Module 4

Transportation Sector
Learning Outcomes
At the end of this chapter, you should be able to:

1. trace the evolution of transportation and travel;

2. discuss the historical development of transport systems;
3. explain the selection of transport mode;
4. discuss the role of international rail transportation;
5. identify the reasons for the growth and decline of ship travel;
6. explain the importance and scope of the bus/motor coach industry;
7. describe the impact of private car ownership on the tourism industry;
8. enumerate the dynamics of the worldwide car rental industry; and
9. discuss the role of the airline industry in the development of tourism.
Lesson 1
Transportation and Travel Evolution

Transportation and travel have undergone many changes. A review of the history of
transportation and travel shows that their evolution took seven eras. These are the pre-
industrial travel system era, the early-industrial travel system era, the mature-railway system
era, the express-travel system era, the automobile-based travel system era, the modern-tourism
travel system era, and the post-mobility adjustment era.
Automobile-Based Travel System Era
This influence of the privately owned automobile was enhanced in North America and
Europe from the 1920s onward. Car ownership boomed in North America. Motorways, interstate
highways, and other trunk highways were developed in the latter half of this era which was from
1920 to 1974. The automobile was predominant over other travel modes from 1920 to 1945.

Modern-Tourism Travel System Era

The period from 1945 to 1974 is known as the modern-tourism travel system era, Car
ownership continued to grow at a fast rate, mainly at the expense of long-distance rail travel.
Mass air travel was another post-World War Il occurrence. The introduction of wide-bodied jets
in 1970 greatly increased air travel. The “mass tourism” philosophy
and marketing approaches were prevalent during the 1950s and 1960s.

Post-Mobility Adjustment Era

This era began in 1973 to 1974 as a result of the oil embargo generated by the
Organization of Petroleum Exporting Countries (OPEC) and the resulting increase in fuel prices.
The events of the energy crisis basically changed the travel patterns
throughout the world. The present era is one in which travelers continue to look to alternative,
group-oriented modes of transportation.

Historical Development of the Transport System

The desire to travel is stimulated with the improvement in transportation. Before World
War 1, it took seven days for travelers to go from coast to coast by steam locomotive. By 1950,
travelers could complete the journey in two and a half days by train. In 1938, an airplane with
the speed of 400 miles an hour made possible nonstop coast-to-coast flights of less than eight
hours. In 1950, travel time from coast to coast was lessened to four hours. At present, the
Concorde can make a flight in two and a half hours. Table 2 shows the historical development of
the transport system.

Table 2. Historical Development of the Transport System

Year Mode of Transport Speed (miles per hour)

6000BC Caramel Caravan 8

1600BC Chariot 20

AD 1784 First English mail coach 10

1825 Fish Steam 13

1890 Improved steam locomotive 100

 1931 Land speed record (bluebird: 350
Sir Malcolm Campbell)

1938 Land speed record (Napier- 400

Railton car: John Cobb)

1938 Piston aircraft 41

1952 United States Liner from New 1,300

York to Le Havre

1958 Jet fighter aircraft 600

1958 Boeing 707 and DC-8 aircraft 17,560

1967 Rocket plane 4,534

1970 Fighter bomber (Mirage IV) 1,450

1970 Commercial aircraft: 1,320

Concorde

1970 Boeing 747 626

Source: Reason, James. Man in Motion: the Psychology of travel. London: George Weindenfeld and Nicolson Limited, 1996.

The development in transportation has made the world a smaller place. It is now
possible to take one to two weeks of vacation in distant places like Europe, the United States,
the Caribbean, Mexico, and South America. Now, travelers can go to any place in the world due
to fast and efficient means of transportation.
LESSON II

Selection of Transportation Mode

There are many reasons why people select one transportation mode over another for
their business and pleasure trips. The most common reasons are cost, traveling time, safety,
convenience, comfort, availability, frequency of trips, ground services, terminal facilities and
locations, status and prestige, and departure and arrival times. People belonging to different
travel segments have different value perceptions. For example, the time spent in traveling as
well as departure and arrival times are very important to the business traveler while the cost of
the trip is the traveler’s primary consideration.
Jagdish Sheth developed a theory identifying transportation variables and the value of
travelers. He found out that travelers choose a travel mode based on how they psychologically
weigh the five factors, namely: functional, aesthetic/emotional, social/organizational, situational,
and curiosity. The functional utility of a mode is its expected performance for a specific purpose:
Examples of stops or transfers, times, safety record, the directness of the trip, and the number
of stops or transfers. Aesthetic/emotional is related to such aspects as fear, social concern,
style, luxury, comfort, and other personal feelings that the form of transportation might evoke.
Social/organizational shows that the frequent users of certain kinds of transportation are
stereotyped according to sex, racial origin, income, price/cost, and education. Example, those
who take bus tours and cruises are generally retired people. Situational refers to how
conveniently located the particular m refers to the traveler'sand its terminal facilities are for the
traveler. Curiosity utility lantie on Concorde perceived need to do something new and different.
Flying trams may have a high curiosity value for many business travelers.

Travel by Train
Trains stimulated travel within the United States, Canada, and Europe in the 19th and
early 20th centuries. Britain had its first organized train tour in 1841 when Thomas Cook
organized an excursion between Leicester and Loughboroug. In 1851, three million Englishmen
boarded the train to see the Great Exhibition in London. The train was instrumental in
stimulating the development of many seaside resorts in Britain.
The first transcontinental route in the United States was completed in 1869. With the
advent of the steam locomotive in 1825 until after World War Il, travel by train became the
primary means of movement within the United States. During the latter part of the 1800s and the
first part of the 1900s, the train connected major population centers and popular spas and
resorts such as the Niagara Falls, Long Beach, Saratoga, New Jersey, and Las Vegas. This
dependence on the train is shown in the development of Las Vegas where large hotels were
located downtown, a short distance from the railroad station. This gave tourists who arrived by
train quick and easy access to hotels and casinos.
In 1863, long-distance rail travel was boosted when George M. Pullman built the
Pullman coach, a luxury first-class sleeping and dining facility. In 1868, the diner car was
introduced on the Chicago and Alton line. Ten years later, an elaborate plan was obtained in all
trains. meal could
The popularity of the train lasted only for a brief period after World War II when the
automobile began to gain more popularity as a Passenger transportation mode. US railroads
carried 77% of the nation’s passenger traffic, By 1950, with the rapid growth of private
automobile ownership and usage, passenger traffic declined to 46%. In an effort to save the
railroad industry, the Rail Passenger Service Act became a law in October 1970. The act
created the National Railroad Passenger Corporation, now commonly known as Amtrak, which
began its operations in via 1971 and was intended to be a profit-making corporation. Canada’s
equivalent of Amtrak is VIA Rail Canada, which was created in 1977
Several pes have been made to determine why travelers select the train as an ee ation
mode. Four evident factors are: cost/price, comfort, safety, and the ability to see the area where
the train is passing. VIA Rail’s onboard surveys of business travelers have identified user cost,
convenience, travel time, and comfort as of primary importance.

