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A frAmework for successful hotel developments

Article  in  South African Journal of Economic and Management Sciences (SAJEMS) · June 2007
DOI: 10.4102/sajems.v10i2.584

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SAJEMS NS 10 (2007) No 2 223

A framework for successful hotel developments

I Venter and CE Cloete
Department of Construction Economics, University of Pretoria

Abstract
Although there are similarities between hotel and other commercial property developments, hotel
development has unique characteristics and requires specific management expertise. Hotels are
usually ’single-use’ properties, whose primary revenue is generated from a service-based industry.
They have a market value directly related to their ability to generate future net income by means
of their operations. The essence of successful hotel property development lies in understanding
these unique characteristics.
Various critical success factors for hotel development are identified in this article, and incorporated
into a hotel property development framework, establishing a practical ‘road map’ for successful
hotel developments.
The validity of the proposed hotel property development framework has been assessed by intensive
direct interviews with hotel development professionals.
JEL L74

1 2
Introduction Hotel property development and
hotel business development
Although there are similarities between hotel
and other commercial property developments, The concept hotel development is often used
the hotel development process has unique and generically to refer to either hotel property
very specific characteristics that are not reflected development or hotel business development,
in the available development frameworks. even to both simultaneously. However, the two
The present study presents a comprehensive concepts should not be confused, as there is a
and definitive hotel property development clear distinction between them.
framework, which includes critical success factors Hotel business development applies to the
and components for hotel development. full spectrum of hotel business, from strategic
The critical success factors for hotel deve- or day-to-day operations to expanding the
lopment were identified by asking the following organisation’s market exposure. Hotel business
questions: expansion could be achieved by means of a wide
• What is a hotel and what is a hotel business? variety of possibilities, such as organisational
• What are the constituent parts of a hotel mergers, existing hotel property purchases,
business? marketing, hotel facility renovations, hotel
extensions and new-builds, marketing, branding
• What is hotel property development?
and business repositioning. It must be noted,
• What is included in the scope of hotel however, that, when a hotel business is expanded
property development? by means of facilities renovation, extensions or
• What are the criteria for a successful hotel new-builds, organisations venture into hotel
development? property development.
Even though hotel business development and
hotel property development are two separate
224 SAJEMS NS 10 (2007) No 2

entities, they often function as interconnected decline, the average daily revenue (ADR) and
requirements in the full spectrum of hotel revenue per available room (RevPAR), two
development. This would start with strategic key measures of market performance for the
business management at one end of the hotel industry, are threatened. Once ADR and
spectrum and would conclude at the other end RevPAR begin to fall, hotels typically lower their
with the final handing over of a newly-built hotel room rates in an attempt to recover lost revenue.
to the operator. Unfortunately, more often than not, this has a
Hotels are highly complex real-estate negative effect on profitability, rendering the
projects involving high risk and often market less attractive to investors.
consuming a prodigious amount of time, Proposals for new hotels require feasibility
energy and ca­pital. A combination of studies to measure market demand and to assess
extreme uncertainty, an extensive and whether a proposed project is economically
ever-shifting array of market segments and viable. In order to avoid the problems of
high expectations from the parties involved overbuilding, new studies should focus on one
frequently makes hotel development a more major question (Turkel, 2000):
exciting challenging than other kinds of real • Is there a market for this hotel in this
estate de­velopment. A hotel is, in fact, an location?
unusual type of business formula combining
If there is, the following detailed questions
a form of real es­tate with an ongoing service-
should be asked:
orientated business. The successful developer
would understand this essential ‘duality’ as both – Where is that market?
real estate and business (Baltin et al., 1999). – How large is it?
The hotel market is extremely volatile – What are its needs?
(Kennedy, 1999). An analysis of 25 regional
– How is it currently being served?
hotels in the United Kingdom over 20 years,
encompassing two periods of recession (1981 – What share can be captured?
and 1993) and two periods of peak performance Turkel (2000) further recommends that, in order
(1990 and 1998), indicate sustained real growth to make feasibility studies more realistic, there
in profitability. Trading profits are shown to have should be a fresh look at the methodology, not
increased between 2.9 and 3.5 per cent in real overlooking the following important issues:
terms over the 20-year period. However, despite • Occupancy and average daily rate projections
this, there is evidence of short-term volatility in should reflect the real volatility in the
earnings performance (Graham, 2001). marketplace.
Not only do economic trends and cycles
• There should be a genuine analysis of the
impact on a country’s hotel market stability,
tradeoffs inherent in the yield management
but also political, technological, socio-economic
decisions as they pertain to both market
and other uncontrollable factors. For example,
penetration and revenue maximisation.
the tourism and hotel industries are key foreign
currency earners for Egypt, but there is always • There should be a serious analysis of
the danger that the industries could be severely the relative profitability of the food and
harmed by terrorism. This occurred after the beverage outlets beyond the misleading
Luxor massacre in November 1997 (Butter, departmental profit margins provided by
1997), and after the terrorist attack in the World the Uniform System of Accounts.
Trade Centre on 11 September 2001. • The feasibility study analysis should enable
The factors affecting the macro-economic owners to decide whether to manage, lease
environment have a direct but delayed impact on or franchise the food outlets.
the hotel industry and business environments. This
While location remains the single most
in turn influences hotel revenues and profitability,
important factor affecting investment and
impacting negatively on the feasibility of hotel
lending decisions, intangible assets like brand
developments. When occupancies begin to
SAJEMS NS 10 (2007) No 2 225

