Hilton Group to sell hotels business to sister company in the US
15 Oct 2005
London:
The Hilton Group, UK, is in talks to sell its international
hotels business after receiving an indicative offer from
sister group Hilton Hotel Corporation, which controls
the brand in the US.
The
deal, thought to value London-listed Hilton at £3.6bn,
would split the business from the group's other main division,
betting shop chain Ladbrokes.Weak trading conditions in
Britain, and in London in particular since July, would
need to be reflected in any offer. Industry revenues per
available room - an important measure for hotel groups
- was down by 10% in August.
In
common with other European hotel firms, Hilton Group has
been shedding property assets and moving to the kind of
management and franchised business model which has long
been the norm in the US. Hilton Corporation will be attracted
by the international business's lower tax rate of 20 per
cent. Marriage talks between the two groups follow a lengthy
engagement, which started eight years ago with a marketing
alliance. David Michels from Hilton Group and Hilton Corporation
chief executive Stephen Bollenbach sit as non-executive
directors on each other's boards and have overseen a gradual
strengthening in ties between the two firms.
The
500 hotels which operate under the Hilton flag are supported
by a unified sales force, reservation system and - most
profitably - a single loyalty programme. The ties have
benefited all 2,700 hotels within the two businesses.
The
Hilton empire was founded in San Francisco by Conrad Hilton
in 1919 but did not start expanding beyond America until
30 years later. In 1964, the company split in two, with
Hilton Group focusing on growth in what have become known
as "gateway cities" outside the US.
In
1987 the international business was acquired by Ladbrokes,
which
was then made up of a broad conglomerate of leisure businesses.
A decade later the two groups signed a marketing alliance
- a deal widely seen as a prelude to a merger.