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HOTEL PROPERTY DEVELOPMENT:

A FRAMEWORK FOR SUCCESSFUL DEVELOPMENTS

by

Ivan Venter

Dissertation submitted in partial fulfilment of the requirements for the degree

MASTER OF SCIENCE (REAL ESTATE)

in the Faculty of Engineering, Built Environment and Information Technology

University of Pretoria

Study leader: Professor C.E. Cloete

February 2006

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PREFACE

This dissertation, Hotel Property Development: A Framework For Successful Developments, is the result of my passion to develop and construct hotels, and was born from a desire to understand the full scope of hotel property development.

Working in the hotel development and construction industry, I often contemplated the reasons why some hotels were successful, whilst others branded failures. No single comprehensive answer was available in published literature nor did industry professionals provide an encapsulating explanation.

This lack of understanding motivated my research in hotel property development, and established an interest in a field not yet extensively explored or published.

All commercial and public organisations, to be successful, should comply with a mix of critical success factors that is unique to their environments. Similarly, hotel developments should subscribe to a mix of critical success factors, which are incorporated during the development process.

A hotel business consists of two distinct components – the tangible (building, furniture,

fittings and equipment) and intangible parts (service orientated business). It could be taken for granted, for a hotel development to be successful, that all tangible and intangible critical

success factors should be incorporated during development in a specific mix and manner.

The question is what are the tangible and intangible critical success factors, how should

these factors be combined, and at what stages in the development process should the factors

be combined?

It became clear to comprehensively understand and explain the full scope of hotel property development, that all aggregate components representing the whole entity of hotel development had to be analysed and combined in a single document.

In an attempt to answer these questions, the critical success factors for hotel property development are established as a secondary dissertation objective, and subsequently combined in a hotel property development framework that forms the primary objective of the study.

The dissertation literature review identifies the critical success factors for hotel development in the process of answering the following questions:

What is a hotel and hotel business?

What are the constituent parts a hotel business?

What is hotel property development?

What is included in the scope of hotel property development?

The primary objective of the study, the empirical study, explains how the hotel development framework was established and validated.

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Hotel Property Development: A Framework For Successful Developments consists of five basic and interrelated components:

Section A – Introduction, explains the prerequisites for a Masters Degree dissertation as defined by the University of Pretoria.

Section B – Literature review, establishes the basis on which the third component section C is founded.

Section C – Empirical study, explains the development and validation process of the proposed hotel property development framework.

Section D – Conclusion, draws the study together and closes with recommendations.

Section E – Addendums and Bibliography.

In an effort to orientate the readers and unambiguously explain the hotel property development body of knowledge (dissertation literature review: section B), a dissertation component guide or ‘road map’ is included at the outset of each chapter to highlight the text covered in the subsequent section. It should be noted that this is not the hotel property development framework, but merely a visual guide.

The dissertation literature review (section B) starts by explaining the principles of a hotel business in chapter 3. The tourism industry, the next chapter (chapter 4), briefly explains the important basis (motivator) tourism forms for hotel and hotel development businesses.

In chapter 5, the dissertation steers towards property development in general and more specifically to hotel property development.

Chapter 6 introduces the concept of strategic management and the application of this in hotel property development.

Hotel property development feasibility studies guide the decision whether to develop or not. The feasibility study process is illustrated in chapter 7.

In the feasibility study explanation, the market analysis and financial feasibility are briefly

covered. As imperative components of the feasibility process, the hotel market analysis and financial feasibility processes are comprehensively explained in chapter 8 and 9.

Chapter 10 deals with risk management of hotel developments, followed by chapter 11, which explains financing of hotel property developments.

A wide variety of project consultants could be appointment, depending on the experience of

the project initiator or client. The selection of a competent development team is dealt with

in chapter 12. After the appointment of a project team, the design phase commences.

Chapter 13 contains the design, documentation and implementation phase of a hotel development, forming yet another very important step to any successful developments.

The literature review concludes with a brief discussion of the construction phase in hotel property development.