and human capital are gaining ground on 3.2 Facilitating services

tangible assets as an important key to hotel
Facilitating services are absolutely essential to
property valuations in the new economy. The
the operation. If the facilitating services are
hotel industry has always been a house divided,
absent, it will be impossible to deliver the core
because companies act in the dual capacities of
benefits. For example, the absence of a front
real estate owners and managers of enterprises,
desk or housekeeping in a hotel would make
seeking capital to support both the property and
its operation impossible. In a restaurant, the
the operational sides of the business. At the
kitchen provides a facilitating service without
same time, management has to allocate capital
which the operation would have to shut down.
between physical assets (the hotels they own
and operate) and intangible assets (customers,
the brands they own, the people they employ,
3.3 Supporting services
the technology they use and the alliances they Supporting services are not essential to providing
form) (Cline, 2001). the core benefit, but they are essential to
A hotel is an establishment that provides marketing the operation. Supporting services
transient lodging for the public and often are used to differentiate between the operation
meals and entertainment. Factors affecting and its competitors. For instance, a restaurant
the success or failures of a hotel development is not a necessary component of a hotel, but
vary according to its primary function (Pyhrr could be used to distinguish one property from
et al., 1989: 871). another. One of the most powerful supporting
services in lodging is its reservation service.
This, and the frequent, often daily, turnover The key to the successful operation of a hotel
of guests means that hotels demand more is providing an experience that truly satisfies
continuous management than most other the guest (Crowne Plaza Standards Manual,
categories of space. Hotel management includes 2000). To accomplish this, the hotel or resort’s
food service and entertainment, and involves management and staff should focus on the
also the typical property-management functions. guests’ perspective of what is important and
The lease period is very short and, if the hotel deliver on those expectations. The customer’s
is to be successful, management must find viewpoint includes elements from reservations
tenants (guests) for spaces that are vacated daily, through check-out. The initial impression is
stressing the importance of hotel marketing gained from reservations and advance deposits.
(Wurtzebach et al., 1995). The actual experience begins with arrivals, the
kerbside/door service, valet parking and front
3 desk registration. Facilities like background
Hotel service product music, the bell service, telecommunications,
voice-mail and messaging, telephone sets, the
Powers (1996: 215) describes the hotel service gift shop, complimentary tea and coffee and
product as a bundle of features and benefits. It complimentary newspapers are conducive to
has three elements: a core benefit, an essential the guests’ enjoyment and sense of being cared
facilitating service and a competitive supporting for. As far as physical comfort is concerned, the
service. guest rooms, bathroom amenities and in-room
dining are important. Practicalities like laundry
3.1 Core benefit services, housekeeping, lost and found, security
and maintenance create an air of convenience
The core benefit is the generic function the
for guests. On the entertainment or relaxation
service product provided to the guest. For
side, they are interested in primary restaurants,
the operation it is the ‘reason for being in
secondary restaurants, the lounge, bars, the
the market’. This could be a night’s lodging,
pool, sports activities and the fitness centre.
entertainment, relaxation, nourishment and a
social experience.
226 SAJEMS NS 10 (2007) No 2

