eHotelier Newsletter

NEVER GIVE UP: CONRAD HILTON MADE QUALITY HIS HOTEL CHAIN’S OVERRIDING CONCERN

Investor's Business Daily, Inc - "Faith," said Conrad Hilton, "was the most significant word of the English language . and the most powerful." As Hilton (1887-1979) built up the famous hotel chain that bears his name, two kinds of faith propelled him: his faith in God, and others' faith in him. Both proved crucial in getting him through hard times. His success was hardly instant. Born in rural New Mexico when it wasn't yet a state, Hilton was the son of a successful local businessman who put him to work from early childhood. His mother was a devout Catholic who taught him the importance of prayer - something Hilton believed in all his life. Working for his father, Hilton learned a great deal about business. He mastered the art of bargaining, recalling proudly how he sold his first pair of shoes to a Spanish matron.

"The buyer is entitled to a bargain," he wrote in his autobiography, "Be My Guest." "The seller is entitled to a profit. So there is a fine margin in between where 'the price is right.' " Years later, he would apply the same theory to million-dollar hotel deals. Hilton learned from his father what not to do. When Hilton was 21, his father delegated responsibility for the business to his son. But the older Hilton kept breathing down Conrad's neck. "I learned at 21 how a man feels when he has been given a job but complete confidence has been withheld," he wrote. "Perhaps that is why, in later years, when I had carefully selected a man for a job, I left him completely alone, knowing I had either made the right selection or I had been wrong."

Like many children in the West at the time, Hilton was shuttled between a number of regional schools. He admitted he wasn't a very good student, but at the New Mexico Military Institute he learned another important aspect of faith. The cadets there enforced a strict code of truth-telling so that someone caught lying was treated as if he didn't exist. Hilton carried this code into adulthood, remarking, "I've never been able to deal with a liar." Hilton tried his hand at a number of things before hitting his gold mine. He managed his sisters' musical act, served a term in the New Mexico Legislature and, foreshadowing what was to come, persuaded a number of partners to join in buying a bank.

Though Hilton made the bank a success, a stint overseas in World War I showed him the world was bigger than New Mexico. On a friend's advice he set off for Texas, hoping to make a banking chain from the oil money that was then pouring in. He couldn't find a bank to buy. But while in Cisco, Texas, he looked for a room at a hotel called the Mobley, and found it overbooked. The owner was frantic. Sensing an opportunity, Hilton changed his plan and offered to take the Mobley off its owner's hands. At the Mobley, Hilton saw that space could be made into money. He filled most of the former dining room area with bedrooms. He also turned an unused corner into a gift shop. Hilton called this "mining for gold." He also realized the value of employee morale. He reminded his workers that he and his co-owner were "completely at their mercy once a guest got beyond the front desk. 'You're the only ones who can give smiling service,' I said. . 'Ninety percent of the Mobley's reputation is in your hands.' " After making the Mobley a success, Hilton branched out. His first additions were shaky hotels, which he bought cheap and refurbished.

By 1924, Hilton decided he was ready for the next challenge: building a new hotel in Dallas. This required raising far more money than he ever had. It was tough. Several times he ran out of cash. But he made a point of being honest and upfront. Based on his reputation alone, friends and supporters lent him the money. In 1925 the Dallas Hilton opened. Hilton was so jubilant he vowed to open a hotel a year. And he did-until the stock market crash of 1929. Hilton had just committed to building a costly hotel in El Paso, Texas. He went ahead and opened it the next year, but the sudden drop in business from the Great Depression left him with crushing debts. Hilton remained optimistic, however. And just when all seemed lost, someone would come up with a loan. Amazingly, one day when Hilton was so broke he couldn't even find cab fare, a bellboy came up and gave him his life savings of $ 300 - "just eating money," he said. Hilton was so moved by this confidence in him he refused to declare bankruptcy. "That would be having no faith," he told a friend. "Running out of hope. If I run out of that I'm dead and I know it." All seemed lost when Hilton's hotels were repossessed over the next several years.

But in 1933, seven Hilton loyalists put up $ 5,000 apiece to help him buy back his El Paso hotel. With keen investments over the next few years, Hilton managed to get back five of his eight hotels and repay all his debts - including to the bellboy. By 1937, Hilton was ready to move beyond Texas. He bought the Sir Francis Drake in San Francisco and the Breakers in Long Beach, Calif. He built a new Hilton in Albuquerque, N.M. And then, after much negotiation, he won the palatial Stevens and the prestigious Palmer House in Chicago. Hilton set his sights higher with each purchase. But when he bought the Roosevelt and Plaza in New York City, the Eastern establishment didn't look kindly on this Westerner invading their turf. Hilton figured he could win their trust by filling a need. At the Plaza, for instance, he revived the Oak Bar, a venerable establishment that had given way to a brokerage.