A survey of Amtrak passengers showed that travelers favored the train for the following
reasons:

1. Safety;
2. Ability to look out of the train and see the interesting things en route;
3. Ability to get up and walk around;
4. Arriving at the destination rested and relaxed; and
5. Personal comfort.

The negative factors of rail travelers are slowness in reaching the destination, inflexible
departure times, and lack of quality in food services. Promotions by Amtrak and VIA Rail have
emphasized the rest and relaxation benefits of taking the train. They have also pointed out that
the downtown-to-downtown routing of trains saves the time of the passengers.
Train travel has continued in Europe and Asia more than in the United States,particularly
for long-distance travel. The Euro City network, formerly the Trans EuropeExpress (TEE)
network, as well as other national lines provided excellent rail services between major cities in
10 countries. The system is being improved. In 1987, the TEE had been replaced by a new
system which includes high-speed trains, with both first-and second-class accommodations.
Travel within Europe would be further improved with the development and construction of the
Eurotunnel between England and the continent. The tunnel would create the single biggest
unified rail network in the world and reduce travel time between England and other European
countries by two hours. Europeans believed that the train was a more efficient form of
transportation from city center to city center on trips up to 300 miles. Like Amtrak, most of the
better railroads of the world were subsidized by the government.
Tres Grande Vitesse
The popularity of the train system in Europe has increased, not only because of its
quality and efficiency, but because of the use of the Eurail Pass. In 1939, a number of European
countries introduced the Eurail Pass which allowed a traveler to use it for two months of
unlimited second-class travel on any of the rail systems of the European countries. Later, it
included unlimited first-class service over different periods varying from 15 days, 21 days, one
month, and three months with access to many ferries and steamer routes. They also introduce
the student Eurail Pass for a second-class travel. It is less expensive than the Eurail Pass and is
good only in 16 countries.

Travel by Ship
Travel by ship preceded travel by train but it was not until the middle of the 19th century
that travel by ocean liners began to become prominent. Ocean liners were used to provide an
important link to passengers among continents. At present, water transport has two major roles
in travel and tourism-ferrying and cruising.
The steamship era began in 1840 when Sir Samuel Cunard pioneered the first
transatlantic-scheduled liner tips. However, the introduction of the jet aircraft led to the rapid
decline in the ships as scheduled passenger transportation mode. In the late 1990s, the era of
travel by ships expired. Cruise chips took the place of regularly scheduled passenger ships.
Many passenger ships were converted into cruise ships. Those that were too old or too large
were junked or scrapped. Others that had historical value were converted into tourist attractions.
For example, the Queen Mary which permanently docked in Long Beach, California became a
tourist attraction and a hotel.

Cruise Ship
Short-duration cruises are more popular because they require less vacation time
and are less expensive. Other travelers can satisfy their desire to experience new environments
and see new cultures and still bring with them the comfort, safety and convenience of home.

Travel by Automobile
The real inventor of the automobile was Carl
Benz of Mannheim, Germany. In 1885 to 1886, he combined the bicycle and the international
combustion engine and designed the complete vehicle engine consisting of the engine, chassis,
and transmission. Then came Henry Ford who, in 1908, produced his Model T car decreased
from $825 in 1908 to $260 in 1925. The automobile industry grew rapidly. However, it was only
after World War II that the popularity of the automobile increased significantly.

Travel by Bus/Motor Coach

Bus travel is
the most flexible and economical form of transportation. In the United States, buses were first
used to carry passengers intercity in the early 1900s. There was little intercity travel before the
1920s. In 1928, the Greyhound Company, the largest privately-owned bus company in the
world, was established. By this time, buses traveled from New York to Los Angeles in about five
days. With road improvements before World War Il, cross-country trip time was reduced to 90
hours.
The terms "bus," "coach," and "motor coach" are used interchangeably. In North
America and elsewhere, the bus performs two major roles. The first is to provide a regular
schedule of intercity passenger transportation services. The second is to provide charter and
tour services. Intercity service is indirectly competitive with private auto, rail, and air service.
Discount airfares have proven to be a major competition for intercity bus service. Thus, intercity
bus service has declined, while charter and tour services have grown. Bus ridership patterns
also changed to short-haul distances of 250 miles or less. Continental Trailways and Greyhound
Lines Inc. are the two major intercity companies, with Greyhound accounting for 60% of the
market.
The main reasons for selecting bus travel over other modes of travel are convenience
and economy. Few people choose the bus for business travel. Bus riders tend to be older and
have less income. Bus service is available in practically every town of 1,000 people or more,
and a passenger station or ticket agent for bus service is at hand in each of these communities.
Most people do not choose bus travel for long trips. Surveys have shown that women bus riders
outnumber men. Recent advertising indicates that bus companies are targeting their marketing
programs toward the family summer vacation market, young couples, older people on summer
vacation, and the
retired people.

Travel by Air
The airplane had a revolutionary impact on tourism from World War II onward.The
history of air transportation can be divided into three parts—Pre-World War II, and Post-World
War Il. On December 17, 1903, the Wright Brothers took a flight on a beach in North Carolina
which lasted 12 seconds with a distance of 120 feet. In 1927, the air industry developed
regularly scheduled passenger trips betweenBoston and New York. Other governments helped
this growth in the 1320s by subsidizing air companies.

