Kleisner Tackles Centralization

<B> Kleisner Tackles Centralization</B>
<I>New Wyndham Prez Takes Field, Kicks Off Turnaround Strategy</I>

By Cheryl Rosen

Climbing aboard a hotel company weighted down by reorganizations, restructurings and financial upheaval, veteran hotelier Fred Kleisner has wasted little time coming up with a plan to get things moving. Just two months since taking over the presidency of C-corporation Wyndham International--former real estate investment trust Patriot American (<I>BTN</I>, July 19)--he already has put together a series of goals and objectives for the next six months.

"My goal is to move from a confederacy of nine or 10 merged companies to a union, and my approach has been to use simplicity, speed and aggressive targets, plus benchmarking, to get things done," he said. "You'll see us go quickly to a centralized organization in Dallas supervising decentralized profit centers, and concentrating on our core Wyndham Hotels & Resorts brand," he said.

Industry analysts agreed that Wyndham is in better shape than the vagaries of the Wall Street REIT market and its merger with Patriot American would seem to indicate. "The problems of the past were Patriot American problems, not Wyndham problems," said one. "But now Wyndham is the dominant brand, the company is well positioned for the future, and Fred is an integral part of that. He should take his time and do things properly. There's no rush to turn things around; what's important is to do things right."

As hotel rates in many markets continue to soften (see story, page 8), Kleisner first is clamping down on internal costs, dumping bricks and mortar and bringing his team physically together. He has closed sales offices in London, New York and Phoenix, and now is "looking at our satellite offices in Wichita," which manage the Summerfield Suites brand. Along the way, he also "right-sized the salaries and expenses of the corporate office."

On the sales side, the strategy clearly is cross-selling a company whose varied brands and properties include the Carmel Valley Ranch, The Boulders, Grand Bay, Summerfield, and Sierra Suites and Clubhouse, as well as Wyndhams. Kleisner has distributed business protocols outlining how salespeople and travel agents should cross-sell the various brands. Heading the sales effort is Don Welch, brought in last month as senior vice president of sales and marketing; vice president of business travel is Kevin Kelly, who came over in April after 12 years at Hilton.

Kleisner also has been keeping a careful eye on the numbers. "Since April 1, we have seen demand growing, but beneath the projections from last year," he said. "April, May and June were a concern to me--but my spirits have been lifted by the demand I've seen more recently in our RevPAR (revenue per available room) growth against that of our competitors," he said.

He is watching the group side in particular, where occupancies hover at around 70 percent. Wyndham gets about 52 percent of its business from groups, 29 percent from corporate transient travelers and 19 percent from leisure travelers.

Also in the works are benchmarking projects that focus on financial best practices, but, in a Kleisner-inspired twist, do not overlook guest and employee satisfaction. "I've asked management to focus on the importance of validating guest satisfaction and employee satisfaction indices, and looking for constant improvement," he said. "If any managers make their financial numbers but do not increase their scores in guest and employee satisfaction, they've cheated our guest or they've cheated our employees."

While industry analysts are predicting a leveling of rates and an accompanying focus on holding down costs by hotel companies in 2000, Kleisner believes Wyndham, with its full-service emphasis, is perfectly situated to weather what he predicts will be but a minor storm. In the hospitality industry, where carefully trained employees make or break the guest experience, what he does not want to do is cut back on staff.

"I've been through four recessions in the hotel industry, and I have found you can manage the full-service side without layoffs," he said. "You can't always do that with luxury hotels. Too often hotel companies build a church big enough for Easter Sunday and wonder why they can't fill it all year. But in the upper upscale and upscale sectors, we don't need Draconian measures to maintain earnings in any market."

Analysts agreed. "He's right on in that regard," said Michael Mahoney, managing director of the hospitality and leisure practice at Pricewaterhouse-Coopers. "Rates may be slowing, but they still are growing. And Fred Kleisner has all the tools necessary to take Wyndham into the next millennium."

Not yet come to fruition is another idea Kleisner is mulling over, inspired by the European market. There, fully 38 percent of hotel rooms are sold at rack rate--while in the United States, only 10 or 12 percent sell for full price. A more realistic pricing policy "is a concept I'm evaluating for the United States," he said.

One thing Kleisner surely will not change quickly is Wyndham's traditional eschewing of frequent traveler programs. Instead, the company almost has completed a data warehousing project that will track Wyndham's most frequent customers and send them individual offers--perhaps an upgrade certificate or a coupon for a free weekend--without the necessity of tracking and redeeming points. The warehouse will have a "soft pre-rollout" Nov. 1. The company will follow that in 2001 with a focus on its best corporate customers, offering special amenities for top corporate accounts.

"First I want to establish recognition of our customers. Then we'll talk about a frequent traveler program," Kleisner said.

A least one customer, Tim Berndt, global travel procurement manager for AlliedSignal Inc. in Morristown, N.J., agreed that the one-stop-shopping approach is the right way to negotiate with the corporate market, and that the process at Wyndham works.

"That has been our experience; we have one point of communication at Wyndham that handles the entire relationship with us, and then works within the Wyndham organization to provide whatever is required," Berndt said. "I don't know if it's radically different from the way things were done in the past, because we didn't have much volume with them in the past, but our business with Wyndham has been growing significantly."

Wyndham now is one of the top five AlliedSignal hotel suppliers, getting 6 percent or 7 percent of its total hotel spend--and even without new business protocols, that's a piece of business destined to grow. In a restructuring of its own, AlliedSignal is acquiring Honeywell, which will push its total hotel spend to $67 million from $37.

As for the lack of a frequency program, Berndt seems all for the idea, as long as he can share in the savings. "Our travelers like reward programs, but I'm more concerned with making sure the traveler has an excellent guest experience and wants to stay there again. We're hoping that they're not having a full-blown rewards program will translate into savings in the rate program. My mission is to drive the lowest cost we can--and we support that approach.