With this gesture to tradition, Hilton was able to quietly refurbish the marble, tapestries and plumbing and give the longtime residents a new place to relax. It worked. Having thus made his name in New York, Hilton went for the big prize: the Waldorf-Astoria. The legendary hotel wasn't making money, but the owners were attached to it. Loath to give up, Hilton spent the next six years lobbying and negotiating with the owners. He finally captured the prize in 1949 and soon had it in the black. Yet he still wanted to raise the bar. In 1942 he opened his first foreign hotel in Puerto Rico, and after the Waldorf purchase he started moving into Europe.

For him, foreign hotels weren't just about business. A fervent internationalist and supporter of the United Nations, Hilton believed American hotels abroad could foster goodwill and personal contact between nations. Hilton At A Glance Born: 1887 in San Antonio, N.M. Died: 1979 in Santa Monica, Calif. Education: Attended the New Mexico School of Mines. Achievements: Founded Hilton Hotels Corp. in 1946 and Hilton International in 1948. Controlled the world's largest hotel organization at the time of his death.

The results of the Yesawich, Pepperdine & Brown/Yankelovich Partners 2002 National Travel Monitor reveal that the travel industry is shaking off the aftershocks of 9/11 and both business and leisure travelers expect to hit the road more in the months ahead. Lingering concerns about the economy, however, still represent a potential drag on travel demand. The results, released today in the nation's capital, were calculated from nationally representative polls of 1,351 leisure and 1,200 business travelers taken during the first quarter of 2002. All estimates are accurate to within +/-2.8% at the 95% level of confidence.

Consumer attitudes toward travel have improved dramatically in recent months, said Peter C. Yesawich, president and CEO of Yesawich, Pepperdine & Brown, an Orlando-based marketing services firm that co- authors the highly regarded annual survey with Yankelovich Partners. This is the 11th year the firm has published the national study of the travel habits, preferences and intentions of Americans. The results of the survey reveal that over one-third of leisure travelers plan to take more trips in the next year. This would translate into a six percent increase in leisure trips taken by Americans if the plans expressed by those surveyed actually come to fruition.

Future Travel Intentions of Leisure Travelers 36 percent say they will take more trips than last year. 39 percent expect to take the same number of trips as last year. 25 percent say they will take fewer trips than last year (or no trips). The future intentions of business travelers were even more optimistic. Over four out of 10 business travelers plan to take more business trips in the coming year, compared to 22 percent who expect to take fewer trips. Overall, the results suggest there will be an eight percent increase in business trips this year versus last. "The results of this year's survey indicate clearly that the industry is poised for a recovery," Yesawich said. "There is still a small minority of travelers hesitant to travel too far from home, but there are far more people who are ready to reclaim their vacations from the fear and emotional trauma that devastated the industry in the aftermath of September 11th. The numbers bode well for the forthcoming summer travel season."

Concerns about the sluggish U.S. economy remain the primary deterrent to the travel industry's full recovery. Among leisure travelers who plan to travel less, "current economic conditions and financial reasons" were cited as the reason why by 37 percent. Only five percent of leisure travelers said air travel is now too big of a hassle, and just four percent believe it is not safe to fly. For business travelers, the economy is by far the major concern.

Nearly four in 10 business travelers who plan to take fewer trips in the year ahead cite "company restrictions because of concerns about the economy" (22 percent) and that "current economic conditions make it difficult to travel" (15 percent). Only three percent say air travel is now "too big of a hassle," and less than one percent feel it is unsafe to fly. Both percentages represent a dramatic decline from the level of concern expressed about the same issues in four other national surveys conducted by Yesawich, Pepperdine & Brown since September 11th. Recent reports about the growth of the U.S. economy during the first quarter augur well for the travel industry, however. "The recovery of the travel industry will undoubtedly mirror the economic upturn, particularly demand for business travel services," said Dennis Marzella, YP&B's senior vice president of research. "The corporate road warriors of America appear ready to hit the road again in increasingly larger numbers." Nevertheless, it is clear that one of the legacies of the tragic events of last fall, the introduction of increased security measures at the nation's airports, has added to the frustration of business travel.