Figure 1
The hotel (product) concept (Source: Diagrammatic interpretation of powers, 1996)

4 to occupy in those segments. The positioning

Hotel segmentation task consists of three steps:
• identifying a set of possible competitive
Segmentation is a three-step process (Kotler et advantages on which to build a position,
al., 1999). The first step in this process is market • selecting the right competitive advantages
segmentation, dividing a market into distinct and effective communication, and
groups of buyers who might require separate
• delivering the chosen position to a carefully
products and/or marketing mixes.
selected target market.
One of the most frequently-used methods for
segmenting a market has been demographic Hotel developers should consider the target
segmentation, which consists of dividing the market that the hotel expects to serve. The
market into groups based on demographic target market will serve as a guide for planning
variables like age, gender, family lifecycle, the physical structure and amenities in the hotel,
income, occupation, education, religion, race which are derived from guest profiles, the hotel's
and nationality. One reason for the popularity of location, the budget and the brand status (Baltin
this method is that consumer needs, wants and & Cole, 1995).
usage rates correlate closely with demographic Hotel organisations approach market segmen-
variables. Another is that demographic variables tation in a manner similar to the one described
are easier to measure than most other types above (Kotler et al., 1999). McDonald and Payne
of variables. Other variables, for example, (1998: 81) categorise segmentation as falling
geographic, geo-demographic, psychographic under the two broad headings of customer
and behaviourist variables, can be used to characteristics and customer responses. In other
segment markets. words, Who are our customers? and Why do
The second step in the segmentation process they behave as they do?
is market targeting, which is the evaluation of
each segment’s attractiveness and then selecting 5
one or more of the market segments. Marketers Hotel property development
identify the segments and then look for the
segments that would be the most profitable for The development process can be defined as
the organisation in the long term. the act of bringing an idea or a concept to
The third step is market positioning, com- successful fruition in bricks and mortar (space),
prising the development of a competitive with associated services. It is a complex process,
position and an appropriate marketing mix for requiring the co-ordinated expertise of a
a product. Once a company has chosen its target number of professionals. On the investment
market segments, it must decide what positions side, financial sources must be attracted by the
SAJEMS NS 10 (2007) No 2 227