Airline Regulation
International tourism requires a system of international air transportation. This
system requires negotiations among nations and carriers in the form of bilateral agreement. The
Bermuda Agreement established the first worldwide model for future bilateral agreements
regarding the exercise of the eight freedoms of the air:
1. First Freedom: The right of an airline to overfly one country to get to
another;
2. Second Freedom: The right of an airline to land in another country for a technical stopover
(fuel, maintenance, etc.) but does not pick up or drop off traffic;
3. Third Freedom: The right of an airline, registered in country X, to drop off traffic from country
X to country Y;
4. Fourth Freedom: The right of an airline, registered in country X, to carry traffic back to country
X from country Y;
5. Freedom: The right of an airline, registered in country X, to collect traffic. In country Y and fly
on to country Z, so long as the flight either originate terminates in country X; gifted.or
6. Sixth Freedom: The right of an airline, registered in country X, to carry traffic to a gateway—a
point in country X—and then abroad. The traffic has neither its origin nor ultimate destination in
country X:
7. Seventh Freedom: The right of an airline, registered in country X, to operate entirely outside
of country X in carrying traffic between two other countries; and
8. Eight Freedom: The right of an airline, registered in country X, to carry traffic between any
two points in the same foreign country; also known as cabotage.

The bilateral air agreement concepts which resulted from these meetings meant that
airline service could not be offered between a nation of origin and one of destination unless
there was a specific agreement between the two nations regarding the details of the service.
Bilateral agreements were established to provide for the orderly development of the
international air transportation industry. The need for bilateral agreements was intensified
because small nations felt that they should have their own national airline or flag carrier.

LEARNING ACTIVITY
I. Identify the following.
___________________1. A public corporation that maintains intercity railroad
passenger services in the United States.
___________________2. European rail pass that allows unlimited travel with a certain
time limit and within specific European countries at a flat rate.
___________________3. A bus often equipped with toilet facilities, designed to carry
passengers for touring.
___________________4. The high-speed trains of France
___________________5. The high-speed trains of Canada
___________________6.The high-speed trains of Japan
___________________7. A governmental regulation agency concerned with airline
operation, safety, and other aviation matters.
___________________8. An Agreement Regulating commercial air services between
two countries.
___________________9. A democratic organization which established a system of
international rates and fares.
___________________10. basic traffic rights which are bilaterally arranged between
nations or established by treaty.
I. Enumerate the following:
11-15. Reasons why travelers favor train travel
16-18. Types of cruises
19-20. Two important aspects of automobile travel

Module 5
Accommodation

Learning Outcomes
At the end of this chapter, you should be able to:

1. cite the history of the accommodation or lodging industry;

2. describe the different types of accommodations;
3. explain the organization of the lodging industry;
4. discuss the management methods in the lodging industry;
5. differentiate chair accommodation operations from referral groups;
6. explain the hotel terminology;
7. discuss hotel profitability and profitability ratios;
8. calculate the hotel’s breakeven point;
9. explain the accommodation reservation and promotion; and
 10. discuss the linkages between hotels and airlines.

LESSON I.

History of the Accommodations of Lodging Industry

In the history of deluxe hotels, the most famous name is that of Hilton Corporation. Conrad
Hilton built an empire that includes the waldorf Astoria in New York and the largest hotel in the
United States, the Conrad Hilton hotel in Chicago with 3,000 rooms. Among the first-class hotels,
the fastest growing group was Sheraton chain founded by Ernest Henderson. The chain is now
owned by International Telephone and Telegraph Company (ITTI). In 1952, Kemmons Wilson
founded the Holiday Inn chain and its concept of clean, comfortable, and reasonably priced
accommodation for the ordinary traveler.
The popularity of the sun vacation in the 1960s brought about development of the resort
hotel. It catered to the vacation traveler who Stayed for a number of the days. It differed from
the traditional hotel because it provided a wide range of special services and it targeted a
special interest group such as sun enthusiasts, golfers, tennis players, scuba divers, and
honeymooners.
 The change in the function of a hotel brought about a change in its architecture. Owners
renovated older downtown properties and adapted them to the needs of the modern-day
traveler. Hotels changed in appearance as extra features were added such as glass-covered
elevators, atrium lobbies, a variety of restaurants and bars, functional meeting rooms, and a full
array of recreational opportunities. The atrium concept in hotels, introduced by architect John
Portman, boosted the popularity of Hyatt.
Another recent development is the overseas expansion of the American chains. Hotels
which met international standards became an export item of the United States. Hilton
International opened its first hotel in San Juan, Puerto Rico in 1949. In addition, it opened a
hotel in Berlin in 1958, followed by several properties in other countries in Europe.
Intercontinental Hotels opened many hotels in Latin America before 1960. At present, it has 109
properties in 49 nations. Sheraton opened its first hotel in Canada in 1949. Holiday Inn opened
its first property in Montreal in 1960. At present, it has 221 international hotels in 52 countries
outside the United States.

Types of Accommodation

Accommodation can be classified into various types; the most popular of which are the
following:

1. Hotels
Hotels can be a 10-room boarding house or a building that has a thousand or more
rooms, convention and meeting facilities, recreation facilities such as swimming pools and
tennis courts, 24-hour room with several restaurants and bars and various types of
entertainment. Hotels have been designed and built to meet almost any kind of budget or level
that the traveling public might want.

2. Motels or Motor Hotels

Normally, motels only offer rooms only and free parking to guests. These are often found
along busy highways and cater primarily to transient and cost-conscious travelers.

3. Resort Hotels
Resort hotels are intended for vacation travelers. These hotels range from budget to
luxury and can accommodate these travelers and even convention delegates. These are usually
located near beaches and offer more amenities, shops, and recreation opportunities.

4. Pensions
Pensions are found principally in Europe. These are usually family-owned
accommodation facilities. In German speaking parts of Europe, a pension is also called
Gasthaus. Pensions and Gasthaus usually offer continental breakfast but do not have facilities
for other meals. Pensions are known for their informal family atmosphere.

5. Paradors
Paradors are unique to Spain. These are generally old castles, convents, or monasteries
that have been converted into hotels by the government and are operated by the government.

6. Condominium Hotels
Condominium hotels are a recent innovation. These are often hotels with apartments
(condominiums) instead of basic rooms. The condominium units are sold by the hotel
developers to individuals who are given a title to the physical real estate. The individual owners
then contract the developer or a management company to operate the hotel and rent the space
for visiting tourists. The individual owners have the right to stay in their own units during specific
periods of the year with a reduced room rate. The developers or management company
receives a fee for managing and owners. Condominium hotels generally appeal to families
because of the apartments.

