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The franchisee pays the franchisor for these rights- to the tune of anywhere from __ .5-15% royaltiesFranchisee Benefits:路 Plans and specifications 路 National and international advertising 路 Central reservation system 路 Volume discounts (furnishings, fixtures, equipment, etc.) 路 Low fee % charged by credit card companies 路 Less risky than starting your own businessFranchisee Drawbacks:路 High fees (typically 5-10% of room revenue) 路 Franchisor's agreement o Lack of freedom (standards set by the franchisor) o Failure to follow the standards: termination of your contract 路 Franchisor has a direct influence on your businessBenefits of Franchisors:路 Increased market share/recognition 路 Up-front fees $$$Drawbacks of Franchisors:路 Need to carefully select franchisees 路 Difficulty in maintaining control of standards 路 Ex: Ritz Carlton, Starbucks(Licensed business/not a franchise), etc.Management ContractLegal agreements that enable one company to have control of another business's operations.Business owners often sign Management Contracts directly withthe management companyManagement Contracts give the management company operational control for an established period of time, usually for ___.2-5 yearsHow did Management Contracts become a thing搂 Hotel Industry's rapid boom since the 1970's 搂 Hotel management companies = Little or no up-front financing 搂 Developers/owners = usually no desire/ability to operate 搂 The real estate and physical plant are owned by different entities 搂 Management company receives a management fee: 路 Contract: 5, 10, 20 years 搂 Typically, 2 to 4.5% of gross revenue: 路 Payment structure can take various forms 路 Ex: with an increase to the incentive fee based on profits: 2% > 2.5% > 3% 路 Ex: 2-2% contract (revenue + profit)Hotel Classification路 Ratings- Quality of Facilities & Services 路 Type/Level of Services & Price 路 OwnershipHotel Ratings - AAA & Forbes路 AAA- Diamond classifications since 1977 路 Forbes- Star classifications 路 Most renowned hotel ratings systems, with rigorous requirements for rating improvements 路 However, not the most important anymoreOnline Reviews路 Most significant and widely used rating system today: o Online Hotel Reviews 路 Ex: Trip Advisor, Google, Hotels.com, Expedia.com, Booking.com, Bing 路 Many hotel companies offer bonuses to staff for positive name mentions. This MATTERS to us. External report cards.Online reviewsAre the most widely used rating system today (Online Hotel Reviews)___ is delivered to the consumer directly through a live presentationLive-based EntertainmentLive-based Entertainment is also referred to as:Location Based Entertainment or Ground Based EntertainmentLive-based Entertainment is primarily ___ based.serviceProperties of Live-based Entertainment include:intangiblesIntangibles:tasks, ideas, services, EXPERIENCES- not physical thingsLive-Based Entertainment products are intangibles that are:搂 Done for or to a customer, difficult to measure, cannot be stored for later use, production and service is simultaneous, cannot be touched, cannot be counted 搂 Production processes for services are very important to customers and frequently involve the customer in the process 搂 Producers of defective services must attempt SERVICE RECOVERY to retain the customerProducers of ___ services must attempt ___to retain the customerdefective; SERVICE RECOVERY路 Unique characteristics of LIVE based entertainment:o Inseparable o Intangible o Heterogeneous o Perishable路 Marketing of services differs from __ marketingproduct___is an important tool used to match ___Revenue management; supply and demand___ satisfaction is key component of ___ satisfactionService ; productService ___ are used to measure service ___.standards; performanceConsumers use five dimensions to determine overall service qualityAssurance Reliability Empathy Responsiveness Tangibles/physicalMarketing of services differs from product marketing because services are:o Service industry, many hotels use satisfaction guarantees to overcome the issue of inseparabilityBecause services like airline flights and hotel beds are perishable, many marketers attempt to match demand with supply through the use of ___.pricing strategies (revenue management)路 Firms can attempt to close ___ by setting appropriate service standards and measuring service performance.standards gapTangiblesappearance of physical facilities, equipment, personnel, and written materialsReliabilityability to perform the promised service dependably and accuratelyResponsivenesswillingness to help customers and provide prompt serviceAssuranceemployees' knowledge and courtesy and their ability to inspire trust and confidenceEmpathycaring, easy access, good/communication, customer understanding, and individualized attention given to customersGaming and Wagering is a $___ Industry100 Billion___has been a part of human existence for a very long time.WageringWagering is presently welcome in all states except ___ and ___.Utah and Hawaii.o ___ and ___ have no form of legalized gambling- including lottery and scratch offsHawaii and