Three Hospitality Terms You Just Can t Ignore

Transcription

1 Three Hospitality Terms You Just Can t Ignore Within the hospitality industry we have all heard these buzz words before: hotel management companies, hotel ownership groups, and hotel brands. Do we really know the difference between them? To be honest, most people do not. When I first started my internship with HSMAI (Hospitality Sales and Marketing Association International) this summer I only had a vague idea of the difference between these three. After being able to visit the corporate offices of two management companies, two brands, and one ownership group, it is finally all making sense. If you are a visual learner like I am, then throughout this article try to think of these three types of hotel companies in a pyramid formation with ownership groups at the point, management companies in the middle, and brands at the base. Ownership Groups Management Companies Brands Throughout my time with HSMAI, I have had the unique opportunity to visit the headquarters of Hilton Worldwide, Marriott International, B.F. Saul Company Hospitality Group, Interstate Hotels & Resorts, and Host Hotels & Resorts to meet with sales, marketing, and revenue management executives in order to get an in-depth view of each company. When reading through these company names, take a minute and see if you can pick out which of these five companies belong under the categories of ownership groups, brands, or management companies. Hotel Brands:

2 With your first glance of this list you probably started with the two names you recognize the most: Hilton and Marriott. These are both hotel brands. A brand by definition is a distinguishing symbol, mark, logo, name, word, sentence or a combination of these items that companies use to distinguish their product from others in the market. When people hear a brand name they immediately think of the impact that that brand has had on them. No matter if we are talking about a clothing brand or a hotel brand, everyone has their likes and dislikes of each. Hotel brands want to standardize their operations across all of their hotels which they sometimes manage as well. We saw this at Marriott headquarters where they have an innovation lab to test new room layouts across their different brands. We saw various brand model rooms including their well-known Fairfield Inn & Suites, Courtyard, and their extended stay Residence Inn. Many innovative things were happening in that lab from futuristic décor to customizable guest experiences. Every hotel brand has their own set of standards that they follow in order to differentiate themselves from other brands to create a consistent relationship with their guests no matter the location. In the end, this leads to brand loyalty. Top 10 Parent Companies of Brands By # of total properties across brands Wyndham Hotel Group 7,485 2 Choice Hotels 6,340 3 IHG (InterContinental Hotels & Resorts) 4,697 4 Hilton Worldwide 4,115 5 Best Western International 4,063 6 Marriott International 3,916 7 Accor Hospitality 3,576 8 Home Inns Group 2,180 9 China Lodging Group 1, Starwood Hotels & Resorts 1,175 Hotel Management Companies: Next, try to pick out the two management companies. These two are Interstate Hotels & Resorts and B.F. Saul Company Hospitality Group. B.F. Saul is a bit of a hybrid it owns and manages, but we will focus on them in the management company group for the purpose of this article. To put it simply, the goal of a management company is to grow the profit and value of an individual hotel for the owner. Management companies want the owners that they work for to

3 bring them to the party. The key to a successful management company is to have a great relationship with the ownership group. Many management companies manage many brands, and that is why it is important to have those brand standards set in place for successful management of their hotels. Both Interstate Hotels & Resorts and B.F. Saul Company manage Marriott and Hilton hotels in their managed portfolios of franchised hotels. When an owner selects and manages their hotel real estate asset, they have the flexibility to be able to sell the hotel at any time and they can strive to grow the value of the real estate. Top 10 Management Companies By gross annual revenue (in millions) YE Interstate Hotels & Resorts 3, White Lodging Services Corporation 1, Destination Hotels & Resorts Pyramid Hotel Group Aimbridge Hospitality Hersha Hospitality Management (HHM) TPG Hospitality Crescent Hotels & Resorts Davidson Hotels & Resorts Remington Ownership Groups: Lastly, by process of elimination, the ownership group is Host Hotels & Resorts. As I heard from almost every company during my visit, it all starts with the real estate. Every single hotel starts out as a real estate investment and that is where the ownership group comes in. Again, ownership group portfolios include multiple brands and independent hotels, but instead of running the day to day operations of the hotel (which is what a management company does) ownership groups focus on the real estate investment. Management companies operate properties owned by investors or real estate groups. The ownership group retains the financial and legal responsibility for the property. In using Host Hotels & Resorts as the example because they are a REIT (Real Estate Investment Trust), their long term goal is to maximize stockholder value

