Hilton Reunites Brand Globally

<H1> Hilton Reunites Brand Globally</H1>By Linda Humphrey

Hilton Hotels Corp. and the U.K.-based Ladbroke Group PLC, owner of the Hilton name overseas, finally have joined forces in an alliance that unites 400 hotels in 49 countries, making it possible for corporations to strike multinational deals with the brand.

A full merger still lingers in the future-the current deal, announced Aug. 28 and slated to be signed early next year, allows each to invest in up to 20 percent of the other-but the two companies will "behave at the operating level exactly as if we were one company," said Hilton chief executive Steve Bollenbach. "It will be invisible to the customer that there are two owners of the Hilton brand."

After a 32-year split, Hilton and its international namesake will pool sales, marketing, advertising, hotel development, guest history and programs such as Hilton's HHonors frequent stay club and Hilton International's Meeting 2000.

The deal also catapults Hilton into the global preferred-rate arena-now the domain of Hyatt, Holiday Inn, Marriott, Radisson and Sheraton. "We now have the critical mass to lead the global hotel industry," said Ladbroke's chief executive, Peter George. Although the two companies would not yet speculate on volume agreements, "it's obviously something we're going to be looking at more and more as we put this alliance together," George said, adding that the international hotels "are mainly focused on the corporate, commercial end of the market" and the resorts are "primarily directed to the conference and convention business, rather than just tourism."

As the "cement that binds the alliance together," George said, Hilton chief executive Steve Bollenbach will join the Ladbroke group board, and George will join the Hilton Hotels Corp. board. "If what we had before was a separation, Peter and I are now engaged, and our companies are now engaged," Bollenbach said. "Over time, I hope we still find ways to get even closer."

"We believed we could lose ground to the global competition if we didn't ally ourselves with Hilton in some way," George said. "We were also in increasing danger of becoming isolated from the United States, which remains the world's largest hotel market and the single most important source of outbound international travelers."

"Hilton has been losing out for decades," said Bjorn Hanson, hospitality industry chairman for Coopers & Lybrand. "Although in most hotel companies the international division is really a separate business, the traveler doesn't see it that way. The visibility of Hilton's litigation and the Conrad name made it clear to the traveling public that these were two separate companies that were not only not cooperating, but in fact were fighting each other."

Still, some travelers have been confused, especially when trying to use their frequent stay points overseas, said Jan Scoblick, hotel administrator for Minneapolis-based 3M, which has a preferred agreement with Hilton hotels worldwide, as well as with several Hilton International hotels."In the minds of travelers, I think that Hilton and Hilton International have been synomymous," she said. "Now they'll be able to jointly market frequency programs and other promotions, which for our travelers would be a perk."

The two former rivals now can harness the power of one of the world's most powerful brand names. "A worldwide study by Landauer Associates of Chicago showed that the Hilton name ranked 21st in brand power and 12th in brand esteem," Bollenbach said. "This is ahead of such renowned companies as American Airlines, McDonald's, American Express and Honda."

Once the agreement is signed, Hilton will buy a 5 percent stake in Ladbroke stock, valued at about $180 million. Ladbroke intends to invest in Hilton's hotel and gaming assets, but will not invest in Hilton's equity at this stage.

"The U.K. market is not very receptive to stock in a U.S. company," Bollenbach said. "We believe that we've captured all of the benefits that we could have achieved in a full merger, but we've done it without the difficulties of merging."

Hilton International will take over management and development for Hilton's nine-property Conrad International brand, launched in 1985 to the chagrin of Ladbroke, which countered with a lawsuit in 1993. The five-star properties most likely will be rechristened Conrad Hiltons, "creating a luxury market niche," Bollenbach said.

In turn, Hilton will expand its franchised hotels to Canada and Mexico, granting Hilton International a 20 percent participation in future franchise developments, not just in Canada or Mexico but in the United States as well.

The two companies also will join forces "on terms yet to be agreed" to develop the international version of Hilton's recently announced midpriced Garden Inn brand.

Hilton, a pioneer in launching overseas hotels, sold its international portfolio to TWA in 1964, the era of international airline-hotel alliances such as Pan Am and Inter-Continental, and Air France and Meridien. Ladbroke picked up the company in 1987.

The hotel industry then turned global, said Hyatt's John Lavin, assistant vice president, individual travel, "with travelers flying all over, as if Kansas City and Greece were the same." The Hyatt executive acknowledged that the deal would make Hilton a more effective competitor. "When landing in a foreign city for the first time, Americans want a hotel brand they can count on-a brand they've sampled at home," Lavin said.

Ladbroke, which currently manages three hotels in the States-the Drake in Chicago, the Minneapolis Marquette and the Washington Vista-is in the midst of a growth spurt. The company signed 14 new agreements last year, more than in any year since acquiring Hilton International, and has inked another 12 this year.