Breaking News
Translate

A Chain of Gold

By Onome Amawhe
Conrad Hilton is the world’s best known innkeeper. Through spectacular rise from being the proprietor of the Mobley Hotel in Cisco Texas—a petroleum boom town— he became the world’ statesman of international hospitality.  Conrad Hilton relocated to Cisco Texas from San Antonio shortly after his service in the U.S Army.

Conrad Hilton, Founder, Hilton Hotel Chain

He had intended to buy a bank and cater to the rapidly emerging oil establishments in Texas during the period known as The Gusher Age, a time of dramatic economic growth in the U.S. State of Texas following the discovery of a large petroleum reserve in the area.

The bank he had hoped to purchase cost too much. He was having a drink in a bar when a property owner mentioned a property that was available for sale. Hilton quickly struck a deal and mobilized an investment group. Funds were transferred within a week and the Mobley, in Cisco (now a local museum and community center) became Hilton’s first hotel in 1919.

In a few weeks Conrad Hilton is in good business.  Hilton bought two more Texas properties in 1920; the Melba in Fort Worthm and the Waldorf in Dallas—named after the prized Waldorf Astoria Hotel in New York.  In 1925 Conrad Hilton built the first hotel to carry his name in Dallas. And with rapid expansions, Hilton consolidated his properties into Hilton Hotels in 1929. In November 1930, the El Paso Hilton was completed and opened. A year later, Hilton owned eight hotels.

During the U.S. depression of the 1930s, Hilton fell into bankruptcy and lost a number of his hotels. He was more than half a million dollars in debt when a young bellboy slipped him $300 to feed himself and his family. In 1931, a Texas hotelier from whom Hilton had borrowed money took possession of his hotels when he defaulted on a $300,000 loan. He was retained as manager to run the National Hotel Company in addition to his (Conrad’s) hotels. Nine months later, Hilton and the Hotelier decided to part.

The separation, however, was in no way peaceful. The Hotelier family and Hilton sued and countersued each other regarding the terms of their agreement for separation, which Hilton claimed allotted him one- third of the hotel stock if the agreement failed to prove satisfactory.  In 1933, while Hilton continued to battle the Hotelier’s family in court until they defaulted on the loan for the El Paso.

He then managed to raise the necessary $30,000 to buy back the hotel. In 1934, Hilton settled with the hotelier who lent him $95,000 and he eventually bought his hotels back. While depression-era hotel owners saved less than one hotel out of five Hilton emerged with five of his eight hotels and he met his debts by the summer of 1937.

In 1938, Hilton bought his first hotel outside of Texas, the Sir Francis Drake in San Francisco. He sold it two years later at a $500,000 profit to raise capital to purchase the Stevens in Chicago, then the largest hotel in the world. In 1942, Hilton acquired three more properties; one in Los Angeles and two in New York and by the following year his name had stretched from coast to coast.

The New York properties included the Roosevelt and the Plaza. In 1945, Hotel magnate traveled to Chicago to complete the purchase of the Stevens, which he had initiated in 1940, and ended up also acquiring the Palmer House. In May 1946, Hilton Hotels Corporation was formed. It made history the next year as the first hotel company to have its stock listed on the New York Stock Exchange.  Conrad Hilton remained president and the largest stockholder.

Despite its reputation, the Waldorf- Astoria in was not a profitable hotel. While negotiations to lease the Waldorf Astoria in 1948 were taking place, Hilton worried his board members with his interest in international hotels and as a result he began to expand his operations outside of the United States and renamed the company.  The Hilton International Company became one of the largest hotel businesses in the world.

The company had previously expanded its operations into credit cards, car rentals, and other services.  In 1949, Conrad Hilton bought the lease on the Waldorf Astoria and made a $1 million profit in its first year under Hilton management. The first European Hilton was opened in Madrid in 1953.  The largest hotel merger in the industry took place in 1954 when Hilton Hotels purchased the Sattler Hotel Company for $111 million.

The Sattler chain consisted of eight hotels with two more under construction.  Sattler was noted for its fine properties and solid reputation. The chain was about to be sold to a New York realty firm when Hilton made a plea to Sattler’s widow. She agreed to sell to Hilton in order to keep the hotels in the hands of hotel people. Earnings per share nearly doubled between 1953 and 1955, largely as a result of this acquisition.

In 1955, another overseas Hilton was opened in Turkey, and the Continental Hilton of Mexico City opened the following year. In 1964, Hilton International spun off and became a public company with Conrad Hilton as president. He was made Chairman of the board of Hilton Hotels that same year.

