INDUSTRY: Value Chain Diagram

The Lodging Industry Value Chain

Diagram Components

Upstream (>500,000 players)

·         Internet reservations

·         Agency reservations

·         Tour operators

·         Corporate reservations

·         Rooms supplies providers

·         General Suppliers

Midstream: Hotels (>50,000 players in the US)

·         Corporate-4,313

·         Franchise-26,127

·         Independent-22,502

**Source: Smith Travel Research, 2014

Downstream: Travelers (>64,000,000)

•         Business

•         Leisure

**Source: USTA, 2015

Value Added Activities

The lodging industry is a highly fragmented industry with millions of players.   For lodging facilities, value added activities are centered on the quality and condition of the physical resources such as the hotel, location of the physical facilities and servicescape. Thus, there are no clearly defined flow activities.  Equally important are the ways hotels use the physical facility to generate value for customers, which is typically achieved through the various levels of support services offered.  Essentially, lodging facilities compete on these factors.  Where possible, lodging facilities attempt to use these factors to develop product-services that are unique, have some level of non-substitutability and cannot be easily imitated. 

For hotels, value added activities are achieved through a combination of core activities and support activities, which are provided at the corporate (or ownership level for independent hotels) and property levels.   Core and support activities work synergistically to provide value.  Core activities are directly related to the lodging facility’s interface with guests.  These activities include reservation processing, check-in and check-out, in-room services, as well as advertising since guests experience advertising directly.  Support activities allow lodging activities to function and provide core activities at a high level.  This includes management of the facility, maintenance and purchasing.   In general, the cumulative effect of value-chain activities and the way they are linked together by a lodging facility, and with the external environment will determine the lodging facility’s performance relative to its competitors.