4 Facts You Need To Know About the Hospitality Sector

4 Facts You Need To Know About the Hospitality Sector

  • On July 20, 2018

In these hot summer months, ‘vacation’ is a verifiable buzzword. Here are some key foundations you need to know before venturing into the tourist based hospitality sector.

  1. Hotels are delineated based on the services they provide. This classification is as follows:
    • Full Service: Full service hotels provide a full range of amenities
    • Limited Service: These hotels have some basic additions, but generally offer less of a range than Full Service properties
    • Budget: Budget hotels seek to find the sweet spot between customer satisfaction and low prices.
    • Extended Stay: Like the name implies, these properties offer amenities that suit those in transit for an extended period of time, such as self-serve laundry facilities or on suite kitchens.
  2. The two main clientele that hotels market to are tourist and business travellers, and as such the amenities reflect those needs (eg. conference rooms for businessman, on-site bussing to city centers for tourists)
  3. While hotels and multi families essentially offer the same service (rentable housing on a mass-scale), the primal difference lies in the transient customer-base. While you don’t have the long-term commitment inherent in multi family properties, you do have the unique ability to scale rents on a daily basis. This means that while your income will fluctuate more, you will have more flexibility to react to market changes.
  4. Metrics unique to the hospitality sector include ADR and Rev Par
    • ADR: ADR stands for Average Daily Rates, and refers to the average of the revenue divided by the amount of rooms rented
    • Rev Par: Rev Par refers to Revenue per Available Room, and refers to the ADR multiplied by the occupancy rate.

Both values are vital to gauge the profitability of an investment.

Use these 4 basic facts to kickstart your hospitality venture.

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