Hilton International enters the franchise world

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WASHINGTON -- Hilton International has taken a major step into what is a brave new world for the chain.

Hilton International, which owns the Hilton brand outside the U.S, has decided to grow its portfolio by creating franchise opportunities for its Hilton and midmarket Scandic brands.

Under the franchisor model, Hilton International conservatively intends to add about 20 hotels, or about 6,000 rooms, a year, worldwide.

"It doesn't sound like much, but I am being very cautious and realistic," said Howard Friedman, president, the Americas, for Hilton International. "I don't have grand plans of growing by 100,000 rooms a year. I would rather be conservative and cautious."

Friedman said Hilton International was previously unable to enter the franchise market because "we have never been structured [to] protect brand value in terms of having systems in place to police, monitor and control [franchisees]."

"Obviously, as a hotel operator, we prefer to manage, own or lease. Franchising does take a different mind-set," he added.

Nevertheless, Friedman said, "The reality of the world is there are some very experienced hotel operating companies out there. They want to retain management. That is the way of the world, and we are happy to move in that direction."

Hilton International has already made a few franchisor deals.

"We did one at [Hilton Narita New Tokyo International Airport] a year and a half ago and we have one called Coral by Hilton in the Dominican Republic," Friedman said.

With those successes under its belt, Hilton International is looking to further grow the brand through "well-capitalized, regional hotel companies," he said.

The firm, which owns, manages or leases approximately 200 hotels in the U.K. and Europe, is especially interested in opening properties in countries where "the barriers to entry are quite steep," Friedman said, specifically in Central America.

To that end, Hilton International recently signed a deal with Princess Hotels & Resorts Corp., which owns the 204-room Hotel Princess Zona Rosa in San Salvador, El Salvador.

The resort will change its name to the Hilton Princess San Salvador, becoming the first Hilton International property in Central America.

Similarly, the company signed a deal with India's Trident Hotel Group to convert eight properties, which Friedman said will be rebranded and reflagged in April.

Aside from Central America and India, he said Hilton International would like to have a presence in Lima, Peru; Rio de Janeiro, Brazil; and Santiago, Chile. The chain is also keen on adding properties in Australia and Asia.

In addition, he said, "We are looking at how to grow Scandic and take the brand into other parts of the world. We have a team based in Europe that will start franchising Scandic. We think the brand has legs elsewhere; for example, the Americas, Australia or China."

Hilton International has spent 12 months developing a franchisee manual and operating procedures.

"We have learned a lot from [Hilton Hotel Corp., which owns the Hilton brand in the U.S.]. They have been generously helping us with the process," Friedman said.

However, he added, Hilton International is not in any hurry to emulate other franchisors by divesting ownership of its current properties.

"I think we will always be a company that owns, leases and manages a fair amount of real estate," Friedman said. "We are not actively looking to dispose of our properties.

"When we do sell assets, it will be with the intension of attempting to maintain management of those properties," he added.

To contact reporter Michael Milligan, send e-mail to [email protected].

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