Lodging: An Overview 

Lodging refers to the provision of accommodation services to travelers and guests, offering a place to sleep and rest. As you can imagine, it is a key component of the hospitality and tourism industry — after all, unless we are visiting family or friends, we need a place to stay. In this chapter, we explore the lodging industry – primarily hotels, but we’ll also take a brief look into other types of accommodation such as camping and vacation rentals like Airbnb and Vrbo. From their historical origins to their contemporary evolution, you’ll learn how the industry evolved, how hotels look and work today, and why they’re so important for travelers.

The lodging industry also offers a wide range of employment opportunities, from entry-level positions such as front desk agents and housekeeping staff to executive roles in hotel management and corporate offices. This diversity of roles makes the lodging industry an attractive career choice for individuals with varying skills and educational backgrounds. You’ll learn more about several of these roles in the next chapter.

To start, let’s take a look at both the US and global hotel industry. While the actual number of global hotels and hotel rooms is unknown, industry research suggests there are 187,000 hotels and 17.5 million guestrooms worldwide.^[1]

There are more than 60,000 hotels and motels in the US with approximately 5.3 million rooms. According to data from the American Hotel & Lodging Association’s 2023 State of the Industry Report, US hotels generated more than $189 billion in revenue in 2022. This revenue is made up of 1.27 billion room nights (the rental of a single hotel room for one night, regardless of the number of guests occupying the room or the duration of their stay) and a 62.7% occupancy rate. U.S. hotels directly employed nearly 2 million people. Additionally, these hotel stays represent a significant economic impact — state and local tax hotel tax revenues in 2022 were $44 billion, an amount that does not include additional traveler spending at local restaurants, shops, and attractions. ^[2]

History & Evolution of Lodging & Hotels

The references to the earliest recorded lodging establishments may be dated to the prehistoric Lascaux caves in France and inns were referenced in ancient China and Japan. However, the Roman Empire documents the best reference of lodging establishments that served travelers from ancient times.  In the ancient city of Pompeii, the discovery of the Inn of Sittius provides a glimpse of the accommodations travelers experienced in these times.

Other lodging establishments appear throughout Pompeii, and rates for the use of a room are posted on the walls.  These establishments provided a single room with an adjacent stable for the traveler’s horse or donkey.  Dining was not included in establishments because the city had tavernas offering food and drink 24 hours a day. Bathing was available in public baths for a fee, and bathroom facilities had modest septic tank arrangements in the inn or public facility.

During colonial times, American inns and taverns became common in cities and towns. These establishments—some of which are still in operation—became local meeting places and served the traveling public. Here in Dutchess County, we are fortunate to have what is believed to be one of the oldest continuously operating inns in the United States—the Beekman Arms in Rhinebeck.

The Modern Hotel Era

The truly first modern hotel chain in America was founded by Ellsworth Statler with the construction of the Statler Hotel in Buffalo, New York, in 1907.  Ellsworth Statler passed away in 1927, but the Statler hotel chain continued to open and operate hotels until 1954, when Hilton Hotels purchased the chain for $111 million dollars—the largest real estate transaction on record at that time.

Not surprisingly, the development of the hotel industry was stopped during the Depression. Occupancy rates and average room rates plunged, and the hotel bankruptcy rate soared. As a result, bank loans to develop hotel properties dried up. This unfortunate episode would impact the industry for almost twenty years and underscored that the key to the hotel industry was the desire of business people and tourists to travel.

After World War II, a convergence of the lack of hotels, a growing desire of people wishing to travel, the development of the interstate highway system, and the advent of jet travel with the introduction of the Boeing 707 would create an unprecedented business expansion of the lodging industry.

There were several leaders developing the hotel industry.  Among them was Kemmons Wilson, a building contractor on a visit to Washington, D.C., who could not find a hotel for his family to stay in.  After his return home in Memphis, Tennessee, he built four roadside Holiday Inns in 1959.  He would then pioneer the franchising of Holiday Inns to bypass the banks, who remained reluctant to extend loans for the development of hotels.

