Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Thu, Mar 12 1992 Date: Thu, 12 Mar 92 05:46:03 EST Message-ID: 03-12 0000 BONUS: Sheraton sheds its old image USA TODAY Update March 12, 1992 Source: USA TODAY:Gannett National Information Network Dallas' Adolphus Hotel has everything travelers expect in a great luxury hotel. And something they might not. The lobby is filled with handsome antiques. The 435 guest rooms are suitably plush. The French Room, with its dazzling gold-leaf ceiling and ornate Louis XIV chairs, is one of only two AAA Five-Diamond restaurants in Dallas. Then there's the shiny brass plaque behind the front desk that links the 80-year-old hotel built by beer baron Adolphus Busch with its new patron - ITT Sheraton. HAS SHERATON GONE LUXURY? Sheraton isn't a name often associated with luxury hotels in the USA. But the company's recent affiliation with the classy Adolphus illustrates the remaking of a chain long known for fine hotels abroad and mediocre ones here. In fact, at a time when many hotel companies are struggling after a decade of overborrowing and overbuilding, Sheraton is on the move. WHAT IS SHERATON DOING TO REVAMP ITS IMAGE? Since 1989, Sheraton has spent $1 billion renovating such grand hotels as New York's St. Regis, Washington's Carlton and San Francisco's Palace. A $160 million deal announced Feb. 20 to buy six Marriott hotels and lease two will put Sheraton on the map in all-suite hotels, whose larger rooms are a hit with travelers. And March 2, it opened a 1,200-room convention hotel in downtown Chicago. When the economy turns around, "Sheraton is positioned to really come out of the chute," says ITT Sheraton Chairman John Kapioltas. WHAT DOES SHERATON'S PARENT HAVE TO SAY? All that activity comes amid talk of restructuring at ITT, Sheraton's deep-pocketed parent. ITT Chairman Rand Araskog is considering spinning off subsidiaries to boost ITT's stock price. But he says ITT plans to expand Sheraton, especially in Europe. That's good news for Kapioltas because he can concentrate on something more important - sharpening Sheraton's fuzzy image. WHAT DO TRAVELERS THINK OF SHERATON? You get answers like: "I don't know why I say this, but second-rate," says Dallas businessman Fred Meis, a recent guest at the Adolphus. "I've stayed at Sheratons, and I don't have a bad impression. I have a better image of Marriott." WAS SHERATON AWARE OF ITS SECOND-RATE IMAGE: It's a familiar story for Kapioltas, who's spent nine years trying to change it. When he became president in 1983 after 22 years working for Sheraton abroad, some traveler surveys then rated Sheraton No. 1 in the world but behind Hilton, Hyatt and Marriott in the USA. "We had many franchises out there that were substandard. We bled (corporate-owned) hotels rather than upgrading them and staying ahead of the competition," says Kapioltas, 64. HOW DOES THE CONTRASTING IMAGE AFFECT SHERATON? Kapioltas knew that had to change. Sheraton has 70% of its 423 hotels in North America, but its overseas hotels produce more than half its earnings. Poor domestic hotels hurt Sheraton in two ways. Some U.S. business travelers avoided Sheratons overseas, and foreign travelers wouldn't consider Sheratons when they came to the USA. HOW IS SHERATON GETTING OUT OF ITS PREDICAMENT? To turn Sheraton around, Kapioltas invigorated top management with new people, courageously shrunk the chain by booting almost half of Sheraton's franchisees - more than 200 of them in six years - and recruited new ones. Though Sheraton has 65 fewer properties today than in 1985, Kapioltas is concentrating on quality over quantity. A $300 million investment in Sheraton's three New York hotels already is paying dividends - 60% of the St. Regis' customers are coming from outside the USA. Now, Sheraton is unleashing a $15 million ad campaign to tell travelers its story. WILL SHERATON IN THE USA MATCH SHERATON ABROAD? Reform doesn't mean all Sheraton hotels will equal the chain's best luxury hotels abroad. In Asia, where workers are paid less, hotels have an average of 15 employees per room, vs. the U.S. average of five. Kapioltas is trying to define a standard of service for Sheraton's various U.S. hotels - all-suites, resorts, luxury hotels, big-city hotels with doormen and room service and small-city hotels whose guests open doors for themselves - that's consistent and better than the domestic competition. WHAT'S THE PROBLEM BEHIND SHERATON'S PLAN? One problem is that Sheraton's variety of hotels, designed to appeal to different types of travelers, contributes to a murky image. How, for instance, does a company best-known for good but not spectacular business hotels position itself as a proprietor of five-star luxury hotels like the Adolphus? It's a delicate act, says corporate consultant Clive Chajet, chairman of Lippincott & Margulies. "Companies that try to be all things to all people wind up being nothing to everybody." HOW WILL SHERATON TACKLE ITS BALANCING ACT? Part of Sheraton's strategy is to market its hotels by type. Smaller hotels, for instance, are being marketed as inns to educate travelers that those properties offer less than do larger hotels. Beyond that, Sheraton is introducing services for business travelers such as faster check-in and check-out, in-room coffee makers and a 30-minute delivery guarantee for room service. IS EXPANSION PART OF SHERATON'S STRATEGY? Meanwhile, Sheraton's expansion continues apace. With real-estate prices in the cellar and plenty of failed hotels for sale, "this is a good time to be buying," says Kapioltas. The chairman -"J.K." to lieutenants at Sheraton's Boston headquarters - is looking for bargain-basement prices of 60 cents on the dollar. He may succeed. There's not much competition around, as Sheraton's deal with Marriott demonstrates. WHERE ELSE DOES SHERATON SEE ITSELF GROWING? Luxury hotels are another target for growth. Kapioltas counts 21 Sheraton hotels worldwide in that group, but there are only six in the USA: the Carlton, the Adolphus, the St. Regis, the Palace and the Princeville and Hana Maui resorts in Hawaii. Meanwhile, he's keeping an eye peeled for opportunities overseas. Outside the USA, at least 12 hotels - from Algarve, Portugal, to Zagreb, Yugoslavia -will join Sheraton this year. WHAT'S THE PROBLEM WITH EXPANSION? As it expands, though, Sheraton is avoiding repeating its own mistakes. Franchised hotels still make up 62% of its properties, but Sheraton is choosing franchisees more carefully now. Sheraton owns its other hotels outright or with partners, leases some and manages some for other owners. HOW WILL SHERATON KEEP ITS DEBT DOWN? Sheraton will not go heavily into debt to fuel its expansion. To keep investment costs down, Sheraton is seeking partners for some projects. And it will choose its moves carefully. "We're not planning to embark on any Field of Dreams expedition - if you build it, they will come," says Bowman. "That's why a lot of companies are sitting where they are - with a lot of empty rooms and a lot of debt." Bonus Editor: Michele Coleman. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM