Transcript Consolidation In the Lodging Industry

Industry Consolidation
In the International Lodging
Industry
Chris Roberts
University of Massachusetts
Agenda
 IO

Economics
Concentration ratios
 1950s–1970s:
courteous competition
 1980s: brand segmentation, growth
 1990s: mergers & acquisitions
 1990s: Divestment from gaming in US
 2000s: Summary & future directions
Overview
 Industrial


Organizational Economics
Concentration of market share
Typically 3 to 5 firms
US Airlines: UA, AA, DL, NW
 W. European Airlines: BA, AF, LH
 Automobiles: GM, Ford, DaimlerChrysler
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
Prior to 1990s, lodging industry was
highly fragmented
1950s-1970s
 Courteous


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
competition
Slow growth industry
Related to highway, reconstruction and
infrastructure development
Standardization
Most firms offer single brand
Limited mergers & acquisitions
1980s
 Fragmentation

113 new US brands introduced 1980-1996


Less than 50% survive
Example: Marriott  Courtyard & Fairfield
 Decline

Holiday Inn brand sold to Bass Plc
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of established brands
HI Worldwide renamed Promus
Howard Johnson, Ramada, Travelodge
 Limited
Mergers & acquisitions
Wave of Mergers
& Acquisitions
 1990s
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
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was period of consolidation
HFS/CUC/Cendant
Choice
Accor
Trusthouse Forte/Granada/Compass
Bass/Intercontinental/6 Continents
Marriott/Ritz Carlton
Hilton/Promus/Doubletree
Starwood/Sheraton/Westin
1990s M&A Wave
 HFS
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Howard Johnson
Ramada
Days Inn
Super 8
Knights Inns
Villager Lodges
Travelodge
Wingate Inn
 Merged
with CUC to form Cendant
1990s M&A Wave
 Choice
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Quality Inns
Comfort Inns
Clarion
Sleep Inns
Econo Lodge
Rodeway Inns
Friendship Inns
Mainstay Suites
1990s M&A Wave
 Accor
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Novotel
Mercure
Sofitel
Ibis
Etap
Formule 1
Motel 6
Red Roof Inns
Other Misc. brands
1990s M&A Wave
 Compass
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Le Meridien
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Macdonald Hotels PLC & the Bank of Scotland
Travelodge
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Grand Hotels (M) Acquisition Company
Heritage
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Group
Compass Group PLC
Posthouse

Bass PLC
1990s M&A Wave
 Bass
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/ Six Continents Hotels
Holiday Inn
Holiday Inn Express
 Holiday Inn Select
 Holiday Inn SunSpree
 Holiday Inn & Suites
 Garden Court
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Crowne Plaza
Staybridge Suites
Inter-Continental Hotels & Resorts
1990s M&A Wave
 Marriott
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International
Marriott Hotels &
Resorts/Suites
Courtyard
Fairfield
Residence Inns
Ramada International
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Ritz-Carlton
New World
Conference Centers
TownePlace Suites
Marriott Executive Center
SpringHill Suites
1990s M&A Wave
 Hilton
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 Promus
Hilton Hotels
Conrad International
Hilton International
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Hampton Inns/Suites
Embassy
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Homewood Suites
Doubletree
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Suites, Vacation, Resorts
Hotels, Guest Suites, Clubs
Red Lion
1990s M&A Wave
 Starwood
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Westin Hotels
Sheraton
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Hotels & Resorts Worldwide
Hotels, Resorts & Inns
Four Points Hotels
St. Regis
Luxury Collection
W Hotels
Caesars (Sold to Park Place Entertainment)
Leading Lodging
Firms
Company
#Properties
1.
3.
Cendant
Choice
Accor
4.
6 Continents
4.
5.
Marriott
Hilton
Starwood
5.
1.
2.
6.
7.
2.
3.
6.
7.
6,400
4,333
3,600
3,200
2,100
1,900
738
#Rooms
1.
2.
3.
4.
5.
6.
7.
542,000
410,733
400,000
464,863
379,547
315,000
227,000
Gaming & Lodging
Firms
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Cendant
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Promus
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Separated into Park Place Entertainment (1999)
Starwood
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Divested Harrah’s Entertainment (1995)
Hilton
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Applied for permit and was denied (1993)
Selling all gaming interests (1999-2000)
Hyatt
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Expanding: 8 casino/hotels & 3 casinos
Impact
 Growth
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through:
Franchising
Acquisitions
New construction
 Over
supply in some markets
 Transfer of risk

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Mergers
New franchise agreements
 Compass
exit from industry
Summary
 Consolidation
occurring in the European
and US lodging markets
6
leaders emerging
Cendant,
Choice, Accor, 6 Continents,
Marriott, Hilton
Brand
stratification
Economy
Exit
through luxury, all suites
from gaming
Thank you for listening.
Chris Roberts
University of Massachusetts