Nobody Asked Me, But… No. 75 – By Stanley Turkel, MHS, ISHC

Blackstone Reportedly Prepping Hilton for Flotation; Things Are Seldom What They Seem, Skim Milk Masquerades As Cream; Quote of the Month; First Announcement

1. Blackstone Reportedly Prepping Hilton for Flotation
Back in August 2007, I wrote in my Nobody Asked Me, But… No. 32 Hotel Online column:
Blackstone’s Acquisition of Hilton-  If you want my considered opinion about the Blackstone acquisition of Hilton, just remember that private equity investors buy and sell companies usually with other people’s money.  They put up a tiny slice of their own capital and multiply it with investments from pension funds, wealthy individuals and foreign government investments.  They shake the acquired companies up, cut spending, reduce reserves and then resell them to smaller investors in the public markets.  Some of these equity firms “rip, strip and flip”.  Look at the Hilton family of brands one year from now to see which have been sold and discarded.  Look at the roster of Hilton executives one year from now to see whether a personnel bloodbath has taken place.
Finally, let’s see if Jonathan Gray, a senior managing director at Blackstone, lives up to his statement, “we are committed to investing in the company and working with Hilton’s outstanding owners and franchisees to continue to grow and enhance the business.” What will happen with the overlap in the middle tier with Hilton Garden Inns, La Quinta and Hampton Inns?  Or in the luxury tier with the overlap of the Waldorf=Astoria Collection, Conrad Hotels & Resorts and the Blackstone LXR portfolio? 
Almost three and a half years later, the following report appeared on the Hotels blog (3/21/2011):
NEW YORK CITY Blackstone Group LP is reportedly organizing the financial records of Hilton Worldwide in a preliminary step toward floating the company on the international markets.
There is no timetable for the floatation, according to a report in The Independent of London, but Blackstone is said to have accountants poring over Hilton’s books to bring them up to international financial reporting standards.  Blackstone is leaning toward selling Hilton Worldwide as a complete unit, according to the report; previously, the private equity giant was thought to be open to unloading Hilton in pieces.
“This is a long process of preparation.  The focus is getting the timing right, so that if you wake up one morning and decide to go for it, you can,” an unnamed source, identified as being “close to the two groups,” tells the newspaper.
Blackstone acquired Hilton in a US $26 billion deal nearly four years ago, at the top of the market, in a highly leveraged deal that would have been nearly impossible in the current financial climate.

2.  Things Are Seldom What They Seem, Skim Milk Masquerades As Cream
If you watched only the commercials of the large oil companies, you would think that they are in the “save the planet” business.  Similarly, the large hotel franchise companies appear to be in the fair franchising business, but they fail even the modest Asian American Hotel Owners 12 Points of Fair Franchising.
Today’s franchise agreements are still one-sided and unfair and heavily skewed in favor of the franchise company.  Despite the minor movement toward fairness during the recent economic crisis, most hotel franchisors still have the  arbitrary power to:

  • Grant new franchises (same or sister brands) anywhere with no territorial protection for existing franchisees
  • Impose higher fees
  • Create new physical and design requirements
  • Mandate sole source procurement
  • Impose exhorbitant liquidated damages in the event of termination
  • Control the selection of members (and agenda) of the franchise advisory council
  • Sell market data including the names, address and preferences of millions of hotel guests.
  • Change rules regarding training, technology upgrades, frequency programs, guests discounts, required franchise services, quality standards
  • Require personal guarantees from owners
  • Restrict a franchise owner’s freedom to sell his property

What can be done? Franchisees can level the playing field only by forming independent franchise owners associations.
3. Quote of the Month
In March 2011, I quoted the following:
“Excellence is not a singular act but a habit. You are what you repeatedly do” Shaquille O’Neal
A few days later, I received the following email from Chuck Mercurio, President/CEO, Partnering Concepts:
“Oh, were it only true… we have enjoyed your articles and sage wisdom over the years, however we felt it necessary to comment on the above-referenced quotation posted on Hotel Online.  Unfortunately, Shaquille, in an attempt to sound wordly, was only re-quoting Aristotle whose original quote was:
“We are what we repeatedly do.  Excellence, then, is not an act, but a habit.”

Mercurio goes on to say, “This quote has become part of our personal credo and one we use often in our lectures at Florida International University and other management training seminars.”  (chuck@partneringconcepts.com)
4.  First Announcement:
My new book “Defying the Passage of Time: 100+ Year-Old Hotels in New York” will be published before the end of 2011.  If you would like to reserve an autographed copy, send your email address to stanturkel@aol.com.
Meanwhile, you can order “Great American Hoteliers: Pioneers of the Hotel Industry” by visiting my website (www.greatamericanhoteliers.com) and click on the order link.
 


Stanley Turkel, CMHS, ISHC recently published his new book, Great American Hoteliers: Pioneers of the Hotel Industry.  It contains 359 pages, 25 illustrations and 16 chapters.  It also has a foreword (by Stephen Rushmore), preface, introduction, bibliography and index.

Ed Watkins, Editor of Lodging Hospitality wrote, “The lodging industry typically doesn’t spend a lot of time considering its past.  Some may find that odd since compared to many other businesses (computers, automobiles aircraft), the hotel business is one of oldest if not the oldest, in the history of man.  That changed recently with the publication of…. Great American Hoteliers: Pioneers of the Hotel Industry, a fascinating and entertaining series of profiles of 16 men who author Stanley Turkel argues were the builders of the modern American hotel industry.  That’s significant because due to the efforts of these titans (and others, of course), the American style of hotelkeeping long surpassed the European tradition that reigned for centuries.

Some of the profiles contain cover names (Hilton, Marriott, Johnson, Wilson) familiar to even casual students of hotel or U.S. history.  Sadly, just one of the pioneers covered the book (John Q. Hammons) is still alive and active in the industry.  To me, the more interesting tales cover hoteliers about whom I knew little before reading his book but now have a greater appreciation for their contributions.

The most compelling story focuses on Kanjibhai Manchhubhai Patel who Turkel identifies as the first Indian-American hotelier.  K.M. Patel arrived in San Francisco in 1923 and soon began operating a small residential hotel in the city.  The rest, as they say, is history; Today, Indian-American hoteliers dominate the industry with their trade association, AAHOA, recently surpassing 10,000 members.  As Turkel says, this community represents a true American success story.

To order the book, go to www.greatamericanhoteliers.com