit ratios of hotels in different countries andare an indication of factors such as operational efficiency and the cost oflabour. These ratios are calculated by most hotels as part of their periodicreporting. On the other hand operating ratios are calculated and monitoredmore frequently, often daily. Two key operating ratios are illustrated in Table 14.

Another useful measure of the extent to which room use is maximized isdouble occupancy, that is the percentage of double or twin bedrooms thatare let for double occupancy (as opposed to single occupancy), and theseare shown for selected cities in Table 15.

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Table 14 Room occupancies and average ratesin selected European countriesa

Average dailyRoom rate per

occupancyb roomc

(%) (US$)

Austria 65.0 75.84France 73.0 112.00Germany 59.9 86.49Ireland 66.7 82.46Norway 61.2 97.26Portugal 66.9 74.73Switzerland 61.1 144.29United Kingdom 71.9 91.90

a All figures are arithmetic means.b Ratio of total occupied rooms to total available rooms.c Room sales divided by total number of occupied rooms.



The hotel bedroom will be better designed and become more func-tional. In appropriate locations the room will have full office facilitiesboth in the form of furniture and available business equipment. Thetelevision will provide a wide range of functions, which will includecheck-out, the provision of basic information, communication bothwithin and outside the hotel, and a wide range of entertainment.

There will be increased emphasis on much improved air purificationand ventilation systems. There is already a discernible need for improvedlighting in all types of hotel, both in the bedroom and bathroom. Thetrend towards non-smoking rooms or sections is expected to continue.Better room facilities for the female business traveller will be expected.

Horwath and Horwath, Hotels of the Future

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Table 15 Double occupancies in selected cities and regionsa

%

Africa and the Middle EastAbu Dhabi (UAE) 23.6Cairo (Egypt) 49.7Casablanca (Morocco) 22.4Johannesburg (South Africa) 30.9Karachi (Pakistan) 14.7Nairobi (Kenya) 28.1Tel Aviv (Israel) 47.2

EuropeAthens (Greece) 48.0Berlin (Germany) 39.8Brussels (Belgium) 27.6Helsinki (Finland) 28.7London (England) 44.8Paris (France) 48.3Prague (Czech Republic) 46.2

a All figures are arithmetic means.

Source: Based on Pannell Kerr Forster, City Surveys, 1998


The food and drink service is the second majoractivity of most hotels and in many of them itaccounts for a larger proportion of employeesthan the provision of sleeping accommodationand related services. This is due to two mainfactors:

� in contrast to hotel rooms, meals and refresh-ments in hotels may be supplied to non-residents as well as to resident guests andinclude substantial functions sales;

� the provision of meals and refreshments isrelatively labour intensive.

Hotels contributing to Horwath Internationalannual reports earned on average the proportionsof total revenue shown in Table 16 from foodand beverage sales in the late 1990s.

The provision of sleeping accommodation is aservice activity, in which there is a negligible useof materials, and there is no cost of sales. Theprovision of meals and refreshments results incomposite products made up of commodities andof service, and the use of materials representsthe cost of sales. Food and drink enter into mealsand refreshments served in hotels in several

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8Food and Drink


stages from their purchase by the hotel to their sale in the same or alteredform to the hotel customer. These processes are described in this chapter asthe food and beverage cycles. According to the size and diversity of the hotelmarkets there may be more than one restaurant and bar and also food anddrink service in rooms and through functions.

The hotel food and beverage operation involves a high degree of technicalknowledge and skill, which cannot be dealt with adequately in a book dealingwith all aspects of the business. The reader is referred to several texts listedin the further reading for this chapter and in the bibliography.

The Food Cycle

The food operation of an hotel may be viewed as a cycle, which consists ofseveral stages – purchasing, receiving, storing and issuing, preparing andselling. The stages represent a clear sequence, through which food passesthrough the hotel from the supplier to the customer, as shown in Figure 11.

Purchasing is the beginning of the hotel food cycle. Normally one person has a designated responsibility for food purchases – a purchasingofficer in a large hotel, the food and beverage manager or one of the assis-tant managers in a medium-sized hotel; in the smaller hotel purchasing may

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Table 16 Food and beverage salesa as a ratio of hotel revenue in main regionsb

1995 1996 1997

Total world 32.3 33.2 35.8Africa and the Middle East 34.6 31.9 35.5Asia 32.2 33.4 37.3Australia 31.7 34.7 34.0c

Europe 40.1 41.9 43.4North America 25.6 26.8 27.3South America 27.2 28.7d 28.3e

a Food revenues derived from the sale of food, including coffee, milk, tea and soft drinks.Beverage revenues derived from the sale of beverages including beer, wine, liquors and ale,including banquet beverage revenues.b All figures are arithmetic means.c Includes New Zealand.d Latin America.e South America.



be undertaken by the owner/manager or the chef, or divided between themas to non-perishable and perishable foods.

The purchasing function extends from identifying best sources of supply,making arrangements with suppliers and placing orders, to close liaison withthe kitchen and other user departments regarding requirements, yield andquality, and with the accounts department regarding payment. For foodsbought in large enough quantities, purchasing is greatly facilitated by stan-dard purchase specifications, which define quality, size and other features ofthe required items.

Receiving entails ensuring that the hotel is being supplied with food ofthe ordered quantity and quality at the agreed price, and its transfer to storesor directly to the user departments. Receiving takes place by a comparisonof delivery notes against orders and by a physical inspection of the deliv-eries. In large hotels there is often a receiving clerk; otherwise receiving

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Storing andIssuing

Purchasing

Receiving

Preparing

Selling

Figure 11 The food cycle


may be the responsibility of the stores assistant; in smaller hotels it may beundertaken by the chef as the principal user.

Storing and issuing consists of maintaining an adequate stock of food forthe day-to-day requirements of the hotel, without loss through spoilage andpilferage and without capital being tied up unnecessarily through over-stocking, and of issues of food to user departments. According to the sizeof the hotel and its requirements, food stores may be sub-divided, and theremay be one or more stores employees responsible for them.

Issues to the kitchen and other user departments are normally made at settimes in the day against authorized requisitions. Periodical stocktaking takesplace to ascertain the value of stocks held in order to determine the foodcosts for a given period and stock values for accounts purposes.

Preparing or food production represents the conversion of the purchasedfoods by chefs and cooks into dishes and meals, and there are four mainaspects in this process:

� volume forecasting seeks to predict the number of meals and of partic-ular items of the menu to be served in each outlet of the hotel each day;

� yields postulate the quantity obtained from items of food after their prepa-ration and cooking;

� recipes give the formulae for producing particular dishes, including thequantities and qualities of ingredients and the method of preparation used;

� portions represent the size or weight of food served to customers.

These four aspects determine the hotel purchasing and operational require-ments. Standard yields, standard recipes and standard portions can contributeto effective food cost control through budgeted costs for all menu items.

Selling is the final stage of the hotel food cycle and consists of the serviceof particular foods, dishes and meals by various categories of food servicestaff to the customer in a restaurant or another hotel facility at particularprices. The main aspects of the selling stage are, therefore, the menu, theform of service and the physical environment and atmosphere in which thesale takes place; these are the three elements of the product, which arereflected in the price.

The menu is the focus of the food operation and there are two main types:

� table d’hôte menu is a limited choice menu with a single price for anycombination of items chosen or with a price determined by the choice ofthe main dish;

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� à la carte menu provides a choice of items, each of which is priced separ-ately.

Three basic levels of service, with variations in each, may be identifiedas:

� self-service, where the customer orders and collects the food from a counterand takes it to a table where he or she consumes it;

� counter service, where the customer is presented with the food he or shehas ordered and consumes it at the counter;

� table service, where the customer is served by a waiter or waitress whotakes the order and serves the meal at the table.

The main aspects which make up the physical environment and atmos-phere of the hotel eating facility are: the shape and size of the room; thedesign and decor; the type and layout of seating; the lighting, temperature,noise level, cleanliness and comfort; the age, appearance, and dress of thestaff and of guests.

In practice, the selling stage is the starting point in the planning and imple-mentation of the hotel food operation because the type of customer and hisor her requirements determine the most appropriate type of outlet in termsof menu, service, environment and atmosphere, and price. This in turn deter-mines the most desirable type of production, storage and purchasingarrangements.

The Beverage Cycle

Beverages normally include spirits, wines, beers and minerals, but oftenexclude other soft drinks which are then treated in hotels as food. Thebeverage function may be also viewed in terms of a cycle, which repre-sents a sequence through which drink passes from the supplier to the customer.

In comparison with food, it is for a number of reasons a simpler cycle.Many beverages are purchased in standard measures under brand names fromone or a few suppliers. Although the money value of individual items maybe high, by and large, beverages are not perishable, and can be handled inthe same form in which they have been purchased through the different stagesof the beverage cycle from purchase to sales.

Receiving is concerned with ensuring that what is delivered has beenordered and vice versa, but because of the form in which beverages are

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supplied, it is a relatively simple procedure. In contrast to food, all bever-ages are normally stored before they are distributed to the selling outletswithin the hotel. Although some wines may call for different storage condi-tions than other wines and other beverages, generally beverages have lessspecific storage requirements than food, but the need to avoid tying up capitalin unnecessary stock applies equally if not more so. Because of the rela-tively high value of some beverages, frequent stocktaking assumes particularimportance.

Whereas food preparation and service are usually separate, each beverage-selling outlet in an hotel combines preparation and sales of beverages, andthere is normally a standard unit of sale for each. The only variations arelikely to occur with cocktails and other mixed drinks.

For all the above reasons beverage control is a simpler matter than foodcost control and takes one of two basic forms:

� standard gross profit percentages are applied to minerals, beers, wines andspirits, which are then controlled against these standards;

� beverages are issued to selling outlets at selling prices, and controlledagainst sales.

With these methods each sales outlet is best treated as a separate cost centre,which can be monitored by adjusting issues for changes in stock levels, andthis is normally done on a weekly basis.

Hotel Restaurants

Each hotel normally has one or more restaurants to serve meals and refresh-ment to resident guests and usually also to non-residents. The number andtype of restaurants is determined by the size and diversity of the marketsserved by the hotel.

One ‘multi-purpose’ restaurant has to satisfy the needs of most smallerhotel operations with limited non-resident markets for lunch and dinnerservice. The restaurant then tends to offer a table d’hôte menu or combina-tion of table d’hôte and à la carte menus with waiter or waitress service formain meals, drink is usually available with food, and both are served in asemi-formal environment and atmosphere.

When the market is large enough, the need arises to differentiate firstbetween those seeking full meals who have enough time available to consume

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them, and those requiring light meals and snacks who have limited time andperhaps also limited means. This differentiation may be introduced by acombination of table and counter service in the same room or through aseparation of the two markets between two facilities – a more or less formalrestaurant with a broadly based menu open at particular times and an informalcoffee shop facility with a limited menu open more or less continuously. Thetwo facilities then offer a choice of differentiated products to different peopleor to the same people on different occasions. A similar need may be met bya limited service of food in the bar, which is then complementary to the fullfood service in the restaurant.

A further differentiation may take place in a large hotel with several restaurants with different menus, service, environment and atmosphere. Oneor more speciality restaurants, including perhaps a nationality restaurant, arestaurant designed to appeal to businessmen, and one to those seekingleisurely dining with entertainment, may comprise the total repertoire of thehotel food service.

Where several restaurants are available in an hotel, it is important to viewthem as a totality of the hotel food service from the customer as well asfrom the hotel point of view. They are seen by the customer as a spectrumof facilities, from which choice is made according to who the customer is,and according to the circumstances in which he or she finds themselves ata particular time. For the hotel the individual restaurants represent more orless differentiated products designed to meet particular customer needs, andthey are, therefore, complementary in the total food service function of thehotel. The spectrum of customer choice and of hotel product differentiationis expressed through the food, service, environment and atmosphere of eachrestaurant, through their availability at particular times, and through the pricescharged in each.

Hotel Bars

The size and diversity of the hotel markets are reflected also in the numberand type of hotel bars, the main hotel outlets for the service of drinks. In asmall hotel one bar may serve residents and non-residents, those having justa drink and those who have a drink before a meal; the same bar may alsosupply drink to the restaurant and for functions; food may be served in thebar in addition to drink. In larger hotels there may be a residents’ bar perhapscombined with television lounge, a lounge or cocktail or a restaurant bar,and one or more separate bars serving functions.

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Corresponding to the different types of bar are the three elements of theproduct – the range of drink available, the form of service, and the envi-ronment and atmosphere, with many possible variations in each. But whathas been said about hotel restaurants applies also to hotel bars; where thereis more than one outlet, they represent a spectrum of choice for the customerand a range of differentiated products from the point of view of the hotel,which are complementary parts of the total beverage function of the hotel.

Room Service

In many hotels guests have a choice of having a breakfast and often alsoother meals and drinks served in their room, perhaps by the same staff whoserve in the restaurants and bars, or by the housekeeping staff, or by room(floor) service staff in a large hotel.

When meals and drinks are supplied to rooms as part of the restaurantand bar service, they can be regarded as extensions of the operations of thosedepartments. But in large hotels room service may be organized as a sepa-rate department, particularly when it operates from separate floor kitchens.Room service of drinks may also be provided by means of bar units in guestrooms, which are stocked with a selection of alcoholic and non-alcoholicdrinks for the use of guests who are charged for the drinks consumed.

Room service in hotels may be seen in two ways. For the guest it is anadditional hotel service for his or her convenience. For the hotel it is anadditional product, which may relieve pressures in the restaurant and bars,and particularly through pre-ordered breakfasts and through room bar unitsit may contribute to a more efficient food and beverage service.

Functions

Banquets, conferences and similar hotel services may be conveniently groupedtogether as distinct and separate hotel products under the heading of func-tions. Their users may also require sleeping accommodation and other hotelservices, but several aspects distinguish functions from other parts of thefood and beverage operation of the hotel:

� the customers are organized groups such as clubs, societies and otherorganizations;

� the organized groups make arrangements for dates and times, numbersattending, menus and other requirements for each occasion, in advance;

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� each occasion can be treated as a separate operation planned and organ-ized as such;

� normally the same agreed menu is served to all participants;� the operation usually takes place in separate rooms and is served by staff

who are distinct from those serving others in restaurants and bars, althoughthey may be interchangeable between these facilities.

In smaller hotels functions may be an extension of the activities of therestaurant and bar and the same departments may be responsible for theirexecution, although the arrangements are usually made with the organizersby the management and in the larger hotels by the food and beverage manager.In hotels with a large volume of functions there is usually a separatebanqueting or functions department.

Procedures similar to advance reservations of bedrooms are then intro-duced to plan and coordinate this activity of the hotel and the main recordsinclude:

� a function agreement, which summarizes the arrangements for each function;

� a function diary, which lists details of all functions in date order;� a functions chart, which provides a visual record of all functions arranged

for a period ahead.

These are supplemented by in-house information and instruction lists, whichare distributed to all concerned in the hotel.

Because each function is a separate occasion, with its own price, menuand staffing, it can be closely controlled, especially when food productiontakes place in a separate kitchen and when the function is provided with itsown bar. The revenue and the direct costs can be ascertained with accuracy.Moreover, the volume of identical meals prepared and served together enableshigher profit margins to be achieved from functions than from other foodand beverage activities, and functions often represent the second most prof-itable hotel product, after rooms.

Food and Beverage Support Services

Two main ‘back-of-the-house’ facilities serve the hotel food and beveragesales facilities restaurants, bars, room service and functions: the kitchen andthe stores.

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A major distinction in kitchen facilities in hotels arises from the extent towhich they are centralized and serve all the food outlets of the hotel wherethere is more than one, or whether separate kitchens are provided to serveeach restaurant and possibly also room service and functions. The scale anddiversity of the food operations are usually the main determining factors, butmuch depends also on the operating preferences and philosophies of hotelmanagements.

One central kitchen makes for ease of supervision of food production andmay also lead to high utilization of equipment and staff. But where mealsare produced for several outlets, it may become more difficult to separatethe costs of food production attributable to each and conflicts may arise in thepriorities demanded by, say, one or more functions taking place when the restaurants may also be at peak pressure.

In large hotels such facilities as baking, butchery and vegetable prepara-tion may be centralized and supply individual kitchens with prepared orpartially prepared foods. Alternatively or within the same operation, indi-vidual kitchens serving particular outlets may be supplied from a centralkitchen, and take the form of ‘finishing’ kitchens, particularly for outlyingfunction rooms and for room service.

The technical considerations of various food production arrangements, theirorganization and methods are outside the scope of this book. The reader isadvised to consult the numerous texts that deal with the subject, several ofwhich are listed in the suggested further reading for this chapter.

Food and beverage stores in hotels are of three basic types:

� food stores, usually sub-divided into dry stores, perishable stores, coldrooms and in other ways;

� beverage stores or ‘cellar’;� linen, china, glass and silver stores.

But storage arrangements in hotels vary. In some hotels the dry stores arethe general stores of the hotel, in which are kept not only non-perishablefoods, but also cleaning materials, stationery and guest supplies, and thecellar is often used for storing not only minerals, beers, wines and spirits,but also cigars, cigarettes and tobacco. Sometimes the cellar is confined towines, which call for special storage conditions, and other drink is storedseparately in the dry stores. Restaurant linen may be stored in the house-keeping department or in the user departments with china, glass and silver.

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Table 17 shows the relationship between food and beverage payroll and relatedexpenses and sales in hotels in Europe and Africa drawn from Pannell KerrForster reports in the late 1990s, which highlight the contrast between thetwo continents.


The financial performance of the food and drink facilities in hotels is reflectedin the food and beverage department operating statement, which shows thesales and expenses resulting in the departmental profit. An illustration ofratios from operating statements of hotels contributing to Horwath Europeanreports is shown in Table 18.

No particular pattern emerges, but it is clear that food and drink facilitiesare barely profitable in Portuguese hotels, where they make little contribu-tion to overall hotel profitability (Figure 12).

As distinct from financial ratios, the main operating ratios used in foodand beverage control are daily seat turnover or rate of seat occupancy, averagesales per seat or per customer, and similar measures of utilization and output,

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Table 17 Food and beverage payroll and related expensesratiosa to salesb in Europe and Africa

1996 1997(%) (%)

Total Europe 40.2 39.1Northern Europe 39.3 38.2Eastern Europe 28.6 27.9Southern Europe 47.3 46.0

Total Africa 20.0 19.7Northern Africa 16.7 16.9Eastern Africa 24.7 21.9Southern Africa 34.8 32.3Western Africa 23.5 25.5

a All figures are arithmetic means.b Ratios are based on respective departmental revenues.

Source: Pannell Kerr Forster, Europe, Middle East and Africa Trends, 1998


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Table 18 Food and beverage sales, expenses and profit ratios in selectedEuropean countriesa

Salesb Expensesc Profit(%) (%) (%)

Austria 100.0 86.3 13.7France 100.0 78.2 21.7Germany 100.0 85.3 14.7Ireland 100.0 70.1 29.9Norway 100.0 78.9 21.1Portugal 100.0 94.8 5.2Switzerland 100.0 84.3 15.7United Kingdom 100.0 64.5 35.5

a All figures are arithmetic means.b Revenue from the sale of food (including coffee, tea, milk and soft drinks) and beverages(including beer, wine, and other liquors).c Cost of food and drink plus food and beverage payroll including salaries, wages and employeebenefits plus items such as china, glassware, silver, linen, contract cleaning, laundry and drycleaning, licences, music and entertainment, operating supplies and uniforms.


0

10

20

30

40

50

60

70

80

90

100

UK Ire Fra Nor Switz Ger Aus Port

Departmental Expenses Departmental Profit

Figure 12 Food and beverage ratios in European hotels, 1997


which are calculated in a similar way as occupancy and rate statistics describedin connection with rooms in the last chapter.

There is a discernible trend towards more leisure eating in most devel-oped countries. This implies that hotel restaurants will become morespecialised, often offering special themes, and many may seek specificmarket niches.

Competition will arise, not only from conventional restaurants in thevicinity, but from specialised themed restaurants which will often bebranded with a high profile, from stores offering high quality preparedtake-away foods, and from home catering.

We anticipate that franchising will spread to the hotel restaurant witheither the hotel becoming the franchisee or with the restaurant beinglet to a franchisee. Whether franchised or not, the hotel restaurant maywell become a branded product.

Technological advancements will make it possible for even relativelymodest hotel restaurants to provide high quality cuisine.

Improved levels of sanitation and hygiene will be expected in boththe restaurant and the kitchen.

Horwarth and Horwath, Hotels of the Future

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Accommodation, food and drink services are theprimary activities of hotels, which generate all or most hotel revenue, account for all or most oftheir employees, and represent the principal prod-ucts provided by the major hotel departments.But the present-day hotel guest normally alsoexpects other facilities and services. In additionto a comfortable room, and meals and refresh-ments in a restaurant or bar or in the room, aguest may want to use the telephone or haveclothes laundered or dry cleaned. In a largemodern hotel a guest may expect to be able tobuy newspapers, magazines and souvenirs, havea haircut, obtain theatre tickets, and book anairline ticket for the next stage of a trip.

The hotel services other than accommodation,food and drink may be provided to the guest bythe hotel or by other operators on the hotelpremises. The revenue-earning activities provideddirectly by the hotel are variously described asancillary or subsidiary revenue-earning, and aregrouped for accounting and control purposes in what are known as minor operated depart-ments, to distinguish them from major operated

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9Miscellaneous Guest

Services


departments concerned with rooms, food and beverages. Both are distin-guished from rental and concession arrangements, under which some of theseand other services may be provided to guests by outside firms operating inthe hotel.

Several of these services were referred to in Chapter 7 in connection withthe hotel accommodation function, as they are often provided by hotel recep-tion, uniformed staff or the housekeeping department. In this chapter theyare described as separate sources of hotel revenue with their own organiza-tional and operating considerations.

Hotels contributing to annual reports of Horwath International earned onaverage the proportions of their total revenue shown in Table 19 from sourcesother than accommodation, food and drink in the late l990s (and see alsoFigure 13).

Guest Telephones

One of the basic requirements of hotel guests is to communicate with theoutside world, and telephone services, which include telegrams, and some-times also facsimile, are the most common ancillary services provided byhotels for their guests.

