Vocabulary Practice
1. What is a hotel chain?
2. What is a subsidiary?
3. What is a referral system?
4. What is a logo? What is it designed to do?
5. What is a management contract?
6. What is a joint venture?
7. What do cosultants mean?
8. What do consultants do? For what purposes are they hired by hotels?
9. What is a bulk purchase?
Hotel and Motel Chains
The boom in the airline industry that began about twenty years ago resulted in a corresponding boom in hotel construction. A feature of this rapid construction of new hotels was the emergence of hotel chains as a dominant force in the accommodations industry. Indeed, some of the chains are owned by airlines; an outstanding example is the Inter-Continental chain, a subsidiary of Pan American Airways.
The hotel chains have several competitive advantages over individually owned and operated establishments. One of the most important of these is having the resources to spend more money on advertising. Television advertising, for example, is too expensive for most individual hotel operators. The chains, on the other hand, can spread the cost among all of their member units. The hotel chains also have advertising and public relations personnel on their corporate headquarters staffs, who give valuable advice and support to their fellow workers in the individual hotels.
Another advantage comes from the standardization of equipment and operating procedures. The chains publish detailed manuals that specify procedures to be followed even in such tasks as making beds and setting tables. This results in a very visible degree of uniformity between the hotels in the chain. While uniformity may not always be a desirable quality, the traveling public has an excellent idea of what kind of accommodations to expect. Even when the different hotels in the chain are not tightly controlled by a central office, it is customary to have an inspection system in order to guarantee that the overall standards are being met.
The most important and most obvious advantage is the increased efficiency in making and controlling reservations. A guest at one hotel, for instance, can receive confirmation of a room at another in a matter of minutes. When a chain is owned by an airline, the traveler can make his reservations for flights and for hotel rooms at the same time and place. The chains also make it easy to reserve a room by telephone, either through one nationwide telephone number or by local telephone service in key market cities. The telephones are tied in to computer or teletype systems, which make it possible to confirm space while the caller is still on the phone.
Many of the chains are, in fact, referral systems rather than corporate-owned groups. In a referral system, the operators of individual hotels or motels pay a fee to a group that has joined together in a reservations system. In most cases, the establishment is inspected by the headquarters staff of the chain to ensure that it meets the chain's standards. If it does meet those standards, it can then use the name and advertising symbol, the logo, as it is called, for the group. In effect, the individual operation has become a chain member.
The chains have expanded in a number of other ways. One way is through direct investment. This means that the headquarters corporation itself puts up the necessary money to build and operate a new hotel or to buy and refurbish an old one.
Another way to expand is by establishing management contracts with the actual owners of the hotel. The chain in effect takes over an empty building and operates it according to its own operating procedures for a fee or for a percentage of the profits. This method is frequently used when the chain expands into a foreign country, since it eliminates the risk that the organization will lose its investment because of political upheaval. A somewhat similar method is the joint venture, a partnership in which both the chain and local investors put up part of the capital that is necessary for new construction or the purchase of an existing building.
Yet another way to expand, widely used by some of the motel chains, is franchising which is a leasing arrangement that requires the hotel operator to pay a fee for the use of plans, manuals of procedure, and advertising material. In return, he is granted a license to operate a business under the name of the parent corporation. The franchise operator puts up the capital, but he gets a standardized product with a known sales potential. He can, of course, also get a great deal of help from the licensing corporation in establishing his operation and then in solving problems that arise after it has opened. Some franchise operations are also joint ventures, with both the corporation and the individual owner supplying part of the initial capital.
The expansion of the chains has resulted in a growth of hotel and hotel-related jobs, particularly at the management levels and in such fields as hotel design and interior decoration. The top staff people arc usually experienced hotelmen who can effectively control the operations of the individual units. They are backed up by troubleshooters who travel to hotels that have problems. Also, it is not unusual, for example, for an experienced manager to be transferred to a new hotel in order to ensure that the new operation will be successful quickly. We have already noted that the referral systems and franchising organizations employ staff inspectors. The inspectors are usually experienced hotelmen with backgrounds in management.
One of the strengths of the chain system is the large advertising and public relations staff located at the chain's headquarters. This staff prepares publicity campaigns for the chain as a whole; it also helps and advises the individual hotels on these matters. The headquarters staff usually has more overall influence with the information media—newspapers, magazines, radio, and television—than is possible for staffs in the individual hotels.
Another advantage for the chains is in increased sales potential for conventions. Some convention salesmen work in the corporate headquarters and promote the whole chain rather than one hotel. In this way the sponsoring group can hold its meetings in one location one year and another the next, while at the same time receiving the assurance of very similar service and costs. With the now commonly accepted idea that conventions should combine business and pleasure, the practice of changing locations every year is very attractive to many sponsoring groups.
Another of the strengths of the chain system is derived from the superior planning and design of hotels. The benefits begin here even before the location is selected, for the chains have access to expensive market research data on site selection and size of the hotel. The large chains employ architects and interior decorators who specialize in hotel work. Many chains often hire consultants to advise them. The chains can either use their expert knowledge directly to build their own hotels or pass it along to others when they participate in a joint venture, a management leasing arrangement, or a franchising operation.
Hotel design poses special problems in such matters as size and location and their relationship to each other. For example, the space allotted to service and storage areas, which must be adequate but not excessive, may make the difference between the profitability and unprofitability of the operation. In the interior design, the use of furniture, fabrics, and equipment that have been tested can sharply cut maintenance costs. From the time that construction of a new facility is decided on, the experts at corporate headquarters can give valuable help and advice so that the design of the hotel will contribute to its success.
