Deck 2: The Modem Hotel Industry

Question 1

A pure management contract is almost unknown today because management companies must put up some equity if they hope to win the management contract.

Answer 1

True

Question 2

In order to assure quality standards, franchise contracts require the franchise buyer (the franchisee) to hire the franchise seller (the franchisor) to manage the franchise.

Answer 2

False

Question 3

An industry "rule of thumb"is a simple formula for converting the square footage of a guest room into the square meters of the metric system.

Answer 3

False

Question 4

Casino hotels earn most of their revenue from casino win, assigning a secondary role to room sales, which is the primary earner of traditional hotels.

Question 5

Spas are widely available, but not profitable; hotels offer them merely as an amenity - part of the amenity creep that competition has forced on many hotels.

Question 6

Which lodging company does not own, nor manage, nor lease, nor franchise hotels?

A) Cendant
B) Best Western
C) Hilton
D) Inter-Continental
E) None of these, each chain does some of each

Question 7

Which of the following components would NOT be in a mixed-use project?

A) Retail
B) Government
C) Hotels
D) Businesses
E) Entertainment

Question 8

Budget hotels compete by:

A) Reinforcing the brand name through additional amenities
B) Focusing on the quality and special characteristic of their swimming pools
C) Locating on less expensive, somewhat-out-of-the-way real estate
D) Using an employee to room ratio of 1 to 1
E) All of the above

Question 9

Early efforts at "brand-stretching:"

A) Resulted in a better business cycle
B) Encouraged chains to acquire other companies and brands
C) Created new trade organizations
D) Improved the RevPar of mid-scale hotels
E) All of the above except D

Question 10

REITS are:

A) Real Estate Investment Trusts - methods of financing real estate, often hotels, through shares sold to the public
B) Real Estate Insured Treasuries - federal loans to minority business persons if used to develop lodging facilities
C) Real Estate Issues Taskforce - watchdog group that monitors environmentally sensitive places (along beach fronts, for example) not open to hotel or other business development
D) The "RE[ed] International Treaty," which limits resort developers from using strong currencies in under-developed nations
E) None of the above

Question 11

Since the end of World War II, the French government has leaned "left,"toward a labor/socialistic environment. Providing numerous social services for its citizens has driven up social-security payroll taxes. Minimum wages are high and there are many paid holidays.Coincidentally, France has a much larger ratio of economy-budget/hard-budget hotels compared to higher-priced hotels when compared to similar ratios in other nations. Explain.

Question 12

A brand is successful when customers (guests) have come to recognize the name and logo and associate a particular level of service, cost and accommodations with that name.

Question 13

Improving RevPar industrywide has brought rising amenities with it.

Question 14

Branding is about consistency more than about identifying with the parent corporation; and about quality more than about advertising.

Question 15

Web sites that sell hotel reservations focus on price, not brand; that's possible because more and more hotel rooms are viewed as a commodity rather than a service.

Question 16

Hard budget hotel rooms are about 225-275 square feet; especially those found in several airports worldwide.

Question 17

Most states that allow casino gambling have passed legislation that forbids casinos to be part of mixed-use projects.

Question 18

"Amenity creep"is the industry's special terminology for a suspect employee whom the hotel doesn't dare employ.

Question 19

Double occupancy is more important to casino hotels than to commercial or resort hotels.

Question 20

Mezzanine financing is the money borrowed to help finance construction of the lobby mezzanine; the area between the ground floor and the first floor.

Question 21

There are five "Parties to the Deal;"the owner, the lender, the operator, the franchisor and the developer, but one party can combine several roles.

Question 22

Hotel chains can be "parties to the deal"by operating the hotel and providing its brand; they are not permitted by law to be the developer, the equity source or the hotel's owner.

Question 23

A membership organization, such as Best Western, is a hotel chain with a fancier name; there is really no difference in being a member of Best Western or a member of, say, Hilton or Marriott.

Question 24

Owning companies are able to get many concessions (smaller fees, shorter contracts, etc.) from management companies if the contract is negotiated during good economic times.

Question 25

Condominiums and timeshares are the same exact thing but marketed under different names.

Question 26

Female guests more than male guests are more likely to be downstairs buyers.

Question 27

Under the franchise contract, franchisees (hotel owners) can manage their own properties or hire a management company to do the job.

Question 28

The conversion to condos of the world-famous Plaza Hotel in New York City is part of a nationwide movement toward condo hotels and the resurgence of residents to city-centers.

Question 29

Unlike timeshares, where upkeep is the owner's responsibility, condominium upkeep and repair are the developer's costs.

Question 30

In an effort to clean up the initial bad reputation of timeshares, states outlawed the placement of operating hotels next to or near to timeshare units.

Question 31

Joint Ventures are partnerships of entities (such as governments, private corporations, pre-existing partnership, equity firms, etc.) rather than partnerships of individual persons.

Question 32

In an effort to further segment the industry, budget hotels are sub-classified as hard budgets (low-end budgets) and upscale budgets.

Question 33

Hotels must be open 24-hours each day if they are to qualify legally as a hotel.

Question 34

Timeshares have outgrown their very bad reputation because reputable companies such as Hilton, Marriott and Disney have entered the field.

Question 35

The growth of the world-wide Web and the simultaneous disaster of the World Trade Center, which caused a rapid fall in occupancy, helped establish new nonguest buyers such as Priceline.com.

Question 36

Churning is the professional term given to butter that is offered by hotel companies that stress "green"accommodations.

Question 37

Hotel chains such as Hilton grow by acquiring other hotel chains; among Hilton's recent acquisitions are Starwood and Choice.

