Hilton may double Europe hotels by 2010
Hilton Hotels Corp. CEO Stephen Bollenbach said the company may more than double its European hotels within four years, and is seeking a partner in China to add about 100 inns. The company, the second-largest US hotel operator by revenue, will probably have 450 hotels in Europe by 2010, up from about 180, Bollenbach said in an interview in Rome yesterday. „This will be a huge expansion opportunity,” he said. „It's very important to be big in the hotel business. That's what allows us to provide things our guests really, really value,” such as worldwide reservations systems, he said. Beverly Hills, California-based Hilton Hotels bought Hilton Group Plc. in February, reuniting the companies for the first time since 1966 and allowing Hilton to expand overseas, where the British company had managed the brand's non-US properties. The company now has around 3,000 hotels in 80 countries. With brands including Homewood Suites, Hilton Garden Inn and Embassy Suites still largely focused on the US, Hilton's „greatest opportunity is to go international,” said Bruce Baltin of PKF Consulting in Los Angeles. „There's a lot of potential for that.” Bollenbach plans to manage hotels in Europe for other companies, continuing a move away from hotel ownership. „We would rather manage a hotel for another owner than own it ourselves,” he said.
Shares of Hilton have increased about 16% this year, raising its value to $10.8 billion. It's the eighth-best performer in the 27-member Bloomberg US Travel Index, which gained 1.3% in the same period. Shares of Marriott International Inc., the biggest US hotel operator by sales, are up 19% over the same period. Starwood Hotels & Resorts Worldwide Inc., the third-largest, climbed 14%. In August, Hilton raised its earnings forecast and said it increased room rates 6.3% on higher demand in markets including New York and Chicago. Revenue per available room, a measure of rates and occupancy, climbed 9.8% for Hilton's hotels globally. It charged an average rate of $118.96 per day in the second quarter. Hilton wants to increase the number of hotels worldwide by a third, to 4,000, and is expanding brands including Hilton Garden Inn and Hampton Inn. The greatest risk to Hilton's growth is an oversupply of rooms, surpassing concerns such as passport control deterring tourism and cross-border labor issues, Bollenbach said. „Ours is a very complicated business,” he said. „If there are 100 things to watch and you watch this supply side, you'll have the right answer 99% of the time.”
The company sees „special opportunities” in western Europe, India and China because of their economic expansion, Bollenbach said. In Europe, growth in the 12 nations that use the euro is rising at the fastest clip since 2000 as manufacturing expands and Germany's economy recovers. China and India are the world's fastest-growing major economies. „We are looking to less developed countries,” Bollenbach said. „I think over the next three to five years we want to have 100-plus hotels in China. We think we are going to get a partner. There are a million opportunities.” He declined to name potential venture partners.
Bollenbach, a former Walt Disney Co. CFO who has run Hilton since 1996, said visitors to Beijing and Shanghai have little choice besides „beautiful” hotels costing $500 to $600 a night and budget lodgings with rooms priced as low as $30. „There's nothing in between,” he said. „We think we have a wonderful opportunity.” Eastern Europe and Russia will be in the „beginning stage” for Hilton by 2010, Bollenbach said. „If we had a dozen hotels, that would be considered successful. We expect to have real opportunity in Russia.” Buyout firms from London-based Permira to New York-based Blackstone Group LP are buying more hotels as operators sell property and while keeping management contracts. LBO firms accounted for about half of the €9.3 billion ($12 billion) of European hotel deals in the first half, property advisers Jones Lang LaSalle Inc. said in a July report.
Moscow, the world's most expensive city, will build 100 hotels downtown by 2010 to help alleviate an „acute shortage” of rooms, Interfax reported a month ago, citing the head of the Russian capital's central administrative district. Shares of Sun International Ltd., South Africa's biggest lodging company, had their biggest gain in almost three weeks yesterday after the company said it plans to build a hotel and casino resort in Moscow. Hilton has been selling real estate to generate cash as it focuses on managing brands. Last month, the company sold five hotels in Canada, the first inns to be sold outside the US following the purchase of Hilton Group. „I've been in this business a very long time, and this is the easiest time I've ever seen” to sell hotels, Bollenbach said yesterday. Bollenbach also said Hilton has about 30 possible bidders for its Scandic division, a Stockholm-based hotelier it inherited from Hilton Group Plc. It may sell the unit in „a matter of months.” (Bloomberg)
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