Chain management also increases the efficiency of the total organization in other ways. For example, it permits very large bulk purchases for some kinds of equipment and supplies. The accounting and auditing systems of the chains can be centralized. A centralized personnel office for managerial and technical positions throughout the chain also provides an advantage in securing competent people.
There is a two-way exchange of information between the corporate headquarters and their units. One way is from the individual hotels to executives and supervisory staff members on the headquarters staff. Here, the experience of the corporate executives cart benefit each member hotel rather than just one. The other way of exchanging information is from the headquarters staff to the units in the chain. These arc often, in effect, training assignments for promising young people who have been hired by the corporate personnel office and are sent to work in member hotels. In the different hotels, management trainees can obtain experience in all the wide variety of skills that go into the operation of a hotel. Later, when they have gained the necessary expertise in several areas, these same people may return to the headquarters to direct and train others.
Discussion
1. How is the growth of chain-operated hotels related to the growth of the airline industry?
2. In what ways do hotel chains have an advantage in promotional efforts over individually owned and operated establishments?
3. How does the standardization of management and operating procedures give an advantage to the chains?
4. How can the chains offer greater efficiency in making and controlling reservations?
5. How docs a chain expand by means of a referral system?
6. How do the chains grow by means of direct investment?
7. How do the chains expand by means of management contracts?
8. How do the chains grow through joint ventures?
9. How do the chains expand by means of franchising?
10. In what areas has the expansion of the chains resulted in an increase in hotel and hotel-related jobs?
11. What is the function of inspectors and troubleshooters who work for the chains?
12. How do additional staff members in the corporate headquarters create an increase in promotional power for the entire chain?
13. What advantage do the chains have in increased sales potential for conventions?
14. What advantage do the chains have in the planning and design of hotel structures?
15. How is the design of a hotel related to its profitability?
16. How can maintenance costs be reduced through effective interior design?
17. What are some of the other ways in which chain management increases efficiency?
18. What is one way in which there is an exchange of information between the corporate headquarters of a chain and its individual units?
19. What is a second way of exchanging information between the chain headquarters and the individual hotels?
Review
A. Indicate whether each of the following statements is true or false.
1. The airlines are not allowed to own hotels, so they have very little influence on the accommodations industry.
2. Television advertising is so expensive that it is usually beyond the financial means of individually owned and operated hotels.
3. In chain-operated hotels, the manager can follow whatever procedures he thinks are best.
4. A guest staying at one hotel in a chain can usually make a reservation at another in only a few minutes.
5. Chain-operated hotels do not accept reservations by telephone.
6. A hotel that is part of a referral system normally undergoes inspection to ensure that it meets the standards of the group.
7. Some chain-operated hotels are built as a result of direct investment by the parent corporation.
8. Management contracts help to cut down on the corporation's risk when it is expanding into a country where there is a possibility of a political upheaval.
9. In a joint venture, only the local investors put up the necessary capital.
10. In a franchise system, the owners of the individual units have a license to do business under the corporate name, but they must meet the standards of the parent corporation.
11. There has been no increase in hotel and hotel-related jobs as a result of the growth of the chains.
12. A chain headquarters has no advertising and publicity staff, since it is better for each individual hotel to promote itself.
13. Some sponsoring groups for conventions like the possibility of moving from one hotel to another in a chain so that each annual meeting can be held in a different place.
14. There is no acceptance for the idea that conventions combine business and pleasure.
15. The hotel chains are equipped to give expert advice and help in the location, planning, design, and interior decoration of new hotels.
16. The design of the physical plant of a hotel does not have any relationship to its profitable operation.
17. Centralization, standardization, and size offer advantages to chain operations in such areas as purchasing, accounting, and personnel management.
18. Employees of a chain can move only from the individual hotels to the corporate headquarters.
B. Summarize the advantages that are offered by the chain operation of a hotel. Mention any advantages you can think of that are not given in the text.
C. The reading concentrates on the advantages of hotel-chain operations. Many people, however, including some experienced travelers, do not like to stay in them if there is another choice. Discuss why you think some people may have a negative attitude toward the chain hotels.
UNIT EIGHT
CAREERS IN THE HOTEL INDUSTRY
Special Terms
Commercial School: A school that specializes in commercial or business subjects. Many are privately owned and offer night classes, but they do not give academic degrees.
Professional Training: Training usually considered to be at the university level, given to doctors, lawyers, accountants, and, today, many hotelmen and business administrators.
Apprentice: A beginner who works under a trained and experienced person for a period of time. Many chefs work as apprentices for several years before they qualify as full-fledged chefs.
Skilled Work: Work that requires special aptitude and training. Carpenters and electricians are considered skilled workers.
Semi-skilled Work: Work that requires a small amount of training. Waiters and chambermaids are considered semi-skilled workers.
Unskilled Works: Work that requires neither training nor special aptitude. Kitchen helpers, dishwashers, and day laborers are considered unskilled workers.
Tip: A money payment in addition to wages or salaries for a personal service; it is also called a gratuity.
Wages/Salaries: Payment for work. Wages are figured on an hourly or daily basis. Salaries are figured on a weekly, monthly, or yearly basis.
Occupancy Rate: The percentage of rooms or beds occupied in a hotel during a given period.