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ACKNOWLEDGEMENTS

It is with great appreciation that I acknowledge the contribution to my current career, of three hotel development professionals, who unknowingly served as my mentors to establish and guide my passion for hotel developments. Firstly, Mr. Rod Oosthuizen of SIP Project Managers, appointed me to my very first hotel project where I was introduced to the variety of nuances which distinguishes hotel property development from most other types of property development. The second person is Mr. Jeff Forrer, Development Director of Global Resorts and Casinos, who taught me how to conquer obstacles by energetically tackling it head-on, with an absolute determination to succeed. Finally, Mr. Dean Murphy of Mirage Leisure and Development, who from humble beginnings, working for a building contractor on a hotel project, was subsequently appointed as a hotel development director and today is one of the most formidable global hotel developers. His ambition, aspiration and achievement will remain to serve as a tangible example, reinforcing that I could also achieve the same.

Also, I would like to thank my wife Rhelda, for her support and motivation in completing my Masters of Science studies; Professor Chris Cloete, my study leader; William Carr and Thomas Hilberath of Six Continents Hotels; Peter Neeb of MLC Quantity Surveyors; Keith Randall, Development Director of Southern Sun Hotels and Resorts, James McGee, Development Director of Sun International, Marlien Lourens of Grant Thornton Kessel Feinstein Tourism, Hospitality and Leisure Specialists, for the support, guidance and information.

Finally, I give praise to Lord Jesus, who entrusted me with talents that I could apply.

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ABSTRACT

Title of the dissertation:

Hotel Property Development: A Framework For Successful Developments.

Name of author:

Ivan Venter

Name of study leader:

Professor C.E. Cloete

Institution:

Department of Construction Economics Faculty of Engineering, Built Environment and Information Technology University of Pretoria Republic of South Africa.

Date:

August 2005

Although there are similarities between hotel and other commercial property developments in terms of land, structures and services, it is important when developing hotels to understand that they have unique characteristics. These unique characteristics are that hotels require specific management expertise, are usually a “single-use” property, whose primary revenue is generated from a service-based industry, and has a market value that is directly related to its ability to generate future net income.

The essence of successful hotel property developments lies in understanding these unique characteristics, as illustrated in the dissertation literature review. In addition, the dissertation identifies various critical success factors for hotel development which in turn is incorporated into a hotel property development framework, establishing a practical ‘road map’ for successful hotel developments.

The literature review incorporates a wide range of hotel topics, such as the principles of a hotel business, fundamentals of the tourism industry as a motivator for hotel development, property development in general, hotel property development, strategic hotel management, hotel property development feasibility studies, hotel market analysis, financial feasibility, risk management of hotel developments, financing of hotel property developments, the project team and consultants, the design phases, and finally the construction phase.

The dissertation empirical study tests the validity of the hotel property development framework, by presenting it to and questioning hotel development professionals in intensive direct interviews.

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TABLE OF CONTENTS

PREFACE

 

2

AKNOWLEDGEMENTS

4

ABSTRACT

 

5

Section A:

INTRODUCTION

20

1

Introduction

21

1.1

Dissertation Motivation

21

1.2

Dissertation Hypothesis

21

1.3

Dissertation Objectives

21

1.4

Literature Review

21

1.5

Dissertation Framework

22

1.6

Delimitation

23

1.7

Empirical Study Methodology

23

1.8

Empirical Study Results

23

1.9

Conclusion

24

Section B:

LITERATURE REVIEW

25

2

Introduction to Hotel Development

26

2.1

Hotel Development Framework

30

2.2

Requirements for Successful Hotel Property Developments

33

3

Hotel Business

36

3.1

Service Product

36

3.2

Marketing Concept

38

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3.3

Hotel Service Product

39

3.3.1 Core Benefits

39

3.3.2 Facilitating Services

39

3.3.3 Supporting Services

39

3.4

Hotel Segmentation

39

3.4.1 Customer Characteristics

41

3.4.2 Customer Responses

41

3.4.3 Hotel Market Segments

41

3.4.4 Hotel Product Repositioning

43

3.5

Hotel Branding

43

3.5.1 Branding Concept

43

3.5.2 Brand Equity

44

3.6 Hotel Product Packaging

45

3.7 Hotel Marketing Mix

45

3.7.1 Tangible Hotel Product

46

3.7.2 Hotel Place

47

3.7.2.1 Hotel Place Spectrum

47

3.7.2.2 Hotel Location

49

3.7.2.3 Hotel Grading

49

3.7.3

Hotel Price

50

3.7.3.1 Determining Hotel Rates

52

3.7.3.2 Demand and Competition

53

3.7.3.3 Room Rate Range

53

3.7.3.4 Yield Management

54

3.7.3.5 Life Cycle Costing

55

3.8

Distinguishing Features of the Hotel Business

55

3.8.1 Features Shared with Other Businesses

56

3.8.2 The Major Players

56

3.9

Hotel Operations

56

3.9.1

Rooms Division

57

3.9.1.1 Front Office

57

3.9.1.2 Reservations

58

3.9.1.3 Telephone Services

58

3.9.1.4 Uniformed Services

58

3.9.1.5 Housekeeping

59

3.9.2 Sales and Marketing

59

3.9.3 Human Resources

59

3.9.4 Food and Beverage

60

3.9.5 Accounting

60

3.9.6 Security

61

3.9.7 Maintenance and Engineering

61

3.10

External Factors Influencing the Hotel Industry

61

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4

Tourism Industry

64

4.1

Definitions of Tourism

64

4.1.1 Demand Side Definition of Tourism

64

4.1.2 Supply Side Definition of Tourism

65

4.2 Tourism Distribution

65

4.3 Tourism Attractions

67

4.3.1 Attractions and Destinations

67

4.3.2 Attractions, Supporting Services and Facilities

67

4.3.3 Attractions and Activities

67

4.4

Tourism Industry and Hotel Developments

70

4.5

International Tourism

70

5

Hotel Property Development

73

5.1

Property Development Process

74

5.1.1 Hotel Property Development Process

76

5.1.2 Hotel Property Redevelopment Process

84

5.2

Strategic Hotel Property Development

85

5.2.1 Hotel Development Strategy

86

5.2.2 Hotel Development Criteria

87

5.2.3 Project Objectives and Strategies

90

5.3 Requirements for Successful Hotel Property Development

91

5.4 Scope of Hotels

93

5.4.1 Tourist Accommodation Types

93

5.4.2 Hotel Definition and Categories

94

 

5.4.2.1 Motels, Motor Hotels and Motor Courts

95

5.4.2.2 Boarding Houses, Guesthouses and Pension de Famille

95

5.4.2.3 Bed & Breakfast and Hotels-Garnis

95

5.4.2.4 Holiday Villages

95

5.4.2.5 Condominiums

96

5.4.2.6 Individual Villas, Apartments, Suites and Cottages

96

5.4.3 Hotel Categories (Industry Segments)

97

5.4.4 Hotel Types

102

 

5.4.4.1 Convention Hotels

102

5.4.4.2 Commercial Hotels

103

5.4.4.3 Luxury Hotels

104

5.4.4.4 Economy Hotels

104

5.4.4.5 Boutique Hotels

105

5.4.4.6 All-Suite Hotels

106

5.4.4.7 Airport Hotels

107

5.4.4.8 City Centre (Downtown) Hotels

107

5.4.4.9 Suburban Hotels

108

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5.4.4.10 Resort Hotels

108

5.4.4.11 Conference Centres

112

5.5 Hotel Grading and Standards

112

5.6 Hotel Property Ownership and Management

114

5.6.1 Hotel Owner-Operator

116

5.6.2 Lease Contract

117

5.6.3 Hotel Management Contract

117

 

