Hotel and Motel - Lodging
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Industry Overview
The US hotel and motel industry consists of about 30,000 companies that operate 50,000 individual locations, with combined annual revenue over $90 billion. Large US companies include Marriott International, Hilton Hotels, Carlson Hotels, and Starwood Hotels & Resorts. The industry's 50 largest companies hold about 45 percent of the market. The majority of hotels are part of a chain. A typical hotel has about $7 million in annual revenue and 100 employees.
This industry doesn't include casino hotels, bed-and-breakfast inns, youth hostels, housekeeping cabins and cottages, and tourist homes. Casino hotels are included in the "Gambling Operations" industry profile.
Competitive Landscape
Business and tourist travel drive demand and are closely linked to the health of the economy. The profitability of individual companies depends on efficient operations, because many costs are fixed, and on effective marketing. Large companies have advantages in economies of scale in operations, can more easily raise capital, and have strong name recognition. Small companies can compete effectively in favorable locations and by providing specialty services. A hotel business requires large amounts of capital, but operations are labor-intensive: average annual revenue per employee is less than $65,000.
Products, Operations & Technology
Major industry product lines are room fees and sales of food, alcoholic drinks, and merchandise. Room fees account for 70 percent of industry revenue, food for 15 percent, and alcohol for 5 percent.
Basic operations of hotels and motels consist of providing sleeping accommodations, housekeeping, maintenance, and a variety of personal services. Hotels may provide restaurants, meeting rooms, event hosting, business services, and resort services like golf, tennis, swimming pools, and fitness centers. Labor is a significant operating expense, requiring efficient personnel management. Key industry metrics, in addition to retail sales, are occupancy rates, average room prices, and revenue per available room (RevPAR), which is a hotel's occupancy rate multiplied by its average daily room rate (ADR).
Most companies own and operate their own hotels, but other arrangements are common. Some hotel companies are operators that receive the majority of their revenue from management fees. Companies may franchise their brands to other owners, manage hotels that belong to other owners, or lease hotels from other owners. Some companies also manage time-share properties.
Hotel websites with reservation capability have become major marketing and sales tools, as have listings on the major reservation and travel systems. Computer and communication systems are essential for most hotels to acquire guests via the large reservation systems; provide guest services; and track reservations, guests, and room charges. Due to the large proportion of business travelers and increasing use of the Internet by tourists, many hotels have installed Internet access networks, including wireless networks. With guests' greater cell phone use, some hotels install indoor cell antennas.