Specifically, fully 32 percent of business travelers feel that the new security procedures make business travel "a big hassle," and 18 percent actually report flying less because of the associated inconvenience. The 2002 National Travel Monitor also reveals that Americans are becoming more comfortable with the use of the Internet to make travel plans and purchase travel services. This is particularly true for leisure travelers, 53 percent of which now report using the Internet during the previous 12 months to obtain information or rates online (up from 47 percent last year). More than half (55%) of business travelers consulted the Internet to obtain information, fares and rates during the past 12 months, the same percentage as last year. .

Americans Going Online for Travel Planning 39 percent of travelers who go online and use travel agents think the Internet is easier and faster to use for travel planning than a travel agent. Forty-four percent of business travelers feel the same way. 32 percent of leisure travelers actually made a reservation online during the past 12 months. Among business travelers, the percentage was 33. 90 percent of both leisure and business travelers state that the web site feature they value most is "being able to check the lowest rates for airfare, hotels and car rental companies." "Even though Internet usage is higher among leisure travelers today than in 2001, it is important to note that fully three out of every 10 leisure travelers still use the services of a travel agent.

This is particularly true among older and more affluent travelers. Contrary to the expectations of some industry analysts, travel agents still play a very important role in directing leisure travel demand," Yesawich said. When it comes to vacation preferences, the results of the survey reveal continued interest in destinations that consumers "have never been to before," (81%), beach experiences (67%), visiting arts/architectural and historic sites (51%), destinations that are remote and untouched (46%) and theme parks (45%). The "dream destinations" for Americans remain similar to those identified last year. Florida (40%), California (38%), Colorado (19%), Hawaii (19%) and Arizona (18%) top the list of states, while the out islands of Hawaii (71%), national parks (66%), Honolulu (65%), Florida Keys (59%) and mountain resorts of Colorado (55%) top the individual destination list. Europe (71%), Australia (25%) and the Caribbean (18%) top the list of international destinations, while the Middle East (6%) was identified by only six percent of Americans. Yesawich, Pepperdine & Brown (YP&B) is America's leading marketing, advertising and public relations agency specializing in serving travel industry clients. The company's offices in Orlando, New York, Honolulu, Los Angeles, London and Mexico City serve clients worldwide

RECENT GAS-PRICE SPIKES COULD CAUSE SIGNIFICANT LOSSES FOR U.S. LODGING INDUSTRY

The recent run-up in gasoline prices may end up causing significant losses in room sales for the U.S. lodging industry, according to a recent study conducted at Cornell's Hotel School. The study, which was done at the Center for Hospitality Research, found that the cost to the United States lodging industry of gasoline-price increases is far greater than anticipated.

The study found that, on average, a 1-percent increase in gasoline prices results in a 1.74-percent drop in rooms demand. Those deceptively small-sounding numbers would translate into a loss of millions of room-nights for every 1-percent increase in gasoline prices. The connection between increased gas prices and diminished room-nights was anticipated by the researchers, Cornell University professors Kate Walsh, Cathy Enz, and Linda Canina. They expected that their study would confirm the long-held belief that increases in gasoline prices diminish lodging demand. "We were not prepared for the magnitude of the loss in lodging-industry demand," commented Enz, who is executive director of The Center for Hospitality Research. "I must emphasize that this study is based on branded hotels nationwide in all industry segments and comprises 13 years of data—through good times and bad."

To develop their analysis, the researchers examined monthly room-night data from 1988 through 2000 from the Smith Travel Research database, which compiles rate and occupancy data from 98 percent of U.S. hotels. The study analyzed room-night demand and gasoline prices over the study period. The researchers also factored gross domestic product into their analysis to control for the general effects of good or bad economic times and to help isolate the effects of gasoline prices. All prices were adjusted to year-2000 dollars based on the consumer-price index (CPI).

The researchers examined the effects of gas-price increases on various lodging segments and locations. They determined that the effects of rising gasoline prices fall most heavily on mid-market and economy hotels with suburban or highway-oriented locations. One of the benefits of this study is that the researchers were able to quantify the loss in demand as gasoline prices rise.

For example, a 1-percent increase in gas prices would reduce annual economy-hotel demand by about 2.8 percent. Midmarket limited-service properties (that is, without food service), feel nearly as bad a pinch, and stand to lose 2.5 percent of room-nights with every 1-percent increase in gasoline prices. Upscale hotels are also affected by rising gasoline prices, with a likely loss of about 1 percent of room-nights with every 1-percent increase in gasoline prices. Upper upscale hotels were the only segment in which rooms demand was not significantly affected by gas price fluctuations.

