Real Estate Report: What were your primary areas of responsibility while with Federal Express? What mainly interested you in the position at HIW?

Torn Oliver: As Chief Operating Officer, I was responsible for our inter-national marketing, sales, information technology. and package delivery oper-ations activities, overseeing an organization with 80,000 employees and more than US $ 8 billion in annual revenues. The Holiday Inn brand enjoys unrivaled name recognition in the lodging industry. It's a global entity, with tremendous financial resources behind it from Bass PLC, our parent firm. I was intrigued by the opportunity to lead the charge to further expand the reach of this great brand and dramatically grow the distribution and market appeal of the Crowne Plaza product. Our hotels see more than 150 million travelers a year and operate in more than 60 countries. Those numbers are remarkable, but there's still significant market share to be won at all levels. My conversations with Bass PLC convinced me that their vision for Holiday Inn Worldwide was absolutely on target with mine. and I wanted to be part of the next generation of this company's success.

RER: Have you noted any striking similarities between HIW and FedEx?

Oliver: The similarities are greater than the differences, because the hospitality and air express industries are both service businesses. They're both extremely competitive, and both require you to stay on top when it comes to technology and marketing. Both have dozens of people who contact the person actually buying the service, so in every case, people end up making the difference between winning and losing a customer.

RER: Do you see an opportunity to institute a quality assurance process at HIW similar to the one you established at FedEx? What were the driving principles behind the FedEx program that might be relevant at HIW today?

Oliver: There already are some tremendous efforts under way to raise the level of quality experience across our system, plus I certainly see the opportunity to borrow on my FedEx experience in terms of establishing the underpinnings required for a successful program. Such a foundation is critical for several reasons. First, it tells management that quality is an equal component in any business decision model. Second it sends a message at all levels that quality cannot be compromised for the sake of profit or distribution. And last, it provides the financial and organizational support to ensure that people live and breathe the philosophy. Simply hanging up a few posters that say "We care about quality" and then doing nothing to support the process is a complete waste of time. Anyone needs to know that they have the ability to shut down the "production line" if it means quality would otherwise suffer.

RER: After a few months on the job, what are your views so far regarding Holiday Inn products and brand names?

Oliver: The dynamics of the lodging industry mean that our company's success ultimately will be driven by our ability to create and support segment-leading brands which meet a wide range of consumer needs. The Holiday Inn brand has attempted to meet the expectations of a steadily widening variety of market segments, all under the same brand flag. It is increasingly apparent that the brand's identity has become confusing to the guest and lost "mind" share in the marketplace. Improving the company's efforts to differentiate our product line will require strong, focused leadership and management accountability at an individual brand level, and that's why I have restructured the management team to create a brand president role for the Holiday Inn, Express. and Crowne Plaza brands with worldwide responsibilities. Craig Hunt, a 25-year veteran of Holiday Inn and most recently head of our Americas Franchise Division, has been named President, Holiday Inn Group. John Sweetwood, formerly our chief marketing officer, has been appointed President, Express and Leisure Group. And Tom Arasi is joining us from Tishman Hotel Company as President. Crowne Plaza Hotels & Resorts. I'm confident these gentlemen are the right people to lead these brands to their full potential in the marketplace.

RER: Does the Bristol transaction signal that in the future HIW will mainly focus its attention on franchising hotels, or will the company continue to both own and operate hotels?

Oliver: We are still quite active in the hotel management side of the business, with more than 100 Holiday Inn and Crowne Plaza hotels operating as company-managed properties around the world. We will continue to develop, and manage where it makes sense. The Bristol transaction was simply an intelligent move for Bass PLC and for Bristol both in timing and in its intent.

RER: In this regard, is there a difference in HIW's strategy in the U.S. versus other areas of the world? And are there circumstances in which HIW would be willing to make direct capital investments in hotels?

Oliver: Franchising is our mainstay growth strategy in the U.S. and has been for some time. As an expansion vehicle, it is still maturing in some parts of the world, making joint ventures. management contracts. and equity interests more common in other regions. We are seeing greater interest in franchising, particularly in Europe. We are focused on growing distribution throughout the world, and will use whatever method is appropriate for a given region, including investing in development in the U.S. when it makes sense.