5.6.3.1 Typical Management Contract

118

5.6.3.2 Management Contract Comparative Analysis

122

5.6.3.3 Hotel Management Contract Trends

122

5.6.4

Hotel Franchising

123

5.6.4.1 Franchisee Advantages

124

5.6.4.2 Franchisee Disadvantages

125

5.6.4.3 Franchisor Advantages

126

5.6.4.4 Franchisor Disadvantages

126

5.6.4.5 Typical Franchise Agreement

126

5.6.4.6 Franchise Comparative Analysis

128

5.6.4.7 Franchise Trends

128

5.6.5

Hotel Consortia and Referral Groups

131

5.6.5.1

Typical Affiliation Agreement

131

6

Strategic Hotel Development

134

6.1

Strategic Management

134

6.2

Strategic Hotel Development Planning

136

6.3

Organisation Mission

138

6.4

Corporate Objectives

140

6.5

Development Audit

141

6.6

SWOT Analysis

144

6.7

Assumptions

144

6.8

Development Objectives and Strategies

145

6.9

Financial Feasibility Analyses

145

6.10

Identify Alternative Plans and Mixes

146

6.11

Budgets

146

6.12

First Year’s Detailed Implementation Plan

146

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7

Hotel Property Development Feasibility

149

7.1

Introduction to Feasibility Analysis

149

7.2

Types of Feasibility Analysis Reports

153

7.3

Comparing Property Development Feasibility and Property Appraisal Analysis

154

7.4

Similarities between Strategic Hotel Development Planning and Feasibility Analyses

155

7.5

Feasibility Analyses Process

155

7.5.1 Hotel Property Feasibility Framework

156

7.5.2 Hotel Property Feasibility Analysis Components

157

7.6 Strategic Context and Feasibility Objectives Brief

160

7.7 Macro-Environment Feasibility Analyses

161

7.7.1 Political Factors

161

7.7.2 Economic Factors

164

7.7.3 Socio-Cultural Factors

167

7.7.4 Technological Factors

170

7.8

Macro Hotel Market Analyses

171

7.8.1

Macro Demand for Transient Accommodation

171

7.8.1.1 Total Trips and Person Trips

172

7.8.1.2 Purpose of Trips

173

7.8.1.3 Hotel Trips

174

7.8.1.4 Characteristics of Trips

176

7.8.1.5 Travel Trends by Gender

179

7.8.1.6 Month of Travel

179

7.8.1.7 Payroll Employment

180

7.8.1.8 Modes of Transportation

180

7.8.1.9 International Travel

182

7.8.1.10 Macro Demand by Segment

184

7.8.1.10.1 Business Travel

185

7.8.1.10.2 Meeting and Group Travel

185

7.8.1.10.3 Leisure Travel

189

7.8.2

Macro Supply of Transient Accommodation

190

7.8.2.1

Occupancy, Average Rate and RevPAR Data

191

7.8.3

Macro Travel Price Data

201

7.8.3.1

Future Changes in Hotel Macro Demand

202

7.8.4

Supplementary Macro Hotel Development Indicators and Trends

203

7.8.4.1 Global Hotel Investment Cycle

203

7.8.4.2 Hotel Industry Cycle

204

7.8.4.3 Hotel Product Life-Cycle

205

7.8.4.4 Hotel Property Life-Cycles

206

7.8.4.5 Resort Life-Cycle

207

7.8.4.6 Hotel, Travel and Tourism Trends

207

7.8.4.7 Urban Trend Analyses

211

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7.8.4.8 Real Estate Cycles

212

7.8.4.9 Inflation Cycles

213

7.8.4.10 Other Cycles

213

7.9

Physical Feasibility

214

7.9.1

Site Characteristics

215

7.9.1.1 Site Description

215

7.9.1.2 Services

215

7.9.1.3 Underground Factors

216

7.9.1.4 Topography

216

7.9.1.5 Vegetation

216

7.9.2

Location Characteristics

216

7.9.2.1 Accessibility

7.9.2.2 Exposure of Site and Hotel Facilities

216

7.9.3

Environmental Factors

217

7.9.3.1 Climate

217

7.9.3.2 Uses of Adjacent and Proximate Land

217

7.9.3.3 Environmental Impact of the Proposed Development

217

7.10

Market Feasibility Analysis

217

7.11

Financial Feasibility Analysis

218

8

Hotel Market Analyses

220

8.1

Introduction to Hotel Market Studies

220

8.2

Hotel Market Study Framework

222

8.3

Performing a Hotel Market Study

222

8.4

Market Study Assignment Introduction and Definition

223

8.5

Macro Hotel Market Review

223

8.6

Locational Analysis

224

8.7

Micro Hotel Demand Analysis

225

8.7.1

Build-up Approach Based on an Analysis of Lodging Activity

226

8.7.1.1 Definition of Primary Market Area

227

8.7.1.2 Define Market Segments

228

 

