By Cheryl Hall, The Dallas Morning News
Knight Ridder/Tribune Business News 

Jun. 30--Fred Kleisner simply had to interrupt his first-class neighbors during a flight earlier this month. Two passengers were trying to figure out what the catch was to Wyndham International's free long-distance offer announced in the newspaper that day. 

Nothing, it seems, hacks off road warriors more than exorbitant phone charges tacked on to already pricey overnight stays. And their conversation had become fairly animated. 

So the 57-year-old chairman and chief executive of the Dallas-based hotel company introduced himself and assured his traveling compatriots that the deal was indeed for real. 

"I told them the next time they traveled, they should bring along their personal phone directory, and all the calls would be on us," says Mr. Kleisner, still amused by the chance encounter of the fruitful kind. 

Offering free unlimited long-distance, local telephone, fax, copying and high-speed Internet service at Wyndham's 152 mainland U.S. hotels, resorts and extended-stay properties is Mr. Kleisner's latest salvo in a high-stakes battle for the almighty business traveler. 

The "catch" to these wired freebies is that if you're not already a member of the company's loyalty program, Wyndham ByRequest, you have to sign up for it and stay at one of its hotels by Sept. 30. Mr. Kleisner prefers to think of it as a "hook." 

So far, it's been an effective one. The pace of people signing up for Wyndham's "guest recognition program" has tripled since the enhancements were announced in middle of New York's Times Square on June 3. 

Mr. Kleisner hopes the hotel stay requirement will jolt the sluggish summer travel season and create brand preference in the fall when minds return to business. 

"We're closing in on 425,000 active users," the hotel CEO says cheerily. "Our goal was to be at 500,000 by the end of the year. I think we're going to make it." 

Wyndham International, the fourth-largest U.S. hotel name, has been fighting for its life in recent years, saddled with too much debt from an ill-conceived hotel-buying binge that began in 1997. 

It's far from out of the woods -- hence its current stock price of about a buck a share. But Wyndham's condition is much improved from when Mr. Kleisner arrived on July 9, 1999 -- nine days after New York-based Apollo Real Estate Advisors injected $1 billion in equity into the faltering company. 

The investment firm's mandate to him was daunting: Reduce and refinance the staggering $3.7 billion in debt, bring shaky operations up to snuff and transform Wyndham's nebulous name into a powerful hotel brand. 

Exactly three years later, Mr. Kleisner feels significant headway has been made on all fronts. 

At the time, Wyndham was a loose-knit confederacy of nine acquired companies, each with its own president, headquarters and market strategy. The annual bill for all those corporate offices hit $112 million in 1999. Today, the tab for corporate overhead runs half that, and everything is consolidated in Dallas. 

"The flattest, safest road for us to run on is full-service, upscale hotels and luxury resorts," Mr. Kleisner says of his decision to sell 138 properties that didn't fit that narrow focus. The keepers -- including such renowned hotel names as The Boulders in Arizona -- have since been stamped with the Wyndham brand. 

Eighty-three of the unwanted properties have fetched a total of just over $1 billion. Mr. Kleisner says he's standing firm on his asking price of $1.5 billion for the remaining 55 limited-service, midmarket hotels that operate as Hiltons, Marriotts and the like. 

He'd have all that money in hand had it not been for Sept. 11. 

Mr. Kleisner and Wyndham's chief financial officer, Rick Smith, landed at La Guardia Airport at a little past midnight on that fateful day, primed to sell Wyndham's remaining unwanted hotels for a cool $1.6 billion. 

"I walked out of my loft in SoHo at 8:51 [a.m.], three minutes after the first plane's impact," he recalls with post-tragedy precision. "Someone pointed to the Twin Towers, and I looked up. I thought there'd been a terrible accident involving a small plane and went on to the subway." 

By the time he got to the Midtown offices of his investment bankers, life had been upended. Within 72 hours, it was clear that Wyndham's two deals were on indefinite hold. 

For the next two weeks, Mr. Kleisner and Mr. Smith camped out in quarters borrowed from J.P. Morgan Chase on Park Avenue while they negotiated crucial breathing room from Wyndham's 70 lenders. 

Bargain hunters immediately moved in, offering $1.35 billion in cash for the 58 hotels. "We told them 'no dice,'" Mr. Kleisner says. Wyndham has since sold only three hotels, he says, and the company will wait out the soft market a while longer. 

"We had no reason to sell to bottom fishers once we had our bank waivers," he says. "On the other hand, it was good to know that we could have sold every one of these hotels during the cleanup period of the perfect storm." 

