The hospitality industry is part of the service industry. That makes it challenging since it’s an intangible service, and it isn’t easy to know what to expect beforehand. Also, if you don’t sell the room, the seat, or the berth on a cruise ship before it departs—it’s gone.

These are companies that have a high fixed cost. To make money, you must first establish a specific level of use and demand. For airlines, it may be that to make money, 85% of seats on a given customer flight or a particular type of plane must sell at specific prices. The occupancy rate for cruise ships is 105%. That means there are more than two people in every berth and cabin.

New York City’s hotels are in high demand. The occupancy rate is now hovering around 90%. In the United States, the average occupancy—the percentage of occupied rooms each night—is roughly 65%.

Another variable is the average daily rate. For example, New York City hotel rooms can range from $300 to $500, depending on the market. It could cost around $300 for select service or lifestyle hotels. The average daily charge for a luxury hotel room might be $1,000.

The same is true for airlines and cruise ships. The cruise ship’s average charge per seat determines the average cost of a five-day cruise. All of these businesses are in the business of managing yield. It’s referred to as “yield management.” You want to maximize revenue from a purchase made by a hotel guest, airline passenger, or cruise passenger.

Some of these companies have revenue-generating opportunities when customers use their services. For instance, hotels may sell guests food and beverages, wifi, and spa treatments. Cruise lines sell additional services like retail, restaurants, excursions, and various other onboard activities. Airlines have some limitations. Food is available for purchase onboard, but the selection is minimal. Tax-free purchasing is sometimes available on international flights.

To summarize, when a customer buys a ticket, you want to maximize the yield per ticket. Once they’re on board, you’ll want to maximize the revenue. This is called ticket net yield, or yield, followed by an onboard spending yield.

In terms of hospitality services — hotels, airlines, cruises — Google is a significant power, simply because so many people start their planning at the search engine. As a result, you need to have Google Ads.

In other words, you need to pay to get your brand in front of searching customers.

For example, search “Times Square hotel” in Google and see what comes up. First off, search engine optimization (SEO) plays a part in which brands appear in the first few pages of results. But there are hotel companies that have paid to have their name at the very top. You have to pay for Google Ads to get your name out there.

Say you’re a Moxy Hotel, a Marriott brand targeted at Millennials. You want to make sure that when a consumer in this demographic searches for ‘Moxy Hotel New York City,’ you’re at the top of the first Google page.

The advantage of sites like TripAdvisor, Expedia, and Booking.com is that they can compare rates for several hotels.

If you go directly to the website for a Moxy location, you’re not comparing rates with other properties. There’s more information comparison — and maybe transparency — happening on Expedia, Kayak, etc., than at the hotel’s specific site. But it’s more costly. For example, if the customer books on Expedia, they could pay 10-20% more.

Simply put, hotel brands want consumers to visit their sites directly. How do they do this? For starters, they offer price matching. If you find a lower price than on their site, they’ll match it.

Hotel brands also say that you won’t collect loyalty points if you book through external channels like Expedia or Booking.com. Booking directly gives you loyalty points, and you’ll also get preferred treatment at the hotel.

Finally, in some cases, inventory — not the desired rooms — shows up in search results of external booking sites. Instead of offering a garden or ocean view, these could be on a lower level, windowless, or facing a busy highway.

Ultimately, hotel brands show a preference for consumers who book directly on their site. Having your hospitality brand at the top of Google search results means you’re more likely to have direct bookings.

Suggested Image (if needed): https://unsplash.com/photos/cwr02zo0gP8

Professor Richie Karaburun is originally from Turkey and is currently a Clinical Assistant Professor at New York University’s School of Professional Studies Center of Hospitality.

Professor Karaburun has been in the hospitality industry about 25 years. He started as a management trainee in Los Angeles, then climbed up the ranks. When he left the company, he was the Vice President of Product Development and Contracting.

He was then recruited to be a president of Gulliver’s Travel, which was one of the largest wholesale travel business at the time. After they sold the company, Professor Karaburun joined The Radius, which was one of the largest corporate travel companies at the time.

Here, says Professor Karaburun, “I had my entrepreneurial ideas come up and we founded a company called Roomer Travel. And we raised money. Roomer was an online travel agency similar to Stop Hub.”

Currently, Karaburun is studying marketing and consumer behavior. His research interest is all about social connectedness and its impact on consumer behavior.

He is considered to be a hospitality guru. After 25 years in different aspects of hospitality, he is now proud to teach at NYU Tisch Center of Hospitality, predominantly business development, entrepreneurship, and hospitality marketing.

In this course, you will learn about entrepreneurship and innovation: what does it take to be an entrepreneur? You will also learn whether you are a true entrepreneur.

You will explore hospitality industry disruptors such as Airbnb, and what it takes to create a company from an idea. You will learn how to draft a proper business plan, get funding, hire a team, and manage the team.

Finally, you’ll examine how to create value for the industry you are in, and how you can plan an exit strategy for your business.

