Chains to Watch
This year's most eye-catching hotel operators are distinguished by the strategic adjustments they have made after the massive industry consolidation at the end of the 1990's.
By Tony Dela Cruz, Managing Editor -- Hotels, 4/30/2000 11:00:00 PM
| The Gist |
| Carlson Hospitality Worldwide is widening its focus to emphasize real estate ownership and management contracts. Olympus Hospitality is placing a big bet on unique destination resorts as its seeks to re-establish the Rockresorts name. Ramada International, after a few years of quiet planning, is now getting the full development push from its parent, Marriott International, one that includes a new brand extension. Mövenpick Hotels & Resorts, three years after selling a 30% stake to Kingdom Holdings, is anticipating pronounced growth of its 40-hotel portfolio. |
As our long-time readers know, Chains To Watch captures four hotel companies in a snapshot of activity. Sometimes the recognition is related to the chain’s size, as is the case when we recently featured Bass Hotels & Resorts and Accor. Sometimes, it is because of impending change, as it was last year when we wrote about eventual buyout targets Promus Hotel Corp. and SPHC. But this year, not one chain appears to be in danger of a takeover. None of the four is larger than 800 hotels; one has just 26 hotels.
The 2000 Chains-To-Watch honorees, Carlson Hospitality Worldwide (Minneapolis); Mövenpick Hotels & Resorts (Adliswil, Switzerland); Olympus Hospitality Group (Dallas) and Ramada International (Bethesda, Maryland) are tied together by, if nothing else, their stability of ownership. Carlson is the largest privately held hospitality company in the United States, if not the world.
Newly formed Olympus Hospitality springs from the structure of an aggressive, long-term holder of hotel real estate. Mövenpick, privately held since its formation in 1948, now counts Saudi billionaire Prince Alwaleed as a 30% equity holder. Ramada International, meanwhile, is just re-emerging from a prior mega-merger, the 1997 purchase by Marriott International of its former parent, Renaissance Hotel Group.
There are many lessons to be learned from the Class of 2000: Olympus, in resurrecting the Rockresorts flag, is showing how it is possible, even at a time when all the talk is of consolidation and reducing the number of brands, to make something new from something old. Along the same lines, Ramada International is seeking to re-establish its identity outside of the U.S. with a brand made from scratch, Ramada Encore, which is being described as a designer hotel targeted at budget-conscious young travelers.
Mövenpick is also cutting against the grain. While many chains of its size and capital backing are ambitiously seeking expansion into all global markets, this Swiss chain is focused on its own backyard, Western Europe, and leaving the U.S. and Asia for another day. That leaves the giant of this group, Carlson, which says it is franchising less and buying and managing more. Growth for growth’s sake, it seems, is a thing of the past.
At Market Speed, Carlson Advances
During the recent peak of the lodging cycle, Carlson Hospitality Worldwide, Minneapolis, has resembled a tortoise among hares when compared with other large U.S.-based hotel operators. Carlson has moved with deliberation, organically growing its Radisson, Regent International and Country Inns & Suites brands while the market swirled with mergers and acquisitions.
This past year, the biggest announcement to come out of the US$22-billion collective of hotels, restaurants, cruise ships and leisure travel agencies known as the Carlson Companies was the introduction of a customer loyalty program called Gold Points, which links all its product lines. But Eric Danziger, president of Carlson Hotels Worldwide, insists his division’s conservative play stems from a long-term market perspective. “A couple of years ago, we would not have been a buyer because the prices were outrageous,” he says. “Today, here we are in a market where we are not competing with everyone on the planet for things to be acquired.”
Further, the non-execution of a major deal in the past two years was a “good miss,” Danziger says, because the time was spent strategizing and developing funding vehicles. Nor does the absence of a blockbuster deal mean growth for Carlson Hotels Worldwide stopped altogether. Last year, it formed Carlson Vacation Ownership, tapping into the industry’s hottest segment with each of the Carlson brands. The Country Inns & Suites portfolio exceeded 200 hotels, while Regent International raised its flag on significant properties in New York City and Las Vegas.