Question 38

The Hilton Corporation is primarily a landlord company (it owns the real estate) and avoids where possible the operation and management of the operating hotel.

Question 39

The CMP (Corporate Meeting Package) is similar to the all-inclusive plan.

Question 40

It is said that with nonguest buyers, hotels are buying guests through new marketing channels rather than selling rooms to potential guests.

Question 41

Examples of "nonguests buyers"are both those who (1) negotiate rates for large blocks of potential travelers (AAA) or (2) buy a reservation for an individual traveler (travel desk).

Question 42

Buying a "block of rooms"means committing to a certain number of rooms for a given number of nights.

Question 43

Sources of equity funds shift from Main Street to Wall Street as projects grow in size and cost.

Question 44

A REIT, a real estate investment trust, is a private equity source that a family creates to buy and sell real estate, including hotels.

Question 45

C-Corporations pay income taxes on earnings; REITS do not so long as they return 90% of their profits in dividends.

Question 46

Although hotel REITS cannot operate the hotels that they own, they can own as subsidiaries the companies that do operate the hotels.

Question 47

Wholesalers and tour operators can sell rooms and transportation at less than the sum of the two individual prices because they buy these in large lots from the hotels and the airlines.

Question 48

Hilton has launched a new brand, Waldorf=Astoria, named after the famed New York City hotel landmark, which Hilton owns.

Question 49

Foreign hotel companies enter the U. S. market when the dollar is weak and U.S. companies expand overseas when the dollar is strong.

Question 50

Political stability is especially important to non-USA investor in hotels because foreign investors have a long business horizon and a great appreciation of the value of real estate.

Question 51

The budget hotel concept, long used in the USA, is gaining ground overseas in Europe and even in the PRC (China).

Question 52

The 36/12 rule-of-thumb applies chiefly to the all-suite, extended stay hotel type.

Question 53

Spas feature stress reduction and fit nicely with the appearance of new, "lifestyle"hotels, such as aloft hotels by Starwood's boutique division.

Question 54

By law, hotels must accept all who come in good condition and are able and willing to pay.

Question 55

Business guests are a relatively elastic market; that is, they will come to the hotel when business calls with less concern about the room rate.

Question 56

Business guests are chiefly men; leisure guests are chiefly couples.

Question 57

Its quite possible that the party which buys (reserves) a guest room is not a individual, not a human being.

Question 58

The awards given to PGPs (preferred guest programs) can be seen to be part of amenity creep.

Question 59

"Breakage"is slang for the sales manager's under-the-table (illicit) cut (his/her "break"on the deal) from the tour operator because of the special rate quoted.

Question 60

Unfortunately for small hotels, tour group business from tour operators is not possible; only large hotels can handle that type of business.

Question 61

Although it would be great to do, hotels are limited to one IT package per property, either a spa package; a valentine package, a golf package, etc.

Question 62

IT packages must be offered with care because the hotel is competing against itself: selling the IT room at less than rack rate.

Question 63

Conventions may be so large that a number of hotels as well as the publicly owned convention center may need to combine to service the group.

Question 64

Convention delegates pay their own bills and book their own rooms within a block of rooms that has been reserved by a trade show executive or other nonguest buyer.

Question 65

If many attendees from the same company come to the show/convention, a single entity group may be created within the convention.

Question 66

Incentive tours are highly prized single entities with the "winners"expecting and receiving only the best of accommodations.

Question 67

Incentive companies are nonguest buyers that place themselves between the destination resort and the company that uses the incentive to increase sales (or productivity).

Question 68

Incentive companies and tour operators exert the same type of price pressure on the hotel/seller because each represents the possibility of additional and continuing business.

Question 69

The ups and downs of hotel cycles can be caused by factors external to the industry, changes in income tax laws or events like 9-11, for example.

Question 70

The typical profile worked up by hotels on their guests is a psychographic one; demographic profiles (age, income, gender, etc.) are more difficult to create.

Question 71

Trade shows and conventions are not usually held together; in fact, some state outlaw the combination.

Question 72

Hotels and conference centers alike face competition from in-house (company-owned) training centers that book other activities when not being used by the company.

Question 73

Tour groups are not single entity groups because they do not exist prior to or after the trip.

Question 74

The kitchenette is to the ________ as the swimming pool is to the motor hotel; everyone wants it, but few use it,

A) time share facility
B) ll-suite hotel
C) hard budget hotel
D) spa
E) mixed use project

Question 75

Brand equity requires several components to be in place; which of the following is least critical to brand equity?

A) Instant identification
B) Assured level of service
C) Consistent quality
D) Broad distribution
E) Location, location, location

Question 76

Choice Hotels has many sub-brands, among which is/are:

A) Sleep Inn
B) Howard Johnson
C) Fairfield Inns
D) Travelodge
E) Both B and C

Question 77

"The Residences"at the Atlantis Hotel in the Bahamas sounds to be a:

A) Member of a joint venture
B) Modified American Plan
C) PGP, preferred guest program
D) Condominium hotel
E) None of the above

Question 78

Budget hotels compete by:

A) Focusing on the quality and special characteristic of their swimming pools
B) Using an employee to room ratio of 1 to 1
C) Locating on less expensive, somewhat-out-of-the-way real estate
D) Reinforcing the brand name through additional amenities
E) All of the above

Question 79

Which of the following is out of place in the group?

A) MICE
B) CURFF
C) SMURF
D) SMERF
E) None of the above; that is, the all suggest the same idea

Question 80

Which of the following components would NOT be in a mixed-use project?

A) Government
B) Entertainment
C) Retail
D) Businesses
E) Hotels