Entrepreneur is a French word taken from entreprendre, which means “adventurer” or “one who undertakes.” Entrepreneurs look for and recognize opportunities. They also take an enormous amount of risk to move on to these opportunities and create value for their industries.
An entrepreneur is a risk-taker because success is rarely guaranteed. But, as Edison says: “I didn’t fall a thousand times. I learned many new things.”
Entrepreneurs try to solve problems in either the product or service industry. Products are more tangible items, whereas services are more like hotel, legal, and financial services. #
Lauren Grench details her journey into entrepreneurship, and what it means to blend all these services into a cohesive, memorable experience:
“So LLG is an event management and design firm that specializes in luxury destination weddings. We plan and design luxury destination weddings. That encompasses planning the guest experience. It also includes all the budgeting, vendor negotiations, and contract negotiations.
“Anything with destination planning means complex logistics, [which means] understanding international law, international relations, socioeconomics, understanding what’s going on within our political atmosphere with all the different countries that we’re working with.”
According to Grench, the customer experience defines the industry.
“Hospitality is at the epicenter of event management. You need phenomenal customer relations. You need to make sure that your guest experience is also just as important as your client experience and your vendor experience and your venue experience.”
Each of these areas is vital to the success of any event. Optimizing customer service, customer relations, and the guest experience is about getting them all to work together and ensure the proper execution of the event.
“A common thread for entrepreneurs is that they tend to be really creative, innovative individuals,” Grench says. “They’re always looking after something new, something that would solve an existing problem for the industry. This could be a hospitality industry, financial industry, even a regular taxi industry just like Uber did.”

Hotels have begun to view the home-sharing industry as an alternative and a competitor. They’re also making sure guests know many of the desirable hotel amenities. Security, housekeeping, and round-the-clock service are not available at many home-sharing services.

Hotels offer a wide range of services. They also employ a large number of people. Home-sharing services began as a fee-based online matchmaking service for tourists seeking lodging. A local host with a spare bedroom or apartment wanted to rent it out for a few dollars.

Airbnb can scale extremely quickly because it doesn’t need a lot of host-owned and managed real estate. Home-sharing doesn’t need a massive network of housekeeping, maintenance, sales, and marketing services. Airbnb has grown to be larger than many hotel companies. This is due to the number of units available and the number of guests they can accommodate.

When you consider the hotel industry from the perspective of ownership, corporations like LaSalle and Sunstone aim to buy hotel assets, have them properly operated, and profit from them. In contrast, an apartment owner might list a unit on Airbnb or a similar service to rent for a night. Yet, that individual is unlikely to buy a property to turn it into an Airbnb investment.

A hotel ownership company wants to create an attractive real estate return. An Airbnb host usually wants to reduce part of their monthly ownership expenditures. There was no incentive to earn a real estate return like there is in the hotel investment market. This trait alone aided the expansion of the house-sharing companies.

Everyone knows Airbnb.

Founded in a one-bedroom San Francisco apartment, Airbnb is now valued at more than $22 billion.

The great opportunity for a hotel alternative was recognized by the Airbnb founders when they realized that San Francisco needed more hotel rooms. With insufficient availability, the founders believed that alternative accommodations should be available for anyone travelling, whether for business or for leisure.

The founders thought “Wouldn’t it be nice if people shared their homes with travelers? Wouldn’t it be nice if we had a platform, or a marketplace, for renters and travellers to meet?”. With these questions, Airbnb was born.

The founders started by creating a basic platform where people could post their couch or bedroom for rent to travellers coming to San Francisco at a busy time. They created a value proposition of alternative accommodations that were not only easy to book but also much cheaper than hotels. Over time, the experiential aspect was added with the notion of living like locals, staying with locals, and meeting locals. It was this experiential aspect that really helped Airbnb overall.

Starting in San Francisco, Airbnb eventually grew and expanded into other key American states, and eventually they achieved globalization and entered Europe and Asia. As Airbnb grew so did their offering, with different services, experiences, and attractions added to the platform. They also started hiring hospitality executives to train Airbnb employees and hosts on how to act and think so they could compete with hotels. This was one of their key differentiators. Now, Airbnb is regarded as one of the most well-known alternative accommodation platforms.

The key to Airbnb’s success? Persistency. The founders truly believed in their idea, and they never gave up pursing it. In the beginning, the founder’s received 150 rejection letters when seeking funding money. But these rejections never stopped them for pursuing their ideas, and eventually they received the funding. Persistency was their key to success.

We are going to talk about the seven rules of building a successful business. We’re also going to use an example company that everyone knows: Airbnb.

The number-one rule for building a successful business is to recognize an opportunity. Airbnb founders, when they were starving students in San Francisco, realized that there are many citywide combinations where people cannot get hotel rooms. So, they came up with an idea.

They bought an air mattress for their apartment and made money off of it. That’s why it’s called Airbnb.

The number-two business rule to creating a successful business is to evaluate said business with critical thinking. Airbnb’s founders — one is an artist, another is an engineer — evaluated the offers after they got their first customers for a citywide convention. They thought “Hey, wait a minute! This might be an opportunity. How can we make it bigger and better for everyone?”.