UtahEarly gambling establishments were known as ___saloonssaloons were influenced by 4 major cities:New Orleans St. Louis Chicago San FranciscoIn 20th century America, ___ by state legislationgambling was outlawed1931, gambling was legalized throughout the state of ___ , where America's ___ were set upNevada; first legalized casinos路 1976, ___ allowed gambling in the Atlantic City, now America's ___ cityNew Jersey; second largest gambling路 Most jurisdictions worldwide have a minimum gambling age of ___ to ___.18 ; 21___ have become one of the most important popular forms of gambling casinos.Video lottery machines (slot machines)many shapes and sizes of gambling/casinos:Land based, Riverboats, RacinosFree marketnew competitors are largely free to open in any location (Nevada, Mississippi)Managed competitionthe numbers of competitors and locations are limited (New Jersey)Monopolyonly one casino is granted a license to operate (Quebec, CA)Tribaloften operate as territorial oligopolies路 Pre-World War II:Reno路 Post-World War II:Las VegasBenjamin Bugsy Siegelo Notorious American mobster, and one of the most famously feared gangsters even to this day. o Major influence over the development of Vegas strip o Received backing in 1943 of his proposal for the development of Vegas strip after using his influence within the Jewish Mob, the American Mafia, and the National Crime Syndicate o Convincing them it could be transformed into a legal gambling oasis for organized crime o He got started on the first major hotel of the strip, the Flamingo, which originally opened 12/26/1946Howard Hugheshistoric billionaire and germophobic. Purchased multiple casinos in LV, 1 in Reno, and large sum of desert land for $300m in 1960's. Checked into Desert Inn after creating a diversion that distracted people from noticing his arrival and never checked out. He was asked to leave for high-rollers, and he bought the hotel rather than leave for $13.3M.Corporate Gaming Act of 1967allowed companies with publicly traded shares to own and operate casinos in the state of Nevada. Ownership by large corporations provided important means to hotel and casino financing.Atlantic CityPopular and thriving in the early 1900's, eventually became a neglected city, "economically depressed slum-by-the-sea" 路 1974- First referendum (rejected on statewide gambling) 路 1976- Second referendum (approved, limiting casinos to AC, creating an effective monopoly in the state of NJPara-mutual betting means"between ourselves"Para-mutual betting means "between ourselves"-bets are pooled, and the odds are determined by the opinions of the bettors themselves- measured by the amounts wagered on each horsePara-mutual betting remains legal in __ states.40Para-mutual betting makes ___ annual gross revenues in the US$3 Billion___ is the most widespread of all legalized wagering gamesBingo___ are essentially slot machines tied into a lotteryVideo Lottery Terminals (VLT's)Compound annual average growth rate of Industry10%Although state funding from gambling can exceed ___ in annual taxes and license fees, continuing to legalize gambling may not always lead to continued growth.$22BNegative Externalities include:cost of regulation and enforcement costs of larger crime prevention efforts, and greater need for treatment of new gambling addictionsBroadcast television and radio stations must abide by __ rules when conducting contestsFCCFederal law generally prohibits broadcast advertisements about __lotteriesbroadcasts of requests for funds intended for lawful purposes鈥攊ncluding requests for contributions to meet station operating expenses鈥攁re permitted by federal law. This is about:Solicitations of FundsIf you believe that a station has violated FCC rules regarding contests, lotteries, or solicitations of funds, you can file a complaint. This is about:PenaltiesThe ___ Industry is the most visible regulation of all live-based entertainment sectorsGaming/GamblingRegulatory power usually rests with _____ legislatures, which formally legalize gaming activitiesstate路 Most widely known entities are ___ gaming commissions overseeing licensing and regulationNevada and NJNJ mirrored after Nevada's two-tier system:搂 Gaming Control Board 搂 Gaming Commissions路 Gaming Control Board-works at staff level in investigation and auditing路 Gaming Commissions-acts as quasi-judicial body that deliberates on licensing, revocations, and other related matters路 Casinos are experiences that are ___stimulating, exciting, and entertaining路 Casino Customers typically receive ___ in return for their money spent, but they continue to returnnothing tangibleCustomers are typically___, making them ___.insensitive to price; price inelastic路 Ancient times- evidence of artifacts and structures dating back to 4000 BC in ___China路 First Olympics in 776 BC, held in ___ between various city states.Olympia, Greece路 Team Franchisees are essentially ___ , created and controlled by the owners' associationsmonopoliesTeam Franchisees Benefit from:tax-deductible amortizations of personal service contractsThere are underlying sensitivities of franchise values (at least