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Africa and theMiddle East 13.7%

Latin America/Caribbean 12.6%

Asia 11.1%

North America 7.4%

Europe 7.1%

Australia andNew Zealand 5.9%

Figure 13 Miscellaneous sales and income in hotels, 1997


A basic provision is telephones with coin boxes, which are available inpublic rooms for use by resident guests as well as by non-residents. However,this provision is commonly enhanced by bedroom telephones and there aretwo main operating methods. One is for all calls to be made through the hotel operator who can ascertain the cost of all outgoing calls with theaid of a meter connected to the main switchboard. The other method enables

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Table 19 Miscellaneous sales and income as a ratio of hotel revenue inselected regionsa

1995 1996 1997(%) (%) (%)

Total worldTelecommunicationsb 2.8 2.6 2.3Other incomec 5.3 5.1 5.8

Africa and the Middle EastTelecommunicationsb 6.2 4.5 5.7Other incomec 7.3 4.8 8.0

AsiaTelecommunicationsb 3.7 3.1 2.4Other incomec 7.3 6.2 8.7

Australia and New ZealandTelecommunicationsb 2.6d 2.4d 2.7Other incomec 5.1d 3.9d 3.2

EuropeTelecommunicationsb 2.4 2.1 1.6Other incomec 5.1 5.2 5.5

North AmericaTelecommunicationsb 2.5 2.5 2.5Other incomec 4.2 4.1 4.9

Latin America/CaribbeanTelecommunicationsb 4.1 4.2 4.2Other incomec 8.1 8.3 8.4

a All figures are based on arithmetic means.b Revenues derived from guest use of telephone.c Other income includes income from rentals of space for business purposes and income generatedfrom other sources, excluding investment income.d Australia only.



guests to dial calls from their rooms directly, which are recorded by individualmeters for each room at the cashier’s desk so that charges to guest accountscan be computed from meter readings. The hotel telephone room also oftenprovides telegraph, telex and facsimile (fax) services for guests.

Although the same facilities are also used by the hotel for its own commu-nication purposes, there are clearly costs attributable to guest use. There arefixed costs of the premises, semi-fixed costs of equipment rentals and staffing,and variable costs of individual calls and messages through the externalsystem. Incoming calls and messages are normally available to guests free,but most hotels seek to recover not only the variable costs of outgoing callsand telex and fax messages, but also some or all of the other costs by amark-up in the prices charged to guests.

The telephone and related services, therefore, have their own revenue andalso their own cost of sales, payroll and other direct as well as indirect costs.In smaller hotels guests may be charged only with the basic cost of theirtelephone calls and other costs may be regarded as part of the room cost.But hotel telephone and rela ted services are regarded by most larger hotelsas a revenue-earning activity and as a cost centre, for which the operatingresult may be periodically computed in the same way as for other activitiesof the hotel. If the switchboard operator has also other duties, the payrollcost can be apportioned between the departments concerned and similarlyan apportionment can be made for all costs between the guest use and thehotel use of the service.

Clear policies for this service are desirable. In much the same way as a guest may sometimes make doubtful comparisons between the price of a meal in the hotel restaurant and the cost of its ingredients if the meal were cooked at home, comparisons are made by hotel guests between whatthey are charged for their telephone calls in hotels and what it would havecost them from their own home or office. It is, therefore, important thathotels should take steps to explain the basis of their telephone charges toguests.

Guest Laundry

Although the increased use of drip-dry clothing has made many hotel guestsless reliant on these services, some guests, particularly those staying in hotelsmore than a few days and short-term guests away from home for any lengthof time, often require laundry and valet services in hotels.

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These guest services are organized in one of three main ways – as an ‘in-house’ facility, or by arrangement with an outside laundry and dry cleaningfirm or, in an hotel group, laundry and valeting may be operated as a centralfacility for its hotels. The same facilities may also be used by the hotel forits own purposes – for bedroom and table linen and for the many otherfabrics used throughout the hotel. Whichever of the three arrangementsapplies, the hotel linen room is usually the focal point of the service. Articlesare collected from guests and recorded there before dispatch to the laundry,and returned from there to guests when they have been washed and cleaned– in many hotels as a same-day service.

Although the same facility may be used by guests and by the hotel, eachhas its own revenue and its own costs. The costs of room linen are part ofthe room cost and the costs of table linen are part of the restaurant cost;they are included in the room and meal price respectively. The costs of theguests’ own laundry and dry cleaning are recovered through a separate chargeto the guests’ accounts and this normally includes a mark-up on the pricecharged to the hotel, as a handling charge if an outside firm is used, or asa profit margin to the hotel laundry. For a group laundry it has to be decidedwhether the profit element accrues to the laundry or to the hotels or whetherit is shared by the two.

Guest laundry and valeting are regarded by some hotels as a service totheir guests, which is required no more than to cover its direct costs, but inmost larger hotels they are treated as a revenue-earning activity, for whichrevenue and costs are monitored, and for which operating results are computedseparately. The hotel incurs costs in providing the service and it seems prefer-able that these costs are met by those using the service, rather than throughhigher prices charged to all guests for their stay.

Telephones and laundry have been dealt with here as the two most commonancillary activities in many hotels. Other facilities and services operated byhotels tend to vary greatly from one hotel to another, both in the extent towhich they are provided and in the operating arrangements, and are not,therefore, discussed separately in this chapter.

Rentals and Concessions

In addition to the hotel trading activities discussed so far, a part of the hotelincome may arise from those operated on the hotel premises by others astenants or concessionaires. The activities carried on by these other operatorsmay or may not be providing a service to hotel guests, but their distinctive

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feature is that they are not trading activities of the hotel, which sub-lets partsof the premises, thus distinguishing them from the hotel-operated activities.The tenants are, in respect of these activities, in business on their own accountand pay a rent to the hotel.

This type of income arises most commonly from flats and apartments letto tenants for residential purposes on a long-term basis; offices let to busi-ness and other organizations for their purposes; shops let to retailers; clubrooms let for purposes of a members’ or proprietary club; display rooms andshowcases let to others for the display of their wares. From the point of viewof providing services to hotel guests, the most important in the present contextare various retailing activities.

Hotel services to guests may also be provided by concessionaires who aregiven the right to operate on hotel premises with a view to undertakingservices to guests, which would be otherwise operated by the hotel. Thesemay include some of those which may be provided by tenants, such asnewsagents, hairdressers and souvenir shops, or other services, such as cloak-rooms.

The distinction between direct operation and through rentals and conces-sions may not be apparent to guests, and in any case may not be materialto them, but it is obviously of some significance operationally. There is also a technical legal distinction between rentals and concessions, the former denoting greater independence for the tenant than the licence to use the premises on certain conditions, which is the essence of a concession.

Some types of rental have as their main reason earning income from space which is not required by the hotel for other purposes, or which canearn higher income in that way than it would in another use. In the presentcontext rentals and concessions are seen as alternative means of providingservices to guests. Direct management of these services by the hotel normallyprovides a closer direct control and supervision by the hotel and greater flex-ibility in operation. However, rentals and concessions relieve the hotel fromoperating what is often to the hotel operator an unfamiliar service, whichenables the hotel to concentrate on its primary activities. In recent years there has been an extension of this approach even to some primary hotelactivities, as for example, when an hotel restaurant is operated by anotherorganization.

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Mounting guest expectations will require employees to increase theirknowledge of the guest and the hotel. This will continue to force theintegration of the currently fragmented management informationsystems. The challenge will be for each employee either to possess the knowledge necessary to meet the demand, or to be able to search for,obtain and analyze the information required. It can be expected thatthe management of knowledge will continue to alter the basic natureand structure of the delivery of products and the services as well asthe nature of tasks performed by employees.


Other Sources of Income

There are several other sources of income, which may be convenientlyincluded in this chapter, with a view to providing a comprehensive pictureof all hotel income, although they do not necessarily arise from the provi-sion of hotel services to guests.

� Commissions may accrue to the hotel from the providers of car hire and taxi services, theatre and travel agencies, and other suppliers ofservices to guests, in return for the business generated for them by the hotel.

� Foreign currency and travellers cheques are normally exchanged by hotelsfor guests at rates more favourable to the hotel than those offered bybanks, to safeguard against fluctuations in rates between their encashmentby the hotel and their sale by the hotel to the bank, and sometimes alsoto include a charge for the service rendered.

� Salvage represents revenue derived from the sale by the hotel to dealersof such items as used cooking oil, waste paper and other waste or obso-lete materials.

� Interest is earned by hotels on bank deposits and other investment of sparefunds.

� Cash discounts are earned by hotels by the payment of creditors’ accountswithin the discount period, as distinct from trade discounts, which aremore properly seen as a deduction from the cost of goods and servicesbought.

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The financial performance of minor operated departments of an hotel isreflected in one or more operating statements, prepared in a similar way as forthe major operated departments described in Chapters 7 and 8, and showingdepartmental revenue, expenses and departmental profit. Departmental ratiosfrom operating statements of hotels contributing to Horwath Internationalannual studies in the late 1990s are shown in Table 20. It indicates that telecommunications contributed little to the hotel operating profit in severalcountries and were, in fact, a loss-making service in Norway.

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Table 20 Telecommunications income, expenses and profit ratios in hotels inselected European countriesa

Incomeb Expensesc Profit(%) (%) (%)

Austria 100.0 48.8 51.2France 100.0 77.8 22.2Germany 100.0 38.8 61.2Ireland 100.0 62.9 37.1Norway 100.0 104.7 –4.7Portugal 100.0 59.3 40.7Switzerland 100.0 71.8 28.2United Kingdom 100.0 55.5 44.5

a All figures are arithmetic means.b Revenue received from guest use of telephone, facsimile and telex facilities.c Total costs and expenses incurred in the provision of telephone, facsimile and telex facilitiesfor guests, including related labour costs.



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Part

IVHotel Support

Services


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Several aspects of hotel products, markets andmarketing are considered in this book, before andafter the reader reaches this chapter devoted tomarketing. They provide both an introduction anda follow-up to the discussion of marketing in thischapter. It is, therefore, appropriate to set thischapter in the context of the various referencesto aspects of marketing earlier and later in thisbook, with a view to linking the various parts.

Chapter 1 relates hotel and travel development,places hotels in the total accommodation mar-ket, and examines influences on hotel location.In Chapter 2 hotel facilities and services aredescribed as hotel products, their users as hotelmarkets, and the marketing concept is introduced.In Chapter 3 hotel products and markets enterinto the policies, philosophies and strategies of thebusiness. The main hotel products are consideredin some detail in Chapters 7–9, and aspects ofmarketing are referred to later in the context of hotel organization and staffing in Chapters13–15. The products and markets of small hotels, hotel groups and of international hoteloperations, and how each of them approachesmarketing, receive attention in Chapters 4–6.Chapter 4 contrasts the products, markets and the

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10Marketing


marketing of small and large hotels, and identifies the particular marketingstrengths and weaknesses of the small hotel. Chapter 5 highlights market-ing economies among the most important advantages of large-scale hoteloperations, and marketing as providing a particular scope for centralizationin hotel groups. Chapter 6 suggests that this is also the case where the groups operate internationally, and includes illustrations of the relative impor-tance of particular products and markets for hotels in selected regions andcountries.

There are several books concerned with various aspects of hotel marketingand some of those published in Britain are listed as suggested further readingto this chapter. In view of this and the breadth of the subject, this chapteraims to provide a general outline of the role and scope of the marketingfunction in hotels rather than to deal with its techniques, and the reader isreferred to those texts mainly concerned with marketing for greater detail.

. . . markets vary. Americans may ask you to dine with them at 6 p.m.(or earlier), Britons at 8 p.m., and I have been invited to dinner inSpain at 10 p.m. History, religion and tradition cause marketing differ-ences. Most sensible people like to sit down and relax over a drink.We ‘crazy’ Britons prefer to stand up when we drink our pints in apub. On the Continent of Europe good service is a leisurely meal, inAmerica slow service is often considered bad service. Some countriesstart a meal with coffee, others never have coffee till the end of themeal.

Melvyn Greene, Marketing Hotels and Restaurants into the 90s

From Production to Sales to Marketing

Several phases may be distinguished in the evolution of consumer marketsincluding markets for hotel services.

The first phase is characterized by a shortage of available goods andservices when demand is in excess of supply. There is no sales problem;what is produced can also be sold; the main problem is to increase output.This gives rise to a seller’s market and a production orientation on the partof the seller, and has been apparent in many hotel markets at particular times:for example, during the industrialization of most countries, and as recentlyas the late 1970s and the 1980s in London, Paris, and other capital cities.

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The provision of new capacity, technical progress and increased produc-tivity lead to the second phase, in which higher real incomes also generateincreasing purchasing power. This has occurred first with goods and thenwith various services. A greater supply then exceeds demand and leads to abuyer’s market and a sales orientation on the part of the seller. It is to thisphase that the introduction of sales offices in hotels may be traced, as fallingoccupancies and empty banqueting rooms call for a sales effort.

In the third phase a further growth in capacity and output is normallyaccompanied by a further growth in incomes leading to what has becomeknown in the developed world as the affluent society. It leads to a realiza-tion of the need for goods and services to be produced to match consumers’needs, giving rise to a buyer’s market and a marketing orientation. Increasinglyconsumers’ needs become the starting point in the planning, design and provi-sion of goods and services, in hotels and elsewhere, because selling alonemay not be enough in itself to secure profitability.

Not all hotel markets necessarily undergo these three phases consecutivelyor in step with each other. But the basic pattern has been from a seller’smarket and production orientation, through a buyer’s market and sales orien-tation, to a buyer’s market and marketing orientation. The key characteristicsof the three phases have been the growth in output and capacity on the onehand and the growth of the market on the other hand, accompanied by typicalresponses on the part of the producers.

The Marketing Concept

The British Chartered Institute of Marketing has defined marketing as follows:

Marketing is the management function which organizes and directs all those business activities involved in assessing and convertingcustomer purchasing power into effective demand for a specific productor service and in moving the product or service to the final customeror user so as to achieve the profit target or other objectives set by thecompany.

In this definition the marketing function is seen not merely as a departmentof the business, but as coordinating all aspects of the business, and the roleof marketing not merely in terms of satisfying demand and generating sales,but including the assessment of consumer demand as a starting point;marketing exists to achieve the overall objectives of the business.

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In order to understand marketing in its totality, it is helpful to distinguishbetween the concept and the various tools and techniques. Conceptually,marketing is a philosophy in the conduct of a business. It is based on a beliefthat sustainable profitability can only be achieved by identifying, anticipatingand satisfying customer needs and desires.

Marketing is not synonymous with selling. Selling focuses on the needsof the seller, marketing on the needs of the buyer. Selling is preoccupiedwith the seller’s need to convert his product into cash, marketing with theidea of satisfying the needs of the customer by means of the product. In thischapter selling is seen as one of several elements of total marketing activity,which is described later on in terms of the marketing cycle (see Figure 14).

The paradox is that when the marketing concept is observed and carriedthrough in the entire planning process of a new service, the sales effortrequired in the long run should be minimal. Where great emphasis onsales is required, it usually means that the marketing concept has beendisregarded; it is an enormous task to try and sell something whichpeople neither need nor desire. This does not mean that market-ing replaces sales, but that they are complementary to each other. Ifmarketing establishes what people need, then the sales function demon-strates that their needs can be fulfilled.

Roger Doswell, Towards an Integrated Approach to Hotel Planning

Special Features of Hotel Marketing

Marketing is first and foremost about matching products and markets and inthis sense the marketing of hotel services is in principle no different fromthe marketing of other consumer products. But there are special features ofhotel products and markets and hence of hotel marketing.

For most users hotel rooms are a means to an end and not an end in itselfand the demand for them is what is known as derived demand – the reasonfor their use may be a business visit or a holiday or something else but rarelythe room itself, and the same applies to some extent to other hotel services.

The availability of the most important hotel product, the hotel room, isfixed in time and place. In the short term the number of rooms or beds onoffer cannot be significantly changed and location is part of the highly perish-

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able product, which cannot be stored for future sale or follow the customer.The demand for hotel accommodation and other services fluctuates from dayto day, from week to week, and from one part of the year to another. A wasteoccurs when demand falls and there is a definite upper limit to the volumeof business in a period of peak demand.

Hotel investment is primarily an investment in land and buildings and inter-ior assets. The bulk of the capital invested in the fixed assets of the hotel,combined with the continuity of hotel activity, gives rise to high fixed costs,which have to be covered irrespective of the volume of business. Three keyfactors are, therefore, critical to a successful hotel operation: the right loca-tion, correct capacity and a high level of utilization. All of them implymarketing decisions, first in the conception of the hotel and in its operationsubsequently.

In the conception of the hotel, marketing can contribute first through amarket feasibility study to assess the demand. A study may identify the bestmarket opportunity for an hotel, a gap in the market, a location or choicebetween alternative locations, for a particular hotel concept; or, given a partic-ular location, a study can determine the most appropriate hotel concept. Thetranslation of the concept into an operational facility then takes place throughproduct formulation and development. In the operation of the hotel, marketingcan contribute through a continuous process of market research, productdevelopment, promotion, selling, monitoring and review – the stages of amarketing cycle which is described later in this chapter.

In the planning of a new hotel, there is full scope for adherence to themarketing concept from the outset. In an existing hotel, there is often animportant distinction between the short- and long-term marketing tasks. Inthe short term the marketing task may be to adjust customers’ wants to avail-able facilities and services, but the long-term task is to modify the facilitiesand services to the customers’ wants.

In the short run, our existing facilities and services are given within narrowlimits. We may research the market to see which market segments are orcould be attracted to them, make such adjustments to our products as arepossible, but the main effort is likely to focus on promotion and selling.With low occupancies and low utilization of restaurants, bars and functionrooms, in the short run the sales effort becomes dominant. But it is no excusefor doing just that; it is both necessary and possible to proceed with changingthe products: to establish who our customers could be and what their needsare (market research), and to formulate and develop products meeting theirneeds (product formulation and development). This approach ultimately calls

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for less sales effort, which is then designed to demonstrate to people thattheir needs can be met; it is of particular importance in hotels.

Marketed commodities and articles are concrete, physical and capable ofmeasurement; most of them can be inspected and many of them even triedout before purchase. Services are less tangible and hotel services particu-larly so. Hotel services cannot be easily defined and described in terms ofclearly measurable products and their qualities. They are often bought indi-vidually or as part of a package, and they may be bought directly by theuser or through an intermediary, for example, a travel agent. In hotels, as inother walks of life, it is necessary to make it easy to buy, only more so.

Table 21 shows the ten most offered hotel services in the main regions.Direct dialling of international calls, facsimile and safety deposit boxes appearto be most offered services world-wide.

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Table 21 Guest services offered by hotelsa in main regions

Africa/ Latin Middle North America/

East Asia Australia Europe America Caribbean(%) (%) (%) (%) (%) (%)

Air-Mile programmes 70Airport transportation 77 83 56Auto rental 79 69 78AV equipment 88 86 88 84 90 67Business centre 74 84Concierge services 84 84 91 71 64Direct call dialling of

international calls 93 94 97 96 87 87Facilities for disabled 86 59 90Facsimile for guest use 91 88 92 89 94 89Frequent guest programmes 74 61 46Health clubs 74Multi-lingual staff 88 79 66 84Non-smoking rooms 77 80 93 69 97Safety deposit boxes 95 98 95 81 87 90Sprinklers in public places 84 72 77 43Sprinklers in guest rooms 79 69

a The table includes the ten most offered services for each region.



The Marketing Cycle

Hotel marketing as defined earlier in this chapter can be regarded as a cyclethat begins with an assessment of the existing and potential markets for hotelproducts (see Figure 14). This activity, known as market research, is concernedwith providing management with information about markets and products insuch a way as to contribute to systematic decision-making. We have seenearlier that the contribution may be both to the development of new hotelfacilities and services and to improving existing ones, by identifying thecustomers and their needs in relation to the particular products offered or tobe offered by the hotel.

The next element of the marketing cycle is product formulation and devel-opment. With adequate information about the market it is possible to identifyaccurately the particular segments of the market served or to be served bythe hotel. The formulation and development of the products to match theidentified market segments includes both the range and type of hotel facili-ties and services and pricing. Where this takes place consciously andsystematically, it is possible to achieve a high degree of match between prod-ucts and markets, because particular products have been shaped for particulardefined markets. Where products are developed without market research, themarket often tends to shape itself to the product.

Most new products are brought to the attention of the buyer and existingones are kept in the buyer’s awareness through promotion. In this a broaddistinction may be drawn between three sets of methods. Advertising coversthe use of the press, radio and television, films, posters and other paid-spaceor paid-time media. Public relations include all those efforts other than adver-tising, such as editorial publicity, intended to create and maintain a favourableimage of the hotel and its products. Merchandising is point-of-sale promo-tion of particular significance in hotel restaurants and bars through packaging,display and presentation. The above activities are supported by brochures,signs and other promotional material and activities. Their combination givesthe promotional mix of the hotel, which draws on sales records and whichprovides a stimulus to sales. Table 22 lists a number of promotional tools inuse by hotels in main regions and the proportion of hotels in each regionusing a particular tool. Direct mail, print advertising and promotions are themost commonly used world-wide and also in each region.

However, marketing achieves the objectives of the hotel only when theroom has been booked for the guest, a table reserved in the restaurant, andthe function arrangements have been agreed with the organizer. Accomplish-ing sales places selling in the marketing cycle. It may be performed by sales

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staff whose sole concern is direct selling, but in most successful hotels thereceptionists, waiters and other staff in direct contact with the customer arealso salesmen.

Monitoring of performance and review constitutes the final element of themarketing cycle. It is concerned with comparisons of actual results with plansand budgets and with evaluating the effectiveness of the marketing effort,

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Table 22 Use of promotional tools by hotels in main regionsa

Africa/ Aust. All Middle and North South

hotels East Asia NZ Europe Americab America(%) (%) (%) (%) (%) (%) (%)

Direct mail 75 83 89 94 71 76 79Loyalty cards 48 53 58 55 53 36 27Merchandising 40 17 34 47 40 27 45Outdoor advertising 41 53 55 47 41 39 24Print advertising 92 97 94 97 91 96 87Promotions 83 89 94 91 81 80 76Radio and TV 44 33 47 75 34 56 53Telemarketing 34 22 49 52 28 30 50Web site/Internet 57 47 63 49 58 75 51

a All figures are arithmetic means.b Excluding USA.


MarketResearch

ProductFormulation and

Development

Monitoringand Review

PromotionSelling

Figure 14 The marketing cycle


with a view to providing an informed basis for changes and adjustments inmarket and product policies and strategies of the hotel.

What has been outlined here as the marketing cycle corresponds closelyto the marketing mix, which is commonly described in marketing litera-ture in terms of four variables – product, price, promotion, place (the four Ps).

Marketing Resources

It is of interest to see what resources are devoted by hotels to marketing.An indication is provided in Tables 23 and 24 for hotels contributing toHorwath reports in the late l990s.

The particular definition of marketing adopted is based on the UniformSystem of Accounts for Hotels, which explains what is covered as follows:

Costs incurred in connection with the creation and maintenance of theimage of the property and the development, promotion and furtheringof new business.