Gaining Focus
“We spent this period of capital craziness focusing on being a good hotel company,” Danziger says. Perhaps the most visible pay-off for that patience will be the continued transformation of the Radisson brand, which earlier this year received its first brand-identity makeover since its mid-1960s introduction. Carlson is currently in negotiations with capital partners to create a US$1-billion funding vehicle to purchase 25 hotels in strategic markets for the purpose of converting them to the Radisson brand. (Conversely, 37 hotels have been ejected from the Radisson system.)
The initiative marks a strategic shift for Carlson because it has previously stayed away from both owning and managing hotel real estate. “With this, we will have entry into the real-estate business and significant entry into the management business,” Danziger says. Indicative of that commitment is one particular signed deal, which will make Carlson a 50% owner of a hotel in New York City, with some of the highest-priced hotel real estate in the world.
“Some locations are a home run for Radisson, some also feed the travel-agency side,” he explains. “All this stuff ties in with the fact that we have to change the company from its past: Once just a franchisor, but in the future, a manager and an owner.”
The hands-on shift meant getting out of the Radisson Inns business so that the flag could be credible as a better full-service brand, going head-to-head not with Hyatt or Wyndham, but with Hilton and Crowne Plaza. “It’s not so much moving Radisson upstream as moving it to a clear position,” Danziger says. “This brand needs to be a pre-dominant 3-star-plus brand in the United States.”
As for Regent International, the intent is to transform it from a luxury brand with a primarily Asian profile to one that is instantly recognizable in major markets. “When we acquired the brand two years ago, it was principally an Asian brand,” Danziger says. “Now, to have two monster resorts in Vegas and a hotel that we manage smack in the middle of Wall Street—that is huge.” The Las Vegas resorts, located in the adjacent resort area of Summerlin, feature one of the world’s largest destination spas, while the New York property at 55 Wall St. supplies an important presence in a gateway with traditionally high barriers to entry.
Soon: 1,400 Hotels
Carlson is likely to be an active participant in whatever remaining consolidation might occur in the global lodging industry. “There will be four or five players left at the end of the day, and we intend to be one of those,” Danziger says. “We have 690 hotels. We expect that could be doubled.”
Specifically, with luxury, full-service and economy suites products, Carlson would probably benefit from filling in a couple of vacant price-points in its portfolio, according to Danziger. “I think there are still opportunities for us; we may want to consider acquiring a two-star brand,” he says.
Other expansion possibilities revolve around what Danziger calls a “full-speed resort strategy,” and he also indicates there is space in between the Radisson and Regent brands that could also be used to create or acquire a 4-star flag.
Ultimately, Danziger, who comes from a long operations background, insists hands-on expertise will prove to be Carlson’s best weapon. Although double-digit RevPAR growth in the late-1990s is what supplied many public hotel chains with the firepower to grow rapidly, it is now a 2%-to-3% annual growth figure that guides the industry going forward. “If that’s the case, then it comes down to what I think it should, which is to out-market the other guy, gaining customer loyalty, frequency programs, earning trust, providing value to guests,” Danziger says. “We are not afraid of a possible downturn, because everything we’re going to do is to make us stronger.”
Olympus Leads Second Wave of Buyers
Olympus Hospitality Group, led by former Rosewood and Four Seasons senior executives, has emerged as an aggressive buyer of brands and real-estate portfolios.
Experts have predicted more consolidation in the lodging industry following the handful of late-1990s billion-dollar deals that reset the world’s hotel brand hierarchy. Harder to predict, however, is who will be the deal-makers after giants like Bass, Accor, Marriott and Hilton have taken their large bites. One answer is Olympus Hospitality Group, the name given to the pool of brands and assets assembled by Olympus Real Estate Group, an aggressive U.S.-based investment fund.
Although the multi-brand umbrella structure of Olympus Hospitality was just announced in January of this year, the new group’s origin dates back to 1997, when Olympus Real Estate first made a significant investment in the Park Plaza International brand, a one-time Cendant-franchised brand. From there, Olympus has made further brand investments and acquisitions, picking up the near-dormant Rockresorts luxury flag and forming Unique Hotels & Resorts, which focuses on small, non-branded luxury hotels rich in historical context and design.
