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Strong Brand Name : How To Became Largest Hotel Operator Worldwide

» Posted by on Dec 22, 2013 in Letter | 1 comment

Strong Brand Name : How To Became Largest Hotel Operator Worldwide

 

Hilton Worldwide Inc , the world’s largest hotel operator, raised roughly $2.34 billion in its initial public offering last week.

That growth came not by expanding Hilton’s empire of company-owned hotels. Instead, the New York private-equity firm has taken a more economical route—renting out Hilton’s brand name to franchisees.

This strategy is only executable with strong brand name.

Of the 164,000 rooms added by the company since 2006, more than nine out of 10 were franchised, according to Hilton’s securities filings.

The strategy is a revved-up version of an increasingly popular tactic in the hotel industry: rent out brand names, booking systems and even loyalty-points programs, collecting a 5% fee on room revenue and avoiding costly overhead tied to building and owning properties.

Hilton’s brands now fly their flag at properties housing 672,000 rooms world-wide. About 70% of those rooms are owned and operated by someone else, according to Hilton filings. Before Blackstone acquired Hilton, franchise hotels accounted for about 60% of the rooms.

 

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