Hotel Industry Overview

Basics of Hotel Business

• Guests pay nightly rates for rooms.
• Rates depend on location and star rating of the hotel.
• Additional charges for amenities (breakfast, laundry, etc.).
• High fixed and variable costs.

Example Case: JW Marriott, LA

• 21 floors, 900 rooms, luxury facilities.
• Low season: only 30% occupancy leads to high operational costs (housekeeping, bar, etc.).
• Need for consistent guest flow.
• Room pricing strategy fluctuates between low season (Nov-Mar) and high season (May-Aug).

Revenue Generation in Hotels

• Additional amenities (spa, gym, etc.) increase average guest bills.
• Seasonal pricing: lower in low season, higher in high season.
• Hotel industry categorized into economy, midscale, upscale, and luxury hotels.

Leading Hotel Corporations

1. Marriott

• Highest market cap, grossed $14B in 2021 across 1.5M rooms.
• Luxury brands: Ritz Carlton, St Regis, JW Marriott.
• Strong midscale presence (Courtyard, Fairfield).

2. Hilton

• Grossed $6B in 2021 with over 1M rooms.
• Luxury brands: Waldorf Astoria, Conrad.
• Successful in upscale and midscale segments (DoubleTree, Hampton Inn).

3. InterContinental Hotel Group (IHG)

• Grossed $2.9B in 2021 with 900,000 rooms.
• Luxury brands: Regent, Six Senses.
• Midscale: Holiday Inn.

4. Hyatt

• Grossed $3B in 2021 with less than 300,000 rooms.
• Luxury brands: Grand Hyatt, Park Hyatt.
• Focus on business travel segment.

5. Wyndham

• Grossed $1.5B in 2021 across 800,000 rooms.
• Focus on budget and economy hotels (Super 8, Days Inn).

Competition from Airbnb

Overview

• Airbnb provides a platform for hosts to rent out spaces with less overhead costs compared to hotels.
• Hosts set their own prices, Airbnb charges service fees.
• Airbnb had 6M active listings in 2021, exceeding hotel capacity of major corporations.

Hotel Industry Reaction

• Hotels have evolved into asset-light, fee-based platforms, similar to Airbnb.
• Traditional hotel model (asset-heavy) has high capital requirements.
• Major hotel brands were already transitioning before Airbnb's rise.

Business Models in Hotels

Franchising and Management

• Hotel giants operate under franchising models, allowing third-party ownership with brand association.
• Franchisees pay a percentage of gross revenue for brand and infrastructure.
• Management contracts: hotel giants operate properties for owners.

Current Market Trends

• Hilton owns <2% of hotel rooms, Marriott 1%, and Wyndham none.
• Franchise fees have become a significant revenue stream.

Conclusion

• The hotel industry has been adapting to become more asset-light over decades.
• Airbnb's growth presents challenges but also highlights the hotel industry's evolution.
• Hotels maintain advantages in service consistency and guest experience over Airbnb.