LECTURE NOTES 7

OWNERSHIP AND MANAGEMENT OF ACCOMMODATIONS

1. The Emergence of the International HotelHistorically hotel companies first focused on their own region and within their continental boundaries. However, as international travel increased in the late 1950s, more and more hotels began to look at expansion into international markets. One of the major catalysts in the international hotel development arena was the former Pan American Airlines. As air travel developed, Pan Am discovered that many locations did not have adequate hotel accommodations. In order to better serve international travelers, Pan Am formed the Inter-Continental Hotels Corporation (IHC) as a wholly owned subsidiary in 1946. Soon Pan Am acquired its first hotel in Brazil in 1949 (Gee, 1994, p. 30). Inter-Continental Hotels and others were established with the international business traveler as a primary market, and this segment remains important representing approximately 60% of Inter-Continental’s sales. Other airlines followed the Pan Am example including United Airlines which merged with Westin Hotels and Resorts in 1978. Although United Airlines has since divested itself of hotel ownership, many major airlines of the world continue with either ownership or arrangements to promote certain hotels through their reservation systems such as Japan Airlines with its international network of affiliated Nikko hotels. Although the hotel market generally is dominated by U.S. multinational corporations and chains, European chains such as Forte PLC, Club Mediterranee, Accor, and Meridien, and Asian chains such as the Taj Group, Oberoi, and the Mandarin-Oriental hotels have properties on more than one continent. The following table lists the 10 largest corporate chains in the world.

Top 10 of worldwide hotel groups as of 1 January 2013

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2. Hotel chainsIt is important to understand that hotels are managed and operated under different systems around the world. There are many models, including:• Independently owned and operated properties (independent hotels)• Properties that are independently owned and operated with chain affiliation (consortia)• Chain-owned and operated properties (hotel chains)• Franchised properties.• Independently owned, chain-operated properties (management contracts)Independently-owned and operated properties outnumber chain affiliated properties, but in terms of number of rooms, hotels owned and operated by chains are dominant worldwide. In different parts of the world, expansion has taken place differently. In Asia, equity investments are preferred, whereas in North America franchising and management contracts tend to be more popular. In reality, there are many combinations and arrangements for managing hotels.

There are two main kinds of hotel chains: hotel consortia voluntary associations, which group together independently owned and operated hotels, that join together primarily for marketing reasons, and integrated chains, chains or corporate hotel chains, which are made up of homogenous units and can be managed by the corporate chain or by a conglomerate Conglomerates are companies that manage corporate brands and independent unbranded hotels

2.1. Hotel consortia - membership affiliationsThe consortium is a group of independent hotels or small properties that share the same marketing policy and the same reservation system. Independent hotels are grouped together by hotel consortia, in order to compete with integrated chains. They promote themselves under a single brand and try to convey a recognizable image to the public, comparable standards of service, buildings and furnishings in order to build up customer loyalty. For these services, the members pay initial entry fees and annual membership fees to the consortium. The participation to a consortium can be limited in time.Hotel consortia benefit from economies of scale when it comes to purchasing and marketing. The main benefits of joining a consortium are:

- joint production of guides and brochures, which advertise all hotels in the chain

- joint national and international advertising campaigns- links into CRS- centralized purchasing of hotel equipment- technical assistance and management consultancy- freedom to make operational decisions- flexible contract, short-term

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- no obligation for operational standards compliance- greater company exposure to the market

The disadvantages might be that:- some consortia require members to comply with some rules regarding quality or image- members risk diluting their own image while part of the consortiumThe cost of membership of a large international hotel consortium is about 1% of turnover after tax.

Major hotel consortia

Rank 2012 Rank

Company Headquarters 2011 Rooms

2011 Hotels

1 1 Utell/Unirez Representation Services

Dallas, Texas USA 1381379 11282

2 2 Supranational Hotels Ltd.

