One thing about the business world is imitation of a good thing. For example, once Apple came out with the iPod in the early 2000’s, most of the world never heard of portable MP3 players, and within a few short years, not only did Apple single handedly create a market, they also created an industry – now there are tons of companies creating MP3 players, putting MP3 playing capabilities into CD Players, Cell Phones, even cars. Another example is Starbucks – who would have thought that some small Seattle company would make it cool, and hip to buy a 3 dollar cup of coffee (and that’s for a small cup – oops – I mean Tall), when every local diner, restaurant, and even stalwarts like Dunkin Donuts were selling essentially the same thing (minus burnt coffee taste) for a MUCH MUCH cheaper price.. Starbucks stole the market, and while they didn’t put every diner and Dunkin Donuts out of business – they did create an industry which didn’t exist 10 or 15 years ago.

That same imitation is currently occurring with boutique hotels in the Hotel Industry, first you had Ian Schrager who created the Morgans Hotel Group, then Barry Sternlicht, who created W Hotels and was the first person to successfully replicate the boutique hotel brand on a large scale.  Kimpton, Thompson & NYLO Hotels came around, then the industry heavyweights started coming on board – IHG with their Indigo brand, Choice with Cambria Suites (can’t really call that a boutique brand though),  in April Hyatt announced Andaz, and over the summer Marriott announced their partnership with Ian Schrager (Ian Schrager sold his interest and broke all ties to Morgans Hotel Group in July 2005 to start the Ian Schrager Company and focus on his own hotels/condo developments), Starwood Hotels created element & aloft which while they are not true boutique brands – definitely have their roots in the boutique hotel style.

That leads Hilton the lone man out – which is odd because as a “Top 5″ hotel brand, it’s odd they have not they definitely have the developers, resources and most of all – ability – to blow the market away. Out of all of Hilton’s brands, none of them really come close to even having a boutique “feel” – honestly – is there much of a difference between staying in a Hilton or a DoubleTree? What about Embassay Suites, or Homewood Suites? Or Hilton Garden Inn & Hampton Inn? And finally – besides the actual Waldorf=Astoria in New York City – what’s the difference between staying in a Conrad or Waldorf=Astoria Collection hotel? Not too much. Hilton has WAAY too much brand overlap. Now I’m not suggesting that there are not any differences between those brands – there definitely are – but as far as I’m concerned – If you are trying to grow a brand, you don’t want to compete with yourself.

It will be very interesting to see what happens once Blackstone’s purchase of Hilton Hospitality is completed – Blackstone has not been known for keeping their purchased hotel brands together.. Through the last 4 years Blackstone has owned Wyndham, La Quinta, AmeriSuites, Summerfield Suites, Extended Stay Hotels, Wesley Inns, and Meristar Hospitality. Out of that entire list, Blackstone currently only owns La Quinta and Meristar Hospitality (which has been renamed LXR Resorts). At first thought, you may think that Blackstone bought Hilton for the Real Estate (Look what they did with Equity Office Properties), yet out of the 2,900 Hilton Family properties – 60 are owned by Hilton, and another 203 are leased by Hilton – the rest are Joint Ventures, Franchised, or Managed Properties. (These numbers are from Hilton’s 2006 annual report).

It’s a good possibility that Blackstone will once again rename their LXR Resorts into the Waldorf=Astoria collection, and I would not be surprised to see Blackstone break up some of the Hilton brands – perhaps get rid of some of the brands which are not “Core” Hilton brands (DoubleTree, Embassay Suites).

Most likely Blackstone bought Hilton for the cash flow – with very little property owned, and valuable franchise fees, private equity groups love companies with a lot of cash flow. Blackstone also might be interested in invigorating the Hilton Family, and expanding the Hilton brand worldwide – believe it or not, outside of America, the Hilton family is very weak, just recently Hilton announced the expansion of DoubleTree and Hampton Inns in worldwide locations – with the “By Hilton” added to their name, to give these “unknowns” brand cachet.

But I think Blackstone needs to create a boutique brand to really impress the market – I mean, everyone else is doing it.

andrew@alconic-inc.com

Popularity: 4% [?]