I Want My Century 21!
Leave it to Robert W. Pittman to come up with a catchy rallying cry for his sales force. As the new chief executive of Century 21 Real Estate Corp., Pittman--perhaps best known as a founder of MTV Networks and the man who turned around Six Flags Corp.'s theme parks--shares a simple message with the real estate brokers and agents he meets: "You either make dust or you eat dust." It's vintage Pittman. The 42-year-old entertainment-industry hotshot is out to reshape the Century 21 franchise into a marketing powerhouse. Not only will it sell homes, but Pittman envisions a "virtual home store" able to offer and sign up customers for a wide range of discounted home services--all via an agent's laptop computer.
Until last August, Century 21, a franchise operation of more than 6,000 offices in 11 countries, was owned by Metropolitan Life Insurance Co. "The overall philosophy of companies that own residential real estate brokerages has been to try and push their proprietary products through the system," notes Michael G. Mueller, a lodging analyst with Montgomery Securities of San Francisco. By and large, that hasn't been an effective strategy, he says, because brokers are uncomfortable marketing only one company's product. Century 21 did turn a small profit for MetLife, but "there is only so much capital and so much attention to go around, and it was a distraction," says a MetLife spokesperson.
In August, HFS Inc. paid $200 million in cash and stock for the brand. As the world's largest franchise service business, HFS owns brands such as Ramada and Howard Johnson. It sounds ho-hum, but HFS is a fast-growing, entrepreneurial operation (box).
Pittman is taking a fresh approach to the fragmented real estate brokerage industry. The plan: play on the growing importance of brand names and make Century 21 a one-stop shopping center. "Century 21 is the big sleeping giant of this business," says Pittman. His high-tech vision has homeowners sitting down with an agent and ordering up cable service, appliances, a mortgage, insurance, and so on--all at discounts that HFS has negotiated with vendors. "Century 21 is not about buying and selling houses," says Henry R. Silverman, the CEO of HFS. "It's a marketing and distribution opportunity to the 400,000 to 500,000 people buying homes through us."
"CASH-FLOW MACHINE." First and foremost, Century 21 must convince brokers that there is a solid economic benefit to being affiliated with it. Growth in its franchise system was slight under former management. And "we have yet to see how much these preferred vendor arrangements will contribute to the broker's business," notes Mueller. But with an aggressive new management and a market share nearly three times that of the next competitor, and growing, Pittman has a powerful lure for new franchisees.
When Silverman needed someone to implement his grand plan for Century 21, he turned to Pittman. He had met Pittman in 1990 when the two worked on a joint venture between Pittman's employer, Time Warner Inc., and the Blackstone Group, where Silverman was general partner, to buy Six Flags. He was impressed: "When Pittman started at Six Flags, cash flow was $100 million," he says. "When it was sold 3 1/2 years later, cash flow was $170 million."
The concept at the heart of the plan to reshape Century 21 is the same one that has made HFS what analysts call "a cash-flow machine." The idea: build a network of preferred vendors that gain market share and access to Century 21 customers in return for fees that are split between HFS and franchisees and volume discounts. At the same time, increase brand name awareness and revenues by inking licensing deals for the Century 21 name.
The pieces appear to be falling into place. In October, 1995, the company signed a 20-year licensing deal with a Dallas-based home improvement chain, AMRE Inc. AMRE had been the biggest licensee of Sears, Roebuck & Co., operating as Sears Home Improvement Centers. AMRE will now operate under the name Century 21 Home Improvements and pay Century 21 annual fees of $11 million or 3% of revenues, whichever is greater. Brokers making referrals to AMRE that pan out earn referral fees.
AGGRESSIVE ADS. A steady stream of deals has been announced in recent months. Century 21 franchisees now get a volume discount from AT&T and can offer discounts on cars through an agreement with Potamkin Fleet Sales of New York, a large General Motors Corp. dealer. The brand name will get more exposure through a deal with a book publisher for a series of how-to guides for homeowners, a joint venture to launch a revamped magazine, Century 21 House & Home, and a deal with GE Capital Consumer Card Co. to issue co-branded credit cards using the Century 21 and HSF hotel brand names.
Also in the works are deals with mortgage lenders, home-security companies, and online services. Pittman developed technological expertise during his tenure as head of Time Warner Enterprises. He currently serves on the boards of America Online Inc. and 3DO Co., a company focused on interactive multimedia.
Implementing technology across the vast franchise network may prove difficult. "What HFS and Century 21 are trying to do is take existing technology and push it into a business that hasn't been very receptive to it," says Steven M. Friedman, director of the housing segment of E&Y Kenneth Leventhal Real Estate Group. HFS's recent acquisition of Electronic Realty Associates, a pioneer in applying technology to the real estate business, may give Century 21's efforts a jump start.
Pittman's most visible salvo will be an aggressive national ad campaign. At MTV, Pittman had the "I want my MTV" slogan, and at Six Flags, he had "Bigger than Disney and closer to home." Pittman says he will unveil a "high-impact" slogan in the next few months. "The current advertising is too generic," he says. "I want our advertising to be more of a call to action."
It's too early to tell if Pittman can turn Century 21 into a marketing powerhouse. But Pittman, who flies airplanes and rides Harley-Davidson motorcycles in his spare time, has a way of moving companies into the fast lane.