Most recently, Olympus announced its purchase of the assets of Chalet Susse International, a chain of 34 economy hotels in the Northeastern U.S. The portfolio will be managed by Paramount Hotel Group, a management company led by former Prime Hospitality executives. In total, the Olympus portfolio consists of just more than 100 properties.
The principals of Olympus Hospitality themselves are known entities starting anew. President L.K. Eric Prevette is a former chief financial officer with Rosewood Hotels and more recently served at Bel-Air Hotel Management and International Windsor Group, the predecessor companies to Unique Hotels & Resorts. Executive Vice President Carlos Lopes, along with Prevette, was co-managing director of Unique and previously held long-term marketing positions at both Rosewood and Four Seasons Hotels & Resorts.
Multi-disciplined Player
As a whole, the Olympus brand portfolio exudes flexibility across a number of product segments and also allows the company to play various roles. Olympus owns, manages and develops Rock Resorts and the Unique Hotels portfolio while franchising the Park Plaza International and Park Inn International flags. The Susse Chalet portfolio, similarly, is a mixture of owned, managed and franchised properties. “Under the platform, our objective is to continue to provide the franchise services,” Lopes explains. “But we will be converting some of the Chalet Susse properties to the Park Inn brand.”
The acquisition of Chalet Susse is meant to balance the gradual development of Rockresorts with a portfolio that will deliver immediate yields to Olympus Hospitality. “This is a very sound investment strategy,” Prevette says. “We are doing both real-estate investment and growing our management company. We see these as very complementary activities.”
Clearly, a large amount of energy is being spent on resurrecting the Rockresorts name, a flag created by Laurence Rockefeller. “We have followed the name for years,” explains Prevette. “It is a solid concept. It already has great name recognition and awareness amongst travelers.”
The familiarity of Rockresorts creates a platform from which Olympus can acquire more hotels and grow its management business, he says. The challenge, however, is to build the portfolio from the ground up.
When Olympus bought the Rockresorts name, it acquired the brand only, with no attached real estate. Since then, the company has flagged four properties under the Rockresorts name: the Cheeca Lodge in the Florida keys, the new CuisinArt Resort Spa in Anguilla, La Posada de Santa Fe in New Mexico, and Rosario Resort on Orcas Island, Washington.
Prevette and Lopes see Rockresorts establishing a niche for high-end, destination resort properties, each one with a spa, yet with a distinctive identity. “The CuisinArt has its own hydroponics farm,” Lopes says.
“And we are trying to keep these hotels at 200 rooms or less to deliver a high level of personal service.” Prevette sees the Rockresort assets as “solid 4-star properties” and says the goal is to bring them up to 5-star quality.
Private Money
Much of the forward momentum for Olympus Hospitality’s brand aspirations is being provided by the private money made available by Olympus Real Estate. “We do think that private capital is well positioned right now,” Prevette says. “Olympus Real Estate is a private capital fund. It is in the process of raising its third fund, in excess of US$1 billion.”
Such depth of investment resources allows Olympus Hospitality to shop vigorously. “We have an aggressive expansion program, based not on individual assets, but on portfolios that might fit our concept,” Prevette says. “As we go around the globe, there are some opportunities in Asia, although pricing is probably much more competitive there. But we also think that for the opportunities that are strategically important to us, the pricing will make sense.” He explains Olympus is targeting 3-star and 4-star hotels that can be repositioned with new capital and some amenity enhancements. “There may be some portfolio opportunities there, where properties will fit what we’re doing.”
The company already has a presence in Australia through its Park Plaza Kemayan Limited subsidiary, which manages more than two dozen Park Plaza-flagged hotels in the Asia Pacific region. “With the resources in that group, we can collect a lot of information in that part of the world,” Prevette says. He even hints at someday licensing the Rockresort name in distant locales that might lend themselves to a franchise arrangement. “We have some opportunities in Malaysia, Bali and Thailand.”
Marriott Awakens Dormant Ramada Flag
Three years after the Renaissance deal, the repackaging of Ramada begins in earnest.
