Chain’s Founder Promised Travelers ‘No Surprises’--and Delivered for 37 Years

Thursday’s announcement that Holiday Inns will be sold to British conglomerate Bass PLC meant the end of an era for an American institution that pioneered the concept of the roadside family hotel and mushroomed with the growth of auto travel, only to falter as the market matured and fragmented.

Holiday Inns came into being in 1952 because founder and Memphis home builder Kemmons Wilson was disgusted with the roadside accommodations he found when he drove his family on a cross-country trip. In most cities, he had been able to find either an expensive hotel that charged extra for each child, or a typical motel, which one study characterized as “a bower of bliss in which amorous couples devote themselves to the worship of Venus.”

With his partner, Wallace E. Johnson, Wilson decided to create a chain of affordable family hotels. Wilson called them Holiday Inns after a Bing Crosby-Fred Astaire movie; his mother, Doll Wilson, designed the familiar sign with the flashing star and swooping arrow.

Wanted Bright, Airy Rooms

Children stayed for no extra charge. Each room had a Gideon Bible and a telephone, and each Holiday Inn was just like all the others. For years, the company’s slogan was: “The best surprise is no surprise.”

“The typical hotel room of the 1950s was cold and drab,” Wilson once said. “We wanted rooms which were bright and airy with friendly, warm colors.”

Aggressive franchising expanded the chain beyond Memphis and the South. At the same time, the interstate highway system was being completed, and Americans were discovering the pleasures of cross-country auto travel--”the family vacation where you’d pile the kids into the station wagon,” said Roxanne Branch, a spokeswoman for the Hotel and Travel Index in Secaucus, N.J. “They were right there.”

The company would eventually boast that 96% of all U.S. travelers stayed at a Holiday Inn at least once.

In the 1970s, the company focused on building Holiday Inns in suburban areas, one-time executive R. Britton Colbert said in an interview Thursday. The company also expanded internationally--Holiday Inn now boasts a hotel in remote and high-altitude Lhasa, Tibet, complete with yak burgers in the coffee shop and oxygen tanks in each room.

Then came the lodging industry building boom of the late 1970s. Competition emerged in the middle-market segment that Holiday Inn had staked out for itself. The market was shifting more toward the business traveler, but demand failed to keep up with supply.

“Demand increased by 2% to 2.5% in the late 1970s, while the supply was growing 3% to 3.5% per year,” said John Norlander, president of Radisson Hotels in Minneapolis.

Wear, Fragmentation

As Holiday Inn grew larger, it became more difficult to control the quality of each one, said Colbert, now a partner with Laventhol & Horwath, the accounting firm that specializes in the hospitality and real estate industry. “It was a huge system, and there was a big disparity,” he said.

By the early 1980s, the oldest Holiday Inns were decidedly worn out and newer competitors were able to grab Holiday Inn’s market share in certain areas.

At the same time, the market began to fragment. On the high end, more sophisticated travelers demanded amenities that a Holiday Inn could not offer, giving business to Marriotts and Hyatts and suite hotels. On the low end, travelers sought out cheaper rates than the $40 to $70 typical of a Holiday Inn, giving the nod to the Motel 6s and Days Inns.

In the early 1980s, management began weeding out the poor performers as franchise licenses came due. As many as 100 to 150 of the older Holiday Inns, most with only about 100 rooms, were closed or replaced every year with much larger ones, said Colbert, who was an executive with the company during that period.

In a further departure from the past, the company phased out use of the star-and-arrow sign, officially retiring it in 1987.

By 1986, changes in federal tax laws slowed the lodging building boom. Since then, demand has been slowly catching up with supply, industry observers said.

Strong Brand Name

Holiday Inns’ occupancy rates are about 67%, below earlier rates but still above the industry average, analysts said. There are now 1,585 Holiday Inns, including those outside the United States, and a total of 314,242 rooms.

The sale to Bass, which bought the Holiday Inns overseas last year, should bode well for the Holiday Inn chain, analysts said. “With their marketing capability and a great deal of capital, they (Bass) have the ability to solidify their core middle-level business here in North America,” Colbert said. “(Holiday Inn) is one of the strongest brand names in America, and they can take it and leverage it more effectively than Holiday Corp. could in Memphis.”

The sale frees Holiday Inns’ parent to concentrate on projects with strong growth potential. Those include 94 Embassy Suites hotels, designed for business and families; 198 Hampton Inns, limited service motels aimed at the lower end of the market, and 11 Homewood Suites under construction, apartment-like lodgings aimed at the extended-stay traveler. The corporation also operates hotels and casinos under its Harrah’s unit.