London, England 297400 1662

3 4 Hotusa Hotels Barcelona, Spain 192455 21504 3 Great Hotels

Organization London, England 184128 672

5 5 Keytel S.A. Barcelona, Spain 142200 15816 6 Preferred Hotel Group Chicago, Illinois

USA140000 730

7 7 Worldhotels Frankfurt am Main, Germany

100872 518

8 8 Associated Luxury Hotels International

Orlando, Florida USA

87791 132

9 9 Leading Hotels of the World

New York, New York USA

84000 460

10 10 Logis Paris, France 56927 293511 12 AHMI RES-Hotel (Thed

International) Paris, France 31000 192

12 14 Small Luxury Hotels of the World

Surrey, England 24885 485

13 13 Luxe Worldwide Hotels Los Angeles, California USA

24330 220

14 15 Epoque Hotels Miami, Florida USA 22130 35015 16 Hotel Republic London, England 16805* 89*16 17 Sercotel Barcelona, Spain 14100 13517 18 Design Hotels Berlin, Germany 12957 17518 21 Inter-Hotel Paris, France 11700* 271*19 19 ILA-Châteaux & Hôtels

de Charme Brussels, Belgium 11346 258

20 23 Relais & Chateaux Paris, France 11190 48621 22 Chateaux & Hotels

Collection Paris, France 9464* 499*

22 20 Minotel International Lausanne, Switzerland

9000 200

23 24 Exclusive Hotels Paris, France 8005* 189*24 N/A Hotels & Preference Paris, France 7561 130

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25 25 Ringhotels Munich, Germany 7514* 132*

2.2. Integrated hotel chainsIntegrated chains develop and commercialize hotel products that are homogenous and consistent. In terms of management arrangements, they can exert their control either directly, by complete ownership of the hotel, or indirectly, through a franchise system or a management contract. All hotels in the chain carry the name of the chain.

a) Company-Owned and Operated SystemsIn this system, the property is owned by an individual or a company The hotel can be built, bought or owned as a result of taking over an existing hotel company. It can be considered as an entry strategy suitable especially for developed markets.The general advantages of this system are:• The owner has independence• There is more flexibility with decision making and thus decisions are often reached more quickly.• Direct ownership allows the owner major, if not full, control of the operating policies and procedures.• In case of acquisition, there is the advantage of an existing market, which can be easier developed:

o Bass Plc . - bought Holiday Inn;o Accor – bought Motel 6 – entry strategy for the US marketo Forte Plc . - bought Travelodgeo Marriott – through the acquisition of Renaissance Hotels from

New World has consolidated its position in Europe and Asia• Since the owner and manager are the same, this individual or entity obtains the full benefits of the profits.The disadvantages in an owner-operated system can include:• Substantial investments needed• The owner has the full risk. In international settings, this can cause problems in unstable political environments.• When there is only one or a few properties, the reservations and referral system may not be adequate.• It is often more difficult to obtain capital for growth, especially if the chain is small.

In case sole ownership is not permitted, another entry strategy that is frequent especially in developing countries is joint ventures, thus sharing both risks and investment efforts. Marriott International was the first hotel company that entered into a joint venture in Eastern Europe, in Warsaw.

Because of access barriers when buying abroad, another possibility which is largely spread on the international market might be leasing the property and operate it.

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When the ownership company has no experience in the hotel industry, it will outsource the operating responsibilities.

REITS: ANOTHER WAY OF DOING BUSINESSOver the course of the last decade, real estate investment trusts, or REITs, have played a key role in the success of large hotel groups, particularly in the United States and Canada.Combined with other means of financing, REITs have fundamentally changed the structure of hotel-related activities by dividing ownership and management. The introduction of this new means of financing has created a new kind of hotel owner.Hotel owners used to be “hoteliers”; today they are “in real estate.” This has created two different kinds of hotel executives: hotel owners who are in business, and businesspeople who work in the hotel industry. This difference gives rise to two unique orientations: the first group develops long-term strategies and focuses on customer satisfaction, while the second group makes decisions based primarily on short-term financial considerations and focuses on investors.

