Choice, Flag Hotels Unite In Australian Alliance

<B> Choice, Flag Hotels Unite In Australian Alliance</B>

By Judy Jacobs

Australia's largest hotel chain, Flag International Ltd., has joined with Choice Hotels International in a strategic alliance that will offer more accommodations options for travelers doing business Down Under.

The deal, effective July 1, brings together the 481 Flag properties and the 17 Choice hotels in Australia to create Flag Choice Hotels. The agreement provides Choice with the opportunity to acquire, within the first four years of the contract, up to 30 percent of the equity of the new company, and gives Choice proportionate board representation.

Both sides say they will gain from the alliance. Choice will have access to more properties, and Flag will gain worldwide marketing opportunities and a ready-to- use global reservation system.

"What we're getting out of it is the technology. That's what they brought to the table," said Nicholas Alpino, vice president-North America of Flag International Hotels & Resorts. "The Choice 2001 reservation system will be very helpful for us."

Flag also saw a chance to expand into four- and five-star hotels, which Choice's Clarion brand represents. "In the past we were limited in our upmarket properties," Alpino acknowledged. "We do have a few upscale hotels, such as the Menzies in Sydney and Queensland resorts like Lizard and Dunk islands, but this offers an opportunity to expand."

The creation of Flag Choice Hotels will benefit business travelers, who will "be able to draw on a wide network in Australia for multiple-stop travel and take care of their arrangements through one-stop shopping," said Bruno Geny, Choice Hotel's senior vice president, international.

Under the agreement, a number of Flag properties will be rebranded with whichever of the Choice Hotel brands is most appropriate for each Australian market segment. While Choice Hotels includes seven brands, only Clarion, Quality and Comfort are being exported to Australia.

Flag Choice Hotels, a wholly owned subsidiary of Flag International, meanwhile, will acquire a 20-year Australian master franchise from Choice Hotels International to use those three Choice brands, with an option for another 10-year term. Flag Choice Hotels also will manage the Choice 2001 Reservations System and marketing operations of the current Flag chain throughout Australia, Fiji and Papua New Guinea.

"The conversion process will take place rather rapidly," Geny said. "Within three years we expect to have 100 Choice hotels."

Flag Choice will base its conversion strategy on creating four distinct brands in Australia, with four distinct target markets. The Clarion brand will identify the upscale luxury hotels, Quality will represent the upper middle market, Flag will remain in its historical place in the middle, and Comfort will be used for midscale, limited service properties.