Ch. 3Ch. 3

The Lodging The Lodging

IndustryIndustry

Understanding LodgingUnderstanding Lodging

3.13.1

A Brief History of Lodging in the A Brief History of Lodging in the U.S.: Planes, Trains and U.S.: Planes, Trains and

AutomobilesAutomobiles Lodging industry in the U.S. has always been Lodging industry in the U.S. has always been

strongly influenced by changes in transportation.strongly influenced by changes in transportation. As stagecoach routes were established in the mid-As stagecoach routes were established in the mid-

1600, coaching inns became popular1600, coaching inns became popular 1700s Americans started combining lodging with food1700s Americans started combining lodging with food 1794 City Hotel in New York City, the first building in 1794 City Hotel in New York City, the first building in

the U.S. designed specifically as a hotel.the U.S. designed specifically as a hotel. From that point on, throughout the 1800s lodging From that point on, throughout the 1800s lodging

properties began to flourish.properties began to flourish. The Tremont House, the first of the grand hotels, was The Tremont House, the first of the grand hotels, was

built in Boston in 1828. (First hotel to offer private built in Boston in 1828. (First hotel to offer private rooms with locking doors)rooms with locking doors)

History ContinuedHistory Continued 1825 invention of the railroad, inns, taverns, and 1825 invention of the railroad, inns, taverns, and

foodservice facilities located near railway.foodservice facilities located near railway. Near the turn of the century, Conrad Hilton, who was a Near the turn of the century, Conrad Hilton, who was a

banker in New Mexico, purchased is first hotel.banker in New Mexico, purchased is first hotel. Other famous hotels were build during the early part of Other famous hotels were build during the early part of

the twentieth century, including the Ritz Carlton in the twentieth century, including the Ritz Carlton in Boston, Plaza in New York City, and the Stevens Hotel in Boston, Plaza in New York City, and the Stevens Hotel in ChicagoChicago

During the Depression in the 1930s, several hotel During the Depression in the 1930s, several hotel properties closedproperties closed

During World Was II in the 1940s, the lodging industry During World Was II in the 1940s, the lodging industry prospered. (Hotels experienced extremely high prospered. (Hotels experienced extremely high occupancy rates – usually at least 90%)occupancy rates – usually at least 90%)

1950s cross-country vacations became popular with the 1950s cross-country vacations became popular with the automobile and freeway systemautomobile and freeway system

1958 –airlines became popular1958 –airlines became popular

Lodging Operations OrganizationLodging Operations Organization

Front-of-the-House vs. Back-of-the-HouseFront-of-the-House vs. Back-of-the-House Typical lodging operation can be divided Typical lodging operation can be divided

between its administrative departments between its administrative departments and service departmentsand service departments

• Administrative departmentsAdministrative departments = manage the = manage the business responsibilities such as accounting, business responsibilities such as accounting, human resources and training, and marketing and human resources and training, and marketing and sales.sales.

• Service departmentsService departments = are responsible for serving = are responsible for serving the guest directly.the guest directly.

Administrative DepartmentsAdministrative Departments

General Management (GM)General Management (GM) – person in charge – person in charge of lodging establishment (other managers report of lodging establishment (other managers report directly to the GM)directly to the GM)

Accounting and Financial ManagementAccounting and Financial Management – – keeps track of overall profits, records sales, and keeps track of overall profits, records sales, and calculates costscalculates costs

Human ResourcesHuman Resources – hiring labor and evaluate – hiring labor and evaluate performance (resp. local labor laws)performance (resp. local labor laws)

Marketing and SalesMarketing and Sales – make sure their lodging – make sure their lodging facility suite their customers (sales, advertising)facility suite their customers (sales, advertising)

Service DepartmentsService Departments Front OfficeFront Office – have to give good first – have to give good first

impression, good people skills, manage roomsimpression, good people skills, manage rooms HousekeepingHousekeeping – maintaining property, – maintaining property,

responsible for keep guest ready and rooms responsible for keep guest ready and rooms prepared.prepared.