REIT–Real Estate Investment TrustIn the early 90s, the American hotel industry created a new kind of financing called REITs, or Real Estate Investment Trusts. This name designated a business corporation that had beneficial tax rates with regard to ownership. The Real Estate Investment Act was passed in order to allow small investors to invest in a variety of real estate properties, such as office buildings, shopping centers, apartment buildings, spas and hotels. In 1993, the first hotel REITs were formed and soon became prolific financial vehicles for their investors, as well as providing a quick source of income for REIT companies to acquire new properties. Starwood Hotels & Resorts is an American REIT made up of real estate investors; Starwood Hotels & Resorts Worldwide is the management company which the REIT has hired to manage its real estate developments.Although legislation varies depending on the country, this method of financing has spread around the globe.While many investors around the world have already discovered that REITs can offer a good rate of return and help diversify one’s portfolio, several Asian governments are starting to consider them as a way to raise public capital and ease the crushing debt that followed the Asian financial crisis. However, various attempts to create REITs have ended in failure because of poor investments or a lack of desirable assets on the market.In May 2000, the Japanese government passed legislation adopting the J-REIT. This closely resembles the Australian model (Australian LPT), which was, in turn, based on the American REIT (U.S. REIT). The J-REIT offers tax transparency but also allows foreign firms to manage the hotels–unlike the U.S. REIT. At the same time, with economic growth boosting real estate prices and demand, the Monetary Authority of Singapore (MAS) drafted guidelines for a REIT without providing for tax breaks, a move that could inhibit the creation of the new market.

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These developments spurred both Korea and Indonesia into seriously considering REITs.In Europe as well, some real estate companies are entering the market and pension funds are buying hotel properties according to contracts similar to U.S. REITs. In several recent large scale transactions, banks have also played a major role in financing.

A brief look at these systems of management underscores the varied issues of hotel management. There is no one type of management arrangement that is best. The individual arrangements that are agreed upon always involve the weighing of the advantages and disadvantages for a given situation.In recent years, the industry has seen the emergence of larger and larger chains. Beginning in the 1980s many hotel industry companies have sought to combine their resources to gain stronger positions in regional, national, and international markets. The emerging mega-chains have relied heavily on management contracts as one means of expansion, in combination with buy-outs, acquisitions, mergers, and joint ventures.Increasingly, a large percentage of rooms worldwide are in the hands a few corporations who market to multiple market segments. Smaller chains have also formed strategic alliances with the larger mega-chains which has allowed many to survive in a competitive global marketplace.

b) FranchisingA franchise is “an arrangement in which the owner of a trademark, tradename or copyright licenses others, under specified conditions or limitations, to use the owner’s trademark, tradename or copyright in providing goods or services.” Is it the most frequently used entry strategy for quick-service companies.Hotel franchising comes in many forms, but the basic premise is that the owner remains in control of the management and the property, yet has the advantages of a large chain in terms of trademark or tradename and marketing outreach. Most franchise systems are set up with the owner of the property, known as the franchisee, obtaining the right to use the name and to be part of the national or international chain, belonging to the franchiser. Rights given to the property owner include exclusivity of franchise rights to areas defined by the franchiser. Under contract, the franchisee agrees to abide by the operating policies and practices as defined by the franchiser in the agreement. The franchisee contributes personal funds amounting to around 30% of the investment. He also undertakes the whole financial risk of the hotel investment. He benefits from the standardisation and the profitability of the group and from the commercial and promotional advantages brought by belonging to a group. In general, the franchisee will agree to pay a membership fee (aprox. 10% of the investment) and in most cases some percentage of gross sales as defined by the specific contract (3-4%).A separate company, called franchising organization is created to manage the franchise system: McDonald’s, KFC, Hilton International. Master Franchising – franchise granted to an already operating business – right to expand the franchise system - Domino’s Pizza, Howard Johnson, Super 8 Motels.

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In general, the advantages to the franchise system for an owner include:• The right to use the brand name.• Start-up costs are reduced• Being part of a reservations system which has international access.• The right to purchase supplies via the franchiser. In most cases this will afford savings to the owner.• Professional managerial assistance. This is of obvious benefit to an owner who may have limited experience in the hotel industry.Among the disadvantages to the franchise system are:• The franchisee does not have complete management control. In general the policies and procedures must be followed as set by the franchiser.• The franchisee must pay for the franchise rights and agree to pay monthly fees.• The highest risk is quality controlThe franchisee is tied to the franchiser and how the brand name fares in the marketplace tends to affect all parts of the system (Gee, 1994, pp. 242-243).

