Foundations of Lodging Management Chapter 2 "The Structure of the Lodging Industry"

Return On Investment (ROI)
The percentage rate of financial return achieved on the money invested in a hotel property.

ROI(%)= After Tax Profits/ Total Hotel Investment

Profit
The money remaining after all the expenses of operating a business have been paid.
Depreciation
The reduction in the value of an asset as it wears out. This noncash expense is often termed a “tax write-off” because the decline in the value of the asset is tax deductible.
Appreciation
The increase, over time, in the value of an asset. The amount of the increased value is not taxed unless the asset changes hands (is sold)
Owner/ operator
A hotel investor who also manages (operates) the hotel.
General Manager (GM)
The traditional title of the individual at a hotel property who is responsible for final decision-making regarding property-specific operating policies and procedures. Also, the leader of the hotel’s management team.
Management Company
An organization that operates a hotel for a fee. Sometimes called a “contract company”.
Depressed Market
A hotel market area where occupancy rates and/or ADRs are significantly below their historical levels.
Repossession
The taking back of a property by a seller or lender, usually in response to nonpayment by the buyer.
First Tier (management company)
Management companies that operate hotels for owners using the management company’s trade name as the hotel brand. Hyatt, Hilton, and Sheraton are examples.
Second Tier (management company)
Management companies that operate hotels for owners and do not use the management company name as part of the hotel name. American General Hospitality, Summit Hotel Management, and Winegardner and Hammons are examples.
Liable
Legally bound to compensate for injury or loss.
Management Contract
An agreement between a hotel’s owners and a hotel management company under which, for a fee, the management company operates the hotel. Also sometimes called a “management agreement” or a ” operating agreement”
Buy-Out
An agreement in which both parties to a contract agree to end the contract early as a result of one party the other agreed- upon financial compensation.
Franchise
An agreement whereby one party (the franchisor) allows another party to use its logo, brand name, systems, and resources in exchange for a fee.
Franchisor
An organization that manages a brand and sells the right to use the brand name .
Franchisee
An individual or company that buys, under specific terms and conditions, the right to use a brand name for a fixed period of time and at an agreed-upon price.
Brand
The name of a specific hotel group. For example, Holiday Inn and Comfort Inn are two different brands. Additional examples of brands include Hyatt, Hampton Inn, Super 8, and Radisson.
Chain
The hotels operated by a group of franchisees who have all franchised the same hotel brand name. Also called a “brand” or a “flag”.
Conversion
The changing of a hotel from one brand to another. Also known as “re-flagging”
System-Wide
The term used to describe a characteristic of all hotels within a single brand. Used, for example, in : “Last year, the system-wide ADR for our brand was $99.50”
Franchise Agreement
A legal contract between a hotel’s owners(the franchisee) and the brand managers(the franchisors) that describes the duties and responsibilities of each in the franchise relationship.
Federal Trade Commission (FTC)
Government agency that enforces federal antitrust and consumer protection laws. It also seeks to ensure that the nation’s business markets function competitively and are free of undue restrictions caused by acts or practices that are unfair or deceptive.
Franchise Offering Circular (FOC)
Franchise disclosure document prepared by a franchisor and registered and filed with the state governmental agency responsible for administrating franchise relationships.
Brand Standard
A hotel service or feature that must be offered by any property entering or remaining in a specific hotel brand.
Asian American Hotel Owners Association (AAHO)
An association of hotel owners who, through an exchange of ideas, seek to promote professionalism and excellence in hotel ownership.
Market Share
The percentage of a total market (typically measured in dollars spent) captured by a property.
Franchise Service Director (FSD)
The representative of a franchise brand who interacts directly with a hotel franchise. Different brands may title this important position somewhat differently, but each will have a comparable position.