4 through disciplined and opportunistic capital allocation and sound financial management. In short, they are looking for the best returns on their investment because they are in the real estate investment trust business. As I learned from my visit with Host Hotels & Resorts, superior asset management, design and construction, investment strategy, and finance are some of the key functions of a hotel ownership group. If you are unsure what a REIT is, it is another big buzz word in the industry today. When a company is categorized as a REIT it means that it is a publicly traded company like Host Hotels & Resorts. A REIT by definition is a real estate company that offers common shares to the public. REIT stock is comparable to any other stock that signifies ownership in a business. REITs primarily manage various income producing companies, and they must distribute most of their profits as dividends. This is why they must make a conscious effort to market their company well so that a myriad of investors want to take part in it. By # of Top 10 Ownership Groups Rooms 2012/13 1 Accor 190,000 2 G6 Hospitality LLC 63,272 3 Hilton Worldwide 61,670 4 Host Hotels & Resorts 59,838 5 Hospitality Properties Trust 43,976 6 Hyatt Hotels 33,232 7 Clarion Partners 23,821 8 Apple REIT Companies 23,490 9 Ashford Hospitality Group 22, RLJ Lodging Trust 22,300 If you are a visual learner, and still confused after reading the bulk of this, then imagine the hierarchy of these three categories in pyramid form again: Ownership groups are the point of the pyramid because they own the building and focus on the real estate of it, management companies are the middle of the pyramid because they run the day-to-day operations of the hotel, and the brand is the foundation or the base of the pyramid because it is the name that goes on the side of the building and sets the standards and procedures that are put in place in order to uphold the guest relationships that they have built with their clients. As you saw with B.F. Saul Company Hospitality Group, there very well can be hybrid groups; therefore each company does not need to fit into a single part of the pyramid. However, in order to most clearly convey the

5 differences between the three companies, I broke them down into their simplest forms. My challenge to you is to now think of your favorite hotel anywhere in the world and do a bit of research on it. The hotel you may have once known as part of the Marriott brand can now be seen in its pyramid form with an ownership group and a management company helping to lead it to its utmost success. Career Path: When relating this back to our future careers within the hospitality industry, I feel that it is very important to understand the difference between these three types of companies. Whether you are searching for your next internship or find yourself as a rising senior like I am and wondering what your first job will be, it is important to note the type of company you will be working for. Ownership groups, management companies, and brands all specialize in different aspects of the hospitality industry, so make sure to do your research and find out which is the best fit for you. *I d like to give a very special thanks to Dustin Bomar from Hilton Worldwide, Stacey Milne from Marriott International, Brian Berry from Host Hotels & Resorts, George Brennan from Interstate Hotels & Resorts, and Cathy Bokman from B.F. Saul Company Hospitality Group for warmly welcoming me into their offices and educating me on their day to day operations. Links: HSMAI Hotel Brands Visited: Hilton, Marriott Hotel Ownership Groups: Host Hotels & Resorts Hotel Management Companies: Interstate Hotels & Resorts, B.F. Saul Company Hospitality Group Sarah s Bio: Sarah is a rising senior at James Madison University in Harrisonburg, Virginia studying Hospitality Management. She works at the university in the office of admissions and is a summer intern in the HSMAI headquarters office in McLean, Virginia. Last summer she was an intern at the Crowne Plaza Philadelphia West and loved working with the sales professionals in the hotel reaffirming her passion for hospitality sales and marketing. Contact Information: (e mail) zahorasa@dukes.jmu.edu (phone)