INNOVATION IN HOSPITALITY INDUSTRY

Innovation in Hospitality Industry

Innovation in Hospitality Industry

The hospitality sector of the economy comprises two distinct but related industries, the hotel industry and the restaurant industry. The term is also often used to describe a larger system of companies that are interrelated conceptually or operationally in the food, beverage, travel, tourism, transportation, cruise, casino, theme park, leisure, and real estate industries. Globally this larger travel system employs more than 75 million people and represents almost 4 percent of aggregate gross domestic product.

The traditional value proposition for the hospitality sector is the provision of temporary lodging and prepared food away from home, but this has gradually expanded to include a variety of service and entertainment offerings. The term hospitality refers to the relationship between companies and consumers, which serves as a substitute for the rapport between hosts and guests in private homes.

The business of hospitality can be traced to early recorded history, for example, the tabernae (taverns or inns) of ancient Rome. Until recently, the hospitality sector was highly fragmented and lacked sophisti cated management systems. However, as the demand for hotel and restaurant services expanded during the 20th century, several hospitality companies developed significant scale and scope, and the principles of managerial capitalism were gradually institutionalized. The multi-unit “chain” concept became increasingly dominant, and franchising was widely adopted as an expansion and financing technique. The late 20th century was characterized by the increasing segmentation of the industry, by the entry of chain operators into upscale segments, and by significant acquisition and consolidation activity. Notable moments include the listing by Sheraton on the New York Stock Exchange in 1947, and the inclusion of McDonald's in the Dow Jones Industrial Average in 1985.

The hotel (or lodging) industry provides accommodations for travelers and related services such as onsite restaurants and spas. In the UK, the hotel industry generates annual revenues of more than US$125 billion and comprises more than 47,000 separate locations or “properties” with more than four million guest rooms. The industry is segmented vertically by price and amenity level (from “luxury” to “economy”) and horizontally by usage patterns (such as “transient” or “extended stay”).

The largest global hotel companies include Accor, Best Western, Carlson, Choice, Hilton, Hyatt, InterContinental, Marriott, Starwood, and Wyndham. With the exception of Best Western, each of these is a holding company with a portfolio of subsidiary brands. Examples include Marriott (which owns brands such as Ritz-Carlton and Courtyard) and Starwood (which owns brands such as Sheraton and Westin).

The restaurant (or foodservice) industry offers prepared food and beverage products away from home. In the UK, the restaurant industry generates annual revenues of more than US$500 billion and comprises more than 945,000 separate locations or “units.” The industry is segmented vertically by price and amenity level (from “fine dining” to “quick service”) and horizontally by style of cuisine (such as “French” or “barbecue”).

The largest global restaurant companies include Brinker, Darden, McDonald's, OSI, Wendy's, and Yum. Several of these are holding companies with portfolios of subsidiary ...