Question

3. What are the advantages of (a) management contracts and (b) franchising? Discuss their impacts on the development of the hotel industry.

4. Explain how hotels cater to the needs of business and leisure travelers in reference to (a) resorts, (b) airport hotels.

Answer 1

The answer to Q 3:

Advantages of management contracts:

1. Management contracts allow the hotels to operate with low cost and low risk as no up-front financing or equity is needed to get the property for a period of 1year to 20 years.

2. The companies get a share in the profit earned from the property.

3. As less capital is required compared to owning the property, the companies can expand rapidly.

How management contracts impact the development of the hotel industry in the USA:

In the USA, the management companies get 2 to 4.5 percent of gross revenues from management contracts arrangements. This helped the companies to sustain in the market and allowed the hotels to expand with lower costs. Using the management contracts, hotels can spend capital in improving services and other Information Technology infrastructure development.

Advantages of the franchise:

1. Franchise system allows the hotels to expand the brand with lower costs, as the franchise investor use the capital.

2. Franchise system allows the hotels to capture the regional market with the standardized system.

How to franchise impact development of the hotel industry in the USA:

In the USA, the franchise system was started in 1907 and grew during the 1970s and 1980s. Franchise system helped the hotels to expand rapidly in the USA, especially in North America. The restaurants expanded the businesses and added restaurants, meeting rooms and recreational facilities. The standards are maintained in the franchise system, so the hotels did not have concerns for losing the brand image. The hotels could establish a centralized reservation system and could provide discounts to the customers, which resulted in increased customer satisfaction.

The answer to Q 4:

How hotels cater needs of business and leisure travelers in reference to resorts:

The hotels are focusing on developing resorts that can serve as a restaurant, recreational center and can host conventions, conferences, and meetings for business travelers. Business travelers need to travel for meetings and therefore, the business travelers expect relaxation and good food in the hotel. So the resorts keep changing their menu items for food services and focus on sports events, spas, and other recreational activities.

How hotels cater needs of business and leisure travelers in reference to Airport Hotels:

The travelers need to wait at airports in case of delay in the flights or some travelers wait for the connecting flights. In such cases, the travelers feel that they are in different time zones; the airport hotels cater to their needs differently. The hotels provide extended hours of services to create a feeling of liveliness. The hotels provide convenient transportation for such business travelers in affordable charges.

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