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Lecture 1

HA 210 Lecture 1: HA 210 – Chapter 1 Notes


Department
Hospitality Administration
Course Code
HA 210
Professor
Hospodka
Lecture
1

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HA 210 Chapter 1 Notes
Special Characteristics of the Hotel Business
Perishability
a. Midnight, value of unsold inventory is $0
b. Tomorrow we are selling tomorrow’s inventory, which puts pressure to sell now
Location
a. Fixed, you can’t move it to a higher demanding area
b. Re-routing of a highway could devastate business
c. Marketing & sales promotion very important
Fixed Supply
a. Example: Out hotel has only 100 rooms, today only 50 are sold. Revenue is lost,
but we can only sell 100. There is no way to increase production
High Operating Cost
b. Capital intensive
c. Cost per room is $50,000 for a whole hotel it may be $1 million
Labor Intensive
a. Hassles of dealing with labor, and the costs associated with that
High Fixed Costs Low Variable Costs
a. Even at low/no occupancy we incur fixed costs which include: mortgage, utilities,
salaries and marketing
b. Variable costs per occupied room are low, costs of cleaning etc
Seasonality
a. Within a year, business fluctuates from winter to spring to summer to fall in most
hotels
b. Within month, business fluctuates from early to mid to late part of the month
c. Within week, corporate/downtown hotels busy weekdays and empty on weekend
d. Solutions to seasonality: Extend season, have new activities & sales promotions
before and after “traditional” season to extend it
Location
a. Open properties in areas with counter-season
b. Shift employees between properties
Mixed-Use Development
a. Build hotel in area with multiple sources of guests
b. Westin Galleria in Dallas gets corporate crowd on weekdays and tourist/shopper
crowds on weekends
Hotel Classifications
Size
a. The number of available room in the standard measure of size:
b. Mega-hotel: 1500+ rooms
c. Large-hotel: 300+ rooms
d. Medium-hotel: 150-300 rooms
e. Small-hotels: <100 rooms
f. ‘Mom & Pop’ hotels: Small independent roadside motels family owned and
operated
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