November 2022, Virtual
21 November 2022, Hilton London Metropole
When the board of Hilton Group rather haughtily said it had “noted the speculation in this morning's press with regards to a possible sale of the Hilton International division” it is was being just a shade disingenuous.Such speculation has been going on for months and some of it has been coming from its near namesake across the Atlantic the Hilton Hotels Corporation (HHC).Twice this year, senior executives of HHC, including no less, the co-chairman and ceo Steve Bollenbach and the president and chief operating officer Matt Hart, have spoken about how closely the two Hilton companies work together.David Michels, ceo of the UK-owned Hilton Group which operates the Hilton International chain, has also spoken of his willingness to see a closer tie between the two.To the outsider, a merger or take over seems to be the obvious course. “The interesting thing is,” said John Melchior, a UK travel and hotel consultant, “is that 95% of people think they are the same company. This includes the corporate and the leisure travel agent. You ask them if there is any difference between a Hilton in Paris and a Hilton in Oklahoma and they will say it is the same company.“They have never really understood that that is how the market looks at them. They are seen together at exhibitions and have negotiated together for the past five or six years. If the sale does go through, I don't think it will make a huge difference.” What then has stopped it? In the four years since 9/11 the hotel business has globally had a bad time of it. Lack of customers combined with poor rates has prevented much movement in the market. With the good times returning in 2005, most notably in the US and UK markets, this inactivity seem to have ended. The year has seen much movement in the hotel industry with Starwood Capital buying the Le Meridien chain and companies like Whitbread, Hilton International and the InterContinental Hotel Group selling off properties.If a buy up is what HHC has had in mind all along then Hilton International's decision to sell off properties worth £400m has reduced its market price and made it a more attractive proposition for a purchaser.But there is a far greater incentive to bring the Hilton hotels all under one company roof. “Both sides see it as sensible to be global if you want to play in the market,” said Mr Melchior. “The US Hiltons can not go anywhere except in the US.“They see the other global brands, Marriott, InterContinental, Accor dominating globally. If Hilton is to be part of the world's Top Five hotel companies, they have got to go global.”Another industry observer who asked not to be named pinpointed another reason why Hilton might want to pull together.“Whenever I have dealt with them, they seem not to have kept up with the times. They are never the pioneer, always the follower.“To the travel trade, they don't seem to have a clear strategy. We talked to them about a deal last year and they did not seem to have the right data while other chains we talked to did.”But if the time and price seem right - HHC has reportedly bid £3.6bn - is there anything likely to stop the deal? The Hilton Group seemed to go out of its way in its statement to stress that deal was far from done.There are still cultural differences between the US and UK operations and the leaders on either side are strong characters and tough negotiators. Mr Melchior said if it fell apart it could well be due to the personalities.But at the same time there are equally compelling reasons why a sale or at least a merger is in the best interests of Hilton as a whole. It is also what much of the industry seems to expect.“If it does not happen within the next three to four months, people will be saying it has failed,” Mr Melchior said.