That's what Mr. Kleisner calls the fourth quarter of 2001, when guests vanished and business was severely tested. Wyndham's already battered stock price hit a low of 34 cents a share and came perilously close to being booted from the New York Stock Exchange. 

Today, occupancy at Wyndham properties stands around 73 percent. That drops only slightly when its unbranded hotels are added to the mix. That's enough cash coming in to handle the debt payments, Mr. Kleisner says. 

The key to continued recovery in both occupancy and profit margins will be grabbing more of the 7 million frequent business travelers, who typically pay 25 percent more for lodging, food and beverage than the leisure traveler. 

"Marketing gurus have been telling us for the past 10 years that if you solve the problems of your customers, they'll beat a path to your doors," says Mr. Kleisner. 

That's where free long-distance reared its formidable little head. 

Just as Mr. Kleisner had explained to his most skeptical audience -- a group of cynical New York investment bankers -- hotel revenue from telephone charges has plunged as cellphone-toting consumers refuse to pay those rates. Yet Wyndham, like most hotels, gets volume discounts, so the more its customers use its phones, the less each minute costs. 

"Basically we asked, `Could someone conceivably spend 10 hours of a 24-hour period on the phone?' Perhaps, but not likely," he says. "There's no incremental cost for us, and it's a huge benefit to the customer." 

One of Wyndham's corporate clients books 300,000 room nights a year for its employees and estimates that it spends $20 a night on hotel phone fees. Kick in free high-speed Internet access, faxes and copying services, and the hotel company figures it can save this major accounting firm $6.75 million in a year. 

For Wyndham's biggest corporate client, IBM Corp., there is more at stake than money. There's the wear and tear on road warriors who often get hit with a couple of hundred dollars in unexpected (and embarrassing) phone fees because they've hit the wrong access codes, says Tony Angelo, the director of worldwide employee disbursements for Big Blue. 

"The folks at Wyndham are very progressive," Mr. Angelo says. "They're seriously taking into account the needs of their customers and listening to us." 

Also high on the aggravation scale is the $3.50 soda in the mini-bar -- and Mr. Kleisner plans to salve that irritant, too. 

"We're going to take the price of sodas and snacks -- the nonsinful stuff -- down to vending machine levels within the next 60 days," he says. "There are all sorts of things hotels do that are short-sighted and do nothing but tick off the customer." 

When Mr. Kleisner joined Wyndham in 1999, the company's marketing folks were planning a loyalty program that wasn't based on Wyndham points for frequent guests. 

Mr. Kleisner, who came from Starwood Hotels & Resorts Worldwide Inc. where he'd been president of the Americas division, needed convincing. 

"My opinion was: I may not like it, but travel points are the opiate to the traveling public. I thought we'd have to become pushers as I had been in the past." 

But the customers they surveyed said they rarely redeemed hotel points, and when they did, they usually traded them for airline miles. 

"That didn't say much about building hotel brand loyalty," says Mr. Kleisner. "It's not viewed as a privilege or an award. It's a right. It's become just another form of currency." 

When asked what they really wanted, customers said cater to their individual wants -- be it a hypoallergenic pillow or a Bud Light beer. 

"So if you say you want a room on an upper floor, king-sized bed, no-smoking near an elevator, and that you like Diet Coke and Frito-Lay potato chips and you enjoy reading The Dallas Morning News, we'll put them in your room for no extra charge," he says. 

And yes, travelers want those airline points. 

So you get your choice of points from 13 airlines instead of ones from Wyndham. 

Mr. Kleisner says it will be difficult for competitors to follow suit because they have hundreds of franchisees to placate. 

Wyndham owns 76 percent of its hotel rooms and has only a couple of dozen franchisee relationships. 

"We got the whole company on board with a half-dozen phone calls," he says. 

"Our competition would have to rent a ballroom in Las Vegas, deal with multiple layers of franchise constituencies and maybe have 75 percent participation three years later." 

Wyndham recently canned its plans for a $750 million debt offering, saying terms for the sub-investment-grade bonds were too onerous for shareholders. 

Mr. Kleisner, who's been in the hotel business for 38 years and has weathered five recessions, gives the impression that this delay is no big deal. The company has time to wait for the recovery to solidify. 

"People who watch growth on a daily basis are the same people who like to watch men fish or paint dry," Mr. Kleisner says. "I want to see sequential growth, and I'm seeing that now." 

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(c) 2002, The Dallas Morning News. Distributed by Knight Ridder/Tribune Business News. WYN, HLT, MAR, IBM, HOT,