Few would dispute that the least-discussed brand in the Marriott portfolio during the last few years has been Ramada International. It came packaged with the Renaissance flag when Hong Kong’s New World Development sold its hotel assets to Washington, D.C.-based Marriott International in March 1997. The transitional period since then has seen the hiring of Holiday Inn veteran Reas Kondraschow as Ramada International’s senior vice president and managing director in April 1998. Some properties have been added, others have been converted to other Marriott brands. But up until now, it was not particularly clear how the 26-hotel Ramada International portfolio would grow to its stated goal of 300 properties.
Today, Kondraschow says, the infrastructure is now in place to attach a Marriott-styled growth engine to the Ramada flag, with a much-needed infusion of capital spending. Much of 1999 was spent integrating the Ramada International system into Marriott operations networks, consolidating everything from purchasing to insurance procurement, design and other aspects. “Ramada International has been a dormant brand, but Marriott is in a very strong position in terms of culture and ability to deal with the financial community, as well as the hotel community,” he says. “There are maybe 15 to 20 Ramada International executives, but what stands behind us is the whole Marriott organization.”
Kondraschow also is looking to shake Ramada International out of its dormancy through a series of anticipated franchise deals, including 12 in Korea, five in Ireland, two in Australia and others to make a total of 70. Drawing from existing Marriott field contacts and old Holiday Inn relationships, he also has crafted a couple of key development deals.
One with Andras House Ltd., a Belfast-based lodging company, will lead to the debut in 2002 of Ireland’s first Ramada. Another, with Seoul-based AT Hotels Management, will allow AT to refer franchise opportunities for Ramada in South Korea.
Spirited Encore
One Kondraschow initiative that is sure to test the stability and accuracy of Ramada International’s new vision is a brand extension, Ramada Encore, which he describes as an Ian Schrager-styled hotel concept for the limited-service sector. “It evokes emotion but is doing it at the budget level,” he says. Under development for about nine months, Encore is expected to compete against Holiday Inn Express, Ibis, Days Inn, Sleep Inn and Travelodge.
Encore will use plug-and-play fixtures to reduce costs, maximize space usage, and maintain a fashion sense all at once, Kondraschow says. Headboards in the guestroom will be fitted with electrical outlets, while a central hub in the hotel’s public area will house data ports, the hotel bar, a breakfast buffet, reception desk and a communal table. The hub is where guests are encouraged to “eat, work, meet, read, play or drink,” Kondraschow says. The compact bathroom will use mostly glass fixtures to create a sense of space. “The desk chair, however, is a full-sized office chair,” he says. The guestrooms of Encore will measure about 237 sq. ft. (22 sq. m).
Encore is viewed as an international franchising vehicle by Marriott, Kondraschow says, because its simple value proposition translates across regional boundaries. “These hotels can be more than just a bunch of beds and a reception area; they can be adapted to India, Asia, South Africa and other markets,” he says. “By not calling it Express or Limited or Lodge, we’ve allowed the owners the latitude of defining the rate, because when you use the other terms, you do limit the hotel’s rate.”
Ramada Vs. Ramada
Kondraschow describes Encore as a fourth tier to Ramada International’s three-tier portfolio of Plaza, Resort and Hotel products. The executive quite possibly most surprised, however, by the advent of Encore is Steven Belmonte, president of Parsippany, New Jersey-based Ramada Franchise Systems, which licenses the North American rights to the Ramada name, while all other global rights to the brand are exercised by Marriott.
Up until the end of 1999, Belmonte says he was under the impression that the two Ramada entities were working toward a joint-marketing agreement that would advertise one global Ramada portfolio. He was set to make the announcement at Ramada Franchise Systems’ annual convention in early December. “Literally two weeks prior to the convention, I was told they couldn’t proceed forward because [Marriott’s] attorneys would not let them,” Belmonte says.
He says further discussions with Kondraschow revolved around the less unified but still consistent strategy of both Ramada groups having the same three-tier product offering, but that possibility is scuttled by the introduction of Encore. “I think it’s a lost opportunity for them and us not to market jointly, not to work together,” Belmonte says.
A Ramada International spokeswoman acknowledged her company’s late abandonment of the joint-marketing plan, citing the development of Encore, “and with the increased development outside the U.S., our energies were simply not such that we could at that point bring the marketing agreement to a conclusion.”