Another innovator of the modern hotel industry was J. Willard Marriott.  As a successful restaurant developer, he had the foresight to build the Twin Bridges Hotel in Arlington, Virginia, in 1957. His experience in the restaurant business and his understanding of delivering customer service would serve him well as he carefully studied and learned the hotel business at the Twin Bridges.

Conrad Hilton was another pioneer of the hotel industry. The Hilton Corporation was founded in 1919.  Through the Depression and World War II, he was able to forge a successful hotel chain.  His focus and sheer determination through the variances of the American economy would lead to the creation of one of the foremost international hotel chains.

By franchising its name, operating systems, training, and construction resources, Holiday Inn would open a new franchise hotel every three days in the early 1970s. But, this robust expansion did not address the finer points of hotel operations. More and more Holiday Inns failed to update and refurbish their facilities and keep in compliance with the standards of their franchising agreements. Other hotel chains began to emerge buying Holiday Inns and reshaping them into lower-priced economy hotels.  The lesson was simple.  Holiday Inn’s level of service was based on the “One size fits all,” theory. Today, we find all major hotel chains have broken their offerings into different brand names for targeted market segments.

Ownership Structures  

The type of ownership, management, and brand affiliation are very important variables in the classification of hotels. Several ownership models are employed in the sector today, including independent, management contracts, chains, and franchise agreements. This section explains each of these in more detail and provides examples of each.

Independent Ownership

An independent hotel is financed by one individual independent hotel or a small group and is directly managed by its owners or third-party operators. The term independent refers to a management system that is free from outside control.

There are a number of very well-established independently branded hotels. These hotel companies have developed their own standards, support systems, policies and procedures, and best practices in all areas of the business. Independent hotels have the flexibility to customize or adjust their systems to position their property for success, and the location, product, service, experience, sales and marketing, and brand are all necessary for that success. An example of an independent hotel is the Dutchess Inn & Spa in Beacon, NY, owned and operated by Bethany Souza.

Franchise Agreements and Management Contracts

Owners may manage their hotels independently, but in today’s competitive environment, they would likely sign a franchise agreement with a nationally recognized brand as well as a management contract with a hotel management company to manage the property. A hotel chain such as Marriott, Hilton, Hyatt, or IHG (Intercontinental Hotel Group) is comprised of multiple brands. Marriott, following their recent merger with Starwood, currently has 30 different hotel brands, with each name representing a different level of price, service, or target market segments. 

Selecting a brand affiliation is one of the most significant decisions hotel owners must make. The brand affiliation selected will largely determine the cost of hotel development or conversion of an existing property to meet the standards of the new brand. The affiliation will also determine a number of things about the ongoing operation, including the level of services and amenities offered, cost of operation, marketing opportunities or restrictions, and the competitive position in the marketplace. For these reasons, owners typically consider several branding options before choosing to operate independently or to adopt a brand affiliation.

Franchise Agreements

The first thing that comes to mind when you think of a franchise is probably fast food restaurants like McDonalds and Burger King. But franchises operate in a variety of other industries, including food, retail, travel, real estate, business services, cleaning services, fitness centers, and of course, hotels. In fact, four out of five branded hotel rooms in the US are franchised.^[3]

A franchise is a business method that involves one business (the franchisor) licensing their trademarks and methods of doing business to another business owner (the franchisee). Essentially, the franchisee buys into a ready-to-go business model that has proven successful elsewhere, also getting other ongoing support from the franchiser, which has a vested interest in their success. A hotel franchisee becomes part of a network of properties that use a shared brand, image, loyalty program central reservations system, regional and national marketing programs, central purchasing, revenue management support, and brand operating standards. A franchisee also receives training, support, and advice from the franchisor and must adhere to regular inspections, audits, and reporting requirements.