7. Campgrounds
Camping isa popular form of overnight accommodation in both Europe and North
America. In North America, there are at present more than 20,000 campgrounds, some of which
are owned by hotels. Campgrounds usually appeal to families who travel in recreational RVs.
Campgrounds and RVs stopping spots are often found in government parks and forests.

8. Bed and Breakfast

Bed and breakfast is a form of lodging Which and breakfast originated in Europe. This
form of accommodation provides a bed for the night and breakfast the next day. It was only in
the 1970s that the idea was brought to the United States. Retired and semi retired people with
large houses have contributed much to the growth of these establishments.

9. Tourist Inns
Tourist inns are lodging establishments that cater to transients. These do not normally
meet the minimum requirements of an economy hotel.

10. Apartment-Hotels (Apartels)

Apartment-hotels are buildings which contain several independent and furnished or
semi-furnished apartments. These are leased to tourists and travelers on a long-term basis and
offer basic services to its tenants similar to hotels.

11. Health Spas

Health spas are hotels and resorts which cater to people who go to spas or mineral
springs for medical treatment or weight reduction. The idea of visiting health spas originated in
Europe. The Romans and the Greeks visited the spas as early as the first century. The spas
became the center of the social life of the English, the French, and the Germans during the
seventeenth and later centuries. At present, several health spas in Europe offer modern
techniques such as medically supervised rejuvenation programs which include supervised diets
and rigorous exercises to shed fat and reduce weight.

12. Private Homes

The private home is the earliest form of overnight lodging for travelers. It provides
lodging to tourists who cannot be accommodated in hotels and motels during peak vacation
periods.

13. Time-sharing
Time-sharing is a more recent unique type of accommodation. It started in Europe in the
1960s when people found it difficult to make reservations every year in popular hotels during
summer. Time-sharing is the selling of vacation lodging, usually condominiums, for a specific
week or weeks over a given number of years. Originally, condominiums in resorts were bought
and marketed as either a second home or primary home depending on the needs of the buyer.

14. Hostels
 Hostels provide basic amenities such as a bunk bed and a commonly shared toilet and
bathroom. The traveler provides his or her own bedding. Hostels appeal primary to young
travelers. The idea of a hostel was conceived in 1909 by an elementary school teacher in
Germany who wanted to provide low-cost overnight lodging to travelers throughout Europe. In
1930, there were more than 2,000 youth hostels that were established in Germany. In 1934, the
first hostel was established in the United States.

LESSON II

Classification of Hotels

There are different ways of classifying hotels, such as location, type of guest, and price.
According to location, hotels may be center-city, suburban, airport, or highway. Based on guest
type, hotels are classified as commercial, conventions, or resorts. According to price, hotels are
categorized as economy, standard, first class, or deluxe.

Rating Systems
 A number of independent rating guides have been published by individual automobile
associations, and travel organizations using various combinations of star, dots, and alphabetical
indicators. Most rating systems aré based on the quality of the physical structure, furnishings,
maintenance, housekeeping, and overall service. Experienced individuals inspect the hotels and
restaurants every year. Many are regional field representatives who submit detailed reports to
the appropriate office, The raters are not known by the establishment being rated.

The following are used to rate hotels, motels, inns, resorts,

1. 1-star = Good, better than average;

2. 2-star = Very good;

3 3-star = Excellent;

4. 4-star = Outstanding; and

5. 5-star = One of the best in the country.

Organization of the Lodging Industry

A hotel organization can be large and complex. A typical hotel has seven major
divisions, namely: personnel, engineering and maintenance, accounting, security, food and
beverage, marketing and sales, and room division. Each division is run by its own division head.

1. The personnel division recruits new employees and administers policies and employee
benefits for the company.
2. The engineering and maintenance division makes the necessary repairs and
implements the hotel's energy management program.
3. The accounting division handles the financial activities of the operation
which include payment of bills, sending out statements payroll, and
compiling monthly income statements. ’
4. The security division provides protection for both employees and guests.
5. The food and beverage division is responsible for the food and beverages
that are served.
6. The marketing and sales division is responsible for selling the rooms and food service. It
is involved in advertising, development of promotional materials, and making direct
contacts with prospective clients.
7. The room division is responsible for the frontdesk, telephone, reservations,
and housekeeping department.

LESSON III
Management Methods
Traditionally, hotels are operated by the people who own the property. In some cases,
the operator may lease the hotel from the owner and then manage it. In other cases, special
arrangements are made such as franchising and management contracts.

Franchising
Hotels that are franchised are usually owned and operated by the same person or
company. The hotel operator or franchisee signs a contract with the franchisor to maintain
certain operating standards-and to use the franchise name on the hotel or motel.

Management Contracts
Hotel Management contracts are a recent phenomenon. Although the first Management
contract was signed in 1946 by the International Hotels, it was only in the 1970s that
Management contracts became widespread.

Chain Accommodation Operations

Most hotels and motels are part of a chain operation. The individual units in the chain
may all be owned by one large company, be partly owned and partly franchised, or may all be
franchised. In any case, the owning company or franchisor establishes the standards and
operating policies to which each individual unit must conform. Because of their size, chain
operations often have the potential to implement employee selection and training programs, to
buy major equipment and furniture in bulk, and to conduct market research on such matters as
guest room layouts and productivity improvements. All these benefits are passed on to the
owners or managers of the chain units who also benefit from chain marketing and a chain
reservation system.

Referral Groups
Referral groups have become popular because the individual Owner or operator
can remain independent while achieving many of the benefits of 3 chain group. This is through
voluntary membership in the referral organization. Examples of these benefits are advertising
and reservation referrals. One of the largest referral] groups in North America is Best Western
which has approximately 3,000 Properties with more than 200,000 rooms.

LESSON IV

Hotel Terminology
Room rates for hotels are quoted in terms of what meals are included in the price.
European Plan (EP) means that there are no meals included. This is the most commonly used
room rate quoted by North American hotels. American Plan (AP) means that breakfast, lunch,
and dinner are included in the quoted price. In Europe, AP is known as full pension. Meals are
usually a fixed menu with little or no choice. Modified American Plan (MAP) includes breakfast
and dinner but not lunch or breakfast and lunch but not dinner. In Europe, this is known as demi
pension.
A continental breakfast is offered by most European hotels and is included in the room
rate. In Europe, this type of plan is known as hotel garni or pension garni which consists of rolls,
coffee, and sometimes juice.
The Bermuda Plan (BP) is offered by hotels in Bermuda and some other places. It
includes both a room and a full English or American type of breakfast. Bed and breakfast hotels
operate on a Bermuda Plan in Britain and the United States and on continental breakfast plans
in continental Europe.