Company Franchise Information Hotels Franchised

Hotels

Wyndham Hotel Group

http://www.wyndham.com/corporate/franchise/main.wnt

7,016 7,043

Choice Hotels International

http://www.choicehotelsfranchise.com/ 5,827 5,827

IHG (InterContinental Hotels Group)

http://development.ihg.com/?region=americas&page=home

3,585 4,186

Hilton Hotels Corp.

http://hiltonworldwide1.hilton.com/en_US/ww/fob/franchiseDev.do

2,774 3,265

Marriott International

http://www.marriottdevelopment.com/ 2,079 2,999

Accor http://www.accor.com/en/hotels/hotel-development.html

1,129 3,982

Vantage Hospitality Group

http://www.vantagehospitality.com/brands.cfm 845 845

Carlson Hotels Worldwide

http://www.carlson.com/brands/hotels.cfm 840 1,013

Starwood Hotels & Resorts Worldwide

http://development.starwoodhotels.com/ 437 942

LQ Management LLC

http://www.lq.com/lq/about/franchise/index.jsp 337 337

c) Management ContractThis arrangement is favored in many international settings as it allows a hotel chain to establish a presence without the investment of ownership. The

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concept was developed by Inter-Continental Hotel Corporation. It is an entry strategy that is encouraged by host countries, especially developing countries, as it represents a technology transfer. The management contract allows for the separation of ownership and operation. With such an arrangement, the owners act as investors who allow someone else to manage the property. The exact arrangements vary greatly between chains and within chains. There are numerous factors which come into negotiation in a specific management contract. In general, the chain requires fees to be paid for their management responsibility.In the international setting, management contracts are used widely by owners. Financial institutions and lenders have historically favored management contracts because of the lower financial risk for properties which are managed by experienced hotel operators. At the same time, management contracts are a way for hotel companies to expand.There are two types of management companies:- brand name hotel chains – Accor, Sheraton, Holiday Inn – management of their own brands- independent management companies – second tier management companies – most of them in the US.The commission charged by management companies includes:

- base fee – 2-4% full-service hotels; 2-5% - economy/limited service hotels; 1.5 –4% - luxury hotels

- incentive fee – 15% of the increase in net operating income.The management contract system affords the following advantages:• The investors are not required to become involved in the management of the properties.• The brand name generally assists in the property marketing.• The management team is provided for the owners.• Financing is generally easier to obtain.A management contract has the following disadvantages:• Certain fees must be guaranteed by the owners. Thus, the operational risk falls more heavily on the owner than the chain.• Owners and chains often do not agree on daily management practices. Generally the owners have less impact on operations than the operator.• Chains operate by standard management practices. These are often not flexible enough in international settings.• Management contracts often result in strained relations between owners and operators. Perceptions and communications often are stumbling blocks between both parties (Gee, 1994, pp. 230-241).

Companies That Manage The Most Hotels

Company Hotels Managed Total Hotels Marriott International 858 2,718Extended Stay America 475 472

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Accor 475 3,894InterContinental Hotels Group 423 3,520Tharaldson Enterprises 360 360Société du Louvre 345 896Westmont Hospitality 332 332Interstate Hotels & Resorts 295 295Starwood Hotels & Resorts Worldwide

243 738

Hilton Hotels Corp. 206 2,173Source: HOTELS' Giants Survey

Top 20 hotel brands, 2013http://www.rankingthebrands.com/The-Brand-Rankings.aspx?rankingID=28&nav=industry

3. Management Measures for HotelsThe hotel industry uses several key measures including room rates and occupancy ratios to evaluate the business success of individual properties and chains. These standard measurements are used by financial institutions and worldwide consulting organizations to hotels.

