Hotels

The hospitality sector is a diverse section of the economy keyed to discretionary dollars. Hospitality is composed of hotels and motels; tourist destinations like theme parks, and the catering industry. This section of Value Investing explores the hotel industry. Attached are articles that explain the hotel industry, their industry standards and financial models. Several hotel chains are quite effective with earning a good profit. Others have a long way to go to measure up.

Members of this pool of similar investments include:

• • • • • • • • • • • • • • Marriott International Inc.
                          • Hyatt Hotels Corp.
                          • Hilton Worldwide Holdings Inc.
                          • Wyndam Hotels and Resorts Inc.
                          • InterContinental Hotels Group PLC
                          • Choice Hotels

One of the primary characteristics among this group is that the primary source of sales are traditional hotel operations. Many other companies noted as hotels have gambling revenue as the primary or a strong secondary source of sales. This membership has very little revenue generated from gambling operations. In addition, the pool of members have a limited if any income derived from resort operations. A couple of the members do; however, it is not their primary focus and revenues derived from resort operations is less than 10% of the overall revenue streams. Finally, all six members derive more than 70% of their sales from United States locations and not international sales. This allows for a more comparative relationship when evaluating and creating the business decision matrix value investors adhere to for buying low and selling high.

• Heads on Beds – Hotel Management

  
  The hotel business has one tenet that stands above all other hospitality based business standards. Get heads on beds. Why does this one business standard have so much more value than any other? Well, it is simple, the fixed cost of operations for hotels are over 70% of all costs. Therefore any additional guest sleeping in one of the ...

• Hospitality Industry Characterized by High Fixed Costs

  
  There is one unique financial characteristic that is synonymous with the hospitality industry; that is high fixed costs. Or another way of stating the same financial attribute is to simply state that the hospitality industry has low variable costs.

• Value Investing – Absolute Dollars

  
  In the hospitality industry, there is one financial tenet that takes precedence over any other business perspective. In this industry, it is about putting the maximum number of dollars (ABSOLUTE DOLLARS) in the register after each day. One of the most misunderstood business dynamics of this industry is the higher than average fixed cost to run the ...