Room Rates
The maximum rates that hotels charge for a room normally depend on the number of
people occupying it. These rates are called rack rates. These are posted on the inside of the
entrance door of each guest room. The rack rate is not always the rate that is paid for a room.
Hotels, like airlines, have a system of discounted prices.
The revenue that is not obtained for a guest room is gone and cannot be recovered.
Thus, hotels offer discounted rates to special classes of people to encourage them to stay in the
hotel. For example, there are special rates for business travelers, government employees,
airline employees, and other similar groups.
For conventions and conferences, hotels compete with one another by offering the
lowest room rate. Profits on banquet meals and sales of liquor make up for the discounted room
rates.

Hotel Profitability

Room Occupancy
A simple measure of a hotel's profitability is its room occupancy. It is obtained by dividing
the number of rooms occupied by guests on any night by the number of rooms in the hotel and
by multiplying the result by 100 to determine the occupancy on a percentage basis. For
instance, if a 125-room hotel has 75 rooms occupied on a particular night, its occupancy will be:
75
x100=60%
100

Occupancy can also be determined for a week, amonth, a year or any other period of
time. In this case, the numerator is the number of rooms occupied for that period and the
denominator is the number of rooms available during that period that is, the number of rooms in
the hotel times the number of days in the period. For example, if we want to know the
occupancy for a week in 2 i would be: “ 463 rooms were occupied during that week, the
occupancy percentage would be

463 x 100-= (463/875) x 100 = 52.9

(125 x 7)

During peak season, a hotel may have 100% occupancy. However, occupancy can be very low
at other times of the year. In general, Hotels are considered profitable if they can operate with
an average annual occupancy of 65% or higher.

Double Occupancy Rooms

 Occupancy percentage is not usually the best measure of marketing success for a hotel
because it does not show whether the revenue is being maximized. Whether a room is occupied
by one person or by two persons, the occupancy percentage will not change, but the revenue
obtained will be changed. It is for this reason that hotels determine the occupancy and the
double occupancy rate which is the number of rooms occupied by more than one person.
Double occupancy is determined by dividing the number of guests accommodated
during a certain period by the total number of guest rooms during that same period. For
example, if 463 rooms were occupied by 713 guests during a week, the double occupancy is:
713
=1.54
463

The 1.54 double occupancy ratio means that 54% of the rooms were double occupied.

Average Rate Per Room Occupied

Another way of measuring maximization of revenue is the average rate per room
occupied. The average rate will increase if more expensive rooms are sold or if more rooms are
double or triple occupied. The average room rate is obtained by dividing the revenue for a
period by the number of rooms occupied during that period. For example, if a hotel had 463
rooms occupied during a week and a room revenue of $37, 640 for that week, the average room
rate is:
$ 37,640
=$81.30
463

Average Daily Rate Per Guest

Another useful statistics is the average daily rate per guest. This is obtained by dividing
total room revenue for a period by the total number of guests accommodated during that period.
For instance, if the total revenue for the week was $65,529 for a hotel occupied by 1,050
guests, then the average daily rate per guest for the week is:
£ 65.520
=$62.40
1,050

Average Length of Stay

To maximize revenue and increase room occupancy, hotels try to increase the length of
stay of customers through advertising and other marketing methods. If customers can be
motivated to stay an extra day or two, this will mean more revenue for the hotel.

Break Even Point

Hotels are often interested to know their break even point. It is that point at which a
business will make neither a profit nor a loss. The equation for determining it is:
¿ costs
Contribution margin
Fixed costs are those that stay the same regardless of the volume of business.
Examples are management salaries, interest, depreciation, insurance, property taxes, mortgage
payments, amortization, and physical plant maintenance. Contribution margin is defined as the
average room less the variable costs of having a room occupied. Variable costs are those that
change according to the number of guests in hotel. The variable costs for a hotel room are
primarily the costs of housekeeping such as maid wages, linen, laundry, and supplies.

For example, if the fixed cost of a 125-room hotel is $1,950 for a year, its average room
rate is $80, and the variable cost pet room occupied is $20, its breakeven point would be:
 1,950,000
=$1,950,000/$600,000 = 32,500
$ 80.00−$ 20.00

The 32,500 rooms to be occupied during the year can be converted into an occupancy
figure as follows:
32,500 32.500
125 x 365
x100 = 45,625
x100=71.2%

This means that the hotel must average 71.2% occupancy during the course of the year.

A breakeven analysis is an important managerial tool because it shows the percentage of

occupancy that a hotel must have to cover expenses.

Accommodation Reservation
Many large hotels have computerized reservation systems. However , despite these
systems, overbooking still occurs. Overbooking is selling more rooms than the actual available
rooms. Hotels do it for a reason. If hotels book only to capacity, they would often end up with
empty rooms because of “no-show” or people who do not advise that they want their
reservations cancelled. Hotels know from experience that there is a no-show percentage that
can be compensated by overbooking. However, the numbers do not always work out correctly.
The result is disappointed customers and negative publicity.

Registration Cards
Accommodation establishments use the guest registration card as a marketing tool. A
guest registration card provides information about the guests such as his or her name, address,
geographical origin, and other facts. This information can be used to produce a direct mail list
which is used for sending future promotional material. The list can also be expanded to include
the names and addresses of clients who have made reservations, canceled them, and even
customers who made reservations but never arrived.
The geographical origin of the customers can be used to show where advertising efforts
should continue to be directed rather than wasted by promoting the accommodation in places
where a few customers originate.
The guest registration card information can also be used to produce a typical customer
profile. The customer profile can be presented to different print or broadcast advertising media
which can then determine if the market they serve fits this profile. If it does, the establishment
may then be able to use that medium for its advertising.