Number three is building a team. It is one of the most important things in business because, as a leader, you’re as successful as your team. So, Airbnb owners started hiring older and talented individuals in the San Francisco area.

Number four is to write the business plan. It is the roadmap to success. So you have to write it with its components to show your company’s mission and idea’s vision.

Number five is gathering resources, and one of the most important resources is financial. They are what you need to create your company; anywhere from human to material resources.

Number six is to decide the ownership. Airbnb founders didn’t start the company by themselves. They had different partners. So, you have to decide the owner, the ownership structure, and the main shareholders. This is important, especially when you start with a friend or a colleague.

The last rule is to create wealth. Once you start creating value for any industry, people will recognize that you and your company are solving an existing problem and that you’re creating solutions with your ideas. Consequently, you’re going to create wealth, not only for yourself but for society as well.

To summarize the seven rules for creating a successful business: Start with an idea; recognize the problem, how to solve it; who can help you solve this problem, and then, write a business plan. Once decided, look for resources; anywhere from financial to human resources. Lastly, create wealth and value for your market and your society.

Hosting a successful business event or convention is an important part of hospitality management. There are a variety of types of venues, including the following:
Convention Centers
Convention centers are typically larger in size, allowing them to host very large meetings and conventions. A good example is the Jacob Javits Center in New York City.
These spaces are generally a bare boned concrete space that can be set up the way you want to bring your event to life. A stage can be brought in, and very often there’s roll out seating that can be tiered, in rows, or with round tables.
Hotels
Some business events or conventions don’t require the amount of space that a traditional convention center holds. Hotels come in all shapes and sizes, different star ratings, and different styles from traditional to very modern. They generate revenue from renting out event space in either a ballroom or smaller meeting rooms. The ballroom can be divided up into smaller areas or can be fully used and set up with staging, lighting, and production elements.
Guests for the event may also need a room to sleep in and need to eat during the day. This is a great way for the hotel to market and maximize revenues by selling other services that it’s already offering.
Unusual venues
Event organizers sometimes choose unusual venues to make sure their event stands out from the competition. Examples would be a museum, a zoo, or a theme park. These unusual venues provide a surprise and something that will make people take note. These different atmospheres and décor can provide a more personal venue for your event.
Cruise ships are another notable example. In the wintertime they may be docked at the harbor. You now have everything you need for a large convention including rooms, big spaces, big theaters and meeting rooms. The ship also doesn’t have to leave the harbor.

When we think of MICE, the C in the term stands for conventions or conferences. This is a gathering of professionals who come together to discuss a specific topic. The United Nations General Assembly is a good example.

Conventions come in a variety of types and sizes. A corporate convention is the first type. Companies such as Apple and Microsoft, and any other corporation you can think of organize these. They want to gather their employees, shareholders, or investors to discuss a new product they’re introducing, for example.

However, there is a second aspect of conventions: associations, which are slightly different. Associations are groups of people who come together for a specific interest. Perhaps you have a family member who works in the medical industry, such as a dentist. A dentist will be a member of a dental association, and these organizations provide continuing education for individuals in the field.

Consider this: if a dentist has been out of school for a few years, you want them to be up to date on the newest research and treatments for dental issues.

These types of associations also hold annual conferences, and they can be enormous. The International Contact Lens Association, for example, has a yearly meeting that attracts over 10,000 participants.

Different destinations across the world will compete for the right to host that convention over all others. That’s 10,000 people who will need a hotel room, food to eat every night, shopping, and transportation. It’s a lot of spending for destinations to attract that kind of convention.

Conventions play a major role in the hospitality industry. As professionals plan their travels, there’s a lot of specifics event planners need to keep in mind.

Corporate conventions usually take place in the same location every year. For example, if you’re a tech company that is located in Silicon Valley, a lot of your corporate conventions will probably take place in Silicon Valley. It’s very different from association conferences.

Think of my dentist. We have dentists that are located all over the United States. The association that hosts the annual meeting for these dentists will probably want to rotate where the location of the convention will be.

For example, one year it will be in the Northeast and, the next year, it might be in California. It is very important to choose a location that is appealing to people. Because if you, as a dentist, decide where you might get your annual education or training, you might prefer to go to a place like Hawaii over a cold place in the winter, like Detroit.

So, a lot of associations think very carefully about which locations they select and, the destinations work closely with the organizers to attract them. There is also seasonality in terms of days of the week. If we think of conventions, the most popular days for conventions to be hosted are usually Tuesday, Wednesday, and Thursday. Those are peak times. A lot of the venues, such as hotels and convention centers, will be very busy during those times.

The reason is that if you are attending a convention as part of your profession, you want it to take place during working hours, during the working day. You might have to travel to that convention.

If I’m based here in New York and I need to go to a convention in Florida, I might want to leave the day before. So by starting your convention on a Tuesday, it means you give people travel time on Monday. By ending on a Thursday, it means, again, they can travel home on Friday, and they still have their weekend.

Many conventions will also take place anytime between March to May and then again between September to November. Staying away from the main holiday periods. You want to make sure you host a convention at a time when a lot of people are around, not when they’re all traveling or when they’re on vacation.