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Hotel Industry Overview - August 2007 - Trends

LMSB-04-0807-054

"This document is not an official pronouncement of the law or the position of the Service and cannot be used, or cited, or relied upon as such."

Trends

In the 1980's there was extensive merger and acquisition activity between hotel and non-hotel companies. Many companies are now selling specific brands in an effort to get back to their core business.

Another trend in the hotel and beverage industry is paperless inventory systems. Improvements in scanning equipment have made this possible. In many instances, ordering, delivery, payment and stocking are all initiated and accomplished by software prompted by information captured by scanning equipment with very little human involvement.

Some chains have sold ownership in their hotels to foreign investors while still maintaining control.  This provided the capital that was needed for further expansion.

REIT’s (Real Estate Investment Trusts) have been created to allow smaller investors to participate in mortgages and equities.

Product segmentation has become more popular.  Luxury and first class hotels have created more amenities and products for their customers while economy and budget motels have cut back services in order to maintain lower prices.  Also specialized extended stay and suite hotels have become more popular.   Hotels with indoor water parks are one of the newest trends.  Timeshares is another segment that many hotel companies are involved with recently. The development, sale, and management of timeshares have become particularly popular with the large chains. Franchising continues to flourish in the hotel industry.

Audit issues cover a variety of areas, as would be expected.  In addition to matters such as cost segregation, which impact numerous industries, hotel companies have undertaken such activities as donating used bedding as they upgrade their equipment, using trusts to defer income, delaying recognition of last day of the year receipts, franchising, condo conversion, and so forth.

Several years ago, customers generally called a toll-free number to make room reservations.  In 2006, about 50% of hotel rooms were booked through the internet. 

The number of domestic hotel rooms reserved for smokers is declining as major hotel chains are beginning to decrease their total number of smoking rooms or becoming non-smoking facilities altogether.  

Other recent trends in the industry include luxury mattresses, complimentary breakfast, high definition TV, high speed internet access, Wi-Fi (wireless internet access), and room suites.

A recent 2006 trend is hotels re-imaging their lobbies to destination places.  For example part of the lobby may be used for a breakfast area in the morning and a bar at night.  This may include sliding walls, decorative lighting, and music.   One reason for this is to generate more income per square foot. 

A July 2005 article from Knight Ridder Newspapers[2] highlights what the major chains are upgrading in the sleep department.  The article provided the following information:

  • Marriott International has been replacing mattresses at its Marriott and Renaissance hotels for several years and is adding new bedding at its 2,400 hotels, including higher thread count sheets, down comforters and duvet covers at a cost of $190 million.
  • Hilton Hotels is introducing new bedding across its brand, including Hilton, Doubletree and Embassy Suites.  There will be higher thread count sheets, plush top mattresses, extra pillows and user friendly clocks.
  • Crown Plaza replaced some 50,000 beds and bedding in 2004, hired a sleep doctor for advice on relaxation, and tossed in a sleep kit for guests. 
  • Radisson in 2004 began moving in custom-designed Sleep Number beds at 230 of its hotels and resorts, with most of its 90,000 beds to be replaced by 2006.  New bedding is also included in the makeover.
  • Hyatt recently rolled out its Grand Bed, a 13 ½ inch pillow-top mattress, and added more luxurious linens and decorative pillows.
  • Starwood Hotels announced the debut of a new bed at its moderately priced brand, Four Points by Sheraton.   The Four Comfort Bed, a $13 million investment, joins the Heavenly Bed and Sheraton Hotel’s Sweet Sleeper Bed in Starwood’s lineup.
  • Red Roof Inns will offer pillow top mattress pads, 230 thread count sheets and hypoallergenic pillows at select hotels.

Some Best Western hotels will add new mattresses, comforters, feather pillows and triple sheeting.


[2] Martinez, Michael. “Hotels Compete To Give You The Comfiest Night's Sleep.” The Wichita Eagle. 10      July 2005.  H3.

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Page Last Reviewed or Updated: 27-Nov-2013