Given the time and energy spent developing Encore and the fact that Marriott International recently announced it would migrate its traditional economy offering, Fairfield Inn, toward a higher price segment, could the Ramada extension show up in the U.S. under another name?
Kondraschow declined to speculate, other than to insist, “You will not see this product in North America under the Ramada name.”
Mövenpick Gears Up For Growth
Comfortable with its reputation as a Swiss-based regional power, Mövenpick wants to increase its European presence before anything else.
Adliswil, Switzerland is not Beverly Hills, London, Palma de Mallorca or the headquarters city of any of the hotel chains which, like Hilton, Bass or Sol Meliá, command instant attention among investors. But the Swiss city does serve as home to Mövenpick Hotels & Resorts AG, a 40-hotel chain set to grow larger because of one relatively new investor: Saudi Arabia’s Prince Alwaleed Bin Talal Bin Abdul Aziz Al Saud, whose Kingdom Holdings took a 30% stake in the once closely held chain in 1998.
Less than a year later, Mövenpick appointed as its new President and CEO Jean Gabriel Pérès, an 11-year veteran of Forte and Le Méridien’s Asia division. Pérès, when asked to describe his mission, explains the company has been restricted to its Swiss and German markets, despite its 11 hotels in the Middle East and Africa. “Mövenpick, for reasons that amaze me a bit, has not grown during the past five to seven years,” he says. “So the mission is focusing on growth, on creating a real international company culture.”
By that, Pérès means there is an important difference between the kind of 5-star service that revolves around escargot versus being able to refocus the first-generation Mövenpick hotels so they have the sufficient technology to serve a burgeoning 4-star business class. “In any organization, you always have people who look back and people who look forward,” he says. “I think everyone can learn, questioning how they have done things for the past five years.”
Need For Balance
Balance is also an issue. Although Mövenpick has just 13 of 40 hotels in the Middle East, the region generates 32% of its revenues. “We would like to put it down to 25%, and that would be more from strengthening our performance in Europe than anything else,” Pérès says. Nor is he prepared to cut back on Middle East development while waiting for European revenue to catch up. “Sheraton and Méridien have 15 to 20 hotels in Egypt,” he says. “I think we can continue developing there, but I cannot say that is our focus. Our focus is Europe.”
Looking forward, Pérès believes all signs point toward a ratcheting down of 5-star luxury. “During the next four to five years, the 4-star business will be the higher-revenue business,” he says. “The construction costs of a typical 4-star hotel is up to US$150,000 per room, excluding land, and a 5-star is closer to double that. The emergence of a real business class is not increasing this tip of the iceberg of luxury buyers.”
If a press-time announcement by Kingdom Holdings is any indication, change should be forthcoming in some form for Mövenpick and the other hospitality concerns partially owned by Prince Alwaleed. The royal investor is placing all his hotel investments, totaling US$1 billion, into a single unit and offering it in a private placement, which this year is expected to raise between US$300 million and US$500 million.
“The Prince and Kingdom Holdings have a medium-to-long-term perspective,” Pérès explains. “I see this fund as certainly a possibility for Mövenpick to draw additional resources. You can hardly develop management contracts in Europe. You have to take leases or buy hotels.
“When you talk Europe, you’re talking significant investment,” he says. “The emergence of this fund will make that easier.”
Driven By Service
Although Pérès sees Mövenpick’s customers evolving and its capital base growing, he does not see the physical identity or corporate culture of the chain deviating from its service-driven standards. “Today, you have two types of developers, people who want size and people who want tailor-made service,” he says. “If I want to take two full days, not being disturbed, to talk to a potential owner, I can do that.” Every corporate decision made, such as a recently implemented human resources strategy, has an immediate impact on the company, Pérès says. “We are not a large ship, more like a catamaran.”
Another aspect of Mövenpick’s identity to remain in place is its gastronomy, which Pérès says has some historical depth. “Mövenpick was one of the pioneers developing luxury hotels in the Middle East,” he says, because it was one of the first chains to offer immaculate food and beverage in areas like Yemen, which were notorious for rugged local cuisine.
