Types of Lodging Facilities

Types of Lodging Facilities

Classification of hotel facilities is not based on rigid criteria. The definitions can change, depending on market forces, legal criteria, location, function, and, in some cases, personal preference, but the definitions that follow are generally accepted and are the ones intended for these classifications throughout this text.

Hotels

A hotel usually offers guests a full range of accommodations and services, which may include reservations, suites, public dining and banquet facilities, lounge and
entertainment areas, room service, cable television, personal computers, meeting rooms, specialty shops, personal services valet, laundry, hair care, swimming pool and other recreational activities, gaming / casino operations, ground transportation to and from an airport, and concierge services. The size of the property can range from 20 to more than 2,000 rooms.

Types of hotel properties

Hotels





Motels





All - suites





Limited - service hotels





Extended - stay hotels





Market orientation / location

Residential

Center - city

Hotels





All - suites





Limited - service





Extended - stay





Suburban

All - suites





Limited - service





Extended - stay





Commercial

Center - city

Hotels





All - suites





Limited - service





Extended - stay





Suburban

Hotels





Motels





All - suites





Limited - Service





Extended - stay





Airport

Hotels





Motels





All - suites





Limited - service





Highway

Motels





All - suites





Limited - service





Extended - stay





Sales indicators

Occupancy





Average daily rate (ADR)





Yield percentage





Revenue per available room (RevPAR)





Levels of service

Full - service





All - suites





Limited - service





Extended - stay





Affiliation

Hotels are found in center - city, suburban, and airport locations. Guest stays can be overnight or long - term, as much as several weeks in length. These properties sometimes specialize in catering to particular interests, such as conventions or gambling. Casino hotels usually take a secondary role to the casino operation, where the emphasis is on profitable gaming operations.

Motels

Motels offer guests a limited range of services, which may include reservations, vending machines, swimming pools, and cable television. The size of these properties averages from 10 to 50 units. Motels are usually in suburban highway and airport locations. Guests typically stay overnight or a few days. Motels may be located near a free standing restaurant.

All - Suites

The all - suites concept, a new addition to the hotel industry, developed in the 1980s as a separate marketing concept, offers guests a wide range of services, which may include reservations, living room and separate bedroom, kitchenette, optional public dining room and room service, cable television, video cassette players and recorders, specialty shops, personal services valet and laundry, swimming pool, and ground transportation to and from an airport. The size of the operation can range from 50 to more than 100 units.

This type of property is usually found in center - city, suburban, and airport locations. The length of guest stay can be overnight, several days, or long - term. Although this type of hotel may seem new, many downtown, center - city hotels have offered this type of accommodation with in - room kitchenette and sitting rooms since the early 1900s. Now withmass marketing- advertising products and services through mass communications such as television, radio, and the Internet - this type of hotel is considered new.

Limited - Service Hotels

Limited - service hotels appeared on the hotel scene in the mid - 1980s. Hampton Inn and Marriott were among the first organizations to offer limited - service properties. The concept of limited service was developed for a specific segment of the market business and cost - conscious travelers. The range of accommodations and services may include reservations, minimal public dining and meeting facilities, cable television, personal computers, personal services (valet and laundry), and ground transportation to and from an airport.

The size of the property can range from 100 to more than 200 rooms. Limited - service hotels are found in center - city, suburban, and airport locations. They are usually located near restaurants for guest convenience. Guest stays can be overnight or long - term. These properties sometimes specialize in catering to the business traveler and offer special business technology centers.

Extended - Stay Hotels

In “Survey Results of the Extended Stay Lodging Industry,” The Highland Group of Atlanta, Georgia, reports the following information, about this newest hotel product on the market which includes the 31 extended - stay brands as well as some independent hotels.

Extended - stay hotel room supply in the United States increased more than 50 percent in 1997 over 1996. There will be more economy - price than upscale extended stay rooms before the end of 1998. This is a significant reversal from prior years and indicates a change in the way extended - stay lodging is used by American travelers.

Projected extended - stay hotel supply will be more than half a million rooms through 2002. At this level, extended - stay hotel rooms will represent some 12 percent of total lodging inventory.

Assuming supply growth projections are fully realized through 2002, this represents a significant change from the current price distribution of extended - stay hotels and marks a change in the way Americans use extended - stay lodging. Use of extended - stay lodging will have expanded from the corporate expense - account market to encompass most demographic segments. Corporations are taking advantage of the availability of these facilities for training, relocation and temporary assignments at all levels.

At Hilton’s Home wood Suites, the following room amenities are included: kingsize bed or two double beds in the bedroom and foldout sofa in the living room; two remote - controlled color televisions; fully equipped kitchen with a microwave, refrigerator with ice maker, coffeemaker, twin - burner stove, and kitchen utensils; a spacious, well - lit dining area; and ceiling fans and iron and ironing board. Additional hotel services include a business center, an exercise room, and a pool. This hotel concept also structures its room rates to attract the long - term guest.

Market Orientation

Market orientation in the hotel industry is categorized into two segments:

residential hotels, which provide guest accommodations for the long term; and

commercial hotels,which provide short - term accommodations for traveling guests.

Residential properties include hotels, all - suites, limited - service, and extended - stay properties. Services may include (but are not limited to) public dining, recreational facilities, social activities, and personal services. These hotels are usually located in center - city and suburban areas where other activities (shopping, arts and entertainment, busines sservices, public transportation) are available to round out the living experience.

Commercial properties service the transient guest, whose stay is short in duration.Services include (but are not limited to) computerized reservation systems, public dining, banquet service, lounge and entertainment areas, personal services, and shuttle transportation to airports. They may be located almost anywhere.