Selecting a franchise structure may reduce investment risk by enabling the franchisee to associate with an established hotel company. Franchise fees can be substantial, and a franchisee must be willing to adhere to the contractual obligations with the franchisor. Franchise fees typically include an initial fee paid with the franchise application and continuing fees paid during the term of the agreement. These fees are usually a percentage of revenue but can be set at a fixed fee. The total percentage of sales ranges significantly for hotels from 3.3⁠–14.7 percent with a median of 11.8 percent.

Management Contracts

It is common in the hotel industry for ownership to utilize a management contract, which is a service offered by a management company to manage a hotel or resort for its owners. Owners have two main options for the structure of a management contract. One is to enter into a management agreement with an independent third-party hotel management company to manage the hotel. There are hundreds of these companies, but some of the large organizations include Aimbridge, Benchmark Hospitality, Crescent Hotels, and Interstate Hotels.

A slightly different option is for owners to select a single company to provide both the brand and the expertise to manage the property. Marriott, Hilton, and Hyatt are companies that provide this second option to owners.

No matter what the ownership model is, it’s critical for properties to offer a return on investment for owners. In the next chapter, you’ll learn ways the hotel industry measures financial performance.

Types of Lodging Facilities

Before discussing types of hotels and other lodging facilities, let’s first consider four common customer segments and their unique needs and preferences. Leisure travelers often seek amenities such as pools, spas, and recreational activities. Business travelers typically prioritize convenient locations, meeting facilities, and high-speed internet access. Groups require accommodations for events, conferences, and weddings, with special group rates and event planning services. Finally, extended-stay guests need home-like amenities, including kitchenettes and laundry facilities, for longer stays.

Hotels are typically referred to by classification or hotel type, which can be determined by categories such as service levels, size, location, and price. The various ownership structures and brand affiliations also used to differentiate hotels. It’s also important to note that many hotels fit more than one of the categories below.

Hotel Classification by Service Level

Hotels can be classified by the range and quality of services they offer, with full-service hotels providing extensive amenities and facilities on one end and motels offering little more than a room at the other end of the spectrum.

Full-Service:  Smith Travel Research (STR) is an organization that provides the lodging industry with global data benchmarking, analytics and marketplace insights. It defines full-service hotels as upscale, upper upscale and luxury properties with a wide variety of onsite amenities, such as restaurants, meeting spaces, exercise rooms or spas.

Limited-Service:  STR further defines limited-service hotels as properties that offer select or focused facilities and amenities, typically without a full-service restaurant. These hotels are often in the Economy, Midscale, or Upper Midscale segments. Limited-service hotels are often labeled “budget-friendly” and, because of their focused level of services and amenities, require smaller operational staff.

Extended Stay Hotels:  Extended stay hotels are a distinct category of lodging that caters to guests looking for accommodations beyond the typical short-term stay, often a week or more. They provide a home away from home for an extended period, whether for work assignments, relocation, or any other extended travel needs. Extended-stay hotels typically offer suite-style rooms, which include a separate living area and a fully equipped kitchen with appliances like a refrigerator, stove, and microwave. These hotels often include amenities like comfortable seating areas, larger workspaces, and additional storage space. Some may also feature on-site laundry facilities. Guests also often have access to common areas like lounges, outdoor spaces, or BBQ areas, creating opportunities for guests to socialize with one another and build a sense of community.

According to real estate investment company CBRE, this hotel category is experiencing increased demand: “The pandemic and hybrid work arrangements have generated strong demand for longer hotel stays, increasing the popularity of cost-effective extended-stay hotels and making them one of the fastest growing segments in hospitality.”  Additionally, many families find extended-stay hotels attractive because they offer more space and can save on vacation dining costs.