promise of sharing the cash flow generated by 5.1 Hotel development process
development in a manner that properly balances
The real estate development process consists of
risk and return. The physical construction of
eight stages, which are typical but not necessarily
the project requires co-ordination of architects,
followed in all cases: (Wurtzebach et al., 1995:
engineers and contractors. The public sector,
652):
especially local government, must approve the
legality of the development in terms of zoning 1) idea / inception
and building codes, amongst other things. 2) idea refinement
Ultimately, and most importantly, user needs 3) feasibility
must be satisfied. This requires the developer
4) contract negotiations
to identify a market segment in which sufficient
market demand will exist for the type of space 5) commitment point
to be created. 6) construction
The idea for a hotel project could originate 7) initiation of operations
in many quarters (Baltin, 1999). Generally, one
8) asset management over time.
or more of the following parties initiates the
development programme: an equity investor, an Five distinct and generally sequential phases can
investment group, an institutional investor, or an be distinguished when a hotel is being developed
investment fund; a property owner recognising a (Baltin, 1999: 30):
development opportunity; a developer seeking 1) development planning
an opportunity, interested in expanding its real
2) assembly of the development team
estate portfolio, or needing a cash-producing
investment; a developer needing a hotel as 3) feasibility analysis
a component of a mixed-use development; a 4) project implementation
hotel development or management company 5) initial marketing and operations.
seeking to expand its product into new markets;
Inter-Continental Hotels (1996) defines the
a local non-profit, tax-exempt development
following five key development phases for their
corporation; a public or quasi-public agency
hotel developments:
like a redevelopment authority, a planning
department, a development corporation, Phase 1:  Design concept
or a tourism authority; a citizens’ advisory Phase 2:  Design development
committee, or special community task force; Phase 3:  Contract documentation
a special-interest group, organisation of local
Phase 4:  Construction period
businesses, or merchants’ association; or the
owner/developer of a sports or entertainment Phase 5:  Post-construction period.
facility. It is clear from the above that different
The development of a hotel takes a long approaches and viewpoints of property develop-
time, sometimes years. It should be market- ment exist. In fact, the development process
driven, based on the principle that hotels meet is not a rigid but a flexible one that reflects a
the development objectives of investors and particular situation.
owners by providing the type and quality of Although the characteristics and requirements
products and services that the market desires. for hotel property development differ in many
The develop­ment process, therefore, links the respects from those of other types of real estate,
investor/owner, the de­veloper and the operator there are also many similarities. The models
with the public that is to be served. referred to above are combined in a generic
hotel property development process illustrated
in Figure 2.
228 SAJEMS NS 10 (2007) No 2

Figure 2
Property development process
SAJEMS NS 10 (2007) No 2 229

5.2 Hotel development strategy • What brands, products or services are being
supplied? How could they be described?
The starting point of all major business decisions
should be the organisation’s mission statement, • What are the strengths and weaknesses of
with its associated goals. The mission of any the organisation?
organisation should articulate the vision and • What are the opportunities and threats for
give a sense of direction (Brookes, 1999; Pearce the brand?
& Robinson, 1994). • What is the pricing policy? How does it relate
From the hotel organisation’s mission, to price sensitivity in the marketplace?
objectives and strategies, the hotel development
department should develop its own specific External:
task-orientated mission statement, objectives, • Who is the competition? What is known
strategies and control procedures. about them and their strategies?
Ransley and Ingram (2000) suggest that
• How could a competitive advantage be
those concerned with preparing a development
gained?
strategy need to know where the business is
going, should develop a sound knowledge of • Who are our customers? What is known
the product/brand, and should be aware of the about them and their characteristics or
characteristics of the customer profiles. The buying habits? Are these characteristics
objectives should be clearly articulated at the likely to change? If so, how and why?
start of a plan as part of a strategic vision and • Are there any external influences that are
mission. In some instances, the plan can be for likely to affect the ‘marketplace’, including
the corporate entity as a whole, while in other political, environmental, economic or
cases there may be an individual plan for each legislative issues?
project (which could then be consolidated into An example of the objectives defined in a hotel
the corporate plan). group’s development plan is that of Trust House
A development strategy is a statement of how Forte’s Post House Hotels, United Kingdom
an organisation intends reaching its growth (Ransley & Ingram, 2000: 26):
objectives; in the hotel industry this often means
• Expand the group by adding three new
the construction of new units. Clear criteria
hotels a year for a five-year period.
must be set for the hotel building, the facilities
and other considera­tions, such as the site. • Take the brand ultimately into Europe from
Development considerations would include the a strong UK positioning.
site size, the cost per room, total development • Become the preferred hotel group of
costs, and some general guidelines that could choice for the business and leisure traveller
help with the rapid appraisal of potential new operating in the mid-price market.
projects. Finally, a set of locational criteria • Maintain value for money.
should be developed to ensure that the hotel
• Sustain brand loyalty and increase market
is constructed in suitable contexts. This shows
share.
how a clear development strategy can assist in
the proliferation of a hotel brand (Ransley & • Provide an above-average return on invest-
Ingram, 2000). ment.
The development strategy will define and • Develop an economic model for the
analyse in considerable detail the following evaluation of opportunities.
internal and external questions:
Finally, branding is an increasingly popular
Internal: method of marketing and developing hotels,
because it communicates a consistent and
• What are the objectives of the organisation,
understandable message to the potential
its shareholders and its stakeholders?
guest.
230 SAJEMS NS 10 (2007) No 2