within North America) due to:o Changes in player contract standards o Tax and antitrust laws o Demand for luxury stadium seating o Demand for broadcast and cable rightsAll professional sports and teams share concerns over:o Potential for tax-shelter, stadium lease, transfer-pricing benefits for franchise owners o Prices received for broadcast and cable rights o Cost of player salariesThe Cost of player salaries Often account for as much as __ %of total team operating expenses; many conflicts arise between players and owners60%路 ___ agreements in the NFL and NBA already tie labor costs revenues, thus enabling greater profitability to be spreadCollective-bargainingFree agency was approved in late 1975 in what became known as the Messersmith decision路 Previous systems eliminated competition and suppressed player salaries, created valuable property right for club owners 路 After Messersmith, baseball players could become free agents and bargain with other clubs once their contracts expiredMany fewer professional teams and fewer fans would exist without ___broadcasting and cableGrowth began with and is governed by Sports Broadcasting Act passed in 1961o Gave sports leagues the right act as a cartel (free of antitrust sanctions) in bargaining television networks had a most beneficial effect on the development on interest in all professional sports - discussed in another slide o Cable is important source of team revenues; primarily advertiser supported cable networks___ are used to make sure that games aren't viewable in "media markets" that don't have the right to do so. ("media markets" means channels, broadcasts, or steaming services) Generally, the rights to games are held by local teams or sports (networks 2-2-18)Sports blackout rules___ is one of the single largest revenue generators for a sports franchiseBroadcast revenue路 While winning in the marketplace is central to all business strategy, the frequency and visibility is not as high as in sportso Winning (and losing) has a direct impact on not only the playing/team side, but also in the business side o The business culture and focus are driven directly by the on-field success (or failure) of the team or athleteIn the sports industry, ___ is a key model on which some sporting leagues are built.competitive balance___ generate emotional attachment with fans鈥攊ntangible connection as valueSports "stars"Clubs may release information when:o When it is seeking extra shares of stadium revenues from a public ally owned stadium o When it is negotiating with a players' association路 Sporting leagues provide the___ within which individual players, clubs, and teams participateinfrastructure and central decision pointPrivate investors (such as those contributing to the funding of stage plays) are often referred to as:Angel InvestorsIt is estimated that approximately 80% of Broadway type shows are able to fully recover their costs.FalseIn the U.S., the performing arts industry is segmented into which two broad categories?commercial and non-commercialThis type of competitive gambling landscape is one in which only one casino is granted a license to operate:monopolyPari-mutuel means:between ourselvesImmediately following Nevada's legalization of gambling, Vegas became the original casino hub. T/F?FalseGovernment _____ and private foundation grants often fund non-profit performance arts.subsidyThe most significant source of revenue for the performance arts industry is:admissionsOwning a sporting club is not always driven by financial gains.TruePCE spending on sporting admissions has remained fairly resistant to traditional economic fluctuationsTrueThe fact that weaker teams are given early premium positioning in draft picks can be explained by ________________.an underlying need to promote the league as a whole; some teams being weaker than othersProduction is part of the product itself in live-entertainment. Which unique characteristic of LBE is this?InseparabilityCommercial recreation is for profit, indoor and outdoor activities T/F?TrueThe most significant barrier to entry across all entertainment industries is ___________________.capitalThe most significant driver for change in the entertainment industry is:technologyMarketing costs typically add at least _______% to the total cost of the average major feature film release.50The primary focus of the restaurant industry is:fulfill a diverse set of its guests' needs and wantsWhich one of the following would be considered the primary revenue stream in the amusement park industry? transporation revenues valet accomodation park ticket sales F&B taxespark ticket salesWhich one of the following is a key objective of gaming control?Ensure that the industry is free from corruption and organized crimeThe ______ characteristic of live-based entertainment would explain how much of the products are typically "for use, not possession" (IE: a seat within a concert venue, hotel rental.)A: intangibilityContests that are advertised over the radio or broadcast television are subject to oversight and regulation by the FCC.A: TrueSurprisingly, this segment of gaming is a $1 