Chapter 8 Study Guide: HFT 1000 – Flashcards
Unlock all answers in this set
Unlock answersquestion
Hotel Contract Management: Lodging Industry
answer
-concept of separating ownership and operation of a lodging property fueled much of the capital needed to fund the expansive growth of the industry in the 70s and 80s
question
Hotel Contract Management
answer
-investors were able to purchase land all over the country -operators were able to grow their brands and expand into new markets, without huge capital expenditures
question
Hotel Contract Management: Parties Involved
answer
-lenders -owners -operators
question
Hotel Contract Management: Owners
answer
-primarily interested in generating cash flow and ensuring their capital investment grows in values
question
Hotel Contract Management: Operators
answer
-desire an increase in both market presence and market share, maintaining control over the day-to-day management decisions and long-term stability
question
Hotel Contract Management: Types of Operators
answer
-chain operators -independent contractors
question
Hotel Contract Management: Chain Operators
answer
-are affiliated with major hotel chains like Marriott, Starwood, Hilton(becoming smaller each year) -have brand name recognition, a history of successful performance and efficient operating systems
question
Hotel Contract Management: Independent Contractors
answer
-not affiliated with any specific brand -The Hotel Group manages 25 properties under brands like Double Tree, Sheraton and Crowne Plaza
question
The Contract
answer
-most significant change in the contract negotiating process over the past few years has been the more active involvement of lenders and an increase in the power if the owners -owners have developed more knowledge about operations -increase in the number of hotel operators has shifted the bargaining power to owners
question
The Contract: Management Contracts
answer
-comprised of several key provisions -one key provision is operator loan and equity contributions -as a result of the increase in competition amongst operators, many are now choosing to make loan or equity contributions
question
The Contract: Contract Length
answer
-the length of the initial term for chain operators is 8-10 years, with one or two 3-5 year renewals -independent contractor initial terms are typically 1-3 years, with one to two 2 year renewals -owners desire shorter terms, because they believe this will entice the operator to perform well -operators obviously prefer a longer term, stability
question
The Contract: Management Fees
answer
-decreased in recent years, are paid to operators -incentive fees have become more challenging for operators to achieve -trends are a result of the increase in owner negotiating power and competition -management fees for chain operators of full-service hotels average 2.25% of gross revenues without an operator equity contribution and 2.5% of gross revenues with an operator -independent contractors receive base fees of 1.5% and 2.5% respectively
question
The Contract: Incentive Fees
answer
-cash flow after debt service is the amount of cash that flows through the company after paying for its debts -return on equity is the amount of profit a company makes with the money shareholders have invested -in the past, operator incentives were determined by gross operating profit, or the amount of revenue generated after the costs associated with the goods and services sold are removed
question
The Contract: Operator System Reimbursable Expenses
answer
-owner pays the operator for centralized services provided by the operator -owners pay these fees, because these systems are provided by the operator's corporation and property benefits -for chain operators, these expenses range from 2% to 4% of gross revenues, while independent contractor expenses range 0% to 1% of gross revenues -independent contractor fees are significantly lower because they do not have an affiliation with a major hotel chain
question
The Contract: Operating Companies must be held accountable for achieving certain outcomes
answer
-these performance standards are the specific criteria the operators must meet to achieve the owners' goals -these standards are included -often the measures include year-to-year growth, base upon an initial 3-5 year gross operating profit projection
question
The Contract: Benefits
answer
-owners cannot terminate a contract with a chain operator -after some period of time in the contract, owners may terminate the operator -owners must pay operators a termination fee, which ranges from 2-4 times the management fee for chain operators -0.5-2 times the management fee for independent contractors
question
The Contract: Owner and Operator Input
answer
-owners are beginning to negotiate the right to have input on the annual budget and hiring the executive staff -executive staff are employees of the operating company -the hourly workers are employed by the owners
question
Choosing a Hotel Management Company
answer
-it is important for owners to develop criteria for selecting a management company -there are key areas that should be examined and evaluated when choosing a company to operate a hotel
question
Choosing a Hotel Management Company: Owners with Properties
answer
-if the owner has other hotel properties, he/she should rely on feedback from clients with existing management contracts with potential operators
question
Choosing a Hotel Management Company: Owners without Properties
answer
-if the owner has no other previous experience with other operators, he/she should rely on feedback from clients with existing management contracts with potential operators
question
Choosing a Hotel Management Company: Operating Company
answer
-owner should try to determine how accessible the operating company's senior mgmt is -how willing is the operator to meet with the owner and discuss opportunities for growth -reputation? -does operating company's organizational culture and values align -owner should measure the marketing strength and penetration of the operator
question
Contract Foodservice Management
answer
-contract foodservice mgmt was initially called institutional foodservice -today this segment of the foodservice industry is known as on-site foodservice now manage other services
question
The Players
answer
-contractor is the organization that provides the foodservice -host is the organization that hires the contractor -client is the person within the host org. that serves as the host organization's representative and is responsible for monitoring the contractor's performance
question
The Players: Self Operated
answer
-host orgs. that decide to operate their own foodservice instead of hiring an outside contractor
question
On-Site Foodservice Segments: Market Segments
answer
-Business and Industry -Education -Healthcare -Recreation and Leisure -Corrections and Prisons
question
Branding
answer
-increases revenues -"market-style eatery" -national brands include fast food eateries like KFC -regional brands allow the mgmt companies to bring in foods that are unique to local -each of majore on-site foodservice companies has developed its own in-house brands
question
Career Opportunities
answer
-recent college graduates can expect to spend 2-3 months in training, then to Assistant Foodservice Manager -within 3-5 years, an Assistant Manager can move up to a Director position -operators aspire to reach a District Manager position, which oversees on-site foodservice operations within a specific region