Engineering and Facility MaintenanceEngineering and Facility Maintenance – keep – keep physical building in good running order and physical building in good running order and maintain the operation’s mechanical equipmentmaintain the operation’s mechanical equipment

SecuritySecurity – protecting guest, employees and – protecting guest, employees and property, developing and following all emergency property, developing and following all emergency proceduresprocedures

Food and BeverageFood and Beverage – one of the most – one of the most demanding arrearsdemanding arrears

QuestionsQuestions

1.1. Historically, the lodging industry has been closely Historically, the lodging industry has been closely tied to the ________industry?tied to the ________industry?

2.2. What mode of transportation was invented in the What mode of transportation was invented in the early 1800s?early 1800s?

3.3. During which decade in the U.S. did the lodging During which decade in the U.S. did the lodging industry experience the closing of many hotels?industry experience the closing of many hotels?

4.4. List the four arrears of administrative departments List the four arrears of administrative departments and what they do?and what they do?

5.5. List the five areas of service departments and List the five areas of service departments and what they do?what they do?

Organization of the Organization of the Lodging IndustryLodging Industry

3.23.2

Two Types of TravelersTwo Types of Travelers

Guest fall under one of two categories: Guest fall under one of two categories: leisure travelers or business travelersleisure travelers or business travelers

• Leisure travelersLeisure travelers = often want to “get away from it = often want to “get away from it all” – lodging properties cater to specific leisure all” – lodging properties cater to specific leisure travelers by offering services of activities travelers by offering services of activities

• Business travelersBusiness travelers = stay at lodging for business- = stay at lodging for business-related reasons. They represent the majority of related reasons. They represent the majority of guests – they might need fax machines, copies guests – they might need fax machines, copies personal computes etc.personal computes etc.

Most important factor considered when Most important factor considered when selecting a lodging facility is room selecting a lodging facility is room cleanlinesscleanliness

At Your Service: Lodging At Your Service: Lodging Establishments for AllEstablishments for All

Lodging properties can be classified in Lodging properties can be classified in many ways: by the level of service many ways: by the level of service provided, rate charged, amenities offered provided, rate charged, amenities offered

AmenityAmenity = service or facility within the = service or facility within the lodging operation that guests may use or lodging operation that guests may use or enjoy without having to leave the hotelenjoy without having to leave the hotel

• Full-service propertiesFull-service properties = cater to travelers in = cater to travelers in search of a wide range of conveniences. (offer search of a wide range of conveniences. (offer larger rooms, well-trained staff, plenty of larger rooms, well-trained staff, plenty of amenities)amenities)

• Luxury propertiesLuxury properties = hotels that offer top-of-the-line = hotels that offer top-of-the-line comfort and elegance comfort and elegance

At Your Service: Lodging At Your Service: Lodging Establishments for AllEstablishments for All

Economy lodgingEconomy lodging = offers clean, low-priced = offers clean, low-priced accommodations primarily to traveling salespeople, accommodations primarily to traveling salespeople, senior citizens,, and families with moderate income (sm. senior citizens,, and families with moderate income (sm. staff, simple rooms)staff, simple rooms)

Mid-price facilitiesMid-price facilities = between full-service and economy = between full-service and economy sectors sectors

All-Suite propertiesAll-Suite properties = fastest growing segment, offer = fastest growing segment, offer apartment style facilitiesapartment style facilities

ResortsResorts = (spares no expense), feature extensive = (spares no expense), feature extensive facilities for vacationers who are looking for recreational facilities for vacationers who are looking for recreational activates and entertainmentactivates and entertainment

Bed and BreakfastBed and Breakfast = guest who enjoy quaint, quiet = guest who enjoy quaint, quiet accommodations with simple amentias (private-owned)accommodations with simple amentias (private-owned) Page 159, ex. Of hotels and what service bracket they fitPage 159, ex. Of hotels and what service bracket they fit into into

Location, Location, LocationLocation, Location, Location

Location is one of the most influential Location is one of the most influential factors contributing to the success of factors contributing to the success of lodging facilitylodging facility

• Airport facilitiesAirport facilities• Downtown (primarily for business travelers, tend to Downtown (primarily for business travelers, tend to

charge higher rates)charge higher rates)• Suburban properties (travelers who wanted to Suburban properties (travelers who wanted to

attend downtown events but didn’t want to spend attend downtown events but didn’t want to spend the night in the city)the night in the city)

