Members In The News
- PR Newswire (May 07, 2020): FreedomPay Introduces Touchless Commerce Program to Take Payments to the Safer Next Level; Featuring Chris Kronenthal, President and CTO, FreedomPay
- Yahoo Finance (May 18, 2020): HotelPlanner CEO on travel trends as states reopen; Featuring Tim Hentschel ’01, CEO, HotelPlanner.com
- PR Newswire (May 21, 2020): Wyndham Rewards Extends Partnership with Caesars Rewards, Offers Exclusive Perks through 2021; Featuring Eliot Hamlisch, EVP, Loyalty and Revenue Optimization, Wyndham Hotels & Resorts
- The Business Times (June 15, 2020): Hotels bet on staycations to survive Covid-19; Featuring Michelle Woodley ’89, President, Preferred Hotels & Resorts
by Linda Canina, Ph.D., and Steven Carvell, Ph.D
Hotel demand in large urban markets does respond to changes in income, but that demand is relatively inelastic, according to an analysis of 22 top metropolitan areas in the United States. The analysis, made possible through Smith Travel Research, examined room-night demand for 480 individual hotels from 1989 through 2000 and compared that demand to a set of economic measures, including gross domestic product (GDP) and the consumer-confidence index (CCI). Rather than examine aggregate demand against GDP, for instance, the study took the unusual approach of examining the effects of income on each hotel’s demand and then aggregated the individual results. The analysis found that every 1-percent increase in GDP was associated with a .44-percent increase in demand at the urban hotels in the 22 large markets showing that hotel rooms demand is relatively income inelastic.
The study further examined income effects using a novel approach by separating GDP into personal income and business income. This additional analysis confirmed the income inelasticity of hotel demand but also found that personal income changes have twice as great an effect on hotel demand than do changes in business income. Furthermore, the combined elasticity coefficients for personal income and business income approximate the coefficient for GDP.
The analysis of the effect of consumer confidence provided the first known connection between consumers’ future expectations for income. While the effect is relatively small, it is significant with a .03-percent change in hotel demand for every 1-point change in the CCI.
The study also examined price-related elasticity, examining changes in demand both when a hotel changes its own price (ADR) and the substitution effect that occurs competitors’ prices change (market ADR, or MADR). Separating the study sample according to STR’s market segments also yielded further insights about the income elasticity of demand for different hotel price points.
By Gary M. Thompson
Using a computer simulation, one can determine what the optimum table arrangement would be for restaurants of various sizes that accept walk-in customers only and take no reservations.
At issue is whether the restaurateur can gain more revenue when its tables are dedicated to seating parties of specific sizes (for example, parties of one and two people would be served at 2-tops, while parties of one to four people would be served at 4-tops) or whether the restaurant should use tables that can be combined as needed according to party size. The simulation predicted that combinable tables would prove most useful in a small restaurant with a small average party size. In that situation, combining tables increased revenue per available seat hour by about 2 percent compared to having only dedicated tables.
In a large restaurant or any restaurant with a high average party size, the simulation found that dedicated tables were superior to combinable tables. A loss in productivity occurs when some number of tables are held out of service until adjacent tables become available (so that the tables can be combined to seat a large party).
The simulation found that the most efficient approach is for a restaurant’s table-size mix to match its customer party-size mix, since doing so increases the restaurant’s effective customer-service capacity. However, that customer mix cannot always be known before a restaurant is constructed, and that mix might change during different day parts. Moreover, the simulation makes certain assumptions that may need further examination, and it does not take into account such aesthetic factors as customers’ reactions to a particular restaurant layout.
by Cathy Enz, Ph.D.
The chief concern for food-service managers remains human resources, a set of problems that embraces many facets. Also high on managers’ list of concerns is government regulation. Those are the major findings of a study of 448 restaurant operators, senior managers, and owners completed by the Center for Hospitality Research in conjunction with the National Restaurant Association. In addition to human resources and government issues, the respondents identified key points in the categories of food safety, marketing, the economy, competitive dynamics, accounting, and operations. However, none of those were as salient as human resources.
Issues relating to human resources included benefits, compensation, employee attitudes, immigration, interpersonal conflict, loyalty and satisfaction, recruiting, and retention. Many of those issues are connected with the industry’s long-running challenge of finding and keeping willing and talented workers. Indeed, the respondents decried the industry’s image as a place where people mark time while waiting for something else to come along. Perhaps the quintessential comment came from the respondent who wondered why there seemed to be no job applicants even though unemployment rates continue high.
The respondents did not speak with one voice on such issues as compensation and training, however. While many managers fretted at the prospects of having to offer increased pay and better benefits (especially as a result of government regulation), others realistically wondered how their employees can make a living on the industry’s typical pay scales.
The respondents showed considerable antipathy to government regulations, particularly those relating to tax rates and humanresources regulations. One common theme is that the managers are convinced that regulators and legislators do not understand the industry’s distinctive challenges. While other issues paled in comparison with human resources and government regulation, the repondents were cognizant of the need to expand markets and handle food carefully, among other concerns.
by Cathy Enz, Ph.D.
Surveys of hotel general managers conducted in 2001 and in 2002 found some but not many hotels making changes in their safety and security arrrangements. When asked to respond on a five-point scale whether they were doing nothing (1) or much (5) managers generally answered in the middle, indicating that they were making some changes, either by adding security staff or updating security policies. On balance, the hotels made more changes in 2002 than in 2001.
When the sample was broken down into segments, the study found that extended-stay hotels reported the greatest change in safety and security procedures, while luxury hotels were most likely to add security staff, followed by extended-stay properties.
Examining the hotels by their geographic location revealed little differences in the plans to add security employees, but certain areas stood out with regard to making changes in safety and security procedures. Hotels in the west-south-central region (including Oklahoma and Texas) were most likely to make procedural changes, followed by those in the populous middle-Atlantic region (New Jersey and New York) and the east-north-central region (Illinois and Michigan).
One factor that is undoubtedly influencing the findings is the probability that many hotels already had effective safety and security systems in place before the September 11 attacks.