From the days of travel by coach and horses, followed by the age of steam trains, to the advent of the car, the aeroplane and now, perhaps, the spacecraft, the hospitality industry has historically been driven by evolution in modes of travel. Coach travel was synonymous with the coaching inn; trains gave rise to the great railway hotels in Europe, the Americas and elsewhere in the world where the great cities were joined by steel rails.
Travel then was still a luxury, but Henry Ford changed that for-ever, with the introduction of the mass-produced car. Volume production at affordable prices led to volume accommodation at comparative pricing in hotels. Market segmentation focused on quality of accommodation and pricing. By the 1950s Holiday Inn had opened their first motel and, in the UK, the Automobile Association (AA) introduced its quality star rating system.
Travel by most people, however, was primarily still undertaken within national boundaries. In the 1960s, the growth of the airline industry led to the development of the package holiday with its consequential boom in resort developments in the Caribbean and Mediterranean. Similarly, the post Second World War rebuilding programmes, largely funded by the Marshall plan, led to an Concepts
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Midland Hotel, Manchester:
a railway hotel (Courtesy The Paramount Hotel Group)
increase in international business travel. The airlines became active in hotel ownership and operations, developing their own international chains in competition with the expanding US chains such as Holiday Inn, Hilton and Sheraton. In Europe, Lufthansa owned Penta Hotels, KLM funded Golden Tulip, and US carriers expanded Intercontinental. Each country saw growth of its local national chains, Trusthouse Forte and Grand Metropolitan Hotels in the UK, Accor in France, Scandic in Scandinavia. Meanwhile, the USA in the 1960s boasted 23 000 hotels, 40 000 motels and 170 hotel chains.
It was to the USA that the world looked for the development of new concepts and operational management systems, not least because of their economic prosperity and widespread internal travel. The development of US hotels outside of the motherland was funded, not by those companies, but by local investors, while the hotel companies provided the operational expertise, the distribution systems and most importantly, the product. Owners just signed a management contract and effectively handed over the asset for periods of up to 25 years, and looked for a return from the hotel property’s turnover. To increase their expansion in the mid-scale hotel sector, Holiday Inn used the franchise agreement. Essentially, this provided the owner/operator with the right to use the brand name if they complied with the company’s standards and systems, in return for an entry fee and fee per reservation delivered by the Holiday Inn distribution network.
These hotel products were established concepts originally developed in the USA and standardized to facilitate ease in expansion and operations internationally. Initially conceived to service home market customers when travelling on business or leisure, the hotel facilities provided were similar to those built at the beginning of the twentieth century. These included bedrooms with en-suite facilities, conference and banqueting rooms, bars, restaurants and the ubiquitous coffee shop. Designed to be self-sufficient, the back of house facilities included a bakery, butchery, laundry, extensive storage areas and a range of kitchens with their associated preparation and chilled storage areas. With com-puterization in its infancy, administrative processes, while stand-ardized, lacked the centralization of today and, consequently, administration, management staff and their facilities were much more extensive than today.
Although the format of standardization was primarily a man-agement tool to control and ease the process of development, it also offered great reassurance to the guest because it ensured a recognized and consistent standard of service and facilities. These were designed to be similar, or of an aspirational standard, to those experienced at the guest’s home. These standards evolved into one of the early benefits of brand value for the home market
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customer, identified by the immortal quote from an unnamed hotel guest:
I’m not sure whether I’m in Paris or Berlin, but I am staying in a Holiday Inn!
Unarguably, for travellers from North America, such product stan-dardization in the 1970s provided added value, as the local alter-native products were shrouded in myth. These stereotypical hotels were often based on tales of their fathers’ experiences in Europe and elsewhere during the Second World War, ranging from those strange French toilets and contaminated drinking water to the exotic, but strange and inedible, food on offer. The same stand-ardization approach applied to the large-scale development of package holiday resort hotels and, while many of these properties were developed and managed by local entrepreneurs, the product content and systems used were cloned from the US chains. Many such properties still trade in the older resort destinations in the Mediterranean and other resort areas around the world.
With the increase in wealth in the developed countries and the expansion in internationally based regional offices and manufac-turing plants, the hospitality industry enjoyed a boom in devel-opment throughout the 1980s. This resulted in an increase in the number of operating companies both on a national and inter-national basis. With increased competition, especially in the home markets, greater brand name recognition and more effective distribution systems, the industry began to move away from the established quality star rating system and began to explore the potential of market segmentation. Crowne Plaza by Holiday Inn and Courtyard by Marriott were early examples of this phe-nomenon. Simultaneously, product types were developed to pro-vide airport, all-suite, conference, health spas, marina, golf and ski hotels, with resort developments moving into timeshare and the creation of destination venues such as theme parks and other family-based activity parks. Not surprisingly, most of these con-cepts were initially developed in the USA. This was driven by its greater wealth and fiercer competition, the demand for continuing growth and return on investment proved the ideal laboratory for commercial innovation. The budget or limited service product unit was a classic example. Adapted to suit local conditions interna-tionally, primarily in size, area and number of bedrooms per unit, the budget sector witnessed rapid growth and separately pro-vided a new entry level for people who had previously not used hotels other than for vacationing.