It is essential to note the very gray areas in using these two types of categories. Acommercial lodging establishment may have a certain percentage of permanent residents. Likewise, a residential hotel may have nightly rentals available. Owners and general managers need to exhibit a great deal of flexibility in meeting the needs of the available markets.

Sales Indicators

Sales indicators,including hotel occupancy and average daily rate, are another means for describing hotels. This information is necessary for business investors to estimate the profitability of a hotel.

There are four factors that measure a hotel’s degree of financial success: occupancy percentage, average daily rate, yield percentage, and revenue per available room (RevPAR). Occupancy percentageis the number of rooms sold divided by the number of rooms available. Average daily rate (ADR)is the total room revenue divided by the number of rooms sold.

Yield percentage, the effectiveness of a hotel at selling its rooms at the highest rate available to the most profitable guest, reveals a facility’s success in selling its room inventory on a daily basis. RevPAR is used to indicate the ability of each guestroom to produce a profit. Once the daily sales opportunity has presented itself, it cannot be repeated (excluding the opportunity to sell a room at a half - day rate).

Occupancy

Occupancy percentages measure the effectiveness of the marketing and sales department as well as the front office in its external and internal marketing efforts. Occupancy percentage is also used by investors to determine the potential gross income, which is the amount of sales a hotel might obtain at a given level of occupancy, average daily rate, and anticipated yield. However, it is also important not to assume that occupancy is standard each night. Variations occur on a daily basis and by season.

Average Daily Rate

The average daily rate (sometimes referred to as average room rate) is also used inprojecting room revenues- the amount of room sales received - for a hotel. However, this figure also affects guests’ expectations of their hotel experience. Guests expect higher room rates to correlate with higher levels of service: the hotel with a rate of $150 per night is expected to offer more services than a hotel in the same geographic area with arate of $55 per night. These expectations have been extensively capitalized upon by major hotel chains, by developing different properties to meet the expectations of various segments of the hotel market, as discussed earlier in the chapter.

Yield Percentage

Yield percentage measures a hotel manager’s efforts in achieving maximum occupancy at the highest room rate possible. Prior to the 1990s, hotel managers relied on occupancy and average daily rate as indicators of meeting financial goals. Yield percentage forces managers to think in more active terms.

RevPAR (Revenue per Available Room)

RevPAR is determined by dividing room revenue received for a specific day by the number of rooms available in the hotel for that day. The formulas for determining RevPAR are as follows:

For example, RevPAR for a hotel that has $10,000 in room revenue for the night of September 15 with 200 rooms available would equal $50 ($10,000 / 200 = $50).

This same hotel on September 15 with 200 rooms, room revenue of $10,000, 125 rooms sold, an average daily rate of $80 ($10,000 / 125 = $80), and hotel occupancy of 62.5 percent (125 rooms sold / 200 rooms available X 100 = 62.5 percent) would still produce the same RevPAR (.625 X $80 = $50).

RevPAR is used in hotels to determine the amount of dollars each hotel room produces for the overall financial success of the hotel. The profit from the sale of a hotel room is much greater than that from a similar food and beverage sale. However, the food and beverage aspect of the hotel industry is essential in attracting some categories of guests who want conference services.

Consider the following article, “January RevPAR Grows Nearly Ten Percent at Suburban Lodge Company - Owned Hotels,” which was published on - line. It shows Suburban Lodges of America’s use of RevPAR to inform its shareholders. (Suburban Lodges of America owns, franchises, and manages Suburban Lodge hotels, the nation’s largest chain of economy extended - stay hotels, and franchises Guest House International hotels, the midmarket nightly - stay hotel chain with the franchisee - friendly franchise agreement.)

ATLANTA - (BUSINESS WIRE) - Feb. 8, 2001 - Suburban Lodges of America, Inc. (NASDAQ: SLAM) announced today that weekly revenue per available room (“RevPAR”) for Company - owned Suburban Lodge hotels increased 9.7%, to $145.07, for the month of January 2001 in comparison to RevPAR of $132.26 in January 2000. The increase in current year RevPAR was attributable primarily toa 9.0% increase in the hotels’ average occupancy rate, to 73.8% from 67.7% in January 2000, combined with a small increase in average weekly rate (“AWR”) to $197.68 from $196.75 in January 2000. The Company believes that its January 2000 RevPAR and occupancy rates were negatively impacted by reduced travel resulting from Y2K - related concerns.

In commenting on the release of this information, Chief Financial Officer Chuck Criscillis stated, “Like many other companies, we are looking for ways to better communicate our progress with our shareholders. Reporting our hotels’ operating data on a monthly basis is one way to accomplish this. By releasing these numbers, we are not intimating that similar RevPAR increases will be achieved for the balance of the year.

While we are anticipating RevPAR growth for the balance of 2001, we don’t view the January growth rate as sustainable because of the weakness in January 2000 occupancy rates. Nonetheless, our January 2001 statistics provide strong evidence that our strategy of focusing on occupancy more than on room rates can yield meaningful revenue growth.”

The matters discussed in the fore going paragraphs of this news release include forward - looking statements that involve risks and uncertainties that could cause results to differ from anticipated results, including, but not limited to, general economic conditions, weather patterns, individuals’ plans for business and personal travel, and other risks indicated in the Company’s filings with the Securities and Exchange Commission.

This article addresses the importance of using RevPAR to present a fuller financial picture that is based on factors that impact room sales, such as economic conditions, weather patterns, and business and personal travel.

 Types of Lodging Facilities