Marketing includes payroll and other expenses of the relevant activities.Until recently, costs of a reservation system were charged to the marketing

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Table 23 Marketinga expenses as a ratio of hotel sales in main regionsb

Marketing expenses Payroll and related (total) expenses(%) (%)

All hotels 4.6 n/aAfrica and the Middle East 3.5 0.9Asia 3.6 1.4Australia and New Zealand 4.9 1.4Europe 3.6 1.1North Americac 5.7 2.2South America 5.8 1.8

a Marketing expenses typically include sales expenses, advertising expenses (print, TV, radioand outdoor), merchandising, public relations and departmental payroll.b All figures are arithmetic means.c Excluding USA.



department. However, current Horwath reports follow the ninth revised edition of the Uniform System, which recognizes that these costs are more appropriately charged as a rooms department expense, because theprimary purpose of a reservation system is to facilitate the rooms bookingfunction.

As shown in Tables 23 and 24, in the late l990s most hotels contributingto Horwath International reports spent on average between 2 and 6 per cent

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Table 24 Marketing expensesa as a ratio of hotel sales in selected Europeancountriesb

1995 1996 1997(%) (%) (%)

Benelux 4.8 3.9 3.6Germany 5.0 4.8 4.3Ireland 3.9 3.5 3.3Spain 3.2 3.2 4.4Switzerland 3.9 3.5 5.0United Kingdom 3.3 2.2 2.3

a Marketing expenses typically include sales expenses, advertising expenses (print, TV, radioand outdoor), merchandising, public relations and departmental payroll.b All figures are arithmetic means.


Canada 5.8%

5.7%

4.9%

2.3%

United States

United Kingdom

Australia andNew Zealand

Figure 15 Marketing expenses in hotels, 1997


of their total revenue on marketing activities as defined earlier. However,these figures may underestimate total marketing costs, which, some wouldargue, include not only reservation costs and commissions paid to inter-mediaries, but also the cost of discounts to tour operators and others, in orderto achieve a particular volume of business.

Yield and Quality Management

In recent years, hotels, in common with other types of business, have beenincreasingly adopting yield management – the concept and techniquesconcerned with the maximization of profit and revenue. As hotels cannotstore their primary product – bedroom accommodation – they must sell itat the best possible price, because an empty bedroom is an opportunity lostfor ever. Yield management can help in two main ways:

� rooms inventory management; and� differential pricing structure.

The former is concerned with matching different room types to the avail-able demand and the latter concerns obtaining the best price at any particulartime. Rooms yield is calculated according to the following formula:

Rooms sold Average achieved room rate–––––––––––––––––––– × –––––––––––––––––––––––Rooms available for sale Average room rate potential

Occupancy and discount rates are, therefore, key determinants of yieldsachieved by hotels. These are illustrated for selected African, Middle Easternand European cities in the late 1990s in Table 25. It shows that the highestyield is achieved by hotels with high occupancies and low discount rates, asin London and Tel Aviv; hotels with high occupancies achieved through highdiscounts show low yields, as in Casablanca and in Karachi. On the whole,hotels in European cities tend to discount rates to fill their rooms less thanthose in Africa and the Middle East and are, therefore, more successful inmaximizing their rooms revenue.

Another growing concern of marketing significance on the part of hoteliershas been the management of quality. The systematic process consists ofseveral stages: determining the guests’ requirements; designing hotel facili-ties and services to meet them; operating the hotel in conformity with theestablished standards; monitoring the guest satisfaction. Among hotel com-panies, Holiday Inns has pioneered the recognition of the importance of

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quality in ensuring guest satisfaction and of its role in marketing. A nationalseries of guidelines to companies on what is required of a quality system isprovided by the British Standards Institution in BS 5750. (ISO 9000 is theinternational equivalent of BS 5750.)

You all know the old ‘rule’ about a new hotel. First year it loses money.The second year it breaks even, then the third year shows a reason-able profit. The same applies to a lot of marketing effort and cost. Ifonly a one-year viewpoint is taken on marketing results, this seriouslyinhibits recovery from the present problems, and restricts long-termprofit growth. My case is that basically both operating and marketingmanagement must have a marketing strategy looking ahead for two tothree years.

Melvyn Greene, Marketing Hotels and Restaurants into the 90s

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Table 25 Room occupancies, discounts and yield in selected cities

Occupancy Discount Yield(%) (%) (%)

Africa and the Middle EastAbu Dhabi 63.3 37.5 39.6Cairo 75.3 53.6 34.9Casablanca 63.7 59.4 25.9Johannesburg 50.0 27.5 36.3Karachi 69.8 67.6 22.6Nairobi 58.8 55.4 26.2Tel Aviv 67.0 30.1 46.8

EuropeAthens 73.0 48.7 37.4Berlin 64.8 41.0 38.2Brussels 68.3 52.0 32.8Helsinki 65.8 44.0 36.8London 83.3 35.1 54.1Paris 75.1 42.4 43.3Prague 67.8 40.4 40.4



Hotels in the Total Tourist Product

More often than not hotel accommodation and other hotel products are partsof a total tourist product, which covers, from the point of view of the tourist,the whole experience from the time he or she leaves home to the time theyreturn. Airline seats and hotel beds may be seen as individual products bytheir suppliers but, as far as the tourist is concerned, they are only productcomponents; for the tourist, what he or she buys is a composite product, anamalgam of attractions, transportation, accommodation, entertainment andother activities.

The amalgam or package the tourist buys is seen most clearly in the caseof inclusive tours, where the tour operator or another organizer brings togetherall the elements of a holiday, which the operator promotes and offers forsale as a single product at one inclusive price. However, all tourists buypackages, whether they use travel agents or not, and whether they buy thevarious components separately or as an inclusive tour, and this applies toholidays as well as to business trips.

This has important implications for hotel marketing, for increasingly hotelbeds and other hotel facilities and services cannot be successfully marketedin isolation. They are supplied by many separate individual operators, eachof whom provides only a part of what the tourist buys and often in rela-tively small quantities. We have seen earlier that for most hotel users hotelrooms are a means to an end and not an end in itself; they also normallyneed other means to an end, and their concern as consumers is the end ratherthan the means. In these circumstances it becomes increasingly important torealize that all suppliers, including hoteliers, are in the main serving to facil-itate what is seen by the consumer as part of one overall tourist experience.It follows that the interests of all suppliers of facilities, including hoteliers,are more effectively served if they recognize their respective roles in andcontributions to the total product, and if they organize their respectivemarketing efforts accordingly. This is not to say that they need to submergetheir identities and integrate under one control. But it does mean that a greatdeal of promotion of independent individual hotels, transport and relatedcompanies may be less effective than coordinated efforts of those concernedwith the promotion of the total tourist products.

Three types of coordination are required for effective marketing in traveland tourism, where components of the total product are provided by separateproducers:

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� at the destination it is the role of the official tourist organization to formu-late and develop tourist products based on the destination and to promotethem in appropriate markets;

� at the generating end it is the role of the tour operator to assemble compo-nent services into packages and to promote them and sell them as singleproducts;

� it is the role of individual operators to formulate, develop and supply theirproducts as parts of a total tourist product.

Just as it is necessary to question whether airlines are really in the busi-ness of selling seats in the air (a transport experience), it is necessary toquestion whether hotels are really in the business of selling rooms (an accom-modation experience).

It is becoming apparent with the evolution of the information highwaythat managers will be increasingly involved in direct-to-consumermarketing and knowledge sharing. This is already being seen in thestrategic alliances occurring with the development of Global Distribu-tion Services (GDS). While these systems are structured to deal witheach other (airline reservations with hotel systems tied to travel agents),many of these intermediaries may find themselves shut out of the equa-tion in the future. While it is still unclear how this will play out, thedirect-to-consumer dimension seems inescapable.


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127

The various functions of the hotel – rooms, foodand drink and other guest services – weredescribed in Part III of this book. Part IV isdevoted to hotel support services; it begins withthe discussion of marketing in Chapter 10 andconcludes with a discussion of finance andaccounts in Chapter 12. All this activity takesplace in buildings, and the business of hotels is,therefore, concerned, in addition to markets,money and people, also with the ownership andmanagement of property. The hotel business isincreasingly concerned with managing, devel-oping and maintaining the property and itsfacilities, and these activities present a constantchallenge for the hotelier.

Property Ownership

An investment in hotels is first and foremost aninvestment in land and buildings, which repre-sent the dominant assets of hotels. Other fixedassets are:

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11Property Ownership

and Management


� plant and equipment, including such major items as air conditioning,boilers, lifts, and heavy kitchen equipment;

� furniture, furnishings, and small equipment;� china, glass, linen and cutlery.

Accordingly, there is a dual nature of investment in hotels – as an invest-ment in land and buildings and an investment in interior assets. This distinctionhas been recognized in three principal ways in recent years. First, the buildingshell may be owned by a developer, sometimes as part of some larger project,and leased to an hotel operator on a rental basis. This relationship is alsoimplied by some hotel groups, which apply internal rentals to hotels ownedby them; in this way the hotel profits are assessed after taking into accountthe notional rental of the land and building. Secondly, hotel companies makeuse of sale-and-lease-back arrangements as a means of financing the invest-ment, which reduces the capital requirement for the hotel operator. Thirdly,interior assets may be also leased by the hotel operator rather than bought,thereby also reducing the capital requirement.

There are, therefore, various arrangements as to who is involved in prop-erty ownership and in hotel management. An hotel operator may invest inthe property represented by land and buildings or enter into a leasing arrange-ment and invest only in the interior assets, or an operator may enter into amanagement contract without any direct capital investment.

Property Operation and Maintenance

In large hotels and in multi-unit hotel groups normally a senior person is ultimately responsible for property support services, who may be vari-ously described as the technical services, buildings and services, or worksdirector, officer, or superintendent, or simply as chief engineer, or by somesuch title. In large organizations the technical services may be subdividedbetween those responsible for buildings, for engineering, and for otherservices.

Technical considerations involved in property operation and maintenanceand in the related subject of energy are outside the scope of this book.Although they may be the direct concern of hotel management in smallerhotels, they are specialist activities normally entrusted to specialist staff andsometimes ‘contracted out’. Moreover, they are well documented in manytexts, and several of those published in the UK are listed as suggested furtherreading.

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Property operation, maintenance and energy costs are costs of hotel oper-ation, as distinct from the capital investment outlay on the assets. They are, therefore, appropriately included in hotel profit and loss statements. What role these costs play in different parts of the world is illustrated in Tables 26 and 27, based on hotels contributing to both HorwathInternational and Pannell Kerr Forster reports in the late 1990s (and see alsoFigure 16).

In the Uniform System of Accounts for Hotels property operation and main-tenance includes operating costs of repairs and maintenance of buildings,plant and equipment, furniture and furnishings, as well as the maintenanceof grounds, related wages and salaries, and work let out on contract.

The main factors that influence these costs are the age and size of thehotel – older hotels tend to spend more of their revenue on property oper-ation and maintenance than newer ones, and so do relatively smaller hotelsin comparison with large ones. When interpreting the above figures, it shouldbe borne in mind that the hotels on which the figures are based are typicallylarge, modern hotels.

Technology is becoming an essential component of the increasinglypopular “smart hotel room” – where every need of the traveller is metand systems control temperatures, air purity and sound. Functions arecontrolled by sensors linked to computers, providing maximum guestcomfort at minimum cost. Communications ports connecting guests tothe outside world are increasingly expected by business travellers whorequire constant contact with the office. Hotels which provide theseand make room design adjustments for the business guest, will undoubt-edly be in a better position to capture their business.


Facilities Management

Although property operation and maintenance is often an internal functionof many hotel organizations, there is an increasing movement in many firmsto concentrate on what they do best and outsourcing other non-core activi-ties. For hotel organizations, this core activity is the marketing andmanagement of the hotel operation, but other support functions requirespecialist help. It may not be cost-effective or practical for an hotel to manageactivities such as cleaning, laundry, refuse collection, grounds maintenance,

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Table 26 Property operation and maintenance costsa as a ratio of hotel salesin main regionsb

1995 1996 1997(%) (%) (%)

Total world 5.1 5.3 5.0Africa and the Middle East 6.1 5.4 5.2Asia 4.6 5.1 4.0Australia and New Zealand 4.2c 4.4c 4.0Europe 4.5 4.6 5.0North America 5.4 5.5 5.0Latin America/Caribbean 6.7 7.7 5.9d

a Included in this category are the cost of materials in the upkeep and repair to the building,curtains and draperies, electrical and mechanical equipment, elevators, floor, furniture, groundsand landscaping and swimming pool. In addition, the cost of operating supplies, painting anddecorating, uniforms and the removal of waste matter.b All figures are arithmetic means.c Australia only.d South America.


Table 27 Property operation and maintenance expensesa as a ratio of hotelsales in selected European countriesb

1995 1996 1997(%) (%) (%)

Austria n/a 5.6 5.1France 5.1 n/a 3.6Germany 4.9 4.7 5.1Ireland 5.2 4.1 4.3Norway n/a 4.6 6.0Portugal n/a 5.2 5.3Switzerland 5.8 5.5 5.2United Kingdom 3.4 3.5 3.7

a Included in this category are the cost of materials in the upkeep and repair to the building,curtains and draperies, electrical and mechanical equipment, elevators, floor, furniture, groundsand landscaping and swimming pool. In addition, the cost of operating supplies, painting anddecorating, uniforms and the removal of waste matter.b All figures are arithmetic means.

Source: Based on Worldwide Hotel Industry, 1996, 1997 and 1998


redecoration, minor repairs, heating and electrical matters, swimming poolmaintenance or even housekeeping. These activities may be outsourced tofacilities management firms who would manage these activities on a contrac-tual basis. Such arrangements help the hotel to ensure that these essentialproperty management tasks are planned and budgeted for in a systematicway, and that the quality of the facilities is maintained.

Energy

In the Uniform System of Accounts for Hotels energy costs include the cost of electricity, gas, oil, steam, water and other fuels. They are describedin the latest edition of the Uniform System as utility costs. These costs are shown in Tables 28 and 29 for hotels contributing to Pannell Kerr Forster International reports in 1998 as a ratio of total revenue. Overall energy costs account for a higher proportion of hotel revenue in climateswhere air conditioning is an essential requirement in first class hotels, than in cold climates where heating represents the major part of energyconsumption.

Energy costs represent a significant element of hotel costs and their controlhas been receiving particular attention in most regions and countries in recentyears. This is reflected in the Uniform System, which indicates the kind ofstatistical information to be produced by monitoring demand and consump-tion in physical units as shown on page 133.

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Canada

5.2%

5.0%

4.0%

3.7%United States

United Kingdom


Figure 16 Property operation and maintenance costs in hotels, 1997


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Table 28 Energy costs as a ratio of hotel salesin selected areas of Europea

(%)

All Europe 2.98Northern Europe 2.92Eastern Europe 2.83Southern Europe 2.83

a Energy costs and expenses as a percentage of total revenues.

Source: Based on Pannell, Kerr Forster, Europe, Middle Eastand Africa Trends, 1998

Table 29 Energy costs as a ratio of hotel salesin selected countries and regionsa

(%)

Middle EastIsrael 3.27Pakistan 9.06UAE 3.05

AfricaEgypt 4.17Kenya 5.24Morocco 7.27

EuropeAustria 4.03Portugal 3.67Switzerland 2.99

a All figures are arithmetic means.Source: Based on Pannell, Kerr Forster, Europe,Middle East and Africa Trends, 1998


Water cubic feet/ Purchased steamgallons/litres pounds

Electricity kWh Natural gas 100 cubic feetElectrical demand kW L.P. gas poundsOil gallons/litres Heating degree daysCoal tons/kilos Cooling degree days

Technology will play an increasing role in providing a safe and healthyenvironment through environmental control and guest protectionfeatures; improved water quality and waste disposal processes madepossible by the advances in monitoring environmental variables andbiotechnology applications which use bacteria to destroy harmfulelements in the environment. Hoteliers who take advantage of theseexciting discoveries will be one step up on the competition in winningbusiness from safety-conscious guests.


Hotels and the Environment

Over the past two or three decades concern has arisen over the effects ofhuman activities on the environment. The key problems have been identifiedas global warming, ozone depletion and acid rain, as well as the depletionand pollution of land and water natural resources.

Hotels are increasingly recognizing the need for using energy and otherresources responsibly and controlling consumption, as a social responsibilityas well as good business. Many leading international companies are nowmembers of the International Hotels Environment Initiative (IHEI), which hasdeveloped practical guidelines for hotels. The International Hotel & RestaurantAssociation seeks to assist hoteliers in reconciling environmental issues withcompetitive pressures. Hotels figure prominently also in the work of the WorldTravel & Tourism Council which monitors, assesses and communicates effective environmental strategies in travel and tourism.

The environmental conservation movement is gaining in momentum in itsconcern for natural resources – water, land, air – and this is linked to protect-ing the environment in previously underdeveloped regions in a socially responsible fashion. There is a growing acknowledgement of the importance

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of ‘sustainable development’ and ‘ecotourism’ that will affect the way thathotels, particularly in resorts and rural locations, develop their properties andmanage their operations in the future.

These interactions between aspects of the whole operation, from design,purchasing specification, production planning, stock management, wastemanagement and waste disposal can provide financial as well as envi-ronmental benefits. A hotel cannot afford to be altruistic, but byconsidering environmental management holistically it may be possibleto invest savings made in one area into other activities which have lessclear financial benefits.

David Kirk, Environmental Management for Hotels

There can be little doubt that many businesses are still coming to termswith the fact that a heightened awareness of the environment has addedan entirely new dimension to their decision-making processes.

I believe that as environmental pressures from legislators, consumers,investors, neighbours and even employees intensify, as I believe theywill, the real competitive advantage will be held by those who aremaking environmental responsibility integral to their overall strategy,both in the management of existing operations and in the planning ofnew developments.

HRH the Prince of Wales, IHEI Manual

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The financial position and performance of anhotel are reflected in two key statements – thebalance sheet and the profit and loss account.The balance sheet gives a view of the positionof the business at a particular point in time, forexample, at the end of a year, about the waysmoney has been raised and about the forms ittakes in the business. The profit and loss accountshows the revenue and the costs and expensesincurred in earning that revenue, for a givenperiod, a week, a month, or a year.

Several main groups of people are interestedin the information these two statements convey– in particular the owners, lenders and managers– and it is possible to distinguish between twooutlooks – long-term and short-term.

Owners and long-term lenders are interestedin the sustained profitability of the hotel. Theylook for evidence of this at the return on invest-ment, as an indication of the use the businessmakes of its assets, and at the relationshipbetween owners’ capital and loans, as an indica-tion of the way in which risks are spread, as wellas at the long-term trends.

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12Finance and Accounts


Short-term lenders and trade creditors take a more limited view and wishto be particularly satisfied that the hotel can meet its current obligations.They look for evidence of this at its current assets, particularly cash andthose readily convertible into cash, and at the extent of its current liabilities,which have to be met in the short term.

Management has responsibilities to investors and to both long-term andshort-term creditors. Therefore, management has to consider all the aspectsthat are of interest to these parties, but management is concerned also withplanning and day-to-day control of the business. The financial statements itneeds have to be more detailed and more frequent than those required byothers, to enable it to direct the hotel and to monitor its progress.

Both financial statements are of interest to all these different parties.However, normally the balance sheet is of particular value to owners andlenders, whilst the profit and loss account is of greater value to management.In this chapter illustrations of hotel financial statements provide a basis forthe description of their main features and of the financial characteristics ofthe hotel business.

The Hotel Balance Sheet

There is no universal agreement on the presentation of the balance sheet andone variation arises in its horizontal form: for example, in Britain assets are

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Table 30 Balance sheet as at 31 December 0000

Fixed assetsLand and buildings £675 000Plant and equipment £100 000Furniture and furnishings £75 000China, glass, cutlery, linen £30 000 £880 000

Current assetsStocks £30 000Debtors and prepayments £60 000Cash £30 000 £120 000 £1 000 000

Owner’s capital £600 000Long-term loans £300 000Current liabilities

Creditors and accruals £30 000Bank overdraft £70 000 £100 000 £1 000 000

Note: The form of ownership and taxation have been ignored in this illustration.


shown on the right-hand side and capital and liabilities on the left-hand side;in some countries the balance sheet is part of the double entry system ofaccounts and the reverse applies. The simplified example in Table 30 is avertical statement of an hotel with an investment of £1 000 000, with theassets listed first, and how they are financed next.

Balance Sheet Ratios and Analysis

The different forms of capital employed in the business are represented by thevarious types of assets used in the hotel, and balance sheet items are grouped intosections – fixed and current assets, equity and long- and short-term liabilities.

Hotel investment requirements are basically of three types. Short-term capital is required for up to a year for operating and minor capital expendi-ture; medium-term finance is required for several years for internal fixedassets; long-term finance, for more than a few years, is required for land andbuildings. The grouping of assets into fixed and current reflects the investmentintensity, which is normally very high in hotels, because the bulk of hotelinvestment is in land and buildings and other fixed assets. The investmentintensity – the relationship between fixed and current assets – has importantimplications; for example, it contributes to high fixed costs of hotel operationthrough depreciation and other expenses of property ownership. Current assetscomprise cash and other items convertible into cash in the normal course ofbusiness, such as stocks, which tend to be small in the hotel business, becausethey are converted into debtors or cash relatively quickly. It is, therefore, notuncommon to find 80–90 per cent of the total investment in hotels in the formof fixed assets, giving an investment intensity of 4 or more.

The distinction between long- and short-term liabilities emphasizes theirdifferent nature and the time scale of the obligations. The former are a formof total financing of the hotel; the latter are in the main amounts owed tosuppliers and, unless they include such short-term borrowing as bank over-drafts, they tend to be relatively small in hotels.

The difference between the total assets and the total liabilities is the equityor the net worth of the business. It represents the owners’ capital, and accord-ing to the form of ownership, is represented by the shareholders’ capital in acompany or by capital accounts for partnerships and individual proprietorships.Initially money can be put in the business by the owners or contributed by others. Subsequently capital can be increased by the owners putting in more or by profits not drawn out by owners; more can be also borrowed as loans.

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The relationship between equity and liabilities is known as capital gearing.The ratio is calculated by dividing the net worth by total liabilities or, wherecurrent liabilities fluctuate, the net worth is divided by the long-term debtonly, and indicates the strength of the capitalization. Both investors andlenders are interested in the return on total assets irrespective of the sourceof funds, but capital gearing influences their respective risks. Where theproportion of indebtedness is high in relation to owners’ capital, small changesin profit may have a significant impact on the return available to owners, asinterest on loans and instalments have to be paid in any case when due. Theextent of desirable gearing in hotels, as in other types of business, dependsto a greater extent on whether the rate of return earned by the hotel exceedsthe rate of interest paid on the loan.

Another important relationship exists between current assets and currentliabilities, because the latter have to be paid in the main out of the former.The excess of current assets over current liabilities represents the net workingcapital of the business. The current ratio, as it is called, is calculated bydividing current liabilities into current assets, and represents a measure ofthe liquidity of the business. Where stocks are high, it is preferable to excludethem and to calculate the current ratio on the basis of other current assets.But in hotels a simple ratio of 1.00 is normally considered acceptable inview of the commonly low stocks in relation to total current assets and theirrapid turnover.

