1. InterContinental Hotels Group URL: www.ichotelsgroup.com Background information: InterContinental Hotels Group PLC is the world's largest hotel group by number of rooms. InterContinental Hotels Group owns, manages, leases, or franchises, through various subsidiaries, over 4,400 hotels and 640,000 guest rooms in nearly 100 countries and territories around the world. Exercises:

a. List the seven hotel brand names in the InterContinental Hotels Group.

b. Explain what Priority Club Rewards entails through the InterContinental Hotels Group.

2. Internet Exercises:

Site name: Lodging magazine URL: www.lodgingmagazine.com Background information: Lodging magazine profiles leaders driving hospitality to new heights, designers breaking the mold, and general managers applying new solutions to age-old problems in hospitality. The 30-year-old magazine reports on restaurant and food trends, best practices, and industry events. Exercises:

a. Click on the "Blog" tab on the Web site. Scan several posts under this tab. Describe some of the challenges currently facing lodging managers in the operations area.

b. Click on the "Past Issues" tab and then the "Marketing" link on the Web site. Scan several articles under this tab. Describe some of the challenges currently facing lodging managers in the marketing area.

c. What other operational categories are covered in the magazine?

Part 3- Going Public: Some Good News and Some Bad and list the advantages and disadvantages of a hotel company going public

In 1968, the first two La Quinta Inns were built by Barshop Motel Enterprises in San Antonio, Texas, to serve visitors to the 1968 World's Fair, HemisFair.1 Although Sam Barshop had not intended to start a chain, the limited-service concept of La Quinta was so successful that he was approached by developers and investors, and soon his company began to expand. In 1973, in order to secure funds for expansion, the company went public. By 1978, ten years after the first inn opened, there were 56 inns in operation, with an occupancy rate of 90 percent. Another 19 inns were under construction. By the end of the 1980s, there were about 200 La Quinta Inns in operation.

In 1989, however, a Hong Kong firm, Industrial Equity, began to acquire shares of La Quinta, and by early 1990, it controlled 10 percent of the outstanding shares. Shortly thereafter, a second group of investors headed by two Texas financiers, the Bass brothers, began to acquire shares. In January 1991, La Quinta hired Goldman Sachs, a New York investment banking firm, to explore ways to "increase shareholder value"-including the sale of the company.

However, at that time, mergers and acquisitions activity was depressed, as were La Quinta's shares, by a recessionary stock market. La Quinta stock, which had been as high as $26 per share, was selling in the $11 to $15 range, and a suitable buyer for the company could not be found. La Quinta's management spent an estimated $2 million in fees to attorneys, management consultants, advisors, and investment bankers in its fight to retain control of the company. The company's operations and expansion were seriously compromised as executives spent time fending off what they saw as a hostile takeover bid.

In June 1991, an accommodation between La Quinta's management and the dissident shareholders was reached. Five members of La Quinta's 11-person board were asked to resign, and new directors representing the Bass-led group (which by then owned 14.9 percent of the company's shares) were elected in their place. Barshop's supporters on the board retained five seats, and the eleventh seat on the board went unfilled. Working with the new board, the consulting firm of McKinsey & Company conducted a three-month management study of La Quinta. As a result, the company was restructured, reducing its workforce by 72 people, 50 of whom were at the corporate offices. The company also took a $7.95 million restructuring charge, including $3.94 million for severances. At that time and shortly thereafter, several senior executives resigned. Then, in March 1992, Barshop turned over the presidency of the company to a former executive vice president of Motel 6, remaining as chairman of the board for another two years until he resigned in March 1994.

Selected in their place. Barshop's supporters on the board retained five seats, and the eleventh seat on the board went unfilled. Working with the new board, the consulting firm of McKinsey & Company conducted a three-month management study of La Quinta. As a result, the company was restructured, reducing its workforce by 72 people, 50 of whom were at the corporate offices. The company also took a $7.95 million restructuring charge, including $3.94 million for severances. At that time and shortly thereafter, several senior executives resigned. Then, in March 1992, Barshop turned over the presidency of the company to a former executive vice president of Motel 6, remaining as chairman of the board for another two years until he resigned in March 1994.

In June 1991, at the time of the first compromise with the Bass-led group, Barshop had these comments on being a publicly held company:

There are a lot of advantages to not being a public company. You're not responsible to the Securities and Exchange Commission or a large number of shareholders. You run your own business. You can focus on cash flow rather than earnings per share.... It's been stressful. Business isn't as much fun as it used to be. I've never dealt with anything like this before. Things aren't done the way they used to be. I've learned more about proxies than I ever wanted to know.

Barshop ultimately lost control of his company, a company that by that time had 220 inns in 29 states. He sold 80 percent of his shares for $17.4 million and was paid something on the order of a million dollars during the last two years he served as chairman. Finally, we should note that he will go down in hospitality history as the man who invented the limited-service hotel.

This note is based, except as noted, on news stories reported in the San Antonio Express News, the San Antonio Light, and the San Antonio Business Journal, between January 1990 and March 1994; the June 1988 issue of Innput, an employee publication of La Quinta; and public statements by La Quinta Inns to its employees and the press. I would like to thank Mary Starling, secretary to Sam Barshop, for her assistance with the preparation of this note.

1. What are some of the conditions of competition in the hotel business? What is their impact?

2. What is the impact of partnerships on hotel marketing?