Billion Industry:A: BingoPari-mutuel betting is that which is done ______.A: between ourselvesThe intangible characteristic of live-based entertainment might explain how both the customer and employee are both part of service experienceA: FalseThis type of competitive gaming landscape is one in which only one casino is granted a license to operateA: Monopoly ModelIn live based entertainment, the customer cares about how the product was produced; arguably, that's what they paid for (the production). Whereas in media based entertainment, the customer cares very little about how the product was made. Production being part of consumption itself describes which unique characteristic of hospitality?A: inseparabilityThe four unique characteristics of live-based entertainment, particularly those with service elements, are _____.A: inseparability, perishability, intangibility, heterogeneityHospitality and Tourism are significant drivers of economic growth.A: TrueLotteries were re-legalized in the 1960's as a ______.A: state sanctioned fundraiser mechanismIt took multiple referendums and votes to legalize gaming in New JerseyA: TrueProducts of live-based entertainment are primarily intangible?A: TrueThis type of competitive gaming landscape is one in which the competitors are largely free to open in any location?A: Free MarketWho was the notorious American mobster that had a major influence over the development of the Vegas strip?A: Bugsy SiegelWhen someone is traveling long distances to get to a casino, we often find that their spend per visit is -----------, and the number of times they visit is ---------.A: Highest, LowestIn live-based entertainment segments, we can all watch the same show and walk away with different perceptions. This embodies which unique characteristic of live-based entertainment?A: HeterogeneityPulling up to the entrance of a hotel and being greeted by the valet attendant can be a moment of truth.A: TrueIn hospitality, Moments of Truth are always related to the tangible elements of an experience (IE: the food quality in a dining experience).A: FalseLegalized gambling exists in all 50 states except -------------.A: Hawaii and UtahImmediately following Nevada's legalization of gambling, ------------ became the original hub of legalized gaming.A: RenoProducts of live-based entertainment are primarily intangible.A: TrueThis type of competitive gaming landscape is one in which the number of competitors and locations are limitedA: Managed competitionThis unique characteristic of live-based entertainment is directly tied to inventory.A: PerishabilityIn gaming, Free Markets are those which are free (or low cost) to enterA: FalseThis type of competitive gaming landscape is one which only one casino is granted a license to operateA: Monopoly ModelUnlike ownership of a hotel or investment in a major film, owning a sporting club is always exclusively driven by potential financial gains.A: FALSEMany organizations in the performance art segment are non-profit, requiring ______ from government and private foundation grants.A: SubsidyLive theater can be considered which of the following (presentation, destination, business, place):A: All answers are correct (presentation, destination, business, place)Of all performing arts categories ___ and ___ are commercially the largest:theatre and musical theatre路 Many organizations in this segment are nonprofit, requiring __ from government and private-foundation grants and from ___ contributionssubsidy; individualPerforming Arts firms are divided into two major categories:Commercial and Non-commercialBroadcast revenue is only one small (but not overtly significant) component of the revenue generated by the sports industry.A: FALSEThe most significant source of revenue for the performing arts industry is __________.A: admissionsRoutine personal consumption expenditure (PCE) spending on sporting admissions has remained fairly resistant to traditional economic fluctuations.A: TRUEA looping gravity railway is a(n) _______.A: roller coasterThorough forecasting and scheduling is essential in successful management and operation of an amusement park.A: TrueThe key to scheduling in amusement marks is to ___________. (stay with legal considerations, minimize customer waiting time, optimize labor utilization, and maximization of utilization)A: All answers are correct (stay with legal considerations, minimize customer waiting time, optimize labor utilization, and maximization of utilization)As with many live-entertainment businesses, the challenge in obtaining profitability in amusement parks becomes matching demand with __________.A: capacityTeam Franchises in sports are essentially monopolies within their own industry?A: TRUEWhich unique characteristic of live-based entertainment is demonstrated by the fact that the Fans are a significant part of the game itself? IE: Fans interact with the players, and both feed off of and react to one another.A: InseparabilityThe major categories of revenue stream for amusement parks include ----.A: All answers are correct (Merchandise Sales, Resort/Hotel accommodations, Park