Bina Nusantara University 1 Matakuliah G

Bina Nusantara University 1

Matakuliah : G 0424 – Hotel and Restaurant Management Tahun : 2008 Konsep Pengelolaan Hotel Pertemuan 3 -4 Bina Nusantara University 2

Topics • • Sole prorietor Partnership Franchising and licensing Hotel management

Learning Objectives Students are able • To identify hotel structures • To understand the differences between division • To identify the hotel management concept 4

Hotel Management • One corporation owning several hotels • Parent company with individual subsidiary owning each hotel • Joint venture & partnerships] • Leasing, Profit sharing lease, Sale & leaseback • Management contract • Franchise & Licensing agreement 5

Sole Proprietor • Sole proprietorship is the same as one company owning several hotels. • Some use the term of corporation, ie. PT, Ltd. , Inc, Plc. • Hotels are owned and operated by a single company and act as an independent enterprise. • The company may use its own expertise in managing the property, start from site selection, hotel developemt, marketing and operation. • It may use the chain's reservation system. • Examples: PT. Sofyan Hotel owns Sofyan Cikini, Sofyan Menteng and Sofyan Tebet. 6

The advantages and disadvantages of Sole Proprietorship It doesn't pay corporate taxes but pays personal income taxes on the profit made. The accounting system is much simpler. Can have total control over the company Decision can be made quickly without having to consult others. Single owner takes all the risks. A hard time raising the capital. Limited liability company. Hiring employees may be difficult. All debts are debts of the owner. 7

Holding company • Holding company is the term used for parent company with individual subsidiary owning each hotel. • It is a corporation that owns enough voting stock in another firms to control management and operation by influencing or electing its board of directors. • It may operate hotel chains either using the same name or different brands. Upper upscale • Examples: Accor group Sofitel Mercure Pullman Novotel Suite Hotel Allseasons Motel 6 Etap Upscale and midscale Adagio Ibis Formule 1 Economy Budget 8

Advantage and disadvantage of Holding company Possible to obtain control of another company with less investment. Easily to get additional debt financing from other SBU. Allows for decentralized management Complexity and complicated in management and operation. Growth of monopoly over the companies. Chance of fraud – double tax report.

Joint venture and Partnership • Joint venture is a contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. • All parties agree to share in the profits and losses of the enterprise. • In partnership, the companies are joined together to run "a business in common". • A partnership is a type of business entity in which partners (owners) share with each other the profits or losses of the business undertaking in which all have invested.

Advantages and disadvantages of joint venture Opportunity to gain new capacity and expertise Enter geographic markets or new technological Access to greater resources, Sharing of risks with a venture partner Takes time and effort to build the right relationship. Objectives of venture are not 100% clear and communicated. Different cultures result in poor integration and cooperation. The partners don't provide enough leadership.

Leasing, Profit Sharing Lease, Sale and Lease Back • Leasing is the way of one person (called a tenant or lessee) to possess property belonging to another person (called a landlord or lessor) to be managed and operated. • Profit sharing lease is one type of leasing where the lessee and the lessor are shared the profit earn from the management and operation. • Sale and lease back is a common type of leasing in hotel industry where the lessor 'sells' the property, the lessee operates and the property will be returned back to the owner after a period of time.

Advantages and disadvantages of leasing Less capital-intensive The company grows more rapidly. Leasing shifts risks to the lessor Leasing may provide more flexibility to a business. If a business must change its operations significantly, it may be expensive or otherwise difficult to terminate a lease before the end of the term. If the business is successful, lessors may demand higher rental payments when leases come up for renewal.

Management Contract • A management contract is a contract arrangements to more easily obtain economies of scale, a global reservation systems, brand recognition etc. • It is used when the company is lack of local skills to run an operation. • A management contract can involve a wide range of functions, such as technical operation of a production facility, management of personnel, accounting, marketing services and training.

Advantages and disadvantages of management contract It is an alternative to foreign direct investment. It doesn't involve high risk High yield return on investment It has limitation of contract time periods. There is restriction on entry arrangement. Fee of 3. 5% of total revenues and 6 -10% of gross operating profit should be paid to 'brand'.

Franchising and Licensing • Franchising refers to the method of practicing and using another person's philosophy of business. The "franchisors" authorize the proven methods and trademarks of their businesses to "franchisees" for a fee and a percentage of gross monthly sales. • The verb license means to give permission. License may be granted by a party ("licensor") to another party ("licensee") as an element of an agreement between those parties. A shorthand definition of a license is "a promise (by the licensor) not to sue (the licensee). " Bina Nusantara University 16

Advantages and disadvantages of franchising A well run franchise would offer a For franchisees, the main turnkey business: from site disadvantage of franchising is a selection to lease negotiation, loss of control. training, mentoring and ongoing Starting and operating a franchise support as well as statutory business carries expenses. requirements and The franchisor/franchisee troubleshooting relationship can easily cause Franchisors are able to expand conflict if either side is rapidly across countries and incompetent (or acting in bad continents faith).

Advantages and disadvantages of licensing The possibility of local company to product and market the product. Licensor get a royalty. Such agreements usually involve the use of the trademarks, patents technical know-how, specialized equipment, training, etc. Earn some money without many hesitation It may be difficult to find a suitable local firm. Lose control of your technical "know-how". Local partner may not fulfill his part of the agreement. The licenses may become an eventual competitor.

Hotel Operation Examples 20

Conclusion • Hotel can be managed with various kinds of concept. • It can be in a single or mixed concept. • Each concept has its own benefits and costs. Bina Nusantara University 21