The late 1960s saw significant changes, beginning with the 1965 formation of Statler Hilton Inns, a corporate franchising subsidiary, and a change of presidents. In 1966, Hilton’s son, William Baron Hilton assumed the presidency. His conservative fiscal strategies set a decidedly different course for the company his father had built. Barron Hilton was an avid poker and was very interested in making gambling a part of the Hilton Empire. He was denied a gaming license in Atlantic City by the New Jersey Casino Control Commission in 1985, when alleged ties to organized crime were discovered.

The commission stated that Hilton’s 13-year relationship with Sidney Korshak, a Chicago labor attorney associated with organized crime figures, was the main reason the gaming license was denied. Hilton had already spent $320 million to build the casino, “the largest undertaking in the company’s history,” according to the 1984 annual report.

Hilton sold his newly built property to Donald Trump, a real estate and casino czar. Hilton ended relations with Korshak in 1984, because the New Jersey authorities made it clear that Korshak was an obstacle to getting a license in Atlantic City. In 1991, Hilton finally received permission to operate a casino in Atlantic City. He also made Hilton one of the first in the hotel industry to use management leaseback deals.

In 1967, Baron, as an aviation enthusiast, persuaded his father, as the largest shareholder of Hilton International, to swap his stake in the overseas operations for shares of Tran world Airline. The expectation had been that Trans world Airlines stock would rise, but its value plummeted over the next 18 months and Hilton lost the rights to his name overseas but he remained chairman of Hilton International.

During the 1970s, Baron Hilton concentrated on franchising the Hilton name and managing other hotels. In 1973, the company launched a computerized hotel reservation dubbed HILTRON. The system served not only the Hilton chain but was also employed by other chains in the industry, providing yet another source of revenue. In 1975, Hilton sold a 50 percent interest in six major hotels to Prudential Life Insurance Company of America for $85 million but continued to manage properties in exchange for a percentage of room revenues and gross profits. This was one of the first management leaseback deals in the industry. Joint –venture arrangements later became standard industry practice. In 1977, the purchase of Waldorf Astoria’s building and land was finalized for $35 million.

The decade closed with the appointment of Barron Hilton as chairman of the board in 1979. During the 1980s, Hilton continued to make its money primarily through casino gambling, leasing and management and franchise fees. In 1972, Hilton bought control of two Las Vegas casinos, paying $112 million for them. Growth in the hotel part of his empire came from expanding the number of hotels it franchised. His strategy of owning very few properties outright was later imitated by other hotel companies in the 1980s. By 1985 gaming was providing 40 percent of the company’s operating income, and earnings had increased by 20 percent annually since Hilton entry into that industry.  In 1985, Hilton arrived Nigeria with signing of Management Agreement for Nicon Noga Hotel in Abuja.  During the late 1980s, Baron concentrated on solving the problem of his father’s will. Before his death, Conrad Hilton had bequeathed the bulk of his holding-a 27 percent block of Hilton shares to the Conrad Hilton Foundation.

The foundation, incorporated in 1950, gives aid to Roman Catholic nuns. The Conrad Hilton foundation left Baron Hilton with 3.6 percent of Hilton Hotels, but he claimed to have exercised an option on the foundation’s shares immediately, buying their portion at the market rate of $24.  Ownership of the stock was contested for the next decade. At issue was the interpretation of an option Conrad Hilton had allotted Baron Hilton in his will. Baron Hilton claimed the will allowed him to buy the entire stock from the foundation at the 1979 price. The estates executor claimed the will intended that Baron Hilton be entitled to no more than 7 percent of the shares.

A November 1988 settlement gave Baron Hilton four million of the disputed shares, a stake valued at $204 million (during this time, the business was in the hands of Ladbroke, now Hilton Group who acquired the chain in 1987) Hilton closed the decade enjoying a 70 percent occupancy rate in its newly rejuvenated domestic hotels, greater international expansion, and properties totaling an estimated $4 billion to $6 billion. In May 1989, Chairman Baron Hilton solicited bids for the chain. At time he resigned in 1989, the company had not received a satisfactory bid, and Hilton decided not to sell. In 1997, with the growing globalization trend, the two Hiltons commenced re-unification talks.

This saw the light of day in February 2006 when Hilton Hotel Corporation re-united with its international counterpart, Hilton Group, after over 40 intervening years, to create a multi-Billion dollar business with the feasibility made obvious in the fact of the close relationship the two Hilton businesses have had since 1997 when they launched a global marketing alliance, common identity and a joint venture agreement that has culminated in this milestone re-unification. In the late 1990s, Hilton Hotels was the third-largest lodging company in the world. It owned, managed, and franchised more than 250 hotels worldwide, including New York City’s Waldorf-Astoria, Hilton Hawaiian Village, and Chicago’s Palmer House Hilton.


Disclaimer

Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.