The Hotel Profit and Loss Statement

A condensed statement showing the main revenue and expense headings isnormally used for financial reporting purposes to satisfy legal requirements,but a more detailed structured statement is helpful for management and oper-ational control purposes. A form of this statement, known as the summaryoperating statement, without the inclusion of intermediate profit levels, isshown in Table 31, where the figures give the performance of an hotel witha total revenue of £2 000 000.

The main profit and loss concepts are:

� revenues are classified by product/department, showing the revenue mix;� costs and expenses are classified by type of cost and expense into cost

of sales, payroll, other direct expenses, undistributed operating expenses,and fixed charges;

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Table 31 Profit and loss summary operating statement for the year to 31 December 0000

£000 £000

RevenueRooms 968Food 560Beverages 256Minor operated departments 148Rentals and other income 68 2 000

Departmental cost of salesFood 188Beverages 61Minor operated departments 73 322

Departmental payroll and related expensesRooms 166Food and beverages 297Minor operated departments 38 501

Other departmental expensesRooms 98Food and beverages 95Minor operated expenses 30 223

Undistributed operating expensesAdministration and general 188Marketing 68Property operation, maintenance, energy 200 456

Fixed chargesRent 120Depreciation 80Other fixed charges 136 336

Net profit 162(before income taxes and gain or loss on sale of property)


� cost of departmental sales (opening stock � purchases � closing stock) isrelated to each category of sales (food, beverages, minor operated depart-ments);

� departmental payroll is related to each category of sales (rooms, food andbeverages, minor operated departments);

� other direct departmental expenses incurred in the operation of a depart-ment are allocated to that department;

� operating expenses relating to the whole hotel, which are not distributedto departments, are distinguished from fixed charges related to assets andcapital.

The summary operating statement enables profit margins to be establishedat various levels, after certain expenses but before others, and the net profit.There are several profit levels:

� departmental gross profit for food, beverages, and minor operated depart-ments (revenue less cost of sales);

� departmental net margin for rooms, food and beverages, and minor oper-ated departments (revenue less prime cost, i.e. cost of sales and payroll);

� departmental operating profit for rooms, food and beverages, and minoroperated departments (revenue less direct expenses, i.e. prime cost andother departmental expenses);

� hotel operating income (the sum of departmental profits plus rentals andother income);

� hotel operating profit (operating income less undistributed operatingexpenses);

� hotel net profit (operating profit less fixed charges).

Profit and Loss Ratios and Analysis

The relationship between revenues and costs and expenses of operated depart-ments, which account for the first three profit levels above, were presentedfor rooms, food and beverages, and minor operated departments in Tables13, 18 and 20 in Chapters 7, 8 and 9. The next three profit levels relate tothe hotel as a whole. All six profit levels based on Table 31 are summarizedin Table 32.

A number of ratios may be calculated from the information in Table 32:

� for each operated department each element of cost (cost of sales, payroll,other departmental expenses) may be expressed as a percentage of depart-mental sales;

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� for each operated department each profit margin (departmental gross profit,net margin, operating profit) may be expressed as a percentage of depart-mental sales;

� for the whole hotel rentals and other income, undistributed operatingexpenses, and fixed charges may be expressed as a percentage of totalhotel revenue;

� for the whole hotel operating income, operating profit, and net profit maybe expressed as a percentage of total hotel revenue.

In Table 33 the information from Table 32 is expressed in the form ofratios. Departmental costs and expenses and profit margins are related tocorresponding departmental sales. Costs and expenses and profit margins ofthe whole hotel are related to total hotel revenue.

Particular ratios are of significance for particular purposes. They enableeach element of cost and expense to be controlled for each operated depart-ment in relation to the sales of that department. Similarly, total departmental

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Table 32 Profit and loss summary operating statement for the year to31 December 0000 showing profit levels

Rooms Food Beverages MODa Total(£000) (£000) (£000) (£000) (£000)

Revenue 968 560 256 148 1 932b

Less departmental cost of sales – 188 61 73 322DEPARTMENTAL GROSS PROFIT 968 372 195 75 1 610Less departmental payroll and related

expenses 166 297 38 501DEPARTMENTAL NET MARGIN 802 270 37 1 109Less other departmental expenses 98 95 30 223DEPARTMENTAL OPERATING PROFIT 704 175 7 886Add rentals and other income 68HOTEL OPERATING INCOME 954Less undistributed operating expenses 456HOTEL OPERATING PROFIT 498Less fixed charges 336HOTEL NET PROFIT 162

(before income taxes and gain or loss on sale of property)

a Minor operated departments.b Excluding Rentals and Other Income (£68 000), before this is added to Departmental OperatingProfit.


costs and expenses, as well as undistributed operating expenses and fixedcharges, can be controlled in relation to total hotel revenue. They can alsoassist in decision-making. For example, the prime cost of the food andbeverage operation covers both the cost of food and beverages and the labourcost, including preparation and service, and is an important concept in menupricing. Thus in any comparison between fresh foods and convenience foods,the prime cost and the departmental net margin ratios provide a basis forevaluating alternative means of operation.

When the departmentalization of the operating statement follows theresponsibilities of the hotel organization structure, it is possible to equatethe various profit levels with individual responsibilities. In this only itemsof revenue and expenditure which can be controlled by individuals are attrib-uted to them. Thus for example:

� departmental gross profit is the responsibility of the chef, head barperson,telephone supervisor;

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Table 33 Ratios of costs, expenses and profit margins to departmental salesand to hotel revenue

MinorOperated

Rooms Food Beverages Depts Totala

(%) (%) (%) (%) (%)

Revenue 100 100 100 100 100Less departmental cost of sales –– 34 24 50 ––DEPARTMENTAL GROSS PROFIT 100 66 76 50 ––Less departmental payroll and related

expenses 17 36 26 ––DEPARTMENTAL NET MARGIN 83 33 25 ––Less other departmental expenses 10 12 20 ––DEPARTMENTAL OPERATING

PROFIT 73 21 4 44.3Add rentals and other income 3.4HOTEL OPERATING INCOME 47.7Less undistributed operating expenses 22.8HOTEL OPERATING PROFIT 24.9Less fixed charges 16.8HOTEL NET PROFIT 8.1

a Including rentals and other income.


� departmental operating profit is the responsibility of the front hall managerand the food and beverage manager;

� hotel operating profit is the responsibility of the hotel manager.

Hotel control is facilitated not only by the structure of the financial state-ments and the amount of detail and analysis they contain, but also by thefrequency with which they are produced. This varies as between differenthotels, but it is common to find that the following are produced togetherwith related ratios and with supporting schedules:

� daily statement of revenue;� weekly statement of cost of sales and payroll;� monthly operating statement of revenue, costs and expenses;� quarterly balance sheet.

Hotel Operating Profit

The most significant profit level for management purposes is the hotel oper-ating profit, i.e. the level after all operating costs and expenses have beendeducted from hotel revenue, and before fixed charges. This is normally thelevel for which the responsibility lies with the hotel operational management.The ratios of hotel operating profit achieved by hotels contributing to Horwath

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Table 34 Hotel operating profit as a ratio of hotel sales in main regionsa

1995 1996 1997(%) (%) (%)

Total world 29.4 30.2 31.4Africa and the Middle East 35.7 40.1 34.9Asia 37.6 36.8 35.3Australia and New Zealand 27.5b 28.6b 31.7Europe 28.8 29.4 29.2North America 29.2 30.2 34.7c

Latin America/Caribbean 25.7 24.7 25.8d

a All figures are arithmetic means and are calculated before management fees.b Australia only.c Excluding USA.d South America.



International reports in the late 1990s are shown in Tables 34 and 35. Theachieved operating profit in different regions and countries ranges widelyand in some of them fluctuates widely from year to year. The United Kingdomappears to produce consistently high rates of profit (Figure 17).

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Table 35 Hotel operating profita as a ratio of hotel sales in selected countriesb

1995 1996 1997(%) (%) (%)

Germany 24.7 23.9 23.2Hungary 25.0 28.6 35.9Ireland 22.9 22.9 26.0Japan 27.3 22.7 19.8Mexico 36.1 39.3 33.0Spain 23.0 24.0 18.4Switzerland 24.9 13.6 17.6United Kingdom 34.5 36.6 37.1

a Represents hotel operating profit before management fees.b All figures are arithmetic means.


Canada

37.1%

36.6%

31.7%

30.2%

United States

United Kingdom


Figure 17 Hotel operating profit, 1997


Balance Sheet and Profit and Loss Relationships

So far we have considered mainly relationships between two individual itemsor groups of items within one financial statement. Thus from the balancesheet emerges the investment intensity of the hotel as a relationship betweenfixed and current assets, the capital gearing as a relationship between owners’capital and liabilities, and the liquidity of the hotel as a relationship betweencurrent assets and current liabilities. From the profit and loss state-ment a multitude of relationships emerges when components of revenue,costs and expenses, and profit margins are related to total or departmental revenue.

However, there are also many points at which items in the balance sheetand in the profit and loss statement are related to each other. When assetsare used up, they become expenses; for example, fixed assets are depreci-ated and depreciation becomes an expense; stocks are used up and becomethe cost of sales. On the other hand revenues create assets; for example,sales generate cash or debtors. Credit purchases create liabilities. Profitincreases the net worth of the business and loss reduces it. A meaningfulfinancial analysis of an hotel has to include these relationships between assets,liabilities, income and expenses.

The most important relationship is that between earnings and assets,because the ratio of earnings to investment is a measure of the effectivenessof management in employing assets to generate profits. This is a more mean-ingful measure than return on owners’ capital in a total view of theperformance of the hotel. Earnings are used in the calculation before deduc-tion of interest, which is not a charge against operations but a charge forthe use of a particular form of capital, and in evaluating the use that is madeof assets, the source of capital is immaterial.

There are also important relationships between stocks and sales, debtorsand sales, and creditors and purchases. The rate of stock turnover is calcu-lated by dividing the cost of food, beverages and other sales by the averagestock, i.e. the sum of opening and closing stocks divided by two. The raterepresents the number of times a particular stock turns over in a year andis a useful indicator for avoiding overstocking.

The speed with which debts are collected from customers is shown by therate of debt turnover, which is measured by dividing credit sales by averagedebtors, i.e. the sum of opening and closing debtors divided by two; some-times total sales are used in calculating this ratio rather than credit sales.

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The business environment will continue to challenge with its growingcomplexity and uncertainty. It will require a talented management cadreto balance the greater demands for the perfect delivery of services andproducts, with the requirements of owners and investors who wantreturns on their assets on a par with other investment opportunities.So while the turbulence of the last decade has passed like an angryhurricane, the calm after the storm will never mean a return to thegood old days prior to 1985. Better forecasting and long term strategicmanagement will be a must, and there is every reason to believe thatthe industry is well prepared to put these in place.


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Part

VPeople andProcedures


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Organization is the framework in which variousactivities operate. It is concerned with suchmatters as the division of tasks within firms andestablishments, positions of responsibility andauthority, and relationships between them. Itintroduces such concepts as the span of control(the number of subordinates supervised directlyby an individual), levels of management (thenumber of tiers through which management oper-ates), delegation (the allocation of responsibilityand authority to designated individuals in the lineof ‘command’). This chapter is concerned withcharacteristics of hotel organization rather thanwith management concepts.

Until not so long ago – about the middle of thetwentieth century and even later than that – thetypical hotel of almost any size was characterizedby a large number of individuals and departmentsdirectly responsible to the hotel manager whowas closely concerned with his guests and withall or most aspects of the hotel operation. Theremight have been one or more assistant managerswho had little or no authority over such keyindividuals as the chef, the head waiter or thehousekeeper. The hotel manager usually com-bined the ‘mine host’ concept of hotelkeeping

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13Hotel Organization


with a close involvement in the operation. He normally had all or most ofthe technical skills that enter into the business of accommodating and cateringfor guests. Although he might have given more attention to departments inwhich he felt confident about his expertise, and less to those in which hisknowledge and skills might have been lacking, his approach was essentiallythat of a technician rather than the manager of a business. Hotels servedthose who chose to use them. The financial control was exercised by theowners or by accountants on their behalf. Personnel management rarelyextended beyond the ‘hiring and firing’ of staff. Hotel buildings and interiorswere not often viewed as business assets required to produce a return comparable to other commercial investments; maintenance and energy werecheap.

Several influences have tended to change this profile generally and theapproach to hotel organization in particular in the second half of the twen-tieth century. The market for hotels, the number of hotels and the size ofindividual operations have grown, against the background of economic andsocial conditions in most parts of the world. Business and managementthought and practice have found their way into hotels, with the entry intothe hotel business of firms engaged in other industries, development of hoteleducation and training, and higher quality of management. Innovation in hotelorganization, at first largely confined to a few firms in North America, hasspread to others in other countries. These and other influences have broughtabout changes in the ways in which hotels organize their activities today.

Three particular developments illustrate the changes in hotel organizationin post-war Britain. One relates to the grouping of functions. In the early1950s hotel reception, uniformed services and housekeeping were invariablyregarded as separate departments, each reporting directly to the hotel manager;twenty years later many large hotels had front hall managers, rooms managers,or assistant managers with specific responsibilities in this area. Similarly,over the same period in most large hotels, food and beverage managers cameto be appointed, responsible for all the hotel activities previously organizedin restaurants, bars and kitchens under the direct control of the hotel manager.Secondly, there has been a growth in specialists. In the early 1950s only afew large hotels had a staff manager, a public relations officer or a buyer;by the early 1970s personnel, sales and marketing, and purchasing depart-ments were common features of the large hotels and of hotel groups. Thirdly,where each hotel used to be more or less self-sufficient in the provision ofits various guest services and supporting requirements, many of these arenow provided through internal rentals and concessions and through specialistsuppliers and operators such as outside bakeries, butcheries and laundries.

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Organization is a function of purpose and the complexity of the hotel busi-ness arises because it is concerned with several distinct products, servicesand facilities, which are offered in various combinations, as we saw in PartIII of this book. It is helpful to arrange these, and the hotel activities describedin Parts III and IV, into a simple framework along the lines of those sixchapters, and the classification of activities outlined below follows thecommon pattern of uniform and standard systems of accounts in use in anumber of countries:

Operated departments Major (primary) Rooms(revenue-earning) Food

Beverages

Minor (ancillary) Guest telephonesGuest laundry and valetingOther guest services

Support service Administration and departments general(undistributed overhead) Marketing

Property operation, maintenance and energy

In this schedule a distinction is drawn first between revenue-earningservices operated by the hotel (dealt with in Part III of this book) and activ-ities that service the hotel (dealt with in Parts IV and V). The revenue-earningservices are divided further into primary and ancillary (dealt with in Chapters7, 8 and 9 respectively). It has been found in practice that the most effec-tive hotel organization structures follow this classification and provide forclear profit and cost centre responsibilities.

Rooms

In Chapter 7 the accommodation function of the hotel is described in termsof reception, uniformed services and housekeeping. Several typical organi-zational approaches may be identified in respect of these activities in practice:

� all three activities operate as separate departments with their own headsof department;

� reception and uniformed services are grouped together as the front hallor front house of the hotel under an assistant manager for whom this isthe sole or main responsibility;

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� reception and uniformed services are grouped together as a front hall orfront house department with its own head of department (this approachis illustrated in Figure 18 below);

� all three activities are grouped together as the rooms department underan assistant manager for whom this is the sole or main responsibility;

� all three activities are grouped together as the rooms department with itsown head of department.

The first approach provides for a direct line of responsibility and authoritybetween each separate head of department and the hotel manager and hencefor a close contact between the two levels of management; however, it extendsthe hotel manager’s span of control and he is required to coordinate the separate departments. The other four approaches are designed to reduce the hotel manager’s span of control and provide for a coordination of relatedactivities at an intermediate level, but increase the number of levels throughwhich management has to operate, and reduce the amount of direct contactbetween the hotel manager and the departments concerned.

Several activities were described in connection with rooms, which may bearranged differently in large hotels.

� In most hotels advance reservations form an integral part of hotel recep-tion and the same employees deal with them and with other receptiontasks. But advance reservations may be dealt with in a separate sectionof the reception office or in a separate department, to enable employeesto concentrate on the respective tasks without conflicting demands on theirtime and attention. Sometimes all advance reservations are concentratedin the sales department, which has a responsibility for maximizing hoteloccupancy.

� In smaller hotels guest accounts are normally handled by book-keeper/receptionists, but strictly speaking guest accounts represent anextension of the accounting function of the hotel. Therefore, where guestaccounting is handled by bill office clerks and cashiers, they normallyform a part of the accounts department.

� In some hotels room service is provided by housekeeping staff, but roomservice is clearly part of the food and beverage function of the hotel.

Food and Beverages

In Chapter 8 the food and beverage function of the hotel is described interms of the food and beverage cycle, the main sales outlets, and the related

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support services. Several typical organizational approaches may be identi-fied in respect of this function in practice:

� each sales outlet and supporting service operates as a separate departmentwith its own head of department;

� several departments are grouped together under an assistant manager forwhom they represent the sole or main responsibility, e.g. purchasing andstorage, bars and cellars, the ‘back-of-the-house’ activities including thekitchen, and so on;

� several of these departments are grouped together as one department underits own head of department;

� all food and beverage activities are grouped together under an assistantmanager for whom they represent the sole or main responsibility;

� all food and beverage activities are grouped together as a food and beveragedepartment with its own head of department, as illustrated in Figure 18below.

The same observations apply to these approaches as are made above inrelation to rooms, regarding lines of responsibility and authority, span ofcontrol and levels of management; the size of the span of control and thenumber of management levels are conflicting considerations.

Several aspects of the food and beverage function are closely related toeach other but also to other parts of the hotel operation:

� Most hotels have facilities serving both food and beverages, although insome of them food or beverages may predominate. Whilst it is usuallyrelatively easy to separate the revenue from each, it is often impracticalto separate accurately all the costs of operation other than the cost ofsales, because the same employees may handle both products, and becauseother goods and services provided in the same outlet may not be readilyidentifiable as either food or beverages. In these circumstances food andbeverages are treated together, analysed by sales outlet, and the relatedresponsibilities are reflected in the organization structure.

� Food and beverage control based on the food and beverage cycles describedin Chapter 8 may be appropriately seen as part of the total accountingfunction of the hotel. In these circumstances such employees as restaurantcashiers and cost control clerks are included on the staff of the hotelaccountant.

� Where there is a separate sales department, food and beverage sales areusually closely monitored by that department, and such arrangements as

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reservations for functions may form part of the responsibilities of the salesdepartment.


In Chapter 9 miscellaneous guest services are illustrated in terms of suchactivities as telephones and laundry and the typical organizational approachesfor most of them are shown to be of two main kinds:

� the services are operated under direct management of the hotel as minoroperated departments;

� the services are operated under rental and concession arrangements withthe hotel by another firm.

The alternative arrangements may apply in the provision of the followingmain services to guests:

beauty shop and hairdressing secretarial servicesflorist squash courts and tennis courtsgarage gifts and souvenirslaundry and dry cleaning swimming poolnewspapers and magazines tobacconist

Direct management of these services normally provides for a closer directcontrol and supervision by the hotel and for greater flexibility in operation.In many hotels the services are merely grouped as residuary hotel activitiesfor accounting and control purposes and are in practice provided as part ofthe services of other hotel departments, e.g. reception, uniformed services,housekeeping or general administration, and are not separate departments inthe organizational sense. Only when the volume of a particular service issufficiently large, might it be organized as a separate department. And it isonly then that the option arises for the service to be provided for the guestsby another operator, because it warrants his or her involvement, under arental or concession arrangement. Such arrangement then relieves the hotelfrom operating what is often to the hotel operator an unfamiliar service andallows it to concentrate on its primary activities.

Therefore, major deciding factors are the size of the operation, the avail-ability of suitable operators of particular services, and the operational philoso-phies of the hotel or hotel group, as well as the quality of service and thefinancial return to the hotel, which may result from one or the other approach.

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Hotel Support Services

Earlier in this chapter hotel activities were classified into revenue-earningand support service departments. The first group is considered in Part III ofthis book, the second in Parts IV and V. The first of the support servicedepartments – administration and general – relates to functions of generalmanagement (some of which are considered in this chapter), purchasing(discussed in connection with food and beverages in Chapter 8, although notconfined to them), personnel (to be dealt with in Chapter 14) and accountingand control (included in Chapter 12). The remaining support services arecovered in Chapters 10 and 11.

In practice the non-revenue service activities are organized in one of threemain ways:

� retained among the hotel manager’s own responsibilities;� assigned to an assistant manager as one of his or her responsibilities;� assigned to a separate department with its own head of department.

To a greater or lesser extent each of these activities may also draw for itsperformance on external specialist advice and assistance. The main specialistactivities, which may be organized in one of these ways, and examples ofthe external sources of advice and assistance available to the hotel in respectof each can be summarized as follows:

Accounting and finance Hotel accountants and consultantsPublic accountants and auditorsProfessional stock-takers

Personnel services Personnel recruitment and selection specialists

Work study, human resource and industrial relations advisers

Training boards and other agencies

Purchasing Hotel accountants and consultantsFurniture and equipment specialistsVarious suppliers

Sales and marketing Market research agenciesAdvertising agenciesPublic relations consultants

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Property operation, Architects, builders, designersmaintenance, energy Consulting engineers

Utility undertakings

Advisory services are also sometimes provided by professional bodies, tradeassociations for their members, the technical press and other agencies.

Apart from any operational philosophies, the adoption of the organiza-tional approaches, in respect of a particular activity, is largely determinedby the size of operation: the first is normally associated with a small hotel;the second with medium size; and the third with large operations, but nohard and fast rules apply. Each of these activities comprises specialist know-ledge and skills, as distinct from normal operational know-how inherent inthe primary operating activities.

The Management Structure

Following the discussion of the division and grouping of operated and serviceactivities into departments, it is next necessary to consider the total manage-ment structure of the hotel; this comprises all positions of responsibility andauthority below top management, which is represented in an hotel companyby the board of directors. The management team consists of the hotel manager,one or more deputy or assistant managers, and the heads of departments. Adiscussion of the management structure is concerned with these posts andwith the relationships between them.

According to the size of the hotel and the particular arrangement in oper-ation, the hotel chief executive may be variously designated as managingdirector, general manager or simply hotel manager. He or she may to a greateror lesser extent participate in the formulation of the hotel policies and strategies, and will invariably be responsible for their implementation and for the hotel performance. In larger hotels this level may be sub-dividedbetween a managing director or general manager and the hotel manager or a resident manager. The former then reports to the board and normallycoordinates the work of the specialist departments and of the hotel or resident manager, who is in turn responsible for the day-to-day managementof the hotel activities.