8.7.1.2.1 Commercial Segment

228

8.7.1.2.2 Meeting and Group Segments

229

8.7.1.2.3 Leisure Segments

229

8.7.1.3 Identify Primary and Secondary Competition, Room Count and Competitive Weighting Factors

229

8.7.1.4 Estimate Occupancy and Determine Market Segmentation

231

8.7.1.5 Quantify Accommodated Room Night Demand

232

8.7.1.6 Fair Share, Market Share and Penetration Factors

233

8.7.1.7 Estimate Latent Demand

233

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8.7.1.7.1 Unaccommodated Demand

233

8.7.1.7.2 Induced Demand

235

8.7.1.8

Quantify Total Room Night Demand

235

8.7.2

Build-up Approach Based on an Analysis of Demand Generators

236

 

8.7.2.1 Identify Generators of Transient Visitation

236

8.7.2.2 Interview or Survey Selected Demand Generators

237

8.7.2.2.1 Demand Factors

237

8.7.2.2.2 Design Factors

238

8.7.2.3

Quantify Room Night Demand

240

8.7.3

Forecasting Room Night Demand

240

8.8

Micro Hotel Supply Analysis

242

8.8.1 Total Guestroom Supply

243

8.8.2 Total Accommodatable Latent Demand

244

8.8.3 Total Usable Latent Demand

244

8.8.4 Allocate Area Demand to all Competitive Hotels

245

 

8.8.4.1 Demand Allocation Based on an Analysis of Customer Preference Items

246

8.8.4.2 Demand Allocation Based on an Analysis of penetration Factors

250

8.8.5 Room Nights Captured

252

8.8.6 Stabilised Occupancy

253

8.8.7 Proposed Hotel and Facilities Suitability Recommendation

255

9

Financial Feasibility

257

9.1

Introduction to Feasibility Studies

257

9.2

Different Types of Financial Feasibility Reports

257

9.3

Structure of the Feasibility Study

258

9.4

Capital Cost (Development Cost or Total Cost Outlay of the Project)

258

9.4.1 Land Costs

261

9.4.2 Construction Cost

261

 

9.4.2.1 Estimated Current Construction Cost

261

9.4.2.2 Construction Cost Escalation

262

9.4.2.3 Hotel Construction Cost Drivers

263

9.4.3 Furniture Fittings & Equipment (FF&E) Costs

264

9.4.4 Professional Fees and Disbursements

264

 

9.4.4.1 Professional Fees

264

9.4.4.2 Disbursements

265

9.4.5 Financing Costs

265

9.4.6 Pre-Opening Costs

265

9.4.7 Sundry Costs

265

9.5

Total Net Projected Income (Forecasting Hotel Revenue and Expenditure)

266

9.5.1 Existing Facility vs. Proposed Facility

266

9.5.2 Uniform System of Accounts for Hotels

267

9.5.3 Forecasting Revenues and Expenses

269

 

9.5.3.1

Rooms Revenue Defined

269

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9.5.3.2

Fixed and Variable Component Approach to Forecasting

269

9.5.3.2.1 Theoretical Basis

270

9.5.3.2.2 Application of the Approach

271

9.6

Capital Expenditure (CapEx)

278

9.7

Cash Flow Projections

279

9.8

Income Tax

280

9.9

Measures of Return

280

10

Risk Management

283

10.1

Introduction to Risk Management

283

10.2

Risk Prevention

284

10.3

Types of Risk

284

10.3.1 Inflation Risk

285

10.3.2 Financial Risk

285

10.3.3 Business Risk

286

10.3.4 Liquidity Risk

286

10.3.5 Project Development Risk

286

 

