Sleepless Nights At Holiday Inn

Tom Oliver has big plans, but not all franchisees are happy

Days before Thomas R. Oliver, the new chief executive of Holiday Hospitality Corp., was to rechristen one of his Holiday Inn hotel brands, he faced an uprising. Hoping to differentiate its budget chain, Holiday Inn Express, from the company's flagship Holiday Inns, he figured a new name would do the trick. But when rumors spread that the new name would be "New Horizon by Holiday Inn," irate franchisees balked. Fearful that the loss of the well-known name would send travelers elsewhere, they threatened legal action.

Oliver quickly dropped the name-change plan, but his biggest marketing problem remains unsolved. Holiday Hospitality suffers from a bad case of brand confusion. The company is the umbrella for several chains: Along with the core Holiday Inns, it targets business travelers with Holiday Inn Select, penny-pinchers with Holiday Inn Express, and big spenders with its luxury Crowne Plaza hotels. But its own customer surveys show consumers haven't a clue as to the differences among them.

IMAGE PROBLEM. That puts Oliver, 56, in a tight corner. He needs to develop a branding strategy that creates distinctions among the different chains, without scrapping the Holiday Inn name. Says R. Mark Woodworth of PKF Consulting, Atlanta-based tourism industry specialists: "He's got to put a new face on top of an old, familiar name."

Moreover, he's got to do it fast. A poor image has left the company adrift despite the recent resurgence in the hotel industry. Last year, analysts estimate revenue per available room at the main Holiday Inn chain grew just 2.5%, less than half the 6% logged by the industry overall. For the company as a whole, both revenue and profits for the company dipped in 1996; on revenues of $1 billion, earnings fell 4%, to $288 million. "People think Holiday Inn hotels are old and not properly maintained," says Bjorn Hanson, who heads the gaming and lodging unit for consultants Coopers & Lybrand.

If Oliver is daunted, he doesn't show it. The former chief operating officer of Federal Express Corp. arrived at Holiday in March, and he vows to make each of its chains a leader in its category by 2002. A marketing whiz who was the brains behind FedEx' overnight delivery service, Oliver has a drawer full of plans. In addition to a multiyear, $1 billion renovation and advertising campaign for the flagship Holiday Inn, he wants to expand Crowne Plaza and develop a whole new chain aimed at the extended-stay business traveler. "Our issue is going to be understanding the different brands and how they're important to consumers," he says. "Then we'll market the heck out of them."

Still, Oliver's efforts have drawn mixed reviews so far. He gets highest marks for the hands-on way he has ramped up the upgrade at the Holiday Inn chain. Since 1995, more than half its 1,346 hotels have gotten a makeover: To the new furniture that was already on order, Oliver has added better gyms and even brand-name foods such as Tropicana juices to start the day. The moves, which Oliver has capped off with Holiday Inn's most extensive national TV ad campaign in years, seem to be working. Franchise owners say revenues at some renovated properties have jumped as much as 50%. Moreover, the company claims that customer quality ratings, which had been declining, are moving up again.

But not all of Oliver's changes are going over as well among franchisees. Franchisees had long complained that previous Holiday executives spent more time wrangling over financing with parent company Bass PLC than on buffing up the hotels. Quality also suffered, as laggards were allowed to remain in the system. So even though franchisees welcomed Oliver's arrival, his attempts to rename the budget chain have left many wary. "Every brand needs consistency," says one franchisee. "If you change the name, you hurt us."

Oliver's more ambitious plans also face a stiff challenge. He wants to create an entirely new chain to be called Staybridge Suites by Holiday Inn, tailored to travelers on long-term business assignments. With Staybridge scheduled to break ground this year, Oliver plans to open 200 hotels in five years. To draw in Corporate America's road warriors, the suites will include speakerphones, interactive TV capabilities, ergonomic seating, and computer connections.

NEAR-MISS? Few doubt it's a market with lucrative potential: Extended-stay travel is the hotel industry's fastest-growing segment. But healthier players such as Marriott International, which has 247 extended-stay hotels around the country, already dominate. Moreover, critics say Staybridge costs will likely be high. Not only is starting a chain from the ground up pricey, but plans call for more employees than in traditional extended-stay hotels, with perks such as a 24-hour staffed front desk. "They've missed the market," says former Holiday Inn executive Michael A. Leven, who is now CEO of U.S. Franchising, which runs the budget Microtel chain.

For now, however, many of Holiday's long-suffering franchisees are willing to give Oliver some rope. "This guy is new, so I'm in wait-and-see mode," says Jay S. Patel, who owns three Holiday Inn Express hotels in Florida. Later this month, he will unveil his strategy before 2,000-plus franchise owners at their annual meeting in Nashville. Many see in him the only hope for the much-promised turnaround. Indeed, franchisees who have dealt with Oliver directly praise his guest-eye view of the business. J. Peter Kline, a franchise owner in Dallas, recalls that after Oliver visited his hotel last spring incognito, he got a full report card, including orders to spruce up the gym. "We've finally got someone up to the plate that's shaking the brand up," Kline says.

That has rivals, too, watching Holiday's efforts for the first time in years. "I think he has a chance, but the real test is getting the franchisees on his team," says the CEO of one hotel chain. To do so, however, Oliver will have to start by convincing them his plans are on target.

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