5.3 Hotel development criteria a hotel? Who will serve as the developer?
How familiar is the developer with the
The most common pitfalls (Echavarren, 2001)
hotel development process? Is making a
when developing a project are:
special statement an objective (through
• Lack of vision and objectives for the project: distinctive design, for example)? Will
the project arises on impulse and its strategy government policies encourage or discourage
and objectives are not clearly defined development of the site? Are appropriate
• Unrealistic objectives: estimated savings public financing incentives available?
or expected returns are not calculated How will the public react to the proposed
properly development? How long will the necessary
• Inadequate project specifications, require- approval processes take?
ments are not calculated and areas are Operational objectives: What type of
undefined. hotel management will be best - franchise,
The development planning of a property starts affiliate, or owner/manager? Can the
with setting overall objectives. The central owner/developer manage the hotel, or will
problem with many unsuccessful hotels is that the services of a professional hotel operator
the inexperienced party’s original inspiration be required? What level of owner/developer
is never consolidated with sound business involvement in the hotel is desirable or even
planning. Some developers and investors possible?’
attempt a project without considering the level
These objectives must coordinate with real-
of their commitment, their ability to finance
world conditions. Initial planning therefore
the project, or their expectations of financial
has to identify any conditions and activities that
gain. Developers building a hotel in a mixed-use
could have a positive or negative impact on the
development often fail to make these critical
hotel’s development. Important data must be
assessments. Developers who perceive an
assembled at this early stage and consultations
overriding need for a hotel often ignore good
initiated with experts and potential participants
planning practice.
(public agency officials, lenders, developers,
To establish a property’s development
syndicates, bankers, hotel operators, and
objectives, the following initial questions should
architects). Failure to do this will limit the
be addressed (Baltin et al., 1999: 30):
developer’s chances of putting together an
‘Financial objectives: Is long-term value economically feasible development programme.
appreciation an objective? Is the creation The developer must find answers to some
of an operating entity an objective? Are detailed questions on development issues.
development profits being sought? What All the elements that could affect the
are the priorities of the developer regarding development of the hotel product and the
these goals? How much equity can the owner’s requirements should be considered.
development partners invest? Can the During the 1980s, the Trust House Forte’s
developer obtain financing for a project of Post House chain, after extensive research,
this magnitude? What return on investment formulated a development plan and a strategy
will be acceptable to the developers and for future business expansion. The development
the potential financial partners? How plan included criteria for the hotel, the site
much time, money and resources can be and other considerations (Ransley & Ingram,
committed by all parties involved? 2000).
Development objectives: Does the site
present development constraints? Develop- 5.4 Requirements for successful hotel
ment opportunities? Is the site free of toxic property development
contamination? Are the surrounding land It is imperative for a hotel developer or hotel
uses (existing and proposed) compatible with organisation wanting to develop a hotel, to
SAJEMS NS 10 (2007) No 2 231

establish an overarching comprehension of a attract the hotel guest. The successfully-targeted

