UNIT V

Ownership and Affiliations of Hotels

I. Sole Ownership/Independent Hotels

 Ownership basis and do not have any affiliation or contract through any other
property
 They do not have any tie-up with any other hotels with regards to policy,
procedures and financial obligations.
 Self-ownership is the concept of property in one’s own person, expressed as the
moral or natural right of person to have bodily integrity and be the exclusive
controller of his body and life.
 Advantages:
i. One head control
ii. Need not take any kind of affiliation
iii. Chances of creativity in development
iv. Profit need not share
 Disadvantages
i. Capital in his on hand
ii. Heavy risk
iii. Lack of new trends
iv. Liability issues
v. High responsibility

II. Lease Arrangements

 Is the contractual agreement calling for the lessee (user) to pay the lessor
(owner)
 Most Restaurant most commonly use the ground lease. Ground means that a
tenant pays a long term use of a specified property for a period of time, usually
2-5 years
 Advantages & Disadvantages
i. Leasing is less capital incentives
ii. Leasing may provide more flexibility to a business
iii. If it’s successful, lessor may demand higher rental payments

I. Chain/Group Hotels Operations

 There are many single owner hotels, yet more and more hotels and motels are
getting affiliated to each other.
 This gives them the advantage of large central organization providing reservation
system, management services, financial strength, expertise, manpower
specialties, merchandises and promotional help.
 Affiliated Reservation Network - This network is referred to as the hotel chain’s
reservation system
i. Main Advantages
1. Streamline the process of reservation
 2. Reduce overall system cost
3. Attract business for or refer business to another chain property
ii. Some Duties
1. Serve as an inter-property communication network
2. Serve as an accounting transfer tool
3. Serve as a destination information system
4. Serve as a connection with GDS system including several central
reservation offices connected to each other

I. Management Contract /Professional Management

 Management contracts are hotel management enterprises which operated
properties owned by other entities. In some cases, the hotel owners may
arrange to run their properties through a management contract with an
enterprise that specializes in managing hotels. The reason for this is that the
owner may not:
1. have the necessary expertise or;
2. Desire to become involved in the operations of the hotel.
 This also a type of organization
 The contract is entered into a long term basis between the owner and the
operator and usually as per the contract
 Owner retains the legal and financial responsibilities
 Operator pays for the operating expenses and collects from the owner and
agreed upon fees.
 Owner is responsible for paying taxes, insurance and serving debt.

Advantages of Management Contract Disadvantages of Management Conract

Hotel owners • Acquisition of operational • Lost of operational control

expertise which can reduce the
chance of business failure and
enhance the service quality.
• Gain national or international
recognition for the hotel if it is
operated by a reputable
management enterprise
• The owners are not required to
be involved in the hotel
operations
• Financially liable for all costs, expenses
and losses of the hotel
• The management enterprise may have
less incentive and morale in managing
the hotel if only a fixed management
fee is paid without any sharing of
profits.

Advantages of Management Disadvantages of Management Conract

Contract
Management • Receive a management • Over dependence on owner for
Enterprise fee during the contract providing necessary funds in
 period regardless of the operations;
hotel performance; • Minimum input in ownership
• Little or no up-front decisions, such as transfer of
financing or equity hotel ownership from the owner
involved; to another buyer;
• Management contract • No extra rewards for good
period can last for five, business performance if the
ten or twenty years management contract is run in a
fee structure without any
incentive schemes.