RER: It appears that recently the Holiday Inn brand name has been disassociated from Crowne Plaza. Is this part of a strategy to separate or spin-off the Crowne Plaza division? What are the benefits?

Oliver: The company established Crowne Plaza as a separate brand in September 1994 in recognition of its growing recognition among upscale business and leisure travelers. It is very much a part of our growth strategy for the future. The benefits of the separation? I'd say the benefit comes in the realm of clearly defining the product for the guest, given that the Holiday Inn product line has been wide-ranging in appeal and customer base.

RER: Is there now a more crystallized view toward Crowne Plaza's product definition and brand positioning? Where do you see Crowne Plaza fitting into the current competitive set of upscale, full-service hotels?

Oliver: Crowne Plaza has a loyal following, but one of my initial objectives is to more clearly define and establish Crowne Plaza's market position in the global marketplace. We want to expand the brand's distribution dramatically, so when people travel, a Crowne Plaza will be available. Once we've more clearly established a global presence for Crowne Plaza, I see the brand taking on the competition on an equal playing field by winning new customers and garnering a level of "guest preference" that creates real market share.

RER: Do you believe that franchising will work well in the luxury segment?

Oliver: With the right brand, the right investor and operator, and the right support from the franchiser, yes.

RER: Regarding the launch of Express, Select, and SunSpree Resorts, are there significant growth opportunities for these new brands outside the U.S., particularly in Europe, Asia, and Latin America?

Oliver: Express already has been embraced outside the U.S., with properties being built or converted in several European countries, Latin America, and in Asia Pacific. Holiday Inn Select and Holiday Inn SunSpree Resorts have been exclusively Americas products and it's too early to speculate what opportunities these products have elsewhere. We're always assessing growth opportunities for each of our products and it's something we'll continue to evaluate.

RER: What plans for further leveraging the Holiday Inn brand name are you considering:  all-suite hotels, extended stay, timesharing, gaming, restaurants, or cruise lines?

Oliver: I'm not anxious to reveal a competitive advantage, so I'll be some what cryptic here. Suffice to say, the extended stay market offers tremendous opportunity and we'll be there. As for the other categories you mentioned, we're constantly evaluating where it makes sense to leverage our brand equity. Several of those categories have some possibilities, so don't count us out anywhere.

RER: Are there plans to leverage further the reservations and yield management Systems HIW has developed by separating those functions and/or allowing them to service other hotel companies for a fee?

Oliver: Our reservation and yield management systems represent a tremendous competitive advantage for us. Anything's possible, but I'll reserve judgment on how much of that capability I want to offer to someone out to take market share away from our brands.

RER: What geographic markets do you believe have the greatest growth potential for HIW?

Oliver: The opportunities for our brands are fairly limitless, subject to some competitive issues in certain markets where a substantial amount of product exists. Asia Pacific holds great potential, as do most markets in Europe, The Middle East, and Africa. There are still markets in the Americas where growth potential is high, including Latin America and Mexico. Looking at Crowne Plaza specifically, there are some major markets in the U.S., for example, that are absolutes -we should and will be there.

RER: Is technology likely to be a big focus for HIW under your admin-istration?

Oliver: Without question. It makes a significant amount of what we provide to the owner, the operator, and the guest possible.

RER: What are the competitive market forces most influencing the company's plans?

Oliver: We do our best to anticipate the market, but in terms of what we observe and consider, the moods of the financial markets certainly, as well as hotel investor focus and overall business and travel trends. There's been a heavy emphasis on investment in the limited service in recent years and stories about consolidation in the up-scale brands have run almost weekly of late. We'll probably see some further re-balancing as the new profile of the industry becomes apparent.

RER: What key challenges will HIW face over the next few years?

Oliver: Maintaining a consistent quality experience across a growing system and constantly reinforcing our brand messages to an ever-changing customer base. It's a bit of three-dimensional chess.

RER: What is your vision of the successful, leading-edge hotel company in the year 2000 and beyond?

Oliver: In my book, a successful, leading-edge hotel company will always be one that does whatever it takes to continuously re-establish itself in growing markets, offering well-supported powerful brands to its investors. and creating a consistent quality experience across the board for its guests.

The Real Estate Report is published by KPMG's National Real Estate, Hospitality, and Construction Practice. © 1997 by KPMG Peat Marwick LLP All rights reserved. For additional information email KPMG.

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