The complexity and continuity of the hotel activities normally give riseto the need for one or more deputy or assistant managers. A deputy hotel

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manager normally has authority over the heads of departments. But there ismuch variation in the role, authority and responsibilities of hotel assistantmanagers. In some instances they are the hotel manager’s deputies in all butname, in respect of the whole operation or some parts of it, e.g. food andbeverages, front hall, ‘back of the house’, and so on; in other cases theyhave these specific responsibilities in addition to their general role as themanager’s deputies. But many so-called assistant managers perform roles,which are more appropriately described as those of general assistants(assisting where required throughout the hotel) or of personal assistants tothe manager (acting on his or her behalf as the manager directs them to do).Yet in other cases their main role is guest contact.

All the roles described above may be appropriate in particular circum-stances, but effective hotel management calls for a clear definition ofresponsibility and authority. The relationships with heads of departments areespecially important in this context. Titles, which describe the particular roles,can be helpful in this direction.

In order to provide clear-cut lines of responsibility and authority and an effective coordination of related activities, some hotels function withoutassistant managers as such: those who would normally be in such posi-tions are allocated specific responsibilities and appropriate titles to describethem.

Those in positions of heads of departments fall into two distinct cate-gories. Heads of operated departments are known as line managers, withdirect lines of responsibility and authority to their superiors and to theirsubordinates in respect of each operated department. Heads of service depart-ments are specialists who provide advice and service to line management,and relieve them of such specialist tasks as are considered to be more effec-tively discharged through the appointment of specialists; they have no directauthority over employees other than those of their own departments. Linemanagement includes, for example, head receptionists, head housekeepers,head chefs and restaurant managers. Specialists include accountants, buyers,personnel and purchasing officers and similar posts. In order to draw a distinc-tion between the two, it is helpful to confine the designation ‘manager’ tooperated departments.

It is also relevant to refer in this context to a confusion, which often ariseswith various trainee positions. It is difficult to justify such titles as ‘traineemanager’ unless its holder has been designated to fill a specific post, for

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which he or she is training. A person who is undergoing training with a viewto an ultimate unspecified position of responsibility is more appropriatelydescribed as a management trainee.

Organization Structure of a Large Hotel: an Illustration

Some of the concepts discussed in this chapter are illustrated in the organi-zation chart of a large London hotel with several hundred rooms, extensivefood and beverage facilities and several hundred employees (Figure 18). Inthis instance a conscious attempt has been made to introduce a manage-ment structure designed to reduce the span of control of those concernedwith the coordination of related activities and to provide a high degree ofdelegation.

Each position in the chart carries specific responsibilities and also over-all responsibilities common to all management positions, such as the imple-mentation of policy in relation to sectional requirements, employeemotivation, training, safety, adherence to budgets and accountability for theperformance and results of the department(s) for which a particular indi-vidual is responsible. However, each individual is responsible only for thoseresults he or she can control.

The organization chart is supported by schedules of management respon-sibilities, which state for each position the title, the responsibilities of thepost, the immediate superior, the relationships with other management posi-tions within the organization, as well as the requirements of the post in termsof age, education, training, experience and any special requirements.

A ‘principle of three’ has been introduced in this hotel in decision-making.For example, menu planning for each outlet is undertaken by the food andbeverage manager, the chef and the appropriate departmental head; full-time members of staff are engaged by the personnel officer, the immediateand the next-but-one superior of the employee. In relation to menu plan-ning this approach is considered helpful in securing maximum utilization of kitchen facilities and in giving full recognition to the position of eachdepartmental manager. In relation to staff engagement the principle is considered to be conducive to good selection, to creating a favourable impres-sion on future employees, to securing the acceptance of new employees by their superiors, and to establishing a close knowledge of employees bymanagement.

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HeadTelephonist

Head ofReservations

HeadConcierge

HeadReceptionist

Head BillOffice Clerk

ResidentManager

GeneralManager

PurchasingOfficer

PropertyManager

SecurityOfficer

HeadCashier

Deputy HeadHousekeeper

Deputy NightManager

HeadHousekeeper

NightManager

Head ofAccounts

Head ofControl

HeadStorekeeper

Bar and CellarManager

BanquetingManager

HeadChef

SousChefs

RestaurantManager

Grill RoomManager

Coffee ShopManager

Staff CateringSupervisor

HeadBarperson

Head LinenKeeper

AssistantHousekeepers

CellarSupervisor

Lounge HeadWaiter

Floor HeadWaiter

RestaurantHead Waiter

Sommelier

PublicRelations

Officer

SalesPromotion

Officer

HumanResources

Officer

Food andBeverageManager

Front ofHouse

Manager

Comptroller

Figure 18 Organization chart of a large hotel


The scenarios surrounding the role of technology suggest that the struc-ture of the hotel – how resources are allocated and functions assigned– will change dramatically for two reasons. First, because the hotelwill have to be an efficient user of increasingly scarce resources. Thisis already apparent as hotel companies continue to downsize and usetechnology to supplement what has been lost. Secondly, the nature of the tasks performed to deliver optimum levels of service will be alteredby the use of technology. The combination of downsizing and technologywill require more responsibility from hotel employees at all levels.



In hotel uniform and standard systems of accounts operational expensesrelating to the whole hotel, as distinct from those relating to particular oper-ated departments, are treated as undistributed operating expenses. They are

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Table 36 Administrative and general expensesa as a ratio of hotel sales in mainregionsb

1995 1996 1997(%) (%) (%)

Total world 9.6 9.6 9.2Africa and the Middle East 10.4 9.4 9.8Asia 8.1 8.7 8.0Australia and New Zealand 7.8c 7.6c 7.0Europe 9.7 9.2 9.2North America 9.2 9.9 9.0d

Latin America/Caribbean 12.8 12.5 13.3e

a Typically includes cash overages and shortages, credit card commissions, credit and collection,data processing and information systems, donations, dues and subscriptions, executive officecharges, human resources, internal audit, internal communications systems, loss and damage,operating supplies, postage and telegrams, professional fees, provision for doubtful accounts,security, transportation (non-guest) and travel and entertainment.b All figures are arithmetic means.c Australia only.d Excluding USA.e South America.



commonly classified in four main groups: administrative and general;marketing; energy; property operation and maintenance.

The first category, administrative and general expenses, covers to a greatextent the payroll and other expenses of general management, accountingand control. Their incidence in hotels contributing to Horwath Internationalreports in the late 1990s is shown in Table 36 and in European hotels inTable 37. In most global regions, with the major exception of Latin Americaand the Caribbean, administrative and general expenses amount to around 8-10 per cent of total sales. Among European countries that level is consistentlyexceeded by Ireland.

Information Technology in Hotels

Since the 1960s, rapid development of information technology and computershas spread to almost every walk of life and some of its most fruitful appli-cations have been in service industries, in accounting, banking and retailing,as well as in hotels. More recently developments in computer hardware andsoftware have enabled the more widespread use of computers in both small

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161

Table 37 Administrative and general expensesa as a ratio of hotel sales inselected European countriesb

1995 1996 1997(%) (%) (%)

Austria n/a 6.7 8.7France 10.6 n/a 9.0Germany 9.0 9.3 9.9Ireland 12.3 10.2 10.5Norway n/a 6.0 6.4Portugal n/a 10.6 9.5Switzerland 7.5 6.7 9.1United Kingdom 9.2 8.8 9.1

a Typically includes cash overages and shortages, credit card commissions, credit and collection,data processing and information systems, donations, dues and subscriptions, executive officecharges, human resources, internal audit, internal communications systems, loss and damage,operating supplies, postage and telegrams, professional fees, provision for doubtful accounts,security, transportation (non-guest) and travel and entertainment.b All figures are arithmetic means.



and large hotel operations. This technology now makes possible fast, reliableand cheap electronic devices that can help hotels in the following areas:

� Administration: word-processing, spreadsheets, data storage and manipulation.� Communications: fax, e-mail, telephone, messaging, pagers.� Control: reservations, billing, telephone charging, in-room entertainment.� Finance: budgeting, accounting and taxation.� Internal systems: property and energy management, security and fire control.� Management: management information and decision-making, project

management systems.� Marketing: Internet selling, customer profiling.

The new technology is fast and speed is important in hotels – in respondingto a guest, travel agent or tour operator enquiring about room availability, ineffecting a reservation, in linking the reservation with the registration ofguests, their charges, and the settlement of accounts.

The new technology is accurate and accuracy is important in hotels. Thesale of a drink affects cash or a guest’s bill, the liquor stock and the revenueanalysis of the hotel – it should affect all three to exactly the same extent.

The new technology is becoming cheap to use, cheaper than ordinary officemachinery, and with rising costs of clerical labour in hotels, the scope forsaving may be considerable.

The new technology, therefore, also has a major contribution to make tothe way that hotels operate.

The main applications of computers in hotels are being extended fromtheir established role in reservation systems to front office procedures andguest accounting, to purchasing, stock control and general accounting func-tions of hotels, as well as other aspects of hotel operations, to form integratedmanagement information systems, which enable the whole business to beclosely coordinated and monitored.

A major development of recent years has been a rapid growth of computerreservation systems (CRS) and global distribution systems (GDS) and centralreservations systems. Developed initially by airlines, the interactive electronicdata systems provide direct access through terminals not only to airline but alsohotel and other operators’ computers, to establish product availability, makereservations and print tickets or confirmations. The leading hotel consortiashown in Appendix G use the power of the new technology to market the hotelservices of their members around the world. Global distribution systems allowthese consortia to update information on availability of room stock and prices.

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It is difficult to consider any aspect of hotel oper-ations without reference to staffing and it isimpossible to confine staffing considerations toa single chapter. Staffing and related aspects ofhotel operations, therefore, receive some atten-tion throughout this book. It is helpful to set thischapter in the context of the various referencesmade to staffing earlier and also subsequently, sothat a wider view may be taken of the humanresources in the hotel business by linking togetherthe separate parts.

In Chapter 1 hotels are seen as importantemployers of human resources, in Chapter 2 theservice provided by employees is described as anintegral element of hotel products, and in Chapter3 hotel employees enter into the policies, philoso-phies and strategies of the business. Theorganization and staffing of the revenue-earningactivities of hotels are considered in Chapters 7,8 and 9, and similarly these matters are includedin relation to the servicing activities of hotels inChapters 10, 11 and 12. Several of these consid-erations are brought together in Chapter 13 aspart of the discussion of hotel organization.Performance in hotels forms a separate Chapter15. The distinctive characteristics of small hotels,

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14Hotel Staffing


hotel groups and international hotel operations are outlined in Chapters 4, 5and 6.

The concern with the human resource function (or the personnel functionas it used to be described) of the hotel covers the following main aspects:

� job analysis, manpower planning and scheduling of work;� recruitment, selection and training of employees;� job evaluation, conditions of employment and welfare of employees;� promotion, retirement and termination of employment;� employee consultation, negotiation and the handling of disputes.

The employment of people in hotels in different countries takes place inparticular economic, political and social environments, in hotels with differ-ent market and operating conditions, customs and practices; increasinglyemployment is regulated by laws of those countries. It is, therefore, less thanrealistic to attempt to deal with the various aspects of the human resourcefunction in a way that would be meaningful to all or most hotels. This chapterhas particular and somewhat limited aims and scope, and focuses on threeaspects: determinants of hotel staffing, variations in hotel staffing to be foundin different regions and countries, and the organization of the human resourcefunction, which may be applicable beyond the boundaries of one country.There are many texts dealing more or less comprehensively with humanresource function, some of them specifically in hotels, and several of those available in Britain are listed as suggested further reading for thischapter.

Determinants of Hotel Staffing

In their study of British hotels, the Department of Employment ManpowerResearch Unit (1971) identified eight main factors that determine hotelstaffing:

� Size of hotel (number of bedrooms, number of beds, number and size ofrestaurants, etc.) determines the scale and type of operations and the extentto which economies of scale can be achieved. Large hotels tend to havea lower staff/guest ratio than medium-sized hotels and the ratio was alsofound to be low in smaller owner/managed hotels where the owner andhis family generally work longer hours and employ fewer staff.

� Ownership may affect staffing by its influence on the scale of operationand through the owner’s attitude to hotelkeeping. Group-owned hotels tend

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to be larger and more standardized than the independent hotels, whichtend to be more individualistic.

� Age and layout of the buildings affects the efficiency of hotel operationsand, therefore, the staffing levels. Modern purpose-built hotels with a viewto ease and economy of operation can operate with fewer staff than olderhotels, which are more difficult and expensive to operate.

� Range and type of facilities and services influence the number and typeof staff required to provide them. Generally the greater the variety of foodand beverage facilities and of other guest services within the hotel, thegreater the staffing requirements.

� Methods by which hotel services are provided have a pronounced effecton the number and skills required to provide them. Hotel services maybe provided personally by staff or through self-service and other non-personal methods with wide variations in required staffing.

� Quality of staff has a bearing on their output and, therefore, on the numberof staff required to provide a particular volume and standard of hotel facil-ities and services. This is a matter of attitude, motivation and training.

� Organization influences the staffing of hotels through the division of tasksand responsibilities, the extent of use of labour-saving equipment, tech-niques and procedures, and the extent to which specialist contractors andsuppliers are used for particular hotel requirements.

� Incidence of demand, annually, weekly and during the day, gives rise toannual, weekly and daily fluctuations in staffing requirements, which canbe met to a varying extent by the employment of temporary, casual andpart-time staff.

Hotel Products and Staffing

Numbers of employees in different departments depend on several factors,including the relative importance of each activity in the total hotel opera-tion, and also on the criteria used in allocating employees betweendepartments. The distribution of employees between the various activities ofthe hotel provides a broad indication of the occupational requirements of thehotel operation. Generally even smaller hotels require a range of several quitedistinct skills and attributes in their employees, and the larger the hotel, thegreater the range and complexity of its staffing.

The operating conditions of various hotels, the range of skills and occu-pations, their grouping in departments and the conditions of work, are someof the distinctive features of employment in hotels. The staffing of hotels has particular requirements and poses particular problems for management,

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165


especially when the human resource function is interpreted as dealing withmore than just the process of employment. It is, therefore, important toconsider how the human resource function may be organized.

Organization of the Human Resource Function

The various aspects of the human resource function may be the direct respon-sibility of the hotel manager in a smaller hotel, but as the size of the operationincreases, the manager may delegate some or all of them to an assistantmanager. In a large hotel or in an hotel group the human resource functionis normally the responsibility of a separate department, which forms one ofthe main service departments of the hotel. In any hotel where the responsi-bility is delegated, line management is to a greater or lesser extent concernedwith aspects of the human resource function too. Whilst human resource

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RecruitmentAssistant

(c)

Training Manager(d)

Welfare Assistant(e)

Human ResourceManager

(a)

Human ResourceDevelopment

Assistant(b)

General Manager

Head Office Each Hotel

Human ResourceManager

(Head Office)(f)

Assistant Manager(Human Resources)

(g)

Figure 19 Organization of the human resource function of a group of hotels


administration – the various employment procedures in particular – may beremoved from line managers, they nevertheless normally participate inemployee selection and usually also in on-the-job training; through the direc-tion and supervision of employees they are also directly concerned with thehuman relations of the business generally.

The particular responsibilities involved and how they may be organized,can be seen most clearly in hotel operations where they are highly devel-oped and specialized. This is illustrated in what follows in the example ofan hotel group, which operates 18 London hotels with some 3500 employees.The illustration of the organization of the whole human resource function isfollowed by an illustration of the approach of the same company to training,one of the integral component functions of the human resource department.

The organization of the central human resource department and the rela-tionship between the centre and individual hotels is summarized in outlinein Figure 19 and in Table 38. This is not necessarily typical of the approachesadopted in hotel companies generally or in Britain in particular, but it illus-trates well what is involved and a possible approach.

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Table 38 Schedule of human resource responsibilities in a group of hotels

Position Responsible to Responsible for

(a) Human Resource General Manager All aspects of the human Manager resource function

(b) Human Resource Human Resource Job analyis and evaluation, Development Assistant Manager research, records,

statistics(c) Recruitment Assistant Human Resource Recruitment and preliminary

Manager selection(d) Training Manager Human Resource All aspects of training

Manager(e) Welfare Assistant Human Resource Health, welfare, safety,

Manager including staff accommodation

(f) Human Resource Human Resource All aspects of the human Manager (Head Office) Manager resource function in

respect of head office personnel and hotel management

(g) Hotel Assistant Manager Hotel Manager All aspects of the human(Human Resources) resource function in

respect of staff in the hotel


The human resource manager is one of several specialists reporting directlyto the general manager; he or she is particularly concerned with employmentpolicies, with broad issues of employment in the company and with themanagement of the department. The day-to-day operation of the departmentis divided between several key subordinates within the department and thosewith human resource responsibilities in individual hotels. One of the keysubordinates is responsible for the human resource function of head officeemployees, hotel managers and assistant managers.

The central human resource department provides a service to the headoffice and to the hotels in the group. The allocation of responsibilities forhuman resource matters to an assistant manager in each hotel implies thatthat person is the group human resource officer’s representative in the hotel,but with a direct line of responsibility to the hotel manager.

Organization of Training

The training division of the human resource department aims to contributeto:

� improving employees’ knowledge, skills and attitudes to work;� increasing output and sales;� improving recruitment;� increasing employees’ loyalty;� improving the image of the Company in the outside world;� reducing breakages, waste of materials and misuse of equipment;� reducing accidents;

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Trainer, Aidsand Equipment

(I)

OperativeTrainer

(h)

SupervisoryTrainer

(i)

ManagementTrainer

(j)

TrainingManager

(d)

HumanResourceManager

TrainingInstructors

(k)

Figure 20 Organization of the training function in a group of hotels


� reducing absenteeism;� reducing labour turnover;� reducing stresses on management.

The organization of the training division is shown in outline in Figure 20and in Table 39.

Functions of the Training Division

In order to achieve its aims, the training division has the following mainfunctions:

� to formulate a training policy for the approval of the General Managerand the Board and to keep them regularly informed of its implementation;

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Table 39 Schedule of training responsibilities in a group of hotels

Position Role

(d) Training Manager Directs and coordinates all training and maintains close liaison with Recruitment and Welfare Assistants, Human Resource Manager (Head Office) and Hotel Assistant Managers (Human Resources)

(h) Operative Trainer Is responsible for supervision and coordination of all training below the level of assistant head of department

(i) Supervisory Trainer Is responsible for supervision and coordination of all management training above operative and below assistant manager level, i.e. head and assistant head of department training

(j) Management Trainer Is responsible for supervision and coordination of all management training above head of department level

(k) Training Instructors Are specialist trainers in food production, food and drink service, housekeeping, reception and administration, providing instruction at all levels, under the supervision and in cooperation with training officers

(l) Trainer, Aids and Equipment Is responsible for production, maintenance and storage of all training aids and equipment, including operational and training manuals


� to prepare an annual budget for the approval of the General Manager andthe Board and to report regularly to them on income and expenditure;

� to identify quantitatively and qualitatively the training requirements forall grades and categories of employees and keep them under review;

� to maintain close liaison with educational institutions and training centres,assess the appropriateness of their facilities and services for the trainingrequirements of the Company, and to arrange for new courses;

� to establish and operate induction, orientation, refresher and other appro-priate courses for different grades and categories of Company employeesas necessary, and to make arrangements for their attendance;

� to cooperate with appropriate staff of the human resource department inestablishing and maintaining an inventory of management and supervisorystaff and those suitable for developing into such positions, with a view toproviding for systematic development of existing and new managers andsupervisors;

� to establish and administer training schemes for all grades and categoriesof employment;

� to maintain adequate premises for purposes of training administration andinstruction;

� to prepare operating and training manuals and other publications, teachingaids and other necessary material for employee training;

� to maintain all necessary procedures for training within the Company;� to represent the Company in all matters concerned with training both

within and outside the Company and advise the General Manager and theBoard on all such matters.

. . . the hotel industry, along with other sectors in travel and tourism, willfind it necessary to rethink attitudes towards investment in human capital.Training and development programmes will no longer be luxuries butwill be essential to meet the needs brought about by technology and by the changing customer and labour force. Such programmes willrequire considerable investment in technology to implement effectively.In addition, managers will have to re-examine attitudes to the way humanresources can be used to meet both customers’ and employees’ needs,requiring an in-depth analysis of the spectrum of human relations.


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The performance of hotels reflects their successin a range of areas. Successful performance isnecessary for any hotel to survive and prosper,often in an increasingly competitive environment.Success enables the hotel to earn the revenuerequired to pay its debts, reward its staff andmake the profit to give a suitable rate of returnfor its owners or investors. As with any modernbusiness activity, there are greater pressures toperform better, not least to ensure that customersare happy with the services provided and thatthey return to the hotel. Performance is a broadterm and this final chapter will explore someways in which it might be measured and moni-tored.

Criteria of Performance

The hotel can be regarded as a systems modelwhich takes in inputs that lead to desirableoutputs, as shown in Figure 21.

The effort, time and capital that is put into abusiness can lead to outputs of job satisfaction,wages and salaries and return on investment forstaff and owners. Similarly, the hotel system can

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15Performance in Hotels


input tired and hungry customers and output those whose needs are satis-fied by the services provided by the hotel.

Performance is a relationship between the inputs and outputs of an hotel,including tangible goods and intangible services. Tangible goods include foodand drink to be consumed by the customer, while the services produced byan hotel are less tangible and are often subjectively judged by the customer.As a consequence, it is more difficult to measure intangibles objectively andto ensure that hotel services always satisfy the customer. It is much easierto use absolute measures of performance such as profit, return on investmentand assets, as described in Chapter 12. Similarly, hotels need to know howefficient they are in relating inputs to outputs (e.g. costs to sales), especiallywith labour costs, which are often the largest single element of cost for anhotel.

One way of integrating the tangible and intangible measures that driveperformance is through Kaplan and Norton’s (1992) ‘Balanced Scorecard’,which is shown in Figure 22.

Because the running of an hotel nowadays is such a complex activity,managers need to be able to monitor the business from a number of perspec-tives:

� Financial perspectives: How the hotel looks to shareholders.� Internal business perspectives: The activities in which the hotel must

excel.

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INPUTS

Costs

Employees

Tired and hungrycustomers

Capital

Time and effort

OUTPUTS

Revenue

Job satisfaction

Fed and restedcustomers

Return on investment

Wages and salaries

Figure 21 The hotel as a systems model


� Innovation and learning perspective: Ways in which the hotel canimprove and create value.

� Customer perspective: The hotel from the viewpoint of customers.

Financial Perspective

In order to succeed, hotels must generate outputs that can be measured interms of profitability, growth and shareholder value. As shown in Chapter12, financial information can be shown either as actual figures or as ratios.Profitability, sales and costs can be indicated in the profit and loss operatingstatement, while the net worth of the business is recorded in the balancesheet.