wide, but specific range of hotel operational and development will focus on the market objectives
development factors. it is supposed to achieve.
Success requirements, according to Lawson ‘A targeted design begins not with colour
(1997: 1), could generally be grouped under the swatches, but with an analysis of all the
following five headings: information bearing on the hotel’s market
• Marketing: an increasing and unsatisfied position, which includes the following’:
demand for accommodation stemming
• competition,
from the tourism, recreation and business
attractions of a locality. • available market,
• Economics: the state of the economy and • targeted market segment, by purpose of
financial inducements or constraints that visit,
may favour or restrict investment. • guest profiles using psychographics,
• Location: availability of appropriate sites • budgetary considerations,
with adequate infra-structural services and • consideration of potential amenities,
opportunities for development. facilities configuration and aesthetics,
• Enterprise: correct interpretation of • management configuration and goals,
requirements and entrepreneurial orga-
• brand standards, strengths and constraints,
nisation of the necessary finance and
and
expertise to successfully implement a
project. • marketing and distribution capabilities.
• Planning and design: careful planning and Targeted design requires as much data as
design of facilities to create an attractive possible about the potential guest, using both
hotel that will satisfy the marketing, guest questionnaires and interviews with the
functional and financial criteria. hotel sales, food and beverage, housekeeping
and management staff. The manager, market
According to Cloete (1998: 116), success factors
consultant, designer and owner can then
for property developments that are relatively
collaborate on a focused design that will include
controllable, even if only in the sense that the
not only decor, but also facilities configuration,
developer is able to choose between alternatives,
pricing, amenities and marketing strategy
are:
(Baltin & Cole, 1995).
• type and quality of property, From a hotel operator/developer’s point-
• factors regarding location, of-view, Sun International defines its hotel
• price, interest and costs, and development success criteria as (McGee,
2002):
• time and marketing
• location,
There are also a number of other factors over
• accessibility (for guests, staff and suppliers),
which an investor has less or no control:
• flexibility of design (combination of room
• international, national and local economic,
types, such as suites, king-size, double-
political and social factors,
double and interconnecting),
• national and local government regulations
• efficiency of design,
(legislation, town planning and building
regulations), and • marketing,
• short- and long-term business confidence. • branding,
• staffing (skills, training and experience),
Baltin and Cole (1995: 36) caution against
designers who often incorrectly do what their • standards (education, implementation and
clients think is correct, rather than what will consistency of standards), and
• government requirements (taxes, duties,
crime and policies).
232 SAJEMS NS 10 (2007) No 2

5.5 Establishing the hotel property The development frameworks are broadly
development framework similar, but slightly adjusted to suit the different
development viewpoints of either a hotel
The aim of the study is to develop and validate operator or a hotel property developer.
a hotel property development framework.
Hotel developments should subscribe to a 5.6 Validation of the proposed
mix of critical success factors, which should be
frameworks
incorporated during the development process.
The following critical success factors for hotel The research methodology could be broadly
developments were identified: categorised as a content analysis-type empirical
• operational strategic direction and market study (Mouton, 2001), in which secondary
understanding, textual data was analysed, and critical factors
identified. These were in turn included in
• branding and marketing,
a visual and sequential framework that was
• operational management and staff – skills, validated in practice by means of intensive
training and experience, interviews with key hotel development managers
• operational and construction standards – of leading hotel operators and a hotel property
education, implementation and consistency developer.
of standards, Owing to the logistical requirements of
• national and local government regulations intensive interviews, the interviews were limited
– taxes, duties, policies, legislation, town to hotel operators and hotel property developers
planning and building regulations, based in the Republic of South Africa, operating
or developing properties in the southern African
• site location,
region.
• accessibility – for guests, staff and suppliers, The interviews were conducted on a
• feasibility – financial, market, physical, personal (face-to-face) basis, were guided by
macro-environment, questionnaires and developed as extensions of
• design efficiency – meeting budget, the hotel development framework for a hotel
operational efficiency and guest satis- operator and hotel development framework for
faction, a hotel property developer.
• development of strategic and project
objectives,
• development team – team leader, executive
management, key operational staff,
consultants, and advisors, and
• contractor – cost, time, quality, experience,
resources, capability and attitude.
In addition to identifying the critical success
factors for hotel development, they had to
combine in a sequence and at specific junctures
to form a practical and definitive hotel property-
development framework.
In solution, two hotel property-development
frameworks were developed, first for hotel
operators and second for hotel property
developers. The hotel development framework
for a hotel operator is included in figure 3(a),
and that for a hotel property developer in figure
3(b).
SAJEMS NS 10 (2007) No 2 233