Resort & Destination Hotels: A special part of the lodging industry is hotels designated as resorts. A resort is a full-service hotel that provides access to or offers a range of recreation facilities and amenities and is generally located in areas that attract vacationers. A resort is often the primary provider of the guest experience – and is often the reason a guest selects to visit a region. It will generally have one “signature” amenity or attraction.^[4] Examples of signature amenities and experiences include skiing and mountains, golf, beach and ocean, lakeside, casino and gaming, all-inclusiveness, spa and wellness, marina, tennis, and waterpark. In addition, resorts also offer secondary experiences and a leisure or retreat-style environment. The Mohonk Mountain House, located in New Paltz, NY, offers guests exclusive access to more than 85 miles of hiking trails, one of its signature amenities.

Generally, the guests at resort hotels are more relaxed and not on the fast-paced schedule of their normal lives.  The purpose of their visit creates a profile of a far different guest than visiting city hotels.  Customer service is always a criterion for service industry success and takes on a different dynamic when the guest is looking to relax.  Consequently, these venues offer a more comfortable guest interaction.

Hotel Classification by Size & Complexity

A hotel can be classified by the number of guest rooms it has; hotel sizes can range from a small boutique hotel with fewer than 50 rooms to a large resort hotel with more than 1,000 rooms. The complexity of the hotel is determined by the volume and number of additional revenue-generating functions, such as the square feet of available conference space, the number of F&B operations, and additional services and amenities like pools, fitness centers, spas, golf, etc.

Boutique hotels are intimate, stylish, and often independently owned accommodations that emphasize individualized and unique guest experiences. Characterized by their smaller size and distinctive design, these hotels typically feature carefully curated decor, personalized services, and a strong sense of personality. Boutique hotels aim to create a sense of intimacy and charm, often found in quirky or historic buildings. Guests can expect personalized attention, thoughtfully designed rooms, and an ambiance that reflects the local culture or a specific theme. These hotels offer an alternative to the cookie-cutter approach of larger chain hotels, appealing to travelers seeking a more intimate, one-of-a-kind stay.

According to Bill Lewis, general manager for the Magnolia Hotel and Spa in Victoria, BC, “Boutique hotels are all about their smaller size, sense of style, and personalized nature.”  He further notes that “the individual style of boutique hotels really provides a differentiated experience than that of the larger branded properties which have seen considerable consolidation in the last number of years.  Our guests really appreciate this luxurious and intimate experience which our size and staffing levels allow us to achieve.”

Convention Hotels are large hotels specifically designed to host conferences, conventions, and other large-scale events. Many professional associations, like the National Association of Realtors or the American Medical Association, have large annual tradeshows and conferences designed for business development, education, and networking. This is a significant market within the hospitality and tourism industry, with 2023 revenues reaching more than $23 billion in the United States.^[5]

Convention hotels typically feature extensive meeting and event spaces, such as ballrooms, conference rooms, and exhibition halls, equipped with state-of-the-art audiovisual technology and support services. Convention hotels also offer a range of amenities to accommodate business travelers and event attendees, including multiple dining options, business centers, fitness facilities, and a significant number of guest rooms to house participants. Their locations are often strategic, near major airports, city centers, or convention centers to facilitate easy access for attendees.

Hotel Classification by Location

The location of a hotel can also determine the type of guest served. An airport hotel may be very different from a city-center property in an urban environment, a remote island resort, or a small quaint bed and breakfast located on top of a mountain. Hotels that specialize in conferences may be located near entertainment destinations like Las Vegas or Disney theme parks to provide pre-and post-conference activities for attendees.

Business/Airport Hotels are a specific category of accommodations designed to cater primarily to the needs of business travelers and those passing through airports.  They typically offer business-focused amenities such as high-speed internet access, business centers, meeting rooms, and printing or copying facilities to support work-related tasks. These hotels also prioritize convenience for guests, offering shuttle services to and from the airport and express check-in and check-out services to streamline the process for those with tight schedules. Many business hotels also have on-site conference rooms and meeting facilities, making them an ideal choice for smaller corporate events and meetings. While business and airport hotels can be upscale properties, most offer competitive pricing to attract cost-conscious business travelers. Special packages and loyalty programs may be available to frequent guests.