10.3.5.1 Basic Definition

286

10.3.5.2 Feasibility and Design

286

10.3.5.3 Contracts

287

10.3.5.4 Construction

287

10.3.5.5 Rental / Sale / Occupancy

287

11

Financing Hotel Developments

289

11.1

Sources of Hotel Development Funds

289

11.2

Hotel Development Financing Methods

290

11.3

Preparing a Loan Package

291

11.4

Evaluating the Financing Package

292

12

Project Team

294

12.1

Project Consultants

294

12.1.1 Hotel Development Consultant (Adviser)

295

12.1.2 Architect

296

12.1.3 Interior Designer

296

12.1.4 Landscape Architect

296

12.1.5 Quantity Surveyor

297

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12.1.6 Engineers

298

12.1.7 Kitchen and Laundry Consultant

298

12.1.8 Market and Financial Consultant

299

12.1.9 Legal Consultant

299

12.2

Consultant Appointment Clarification

299

12.3

Consultant Inputs

299

13

Design, Approval and Implementation Phase

303

13.1

Role of the Designer

303

13.2

The Project Design Brief

304

13.3

The Components of Hotel Design

306

13.4

The Purpose of Design

306

13.5

Factors Affecting Design

307

13.6

Factors Affecting Space

307

13.6.1 Hotel Functions

307

13.6.2 Variations in Space Requirements

308

13.6.3 Preliminary Estimates of Space

309

13.6.4 American and Large International Hotel Chains

309

13.7

Design Considerations

310

13.7.1 Sensory Design Responses

310

13.7.2 Aesthetics and Style

310

13.7.3 Accommodation Design

311

13.7.4 Food and Beverage Facilities Design

311

13.8

Hotel Design Process

312

13.8.1 Hotel Design Process Model

312

13.8.2 Site Selection

313

13.8.3 Master Planning

313

13.8.4 Site Design

314

13.8.5 Hotel Design

314

 

13.8.5.1 Different Hotel Type Designs

314

13.8.5.2 Hotel Components

315

13.8.5.2.1 Guestrooms

315

13.8.5.2.2 Public Areas

315

13.8.5.2.3 Administrative and Support Areas

316

13.8.5.3

Special Features and Amenities

316

13.8.6

The Architectural Design Process

317

13.8.6.1 Conceptual Design

317

13.8.6.2 Schematic Design

317

13.8.6.3 Design Development

317

13.8.6.4 Construction Phase

318

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13.9

Project Implementation

14

Construction Phase

14.1

Construction Contract Options

14.1.1

Design-Award-Build

14.1.2

Fast Track

14.1.3

Design/Build

14.2

Client’s Role and Function

14.3

Management of the Construction Process

14.4

Construction Completion and Operator Occupation

Section C:

EMPIRICAL STUDY

15

Empirical Study

15.1

Introduction to the Empirical Study

15.2

Critical Success Factors For Hotel Development

15.3

Establishing The Hotel Property Development Framework

15.4

Hotel Development Framework validation Process

15.5

Empirical Research Methodology

15.6

Research Interviewee Feedback

Section D:

CONCLUSION

Section E:

ADDENDUMS

Addendum ‘A’: World Tourism Organisation Minimum Hotel Standards Addendum ‘B’: Characteristics of Hotel Market Segments Addendum ‘C’: Hotel Feasibility, Appraisal, Valuation or Market Study Data Collection Checklist Addendum ‘D’: Hotel Development Cost Categories Addendum ‘E’: Outline Hotel Project Brief Addendum ‘F’: Hotel Operator Questionnaire Addendum ‘G’: Hotel Property Developer Questionnaire

GLOSSARY OF TERMS BIBLIOGRAPHY

15

318

320

320

321

321

323

323

324

326

328

328

328

328

329

329

332

332

334

337

338

345

349

371

392

401

407

412

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LIST OF TABLES

Section 3

3.4.3(a)

Hotel Market Segments

42

3.7.2.1(a)

Six Continents Hotels Brand and Market Segmentation

49

Section 4

4.2(a)

Components of the Tourism Distribution System

66

4.3(a)

The Four Categories of Attractions

69

4.5(a)

World’s Top Tourism Destinations by International Tourism

71

Section 5

Arrivals

5.4.3(a)

Types of Hotels by Development Criteria

98

5.4.3(b)

Six Continent Hotels Brand and Market Segmentation

98

5.4.3(c)

Hotel Identification

99

5.4.3(d)

Characteristics of Various Sizes of Hotels

100

5.4.4(a)

USA Hotel Type Profiles

103

5.6(a)

Types of Hotel Ownership

116

5.6.4.7(a)

