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Hotel and Motel Chains
The boom in the airline industry resulted in a corresponding boom in the hotel construction. A future of this rapid construction of new hotels was the emergence of hotel chains as a dominant force in the accommodation industry. Indeed, some of the chains are owned by airlines; an outstanding example is the Inter-Continental chain, a subsidiary of the Pan American Airways.
Hotel chains have several competitive advantages over individually owned and operated establishments. One of the most important of these is having resources to spend more money on advertising. Television commercials, for example, are too expensive for most individual hotel operators. Chains, on the other hand, can spread the cost among all of their member units. Hotel chains also have advertising and public relations personnel on their corporate headquarters staffs who give their fellow workers in individual hotels valuable advice and support.
Another advantage comes from the standardization of equipment and operating procedures. Chains publish detailed manuals that specify procedures to be followed even in such tasks as making beds and setting tables. While uniformity may not always be a desirable quality, the travelling public has an excellent idea of what kind of accommodation to expect. Even when 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 the 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 hotel in a matter of minutes. When a chain is owned by an airline, a traveler can make his reservations for flights and hotel rooms at the same time and place. 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 into computer or telephone systems which make it possible to confirm space when the caller is still on the phone.
Many of the chains are, in fact, referral systems. 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 insure that it meets the chain’s standards. If it does meet those standards, it can then use the name and the advertising symbol (the logo, as it is called) for the group. In effect, the individual operation has become a chain member.
Another way to expand is by establishing management contracts with the actual owners of the hotel. A chain takes over an empty building and operates it according to its own operating procedures for a fee or for a percentage of the profits. 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 a parent corporation. The franchise operator puts up the capital, but he gets a standardized product with a known sales potential.
The expansion of chains has resulted in growth of hotel and hotel-related jobs, particularly at the management level and in such fields as hotel design and interior decoration. The top staff people are usually experienced hotelmen who can effectively control the operations of the individual units.
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.
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 section 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.
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.