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Industry Consolidation In the International Lodging Industry

Industry Consolidation In the International Lodging Industry. Chris Roberts University of Massachusetts. Agenda. IO Economics Concentration ratios 1950s–1970s: courteous competition 1980s: brand segmentation, growth 1990s: mergers & acquisitions 1990s: Divestment from gaming in US

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Industry Consolidation In the International Lodging Industry

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  1. Industry ConsolidationIn the International Lodging Industry Chris Roberts University of Massachusetts

  2. Agenda • IO Economics • Concentration ratios • 1950s–1970s: courteous competition • 1980s: brand segmentation, growth • 1990s: mergers & acquisitions • 1990s: Divestment from gaming in US • 2000s: Summary & future directions

  3. Overview • Industrial Organizational Economics • Concentration of market share • Typically 3 to 5 firms • US Airlines: UA, AA, DL, NW • W. European Airlines: BA, AF, LH • Automobiles: GM, Ford, DaimlerChrysler • Prior to 1990s, lodging industry was highly fragmented

  4. 1950s-1970s • Courteous competition • Slow growth industry • Related to highway, reconstruction and infrastructure development • Standardization • Most firms offer single brand • Limited mergers & acquisitions

  5. 1980s • Fragmentation • 113 new US brands introduced 1980-1996 • Less than 50% survive • Example: Marriott  Courtyard & Fairfield • Decline of established brands • Holiday Inn brand sold to Bass Plc • HI Worldwide renamed Promus • Howard Johnson, Ramada, Travelodge • Limited Mergers & acquisitions

  6. Wave of Mergers & Acquisitions • 1990s was period of consolidation • HFS/CUC/Cendant • Choice • Accor • Trusthouse Forte/Granada/Compass • Bass/Intercontinental/6 Continents • Marriott/Ritz Carlton • Hilton/Promus/Doubletree • Starwood/Sheraton/Westin

  7. 1990s M&A Wave • HFS • Howard Johnson • Ramada • Days Inn • Super 8 • Knights Inns • Villager Lodges • Travelodge • Wingate Inn • Merged with CUC to form Cendant

  8. 1990s M&A Wave • Choice • Quality Inns • Comfort Inns • Clarion • Sleep Inns • Econo Lodge • Rodeway Inns • Friendship Inns • Mainstay Suites

  9. 1990s M&A Wave • Accor • Novotel • Mercure • Sofitel • Ibis • Etap • Formule 1 • Motel 6 • Red Roof Inns • Other Misc. brands

  10. 1990s M&A Wave • Compass Group • Le Meridien • Grand Hotels (M) Acquisition Company • Heritage • Macdonald Hotels PLC & the Bank of Scotland • Travelodge • Compass Group PLC • Posthouse • Bass PLC

  11. 1990s M&A Wave • Bass / Six Continents Hotels • Holiday Inn • Holiday Inn Express • Holiday Inn Select • Holiday Inn SunSpree • Holiday Inn & Suites • Garden Court • Crowne Plaza • Staybridge Suites • Inter-Continental Hotels & Resorts

  12. Marriott International Marriott Hotels & Resorts/Suites Courtyard Fairfield Residence Inns Ramada International Ritz-Carlton New World Conference Centers TownePlace Suites Marriott Executive Center SpringHill Suites 1990s M&A Wave

  13. Hilton Hilton Hotels Conrad International Hilton International Promus Hampton Inns/Suites Embassy Suites, Vacation, Resorts Homewood Suites Doubletree Hotels, Guest Suites, Clubs Red Lion 1990s M&A Wave

  14. 1990s M&A Wave • Starwood Hotels & Resorts Worldwide • Westin Hotels • Sheraton • Hotels, Resorts & Inns • Four Points Hotels • St. Regis • Luxury Collection • W Hotels • Caesars (Sold to Park Place Entertainment)

  15. Cendant Choice Accor 6 Continents Marriott Hilton Starwood Leading Lodging Firms Company #Properties #Rooms 6,400 4,333 3,600 3,200 2,100 1,900 738 542,000 410,733 400,000 464,863 379,547 315,000 227,000

  16. Cendant Applied for permit and was denied (1993) Promus Divested Harrah’s Entertainment (1995) Hilton Separated into Park Place Entertainment (1999) Starwood Selling all gaming interests (1999-2000) Hyatt Expanding: 8 casino/hotels & 3 casinos Gaming & Lodging Firms

  17. Impact • Growth through: • Franchising • Acquisitions • New construction • Over supply in some markets • Transfer of risk • Mergers • New franchise agreements • Compass exit from industry

  18. Summary • Consolidation occurring in the European and US lodging markets • 6 leaders emerging • Cendant, Choice, Accor, 6 Continents, Marriott, Hilton • Brand stratification • Economy through luxury, all suites • Exit from gaming

  19. ChrisRobertsUniversityofMassachusetts Thank you for listening.

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