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Six Continents Hotels Expanding Brands and Developing Prototypes; Plans to Add 250+
Properties Over the Next Few Years
By Caroline Wilbert, The Atlanta Journal-Constitution
Knight Ridder/Tribune Business News 

Sep. 23, 2002 - Despite the down economy, the development engine at one international hotel company is revving up. 

Six Continents Hotels, which has its North American headquarters in Atlanta, is developing two hotels locally. The properties --- an Inter-Continental in Buckhead and a Holiday Inn in Gwinnett County --- signal the company's shifting strategy toward smaller midprice hotels and an expansion of its upscale brands. 

The Gwinnett Holiday Inn is the first of a new prototype, which is smaller than a typical Holiday Inn and designed to appeal to today's franchisees, partly because it costs less to develop. The company expects this new prototype to be used in the bulk of new Holiday Inn development over the next few years. 

The Inter-Continental is part of a larger push to expand the upscale brand in the United States. The company plans to announce more details on its plan for Inter-Continental today. 

"We see the brighter side of tomorrow, and it suggests this is a great time to get a shovel in the dirt," said Stevan Porter, president of the Americas division. 

Six Continents Hotels is part of London-based Six Continents PLC, which also owns pubs and other businesses. Its hotel brands include Holiday Inn, Inter-Continental, Crowne Plaza and Staybridge Suites. The company, owns, operates or franchises more than 3,270 hotels in about 100 countries. 

Six Continents, like the rest of the hotel industry, has seen income fall since Sept. 11. Still, Six Continents has capital because its parent company sold its beer business two years ago for 2.3 billion pounds ($3.6 billion). 

The development is a "great way to use the strength of our balance sheet," Porter said. 

Some analysts downplay the significance of the company's development plans. Building one hotel at a time is too slow, said Mark Abramson at Bear, Stearns. He and many other analysts and investors say the company needs to make an acquisition. 

Eventually, Six Continents either has to give the money back to investors or spend it. "Investors have been waiting two years and they are losing patience," Abramson said. 

Porter said the company hasn't yet seen a deal "that passes muster." 

In the meantime, the company is expanding its brands and spending its money by developing prototypes and adding 250 to 300 properties per year over the next few years. Though some will be franchisees, the company is also developing its own hotels in brands that once were almost exclusively franchised, such as Holiday Inn and Staybridge Suites. 

The "credit crunch" has made it more difficult for franchisees to get financing, said Jonathan Kurnit, senior vice president for franchise and real estate development. Plus, the company wants to "lead by example," he said. 

On the upper end, development allows the company to expand its reach in the United States, where its brands, Crowne Plaza and Inter-Continental, aren't as well-known as competitors. 

HERE'S A LOOK AT PLANS, BY BRAND: 

--Staybridge Suites by Holiday Inn: Six Continents jumped into the extended-stay game in 1988, a time when many companies were expanding in this area. Staybridge is one of the more upscale brands within extended-stay. 

The extended-stay niche --- which caters to management trainees, consultants, people relocating and other long-term guests --- has outperformed the rest of the hotel industry during the downturn. 

Six Continents' strategy, historically, has been to franchise the vast majority of Staybridge Suites. However, the company plans to build 20 to 25 itself per year over the next few years. 

One reason, according to Kurnit, is that Staybridge "is a very attractive financial performer." 

The other reason is to help grow the brand. "The name of the game with Staybridge Suites is critical mass," he said. "We want to get to 100 properties as quick as we can." 

At present there are about 40 hotels. 

--Holiday Inn: Holiday Inn, which turned 50 this year, has great market penetration. The challenges are to keep the properties in top shape, to keep the brand fresh and to keep growing when Holiday Inns are already in every conceivable market. The company has added, over the years, new versions of the old standby. 

There are Holiday Inn Selects, Holiday Inn Expresses, Holiday Inn SunSpree Resorts and Holiday Inn Family Suites. In total, there are more than 2,700 Holiday Inns, the vast majority in the United States. 

Holiday Inn Express has been the fastest grower with more than 1,200 of the budget version, which was launched in 1991. 

Still, Porter thinks there is room for another 500 Holiday Inns in the United States. Some will replace old hotels and some will be built in fast-growth pockets, like Gwinnett County. 

The new prototype, he said, is the way to keep growing. Simply put, it is halfway between the Holiday Inn Express and the regular Holiday Inn. A traditional Holiday Inn has 185 rooms. A Holiday Inn Express has 78 rooms. The new prototype will have 145. It will offer more amenities than Express, fewer than Holiday Inn. 

The company plans to develop 20 to 25 of its own Holiday Inns per year over the next few years. Ideally, franchisees will add three times that many per year, he said. 

--Inter-Continental: The upscale international chain, which Six Continents bought in 1998, isn't as well-known in the United States as many competing chains. Six Continents aims to change that. 

It has bought hotels in some markets and is building in other markets, including Atlanta. There are three new hotels in the pipeline, and five more in the discussion phase, Porter said. 

There about 135 Inter-Continental hotels, though most are outside the United States. The Atlanta hotel, which isn't yet under construction, will be on Peachtree Road in Buckhead, near the Atlanta Financial Center. 

Almost all Inter-Continentals are company-owned. The brand plays in the niche just below the Ritz and Four Seasons. 

--Crowne Plaza: In 1994, the company relaunched the Crowne Plaza brand --- originally introduced in 1983 as a product extension of Holiday Inn --- as a separate brand to better reflect its upscale market image and business traveler appeal. 

There are more than 150 Crowne Plaza Hotels and Resorts in 40 countries. About half are company-owned. Porter said the company will add five to 15 Crowne Plazas per year. 

-----To see more of The Atlanta Journal-Constitution, or to subscribe to the newspaper, go to http://www.ajc.com 

(c) 2002, The Atlanta Journal-Constitution. Distributed by Knight Ridder/Tribune Business News. SXC, 


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