Hotels and Airlines

At present, there is a natural link between airline companies and hotels. This is due to
the changed nature of transportation. One of the first links was Pan Am which tied in with the
International Hotels in the 1940s.
According to Lane (1994), there are three major reasons why airline companies link with
hotels. These are:
1. Their desire to protect insisting business and develop future business, thus increasing
their profits;
2. The expectation that hotel ownership will boost tourism development in their home
countries;
3. The desire to expand national culture.
Frequent Flyer Links
Many of the frequent flyer programs of airlines are also lined to hotel usage. This means
that airlines grant passengers extra mileage points for staying in participating hotels.

Accommodation Promotion
Most accommodation establishments promote their properties to members of the travel
as well as to tour wholesalers and travel agencies. They provide travel trade with printed
promotional literature and invite them as guests on familiarization trips. They offer room rates to
representatives of the travel trade promotional booths at travel trade expositions and advertise
in travel trade when they stay in hotels but are not on a familiarization trip. Large hotel chains
install promotional booths at travel trade expositions and advertise in travel trade publications.
These travel trade advertisements emphasize the benefits that will be derived by the tour
wholesaler or travel agency in recommending the hotel. These benefits are the commission the
wholesaler or agency will receive from the hotel and the repeat business that will be generated
for the wholesaler or agency. Many travel agencies handle resort hotel bookings especially
when these are tied in with air travel as a package.
Hotels use the direct mail approach to groups who would like to hold meetings,
conventions, or conferences in the hotel. For these groups, hotels often offer the incentive of
lower room rates for group bookings, and make up the reduced revenue by means of additional
sales of meals and alcoholic beverages. Hotels also offer corporate rates to large companies
from which they would like to get guest room business.
Accommodation establishments also use newspapers for promotion. They spend more
money on newspaper advertisements than any other advertising vehicle. They use the business
sections of newspapers to reach the business traveler and the travel sector to reach the
vacation traveler. They also advertise on radios and televisions, on highways and airport
billboards, on city magazines or directories, and on telephone directories Large hotels use direct
mail operations for advertising. Majority of hotels advertise in travel journals, travel and
recreation magazines, and airline in-flight magazines.

LEARNING ACTIVITY
Identify the following.
___________________1. A resort with mineral springs.
___________________2. Facilities for the lodging of visitors in a destination.
___________________3. The concept of dividing the ownership and use of a lodging
property among investors.
___________________4. Family-owned accommodation facilities
___________________5. Buildings which contain independent and furnished
apartments.
___________________6. Hotel room occupied by two persons.
___________________7. Old castles, convents, or monasteries that have been
converted into hotels by the government,
___________________8. Hotels built along highways.
___________________9. The authorization given by one company to another to sell its
products.
___________________10.A written agreement between the owner and the operator
assumes full responsibility in managing the hotel.

II. Enumerate the following :

11-17. Types of accommodation.
 18-20. Reasons why airline companies link with hotels.

Module 6
Food and Beverages Factor

Learning Outcomes
At the end of this chapter, you should be able to:

1. Trace the history of the food and beverage industry;

2. Describe the different types of restaurants;
3. Explain the importance of the franchising to the restaurant industry;
4. Discuss restaurant profitability and calculate food cost
percentage, gross profit, and average guest check;
5. Calculate the restaurants breakeven points ;
6. Explain the role of the menu in a
restaurants success 7. Differentiate airline catering from
restaurant catering; and 8. Discuss restaurant promotion.
LESSON I

History of the Food and Beverages Service

In early history, there was much evidence that certain groups of people cooked
together in big groups and that the early inns provided a crude menu. In the Roman era, there
were some establishments that offered sausage or roast meat,bread,and a cup of wine. The
forerunner of the modern restaurant that provides hot food and drink developed in rome. Many
of the early restaurants were in the cities, near temples and government buildings. After the fall
of the Roman Empire, the manors and castles provided food to large numbers of people. The
early inns provided bread and wine to travelers.
In 1200, public cook shops were opened in London
which offered pre cooked take out food. The royal families of Europe introduced cutlery, table
linen, crystal glasses, new foods such as turkey potato, and the roadside tavern. In the sixteenth
century, British inns and taverns began to serve one meal a day at a fixed time and price and at
a common table. The meal was known as ordinary in London was the Castle and Lloyd’s which
was the meeting place for merchants and ship owners. In the seventeenth century, the
ordinaries became fashionable clubs and gambling places as well as centers for political
activities. The word “restaurants” was used in the late eighteenth century for a Paris dining room
serving l;ight dishes. In the United States, taverns
and inns were very similar to those in England. A famous tavern in New York was Fraunces
Tavern. In 18343, the famous Delmonico’s was opened in New York. in Early 1900’s, several
events that were significant to the food industry occured. The hamburger was first served in
1904 at the Saint Louis World’s Fair. The first root beer stand was founded by Roy Allen and
Frank Wright. The
second world war brought many changes to the american public. People became richer, the
automobile made them more mobile, and they shifted to the suburban areas of cIties. In the
1960’s, fast food establishments emerged.
At present, modern popular cuisine including french, chinese, mexican, and
japanese have become common in most cities. The role food plays in tourism may not be a
direct but an indirect attraction.

Types of Restaurants

The following are the different types of Restaurants:

1. Family or Commercial Restaurants

Family-style restaurants offer a wide menu of “meat and potato” selections with a
price range that appeals to an average family income. They serve beer and wine if they have a
liquor license. The decor is bright. A combination of counters, tables, and booths is common.
Parking is necessary since customers usually arrive by car. Family restaurants are normally
located near a residential area and a highway.
The operating hours are usually from early evening
to midnight. The staff are friendly and efficient. The initial investment is medium to high.
2. Coffee Shops
Coffee shops are characterized by a
fast-food service. The decor is simple and prices are relatively low. The staff are often minimally
trained. The peak periods of a coffee shop are lunch and coffee breaks.
3. Cafeterias