• Roadside motes (meet the needs of vacation and Roadside motes (meet the needs of vacation and business travelers)business travelers)

• Resorts (vacation arrears)Resorts (vacation arrears)

Facility Rating SystemsFacility Rating Systems Several organizations rate quality of lodging Several organizations rate quality of lodging

establishments (AAA – diamonds and Mobil establishments (AAA – diamonds and Mobil Travel Guides rate with stars)Travel Guides rate with stars)

AAA – most widely recognizedAAA – most widely recognized One diamondOne diamond – functional accommodations – functional accommodations

(minimum standards)(minimum standards) Two DiamondsTwo Diamonds – noticeable enhancements (décor – noticeable enhancements (décor

and or quality of furnishing)and or quality of furnishing) Three DiamondsThree Diamonds – upgrade in services and comfort, – upgrade in services and comfort,

with additional amenitieswith additional amenities Four DiamondsFour Diamonds – excellent properties offering high – excellent properties offering high

level of service and a wide variety of amenitieslevel of service and a wide variety of amenities Five diamondsFive diamonds – exceptional establishment, – exceptional establishment,

providing the highest level of luxury and serviceproviding the highest level of luxury and service

QuestionsQuestions

1.1. Indicate which type of traveler – business (B) or leisure (L) Indicate which type of traveler – business (B) or leisure (L) would find the features listed below important.would find the features listed below important.

1. Meeting rooms1. Meeting rooms 2. Programs for children2. Programs for children 3. Near shopping areas3. Near shopping areas 4. Location close to airport4. Location close to airport 5. Shuttle bus to theme park5. Shuttle bus to theme park 6. Kiddie swimming pool6. Kiddie swimming pool 7. Shuttle to convention center7. Shuttle to convention center 8. Twenty-four hr. room service8. Twenty-four hr. room service

2.2. What type of hotel is most likely to provide conference and What type of hotel is most likely to provide conference and meeting rooms.meeting rooms.

3.3. Florist shop that operates in a hotel's lobby is known as a…?Florist shop that operates in a hotel's lobby is known as a…?4.4. __________facilities are often constructed far from cities and __________facilities are often constructed far from cities and

transportation routes.transportation routes.5.5. Since hotels primarily relies on business travelers, which hotel Since hotels primarily relies on business travelers, which hotel

typically experience low occupancy rates on the weekdays?typically experience low occupancy rates on the weekdays?

Career Opportunities in Career Opportunities in the Lodging Industrythe Lodging Industry

3.33.3

Developing a Career in the Lodging Developing a Career in the Lodging IndustryIndustry

Certificates and diploma programs are Certificates and diploma programs are offered by high schools and business.offered by high schools and business.

• Work experience, associations and professional Work experience, associations and professional trade organizations offer programs and events that trade organizations offer programs and events that can help you further your career.can help you further your career.

• While most lodging establishments perform the While most lodging establishments perform the same basic functions, the number and type of same basic functions, the number and type of employees at each property will depend on employees at each property will depend on property size and other factorsproperty size and other factors

AdministrativeAdministrative GM GM = responsible for overall lodging = responsible for overall lodging

establishment, have a bachelor’s degree and at establishment, have a bachelor’s degree and at least 10 years work experienceleast 10 years work experience

Assistant General ManagerAssistant General Manager = helps carry out = helps carry out the GM’s plans and serves as a liaison between the GM’s plans and serves as a liaison between management and staff. Reports to GMmanagement and staff. Reports to GM

Resident ManagerResident Manager = supervises front office = supervises front office operations and reservations and is responsible operations and reservations and is responsible for emergencies twenty-four hours a day when for emergencies twenty-four hours a day when the GM is not on duty.the GM is not on duty.

Executive Assistant ManagerExecutive Assistant Manager = responsible = responsible for all room rentals.for all room rentals.

