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 The Brancatelli File

joe THE WAY OF THE FUTURE
IN THE HOTEL BUSINESS


BY JOE BRANCATELLI

September 9, 1999 -- Before we talk about the Way of the Future in the hotel business, at least as represented by Tuesday's announcement of a merger between Hilton and Promus, let's take a stroll down Memory Lane.

Anyone out there remember Granada Royale Hometels? Compri Hotels? Guest Quarters? Pickett Suites? Park Suites? ClubHouse? Hilcrest? Vista International? And for you real geezers out there: Statler Hotels?

All these names--and probably a half-dozen more--were once part of our lives on the road. We stayed in those places. Ate in those places. Slept in those places. They're all gone now, most of them subsumed--or "reflagged," as the hotel industry likes to say--into one of the better-known Promus chains: Embassy Suites, Hampton Inns and Doubletree.

But while we're at the intersection of Memory Lane and the Way of the Future, let us not forget some other facts: Until 1990, the core of what is Promus was the tail that wagged the dog at the parent company of Holiday Inn. Doubletree wasn't even part of Promus until two years ago. In fact, Doubletree was once part of Canadian Pacific Hotels. And Hilton? Let's not even go there because then we'd have to explain that there are actually two independent companies called Hilton: the California-based corporation that can trace its lineage back to Conrad Hilton himself and the London-based firm that can also claim Conrad Hilton as its daddy.

Okay, now that the Ghost of Hotels Past has been served up for your amusement and confusion, here are the details of Tuesday's announcement. In a $4 billion cash and stock deal, Hilton and Promus are merging. The combination creates a new company that would include: the Hilton brand in the United States, the Hilton Garden Inns, Embassy Suites, Hampton Inn, Doubletree, Homewood Suites and Red Lion. Together with the resources of the Hilton Group, that separate and distinct British company, the Hilton system now encompasses 1,900 properties with 350,000 guest rooms in 50 countries.

The merged Hilton-Promus entity becomes a lodging powerhouse in the worldwide battle of the hotel giants. As you can see from the chart below, eight big companies now control almost 2.7 million rooms and dozens of hotel brands.

The goal of these companies is generally the same: capture your lodging loyalty regardless of whether you favor side-of-the-road joints like Motel 6 or Econo Lodges, glitzy pleasure domes like Ritz-Carlton or Regent, or any of the zillion accommodation "segments" in between. No matter where you go or what you spend, these hydra-headed hotel groups want your business. They want to own you.

By now you may be thinking something logical like: Why do I care if Hilton owns Embassy Suites? I could care less if Marriott owns Residence Inn and Renaissance. It's no skin off my nose if some self-styled financial wizard snapped up Sheraton and Westin and merged them into one company. Or if Bass, the beer guys, now own Holiday Inn and Inter-Continental. I don't care who owns the hotel or the hotel brand. I sleep where the price is right, the service is good and the hotel is near where I have to be.

Would that any of that were really true.

You say you don't care about Hilton buying Promus? Well, what if I tell you that all those Embassy Suites and Hampton Inns will be joining the Hilton HHonors program? You say it doesn't mean anything to you that Sheraton and Westin are now one company? So how come Starwood Preferred Guest, their combined frequent-guest plan, launched so successfully this year. And if you don't care that Marriott owns a bazillion brands, how come you go out of your way to find the nearest Courtyard or Fairfield because they give you Marriott Reward points?

Consider how powerful frequent-guest plans have become in cementing your loyalty to these hotel Goliaths. When the U.S. Hilton and British Hilton created what the companies called a "strategic global alliance" and the Hilton International chain joined the Hilton HHonors program, it wasn't long before 25 percent of the guests at Hilton International hotels were Hilton HHonors members. By Hilton's own reckoning, Hilton HHonors members quickly generated $100 million of added revenue at Hilton International hotels.

That, I am sad to say, is the way of the future in the hotel business: Big, giant companies with a kaleidoscope of brands in a rainbow of price points that buy your loyalty with frequent-stay plans.

But maybe the saddest thing of all is this: Not once during the Hilton-Promus press conference in New York on Tuesday did any of the Hilton or Promus executives talk about making their hotels better. Not once did any journalist, including me, even ask them about making their hotels better.

Welcome to the Way of the Future in the hotel business.

WHO ARE YOU SLEEPING WITH?

COMPANY

HOTELS

ROOMS

MAJOR BRANDS
Full Service/Luxury

MAJOR BRANDS
Suites/Extended Stay

MAJOR BRANDS
Limited Service/Economy

ACCOR

3,100

341,000

Sofitel, Novotel, Mercure

 

Ibis, Formule 1, Red Roof, Motel 6

BASS

2,600

450,000

Holiday Inn, CrownePlaza,
Inter-Continental

Staybridge Suites

Holiday Inn Express

CARLSON

590

113,000

Regent, Radisson

 

Country Inns

CENDANT

6,000

500,000

   

Days Inn, Ramada (US), Howard Johnson, Super 8, Wingate Inn

CHOICE

4,100

389,000

Clarion

MainStay Suites

Comfort, Quality, Sleep Inn,
Econo Lodge

HILTON*/PROMUS

1,900

350,000

Hilton, Doubletree, Red Lion

Embassy Suites, Homewood Suites

Hampton Inn, Hilton Garden Inn

MARRIOTT

1,700

331,000

Marriott, Ritz-Carlton, Renaissance

Residence Inn, SpringHill, TownePlace

Courtyard, Fairfield Inn

STARWOOD

650

212,500

Westin, Sheraton, CIGA,
St. Regis, W, Caesars

 

Four Points

This chart lists the approximate number of properties and rooms owned, managed or franchised. Brand groupings have been simplified. *Includes Hilton Group, an independent British company that owns the Hilton name overseas. Source: companies listed.


This column originally appeared at biztravel.com.

Copyright 1993-2004 by Joe Brancatelli. All rights reserved.