Based at the School of Hotel Administration at Cornell University, The Center for Hospitality Research conducts and sponsors research studies aimed at improving the hospitality industry's fundamental operating knowledge. Full details of the study with a segment-by-segment breakdown of the effects of rising gasoline prices can be found on The Center for Hospitality Research web site: www.hotelschool.cornell.edu/chr.

Amid the turbulence of a grueling year marked by an ailing economy and
the tragic events of September, the Canadian tourism industry was
heavily impacted in the fourth quarter of 2001.

According to the National Tourism Indicators Quarterly Estimates Fourth
Quarter 2001 released by Statistics Canada, total tourism expenditures, on an
unadjusted basis, reached $10.1 billion during that period. This is
the worst quarterly decline (6.3%) registered in 15 years. Tourism
expenditures in the fourth quarter were for the first time below that
of the first quarter. Adjusted for seasonality and inflation, real
tourism expenditures for the fourth quarter 2001 dropped by 1.2% from
the previous quarter.

This decline results in part from the aftermath
of the September 11 events, which contributed to a 7.8% decrease in
the number of visitors, and a 3.1% decrease in foreign expenditures.
The overall drop in expenditures is also attributable to other
factors, including the global economic slowdown. The industry
generated $54.6 billion in annual total tourism expenditures for 2001,
a marginal increase of 0.9% over 2000. However, in real dollar terms,
after adjusting for inflation, this amounted to a 0.1% decline.

For the year 2001 overall, international tourist travel to Canada was down
a very modest 0.1% over 2000, reaching 19.6 million overnight
tourists. This performance was significantly weaker than the average
annual growth of 2.5% registered in the last five years.

Source: Canadian Tourism Commission

STARWOOD APPOINTS VICE PRESIDENT IN DEVELOPMENT AND ACQUISITIONS AREA TO OVERSEE ITS MAJOR EXPANSION IN ASIA PACIFIC

- THOMAS J. MONAHAN NAMED VICE PRESIDENT OF FINANCE, ACQUISITIONS &DEVELOPMENT-

Singapore, May 6th 2002 -- Starwood Hotels & Resorts Worldwide, Inc. (NYSE:HOT) has appointed Thomas J Monahan as the Vice President of Finance, Acquisitions and Development for the Asia Pacific region. Under this new appointment, Monahan's major responsibilities include overseeing all financial and growth planning and control activities in the Asia Pacific region.

Monahan joined Starwood as Vice President of Financial Management for Asia Pacific region in August 1996 and assumed the additional responsibilities as the head of the acquisitions and development team late last year.

" We are pleased to have Tom take on this new role with expanded responsibilities in the development area. With his extensive experience and credentials in both finance and the hospitality business we are confident that Tom's support will add great benefit to Starwood's expansion plans in Asia Pacific," stated Miguel Ko, President of Starwood Hotels & Resorts in Asia Pacific.

Known as one of the most dynamic leaders in Starwood Asia Pacific's senior executive team, Monahan has more than 25 years experience in the hospitality industry and finance. Before joining Starwood, Monahan held several senior positions with other international hotel companies including the Forte/Granada group and Inter-Continental. Monahan reports to Miguel Ko, President of Starwood Hotels & Resorts Asia Pacific, based in Singapore.

The sunny forecast doesn't only apply to the weather in South Florida's Greater Fort Lauderdale. Tourism has steadily rebounded and is nearing the lofty 2000 and 2001 levels achieved by the destination prior to September 11. In fact, March 2002 marked the busiest month in the history of Fort Lauderdale/Hollywood International Airport with 1,746,228 passengers - 3.4% above March 2001. Greater Fort Lauderdale has not only recovered at a rate that outpaces the country and the majority of its neighbors, but it has done so without relying on the college student business that was its bread and butter a decade ago, and from which it has worked hard to distance itself in order to attract a more discerning traveler who appreciates the area's natural beauty and diversity of attractions.

According to the Ernst & Young Hospitality Service group update, Greater Fort Lauderdale lodging establishments will continue to see improvement at a rate greater than other Florida cities throughout 2002. The report also predicts that Greater Fort Lauderdale will be one of the first Florida cities to fully rebound from the recession and effects of September 11, a feat which may be accomplished before the end of the summer. Much of Greater Fort Lauderdale's current success can be attributed to the destination's rapid, thoughtfully planned response to the fallout of 9/11.