Accounting and Financial Accounting and Financial Management “Back Office”Management “Back Office”

ControllerController = manages the accounting = manages the accounting department, participates in long-term financial department, participates in long-term financial planning, and provides daily financial reports to planning, and provides daily financial reports to management. Smaller facilities often share the management. Smaller facilities often share the accounting responsibilities among the GM.accounting responsibilities among the GM.

Management Information Systems (MIS Management Information Systems (MIS supervisorsupervisor = computer specialist responsible = computer specialist responsible for solving computer-related problems and for solving computer-related problems and making sure computer systems are running as making sure computer systems are running as efficiently as possible.efficiently as possible.

Human resourcesHuman resources

HRHR = responsible for interviewing, = responsible for interviewing, selecting, recruiting, training, and selecting, recruiting, training, and evaluating performance of the operation’s evaluating performance of the operation’s staff.staff.

• Motivating staffMotivating staff• Providing pay increasesProviding pay increases• Establishing employment policiesEstablishing employment policies• Administration of labor lawsAdministration of labor laws

Marketing and SalesMarketing and Sales(Sell rooms and facilities by creating contracts with guest, (Sell rooms and facilities by creating contracts with guest,

business and people involved in the travel industry)business and people involved in the travel industry)

Marketing directorMarketing director = responsible for generating = responsible for generating new business, organizing special events and new business, organizing special events and conducting market research.conducting market research.

Convention managerConvention manager = plans meetings, = plans meetings, determines rates, and sells the facility’s banquet determines rates, and sells the facility’s banquet service.service.

Convention sales managerConvention sales manager = brings in the = brings in the business by promoting the establishment as a business by promoting the establishment as a site for conferences, seminars, and meetings. site for conferences, seminars, and meetings. (larger properties also have positions such as (larger properties also have positions such as tour and travel sales manager and corporate tour and travel sales manager and corporate sales manager)sales manager)

Front OfficeFront OfficeFront office is the heart of all lodging properties. It has four main Front office is the heart of all lodging properties. It has four main

responsibilities. 1. check-in 2. reservations 3. information 4. checkoutresponsibilities. 1. check-in 2. reservations 3. information 4. checkout Front desk managerFront desk manager = (heading the department) He or she = (heading the department) He or she

prepares budgets, maintains cost-control systems, and forecast prepares budgets, maintains cost-control systems, and forecast room sales. A good communicator and supervisor, oversees a room sales. A good communicator and supervisor, oversees a team of peopleteam of people

Desk clerkDesk clerk = greets and registers guests, and performs all check- = greets and registers guests, and performs all check-in functions (including blocking rooms, verifying information and in functions (including blocking rooms, verifying information and providing details of room rates and availability)providing details of room rates and availability)

Reservations managerReservations manager = oversees the reservations function and = oversees the reservations function and managers a number of full-time reservationsmanagers a number of full-time reservations

Bell captainBell captain = managers an number of employees, including = managers an number of employees, including bellhops, door attendants and valet parking bellhops, door attendants and valet parking

ConciergeConcierge = specializes in providing a wide range of information = specializes in providing a wide range of information services (answer questions, books restaurant reservations, make services (answer questions, books restaurant reservations, make arrangements for car rentals, obtains theater tickets and more)arrangements for car rentals, obtains theater tickets and more)

Night auditorNight auditor = works the evening shift, posting changes not = works the evening shift, posting changes not reordered during earlier shifts and balancing daily financial reordered during earlier shifts and balancing daily financial transactionstransactions

HousekeepingHousekeeping(One of the most important departments, often the largest, works (One of the most important departments, often the largest, works

closely with front office personnel and maintains public areas)closely with front office personnel and maintains public areas)

Executive housekeeperExecutive housekeeper = oversees the = oversees the department by hiring, training, scheduling, department by hiring, training, scheduling, and directing staff; purchasing and and directing staff; purchasing and maintaining an inventory of cleaning maintaining an inventory of cleaning supplies and equipment and setting supplies and equipment and setting cleaning prioritiescleaning priorities

Room attendantsRoom attendants = employees who = employees who actually clean guest roomsactually clean guest rooms

Engineering and Facility MaintenanceEngineering and Facility Maintenance(ensures that all mechanical systems are safe and in proper working order)(ensures that all mechanical systems are safe and in proper working order)