3.1. Hotel RatesHotel rates can be one of the most confusing parts of hotel operational analysis. The officially assigned rate for each type of room in the property is called the rack rate. In reality, hotels have dozens of rates that are discounted off the rack rate. The rack rate, which is based on the investment cost and required revenues to cover fixed and variable operating costs, is generally the highest rate charged for a room.Discounted rates are part of the marketing plan to attract various market segments. Discounted rates can be offered to such groups as government employees, members of the military, tour groups, senior citizens, and many others. The most important measure regarding hotel rates is the average daily rate (ADR), which is calculated by dividing the total room revenue by the number of rooms occupied. Thus, heavy discounting will result in a lower ADR. In recent times, the ADR is more often referred to as sales per room occupied. The need to generate sufficient sales to get beyond the breakeven point has been a major factor in discounting by hotel management. Progressive hotel

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operators today use forms of yield management in room rate allocation. Yield management concepts were pioneered by airlines attempting to maximize the passenger revenue per seat mile, and the basic concept has been adapted to room sales by the hotel industry. A main goal in yield management is to get the maximum rate for each room given the existing demand at a given point in time. All discounted rate programs are reviewed in relation to the room supply and demand analysis. Airlines and hotels realize that airline seats and hotel rooms cannot be inventoried. Hence, any unsold airline seats or hotel rooms will “perish” once the day ends.

Operating expenses = fixed costs + variable costs * √L (no. of occupied beds)Operating revenue = price/room* no of roomsOperating revenue – Operating expenses ≥ 0

3.2. Occupancy RateThe occupancy ratio or rate is as important an indicator of profitability as is the ADR. The occupancy rate is calculated by dividing the number of occupied rooms by the number of rooms available for sale. Hotels rarely operate at 100% occupancy for an entire year, and depending on its ADR, may need as low as 50% or as high as 80% to achieve profitability. As a general rule, hotels require at least 65-70% occupancy for profitability.There are many variables that affect the level of hotel occupancy. It is important to know the occupancy rate of the hotel, but knowing how many people were in the rooms is another important factor. Multiple occupancy tends to increase the revenue for a hotel property. There are other variables such as the rate charged, but in general the higher the percentage of double occupancy the more revenue. As mentioned earlier, rates charged for rooms vary from the rack rate in accordance with marketing programs. The average rate per room occupied is an indication of discounting and multiple occupancy in the property. A higher average rate per room will be achieved when there is less room price discounting and when there are more guests per room.

3.3. Other Revenue and Cost ConcernsAlthough there are hotels which still provide rooms only, most properties and property types have other sources of income that become part of the revenue and cost picture beyond hotel rooms. Worldwide, room revenue does account for well over half of total hotel revenue (aprox. 60%) but other sources of revenue are also significant (food and beverage revenue account for about 30% of the total).Hotel food and beverage revenue come from a variety of outlets including coffee shops, buffets, fine table service, room service, catering, and banquets. Hotels also offer a variety of meal plans. The American plan (AP), also known as full pension in Europe, means that all meals are included in the hotel room rate. Ironically, this rate is not often used in American hotels except perhaps for resorts where it may assist in marketing value vacation packages.

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By contrast, the European plan (EP) normally provides no meals. This is the plan that is most common in North American hotels, as opposed to the American Plan.There are many variations to these two basic plans. The Bermuda plan normally includes some type of breakfast. The modified American plan (MAP) normally includes breakfast and dinner but not lunch.While room and food and beverage revenues comprise the primary sources of income, labor is the industry’s single largest cost. In terms of hotel operations, food and beverage is the highest labor cost area followed by rooms (PKF Consulting, 1994, p. 58). Certainly any analysis of revenue and costs needs to be done by country and region, as many country-specific economic factors must be considered. Hotels are learning that attention to food service can be a good source of additional revenue, as many hotels have attempted to increase their revenue from food and beverage while keeping the expenses associated with food and beverage fairly constant.

4. Food Service Management and OperationsIndependent restaurants commonly owned and operated by individuals, partnerships, or families are found worldwide. Because of the low ratio of profit to sales, however, restaurants are especially susceptible to failure, with the majority going out of business within 5 years (Coltman, 1989, p. 23). Because the profit margin of a food outlet is dependent on food and labor costs, a number of critical factors need to be considered in managing and operating a restaurant. Since much of the success of a restaurant is dependent on the menu, menu planning is basic to a restaurant’s success.The menu is important not only in attracting customers, but also influences the financial investment that is needed to start a restaurant since the menu can dictate the needed equipment, food costs and labor costs. Corporate-owned restaurants with multiple outlets or franchises have additional advantages in terms of cost-savings that individually owned restaurants do not. These include cost savings that may come with limited menus, greater purchasing power and better market penetration through organized marketing efforts. For fast-food outlets especially, franchisers provide training to teach operators ways to control food cost through strict portion control, inventory control, avoidance of waste and controlling labor costs by standardizing procedures and emphasizing continuous training on the job.