Summary of Chain Franchise Fees for First-Class Hotels

130

Section 6

6.3(a)

Hotel Property Development Consultancy’s Mission Statement

139

6.5.1(a)

Development Audit Checklist

142

Section 7

7.1(a)

Hotel (Property) Development Feasibility

151

7.7.2(a)

Economic Development and Tourism

166

7.8.1.1(a)

Person Trips and Party Size Statistics

173

7.8.1.2(a)

National Travel Volume Segmented by Purpose of Trip

174

7.8.1.3(a)

Trips Involving Motel/Hotel Usage

175

7.8.1.4(a)

Person-Trip Characteristics – 1997, USA

176

7.8.1.5(a)

Comparison of Travel Characteristics by Gender – 1997, USA

179

7.8.1.6(a)

Month of Travel – 1996 and 1997, USA

179

7.8.1.7(a)

USA Employment – Hotel and Other Lodging Places

180

7.8.1.8(a)

National Travel Volume Segmented by Mode of Transportation

181

7.8.1.8(b)

Airline Passenger Traffic

181

7.8.1.8(c)

Rates of Growth among Types of Travel

182

7.8.1.9(a)

International Travel to the United States of America

183

7.8.1.9(b)

International Travel to the United States of America

183

7.8.1.9(c)

International Travel from the United States of America

184

7.8.1.10.2(a)

Meeting and Group Attendance

186

7.8.1.10.2(b)

Number of Meetings

186

7.8.1.10.2(c)

Total Expenditure – Meeting and Groups

187

7.8.1.10.2(d)

Types of Facilities at which Meetings Were Held – 1997

187

7.8.1.10.2(e)

Corporate Meetings Characteristics

188

7.8.1.10.3(a)

Typical Travellers Characteristics

190

7.8.2.1(a)

Supply, Demand and Occupancy – USA Lodging Industry

191

7.8.2.1(b)

Average Rate, Occupancy Rate and RevPAR – US Lodging Industry

192

7.8.2.1(c)

Lodging Industry Census by State

193

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7.8.2.1(d)

Lodging

Industry Census by Location

194

7.8.2.1(e)

Hotel Locations (1999 Room Count)

Count)

194

7.8.2.1(f)

Lodging Industry Census by Property Type

195

7.8.2.1(g)

Share of Total Supply Contributed by Hotel Types (1999 – Room

195

7.8.2.1(h)

Hotel Occupancy Levels by State

196

7.8.2.1(k)

Hotel Occupancy Levels by Location Type

197

7.8.2.1(m)

Hotel Occupancy Levels by Property Type

197

7.8.2.1(n)

Hotel Average Room Rate by Sate

198

7.8.2.1(p)

Hotel Average Room Rate by Location Type

199

7.8.2.1(q)

Hotel Average Room Rate by Property Type

199

7.8.2.1(r)

Hotel RevPAR by State

199

7.8.2.1(s)

Hotel RevPAR by Location Type

200

7.8.2.1(t)

Hotel RevPAR by Property Type

200

7.8.3(a)

Travel Price Index

201

7.8.3(b)

Travel Price Index vs. Consumer Price Index

202

7.8.4.1(a)

Global Hotel Investment Cycle

203

7.8.4.3(a)

Product Life-Cycle Curve

205

7.8.4.6(a)

Hotel Type Demand Level Comparison (Northern Hemisphere)

210

7.8.4.6(b)

Typical Weekdays/Weekends Hotel Demand Fluctuations

211

Section 8

8.6(a)

Hotel Locational Requirements

224

8.6(b)

Major and Complementary Hotel Markets

225

8.7.3(a)

Data Reflecting Changes in Demand

242

8.8.4.1(a)

Customer Preferences and Considerations

246

8.8.4.1(b)

Customer Preferences Items by Market Segments

247

8.8.4.1(c)

Estimated Out-of-Town Visitations

248

8.8.4.1(d)

Allocation of Room Nights for Corporate Executives

248

8.8.4.1(e)

Allocation of Room Night for Middle Management

248

8.8.4.1(f)

Allocation of Room Nights for Visiting Sales Representatives

248

8.8.4.1(g)

