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Meimurje University of Applied Sciences

Sport and tourism management

History of Sheraton Hotels & Resorts

(Essay; collegium Basics of Tourism)

Course leader: mr. sc. Ivan Hegedu Assistant: ura Somoi, dipl. oec.

Student: Tomislav Lauri

akovec, 29th May 2012

The worlds leading international hotel company, ITT Sheraton, has its name on about 500 hotels all over the world. It is a company that serves approximately 22 million guests annually what can be thanked to constant technology development, especially in rigorous reserving rooms and staying in touch with guests. Although they are well known in every part of the world, id did not seem that Sheraton would become such a brand at the beginning. In fact, it could not be seen even as a member of a hotel industry. Robert Moore and Ernest Henderson, co-founders of Sheraton hotel chain, had not originally intended to enter the hotel business. While being classmates at Harvard in 1910s, they tried many businesses such as assembling Model-T cars and radios, importing paper-fiber suits and German shepherd dogs. It seemed they would be successful at doing it, but soon after the stock market crashed so they bankrupted. Luckily, Hendersons older brother George invested patiently in securities which was a real bingo to him. Since he had more money than expected his brother advised him to gain some business together. Finally, in 1933 they found an opportunity in hotel industry while hotel prices were lowest ever, so decided to buy 51% of The Continental Hotel in Cambridge, Massachusetts. Not so long after buying their first hotel, Hendersons and Moore decided to buy another one. It was much bigger Stonehaven Hotel in Springfield, Massachusetts which had over 200 rooms. As you can see, at that time there is still no Sheraton name of any hotel in their ownership. It happened for the first time in Hendersons and Moores life in Boston in 1937 soon after they bought one of three hotels. There was a big electric sign Sheraton Hotel at the top of the mentioned one, sign which was to expensive to had been replaced, so elder Henderson concluded: Let it be Sheraton. Unfortunately for them, very soon started The World War II which costed owners of Sheraton a lot and situated younger Henderson and Moore very close to the bankrupting again. Fortunately, 1946 was the best year of hotel industry ever in the USA with growth rate of stunning 95%. Henderson changed company name to The Sheraton Corporation of America and became the first who placed hotel company at New York Stock Exchange. In addition to that, he acquired several office and apartment buildings in New York City, which were later resold for a profit.

From that time on, Sheraton brought innovations to the hotel industry, especially with technological advances. In 1948, Sheraton was the first to use the telex system for a reservations network. Furthermore, in 1958 they introduced Reservatron, the industrys earliest automated electronic reservation system, which made Sheraton the first hotel chain to centralize and computerize reservations. Although being very popular that time in the USA, Sheraton owners had not been content with domestic growth, so they decided to expand on international market. In 1949 they bought two Canadian hotel chains: the Laurentien Hotel Company and the Eppley chain. Ten years later, Sheraton went beyond North America with a flourish that would mark its future: four Hawaiian properties were purchased and the stage was set for Sheratons dominance. In 1961 Sheraton followed with a Middle East project in Tel Aviv, then hotels in Puerto Rico and Jamaica and finally in 1963 with its first South American hotel, the Macuto Sheraton in Venezuela. In contrast of international market, Sheraton had a lot of problems at domestic USA market where things just got worse and worse through the 1960s. Family vacations by car became increasingly popular so the hotels that had mostly businessman guests, such as Sheraton, had shocking situations. As a result, Sheraton had got in very bad debt and had to sell very large quantity of hotels to reduce it. Even though other hotels had been hit by bankruptcy and many were in the red because of overcapacity, Sheraton was still making money in real estate. In fact, Sheraton was in the red quite a bit of the time--but only on the surface. Ernest Henderson's clever accounting kept profits low even though assets were substantial. In the late 1960s ITT bought Sheraton and its manager Claude Feninger decided to start selling franchises and became the industry leader in that segment, which until mid-1970 resulted that Sheraton got worth more than one billion USD for the first time in its history. Howard Bud James, who was Sheraton president and CEO from 1970, continued to develop Sheraton but in different development philosophy. James realized that hotels become little old-fashioned and asked ITT managers to start a plan of building lots of new Sheraton hotels all over the world. Since one was accepted, Sheraton expanded from 4 to 55 foreign countries in just over ten years. Now they had new hotels but problem with filling the rooms as well.

Through marketing campaigns and incentives, Sheraton targeted groups to increase sales. One concept to differentiate Sheraton in a crowded, competitive market was the Sheraton Towers, the first of which opened in Boston in 1970. The Towers, designed for the business traveler, were essentially hotels within hotels, with fancier rooms, and unusual amenities such as concierge service. With Sheraton Club International, a frequent traveler program launched in 1987, Sheraton was highly successful in retaining repeat customers, particularly those in business. Such travelers along with the convention market, which is sometimes booked as much as ten years ahead of time, are an important part of Sheraton's business. To take advantage of an aging U.S. population, Sheraton, in 1977, began offering a 25% discount to members of several senior citizens' organizations. Weekend deals and family plans had been used since Sheraton's early days to fill empty rooms on the weekend, after the bulk of hotel guests--business travelers--left. In 1983, the new Sheraton chairman, president, and CEO, John Kapioltas, former president of Sheraton's Europe, Africa, Middle East, and South Asia division, who was promoted in part because of his development success, presided over an effort to bring to North America the same standards he had applied to five-star properties around the world. After expanding its domestic-resort network with new properties in California, Colorado, and Hawaii, Sheraton continued to lead the way with more industry initiatives. In 1985, it signed an agreement to operate the Great Wall Sheraton Hotel, Beijing, the first hotel in China to bear the name of an international hotel company. Five years later, Sheraton had four hotels in China bearing its name. Sheraton became the first U.S. hotel company to operate in Eastern Europe, with the 1986 opening of a Sheraton hotel in Sofia, Bulgaria. In 1989, it announced the first U.S.-Soviet joint venture to own and operate two hotels in Moscow, the first of which was scheduled to open in 1992. Throughout the 1980s, Sheraton's net income fluctuated widely. It and an ITT development in Florida had a combined net loss of $6 million on revenues of $626 million in 1984 compared to a net profit of $19 million on revenues of $540 million in 1983. This substantial reversal may have led to ITT's 1985 announcement that it would welcome minority shareholders for Sheraton. Despite ITT's scaling back across the board in the late 1980s, it was not likely to sell Sheraton outright, given the great visibility Sheraton afforded and the fact that in 1985 ITT outlined an $80 million plan to upgrade Sheraton technology.

To set itself apart from the competition, Sheraton launched a new ad campaign, "At Sheraton, Little Things Mean A Lot," in addition to the Sheraton Guest Satisfaction System (SGSS), a concept designed to increase guest-service standards and monitor how employees work to achieve that goal. Standard requirements were upgraded as of 1989, including not only the new service standards and SGSS, but a new inspection program, life-safety standards, training, the upgrading of existing properties, and opportunities for future growth. With the help of ITT, Sheraton's business was restructured and its service made uniform. That same company, just past its 50th anniversary was poised for the next century-with a policy of selective growth, high service standards, and rigorous checking procedures to ensure the strength of the ITT Sheraton name as well in the future.

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