5. Hotel OperationsHotel StaffingThe staffing needs for hotels range from executive level positions such as general managers to unskilled positions at lower levels. Jobs such as resident manager, front office manager, director of sales, catering manager, reservations clerk, housekeeper, doorman, chef, kitchen helper, and laundry worker represent only a few of the many levels of employment in hotels. International hotels may face additional challenges in the human resources area at all personnel levels. A new destination, for example, often does not have either the trained labor force for upscale properties or local

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management expertise. It has long been a custom of international hotel chains to recruit experienced managers beyond national boundaries.These expatriate managers bring with them the required hotel education and training. At the same time, ideally these individuals must have the ability to understand and work in the local culture. The successful expatriate manager can often help in the development of middle management recruited and developed from the local labor force.Equally challenging for the international hotels is having an adequate labor force. In general, an adequate labor supply for the hospitality industry is a global problem. The service industry also has historically been one of compensation based on a mix of pay (on the low side) and perquisites (on the high side), long hours, and high turnover. In the international setting, the rules of hiring, supervising, appraising, disciplining and training a hotel staff are also influenced by the local culture. For the international manager, there are often no clear-cut guidelines and success has often come through adaptation and integration of prior experiences with locational realities, different approaches based on local advice and best judgment.

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6. Alliances, mergers and acquisitions in the hotel industryFollowing the lead of the airline industry and distribution network, the hotel industry has also been swept up in a powerful wave of consolidation. By entering into acquisitions, mergers and partnerships of various types, hotel groups are showing unparalleled growth in the number of rooms, annual sales, and worldwide presence on five continents. And even though the number of deals per year is beginning to slow, it would appear that the consolidation of the sector is an ongoing process and not a passing trend.

International growth has not prevented the emergence of new companies, some of which have done quite well, nor has it inhibited the development of domestic groups (Dorint and Maritim in Germany, Jolly in Italy, Fujita Kanko in Japan, Southern Sun Hotels in South Africa, Scandic Hotels in Sweden, etc.).Therefore, although the hotel sector is indeed experiencing consolidation, the industry remains fragmented with independent hotels in the majority.

Hotel groups, large and small, get biggerUnexpected vertical integrationConsolidation through market globalizationTravel & Tourism Analyst recently established an arbitrary yardstick for defining a “global” company: presence in 125 countries, 250,000 rooms and 1,000 hotels. The only groups truly positioned to achieve this status in the coming years are Accor, Best Western, Carlson, Marriott and Starwood. With the exception of Carlson, Accor and Cendant, the giant groups focus their activities primarily on the hotel sector and their development strategies are essentially geared towards brand acquisitions, franchising and geographic expansion. Each brand targets a specific market segment and the stronger the chain, the greater the benefits.

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In terms of global distribution, Cendant is number one in North America. In South America, Inter-Continental is number one and Sol Meliá is number two. In Europe and the Middle East, Accor is the leader with Inter-Continental as number two. In the Asia-Pacific region, it is the opposite, with Inter-Continental as number one and Accor as number two.

Bigger giantsIn the next few years, hotel giants are expected to get even bigger, primarily through a significant rise in franchising. This trend will likely benefit American players, who already dominate in this sector. However, in the United States, the consolidation movement seems to be taking a different route: real estate investment trusts (REITs) and management companies are merging, American hotel groups are merging with international groups, various brand hotels are joining forces, etc.In Europe, the major players are eager to expand by setting off a new wave of consolidation. Bass, for example, sold off its breweries so it could double and diversify its hotel activities in the next five years.There will always be small companies who will emerge and expand by filling specific niches.Their success will then attract the attention of larger companies, making them targets for takeover. The distinct trend towards consolidation will continue and produce increasingly powerful global giants. According to some experts, gigantic companies will eventually be so global that the geographic location of their headquarters will not matter. In other words, there will no longer be major American or European players, but genuine world players.