City Center Hotels are located (you guessed it!) in the central business district or downtown area of a city as well as in areas known for tourist, cultural, and entertainment attractions. These hotels typically offer amenities such as business centers, meeting rooms, fitness facilities, and on-site dining. City center hotels provide easy access to public transportation, landmarks, shopping districts, and dining options, making them an ideal choice for guests who want to be in the heart of the city’s activities and attractions. A local example would be the DoubleTree by Hilton Poughkeepsie, which provides easy access to the Mid Hudson Civic Center, the Bardavon 1869 Opera House, and the Dutchess County government offices.

Another location-based hotel classification is Highway/Interstate Hotels. As the name suggests, they are lodging facilities located near major highways or interstate routes, designed to accommodate travelers who are on long road trips or need a convenient overnight stop. These hotels typically offer easy access to and from the highway, ample parking, and basic amenities such as comfortable rooms, complimentary breakfast, and sometimes dining options or vending machines. Their primary appeal lies in their convenience for motorists, often featuring 24-hour check-in services and being situated near gas stations, fast food outlets, and rest areas to cater to the needs of road-weary travelers.

Hotel Classification by Price

As you can probably tell from what you’ve read about hotel classifications, the price points for the various types of hotels is wide-ranging. You would expect a full-service, all-inclusive luxury resort to be quite expensive. You might also expect a hotel located just off an interstate highway exit to be on the cheaper side since most guests are just spending a night before continuing their travels. In most business travel and tourist destinations, you’ll find various types of hotels at many different price points.

For example, we would consider all of the Walt Disney World Resort hotels to be classified as resort/destination hotels. But within this service-level classification Disney offers four price points: Value (Disney’s All-Star Sports Resort), Moderate (Disney’s Port Orleans Resort), Deluxe (Disney’s Animal Kingdom Lodge) and Deluxe Villa (The Villas at Disney’s Grand Floridian Resort & Spa).^[6]  Hotel companies like Marriott, Hilton, and InterContinental Hotels Group also offer a portfolio of brands across price points.

Pricing a hotel involves a complex set of factors, including brand recognition and positioning, target market demographics, location, service level, amenities, operational costs, and market demand. By carefully considering these elements, hotels can strategically set prices that reflect the value offered, meet guest expectations, and optimize revenue. Luxury hotels justify higher prices through exceptional service, premium locations, and extensive amenities, while economy hotels attract budget-conscious travelers with basic accommodations and essential services at lower prices.

Other Hotel Classifications

Bed and Breakfast/ Small hotels are hotels with less than a hundred rooms and comprise a sizable portion of the lodging industry.  These operations provide a more intimate connection between the line employees and guests.  Additionally, their lean management system allows for faster operational changes that may be quickly implemented. The unique character of these offerings has long been an attractive career path for many lodging professionals, providing an opportunity to develop basic operational experience in the front office, marketing, housekeeping, and maintenance.

Vacation Ownership had been an area of remarkable growth in the lodging industry. Also known as timeshares, these facilities offer guests the opportunity to purchase the ownership of a lodging—generally a condominium with kitchen facilities—for a short-term period of a week or two.  Effectively, the guest is an owner during their stay. Timeshares typically offer a guaranteed vacation spot at the same location each year, which can be appealing if you have a favorite destination you love to visit regularly. They also offer cost predictability. You pay for the timeshare upfront or through annual maintenance fees, which may be more stable than fluctuating hotel prices.

Hilton Grand Vacations and the Marriott and Disney Vacation Clubs are among the most popular timeshare brands around the world.

Industry and Consumer Ratings. There are also several industry-related organizations, such as Forbes and AAA which provide consumer ratings for individual hotels and serve as (yet) another form of classifying a property. Forbes has traditionally awarded one to five “Stars” and AAA, one to five “Diamond” ratings. Additionally, many internet sites and digital apps like Trip Advisor, Hotels.com and Booking.com offer hotel property ratings to consumers.

