As ITT Corp.'s Rand Araskog battled in court to fend off Hilton's hostile advances earlier this month, Sheraton Hotels & Resorts went up against Hilton in the bidding for a San Antonio convention hotel, one of the few such building projects to go forward this year.
Meanwhile, Dan Weadock, senior vice president of ITT Corp. and president and CEO of ITT Sheraton Corp., said he is continuing to carry out his aggressive plans for expansion, renovation and the implementation of new technology.
San Antonio city commissioners were expected to award the $198 million convention center hotel construction project to Sheraton at press time because it was willing to put up $70 million, compared with the $20 million investment Hilton proposed to make before obtaining additional funding. Construction of the hotel, to be built next to the convention center, is slated to begin in 1999 and open in 2001.
ITT Corp. also won the first round in court March 6, as Judge Philip Pro of the U.S. Federal Court in Las Vegas denied Hilton's motion to keep ITT from increasing its board to 25 and from exercising its "poison pill" bylaw that would give shareholders ways to fight a hostile takeover, such as increasing their holdings. Still pending, however, is Hilton's motion to force Sheraton to hold its annual meeting on May 14. Otherwise Sheraton won't have to convene its meeting until November.
The poison pill defense against a hostile takeover doesn't "make a company unbuyable," said one analyst, "it makes it either more expensive or more difficult to purchase. There are times when companies take a poison pill that make them undesirable, but nothing a public company can do can prevent it from being a target."
Weadock conceded that Hilton's takeover attempt might come down to a showdown at that meeting, but he was confident that Sheraton would not be acquired. The battle with Hilton, currently "at the bottom of the first inning," Weadock said, "is not a question of higher price."
"Losing this thing is not an option," Weadock said. "We're going to win this. I intend to retire from ITT Sheraton eight years from now at age 65. We are committed to that." Details of Sheraton's strategy against the takeover are under wraps. "As we execute our plans, that's when the world will know about them," he said.
"I don't blame [Hilton chief executive] Steve Bollenbach," Weadock said. "If you can get something cheap, that's great. But don't tell me I have to take it. Think of what Marriott just paid for Renaissance--14 times earnings, 14 times cash flow. That would put Sheraton alone up around $9 billion."
Bill Marriott, president and chief executive of Marriott International, noted that Hilton most likely would have to up its offer of $55 per share. "I don't know that Steve Bollenbach has a desire for a global hotel company as much as he has a desire to have a very strong representation in gaming and to own domestic, full-service hotels," Marriott said.
Now, Weadock said, "our mission is to further distance ourselves from the competition." One way the 420-property chain, which owns more hotels than any of the major chains, will do that is by going on an acquisition spree, including a possible "marriage" to another chain, Weadock said.
Sheraton declined, however, to respond to comments from analysts that the chain is "actively looking" at buying Westin, now suddenly on the block (see story, page 6).
Another way Sheraton will grow is by replacing the chain's 19 different property management systems with two standard systems at almost all properties by next year, Weadock said. The standard systems will link to an integrated system that will make it easier to measure compliance, provide last-room availability and develop guest histories to enhance service.
The fully integrated, worldwide property management system will "dramatically improve things for the business travelers," said Frank Camacho, ITT Sheraton North America's director of marketing. He said that release two of the Integrated Property System, which features further enhancements for identifying guest preferences and improving individualized service, is being beta tested this month and implemented this year.
Just about every European property has switched over to the new LAN-based Fidelio system, and every owned and managed North American hotel has hooked up to the Unix-based Geac Computers system, Weadock said.
Sheraton plans to have all franchised properties on the common platform by the end of 1998, said chief information officer Sean O'Neill. He said that 28 percent of the chain worldwide had already switched over.
About 30 percent of franchises have plugged in to the new systems, with the rest of the chain to follow by the middle of next year, Weadock said. The new systems also will tie into the Delphi system for groups. "At the last minute, meeting planners will be able to make any modifications with regard to seating setups, platforms or speaker changes," he said.
