Holiday Inns, Inc.
Holiday Inns, Inc.
Wholly Owned Subsidiary of Bass PLC
Incorporated: 1954 as Holiday Inns of America
Sales: £4.04 billion (US$6.52 billion)
Holiday Inn Worldwide, the descriptive trade name for Holiday Inns, Inc. is one of the largest international hotel chains, with approximately 1,600 hotels and 320,000 rooms. The company is credited by industry analysts with advances in standardization of service quality across a global network of independent franchises, guaranteed room rates, and computerized reservations. Holiday Inns is a leader in the U.S. hotel industry in the midprice market, the slowest growing and most competitive market segment. Approximately 85% of the Holiday Inns are operated by franchisees.
The historical importance of the Holiday Inn corporation has not yet been evaluated. Yet its proper place is suggested by cultural historians like Warren I. Belasco, whose book, Americans on the Road: From Autocamp to Motel, 1910–1945, about the rise of 20th century tourism in the United States, places the Holiday Inn company alongside Marriott and McDonald’s in importance.
Kemmons Wilson founded the company in 1952, following a motor tour where he and his family encountered unpleasant accommodations. Many Holiday Inns had chaplains on call, and the Bible in each room was opened to a new page daily to create a caring and home-away-from-home atmosphere.
According to Belasco, the Holiday Inn style that materialized in the 1950s was “already outlined” by 1930. The popularity of automobiles and touring, the lure of the newly designated wilderness areas, the availability of campgrounds, and the infatuation with being a tourist contributed to the Depression-era roots of the Holiday Inns. Americans continued to take auto vacations in the mid 1930s; rail and Pullman revenues fell in 1933 while expenditures on gas, oil, and other expenses for vacation motor touring remained unchanged. Kemmons Wilson was aware of some early motel industry issues of the 1930s: the negative image of motels, the question of whether to employ women in motels, and the practice of bargaining for room rates in the absence of fixed nightly charges.
In August 1952, when Wilson opened the first Holiday Inn in Memphis, Tennessee, it was a 120-room property that could boast, according to the company, “a private bath, air conditioning and telephone,” as well as then-luxury symbols, a swimming pool, free ice, free parking, and dog kennels. Children under 12 stayed free. In 1957, when the company went public, trading its stock on the over-the-counter market, the entire offering sold on the first day. Five years later, Holiday Inn’s stock was traded on the New York Stock Exchange.
In the 1960s, Holiday Inn hotels were opened in Canada and throughout Western Europe, while continuing to expand in the U.S. at a rate of what the company called one new property “every two-and-a-half days.” By 1970, the chain estimated its gross sales at more than $1.2 billion.
In 1972 the “Holiday Inn University,” in operation since 1959, opened special facilities in Olive Branch, Mississippi, a few miles outside Memphis. The Holiday Inn University contributed to the consistency of the company’s service by providing for the education and professional advancement of its franchisees and property managers, who were offered the opportunity to study management topics, housekeeping systems, and employee relations in short-term, intensive seminars on a college-like campus, complete with sports facilities.
Even after Kemmons Wilson’s retirement in 1979, and well into the mid-1980s, new properties were being constructed at company estimates of “one every 7 days.” When Wilson retired, he turned the management over to university graduates with degrees in hotel management, a sign of the evolution of an industry that Wilson had done so much to help develop. As Nation’s Business for March 1989 pointed out, Kemmons Wilson was a classic American entrepreneur: “being in business means more to him than the kind of business he is in.”
Michael Rose served as president from 1979 to 1984, when he became chief executive officer of Holiday Corporation, the holding company for the hotels and gambling casinos. At that time, Kenneth Hamlet, with a B.S. degree from the Cornell University School of Hotel Administration, succeeded Rose as president of the hotel company.
Because properties industrywide became greatly overbuilt during the 1980s—as much as 13% overbuilt in every major U.S. city—the company experienced a downturn in profits of nearly $60 million in 1986 for the first time in its history. In 1986 the company was the first U.S. motel chain to open in the People’s Republic of China with the Holiday Inn-Lido Beijing Hotel, a venture which brought less press visibility or profits than anticipated and was in part responsible for the drop in profits.
The decline in profits paved the way for Bass PLC in the United Kingdom to purchase seven European hotels in 1987. The purchase was in keeping with a trend in the 1980s that saw three major hotel chains acquired by British parent companies: Howard Johnson, Rodeway Inns, and Travelodge. Because the U.S. market for hotels was more competitive and more overbuilt than in Europe, two of the three chains, Howard Johnson and Rodeway, were re-sold shortly after takeover.
In 1988 Bass purchased Holiday Inns International, which included all properties outside of North American, plus 13 in the United States. In February 1990 Bass concluded the buyout of Holiday Inns from Holiday Corporation at a total cost of $2.23 billion. That same year, Holiday Corporation had created a separate company, Promus, consisting of the gambling casinos in Nevada and New Jersey, the Hampton Inns chain, and the Embassy Suites and Homewood Suites hotels. Michael Rose, chief executive officer of Holiday Corporation, left that post to become chairman of Promus. Bass acquired Commonwealth Hospitality Ltd., 38 Canadian hotels with 8,700 rooms primarily operating as Holiday Inns. In Great Britain, Bass began developing Holiday Inn Garden Court hotels in addition to the Holiday Inn hotels acquired.
The company’s location in Memphis was detrimental to its public visibility. For nearly four decades, according to the summary published in Public Relations Quarterly in Summer 1987, the company had operated as if it had no competition with virtually no marketing communications at all until 1975. Its location in Memphis severely hampered its press relations, and marketing communications operations were regionally-focused rather than nationally targeted. Each international region handled its own advertising. The communications staff had little experience in other allied segments of the hospitality, travel, and leisure industries.
The analysis of communications management in the Public Relations Quarterly of Summer 1987 pointed out that because of the regionalism of the company, most communications operations were directed to employees, a necessary procedure in a service company where staff came face-to-face with customers. There were no on-going contacts with the trade and industrial press. At the helm there was considerable skepticism about the effectiveness of press relations and their relevance to sales. Most efforts of Holiday Corporation were aimed at improving the local reputation in Memphis of the company as a good citizen, and working to improve the civic climate through philanthropy. At the corporate level, the communications director saw his job as one where his primary responsibility was to “communicate the values of the chief executive to mid-management and subsidiaries.” He thought it impractical for top management to attempt to communicate worldwide in any medium. Following the profits downturn in 1986, communications operations were brought into line with industry practice. Under Hamlet’s leadership, the company placed its emphasis on technology in the late 1980s, and developed completely refurbished communications and marketing operations staffed by hotel industry experts whose goal was to outmarket the competition.
Bass has been chiefly involved in the production and distribution of beer, soft drinks, and on-premise retailing. Vertical integration between these businesses and Holiday Inns resulted in the use of Bass’s existing capabilities in customer service industries, property management, and integrated data base networks. In addition, one of Holiday Inn’s achievements has been its computerization of a global reservation system, Holidex, considered innovative when it was introduced in 1965, and in its third generation at the beginning of the 1990s. Another company achievement has been the standardization of service quality and room rates. In 1990, Kenneth Hamlet resigned as president of Holiday Inns, Inc., and was replaced by Bryan Langton, head of the Bass Hotels and Restaurant Division. Langton also serves as chairman and chief executive officer of Holiday Inn Worldwide.
Belasco, Warren James, Americans on the Road: From Autocamp to Motel, 1910–1945, Cambridge, Massachusetts, MIT Press, 1979.