Much of Mövenpick’s F&B expertise is exported from Mövenpick Holdings’ restaurant division, which developed in parallel with the hotel chain in the 1950s. “It is something that is natural,” Pérès says. Research and development from the company’s stand-alone restaurants spill over to the hotel side, creating F&B concepts that fill multiple needs in terms of fashion, space efficiency and profit-making, he says.
Pérès remains realistic over the short-term limits of Mövenpick’s growth. The Americas will probably remain impenetrable for now. “At this point in time, it would be extremely expensive during the next three to five years,” he says. Perhaps in time, Mövenpick might partner in the United States with another company with the same focus, he says, but the more immediate goal is to double the company’s size in its present markets. About the same time Mövenpick might be ready to look at the U.S., it may find buying opportunities in Asia, he says.
Also Noteworthy
Bass Hotels & Resorts It seems Bass is announcing a major deal each month. Following its January acquisition of SPHC in late February, the London-based giant announced the US$157-million buyout of its largest franchisee, Dallas-based Bristol Hotels & Resorts, operator of 83 Bass-flagged properties. The deal also includes management contracts for another 29 non-Bass hotels, which will be reviewed for conversion possibilities.
About a month after the Bristol deal, Bass announced plans to double the company’s portfolio in Latin America during the next five years. The move reinforces Bass’ identity as a company that sets trends rather than follows them. Bass says it wants a presence in every major capital and financial center in the region, something many operators talk about but do not necessarily act on as Bass has.
Accor SA This Evry, France-based owner, operator and franchisor continues to grow at a relentless pace, barely calling attention to itself except for the occasional buyout of a brand (see Red Roof Inns, 1999) that reminds competitors how financially sound it is compared with its rivals.
Last year, Accor’s profits grew at a rate of 18%, its operating profit increased 27% and its earnings per share rose 17%. Accor Economy Lodging, its North American division comprised of Motel 6 and Red Roof Inns, saw RevPAR increase 3.2%, with Accor’s European brands performing better. European economy hotels enjoyed a RevPAR increase of 8.3%; business and leisure hotels were up 5.5%. Although the Red Roof acquisition boosted Accor’s portfolio by 22%, it expects growth of 10% for the short term, with close to 500 hotels in development.
Thistle Hotels PLC Operating in the shadow of global giant Bass Hotels and Resorts, Thistle Hotels is still the largest hotel operator in London, where it has 23 properties, and the largest owner and operator in the U.K., where it has 58 4-star hotels. Thistle has been on a bit of rollercoaster ride. Brierley Investments Limited, Thistle’s owner since 1990, spent much of 1998 preparing to sell the company, but the storm passed. Brierley’s board instead put into place a plan to re-focus the company’s hotel portfolio. Thistle is actually the second incarnation of the company; it was founded as Mount Charlotte Investment Ltd. in 1961, a hotel investment fund that bought the Thistle chain in 1989.
Today, most of the Mount Charlotte hotels have been either sold or converted to the Thistle name. Analysts applaud the efforts of CEO Ian Burke (ex-Holiday Inn) to surround himself with capable management. But with the lack of an internationally recognized flag, Thistle equally could be a buyer or an acquisition target.
NH Hoteles The major gateways in Spain, Madrid and Barcelona, are enjoying improvements in RevPAR, and local operators are reaping the benefits. NH Hoteles is a prime example, a 73-hotel operator that generated about 70% of its earnings in 1999 in Madrid and Barcelona. NH, founded by Antonio Catalan Diaz in 1978, began as a single hotel in Madrid. It was eventually bought out by public holding company Cofir, which then floated the company in 1997. Bear Stearns is bullish on NH based on the company’s multi-pronged growth. NH is now making a major investment in Latin America and recently purchased Sotogrande, a resort development company. It also launched a small chain of 2-star hotels in Spain to tap into the country’s emerging budget segment. On the other side of the price spectrum, NH has purchased a 20% stake in Jolly, a 4-star hotel operator based in Italy. NH is ambitious; a 1999 merger with fellow Spanish player Tryp did not come to fruition, but could have created a powerhouse.