Trends & Issues in the Hotel Industry

The lodging sector, like any type of industry, is sensitive to shifting local, regional, and global economic, social, and political conditions. Businesses must be flexible to meet the needs of their different markets and evolving trends. These trends affect all hotel types, regions, and destinations differently. However, hotel owners and managers must respond to these trends in a business landscape that is increasingly competitive.  As the digital revolution continues to change the way we work and spend our free time, hoteliers are adapting to respond to what guests expect in their interactions with a hotel, from the booking experience right through to leaving guest reviews and sharing their experiences with others.

The Sharing Economy: Airbnb

Airbnb is an example of a shift to the sharing economy, an economic model in which people rent beds, cars, boats, and other underutilized assets directly from each other, all coordinated via the internet.^[7] Airbnb is the most prominent example of this model. It provides a platform for travelers and manages all aspects of the relationship using digital platforms that include the Airbnb app, mobile, and website.

When hosts create an account, they set the price and write the descriptions to advertise the space to guests.^[8] At Airbnb, the host who rents out the space controls the price, the description of the space, and the guest experience. The host also makes the house rules and has full control over who books the space.  Airbnb provides digital platforms for all aspects of the host and guest interaction, and for these services, it charges hosts a 3.5% service fee. As well, both hosts and guests can rate each other and write reviews.

One criticism of Airbnb from the hospitality industry is that Airbnb does not follow the same operating regulations as those required for hotels.  Another comes from homeowners in apartment complexes who object to neighbors repeatedly renting out their homes to short-term Airbnb guests. Airbnb rentals have also created pressure on the rental housing marketing in popular tourism destinations leading to less long-term rental inventory and higher rental prices.

Distribution and Online Travel Agents

Online Travel Agents (OTAs) are a valuable marketing and third-party distribution resource for hotels and play a significant role in online distribution.  In 2020, OTAs like Expedia, Hotels.com, and Kayak.com had a 24% share of transient reservations in North American markets.

OTAs offer global distribution so that each hotel and chain can be available to anyone. Smaller independent hotels that do not have the global marketing and sales resources of a larger chain are able to gain exposure, sell rooms, and build their reputation through online guest ratings and reviews. OTAs also help hotels offer combined value and packaging options that are attractive to many consumers (for example, booking and search options for hotels, car rentals, air fare, attractions, and travel packages). Customized searches, travel guidance, and rewards points are also available when booking through an OTA. If a hotel or chain has an exceptional product and service, OTAs share guest ratings, which can increase the number of reservations and referrals.

Mobile Devices & Smart Technologies

Mobile devices have placed everything at our fingertips.  Guests are booking stays on their smartphones, and the traditional touch points in hotels are changing.  Guests are looking for ‘frictionless’ check-in and check-out, digital locking systems, and ‘smart’ automated energy-saving devices. Smart technology can now not only improve guest experiences but also reduce operational costs.  For example, with smart reserved parking, hotels can use smart sensors and hotel apps to give guests the choice of reserving their parking space in advance of their arrival, reducing the cost of operating a manual parking inventory (Attala, 2019).

No longer seeking the same ‘touch points’ the hotel and lodging industry must continue to find ways to connect with their guests through mobile devices, touch screens, voice activated technologies and more.

Environmental Sustainability

Hotels are increasingly adopting sustainability practices to reduce their environmental impact and appeal to eco-conscious travelers. Key trends include improving energy efficiency through LED lighting and renewable energy, conserving water with low-flow fixtures and linen reuse programs, and reducing waste by minimizing single-use plastics and enhancing recycling efforts. Sustainable sourcing of local, organic foods and eco-friendly products, along with green building designs that incorporate energy-efficient materials and natural lighting, are also becoming prevalent. Additionally, hotels are engaging guests in their sustainability initiatives by offering incentives and promoting eco-friendly activities, fostering a shared responsibility for environmental stewardship.

Conclusion