Hilton Intl signs deals to grow franchising biz

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MIAMI -- Hilton International took its first steps into the world of hotel franchising about a year ago, and the decision is beginning to pay off, the company said.

Franchising is becoming more of a significant part of our business, said Howard Friedman, president of the Americas for Hilton International. Weve made quite a bit of progress. Weve signed 10 [franchise deals] and have another 20 in the pipeline.

The U.K. company, which controls the Hilton brand outside the U.S, owns and/or manages approximately 400 hotels, mostly in the U.K. and Europe.

Because it is seen as a good growth strategy, the company has been franchising its Hilton and midmarket Scandic brands.

Indias Trident Hotel Group rebranded eight properties as Hiltons and Princess Hotels & Resorts Corp. rebranded the Hotel Princess Zona Rosa in San Salvador, El Salvador, as a Hilton.

Friedman said he hopes to do two more franchise deals with Princess Hotels. But Hilton International has no plans to franchise its luxury Conrad brand.

A joint venture of Hilton Hotels Corp. and Hilton International, Conrad has 17 luxury hotels and plans to grow the brand to 50 hotels by 2010, but not by franchising.

Those will be management agreements, Friedman said. There will be no franchising of that brand. It is a very difficult, and probably wrong, concept to franchise your five- or six-star brand.

New Conrad Hotels are set to open in Tokyo and Phuket, Thailand, this year. Two more are set to debut in Las Vegas and Indianapolis in 2006, and another in Dubai in 2007. Also, Hilton International is considering deals in the Caribbean that may include a condominium component.

As with any large hotel group, the Hilton International portfolio is not only a story of growth. Sometimes properties leave the group, as when the company recently divested itself of 11 hotels in the U.K.

Hilton International, which saw profits rise 41% last year, decided to dispose of the properties because they would have required considerable capital investment to continue to meet Hiltons brand standards.

Friedman said other U.K. properties will likely be sold for similar reasons.

The plan is to selectively dispose of maybe another couple 100 million pounds worth of assets over the next 12 to 24 months, Friedman said.

He was quick to note that Hilton International is not abandoning a long-held strategy of owning hotel assets.

There is a cycle to real estate. You do buy and sell, Friedman said. You time things, and we do feel that the market in the U.K. is quite strong now. We think the cash flow from the hotels is good. It all comes together. Timing is everything. If you want to sell a few hotels, now is a good time to do it. But we are not out there looking to raise capital. We have a very good balance sheet.

That said, Friedman added, We are not becoming the next InterContinental Hotel Group, a reference to that chains recent move to sell a large number of properties.

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

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