The Gulf War at the start of the 1990s resulted in a dramatic decline of travel worldwide and, combined with an economic reces-sion for much of the world, the hospitality industry suffered dra-matically with low financial performance. Many companies were Concepts
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left unable to service debt and ownership of many units fell into the hands of the banks and other financial institutions. Emerging from this challenging period, the industry witnessed a move to consolidation, and the value of brands became a recognized benefit. Similarly, lenders and investors demanded greater trans-parency and involvement in the supervision of the operation of the businesses. Asset and yield management established them-selves as disciplines through which the owner could manage the manager and, as methods of maximizing the value of individual units with non-performing properties or part of properties being converted to alternative use if these provided greater returns.
Similarly, yield management (adapted from the airline industry) focused on maximizing revenue rather than status. The prevalent attitude of brands, however, was that they required international coverage to be meaningful. This need for rapid geographical expansion and resources to match led more companies to seek capital on the stock markets, with the consequential requirement for short-term returns fuelling the standardization of product and depersonalization of service in the industry. Technology eased the demand on staffing numbers and skill levels, outsourcing, processed ready meals, computerization and other automated systems all impacted on reducing capital and operational costs.
Management skills levels focused on managing processes rather than innovation or leadership and the industry focused on ‘punter processing’ (servicing customers) in order to compete for capital with manufacturers.
Consolidation to attain globalization became the key objective of the late 1990s. More energy was focused on strategic planning, market analysis and financial forecasting than any other aspect of the business. Development became a process of replication and product development an issue of cost reduction and, not surpris-ingly, the limited service sector boomed and the full service sector struggled. While the number of product lines in the car industry and other consumer products exploded, the hotel sector’s prod-uct line offer stayed relatively static. The restaurant sector, at the same time, witnessed an explosion in product lines. This was spurred on by the recognition that the average consumer’s wealth, confidence, knowledge, international experience and greater leisure time had instilled a desire and ability for greater discretionary spending. Equally relevant, spend on leisure activity was con-sidered essential for the average household and such spend was selected from a wide product range mixing clothing, sporting activity, health and beauty products, dining experiences with short accommodation breaks. Restaurant development boomed and the branded hotel sector faced a paradox, geared to product roll-out programmes, it was suddenly assailed by a consumer demanding differentiation. Not surprisingly, new players in the market exploited the opportunity to develop a range of niche products such as town house, designer or so-called ‘lifestyle hotels’.
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These units inevitably were of a smaller scale, specific service standard and very individual in their product and management style. Since they were adaptable to conversion of existing proper-ties whether offices, houses, warehouses or other types of build-ings, they were able to place themselves in prime city locations.
In some of the early examples such as Malmaison in the UK, the desire for differentiation led to guests staying in secondary loca-tions, yet happy to pay prime location rates.
Consequently, as the twentieth century drew to a close, the indus-try faced a series of dilemmas. These included issues of how to:
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Differentiate its full service brands between each other and those of the competition•
Standardize product and still reflect local culture and environment•
Obtain funding for global expansion•
Establish a management structure for a worldwide multi-product, service and operating group•
Maintain short-term returns on capital intensive and long-term development projects requiring individual management•
Raise staff skill and retention levels while maintaining afford-able staffing costs•
Maintain or extend planned product life cycles•
Deal with rising market fragmentation in terms of age, culture and consumer lifestyle aspirations•
Address the increase in competitive distribution systems avail-able through the Internet•
Keep control of room stock pricing•
Grow the overall market in competition with other consumer discretionary products•
Reduce exposure to a more volatile travel environment.Other external factors that have, and will continue to impact on the industry’s development include:
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Environmental considerations and consumer expectations•
Increased consumer protection legislation and liability claims•
Increased recognition of minority group requirements and legis-lation aimed at reducing discrimination against, for example, disabled persons•
Increased employment legislation.These challenges and others were the embryonic topics of debate as the world moved into the twenty-first century, and no sooner had the millennium celebrations finished, than the world was Concepts
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changed by the tragic events of 11 September 2001 and the result-ant wars in Afghanistan and Iraq. These events and other crises in the financial sectors, the SARS scare and a general worldwide unease resulted in a general economic slowdown.
The year 2004 is, perhaps, an opportune time for the editors to be publishing a revision of this book. This is because, other than fire-fighting in a difficult economy, it provides the industry with the opportunity to reflect on its evolution and consider the con-tent and method of its development of product, property and facilities in the early part of a new century that, inevitably, will see great changes occurring on the planet.