(Source: Culmination of views in the literature review)

Illustration 3(a)
Hotel development framework for a hotel operator
234 SAJEMS NS 10 (2007) No 2

(Source: Culmination of views in the literature review)

Illustration 3(b)
Hotel development framework for a hotel property developer
SAJEMS NS 10 (2007) No 2 235

The hotel operators interviewed were: There was also comment about the extent
• Global Resorts & Casinos, represented by of detail contained in the hotel development
the development director framework for a hotel operator. Forrer (2002),
Randall (2002) and Shayler (2002) all confirmed
• Legacy Hotels & Resorts, represented by
that, in practice, the hotel development process
the group operations director
would seldom, if ever, contain the same extent
• Sun International, represented by the of detail as is depicted in the hotel development
manager of developments framework.
• Southern Sun Hotels, represented by the Owing to the fact that only one hotel property
development director developer (Kondotel) was interviewed, the
hotel development framework for a hotel
Two hotel property developers were approached,
property developer could not be substantiated.
but only one developer (Kondotel) was willing
Valuable hotel development information was,
to participate and furnish information on hotel
nevertheless, supplied and was incorporated
property development..
into the hotel development framework for a
hotel developer.
5.7 Research interviewee feedback
It is important to highlight, as explained by
All four hotel operators interviewed confirmed both Forrer (2002) and Randall (2002), that a
that, in principle, the process identified in typical hotel development process within the
the hotel development framework for a hotel southern African context will almost always
operator is correct, and is crucial to the process be driven or initiated from the perspective of
of establishing successful hotel developments. an executive hotel operational, as opposed to
However, it transpired clearly that the hotel a property development perspective. This is in
development framework for a hotel operator contrast to the USA or Europe, where specialist
could not be applied in a fixed or rigid manner, hotel property developers often initiate new
but would have to be adapted to suit the hotel developments.
particular scenario presented to develop a
specific hotel property. 6
In practice, depending on project requirements Conclusions and recommendations
and characteristics, some of the framework
components are omitted purely because they Five major South African hotel development
are not required. An example, according to professionals confirmed that the proposed hotel
Shayler (2002), is the construction of the development framework for a hotel operator
Portswood Hotel at Cape Town’s Waterfront, constitutes a practical and valid development
where hardly any market research was carried framework.
out. Legacy Hotels & Resorts made the decision In addition, the development professional
to construct the Portswood Hotel based on the confirmed that the hotel development framework
fact that their adjacent Commodore Hotel’s contains essential and critical hotel property
occupancy was averaging at 85 per cent, which development stages and success factors required
justified the construction of an additional hotel if a hotel development is to be successful.
in close proximity. Critical success factors for hotel development
In addition to omitting some stages when were identified and incorporated into develop-
necessary, Randall (2002) and Forrer (2002) ment frameworks for hotel operators and hotel
advised that some of the individually-identified developers.
stages of the hotel development framework for The primary objective of the study was to test
a hotel operator should be combined into a the validity of the hotel property development
single step. An example already mentioned is framework, which included the following stages
the development strategy process and project and components:
objectives process, which could be addressed
• strategic analysis,
as one stage.
236 SAJEMS NS 10 (2007) No 2

• development audit, Hotel development success requirements could

• development strategy and criteria, be summarised as a combination of marketing,
economics, location, enterprise, professional
• project objectives, and
team, planning and design, and construction
• hotel property development process, factors.
including macro-environmental, market, Hotel property development offers ample
physical and financial feasibility analyses. opportunity for further research, It is recom-
Key points identified while researching mended that the topic of hotel property
the distinguishing success factors of hotel development be further investigated, with
development were: special emphasis on the validation of the critical
success factors for hotel development in practice
1 Hotel business combines three essential
and the establishment of an industry barometer
components – real estate, hotel operation,
for hotel success.
and FFE (furniture, fittings and equip-
ment).
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