Cafeterias are usually located in shopping centers and office buildings. self-service is
typical with limited menus of soaps, entries, dessert.
Cafeterias often required a large preparation area. Their staff are
minimally trained. Beer and wine may be offered. Fast service is necessary to handle the traffic
volume. The operating hours will depend on the location as a school, office building, airport, or
highway. 4. Gourmet Restaurants
Gourmet restaurants generally require a
higher initial investment than other types of restaurants because they require an expensive
ambiance and decor. They cater to those who want a higher standard and are willing to pay the
price. 5. Ethnic Restaurants
Ethnic restaurants
feature the food of a specific region or country. They can be Chinese, or classical French
cuisine. The devor is usually an ethnic motif. 6. Fast-
food Restaurants
Fast -food restaurants have increased in the past 20 years as people have become
more mobile. Franchising is common in this type of restaurant. The menu is limited with low
prices. Because of low prices. Many customers patronize fast-food restaurants.
Fast food restaurants operate for long hours and generally for seven days
a week. Alcoholic beverages are not offered. A well trained staff is required and franchisor sets
standard of service and foods. They have spent two decades successfully.
7. Deli Shops
Deli shops provide delicatessen food
service, combining traditional delicatessen cold meats and cheese with takeout sandwiches,
salads, and similar items. Some deli shops have limited seating capacity. They are usually
located in shopping areas or office buildings and are open from 9:00 AM to 5:00 PM or 9:00 PM.
capital investment is low. Deli shops have low labor costs because only one or two owners and
employees are involved. 8. Buffets Restaurants
Buffets
restaurants are established on a completely self-serve basis. However, if liquor, beer and wine
are offered, tables and service for these beverages are provided. The
food buffet is usually an “all you can eat” hot and cold food for one price. Food preparation and
service staff are kept to a minimum. Buffets are open from 5:00 PM to 11:00 PM.
9.
Transportation Restaurants
 There is a natural link between transportation and food service. Several
restaurants are generally found along auto and bus transportation routes. They are also found
at bus, rail,and air transportation buildings, as well as on transportation vehicles as trains and
ships. Some transportation restaurants cater to tour groups, particularly
bus tour groups. These restaurants can be quite profitable if the market can be maintained.
They require special cafeteria or buffet-type facilities so that arriving groups can be served
quickly and continue on their journey.

Franchising
Franchise restaurants are a
major component of the food service industry, particularly in the fast-food sector. The reasons
for the popularity of franchising in the restaurant industry are very similar to those in the hotel
industry. Franchises are beneficial to the franchisees because they provide operational training,
layout and design assistance, location assistance, managerial expertise, group purchasing
power, most importantly, the identification of a well-known brand supported by regional,
national, and international advertising and promotion. Franchised restaurants can easily get
financing from lending institutions rather than independents.
Franchised restaurants include fast-food chains such as McDonald’s. Kentucky
Fried Chicken, Pizza Hut, A&W Root Beer, and Burger King.They also include dine-in types of
restaurants such as Wendy’s and Pizza Inn and carry-out establishments like Orange Julius.
The fast-food franchise is the most common. The table-service and fast-food restaurants have
spread from the United Stated to other countries throughout the world.

LESSON II
Restaurant Profitability

Food Cost Percentage

Food cost percentage is
often used to measure a restaurant's marketing success. It is determined by dividing the food
cost for a period (a day, a week, a month) by the sales for that same period and then multiplying
it by 100. For example, if the cost of food for one month is $40,000 and sales is $100,000, is
$100,000, the food cost would be:
$ 40,000
x100=40% Many
$ 100,00
restaurant operators strive for a 40% food cost to make the restaurant more profitable.

Gross Profit
Gross profit is the selling price of an item less its food cost. Table 3
shows the importance of gross profit in comparing two menu items.

Table 3. Gross Profit

of Two Menus
Item Cost-Price Selling Price Cost Gross Profit
 Percentage

1 $4 $8 50% $4

2 $1 $4 25% $3
In this table, it would be better to sell item 1 rather than item 2 since item 1 has a higher cost
percentage and a higher gross profit; hence, a contribution to net profit than item 2. For each of
item 1 sold at 50% food cost, there is a $4 gross profit compared with $5 with item 2.

Labor Costs
labor costs are controlled by expressing them as a
percentage of sales on a daily, weekly, or monthly basis and comparing the actual cost with the
standard desired. Instead of treating labor costs as separate
from food costs, many successful restaurants look at these two as a combined cost. For
instance, they set a standard of 75% above in which food costs plus labor costs must not
increase. As long as the operation maintains the combined cost below this level, the restaurant
will be profitable. In a large
restaurant, the organization of the labor force is important to labor cost control. The food service
structure is illustrated in Figure 4.

Average Guest Check

Another profitability measure used in restaurants is the average guest
spending or average check. Average guest spending is calculated by dividing the total revenue
received for a particular period ( a day, a week, a month or a year ) by the total number of
guests served during that period. For example, if 350 guests are served dinner and the total
revenue received is $3,610, the average spending will be:

Break Even Point

Breakeven is that point at
which business will make neither a profit nor a loss. The operation for determining the
breakeven point is.
¿ costs
Contribution margin
fixed costs are those costs that remain the same regardless of the volume of business.
Examples are salaries, interest, depreciation, insurance rent, and the like. The contribution
margin is average to check less variable costs. For example, if a restaurant has an annual fixed
cost of $125,000 and an average guest spending of $10.00 and its variable cost such as food,
labor, and others is 75 % of revenue or $7.5% of guest served, its breakeven point is:
$ 125,000
=$50,000
$ 2.5

The contribution margin is average check less variable costs or $2.50 less $7 .50. The
breakeven number of customers is $50,000.
The proof of this is:
Total revenue: $50,000 x $10 = $500,000
Variable costs: $50,000 x $7.50 = $375,000
Fixed costs: $125,000
Profit or loss: 0

Menus
The menu is the basic planning document for a successful restaurant. Several aspects
of the restaurant's operation depend on the menu. The menu contains the range of offerings, as
well as the selling prices. The menu must portray the style and the theme of the restaurant.
Thus, the menu’s design printing, size and colors are important.
The menu also determines the equipment needed and the investment required. In
general, the more extensive the menu is, the more varied the needed equipment will be. If a
restaurant sells only hamburgers, hotdogs, fries, and softdrinks it required equipment will be
less compared to those of a restaurant with 20 or 30 menu items which require different cooking
methods and more specialized equipment.
In addition, the menu identifies the labor costs of a restaurant. It can determine the
number of staff required and the cost of staff training for food preparation and service, the more
complex the service will be.
Lastly, the menu estimates the cost for uniforms, purchases, storage and space, and
actual food costs. The menu also helps emphasize, by means of boulder prints, which menu
items the restaurant would prefer customers to order.