February year- to-date statistics show an occupancy of 74.5% and an average daily rate of $111.18. Tourism is Broward County's largest industry with regard to employment and contributes nearly $5 billion to the local economy. The overwhelming support, from the community as a whole, enabled the Greater Fort Lauderdale Convention & Visitors Bureau, under the direction of the Broward County Commission, to swiftly implement a million dollar, multi-faceted marketing initiative. This effort combined advertising and public relations and was initially directed primarily at encouraging people in top northeastern cities and those within driving distance to visit Greater Fort Lauderdale. A highlight of the extensive campaign was a 30-second television spot featuring hometown hero Dan Marino, former quarterback for the Dolphins football team, who graciously provided his talent as spokesperson for local tourism.

Additionally, programs such as "Greater Fort LauderDEALS" and Canada-specific offers drove business and garnered media attention by highlighting a busy schedule of seasonal arts and entertainment plus special value opportunities with incentives for visiting attractions and staying at hotels for multiple nights. Compared to the alternative of haphazardly slashing room rates, this positioning has helped to preserve ADR in the long term. "It is undisputable, that Greater Fort Lauderdale's reputation as a safe, welcoming, high value and increasingly upscale destination with appeal for both business and leisure travelers has played an important role in our recovery," said Nicki E Grossman, President of the Greater Fort Lauderdale Convention & Visitors Bureau.

Already a favorite of travelers to South Florida because of its convenience and numerous low-fare carriers, Fort Lauderdale/Hollywood International Airport continues to upgrade and expand facilities in order to meet higher demand. With more than 54,000 passengers moving through the airport on a daily basis, the facility is already back to last year's record-breaking levels. A great deal of activity is also occurring in the hotel sector, primarily in the luxury end of the market. A myriad of refurbishments have been completed or are underway, new developments such as Florida's first St. Regis Hotel have broken ground and recent openings include the 1000-room Westin Diplomat Diplomat Resort & Spa, which has already enjoyed several sellout periods, and the opening of the expanded Riverside Hotel in downtown Fort Lauderdale.

With a record of continuous growth since its opening in 1991, the Greater Fort Lauderdale/Broward County Convention Center is considered one of the most impressive, cost-effective and profitable facilities in the United States. A 230,000-square-foot addition brings the total gross square footage of the structure to 600,000. The center, combined with favorable airfares and a range of accommodations has also been a boon for convention business. In fact, Greater Fort Lauderdale has won business from organizations that were initially scheduled to exhibit outside the United States but have since changed their plans. An example is the XIX International Congress of the Transplantation Society, which will absorb 15,000 room nights in August 2002. For more information, contact the Greater Fort Lauderdale Convention & Visitors Bureau, 1850 Eller Drive, Suite 303, Fort Lauderdale, FL 33316; call 800- 22-SUNNY (in the U.S. and Canada)

The number of overseas visitors to Australia is expected to double by 2012, Tourism Minister Joe Hockey told travel industry experts today. Speaking at the Australian Tourism Export Council (ATEC) in Adelaide, Mr Hockey said the government has a ten year plan to double the number of tourists

The Tourism Minister was supported by his colleague Mark Vaile, Minister for Trade who said: "By supporting tourism and export growth we can generate long-term economic and social benefits for Australia."

The Pacific Asia Travel Association (PATA) Sustainable Tourism Committee has released the PATA Traveller's Code, a set of guidelines to help consumers travel in a responsible and sustainable manner. "PATA is pleased to offer some practical rules of thumb for the travelling public," said Mr. Stephen Yong, Director of the Association's Office of the Environment and Culture. "We hope that this code will raise awareness of sustainable tourism issues and the potential impacts of travel." The committee, chaired by Ms. Dawn Drew of National Geographic Traveler magazine, finalised the six-point code at the 51st PATA Annual Conference in New Delhi:

PATA Traveller's Code Sustaining Indigenous Cultures "Travel is a passage through other people's lives and other people's places."

1. Be Flexible Are you prepared to accept cultures and practices different from your own?

2. Choose Responsibly Have you elected to support businesses that clearly and actively address the cultural and environmental concerns of the locale you are visiting?

3. Do Your Homework Have you done any research about the people and places you plan to visit so you may avoid what may innocently offend them or harm their environment?

4. Be Aware Are you informed of the holidays, holy days, and general religious and social customs of the places you visit?

5. Support Local Enterprise Have you made a commitment to contribute to the local economy by using businesses that economically support the community you are visiting, eating in local restaurants and buying locally made artisan crafts as remembrances of your trip?

6. Be Respectful and Observant Are you willing to respect local laws that may include restrictions of your usage of or access to places and things that may harm or otherwise erode the environment or alter or run counter to the places you visit?

Newsletter - May 7, 2002