Because the fixed costs of hotels are usually high, it is important that salesand revenue (outputs) are maximized and costs (inputs) are minimized. Thecorrect balance must be struck between charging a price that covers costsand includes a suitable profit, with attracting a volume of trade that the hotelcan cope with while maintaining the desired level of quality. As demand for

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173

FinancialPerspective

Innovation andLearning

Perspective

CustomerPerspective

Internal BusinessPerspective

Figure 22 Kaplan and Norton’s (1992) Balanced Scorecard


hotel services is often variable, seasonal or intermittent, management mustensure that staff are kept occupied and productive.

Measures of labour productivity relate output to labour input, and threemain types are physical, financial and combined physical/financial measures:

� physical measures relate physical units of output to numbers employed orhours worked;

� financial measures relate output measured in financial terms to pay-roll;

� physical/financial measures relate output measured in financial terms tonumbers employed or hours worked.

Physical measures are normally specific to particular types of business;financial and combined physical/financial measures can be applied to differenttypes of business, and comparisons can be drawn between them.

There have always been two fundamental ways of widening businessprofit margins. One is by increasing demand for a service or productand the other is by reducing fixed and/or variable costs. Each approachhas commonly been regarded as distinct and unrelated to the other . . . However, adopting either market or cost strategies is too limitedan approach to hotel productivity . . . it is fundamental to the successfulmanagement of productivity in hotels to accept that a reciprocal rela-tionship exists between demand and supply, inputs and outputs, marketstrategies and cost strategies. Hence there is a need for hotels to bemore than simply cost- or market-orientated, but to be both simulta-neously.

Stephen Ball et al., in Hospitality Management, Vol. 5, No. 3

Most measures used in productivity comparisons, which have a commonapplication to establishments and firms, as well as whole industries andeconomies, relate output in money terms to numbers employed. A simpleand widely used approach is to calculate the amount of sales generated peremployee. Another guide to productivity and service is the number ofemployees per bedroom.

Tables 40 and 41 show the staff to room ratios of hotels in Europe, Africaand the Middle East in the years 1996 and 1997. The tables suggest that the

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Table 40 Employees per room in hotels inselected European citiesa

Staff to Staff to room ratio room ratio

1996 1997

Average 0.71 0.72Barcelona 0.49 0.51Brussels 0.46 0.47Geneva 0.74 0.72London 0.82 0.83Madrid 0.64 0.62Moscow 1.46 1.42Paris 0.82 0.82Rome 0.65 0.70Warsaw 1.22 1.26



Table 41 Employees per room in hotels inselected African and Middle Eastern citiesa

Staff to Staff to room ratio room ratio

1996 1997

Average 1.34 1.30Abu Dhabi 1.25 1.22Eilat 1.32 1.32Jeddah 1.06 1.06Karachi 1.71 1.63Kuwait City 1.08 1.11Manama 1.23 1.23Muscat 1.53 1.55Riyadh 1.04 1.05Tel Aviv 0.90 0.88




hotels in Europe have fewer employees per bedroom, and this may be areflection of the greater cost of labour than in Africa or the Middle East.

Table 42 shows the relationships between payroll to sales, and sales topayroll in hotels in the main regions in the late 1990s. This relationship maybe expressed in one of two ways. One is calculated as a percentage, whichshows payroll as a proportion of sales. Another is an index, calculated bydividing payroll into sales; the index represents the number of times thepayroll is covered by sales, or, in other words, the number of sales dollarsor pounds generated for each dollar or pound of payroll.

These measures give a broad indication of productivity levels and trendsfor an individual hotel, but have to be interpreted with care in comparisonsbetween hotels, which may differ in the range and type of facilities andservices provided.

Internal Business Perspective

The second perspective of the Balanced Scorecard is the internal businessperspective. This includes the activities and processes in which the hotel mustexcel in order to be successful, such as:

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Table 42 Sales and payroll in hotels in main regionsa

Payroll/sales Sales/payroll

1995 1996 1997 1995 1996 1997(%) (%) (%)

Africa and the Middle East 23.9 23.8 26.5 4.2 4.2 3.8Asia 25.7 26.2 29.1 3.9 3.8 3.4Australia 36.1 35.5 34.3 2.8 2.8 2.9Europe 32.3 33.1 33.8 3.1 3.0 3.0North America 32.7 32.4 30.9 3.1 3.1 3.2Latin America/Caribbean 28.8 28.8b 32.0c 3.5 3.5b 3.1c

a All figures are arithmetic means.b Latin America.c South America.



� Management: of the property, people and planning for the future. Hotelmanagement is an important activity and a determinant of the success ofthe hotel.

� Operations: the day-to-day running of the business that is central to theway that hotels run. The operational day often runs from check-in timeto check-out time on the following morning. These are often busy timesfor hotels and need to operate efficiently.

� Systems: those internal processes that ensure that, for example, informa-tion is sent to the right department.

� Information: All hotels need to keep records about, for example, customersand finance. Keeping customer records can help the hotel to be respon-sive to the needs of regular customers.

� Communication: Managers and staff need to work together to satisfycustomers, so there is a constant need to communicate effectively. In somehotels there can be conflict between departments that can adversely affectrelationships.

Innovation and Learning Perspective

In the current highly dynamic market environment, there is an increasing need for hotels to consider how they should operate in the future, and this takesinto account product development, marketing and technology. It is the role of management to constantly re-evaluate the facilities and services of the hotelto ensure that they will meet the needs of the market in the future. This mightinclude reviews of the physical facilities; bedrooms, public areas and food and beverage offerings as well as the menus, drinks and style of service offered.In the past few decades, the hotel industry has been characterized by greaterchange and less traditionalism, and this calls for an openness on the part ofmanagement and staff that requires greater creativity and innovation.

One of the greatest challenges of the present era is for hotels to managetheir workforce effectively, because many hotels realize that their employeesare their greatest assets. With an effective workforce, hotels can deliver therequired level of service quality and make the required level of profit, butthe challenge is to develop and retain staff.

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In addition to upgrading their competencies and skills, managers needto become more effective in the behavioural domain by learning how to obtain, motivate and develop human resources that are becomingincreasingly scarce, diverse and expensive. The “my way” or “highway”style of leadership will have to be replaced with one that incorporatesa more individualistic employee who expects more from managementthan ever before. This will also require new communication skills thatacknowledge cultural diversity.


Customer Perspective

The final perspective on performance is that of the customer. Of course,hotels have always had a direct and intimate relationship with their customers,but good relationships do not always ensure that hotels know how customerssee them. This is why many hotels take much time and effort in conductingguest satisfaction surveys and using ‘mystery’ guests to objectively test thequality of their products and service. As the hotel industry world-wide hasbecome so competitive, there is a greater need to focus more on the customerand continuously adapt to their needs. This means that hotels must reviewtheir service and facilities against what is offered by competitors, so that theproduct is periodically developed. Such developments may take the form of

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We hope that you have enjoyed your visit and that you will return again soon. We strivefor quality at this hotel and would appreciate any comments or constructive ideas thatyou may have by filling in this Comment Slip.

Name

Address

Tel. No.

Comment

Room No. (if applicable)

Date

COMMENT SLIP

PLEASE HAND THIS COMMENT SLIP TO RECEPTION

Figure 23 Forte Hotels comment slip, 1999


an improvement in the physical environment, or the nature of the hotel service,as described in Chapters 7, 8 and 9.

Hotels, therefore, need to gauge customer feedback regularly so that regularcomplaints of service or facilities can be addressed. The most popular meansof measurement is by asking hotel users to complete questionnaires orcomment cards about their perceptions. Two examples are shown in Figures23 and 24.

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NameAddress

Country

Arrival date Departure date

Please take a moment and answer the following questions.

How would you rate this hotel on:

When you arrived at the hotel, was the information the hotel had concerning yourreservation correct? Yes NoHow were your reservations made?

Hotel reservation department Free-phone numberTravel agent Group reservatioin cardOther (please specify)

Ease of reservations process 10 9 8 7 6 5 4 3 2 1

Check-in speed 10 9 8 7 6 5 4 3 2 1

Staff efficiency 10 9 8 7 6 5 4 3 2 1

Staff attitude 10 9 8 7 6 5 4 3 2 1

Attentiveness of front desk staff 10 9 8 7 6 5 4 3 2 1

Attentiveness of bell staff 10 9 8 7 6 5 4 3 2 1

Check-out speed 10 9 8 7 6 5 4 3 2 1

Overall quality of service and staff 10 9 8 7 6 5 4 3 2 1

Providing adequate information about 10 9 8 7 6 5 4 3 2 1the activities/facilities in and aroundthe hotel

Was your bill correct? Yes No

Please share any comments about the quality of our hotel staff or their service

Figure 24 Extract from a guest satisfaction survey from Marriott Hotels, 1999


Some Ways to Higher Productivity

Productivity measures provide a means of monitoring productivity levels andtrends, and of comparing them between hotels and departments, with a viewto identifying reasons for differences, and taking steps to improvement.

Although annual ratios for the hotel and for each significant departmentare a useful starting point, it is clear that for many hotels annual figuresconceal wide variations between different parts of the year. It is, therefore,desirable to monitor changes in productivity for periods for which basic inputdata are readily available, on a quarterly, monthly or weekly basis.

When interpreting the calculated ratios in comparisons, the reasons fordifferences between hotels and departments and between different periodscan be normally identified to the factors that determine hotel staffing,described in Chapter 14. Over short periods of several weeks or months, theincidence of demand may be the only variable. Over a year or so, somechanges in productivity may result from changes in most of the factors listedexcept size, ownership and age and layout of the buildings. Over a longerperiod all the influencing factors may change and generate changes in produc-tivity.

The traditional view about increasing labour productivity is that it is largelyrelated to the substitution of capital for labour, by machines replacing men.Whatever scope there may be for this in hotels, there are other means toimproved productivity in the short and medium term:

� A major scope lies in an examination of the extent to which highly labour-intensive guest services continue to meet an economic demand, and inthe elimination of those which do not, or their provision by non-personalmethods. In many hotels beds are ‘turned down’ at night; yet, the bulkof hotel guests do not have beds ‘turned down’ at home; it is expensivein staff time; it intrudes into guests’ privacy. Tea and coffee making equipment and bar units in rooms tend to be preferred by many gueststo floor service.

� As the incidence of demand results in much idle time in hotels, there isoften much scope for improving the utilization of employees’ time throughthe definition of jobs, work scheduling and multifunction staffing, whenthe same employee performs more than one role or task in a working day.

� Concurrently, an improvement in the quality of staff may be achievedthrough improved recruitment, selection and training, and through finan-cial and other incentives to better performance.

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Labour productivity is of major importance for firms and industriesand for the whole economy. Through its effect on output, it is a majorinfluence on the viability of economic activities and ultimately on livingstandards. It is also a major influence on the competitive position offirms and industries in their markets and on the country’s internationalcompetitiveness.

The employment share of hotel and catering services in the (UK)economy exceeds significantly their share of national output, indicatingthat they are labour-intensive.

The highest turnover per person employed is generated by publichouses, the lowest by hotels, restaurants and related activities.

S. Medlik, Tourism and Productivity

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2709 HOTELS 16 apps-end C/PT/ck 7/4/00 10:44 am Page 182

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Appendices


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Appendix ATravel and Hotels in the

United Kingdom in the 1990s

In the 1990s UK residents made in most years more than 100 million overnight trips, with well over 400 million nights away from home. Overseasvisitors increased from 18 million in 1990 to 26 million by the end of the decade and their nights in the country from less than 200 to more than 220 million. Hotels were significant providers of accommodation for both UK residents and overseas visitors.

The total number of hotels has been variously estimated at more than 60 000, but in the absence of compulsory registration, less than half of thetotal are registered with a tourist board – around 19 000 in England, 2 500in Scotland, 1 400 in Wales, with a total capacity of some 900 000 beds.About 4 500 hotels are inspected by the motoring organizations.

The industry turnover increased at current prices throughout the 1990s,from more than £6 billion in 1990 to around £10 billion by the end of the decade. Following major growth in employment in the 1980s when theindustry created more than 50 000 new jobs, in the 1990s employees inemployment (excluding self-employed) approached 300 000.

After its emergence from the recession of the early 1990s, much of the hotelindustry experienced one of the most sustained periods of growth in its history,when it benefited from strong demand, high occupancies and increasing profitability. This performance stimulated a major investment programme,reflected both in the expansion of UK companies abroad and in foreign invest-ment in the UK. UK companies own three of the most important global hotel

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brands – Hilton International, Holiday Inn and Inter-Continental Hotels andResorts.

As we go to print, at the end of the decade and of the century, the UKhotel industry faces with cautious optimism the millennium year.

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186


Appendix BTravel and Hotels in

America in the 1990s

Following the recession of the early 1990s and the Gulf War of 1991, theUS economy enjoyed significant growth for much of the decade. Americansmade well over one billion trips and stayed more than four billion nightsaway from home each year. In addition to travel by US residents, US hotelsbenefited annually from well over 40 million international visitors. However,their profile changed substantially: while the number of overseas travellersto the US continued to grow, for a number of years travel from Canada and Mexico declined or stagnated.

There was major growth in hotel employment in the 1980s, when theindustry created more than half a million jobs against an indifferent produc-tivity performance. Employment in the early 1990s remained in the regionof 1.6 million jobs, before it resumed modest growth, and there appears tohave been a substantial improvement in hotel productivity.

Increasing occupancies and room rates combined with improved efficiencyresulted in the industry recording in the 1990s the highest profits in its history. The dramatic increase in profitability brought about an inflow ofinvestment capital into acquisitions, new development and modernization.However, new development was primarily concentrated in the limited serviceand extended stay sectors throughout the United States, whilst new full service hotels were mainly concentrated in such locations as Orlando andLas Vegas.

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Hotel chains represent the most visible part of the US hotel industry, eachwith hundreds of units and thousands of rooms. But, as in most countries,the bulk of US hotel firms are small businesses, which tend to escapepublished statistics; yet they represent much of the strength of the Americanhotel industry.

As we go to print, the hotel industry in America, as in the UK, faces thefuture with cautious optimism.

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Appendix CGlobal Capacity of Hotels and Similar

Establishmentsa, 1995

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189

Rooms Beds

Capacities in global regions Number % of(000) world

Europe 5 558 43.8Americas 4 638 36.5East Asia and the Pacific (EAP) 1 761 13.9Africa 402 3.2Middle East 190 1.5South Asia 147 1.2World 12 696 100.0

Major capacities in Europe Number % of Number(000) Europe (000)

Italy 944 17.0 1 738Germany n/a 1 491France 597 10.7 1 193Spain 565 10.2 1 074United Kingdom n/a 880


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Rooms Beds

Major capacities in the Americas Number % of Number(000) Americas (000)

United Statesb 3 000+ 65.0+ n/aMexico 370 8.0 741Canada 280 6.0 n/a

Major capacities in East Asia and the Number % of NumberPacific (EAP) (000) EAP (000)

China 486 27.6 987Japan 284 16.1 n/aThailand 256 14.5 n/aAustralia 170 9.6 489

a For most countries, hotels and similar establishments include hotels, motels, inns and boardinghouses; figure for the United Kingdom relates to England only.b Authors’ own estimate.

Source: World Tourism Organization, Compendium of Tourism Statistics 1992–1996, 18th edn, 1998



Appendix DHotel Occupancies in

Selected Countries, 1994,1995, 1996

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1994 1995 1996(%) (%) (%)

Room occupancyAustralia 56.8 58.5 65.5Canada 60.6 61.1 62.4China 62.2 58.1 55.3Egypt 56.0 58.0 63.0France 50.2 49.5 50.3India 69.3 73.7 71.1Japan 67.7 67.8 68.4Malaysia 65.3 65.5 62.3Mexico 50.4 51.2 53.3South Africa 49.3 57.1 56.4

Bed occupancyAustria 34.7 33.3 32.5Chile 37.5 26.6 28.5Germany 34.7 33.9 32.7Kenya 43.1 43.7 44.6Netherlands 34.7 35.3 36.4Portugal 36.0 38.0 38.2Spain 57.0 60.7 59.8Sweden 30.0 32.0 32.0Switzerland 41.0 38.5 36.8Turkey 39.1 47.0 51.2

Source: World Tourism Organization, Compendium of Tourism Statistics 1992–1996, 18th edn, 1998


Appendix ELeading Hotel Groups

World-wide

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Rooms Hotels Head office

1 Cendant Corporation 528 896 5 978 Parsippany, NJ, USA2 Bass Hotels & Resorts 461 434 2 738 Atlanta, GA, USA3 Marriott International 328 300 1 686 Washington, DC, USA4 Choice Hotels International 305 171 3 670 Silver Spring, MD, USA5 Best Western International 301 899 3 814 Phoenix, AZ, USA6 Accor 291 770 2 666 Evry, France7 Starwood Hotels & Resorts 225 014 694 White Plains, NY, USA

Worldwide8 Promus Hotel Corp. 192 043 1 337 Memphis, TN, USA9 Carlson Hospitality 106 244 548 Minneapolis, MN, USA

Worldwide10 Patriot American Hospitalty Inc./ 100 989 472 Dallas, TX, USA

Wyndham International Inc.11 Hilton Hotels Corporation 85 000 250 Beverley Hills, CA, USA12 Hyatt Hotels/Hyatt International 82 224 186 Chicago, IL, USA13 Sol Meliá 65 586 246 Palma de Mallorca, Spain14 Hilton International 54 117 170 Watford, Herts, England15 FelCor Lodging Trust Inc. 50 000 193 Irving, TX, USA16 Forte Hotels 48 407 249 London, England17 Société du Louvre 37 630 601 Paris, France18 Westmont Hospitality Group Inc. 37 207 305 Houston, TX, USA19 La Quinta Inns 37 019 287 San Antonio, TX, USA20 Club Méditerranée SA 36 010 127 Paris, France21 Red Roof Inns 34 181 295 Hilliard, OH, USA22 Extended Stay America 32 347 305 Fort Lauderdale, FL, USA23 Bristol Hotels & Resorts 32 066 120 Addison, TX, USA24 MeriStar Hotels & Resorts Inc. 29 455 117 Washington, DC, USA


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25 Lodgian Inc (formerly Servico) 26 968 143 Atlanta, GA, USA26 Prince Hotels Inc. 26 304 80 Tokyo, Japan27 Tokyu Hotel Group 25 337 118 Tokyo, Japan28 Prime Hospitality Corp. 24 516 180 Fairfield, NJ, USA29 Hospitality Properties Trust 23 440 170 Newton, MA, USA30 Circus Circus 23 418 15 Las Vegas, NV, USA31 Park Place Entertainment 23 000 17 Las Vegas, NV, USA32 Walt Disney Co. 21 050 19 Burbank, CA, USA33 Scandic Hotels AB 20 415 126 Stockholm, Sweden34 Riu Hotels Group 20 150 72 Playa de Palma, Mallorca,

Spain35 US Franchise Systems Inc. 19 844 227 Atlanta, GA, USA36 Friendly Hotels Plc 19 740 283 Edgware, Middlesex,

England37 Marcus Hotels & Resorts 19 462 175 Milwaukee, WI, USA38 Tharaldson Enterprises 19 041 288 Fargo, ND, USA39 Nikko Hotels International 18 907 52 Tokyo, Japan40 Fujita Kanko Inc. 18 860 81 Tokyo, Japan41 Shangri-La Hotels & Resorts 18 455 36 Hong Kong42 Iberostar 17 865 34 Palma de Mallorca, Spain43 Homestead Village Inc. 16 847 125 Atlanta, GA, USA44 Hotels & Compagnie 16 838 326 Les Ulis Cedex, France45 CDL Hotels 16 683 64 Singapore46 Whitbread Hotel Company 16 313 247 Luton, Bedfordshire,

England47 Husa Hotels Group 16 147 178 Barcelona, Spain48 Richfield Hospitality Services Inc. 15 180 57 Englewood, CO, USA49 Omni Hotels 15 112 43 Irving, TX, USA50 Queens Moat Houses Hotels 14 811 106 Romford, Essex, England

Source: Based on Hotels July 1999

Appendix E Leading Hotel Groups World-wide


Appendix FLeading Hotel Groups

in Europe

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1 Accor 291 770 2 666 Evry, France2 Sol Meliá 65 586 246 Palma de Mallorca, Spain3 Hilton International 54 117 170 Watford, Herts, England4 Forte Hotels 48 407 249 London, England5 Société du Louvre 37 630 601 Paris, France6 Club Méditerranée SA 36 010 127 Paris, France7 Scandic Hotels AB 20 415 126 Stockholm, Sweden8 Riu Hotels Group 20 150 72 Playa de Palma, Mallorca, Spain9 Friendly Hotels Plc 19 740 283 Edgware, Middlesex, England

10 Iberostar 17 865 34 Palma de Mallorca, Spain11 Hotels & Compagnie 16 838 326 Les Ulis Cedex, France12 Whitbread Hotel Company 16 313 247 Luton, Bedfordshire, England13 Husa Hotels Group 16 147 178 Barcelona, Spain14 Queens Moat Houses Hotels 14 811 106 Romford, Essex, England15 Barcelo Hotels 14 063 61 Palma de Mallorca, Spain16 Dorint Hotels & Resorts 11 758 77 Mönchengladbach, Germany17 Occidental Hotels 11 106 46 Madrid, Spain18 Treff Hotels AG 10 782 82 Bad Arolsen, Germany19 Thistle Hotels, Plc 10 764 60 Leeds, England20 Steigenberger Hotels AG 10 529 61 Frankfurt/Main, Germany21 Tryp Hotels 10 500 59 Madrid, Spain22 Orbis Co. 10 324 55 Warsaw, Poland23 Maritim Hotels 10 245 41 Bad Salzuflen, Germany24 Fiesta Hotels 9 708 37 Ibiza, Spain25 Mövenpick Hotels & Resorts 8 684 43 Adliswil, Switzerland26 LTI International Hotels 8 309 34 Düsseldorf, Germany27 Ringhotels 8 118 154 Munich, Germany


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28 NH Hotels SA 8 100 71 Madrid, Spain29 Stakis Hotels, Ltd 8 054 53 Glasgow, Scotland30 Rica Hotels & Restaurants 8 000 73 Sandvika, Norway31 Regal Hotel Group Plc 7 700 115 Newbury, Berkshire, England32 Restel 7 461 39 Helsinki, Finland33 Golden Tulip Hotels 7 000 46 EM Hilversum, Netherlands34 Swissôtel Ltd 7 000 22 Zurich, Switzerland35 Kempinski Hotels & Resorts 6 648 25 Munich, Germany36 Greenalls Hotels & Leisure 6 599 99 Warrington, Cheshire, England

(De Vere)37 Sunwing 6 500 22 Stockolm, Sweden38 Danubius Hotel & Spa Co. 6 356 39 Budapest, Hungary39 Jolly Hotels 6 042 37 Valdagno, Italy40 Sokos Hotels 6 021 39 Helsinki, Finland41 Euro Disney SCA 6 000 7 Marne-la Valleé, France42 Romantik Hotels 5 890 182 Karlstein/Main, Germany43 Robinson Club GmbH 5 831 25 Hannover, Germany44 Grecotel SA 5 628 22 Rethymnon, Crete, Greece45 First Hospitality AB 5 146 59 Stockholm, Sweden46 Paradores 5 000 86 Madrid, Spain47 Jarvis Hotels 5 000 62 High Wycombe,

Buckinghamshire, England48 Swallow Hotels Ltd. 4 848 37 Tyne and Wear, England49 Princess Hotels 4 647 11 Tarragona, Reus, Spain50 Warwick International Hotels 4 500 33 Paris, France


Appendix F Leading Hotel Groups in Europe


Appendix GLeading Hotel Consortia

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1 REZsolutions Inc 1 500 000 7 700 Phoenix, AZ, USA2 Lexington Services Corporation 375 000 3 000 Irving, TX, USA3 VIP International Corporation 183 500 1 468 Calgary, Alberta, Canada4 Supranational Hotels 123 500 827 London, England5 Leading Hotels of the World 90 200 315 New York, NY, USA6 Hotusa-Eurostars-Familia Hotels 80 000 757 Barcelona, Spain7 Keytel, S.A. 76 000 650 Barcelona, Spain8 Logis de France 66 180 3 682 Paris, France9 SRS Hotels Steigenberger 60 300 365 Frankfurt/Main, Germany

10 Sceptre Hospitality Resources 55 904 105 Englewood, CO, USA11 Golden Tulip Worldwide Hotels 49 789 394 Brentwood, Middlesex,

England12 Associated Luxury Hotels 35 657 62 Washington, DC, USA13 Summit Hotels & Resorts 31 846 159 Brentwood, Middlesex,

England14 Minotel International 31 000 720 Lausanne, Switzerland15 TOP International Hotels 30 000 260 Düsseldorf, Germany16 Sterling Hotels 27 320 92 Phoenix, AZ, USA17 Robert F. Warner Inc. 26 050 164 New York, NY, USA18 Preferred Hotels Worldwide 24 115 114 Chicago, IL, USA19 Historic Hotels of America 23 844 127 Washington, DC, USA20 Prima Hotels 22 143 143 New York, NY, USA21 ILA-Châteaux & Hotels de Charme 18 295 418 Brussels, Belgium22 Flag Choice Hotels 18 000 489 Melbourne East, Victoria,

Australia23 Small Luxury Hotels of the World 14 555 246 Surrey, England24 Concorde Hotels Group 14 000 74 Paris, France25 Relais & Châteaux 10 000 415 Paris, France



Appendix HHorwath International

Reports

Many illustrations of hotel operations in this book draw on Worldwide HotelIndustry studies published by Horwath International. What the reader shouldbe aware of is described below.