REFRESHING BEVERAGES
aperitifs
Gin Fizz
Screwdriver
Manhattan
Bloody Mary
Campari
Sweet or Dry Vermouth

beer
International Selection
fruit juices
Orange
Pineapple
Apple
Tomato

non-alcoholic cocktail
Fruit Spritzer

spirits
Cognac Otard VSOP
Johnie Walker Red Label
Jim Beam Black Label Whiskey
Gordon's Dry Gin
 Absolut Vodka
Bacardi Carta Blanca

Liqueurs
Cointreau
Drambuie

wines
French Red Wine
A choice of two French Red Wines is available
French White Wine

softdrinks
a range of regular or low-calorie drinks is available
Figure 5. Sample International Airline Menu

Hong Kong-Vancouver
LUNCH
BLACK FOREST HAM WITH MELON

FILLET OF HALIBUT MEUNIERE

with ALMONDS
PARSLEY POTATOLS
COURGE'T'T'E PORTUGUESE
OR
DUCK WITH BLACK MUSHROOMS
VEGETABLES AND CHESTNUTS
SAFFRON RICE
SNOW PEAS, CARROT FLOWERS
CHEESE AND CRACKERS
PLUM TART WITH FRESH CREAM ROLL, BUTTER
TEAS-CEYLON, JAPANESE, JASMINE COFFEE

REFRESHMENTS
LIGHT REFRESHMENTS AND BEVERAGES ARE AVAILABLE THROUGHOUT THE FLIGHT,
IF YOU REQUIRE SERVICE, PLEASE DO NOT HESITATE TO CALL YOUR FLIGHT ATTENDANT.
Figure 6. Sample International Airline Menu

Airline Catering
Airline companies spend billions of dollars every year for food purchases. The average
cost per airline passenger is between $1 and $7 depending on the length of the journey. The
amount is less for shorter trips, since passengers may be offered only non-alcoholic beverages
and a light snack. For longer trips in which two or three meals may be offered including free
alcoholic beverages, the amount is higher, Around 3 to 4% of an airline's total costs is spent on
food.

Food Quality
The main problem of airline companies is to cook the meal on the ground and werve it
several hours later in an extraordinary dry cabin atmosphere, seven miles high, to different
groups of people with their own food preferences, and whose main motivation is to travel rather
than to eat.
In 1992, airline passengers were served a sandwich and coffee from a vacuum flask on
a flight from London to Paris. At present, particularly on long flights, passengers expect hot
meals.

Logistics
To produce hot meals, the airline companies have to prepare specifications for recipes,
ingredients, cooking methods and temperatures, and labor for each flight. These require a
forecast using the actual passenger reservations for each flight including an allowance for
standbys and last-minute reservations in order to have the correct raw materials, equipment,
and food production staff for each shift. Preliminary meal counts are usually prepared from 24 to
72 hours ahead so that food supplies can be bought.
Menus must be carefully selected for each flight to avoid serving the same meal to a
passenger on two succeeding segments of a trip or on a round trip. In addition, trays and
serving utensils and supplies must be in the kitchen when the meal is prepared.

Airplane Galleys
The first airplane galley was designed in 1936 by Douglas for its DC-3. Meals prepared
on the ground were kept hot or cold in insulated containers on the aircraft. After World War II,
the introduction of larger airplanes enabled them to have ovens and refrigerators onboard in
their galleys. The removable ovens are filled with hot food in the ground flight kitchen, moved to
the aircraft, and then plugged into electrical outlets.

Flight Kitchens
The first airline flight kitchen was opened in the late 1930s near Washington D.C.
Hoover Field airport by a gentleman named Marriott. He had a restaurant near the airport. He
noticed that passengers would go to his restaurant to eat before boarding their flights because
no meals were served in the airplane. He approached Eastern Air Transport, now known as
Eastern Airlines, and offered to Prepare lunch boxes in his restaurant for Eastern’s passengers.
Eastern agreed, so the first flight kitchen was established. At present, Marriott In-Flite Services
has approximately 100 flight kitchens around the world which cater to 150 different airlines and
serve 100 million meals a year.
There is an ongoing trend at present in which Flight Kitchen operators lease their dining
equipment from other firms.
Some airline companies have their own flight kitchens while other contract with other
airline companies that are equipped with their own kitchen. Most of the airline Companies turn
over their catering services to outside caterers because airline kitchens are not large and
efficient.

Difference Between Airline Catering and Restaurant Catering

Airline catering is different from restaurant catering because in the latter, the cooks can
make last-minute adjustments. For example, steak might be prepared in the flight kitchen to be
accompanied by a sauce and vegetables to be served two hours later, During this time, it must
be kept hot. If there is a flight delay of one hour, the steak will be stringy, the sauce will be
congealed, and the vegetable will be mushy. In an ordinary restaurant, a meal like this will not
be served but on the airline, the serving crew usually has no other choice but to serve it.
In airline catering, the logistics are very complex but airlines exert great effort to serve
good meals to the passengers. They even respond to the needs of passengers on special diets
if given enough notice.

Restaurant Promotion
Many restaurants advertise their menu in newspapers. Local newspaper advertisements
are used by most restaurants as a major form of external promotion. Several restaurants
advertise in the yellow pages of the local telephone directory; some use local radio or television
stations. Most popular restaurants and national restaurant chains advertise in airline in-flight
magazines, consumer travel magazines, and travel trade publications. Many restaurants try to
foster good relations with nearby hotel employees such as front office staff, bell desk personnel,
and doormen because they are often asked by hotel guests to recommend good nearby
restaurants. Good public relations and word-of-mouth advertising generate a lot of business.

Learning Activity
I. Identify the following.
1. ___________________Restaurants that feature the food of a specific region or country.
2. ___________________Restaurants that offer limited menus with low prices.
3. ___________________A famous tavern in New York.
4. ___________________It contains what the restaurant offers as well as the selling price.
5. ___________________It is the point in which total costs equal total revenue.
6. ___________________Restaurants that offer “all you can eat” hot and cold food for one
price.
7. ___________________Restaurants that provide delicatessen food service.
8. ___________________The selling price of an item less its food cost.
9. ___________________Restaurants found along bus transportation routes.
10. ___________________Another term for average guest spending.

II. Enumerate the following:

11-17. Types of restaurants
18-20. Examples of franchised restaurants