Chief engineerChief engineer = plans and organizes the = plans and organizes the tasks to be carried out by the department tasks to be carried out by the department (administrative duties include budgeting, (administrative duties include budgeting, coordinating and supervising repair and coordinating and supervising repair and maintenance orders, and negotiating maintenance orders, and negotiating contracts – oversees the maintenance)contracts – oversees the maintenance)

• Often train other employees to conserve energy Often train other employees to conserve energy and save on utility costsand save on utility costs

• Provide advice about equipment maintenance and Provide advice about equipment maintenance and environmental controlenvironmental control

SecuritySecurity(Emphasis is on preventing problems, protect guests, large (Emphasis is on preventing problems, protect guests, large

establishments, hire off-duty police officers)establishments, hire off-duty police officers)

Security chiefSecurity chief = extensive law = extensive law enforcement training, work with the enforcement training, work with the director of human resources, goal is to director of human resources, goal is to minimize theftminimize theft

• Provides on-going trainingProvides on-going training• Train security officersTrain security officers• Some security officers dress in plain-clothes other Some security officers dress in plain-clothes other

offices place guards in visible locations where they offices place guards in visible locations where they can see everyone who enters and leaves the can see everyone who enters and leaves the facility.facility.

Food and BeverageFood and Beverage

Food and beverage directorFood and beverage director = = supervises the most labor-intensive supervises the most labor-intensive department of a full-service lodging department of a full-service lodging operationoperation

• Manages the formal dining room, coffee shop and Manages the formal dining room, coffee shop and lounge, manager also directs the hotel’s banquet, lounge, manager also directs the hotel’s banquet, catering and room servicecatering and room service

• Executive chef works with a sous chef and other Executive chef works with a sous chef and other chefs to provide quality meals and refreshments chefs to provide quality meals and refreshments for hotel's guestsfor hotel's guests

QuestionsQuestions

1.1. The following list, please tell me the job The following list, please tell me the job function of each lodging position.function of each lodging position.

assistant general managerassistant general manager chief engineerchief engineer

chief engineerchief engineer night auditornight auditorroom attendantroom attendant human resources directorhuman resources directorconvention managerconvention manager

2.2. Tell me what an executive housekeeper is in Tell me what an executive housekeeper is in charge of?charge of?

3.3. Tell me the four main responsibilities of a front Tell me the four main responsibilities of a front office operations.office operations.

4.4. Tell me what a concierge is?Tell me what a concierge is?

Property Management Property Management Systems and Room RatesSystems and Room Rates

3.43.4

General ManagementGeneral Management

Property management systemsProperty management systems = are = are computer software programs that are designed computer software programs that are designed to specifically for the lodging industry.to specifically for the lodging industry.

• PMS computer program eliminates the need to perform PMS computer program eliminates the need to perform the same tasks over and over.the same tasks over and over.

• For a manager a PMS provides fast and accurate For a manager a PMS provides fast and accurate information and allows for improved control over the information and allows for improved control over the operationoperation

• PMS can connect accounting systems, reservations and PMS can connect accounting systems, reservations and registration databases, housekeeping room status registration databases, housekeeping room status records and marketing researchrecords and marketing research

Guests Account ManagementGuests Account Management

Customer service and satisfaction are the Customer service and satisfaction are the goals of every lodging establishment goals of every lodging establishment

Guest folioGuest folio = record of guest charges and = record of guest charges and payments (chares added to account)payments (chares added to account)

Lodging operations now feature electronic Lodging operations now feature electronic checkout systems that allow guests to use checkout systems that allow guests to use their in-room television remotes to review their in-room television remotes to review their folios, or slip a bill under the doortheir folios, or slip a bill under the door

Rooms ManagementRooms Management

To lodging property departmentsTo lodging property departments• Front office operationsFront office operations• HousekeepingHousekeeping

Room StatusRoom Status ReservationsReservations If a room is available it will read If a room is available it will read openopen,, confirmedconfirmed indicates room has been reserved, indicates room has been reserved, guaranteedguaranteed rooms are usually prepaid, rooms are usually prepaid, repairrepair means the room is unavailablemeans the room is unavailable