Associations: A way to compete with the giants?

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Marketing associations of independent hotels are designed to give individual members the kind of market visibility enjoyed by chain hotels. The phenomenon began in Europe before spreading to North America. Rather than succumbing to market pressures to franchise, some independent establishments prefer to affiliate themselves with a type of voluntary association such as Relais & Châteaux. These associations are usually based on members having a common strategy and image. Best Western in the United States is the largest such association in the world. In France, as of January 1, 2000, there were 26 voluntary associations, the largest of which, Logis de France, boasted 3,650 hotels. In the coming years, in addition to a brand image that accurately targets specific market segments, voluntary associations will have to offer their members a high recognition factor and access to all the latest technologies.Associations can also take the form of marketing and reservations providers. The largest such company in the world is UTELL in the United Kingdom, a subsidiary of Pegasus in the United States. A brand-new addition to the list of top groups and currently ranked 23rd globally, U.S.-based Design Hotels has successfully established itself by offering clients a hotel experience typical of the city visited. When in Rome…The number of associations has grown over the years and the phenomenon is now subject to the trend towards consolidation.

7. Travel industry LinkagesFor tourism to succeed, the hospitality sector must work together with other segments of the travel industry. Over the years, the accommodations industry has learned to work with various industry segments such as airlines, travel agencies, and tour operators to assist in the marketing of the destination. During low season especially, joint promotions of special value tour packages involving the cooperation and contributions of different members of the travel industry, cooperative marketing campaigns, and travel agencies familiarization trips all help to fill rooms and airplane seats.

7.1. Marketing PartnershipsWorking as partners in travel, many major hotels and airlines offer awards that reward consumers for using specified hotels and air carriers. These arrangements have now expanded to rental cars, attractions, and upscale restaurants. The various award programs vary considerably within the industry. Frequent flyer miles and frequent stay point awards at hotels are very common. In addition, there are programs which reduce the price of rooms off the rack rate or the standard room rate by offering free accommodation for every two or more paid nights. The various programs are often confusing to both the consumer and the travel agents as programs are continually modified. These programs, nevertheless, generally build important partnerships within the industry and often develop important consumer brand name loyalties (Kaiser & Helber, 1987, p. 179).

7.2. Hospitality-related Industry OrganizationsIn many countries, the members of the hospitality industry have organized business or industry organizations which provide a variety of services to their

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members. Among the services common to all such organizations is an organized approach to promoting the use and development of hospitality facilities and services for the traveling public.These organizations attempt to help negotiate favorable laws and regulations that affect the hospitality industry and tourism in general.They may also play a valuable role in the resolution of conflicts that may result from differences in goals and objectives with the public sector.For example, the American Hotel and Motel Association (AHMA) is a federation of hotels and motels whose membership accounts for well over 50 percent of all hotels and motels, and in terms of revenue reflects over 80 percent of the revenue for the entire U.S. hotel industry. The AHMA works for favorable laws that affect the industry including such issues as taxation, liability, and advertising. Other regional and international organizations which represent the lodging sector include the European Motel Federation in the Netherlands, the International Hotel Association in Paris, France, the International Organization of Hotel and Restaurant Associations in Zurich, Switzerland, and the Caribbean Hotel Association in Puerto Rico. Specialized sectors of the lodging industry also have organizations to represent them such as the International Youth Hostel Federation and the Bed and Breakfast Reservation Services World Wide.

SUMMARYThe hospitality industry, representing the accommodations industry and the food and beverage sector, comprises a major part of the global tourism industry in terms of revenue and employment. The growth in global tourism has resulted in many changes to the accommodation and food service industry in recent years. Hotels and restaurants have increasingly become part of national, regional and international chains.Franchising has been used extensively in the accommodations industry as well as the food and service industry, which allows a more rapid penetration of the marketplace. However, the bulk of the global food service industry will likely remain with independent restaurants, where the customer seeks a special or different dining experience. New technologies, demographic changes, and economic and political shifts will continue to impact the management and operations of hotels and food outlets in the next century.

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