Sheraton also expects to grow by enhancing its relationship with business travelers through innovations such as the chain's 9-to-5 program, which makes rooms available for checkin at 9 a.m. and extends checkout to 5 p.m. The program, launched in mid-January, has already helped raise total bookings 12 percent, Weadock said.
"Growth is essential," Weadock said. "If you stand still, you're going backwards. There are certain cities I feel we have to get into that we're not."
Weadock's list of locations where he intends to add to the core Sheraton brand includes Palm Springs, Houston, Detroit, Vancouver, Dublin, Barcelona, an unnamed Italian resort city and a southeastern U.S. resort to complement its success in Arizona with the Phoenician.
Croatia and Warsaw properties joined the chain last year. Sheraton plans to announce several dozen more international projects this year, including an Eastern European growth spurt.
The chain's plans to double its 52-property Four Points brand--launched in August of '95--to 100 by year-end probably would fizzle under Hilton's takeover plan, which envisions turning the limited-service brand over to HFS. Sheraton plans to add half of the additional properties in the United States, mostly through franchising, said former Four Points president Kirk Kinsell, who resigned for a new job in the restaurant business just as Hilton announced its hostile takeover attempt.
"Sheraton executives and hoteliers have been screaming for me to release this product overseas, but I want to get a critical mass of about 50 in North America before I take it international," Weadock said, adding that the overseas version would include more managed than franchised properties, to protect brand equity and standards.
While the brand would include many vacation destinations, it also would add a presence in New York and Los Angeles to its many other business markets such as Boston, Chicago, Miami, Atlanta, Toronto and San Francisco, Kinsell said. Kinsell said the advantage of the midscale product was that the frequent traveler program offered stays in Sheraton's upscale properties. "No other competitor offers both midscale and luxury hotel products," he said.
Thirty-six Sheraton Inns--including some of the better ones, Weadock said--have opted to keep the original name. Some hold contracts for another 3 1/2 years. The name switch to Four Points strives to clear up confusion between upscale Sheratons and the midpriced inns.
By midyear, the brand will extend the Sheraton Connections meetings program to make better use of its small-meetings facilities, Kinsell said.
The Luxury Collection, meanwhile, is slated to grow from 49 to 54 or 55 properties by year-end. A Beijing property--touted as "the St. Regis of China"--will debut in May or June, and Kuala Lumpur, Malaysia will follow. "There is a greater demand outside the United States for luxury hotels," Weadock said.
The chain has revamped many of its luxury properties, notably the Bal Harbor in Florida, the St. Regis in New York, the Excelsior in Florence and the Palace in Madrid. "We've had tremendous increase in price and reception with those hotels because, while they have great names, no money was spent on them for quite a number of years," Weadock said.
"We have lead the industry in rate increases," Weadock said. "But when we've upgraded these hotels, you're not going into the same room at a 10 percent increase versus last year. The price in some of these hotels has gone up 50 to 60 percent because we completely renovated them. We're not just raising the rates for the sake of gauging the customer; we're changing the level of our customer and we're changing the product that we're selling."
The chain recently added new luxury hotels in Buenos Aires--which features the largest conference center in Latin America. A Chile hotel will debut in September.
Two luxury properties, however, will downgrade to core Sheratons this year.
Corporate Club rooms, currently about 20 percent of the stock in 17 North American hotels, have taken hold in Australia, Hong Kong and London. More than a dozen North American hotels will add those rooms by year-end. The Sheraton New York and Manhattan are transforming every room to Corporate Club--a tryout that other Sheratons may follow.
Sheratons within the same city--such as Atlanta, Phoenix and London--have begun to offer guests one folio, Weadock said. Some may even share management for a single contact.
Weadock said Sheraton's next generation of innovations will follow the example of the new "Home Page" program, just kicked off at the Penang, Malaysia, Sheraton, which customizes an in-room Internet page for each guest, delivering online newspapers and stock quotes.
"With all of this in real time," Weadock said, "we'll own that customer. We're going to make the investment to deliver that across the chain."
Internet access via the TV or an individual monitor will debut in half a dozen hotels by the end of the year, Weadock said.