Hilton, Ramada Reach Across Borders - 2001-01-29
<B>Hilton, Ramada Reach Across Borders</B>
By Bruce Serlen
Unlike the major hotel acquisitions that transformed the lodging industry in the late '90s, the first significant deal of 2001--announced two weeks ago--was closer to a strategic partnership. In fact, the two parties involved referred to the agreement as an "affiliation." In its unassuming fashion, however, the brand-linking deal between Hilton Hotels Corp. and the 14-property, Mexico City-based Camino Real Hotels & Resorts may come to typify lodging industry agreements for the remainder of the year and beyond.
In a similar transaction that was finalized last month, Ramada International Hotels & Resorts, a unit of Marriott International, converted 15 Treff Hotels in Germany and two in Switzerland into Ramada-Treff Hotels. By year-end, 63 additional Treff properties will be converted.
Transactions such as this have been much more common in Europe than elsewhere. By contrast, such ventures in Mexico as the Hilton deal, and anywhere in Latin America for that matter, have been relatively rare up to now. As the effect of NAFTA continues to be felt in Mexico, however, business travel is expected to increase significantly.
For travel managers looking to build a hotel program in Mexico, Germany or Switzerland, these deals mean greater choice and convenience, assuming they're already using such global, multi-brand suppliers as Hilton or Marriott. In effect, travel buyers get a one-stop shop, rather than having to deal with a number of suppliers. In the course of one negotiation, or one series of negotiations, buyers are able to get most of the coverage they need worldwide. On the other hand, with more inventory consolidated in fewer hands, the negotiating climate might become more difficult. Preference may be given to larger accounts that are prepared to make more extensive volume commitments.
According to the terms of the Hilton-Camino Real agreement, Camino Real properties on April 1 will start using Hilton's worldwide sales and reservations organization. The portfolio includes hotels in Guadalajara, Cuernavaca and Tijuana, as well as the Mexico City flagship. Also in the portfolio is a 359-room property in El Paso, Texas, Camino Real's only U.S. property. Camino Real also will begin participating in Hilton's HHonors frequency program. Given its existing portfolio, Hilton now will be represented in Mexico by 21 hotels, accounting for nearly 5,200 rooms. And Hilton has five more hotels in the pipeline.
According to Juan Manuel Perez Gomez, CEO of Camino Real, his company now will embark on a $40 million renovation of the hotels to bring them up to Hilton's standards for guest services and amenities. As each hotel is refurbished, it will be rebranded.
Similarly, the former Treff properties in Germany and Switzerland underwent refurbishment to meet Ramada International standards before rebranding. "The refurbishment focused on guest services and security standards," said Reas Kondraschow, senior vice president and managing director for Ramada International.
Camino Real's owners, Grupo Empresarial Angeles, which acquired the properties in mid-2000, "was looking for a way to strengthen the hotels' position in the marketplace," said Nelson Diaz, international managing director of franchise development for Hilton. "By working with Hilton's corporate sales, they'll have a better chance to be included in Hilton clients' global programs."
Grupo Empresarial Angeles will retain ownership of the hotels. "They will then be in a franchise relationship to Hilton," Diaz said. The hotels likely will be rebranded as Hiltons. "While a final decision hasn't been made, it makes sense to convert them to the Hilton name as opposed to other brands within the Hilton umbrella. They're full-service properties, after all, and highly regarded in their markets," Diaz added. It's also possible that the Camino Real name will be retained in some form.
Hilton's international strategy "is to build mass in countries where we already have a presence," Diaz said. "Affiliating with a group of hotels is a viable way to achieve this goal. When the group is as strong as Camino Real, ventures like this can be beneficial for all concerned.