HousekeepingHousekeeping occupied, available, stay over, on occupied, available, stay over, on charge (guest have been checked out, but charge (guest have been checked out, but room not cleaned), out of orderroom not cleaned), out of order

Reservation ManagementReservation Management

Central reservation system (CRS) – guest Central reservation system (CRS) – guest call with toll free #, sometimes hooked up call with toll free #, sometimes hooked up with airlineswith airlines

Room inventory (total number of rooms Room inventory (total number of rooms that a property has to sell)that a property has to sell)

• Block rooms – room unavailableBlock rooms – room unavailable• Rooms forecast – order to anticipate room Rooms forecast – order to anticipate room

inventory levels, managers ask for a forecastinventory levels, managers ask for a forecast• No-showsNo-shows• Overbook roomsOverbook rooms• Under stays – guests who leave before their Under stays – guests who leave before their

anticipated date of departureanticipated date of departure

Yield ManagementYield Management

Yield ManagementYield Management – allows managers to – allows managers to change room rates change room rates

• High Demand – raise rates, limit cheaper rooms, High Demand – raise rates, limit cheaper rooms, block out rooms to ensure minimum stayblock out rooms to ensure minimum stay

• Low Demand – lower rates, seek business, Low Demand – lower rates, seek business, promotepromote

Setting Room RatesSetting Room Rates

Room rates vary considerably depending Room rates vary considerably depending on a variety of factors, including on a variety of factors, including construction, real estate cost, level of construction, real estate cost, level of luxury, type of bedding and time of yearluxury, type of bedding and time of year

Many methods for setting room rates, rule Many methods for setting room rates, rule of thumb method suggest that room rates of thumb method suggest that room rates should be set at $1 for every $1,000 of should be set at $1 for every $1,000 of construction costconstruction cost

Ex. If a new hotel is built at $50,000 per room, rat should Ex. If a new hotel is built at $50,000 per room, rat should initially be $50.00initially be $50.00

Hubbart FormulaHubbart Formula(Setting Room Rates Formula)(Setting Room Rates Formula)

1.1. Operating expenses – which are the costs of running the Operating expenses – which are the costs of running the establishmentestablishment

2.2. Desired return on investment (ROI)– which is the money a Desired return on investment (ROI)– which is the money a business hopes to makebusiness hopes to make

3.3. Other income – which is earned in various department (food, Other income – which is earned in various department (food, catering)catering)

4.4. Projected room sales – forecastingProjected room sales – forecasting(operating expense + desired (ROI)) – other income(operating expense + desired (ROI)) – other income

Projected room salesProjected room sales = room rate = room rateEx. Operating expense are $3,000,000; desired ROI $2,00,00; additional income Ex. Operating expense are $3,000,000; desired ROI $2,00,00; additional income

$300,00; projected room sales $100,00 what should the room rate be??$300,00; projected room sales $100,00 what should the room rate be??

($3,000,000 + $2,000,000) - $300,000($3,000,000 + $2,000,000) - $300,000$100,000$100,000 = $47.00= $47.00

Different Room RatesDifferent Room Rates

ComplimentaryComplimentaryGovernment ratesGovernment rates

Airline/agentAirline/agentDay ratesDay rates

Weekly ratesWeekly rates Family ratesFamily rates

Educational ratesEducational ratesLocal business ratesLocal business rates

QuestionsQuestions

1.1. Use the hubbart formula to set a room rate Use the hubbart formula to set a room rate given the following informationgiven the following information

1.1. Projected room sales: $100,000Projected room sales: $100,0002.2. .Desired return on investment: $3,000,000.Desired return on investment: $3,000,0003.3. Operating expenses: $4,000,000Operating expenses: $4,000,0004.4. Other income: $600,000Other income: $600,000

2.2. Which rate category would most likely apply to Which rate category would most likely apply to vacation travelers reserving a hotel room vacation travelers reserving a hotel room during the high season?during the high season?

3.3. A guest uses his in-room TV remote to check A guest uses his in-room TV remote to check out. This convenient checkout procedure is out. This convenient checkout procedure is made possible through the lodging property's made possible through the lodging property's what?what?