All data originate from Horwath International questionnaires completedeach year by several thousand hotels and are subject to non-sampling errors,such as differences in the interpretation of questions by the respondents.

The terminology and definitions follow the 9th revised edition of theUniform System of Accounts for the Lodging Industry. An explanation of themain terms and bases used is given in each report but the reader is advisedto consult the Uniform System for detail.

Arithmetic means of contributing hotels are now used throughout thereports. Each item is analysed separately and the reported accounts and ratiosare calculated for each item. All accounts are expressed in the commoncurrency of the US dollar, into which accounts in national currencies havebeen converted. Users of the information should be aware that currency fluctuations may have a significant effect on the dollar values.

Accounts and ratios are examined separately for six global regions andfor a number of countries. Data are indicative of contributing hotels but notnecessarily representative of any type of hotel or of any region or country.In the reports themselves data are also analysed into three price and threesize categories.

The general profile of the typical contributing hotel in the late 1990s isshown below:

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Location Urban, mainly city centreSome suburban, especially in North AmericaSome resort, especially in Africa, Middle East and Latin

AmericaMarket Primarily business travellers

Also leisure travellers, especially in Africa, Middle East and Latin America

Management Mainly chain-affiliatedAlso independent in all regions, especially in Europe and

Latin America

Pannell Kerr Forster Reports

For some illustrations the book also draws on Pannell Kerr Forster surveysof Europe, Middle East and Africa, which follow a somewhat differentapproach. The results are also presented according to the Uniform Systembut in local currencies. Separate city surveys are produced in addition toregional and country reports.

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198


Appendix ISelect List of Hotel and

Related Organizations

Australia

Australian Hotel Association8 Quay Street, Sydney, NSW 2000

Canada

Hotel Association of Canada1016–130 Albert Street, Ottawa, Ontario KIP 5GY

Ireland

CERT (Ireland’s State Tourism Training Agency)Cert House, Amiens Street, Dublin 1

Irish Hotel Federation13 Northbrook Road, Ranelagh, Dublin 6

New Zealand

Hotel Association of New Zealand8th Floor, Education House, 178 Willis Street, Wellington

South Africa

Federated Hotel Association of South AfricaPO Box 514, Rivonia 2128

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United Kingdom

British Hospitality AssociationQueens House, 55–56 Lincoln’s Inn Fields, London WC2A 3BH

Hotel & Catering International Management Association191 Trinity Road, London SW17 7HN

United States

American Hotel & Motel Association1201 New York Avenue NW, Washington DC20005–3931

Council on Hotel Restaurant and Institutional Education (CHRIE)International Headquarters Office, 1200 17th Street NW, Seventh Floor,Washington DC20036-3907

International

ASEAN Hotel and Restaurant Association (AHRA)Bank Pacific Building, Jalan Jenderal Sudirman, Jakarta, Indonesia(brings together hotel and restaurant groups in South-East Asia)

Caribbean Hotel Association (CHA)18 Marseilles St, Ste 2B, Santurce 00907, Puerto Rico

Confederation of National Hotel and Restaurant Associations in theEuropean Community (HOTREC)Bd Anspach 111, Bte 4, B–1000 Brussels, Belgium

Inter-American Hotel Association (IAHA)Fernandez Albano 171, 3er Piso, Casilla 3410, Santiago, Chile

International Association of Hotel Management Schools (IAHMS)c/o Hague Hotel School, Brusselselaan 2, B–2587 AH Den Haag, Netherlands

International Association of Hotel Schools DirectorsEuhofa Inernational, Le Chalet-à-Gobet, CH–1000 Lausanne 25, Switzerland

International Hotel & Restaurant Association (IHRA)251 rue du Faubourg St Martin, Paris 75010

International Hotel Association South Asia (IHASA)PO Box 2151, Tripureswar, Kathmandu, Nepal

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International Organization of Hotel and Restaurant Associations (HoReCa)Blumenfeldstrasse 20, CH–8046 Zurich, Switzerland

Nordic Hotel and Restaurant Associationc/o SHR, PO Box 1158, Kammakarg 39, S–11181, Stockholm, Sweden(brings together hotel and restaurant bodies in the Nordic countries)

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Appendix I Select List of Hotel and Related Organizations

201


Appendix JSelect List of Hotel

Periodicals

United Kingdom

Caterer & Hotelkeeper (weekly)Reed Business Publishing, Quadrant House, The Quadrant, Sutton, Surrey

SM2 5AS

Hospitality (10× annually)Reed Business Information Ltd, Quadrant House, The Quadrant, Sutton,

Surrey SM2 5AS

Hospitality & Hotelier International (annual)Sterling Publications Ltd, PO Box 799, Brunel House, 55A North Wharf Road,

London W2 1XR

Hospitality Matters (6× annually)Wordsmith and Company, Suffolk House, The Green, Wooburn Green,

Buckinghamshire HP10 0EU

Hospitality (monthly)Reed Business Information Ltd, Quadrant House, The Quadrant, Sutton,

Surrey SM2 5AS

Hotel (10× annually)Manor Publishing Ltd., 19c Commercial Road, Eastbourne, East Sussex

BN21 3XE

Hotel Management International (2× annually)Cornhill Publications, Kings Court, 2–16 Goodge Street, London W1P 1FF

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Hotel & Restaurant Magazine (monthly)Quantum Publishing Ltd, Quantum House, 19 Scarbrook Road, Croydon, Surrey

CR9 1LX

International Journal of Contemporary Hospitality Management (7× annually)MCB University Press, 60/62 Toller Lane, Bradford, West Yorkshire BD8 9BY

International Journal of Hospitality Management (quarterly)Elsevier Science Ltd, The Boulevard, Langford Lane, Kidlington, Oxford

OX5 1GB

United States

Cornell Hotel & Restaurant Administration Quarterly (bimonthly)Elsevier Science Inc., Box 945, New York, NY 10010

Hotel Business (24× annually)45 Research Way, #106, East Setauket, NY 11733-6401

Hotel & Motel Management (21× annually)Advanstar Communications Inc, 7500 Old Oak Boulevard, Cleveland, OH

44130–3343

Hotels (monthly)Cahners Publishing Co, 1350 East Touhy Avenue, Des Plaines, IL 60018–3303

Journal of Hospitality and Tourism Research (3× annually)Sage Publications Inc, 2455 Teller Road, Thousand Oaks, CA 91320

Lodging Hospitality (monthly)Penton Publishing Inc, 1100 Superior Avenue, Cleveland, OH 44114

Other countries

Australian Hotelier (monthly)Level 2, 44 Chippen Street, Chippendale, NSW 2008, Australia

Hospitality Magazine (monthly)PO Box 9904, Newmarket, Auckland, New Zealand

Hospitality Today Magazine (monthly)4180 Lougheed Highway, 4th Floor, Burnaby, BC V5C 6A7, Canada

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Appendix J Select List of Hotel Periodicals

203


Hotel & Catering Review (monthly)Marino House, 52 Glastuhule Road, Sandycove, Co. Dublin

Hotelier & Caterer (monthly)PO Box 180, Howard Place, 7450 Cape Town, South Africa

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Appendix KSuggested Further Reading

Chapter 1 Staying Away from Home

Chin J., Barney W. and O’Sullivan H. (1995) Hotels: Financial Managementand Reporting: An Industry Accounting and Auditing Guide, Chapter 1

Hanlon P. (1999) Global AirlinesJones P. and Lockwood A. (1989) The Management of Hotel Operations,

Chapter 1Jones P. (1996) Introduction to Hospitality Operations, Part AKnowles T. (1998) Hospitality Management – An Introduction, Chapter 1, 2Quest M. ed. (1990) Horwath Book of Tourism

Chapter 2 Hotel Products and Markets

Buttle F. (1994) Hotel and Food Service Marketing. A Managerial Approach,Chapters 4, 5

Gee C.Y. (1994) International Hotels: Development and Management,Chapter 13

Mullins L. (1992) Hospitality Management. A Human Resources Approach,Chapter 1

Chapter 3 Hotel Policies, Philosophies and Strategies

Boella M.J. (1996) Human Resource Management in the Hospitality IndustryTeare R. and Boer A., eds (1991) Strategic Hospitality Management. Theory

and Practice for the 1990sTeare R. and Ingram H. (1993) Strategic Management. A Resource-based

Approach for the Hospitality and Tourism IndustriesTeare R., Adams S. and Messenger S., eds (1992) Managing Projects in

Hospitality Organizations

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205


Teare R., Mountinho L. and Morgan N., eds (1993) Managing and MarketingServices into the 1990s

Chapter 4 The Small Hotel

Jones P. (1996) Introduction to Hospitality Operations, Chapter 6Lennick J. (1989) Running Your Own Small HotelQuest M. (1996) How to Buy Your Own HotelThomas, R. (1997) Management of Small Tourism and Hospitality Firms

Chapter 5 Hotel Groups

Chin J., Barney W. and O’Sullivan H. (1995) Hotels: Financial Managementand Reporting: An Industry Accounting and Auditing Guide, Chapters 5, 10

Jones P. (1996) Introduction to Hospitality Operations, Chapter 6Kotas R., Teare R, Logie J, Jayawardena C. and Bowen J., eds (1997) The

International Hospitality Business, Chapter 4Teare R. and Olsen M. (1992) International Hospitality Management, Part 3

Chapter 6 International Hotel Operations

Gee C.Y. (1994) International Hotels: Development and ManagementKotas R., Teare R., Logie J., Jayawardena C. and Bowen J. eds (1997) The

International Hospitality BusinessTeare R. and Olsen M. (1992) International Hospitality Management.

Corporate Strategy in PracticeJones P. and Pizam A., eds (1993) The International Hospitality Industry

Chapter 7 Rooms and Beds

Abbott P. and Lewry S. (1999) Front Office. Procedures, Social Skills andManagement

Braham B. (1993) Hotel Front OfficeHotel and Catering Training Company (1990) The Accommodation Operation

Chapter 8 Food and Drink

Kinton R., Ceserani V. and Foskett D. (1992) The Theory of CateringKnowles T. (1998) Hospitality Management – An Introduction, Chapter 7Lillicrap D.R. and Cousins J.A. (1990) Food and Beverage Service

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Davis B. and Lockwood A. (1994) Food and Beverage Management: ASelection of Readings

Chapter 9 Miscellaneous Guest Services

Braham B. (1993) Hotel Front Office, Chapter 6Knowles T. (1998) Hospitality Management – An Introduction, Chapter 6

Chapter 10 Marketing

Buttle F. (1994) Hotel and Food Service Marketing. A Managerial ApproachFewell A. and Wills N. (1992) Marketing. Hospitality Managers’ Pocket Book

SeriesKnowles T. (1998) Hospitality Management – An Introduction, Chapter 5Roberts J. (1993) Marketing for the Hospitality IndustryWarne N. and Morrison A. (1996) Hospitality Marketing

Chapter 11 Property Ownership and Management

International Hotels Environment Initiative (1996) Environmental Managementfor Hotels. The Industry Guide to Best Practice

Jones C. and Jowett V. (1997) Managing FacilitiesKatsigris C. and Thomas C. (1999) Design and Equipment for Restaurants

and Foodservice: A Management ViewLawson F. (1994) Restaurants, Clubs and Bars: Planning, Design and Investment

for Food ServiceLawson F. (1995) Hotels and Resorts: Planning, Design and RefurbishmentLawson F. (1999) Conference, Convention and Exhibition CentresTouche Ross (1995) Environmental Action Pack for Hotels

Chapter 12 Finance and Accounts

Adams D. (1997) Management Accounting for the Hospitality Industry: AStrategic Approach

Chin J., Barney W. and O’Sullivan H. (1995) Hotels: Financial Managementand Reporting: An Industry Accounting and Auditing Guide

Harris P. (1999) Profit Planning. Hospitality Managers’ Pocket Book Series

Harris P. and Hazzard P. (1995) Managerial Accounting in the Hotel andCatering Industry

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Appendix K Suggested Further Reading

207


Messenger S. and Shaw H. (1993) Financial Management for the Hospitality,Tourism and Leisure Industries

Chapter 13 Hotel Organization


Mullins L. (1992) Hospitality Management. A Human Resources Approach,Chapter 3

O’Connor P. (1999) Using Computers in HospitalityWood R. (1994) Organizational Behaviour for Hospitality Management,

Chapter 1

Chapter 14 Hotel Staffing

Boella M.J. (1996) Human Resource Management in the Hospitality IndustryGuerrier Y. (1999) Organizational Behaviour in Hotels and Restaurants: An

International PerspectiveHotel and Catering Training Company (1995) Employment in the Catering

and Hospitality IndustryMullins L. (1992) Hospitality Management. A Human Resources Approach,

Chapter 8, 14Wood R. (1994) Organizational Behaviour for Hospitality Management, Part 2

Chapter 15 Performance in Hotels

Boella M.J. (1996) Human Resource Management in the Hospitality Industry,Chapter 19


Johns N. (1996) Productivity Management in Hospitality and TourismOlsen M. et al. eds (1996) Service Quality in Hospitality Organizations,

Part One

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208


Select Bibliography

Abbott P. and Lewry S. (1999) Front Office. Procedures, Social Skills andManagement, 2nd edition, Butterworth-Heinemann, Oxford

Adams D. (1997) Management Accounting for the Hospitality Industry: AStrategic Approach, Cassell, London

Baker S. and Huyton, J. (1994) Principles of Hotel Front Office Operations,Casssell, London

Baud-Bovy M. and Lawson F. (1998) Tourism and Recreation: Handbook ofPlanning and Design, Butterworth-Heinemann, Oxford

Beavis J.R.S. and Medlik S. (1981) A Manual of Hotel Reception, 3rd edition,Heinemann, London

Boella M.J. (1996) Human Resource Management in the Hospitality Industry,6th edition, Stanley Thornes, Cheltenham

Borsenik F.D. and Stutts A.T. (1992) Management of Maintenance andEngineering Systems in the Hospitality Industry, John Wiley, New York

Braham B. (1993) Hotel Front Office, Stanley Thornes, CheltenhamBurkart A.J. and Medlik S. eds (1975) The Management of Tourism: A

Selection of Readings, Heinemann, LondonBurkart A.J. and Medlik S. (1981) Tourism: Past, Present and Future,

Heinemann, LondonBurkart A.J. and Medlik S. (1990) Historical Development of Tourism, CIRET,

Aix-en-ProvenceButtle F. (1994) Hotel and Food Service Marketing. A Managerial Approach,

Cassell, LondonCallan R.J. (2000) Registration, Classification and Grading, Treadmill, LancasterCasado M.A. (2000) Housekeeping Management, Wiley, New YorkChin J., Barney W. and O’Sullivan H. (1995) Hotels: Financial Management

and Reporting: An Industry Accounting and Auditing Guide, AccountancyBooks, Milton Keynes

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209


Davis B. and Lockwood A. (1994) Food and Beverage Management: ASelection of Readings, Butterworth-Heinemann, Oxford

Davis B., Lockwood A. and Stone S. (1998) Food and Beverage Management,3rd edition, Butterworth-Heinemann, Oxford

Doswell R (1970) Towards an Integrated Approach to Hotel Planning, NewUniversity Education, London

Fellows R. and J. (1990) Buildings for Hospitality. Principles of Care andDesign for Accommodation Managers, Pitman, London

Fewell A. and Wills N. (1992) Marketing. Hospitality Managers’ Pocket BookSeries, Butterworth-Heinemann, Oxford

Gee C.Y. (1994) International Hotels: Development and Management,Educational Institute of American Hotel and Motel Association,Washington, DC

Goss-Turner S. (1992) Managing People in the Hotel and Catering Industry,Croner, Kingston upon Thames

Greene M. (1987) Marketing Hotels and Restaurants into the 90s,Butterworth-Heinemann, Oxford

Guerrier Y. (1999) Organizational Behaviour in Hotels and Restaurants: AnInternational Perspective, Wiley, Chichester

Hanlon P. (1999) Global Airlines, 2nd edition, Butterworth-Heinemann,Oxford

Harris P. (1999) Profit Planning. Hospitality Managers’ Pocket Book Series,2nd edition, Butterworth-Heinemann, Oxford

Harris P. and Hazzard P. (1995) Managerial Accounting in the Hotel andCatering Industry, Stanley Thornes, Cheltenham

Horwath & Horwath (UK) Ltd (1988) Hotels of the Future. Strategies andAction Plan. International Hotel Association, Paris

Horwath International (Annual) Worldwide Hotel Industry (formerlyWorldwide Lodging Industry), HI, New York

Hotel and Catering International Management Association (1994) EuropeanManagement Skills in the Hospitality Industry, HCIMA, London

Hotel and Catering Training Company (1990) The Accommodation Operation,HCTC, London

Hotel and Catering Training Company (1995) Employment in the Cateringand Hospitality Industry, HCTC, London

Ingram H. and Ransley J. (2000) Developing Hospitality Properties andFacilities, Butterworth-Heinemann, Oxford

International Association of Hospitality Accountants (1986) Uniform Systemof Accounts for Hotels, 8th revised edition, Hotel Association of New YorkCity Inc., New York

International Association of Hospitality Accountants (1996) Uniform Systemof Accounts for Hotels, 9th revised edition, Hotel Association of New YorkCity Inc., New York

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210


International Hotels Environment Initiative (1996) Environmental Managementfor Hotels. The Industry Guide to Best Practice, 2nd edition, Butterworth-Heinemann, Oxford

Johns N. (1996) Productivity Management in Hospitality and Tourism, Cassell,London

Johns N., Ingram, H. and Lee-Ross, D. (1994) Operational Techniques: AResource-Based Approach, Cassell, London

Jones C. and Jowett V. (1997) Managing Facilities. Hospitality Managers’Pocket Book Series, Butterworth-Heinemann, Oxford

Jones P. (1996) Introduction to Hospitality Operations, Cassell, LondonJones P. and Lockwood A. (1989) The Management of Hotel Operations:

An Innovative Approach to the Study of Hotel Management, Cassell, London

Jones P. and Pizam A. eds (1993) The International Hospitality Industry.Organisational and Operational Issues, Pitman, London

Kaplan R.S. and Norton D.P. (1992) The Balanced Scorecard – TranslatingStrategy into Action, Harvard Business School Press, Ithaca, NY

Katsigris C. and Thomas C. (1999) Design and Equipment for Restaurantsand Foodservice: A Management View, Wiley, New York

Kinton R., Ceserani V. and Foskett D. (1992) The Theory of Catering, Hodder& Stoughton, Sevenoaks

Kirk D. (1996) Environmental Management for Hotels: A Student’s Handbook,Butterworth-Heinemann, Oxford

Knowles T. (1998) Hospitality Management: An Introduction, Pitman, LondonKotas R., Teare R, Logie J, Jayawardena C. and Bowen J., eds (1997) The

International Hospitality Business, Cassell, LondonLawson F. (1994) Restaurants, Clubs and Bars: Planning, Design and Investment

for Food Service, Butterworth-Heinemann, OxfordLawson F. (1995) Hotels and Resorts: Planning, Design and Refurbishment,

Butterworth-Heinemann, OxfordLawson F. (1999) Conference, Convention and Exhibition Centres,

Butterworth-Heinemann, OxfordLennick J. (1989) Running Your Own Small Hotel, Kogan Page, LondonLillicrap D.R. and Cousins J.A. (1990) Food and Beverage Service, Hodder

& Stoughton, SevenoaksMedlik S. (1961) The British Hotel and Catering Industry, Pitman, LondonMedlik S. (1965) Higher Education and Research in Tourism in Western

Europe, Goldsmiths’ travelling fellowships study tour report, Colleges ofAdvanced Technology, London

Medlik S. (1977) Britain – Workshop or Service Centre to the World? Universityof Surrey lecture, University of Surrey, Guildford

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Medlik S. and Airey D.A.(1978) Profile of the Hotel and Catering Industry,2nd edition, Heinemann, London

Medlik S. (1982) Trends in Tourism: World Experience and England’sProspects, English Tourist Board, London

Medlik S. (1983) Holiday Surveys Examined: A Pilot Guide to NationalHoliday Surveys in Western Europe, Horwath and Horwath, London