Admissions, Spending on food and beverage)Higher profit margins are produced in amusement parks once ---- is achieved.A: BreakevenVarious levels of planning are necessary from a scheduling standpoint in amusement parks. Match each planning type with its corresponding timeframe.A: Capacity 鈫 Years Aggregate 鈫 Quarterly/Monthly Master 鈫 Weekly Short Term 鈫 Daily/HourlyThe largest commercial performance arts industry segment is --------------.A: theater and musical theaterWhich component of the Sports Business Model is heavily dependent upon revenue growth of the broadcast and cable industry?A: Incremental Revenue SourcesAiming to conserve park resources and to provide for impairing public use, the ----------------- is a very well-known example of government sponsored recreation.A: National Parks Service鈥嬧婽he fact that weaker teams are given early premium positioning in draft picks can be explained byA: an underlying need to promote the league as a wholeOne form of sports league handicapping that is commonly seen is ___.A: Revenue-sharing rulesNon-commercial recreation is typically not for profitA: TrueAmusement parks have deep-rooted history, effectively first seen in the form of medieval church sponsored fairsA: TrueSporting leagues provide the infrastructure and central decision point within which individual players, clubs, teams, participate. Which of the following is not a function of most leagues?A: setting criteria for players skill levelsUntil the ____, baseball players were not able to operate as free agents which lead to diminished competition and suppressed player salariesA: Messersmith decisionApproximately 1/10 of all trips within the US include a visit to an amusement parkA: TrueAll theme parks are amusement parks, but not all amusement parks are theme parksA: TrueOne way the government raises revenue to support recreation is through _____ . income taxes property taxes sales taxes transient occupancy taxes on hotels All Answers are CorrectA: All Answers are Correct (income taxes, property taxes, sales taxes, and transient occupancy taxes on hotelsThe Sport Business Model (4 pillars)A: 1. Competition: The game itself; competitive by nature consisting of: leagues, teams, players, talent agents and management firms. 2. Incremental Revenue Systems: Broadcasting rights, highly dependent on broadcasting and cable industry revenue growth, sports hours since 1980, sports broadcasting act, cable v Pay Per View, Sponsorships, venue/in-stadium. 3. Ancillary Elements: Athletic equipment, fantasy leagues, sports camps, and more. 4. Fans: Spectators are personally involved in the outcome.Competition:The game itself; competitive by nature consisting of: leagues, teams, players, talent agents and management firms.Incremental Revenue Systems:Broadcasting rights, highly dependent on broadcasting and cable industry revenue growth, sports hours since 1980, sports broadcasting act, cable v Pay Per View, Sponsorships, venue/in-stadium.Ancillary Elements:Ancillary Elements: Athletic equipment, fantasy leagues, sports camps, and more.Fans:Spectators are personally involved in the outcome.___ that which has the effect to pleasurably diverting the psyche and competes for free time availableEntertainmentThe Nine (9) Centralized Themes represented across all entertainment industries (discussed by Vogel in our final chapter)A: 1. Many are called, but few are chosen (or Pareto Effect) 2. Marketing expenditures per unit are proportionately large 3. Ancillary Markets provide disproportionately large returns 4. Capital costs are relatively high, and oligopolistic tendencies are prevalent 5. Public-good characteristics are often present 6. Many products and services are not standardized 7.Technological advances provide the saving grace 8.New entertainment media tend not to render older ones extinct 9. Entertainment products and services have universal appeal.The Four (4) Unique Characteristics of Live Based EntertainmentA: 1. Intangibility: (explain how much of the products are typically "for use, not possession" (IE: a seat within a concert venue, hotel rental.)) 2. Inseparability: (In media based entertainment, the customer cares very little about how the product was made. Production being part of consumption itself describes which unique characteristic of hospitality) 3. Perishability: (This unique characteristic of live-based entertainment is directly tied to inventory.) 4. Heterogeneity: (In live-based entertainment segments, we can all watch the same show and walk away with different perceptions.)Intangibility:(explain how much of the products are typically "for use, not possession" (IE: a seat within a concert venue, hotel rental.))Inseparability:(In media based entertainment, the customer cares very little about how the product was made. Production being part of consumption itself describes which unique characteristic of hospitality)Perishability:(This unique characteristic of live-based entertainment is directly tied to inventory.)Heterogeneity:(In live-based entertainment segments, we can all watch the same show and walk away with different perceptions.)