Starwood Hotels & Resorts Worldwide White Plains, New York-based Starwood might be the epitomy of a hotel company in the public eye. The rumor mill at industry conferences is equally likely to have Starwood as a buyer (of underperforming U.S. Franchise Systems) or as a target of acquisition (by Bass Hotels & Resorts, given Starwood’s own drooping stock price). However, when Starwood does execute a transaction, it appears to be well-crafted. Last year Starwood purchased Vistana, one of the leading timeshare development companies in North America. Although the surface benefit was to make Starwood one of many companies of its size to have a timeshare operation, the deal opened the door to places like Paradise Island in the Bahamas, where Vistana and Sun International are developing a 198-unit hotel attached to the red-hot Atlantis resort. Starwood’s Westin brand, in similar low-key fashion, just added nine hotels in Europe in cities like Milan, Rome, Vienna, Venice and Madrid, with the effect of upscaling the brand’s image and doubling its European presence. Despite its penchant for mega-mergers, Starwood now seems content to build markets one hotel at a time.
Wyndham International When it was paired with the Patriot American Hospitality REIT four years ago, Dallas-based Wyndham sat in the driver’s seat of a high-powered growth vehicle. But a few turns of the stock market and an unfavorable tax ruling spelled the end of the hey-day for paired-share hotel REITs. After Patriot was absorbed into Wyndham, the company converted into a C-Corp. in 1999, with Wyndham Chairman and CEO Jim Carreker put in charge of the new entity. Today, large asset chunks and key personnel are separating from Wyndham. In early spring, Carreker resigned his CEO title while retaining his post as chairman. The new CEO is Wyndham President Fred Kleisner, a former COO of the Americas hotel group at Starwood Hotels & Resorts who joined Wyndham in July 1999. The torch-passing took place on several levels. Two key Carreker lieutenants also resigned, chief investment officer Anne Raymond and Mack Koonce, chief administrative officer. And the Bedrock portfolio, one of the building blocks of Wyndham’s portfolio over the past eight years, was sold to Barcelo Empresas. The 16 former Wyndham Gardens will be reflagged as Starwood and Choice brands.
Westmont Hospitality Not many hotel companies can remain low-profile and fast-growing for long. A prime example is Houston-based Westmont Hospitality, an owner/ operator with international offices in London, Paris and Toronto, and 296 branded hotels in its North American portfolio. Its 34,769 owned and managed rooms make it one of the 20 largest hotel companies in the world, yet the controlling Mangalji family eschews most press coverage. Westmont also has ownership and management interests in more than 100 hotels in Europe.
One analyst describes the company as a good management team, willing to take risks and add value to management-intensive assets that fall beneath the radar of larger chains, such as Bass Hotels & Resorts.
“There are plenty of people willing to buy what Westmont buys, but they are not willing to move quickly enough,” the analyst says. Although Westmont is intentionally vague on the extent of its European acquisitions, which have included deals with such chains as Queen’s Moat and Agip, their North American growth is measurably vigorous, with a hotel count that has increased from 168 in 1997 to 188 in 1998 and 296 in 1999.
Hilton Hotels Corp./Hilton Group One might refer to the formal combination of the two Hilton entities, one based in Los Angeles and the other in London, as the mega-merger that refuses to happen. A joint-marketing alliance put in place about four years ago once encouraged assumptions that a formal merger was a foregone conclusion. The party line on both sides of the Atlantic, however, is that tax considerations keep a merger from being palatable for either party.
The barrier has not prevented the Hiltons from doing big deals. Last year Hilton Group bought Stakis, one of its largest competitors, while Hilton Hotels Corp. bought Promus Hotel Corp. in a highly complementary transaction that increased Hilton’s footprint in such key segments as upscale extended-stay, upper-tier limited-service and all-suites with top Promus brands Homewood Suites, Hampton Inn and Embassy Suites.
The fact that the Promus transaction dwarfs anything Hilton Group has done or is likely to do is not lost on analysts, who say beyond Stakis, the chain has not expanded as fast as it could. There is speculation that Hilton Group is looking at a Hilton Garden Inn-styled product for quick growth.
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