Hotel Management

Concept
Session 3
Agenda

Regulation & Standardization

Hotel Management Concept

Learning Outcome
Students are able to identify different hotel
management concept.
Hotel Management Concept
• One corporation owning several
hotels
• Parent company with individual
subsidiary owning each hotel
• Joint venture & partnerships]
• Leasing, Profit sharing lease, Sale &
leaseback
• Management contract
• Franchise & Licensing agreement
Sole Proprietor
• Sole proprietorship is the same as one company owning
several hotels.
• Some use the term of corporation, ie. PT, Ltd., Inc, Plc.
• Hotels are owned and operated by a single company and act as
an independent enterprise.
• The company may use its own expertise in managing the
property, start from site selection, hotel developemt,
marketing and operation.
• It may use the chain's reservation system.
• Examples:
 The advantages and disadvantages of Sole
Proprietorship
✓ It doesn't pay corporate taxes
but pays personal income
taxes on the profit made.
✓ The accounting system is
much simpler.
✓ Can have total control over
the company
✓ Decision can be made quickly
without having to consult
others.
 Single owner takes all the
risks.
 A hard time raising the
capital.
 Limited liability company.
 Hiring employees may be
difficult.
 All debts are debts of the
owner.
Holding company
• Holding company is the term used for parent company with
individual subsidiary owning each hotel.
• It is a corporation that owns enough voting stock in another
firms to control management and operation by influencing or
electing its board of directors.
• It may operate hotel chains either using the same name or
different brands.
• Examples:
Video 4.1.
 Advantage and disadvantage of Holding
company
✓ Possible to obtain control of  Complexity and complicated
another company with less in management and
investment. operation.
✓ Easily to get additional debt  Growth of monopoly over the
financing from other SBU. companies.
✓ Allows for decentralized  Chance of fraud – double tax
management report.
Joint venture and Partnership
• Joint venture is a contractual agreement joining together two or
more parties for the purpose of executing a particular business
undertaking.
• All parties agree to share in the profits and losses of the
enterprise.
• In partnership, the companies are joined together to run "a
business in common".
• A partnership is a type of business entity in which partners
(owners) share with each other the profits or losses of the
business undertaking in which all have invested.
• Examples:
Video 4.2.
 Advantages and disadvantages of joint
venture
✓ Opportunity to gain new
capacity and expertise
✓ Enter geographic markets or
new technological
✓ Access to greater resources,
✓ Sharing of risks with a
venture partner
 Takes time and effort to
build the right relationship.
 Objectives of venture are not
100% clear and
communicated.
 Different cultures result in
poor integration and co-
operation.
 The partners don't provide
enough leadership.
Leasing, Profit Sharing Lease, Sale & Lease Back
• Leasing is the way of one person (called a tenant or lessee) to
possess property belonging to another person (called a
landlord or lessor) to be managed and operated.
• Profit sharing lease is one type of leasing where the lessee and
the lessor are shared the profit earn from the management
and operation.
• Sale and lease back is a common type of leasing in hotel
industry where the lessor 'sells' the property, the lessee
operates and the property will be returned back to the owner
after a period of time.
• Example:  
Video 4.3.
 Advantages and disadvantages of
leasing
✓ Less capital-intensive
✓ The company grows more
rapidly.
✓ Leasing shifts risks to the
lessor
✓ Leasing may provide more
flexibility to a business.
 If a business must change its
operations significantly, it
may be expensive or
otherwise difficult to
terminate a lease before the
end of the term.
 If the business is successful,
lessors may demand higher
rental payments when leases
come up for renewal.
Management Contract
• A management contract is a contract arrangements to more
easily obtain economies of scale, a global reservation systems,
brand recognition etc.
• It is used when the company is lack of local skills to run an
operation.
• A management contract can involve a wide range of functions,
such as technical operation of a production facility,
management of personnel, accounting, marketing services and
training.
• Examples:
Video 4.4.
 Advantages and disadvantages of
management contract
✓ It is an alternative to foreign
direct investment.
✓ It doesn't involve high risk
✓ High yield return on
investment
 It has limitation of contract
time periods.
 There is restriction on entry
arrangement.
 Fee of 3.5% of total revenues
and 6-10% of gross operating
profit should be paid to
'brand'.
Franchising and Licensing
• Franchising refers to the
method of practicing and
using another person's
philosophy of business. The
"franchisors" authorize the
proven methods and
trademarks of their
businesses to "franchisees"
for a fee and a percentage of
gross monthly sales.
• Examples:
• The verb license means to
give permission. License
may be granted by a party
("licensor") to another party
("licensee") as an element of
an agreement between
those parties. A shorthand
definition of a license is "a
promise (by the licensor) not
to sue (the licensee)."
Advantages and disadvantages of
franchising
✓ A well run franchise would
offer a turnkey business: from
site selection to lease
negotiation, training,
mentoring and ongoing
support as well as statutory
requirements and
troubleshooting
✓ Franchisors are able to
expand rapidly across
countries and continents
 For franchisees, the main
disadvantage of franchising is
a loss of control.
 Starting and operating a
franchise business carries
expenses.
 The franchisor/franchisee
relationship can easily cause
conflict if either side is
incompetent (or acting in bad
faith).
Advantages and disadvantages of
licensing
✓ The possibility of local
company to product and
market the product.
✓ Licensor get a royalty.
✓ Such agreements usually
involve the use of the
trademarks, patents technical
know-how, specialized
equipment, training, etc.
✓ Earn some money without
many hesitation
 It may be difficult to find a
suitable local firm.
 Lose control of your technical
"know-how".
 Local partner may not fulfill
his part of the agreement.
 The licenses may become an
eventual competitor.
Summary
Hotel can be managed with different concept ie.
• Sole Proprietor
• Holding company
• Joint venture & partnerships
• Leasing, Profit sharing lease, Sale & leaseback
• Management contract
• Franchise & Licensing agreement
Tugas Kelompok (TK1)
1. Buat kelompok @4orang.
2. Setiap kelompok mencari satu contoh hotel
management concept (berdasarkan undian).
3. Deskripsikan profil usaha hotel dalam
presentasi maks. 3 slide.
4. Email presentasi dengan subject: TK1 DH
Kode Kelas Nama Kelompok ke
ismayanti_istanto@usahid.ac.id, deadline 3
April 2018.
Any Question?