Hoteliers Try To Reorganize

Six Continents PLC faced an unwanted takeover attempt last week, while Hyatt Corp. announced an extensive reorganization of its North American and international operations. Analysts speculated that the Hyatt move was in anticipation of the company's controlling shareholder, the Pritzker family, spinning off the hotels as a public company.

As a result of these developments, buyers who have preferred supplier relationships with Six Continents, Hyatt Hotels or Hyatt International face a degree of uncertainty over the long-term viability of these agreements. In the short term, all contracts with buyers remain in place.

London-based Six Continents PLC quickly rejected the $8.78 billion offer from Capital Management & Investment PLC, which is controlled by restaurant entrepreneur Hugh Osmond. Osmond has said he would split the hotel business from Six Continents' pubs division and put the hotels up for sale in an attempt to maximize shareholder value.

"The plan envisages wholesale hotel disposals at the bottom of the cycle," said Tim Clarke, CEO of Six Continents, in rejecting the offer on behalf of the company's board. Six Continents' hotel brands include InterContinental, Crowne Plaza, Holiday Inn and an extended stay brand, Staybridge Suites by Holiday Inn. Worldwide, the portfolio numbers 3,300 hotels.

Coincidentally, Six Continents' board last month proposed a break-up plan of its own, also intended to improve shareholder value. Under that plan, the hotels would become a separate business to be called InterContinental Hotel Group, while the pubs became a separate entity called Mitchells & Butlers PLC.

Should the Osmond plan succeed, analysts expect other lodging companies to bid for individual hotels in the Six Continents portfolio as opposed to an entire brand. Hilton Group PLC and Starwood were among the possible acquirers mentioned.

Under the Hyatt reorganization, North America and international operations would be combined, rather than formally merged. Hyatt Hotels Corp. operates 123 properties in the United States, Canada and Caribbean, while Hyatt International Corp. manages 84 properties in 39 countries. Hyatt Hotels Corp. vice president of sales Ty Helms assured corporate travel managers that "relationships with Hyatt that have been seamless will continue to be seamless."

As part of the new structure, Chicago-based Hyatt said it expected to expand more rapidly as well as benefit from operational efficiencies. As a global hotel company, Hyatt is relatively small, compared, for example, with Six Continents, Marriott International or Hilton Hotels Corp. Marriott and Hilton have 2,500 hotels and 2,000 hotels, respectively. Hyatt is also a single-brand company, whereas Marriott, Hilton and Starwood have multiple brands. The Pritzker family, however, does have a significant equity stake in U.S. Franchise Systems, which manages midprice, economy and budget brands.