Brands across the water

The Sheraton Park Tower hotel in the exclusive London district of Knightsbridge could be under new management by the year-end, if all goes to plan for the acquisitive boss of US-based Hilton Hotels Corporation. Steve Bollenbach, appointed president and chief executive of Hilton Corporation in February last year, has set his sights on adding this landmark hotel, near Harrods and Hyde Park, to his expanding empire along with all the other 422 hotels in ITT Sheraton's worldwide portfolio.

Not surprisingly, his is an ambition not shared by the management of ITT Sheraton, and Hilton Hotels Corporation's $6.5b hostile bid for the group is being hotly contested.

Their battle is the latest in a series of acquisitions, mergers and partnerships in the hotel industry. Just as in recent years the major airlines have been joining up to create global networks, the leading hotel groups, especially those based in the USA, are now actively seeking to extend their networks across the world.

Battle for control

Undoubtedly, Sir Rocco Forte will be interested in the outcome of the Hilton-versus-Sheraton fight. Just last year, he himself was in the midst of a bitter battle to hold on to the hotel group his father had built from nothing. In 1994, Sir Rocco had fought off competition from Accor to buy Le Méridien hotels from Air France but, two years later, he lost the battle for control of Forte to Granada.

What happens to ITT Sheraton is anyone's guess, though it is clear that, under Bollenbach, Hilton has been transformed into a powerful opponent. It was he who helped engineer the recent reconciliation between Hilton Hotels Corporation, based in Beverly Hills, and the Ladbroke-owned Hilton International, based in Watford, which owns the Hilton brand name outside the USA.

Up until two months ago, there had been little co-operation between the two companies, aside from sharing a reservations system. Both had separate brand identities and separate sales and marketing operations. The new partnership will change all that, and the unified Hilton brand, representing more than 400 hotels in 50 countries, is setting itself up as the leader among global hotel chains. Winning control of ITT Sheraton would consolidate that leadership position.

In its quest for global dominance, Hilton has plenty of competition. Rivals include Holiday Inn Worldwide, owned by Bass in the UK, and the US-based Choice International. Virtually every day, one or the other announces that it has signed another franchise partner in a new country. At World Travel Market in London's Earls Court last November, Holiday Inn Worldwide declared its intention of operating or franchising 3,000 hotels by the end of 1998. The French group Accor is also very well represented worldwide by its range of brands, including Novotel and Sofitel.

Washington-based Marriott International, meanwhile, has also been extremely active in expanding its network outside the USA. It now has 1,300 hotels and plans to have 2,000 hotels by the year 2000. Recent moves towards that aim include its investment in Ritz-Carlton Hotels last year and its $1b purchase earlier this year of Renaissance Hotels and its brands Renaissance, New World and the mid-priced Ramada International outside the USA.

In the UK, Marriott is seeking expansion of its network through a master franchise agreement with Whitbread.

Other chains bent on global expansion are Inter-Continental Hotels and Resorts, Hyatt International and Westin, the last-named of which recently strengthened its presence in Europe through a marketing alliance with the French Demeure Hotels chain of small boutique properties.

Another partnership deal was signed at the end of last year between Carlson Hospitality, parent of Radisson International hotels, and the upmarket Four Seasons Regent Hotels chain. The agreement gives Carlson the right to develop the Regent brand internationally.

So what is the motivation behind this drive for hotel chains to have global coverage? Put simply, there is a financial advantage to them in being bigger. They get economies of scale in purchasing, sales and marketing, and human resources. KPMG's William Barney also stresses the need for hotel companies to be big enough to afford to invest in technology such as the global distribution systems which are increasingly being used by travel agents to make hotel bookings.

But perhaps the key driver of globalisation in the hotel industry is companies' desire to have representation everywhere their customers travel. "Hotel groups see the benefit of being able to lock customers in by being able to accommodate their needs in different parts of the world," says Martin Gerty, managing director of hotel consultancy Horwath UK.

New markets

This is clear from the Marriott acquisition of Renaissance. Before this, Marriott was very much a US-based chain. Brand loyalty from clients travelling within that country's borders, where it has extensive coverage, meant nothing once those customers flew off on business trips to, for example, Asia or the Pacific. Buying Renaissance not only strengthened Marriott's hand in Asia but opened up new markets for it in Russia, China and Japan.

According to David Scowsill, Hilton International's senior vice-president, sales and marketing and information technology, the recent moves toward consolidation and globalisation in the industry are part of a trend that is likely to continue.

"Hotel companies are beginning to understand that, now more than ever, it is a global business that we are in," he says. "Corporate account customers do move around globally, and hotel groups need to be able to satisfy their requirements in the sense of providing properties where they want to be.

"If you really want to have good coverage for corporate travellers, you need to have properties around the world where they are going to want to stay. I think the process of globalisation will continue quite rapidly now," he adds.