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Hilton Going Public: Good or Bad for Franchisees?

September 13, 2013
URL: http://www.entrepreneur.com/article/228404

In a move that could impact its franchisees, Hilton Worldwide Holdings filed for an initial public offering worth up to $1.25 billion on Thursday.

Hilton, whose properties include Hilton Hotels and Resorts, Doubletree by Hilton and Hampton Hotels, was taken private by Blackstone Group in 2007 for more than $18 billion and an additional $7 billion in assumed debt. The company has seen solid growth these last few years, posting revenue of $9.3 billion in 2012, up 5.6% from 2011 and up 15% from 2010, according to the IPO filing with the Securities and Exchange Commission. 

Hilton’s global franchising strategy has been key to its success. By licensing the Hilton brand to franchisees through a variety of Hilton Worldwide brands, Hilton has managed to create lower-risk and more profitable properties than those it operates itself. The company has grown to become one of the largest hotel chains in the world, with more than 4,000 properties in 90 countries and territories.

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While going public is certainly a big change for the company, its global franchisees will likely not have to worry.

Bill Carroll, senior lecturer at the Cornell University School of Hotel Administration and analyst for PhoCusWright, argues that going private gave Hilton a chance to grow and become more effective without being under the "financial microscope," and that going public now could offer new opportunities for growth. With the return to the competition and increased transparency of the public marketplace, franchisees may be offered better loyalty programs than when the company was private. Competing directly with Marriott International and Hyatt Hotels could increase pressure to attract new franchisees, he says.

Carroll doubts much will change in the global franchising strategy, considering how important it is to the company's success. "Why would they back away from it?" he asks.

Still, even if Hilton were to make a significant change to its franchising strategy, its franchisees likely wouldn't have much of a say. "Hilton can change how the company operates at will," says Stanley Turkel, a hotel and franchise analyst. "Franchises are the one place in business where you can be bought and sold without any say." 

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