Medlik S. (1983) Trends in World Tourism: A Review, International HotelAssociation, Paris, Horwath and Horwath, London

Medlik S. (1984) Europeans on Holiday, Horwarth and Horwarth (UK), LondonMedlik S. (1985) Paying Guests: A Report on the Challenge and Opportunity

of Travel and Tourism, CBI, LondonMedlik S. (1988) Tourism and Productivity, British Tourist Authority/English

Tourist Board Research Services, LondonMedlik S. (1988) Tourism Employment in Wales, Wales Tourist Board, CardiffMedlik S. ed. (1991) Managing Tourism, Butterworth-Heinemann, OxfordMedlik S. (1996) Dictionary of Travel, Tourism and Hospitality, 2nd edition,

Butterworth-Heinemann, OxfordMedlik S. (1997) Understanding Tourism, Butterworth-Heinemann, OxfordMedlik S. and Denton J. (1967) Your Manpower: A Practical Guide to the

Manpower Statistics of the Hotel and Catering Industry, HMSO, LondonMessenger S. and Shaw H. (1993) Financial Management for the Hospitality,

Tourism and Leisure Industries, Macmillan, BasingstokeMullins L. (1992) Hospitality Management. A Human Resources Approach,

Pitman, LondonO’Connor P. (1999) Using Computers in Hospitality, Cassell, LondonOlsen M. (1995) Into the New Millennium: A White Paper on the Global

Hospitality Industry, International Hotel Association, ParisOlsen M. et al., eds (1996) Service Quality in Hospitality Organizations,

Cassell, LondonOrganisation for Economic Co-operation and Development (Annual), Tourism

Policy and International Tourism in OECD Countries, OECD, ParisPannell Kerr Forster (1998) EuroCity Survey, Pannell Kerr Forster, LondonPannell Kerr Forster (1998) Europe, Middle East and Africa Trends, Pannell

Kerr Forster, LondonPannell Kerr Forster (1998) Middle East and Africa City Survey, Pannell Kerr

Forster, LondonQuest M. ed. (1990) Horwath Book of Tourism, Macmillan, LondonQuest, M. (1996) How to Buy Your Own Hotel, Brodie Marshall, LondonRaleigh L.E and Roginsky R.J. eds (1995) Hotel Investments: Issues and

Perspectives, Educational Institute of American Hotel and Motel Association,Washington, DC

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Riley M. (1995) Managing People, Butterworth-Heinemann, OxfordRiley M. (1996) Human Resource Management. A Guide to Personnel Practice

in the Hotel and Catering Industries, 2nd edition, Butterworth-Heinemann,Oxford

Roberts J. (1993) Marketing for the Hospitality Industry, Hodder & Stoughton,Sevenoaks

Shone A. (1998) Business of Conferences, Butterworth-Heinemann, OxfordSmith J. (1990) Practical Computing. A Guide for Hotel and Catering

Students, Butterworth-Heinemann, OxfordSwarbrooke J. and Horner S. (1999) Consumer Behaviour in Tourism,

Butterworth-Heinemann, OxfordTeare R., Adams S. and Messenger S. eds (1992) Managing Projects in

Hospitality Organizations, Cassell, London Teare R. and Boer A. eds (1991) Strategic Hospitality Management. Theory

and Practice for the 1990s, Cassell, LondonTeare R. and Ingram H. (1993) Strategic Management for the Hospitality

and Tourism Industries: A Resource Based Approach, Cassell, LondonTeare R. and Olsen M. (1992) International Hospitality Management.

Corporate Strategy in Practice, Pitman, LondonTeare R., Mountinho L. and Morgan N. eds (1993) Managing and Marketing

Services into the 1990s, Cassell, LondonThomas R. (1997) Management of Small Tourism and Hospitality Firms,

Cassell, LondonTouche Ross (1995) Environmental Action Pack for Hotels, International Hotel

Association, ParisVenison P. (1983) Managing Hotels, Butterworth-Heinemann, OxfordWaller K. (1996) Improving Food and Beverage Performance, Butterworth-

Heinemann, OxfordWarne N. and Morrison A. (1996) Hospitality Marketing, Butterworth-

Heinemann, OxfordWitt S.F., Brooke, M.Z. and Buckley P.J. (1991) The Management of

International Tourism, Unwin Hyman, LondonWood R. (1994) Organizational Behaviour for Hospitality Management,

Butterworth-Heinemann, OxfordWorld Tourism Organization (Annual) Compendium of Tourism Statistics,

WTO, MadridYeoman I. and Ingold A. (1997) Yield Management: Strategies for the Service

Industries, Cassell, London

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213


Abu Dhabi, 124, 175Accommodation:

capacities, 9, 185, 189markets, 7–8, 16–17, 185

Accor, xviii, 22, 28, 51, 52, 53, 64, 71,192, 194

Accounting and control:administration, 160–1balance sheet, 136–8, 145–6centralization, 58, 62 passimenergy, 131–3food and beverages, 90–4, 135–43

passimgeneral, 135–6groups of hotels, 55–62 passiminternational operations, 70–2marketing, 121–3minor operating departments, 109,

138–43profit and loss statement, 138–46property operation and

maintenance, 129–31rooms, 85–8, 138–43small hotel, 45–7

Aer Lingus, 64, Africa, 9, 66, 67, 68, 69, 80, 86, 88,

103, 104, 118, 120, 121, 124,130, 132, 160, 175, 176, 189, 198

Air France, 65Americas, 9, 189, 190

Amex, 69Asia, 66, 67, 68, 69, 80, 103, 104, 118,

120, 121, 130, 160, 176Associated Luxury Hotels, 186Athens, 124Australia, 9, 66, 67, 68, 69, 80, 103,

104, 118, 120, 121, 122, 130,131, 160, 176, 190, 191

Austria, 8, 67, 86, 87, 100, 109, 136,132, 161, 191

Balance sheet:general, 135–7ratios and analysis, 137–8relationships with profit and

loss, 145Ball, S., 174Bamford, G., xviiiBank of Tokyo-Mitsubishi, 71Bankers Trust, 71Barcelo Hotels, 194Barcelona, 175Barney, W., 56Bars, 95–6Bass Hotels & Resorts, 52, 53, 63, 64,

65, 70, 192Battersea Polytechnic, xvBeavis, J.R.S., xvBelgium, 88Benelux, 122

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214

Index

2709 HOTELS 17 Index B/PT/ck 7/4/00 10:47 am Page 214

Berlin, 124Best Western International, 64, 192Beverage cycle, 93–4Boca Raton Resort and Club, 31Boomer, L., xiiiBranding, 22Bristol Hotels & Resorts, 192British hotel industry, 185British Standards, 124Brussels, 124, 175Budgets, 35Burkart, A.J., xvBuying economies, 54–5Buying hotel services, 22–3

Cairo, 124Caisse Centrale de Coopération

Économique, 71Campbell-Smith, G., xviCanada, 9, 71, 122, 131, 144, 187, 190,

191Capital gearing, 138Caribbean, 68, 69, 80, 103, 104, 118,

130, 160, 161, 176Carlson Hospitality Worldwide, 53, 64,

70, 192Casablanca, 124Catering market(s), 17–18CDL Hotels, 193Cendant Corporation, 50, 53, 65, 192Centralization, 58–62Charge cards, 69Chartered Institute of Marketing, 115Chile, 191Chin, J., 56China, 69, 190, 191Choice Hotels International, 53, 64, 70,

192Circus Circus, 193Club Méditerranée SA, 64, 69, 71, 192,

194Commissions, 108, 123Commonwealth Development

Corporation, 71

Computers, 161–2Concessions, 103, 106–8, 150, 154Concorde Hotels Group, 196Consortia, 48, 49, 196Control, see Accounting and controlCopthorne Hotels, 65Cornell University, xvCredit cards, 68, 69Crowther, Lord, xvCzech Republic, 8, 88

Danubius Hotels & Spa Co., 195Definition and function of hotels, 3–4Demand generating sources, 18–19Department of Employment Manpower

Research Unit, 164Deutsche Bank, 71Deutsche Finanzierungsgesellschaft für

Beteilgungen inEntwicklungsländern, 73

Developed countries, 65Developing countries, 63–5, 71Diners, 69Direct mail, 120Discounts, 108, 124Dorint Hotels, 194Doswell, R., xvi, 13, 15, 116Drucker, P., xiii

East Asia and the Pacific, 9, 189, 190Economies of scale, 53–5Edinburgh, 6E-funds transfer, 68Egypt, 88, 132, 191Eilat, 175Energy, 131–3England, 6, 7, 51, 62, 88, 185Environment, 133–4Erstad, M., xviiiEuro Disney SCA, 195Eurocard, 69Europe, 6, 7, 9, 51, 66, 67, 68, 69, 71,

80, 86, 87, 103, 104, 109, 118,120, 121, 122, 124, 130, 132,

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160, 161, 175, 176, 189, 194,198, see also individual countries

European Bank for Reconstruction andDevelopment, 71

European Investment Bank, 71Extended Stay America, 192

Facilities management, 129–31Facilities and services as products, 13Far East, 71Fayol, H., xiiiFearn, D.A., xviFelCor Lodging Trust Inc., 192Fenton, L.S., xviFiesta Hotels, 194Finance, see Accounting and controlFinancial economies, 54Finland, 51, 88First Hospitality AB, 195Flag Choice Hotels, 196Food and beverages:

accounting and control, 99–101,141–3

cycles, 90–4expenses, 100function, 89–90future, 101organization, 99, 152–4outlets, 94–7preparation and production, 98profit, 100revenue and sales, 66, 67, 90, 100staffing, 99statistics, 99–100support services, 97–8

Food cycle, 90–3Foreign currency, 108Forte Hotels, xviii, 22, 29, 63, 64, 70,

178, 192, 194Four Seasons Hotels, 64, 71Fowler, N.A., xviFrance, 8, 9, 51, 67, 71, 86, 88, 100,

109, 130, 160, 189, 191

Franchising, 52, 53, 70Friendly Hotels Plc, 193, 194Front desk, see ReceptionFujita Kanko, 193Fuller, J., xvFunctions, 96

Geneva, 175Germany, 8, 9, 51, 67, 71, 86, 88, 100,

109, 122, 130, 144, 160, 189, 191

Gerty, M., xviiiGilbreth, F.B. and L.M., xiiiGlobal Distribution Services, 126Golden Tulip Hotels, 195, 196Goldman Sachs, 71Granada, 63, 75Grecotel SA, 195Greece, 51, 88Greenalls Hotels & Leisure, 195Grosvenor House Hotel, London, xvGroups of hotels:

advantages, 53–5centralization, 57–9illustrations, 59–62operations, 52–3problems of, 55–7statistics, 50–1, 192–6

Guest:arrivals and departures, 81–2information, 82–4laundry, 105–6mail, 82–3reception, 79–81registration, 81satisfaction surveys, 178–9services, 77–109 passim, 118

Helsinki, 124Herzberg, F., xiiiHilton Hotels Corporation, 192Hilton International, 64, 70, 186, 192,

194Historic Hotels of America, 196

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Historical development, 5–7Holiday Hospitality Corporation, 22,

123, 186Homestead Village Inc., 193Honegger, G., xviiiHong Kong, 71Horwath and Horwath, 88, 101Horwath International, xviii, 121, 122,

197Hospitality Properties Trust, 193Hotusa-Eurostars-Familia Hotels, 196Hôtel garni, 6Hotel industries, 185–8Hotel organizations, 199–201Hotel periodicals, 202–4Hotel Waldorf Astoria

Corporation, xiiiHotels, xviii, 52, 53, 193, 195, 196Hotels & Compagnie, 53, 193, 194Housekeeping, 79–80, 84–5, 151–2HSBC Group, 71Human resources:

centralization, 58–62 passimfunction, 163–4, 166–8, 170organization, 155see also Policies; Productivity;

StaffingHungary, 8, 51, 144Husa Hotels Group, 193, 194Hyatt Hotels/Hyatt International, 52, 64,

70

Iberostar, 193, 194ILA-Châteaux & Hotels de Charme,

196Image as part of product, 14Importance of hotels, 4–5India, 191Information technology, 161–2Inter-Continental Hotels and Resorts, 63,

64, 186Inter-hotel comparison surveys, 49International Hotel & Restaurant

Association, 133

International hotel operations:definition, 63–4examples, 63–5finance, 70–2markets, 66–9organization, 72–5ownership, 70–2products, 65–6

International Hotels EnvironmentInitiative, 133

Internet, 120Investment, 136–8, 185, 187Ireland, 66, 67, 86, 100, 109, 122, 130,

144, 160Israel, 88, 132Italy, 9, 51, 189

JAL Hotels, 71Japan, 9, 69, 71, 144, 190, 191Japan Airlines, 65Jarvis Hotels, 195Jeddah, 175Johannesburg, 124Joint Industry Committee for National

Readership Surveys, 21Joint ventures, 70Jolly Hotels, 195Jones, A.H., xvJ.P. Morgan, 71

Kaplan and Norton’s BalancedScorecard, 172–3

Karachi, 124, 175Kempinski Hotels & Resorts, 195Kenya, 88, 132, 191Keytel, S.A., 196Kirk, D., 134Kitchens, 97–8Kuwait, 175

La Quinta Inns, 192Las Vegas, 187Latin America, 68, 69, 80, 103, 104,

118, 130, 160, 161, 176, 198

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Laundry, 105–6Leading Hotels of the World, 196Lease, 52, 70Leggett, D.M.A., xvLess developed countries, 63–5, 71Lexington Services Corporation, 196Liquidity ratios, 145Location of hotels, 9–10, 13, 198Lodgian Inc., 193Logis de France, 196London, 59, 114, 124, 167–9, 175Lowe, A., 41Loyalty cards, 120LTI International Hotels, 71, 194

McGregor, D., xiiiMadrid, 175Mail, 82–3Malaysia, 191Management by objectives, 36Management contracts, 52, 70Management structure, 156–8Managerial economies, 54Manama, 175Marcus Hotels & Resorts, 193Maritim Hotels, 194Market:

areas, 19–20composition, 66–7concept, 13–15evolution, 114–15international hotels, 66–9research, 119, 120segmentation, 20–22small hotels, 40–1UK hotels, 185US hotels, 188

Marketing:concept, 115–16cycle, 119–21economies, 54expenses, 121–3mix, 121orientation, 23–4, 115

payroll, 121resources, 121–3special features, 116–18

Marriott International, xviii, 52, 53, 64,65, 70, 73, 75, 179, 192

Mastercard, 69Mediterranean, The, 69Meek, H.B., xvMerchandising, 120Meridien Hotels, 65, 70, 72MeriStar Hotels & Resorts Inc., 192Mexico, 9, 144, 187, 190, 191Middle East, 9, 66, 67, 68, 69, 80, 88,

103, 104, 118, 120, 121, 124,130, 132, 160, 175, 176, 189, 198

Middleton, V.T.C., xvMinor operated departments:

accounting and control, 108, 141–3

function, 102–3organization, 102–9, 154revenue and sales, 103–4

Minotel International, 196Monitoring of marketing

performance, 120Morocco, 88, 132Moscow, 175Mullins, L., 45Multinational companies, 63–4, 71Muscat, 175

Nailon, P.W., xviNairobi, 124Neil, J., xviiiNetherlands, 8, 51, 191New Zealand, 66, 67, 68, 69, 80, 103,

104, 120, 121, 122, 130, 131, 160

NH Hotels SA, 195Nightingale, M.A., xviNikko Hotels International, 64, 65,

193Nomura, 71

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North America, 7, 66, 67, 68, 69, 71,80, 103, 104, 118, 120, 121, 130,160, 176, 198;

see also Canada, United StatesNorway, 51, 67, 86, 100, 109, 130,

161

Objectives, 26–36 passimOccidental Hotels, 71, 194Olsen, M., 108, 126, 129, 133, 146,

160, 178Omni Hotels, 193Orbis Hotels, 194Organization:

food and beverages, 99, 152–4general, 149–51groups of hotels, 50–62 passim,

166–70international hotel operations, 72–5large hotel, 158–9marketing, 119–20, 125–6minor operated departments, 103–6,

154miscellaneous guest services, 102–9,

154property ownership, operation and

maintenance, 127–31rooms, 85–6, 151–2small hotel, 42–5support services, 155–6training, 168–70

Organization for Economic Co-operationand Development, 7, 8

Organizations, 199–201Orlando, 185O’Sullivan, H., 56Outdoor advertising, 120Ownership:

finance and accounts, 135–8, 145–6

groups of hotels, 50–1international hotel operations, 70–2property, 127–8small hotels, 41–2

Pacific, see East Asia and the Pacific;individual countries

Pakistan, 88, 132Pan American World Airways, 64Pannell Kerr Forster, xviii, 85, 86, 88,

124, 132, 175, 198Paradores, 195Paribas, 71Paris, 114, 124, 175Park Place Entertainment, 193Parker, A., xviiiParkinson, G., xviParties in the hotel business, 27–9Patriot American Hospitality Inc./

Wyndham International Inc., 192

Paying for hotel services, 22–3, 68Performance, 171–81 passimPhilosophies, 33–4Plans, 34–6Poland, 51Policies, 25–36 passimPortugal, 8, 67, 86, 100, 109, 130, 132,

161, 191Prague, 124Preferred Hotels Worldwide, 196Price as part of product, 14Prime Hospitality Corporation, 193Prince Hotels, 71, 193Prince of Wales, HRH, The, 134Princess Hotels, 195Print advertising, 120Product branding, 22Product formulation and

development, 119, 120Production orientation, 114Productivity:

importance of, 181measures, 174–6scope for improvement, 180

Profit and loss:general, 135–6operating profit, 143–4ratios and analysis, 140–3

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relationships with balance sheet, 145statement, 138–40

Promotion, 119–20Promus Hotel Corporation, 52, 53,

192Property:

costs, 129–31operation and maintenance, 128–9ownership, 127–8staffing, 128

Purchasing, 54–5, 58–62, 155

Quality management, 123–4Queens Moat Houses Hotels, 193, 194

Radio promotion, 120Receiving (supplies), 91–2, 93–4Reception, 79–80, 151–2Red Roof Inns, 52, 192Regal Hotels Plc, 195Relais & Châteaux, 196Rentals, 106–7, 154Restaurants, 94–5Restel, 195REZsolutions Inc., 196Rica Hotels & Restaurants, 195Richfield Hospitality Services Inc., 193Ring Hotels, 194Risk-spreading economies, 55Riu Hotels Group, 193, 194Riyadh, 175Robert F. Warner Inc., 196Robinson Club GmbH, 195Romantik Hotels, 64, 195Rome, 175Rooms:

accounting and control, 87–8, 141–3 passim

allocation, 81capacity, 9, 79expenses, 86function, 79–80future, 87occupancies, 87, 124, 191

organization, 85payroll, 86profit, 86, 142records, 81–2reservations, 68, 81–2, 151–2revenue and sales, 66, 67, 80–2,

86service, 96statistics, 86–7

Royal Garden Hotel, London, 28

Sales and marketing, 58–62 passim,115–16, 155

Sales orientation, 115Salvage, 108Scandic Hotels AB, 193, 194Sceptre Hospitality Resources, 196Scotland, 6, 51, 185Selling:

as element of marketing cycle,119–20

beverages, 95food, 92rooms, 81–2

Service in hotels, 14, 15Services as products, 15–16Shangri-La Hotels & Resorts, 71, 193Small hotel:

accounting and control, 45–7definition, 39–40future, 48–9organization and staffing, 42–5ownership and finance, 41–2products and markets, 40–1

Small Luxury Hotels of the World, 196Social grades, 21Société du Louvre, 52, 64, 71, 192,

194Société Générale, 71Sokos Hotels, 195Sol Meliá, 52, 71, 192, 194South Africa, 88, 191South America, 67, 68, 80, 120, 121,

130, 143, 160, 176

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220


South Asia, 9, 189Spain, 8, 9, 51, 71, 122, 144, 189,

191SRS Hotels Steigenberger, 196Staffing:

determinants, 164–5food and beverages, 99general, 163–4rooms, 85–6small hotel, 42–5see also Human resources; Policies;

ProductivityStakis Hotels, 195Standard systems of accounts, 151,

160Starwood Hotels & Restaurants, 52, 53,

64, 70, 192Steigenberger Hotels AG, 194Sterling Hotels, 196Storing and issuing (supplies), 92, 94Supplementary accommodation, 8Support services, 155–6Supranational Hotels, 196Strategies, 34–6Summit Hotels & Resorts, 196Sunwing Hotels, 195Surrey University, xv, xvi, xviiSwallow Hotels Ltd, 195Sweden, 8, 51, 191Swissair, 65Swissôtel, 65, 195Switzerland, 51, 67, 86, 100, 109, 122,

130, 132, 144, 161, 191Systems model, 171–81 passim

Taylor, F.W., xiiiTechnical economies, 54Technology, 129, 133, 161–2Tel Aviv, 124, 175Telecommunications, 66, 67, 104, 109Telemarketing, 120Telephones, 103–5Thailand, 9, 190Tharaldson Enterprises, 52, 193

Thistle Hotels Plc, 194Tokyu Hotel Group, 71, 193TOP International Hotels, 196Tourist product, 125–6Training, 168–70Trans World Airlines, 64Travel agents’ commissions, 108, 123Travel and hotels, 5–6, 185–6Travel market(s), 8–9, 16–17Travellers cheques, 108Treff Hotels AG, 194Trigano, G., 69TRI Hospitality Consulting, xviiiTryp Hotels, 194Turkey, 191TV promotion, 120Types of hotels, 10–12

United Arab Emirates, 88, 132Uniform system of accounts, 121, 129,

131, 150, 160, 197, 198Uniformed staff and services, 79–80,

83–4United Kingdom, 7, 9, 67, 70, 86, 100,

109, 122, 130, 131, 144, 161,185–6, 189; see also England;Scotland; Wales

United States of America, 7, 9, 50–1, 70,122, 131, 144, 187–8, 190

University:Cornell, xvSurrey, xv, xvi, xvii

US Franchise Systems, 53, 193US hotel industry, 187–8

Venison, P., 47VIP International Corporation, 196Visa, 69

Waldorf-Astoria Hotel Corporation, xiii

Wales, 62, 185Walt Disney Co., 193Ward, T., xviii

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Index

221


Warsaw, 175Warwick International Hotels, 195Website, 120Westmont Hospitality Group Inc, 192Whitbread Group of Hotels, xviii, 22,

35, 193, 194White Hart Hotel, Salisbury, xviiiWorld Bank Group, 71

World Tourism Organization, 9, 191World Travel & Tourism Council, 133Worldwide Hotel Industry, 66, 67, 68,

69, 80, 86, 87, 100, 104, 109,118, 120, 121, 122, 130, 143,144, 160, 197

Yield management, 123, 124

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222


the business of hotels

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