Happily

Call the Sheraton Park Tower in London to make a reservation and, while you may not realise it, the enquiry will be answered a mile away at the hotel's sister property on Park Lane.

This is hardly unusual given today's sophisticated telecoms systems, but it is an example of how Sheraton's "complexing" strategy, adopted last year for its three central London properties, works. Resources, equipment and manpower are pooled so that, to all intents, Sheraton runs a 700-room hotel in the capital with one switchboard, reservations team, sales team and human resources department, instead of three separate units at the Belgravia, Park Lane and Park Tower.

Sheraton's Europe division president Robert Cotter cites the strategy as a good example of how "big is better" in the hotel business - the more hotels you have, the more opportunities for economies of scale. According to Cotter, the savings made as a result of pooling back-office resources are ploughed into the hotels' front of house operations.

"In London alone, we have made savings of £600,000 a year. With that money, we tripled the number of smart rooms we had in the city," says Cotter, referring to Sheraton's investment in bedrooms equipped with all the technology required by business travellers.

Expansion

According to Cotter, Sheraton will have even more opportunities to put this strategy into action in the UK over the coming years as the group, under new parent company Starwood Hotels and Resorts, seeks significant expansion across all its brands. They include its midmarket Four Points chain, main brand Sheraton and de luxe brand the Luxury Collection.

The $14.6b (£8.7b) sale of Sheraton finally went through at the end of February, bringing to an end the hotel group's fierce battle to see off a hostile takeover bid led by the Hilton Hotels Corporation's chief executive officer, Steve Bollenbach.

Completion of the deal saw the ITT Sheraton listing taken off the New York Stock Exchange and integrated into Starwood's fast-growing empire, led by thirty-something chairman and chief executive officer Barry Sternlicht.

Remaining independent was obviously the preferred option for Sheraton, which has been in existence since 1937. But Cotter concedes that last year ITT Sheraton was vulnerable to takeover in a market of hotel mergers and mega-mergers. He says there is no question that Starwood is the preferred choice of parent.

Flawed

"In our view," he says, "Hilton's opening bid was representative of the fact that they didn't understand the value of the company or the brand. I have a great deal of respect for Stephen Bollenbach and what he has accomplished, but we felt that the bid was strategically flawed."

Cotter was also concerned that, with Hilton as parent, the Sheraton family of brands would be pulled apart. "At the end of the day," he says, "Barry Sternlicht showed a complete appreciation of the brands, and we are feeling very positive about our future with Starwood."

Saying that, Cotter is cagey about how the enlarged group will go forward on branding, though he says there are no plans to drop any of the existing names. On the rumours that Starwood is keen to develop a de luxe St Regis portfolio, named after Sheraton's flagship hotel in New York, Cotter hints that the St Regis name could be adopted as a sub-brand of the Luxury Collection, launched by Sheraton in 1995 to incorporate the Ciga group of hotels, acquired in 1994, as well as some of its own de luxe properties. Cotter says that St Regis could be used as a name for Sheraton's new-build de luxe hotels, as distinct from those with centuries of history, such as the Venetian hotels Gritti Palace or the Danieli.

Another negative aspect to the Hilton deal, in Cotter's view, was the fact that so many properties in the Hilton and Sheraton portfolios were in the same locations in capital cities around the world. Starwood's other hotel chain, Westin, complements the Sheraton portfolio well, with the bulk of Sheraton properties in North America and Westin strong in Asia.

Unknown

Until now, Starwood, the "white knight" saving Sheraton from Hilton's acquisitive clutches, has been a relatively unknown name in the UK. Even in the USA, Starwood is something of an unknown entity, despite its notoriety as the largest of the controversial real estate investment trusts, which enjoy preferential tax breaks (Caterer, 12 February, page 62). What is known is that it has pursued a policy of aggressive expansion in the hotel industry over the past three years, and that its meteoric growth shows no sign of slowing. Its portfolio now includes more than 650 hotels and resorts in more than 70 countries.

According to Cotter, Sheraton already had the UK in its sights for expansion before the Starwood deal, and this market remains a priority, particularly for the Four Points portfolio of full-service hotels. Cotter says the simplest way to import the brand would be to strike a similar deal to the one Sheraton signed recently with the German chain, Arabella Hotels.

In that case, Sheraton made the breakthrough into the German market not by acquisition but by a joint venture with an existing player with a strong, locally known brand. To ensure that the partnership retains its domestic business, and opens up international markets, the two brands have been twinned and all hotels renamed Arabella Sheratons.

For the other brands, Cotter sees central London as having room for a Westin hotel, as well as a Luxury Collection property and another core brand Sheraton. "We are also interested in Manchester and Birmingham," he says. "The UK is high on the radar screen at the moment."

As the recent sale of Inter-Continental to Bass showed, globalisation in the hotel industry did not end with the Sheraton deal. Cotter has little doubt that European hotels are set to follow the example of hotels in the USA by affiliating to larger brands. He quotes the figure that, 15 years ago, 40% of hotels in the USA were brand-affiliated and now it is 70%. At present, an estimated 40% of hotels in Europe are affiliated.

Cotter says building and maintaining a strong brand is all-important in the hotel industry, given the importance of technology for delivering bookings. "In the USA, 70% of reservations are made on global distribution systems," he says. "It is the power of the brand which is driving the customer's decision to book."