Total Demand to Subject from Manufacturing Company

248

8.8.4.2(a)

Penetration Factor

251

8.8.4.2(b)

Demand, Market Share and Capture Rate

251

8.8.4.2(c)

Hotel D – Projected Room Nights

252

8.8.6(a)

Maximum Occupancy

254

8.8.6(b)

20-Year Occupancy History

254

8.8.6(c)

20-Year Occupancy Cycles

255

Section 9

9.5.3.2.2(a)

Units of Comparison Applied

274

9.5.3.2.2(b)

Fixed and Variable Percentages

277

Section 12

12.2(a)

Clarification Matters when Appointing Consultants or Employees

299

12.3(a)

Consultancy Inputs

300

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Section 13

13.6.1(a)

Hotel Functions

307

13.6.2(a)

Space Considerations

308

13.6.3(a)

Size Range of European Hotels, 150 – 350 Rooms

309

13.6.4(a)

Size of USA Hotels, 250 – 500 Rooms

310

Section 14

14.1(a)

Comparative Advantages and Disadvantages of Construction Contracts

322

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LIST OF FIGURES

Section 2

2.2(a)

Hotel Development Framework for a Hotel Operator

31

2.2(b)

Hotel Development Framework for a Hotel Property Developer

32

Section 3

3(a)

Hotel Value Components

36

3.3(a)

The Hotel (Product) Concept

40

3.7.3(a)

Factors Affecting Price

50

Section 4

4.1(a)

Tourism Industry Elements

64

Section 5

5.1.1(a)

Hotel Property Development Process

76

5.1.2(a)

Hotel Redevelopment Process

85

5.4.1(a)

United Kingdom Domestic Tourists 1992: Visit by Purpose

94

5.4.1(b)

United Kingdom Domestic Tourists 1992: Accommodation Used

94

Section 6

6.1(a)

The Five Stage Strategic Management Process

135

6.2(a)

Strategic Hotel Development Planning

137

6.4(a)

Relationship between Corporate Objectives and Strategies

140

6.5(a)

Constituent Parts of the Development Audit

141

Section 7

7.5.1(a)

Hotel Property Development Feasibility Process

157

Section 9

9.3(a)

Components of the Total Capital Cost

258

9.3(b)

Feasibility Components and Return on Investment Calculations

259

Section 13

13.7(a)

A Model of the Hotel Design Process

312

Section 15

15(a)

Hotel Development Framework for a Hotel Operator

329

15(b)

Hotel Development Framework for a Hotel Property Developer

330

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Section A

INTRODUCTION

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1

Introduction

1.1

Research Motivation

Although there are similarities between hotel and other commercial property developments, the hotel development process have unique and very specific characteristics.

From extensive involvement, reading and researching property development over the last twenty years, various property development processes were observed. What clearly transpired in practice, from reading and research was the total absence of a hotel development framework.

The total absence of a hotel development framework, served as motivation to establishing a comprehensive and definitive hotel property development framework, which included critical success factors and components for hotel developments.

1.2 Dissertation Hypothesis

“Does the hotel property development frameworks, proposed in this dissertation called Hotel Property Development: A Framework For Successful Developments, establish a practical and comprehensive property development framework for developing successful hotels?”

1.3 Dissertation Objectives

The dissertation objectives were categorised as either primary or secondary objectives. The secondary objective established a body of knowledge from which the primary objective drew factors and components.

The secondary objective was to establish the critical success factors for hotel development, which were identified by addressing the following questions:

What is a hotel and hotel business?

What are the constituent parts a hotel business?

What is hotel property development?

What is included in the scope of hotel property development?

What are the criteria for a successful hotel development?

The primary objective of the study was to test the validity development framework.

1.4 Literature Review

of the hotel property

The dissertation research originally commenced with internet search engines, such as www.yahoo.com and www.google.com, resulting in several referrals (internet links) to professional organisations. These professional hotel development organisations’ websites contains a wealth of information, direction and research possibilities. Unfortunately, but understandably, commercial organisations are reluctant to furnish any information of substance, unless you are willing to contract their services. However, some of the more reputable hotel development consultants publish regular newsletters, either on the internet,

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