The future of the US hotel industry is linked to its globalization. Companies cannot grow if they do not go beyond the borders of the United States. The active development of international hotel corporations began with the introduction of the Boeing 707 in the late 50s and the Boeing 747 in the early 70s. This was the time of the boom in international business and tourism, and with it came the need to expand international hotel chains. There was a great demand for American hotels and their management experience in developing countries – each wanted to have “branded” hotels in their capital cities.
Some chains were owned by airlines or had airlines as partners. For some, this situation has persisted to this day. In 1948, the U.S. government, looking for ways to boost the economy in Latin America, approached several hotel companies with a proposal to start building their branches in these countries.
In the late 50s, only Pan American Airways agreed to do so. As a result, Pan Am established subsidiaries called Intercontinental Hotels in Venezuela, Brazil, Uruguay, Chile, Colombia, Mexico, Curacao, Cuba, and the Dominican Republic. By 1981, 85 of these hotels were scattered across almost 50 countries. Pan Am then sold its hotel chain to Saison Japanese Corporation, which in turn resold it to Grand Metropolitan. And in 1992. Pan Am, after a long and painful fall from the heights of success, declared bankruptcy and ceased to exist.
Conrad Hilton was also a pioneer in the development of the international hotel market by the United States. In 1948, he signed a contract to manage the Caribe Hilton hotel in San Juan, Puerto Rico. Hilton outbid all other American firms and was awarded the contract primarily because he was the only one who could answer a letter written in Spanish. By 1974. Hilton International operated 61 hotels (23263 rooms) in 31 countries outside the United States. In 1964, Hilton International spun off from Hilton U.S., and in 1967 it was acquired by Trans-World Air Lines (TWA). Now Hilton International is owned by the British Ladbroke Group Pic.
Sheraton Hotel Corporation, a subsidiary of ITT, has 13,007 rooms in 422 hotels located in 62 countries. In terms of the scale of its operations, it is second only to the French company Group Accor, which operates in 66 countries under the Novotel, Sofitel, Pullman, Motel 6 and Formule 1 brands.
Foreign investors have repeatedly bought and sold not only individual American hotels but also hotel chains. Bass Pic (UK) bought Holiday Corporation, Grand Metropolitan (UK) bought Intercontinental Hotels, Group Accor (France) bought Motel 6.
In the late 80s and early 90s, several American hotels were also acquired by Japanese investors. According to Christopher Mead, director of the Mead Ventures joint venture, the Japanese already own all or part of 296 American hotels, and he predicts that by the end of the decade the number of American hotels in which Japanese money is invested may exceed four hundred.
It is interesting to note one statistical detail – every $1000 invested in the purchase or construction of one hotel room must return $1 from the rental of this room to compensate for the investment. Based on these calculations, the cost of a room in the Bel Air hotel should be $1200 per day. Obviously, the cost of the hotel was overestimated, and the purchase was not focused on extracting income, but rather on prestige considerations.
In the second half of the 80s, Japanese investors had a lot of cash and could afford to buy real estate in America. This was facilitated by the appreciation of the yen against the dollar. Land and property in the United States were much cheaper than in Japan, and in theory should have been sold at a discount. In reality, however, property prices, including hotels, were overpriced. For example, La Costa Resort and Spa in La Costa in California. This property (470 rooms and a golf course) was acquired by Sports Shinko in 1986 for $250 million, i.e. each room cost $531914. Two interesting things are worth mentioning about this deal. The first is that in the few months between the date of signing the documents and the day of the actual payment, the buyer saved $26 million due to the yen’s appreciation against the dollar. The second point is even more interesting: in the first year of operation under the supervision of the new owners, the company lost $26 million. This was partly due to “lack of diligence.” However, a careful examination of the situation would have revealed the fact that very significant cash outlays would have been required to maintain the hotel in good condition.
Obviously, when making the purchase, the new owners were looking far ahead, expecting that land values in Southern California would undoubtedly rise significantly in the coming years. In the meantime, without worrying about temporary losses, they made full use of the space along the golf courses, building and selling expensive condominiums. Around 1990, Japanese investment in U.S. hotels peaked and then declined. Others, especially Hong Kong, Taiwan, and Korea, began to take their place. The wealthy Hong Kong Cheng family bought the Stouffer hotel chain from Nestle (Switzerland). Cheng Yudong also owns a controlling stake in New World Development Co. Ltd. the founding company of Ramada International and New World.
Hotels, which owns 11 hotels in Asia. Mr. Cheng also owns the Regent and Grand Hyatt in Hong Kong. Needless to say, Mr. Cheng has long been a billionaire.