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InterContinental Hotels Group, now the world's second largest hotel operator, traces its roots back to an 18th century brewery in Northern England. The first Bass brewery was established in Staffordshire in 1777 by William Bass, with the aim of producing lighter ales with local Burton-on-Trent water. By the end of the century, more than half of the Bass ale produced by the company was being shipped to Scandinavia, Russia and Germany. The painter Manet included two bottles of Bass in his 'Bar aux Folies Bergere', and the company's red triangle logo became Britain's first registered trademark. Under the control of the founder's grandson, Michael Bass, the business had become the world's biggest brewer of ale and bitter by the late 19th century.
Unlike other brewers who sold beer through their own pub networks, Bass distributed mainly to independent or "free-house" pubs. This proved a lucrative market for many years until a change in consumer drinking habits in the early 20th century. The growing popularity of the cinema in the 1920s had a damaging effect on this market, with many customers opting for a night out at the pictures instead. Many of Bass's customers went out of business, and the brewer responded by acquiring rivals which already had their own tied-house pub networks. Worthington & Company was the first purchase in 1926, followed by others including Mitchells & Butler and Charrington United. By the late 1960s, Bass had come to dominate the British beer market, controlling close to a quarter of the country's pub estate, as well as a number of popular beers including Charrington and Carling.
It also gave the group the basis for a small hotels business. Several of the enlarged company's pubs also offered accommodation, and Bass Charrington relaunched this business under the name Crest Hotels, expanding its footprint through a series of acquisitions including a small network of hotels in Europe from Esso. Pub hotels were gradually divested in favour of more modern but affordable three and four-star outlets, and in 1987, the group forged its first links with the Holiday Inn brand, then controlled by global giant Holiday Corporation.
One of the best-known names in the worldwide hotel industry, Holiday Inn was founded in 1952 by Kemmons Wilson, an entrepreneur who had already made a fortune building homes in and around Memphis, Tennessee. On a family trip to Washington, DC in 1951, he was outraged that the guesthouses in which he and his family stayed along the way were not only usually dirty, but also charged extra for his two kids. As a result he decided to set up his own motel chain, offering high standards of cleanliness and charging a flat rate per room irrespective of how many people stayed in it. He also set out to offer a few basic amenities as standard, such as air conditioning in every room, free parking, free ice and in-room phones. In the process he completely transformed the American hospitality industry, establishing uniform standards which had never existed before.
Wilson's first hotel opened outside Memphis in 1952. He borrowed the name Holiday Inn from a popular Bing Crosby movie. Another three followed in and around the city soon afterwards, and the growth of America's new network of interstate highways fuelled a rapid expansion of the chain from cost to coast. In 1957, the first Holiday Inn opened in Canada. In 1960, the chain opened its first European outlet in Holland. Although Wilson continued to own some of the hotels himself, the majority were franchised to other owner-operators, but all under strict conditions of comfort, cleanliness, quality service and good food at moderate prices. The huge success of the chain inspired numerous competitors, such as Howard Johnson, Red Roof, Best Western, Days Inns, Ramada Inns and many others. But Holiday Inn remained the leader of the pack. At its peak in the mid-1970s, Wilson's Holiday Corporation oversaw the operation of some 1,700 Holiday Inn outlets, located throughout North America as well as a small number of outlets in Europe, South America and Africa. In 1983, the group introduced a secondary, midscale brand, initially as Crowne Plaza Holiday Inn, offering higher quality accommodation in major cities for business travellers.
Keen to establish an international hotel business of its own, Bass formed a partnership with Holiday Corporation in 1987 to take over control of Holiday Inn's 180 or so properties outside North America and also expand its footprint into new territories. Two years later, it agreed to acquire Holiday Corp's business in the US, Canada and Mexico as well, taking over full control of the Holiday Inn brand worldwide by early 1990. (Holiday Corporation's remaining hotel interests, including Harrah's Casinos and Embassy Suites, were spun off into what is now Harrah's Entertainment).
While Bass focused on its leisure business, rival brewer Scottish & Newcastle seized pole position in the UK with the 1995 purchase of Scottish Courage. Bass responded the following year by attempting to buy Allied Domecq's half-share of Carlsberg-Tetley for £200m, but the deal was subsequently vetoed after a year of deliberation by government regulators. Bass was forced to sell its stake on to Carlsberg, making a £40m loss in the process. Keen to make up for wasted time, the group set about amassing an acquisition war-chest through a frenetic series of further sales in late 1997 and early 1998. Bass sold 61 of its North American hotels to franchisee Bristol Hotels and Resorts for $391m and pulled out of the gaming business altogether, offloading its bingo clubs, Barcrest amusement machines and 900-strong Coral betting shop chain, as well as 1,400 tenanted pubs. But the most significant deal was a move into upscale hospitality, with the purchase in 1998 of InterContinental Hotels for £1.8bn.
One of the great names in international hospitality, the InterContinental brand was first launched in 1947 by Pan American World Airways. Already a pioneer in international travel, Pan Am introduced the first ever round-the-world service in 1942, and set out to provide suitably luxurious accommodation for its passengers (and crew) on their various stopovers along the route. The first selected location was Belem, Brazil, en route to Africa, and other hotels were opened in Latin America, Europe and the Near East. In 1981 the company was acquired by British hospitality group Grand Metropolitan (later Diageo), who expanded it with the addition of their own portfolio of luxury hotels. They in turn sold the business on in 1988 to Japanese group Seibu Saison who ran it for 10 years until the purchase by Bass. This deal was a superb coup, stolen from under the noses of rival bidder Marriott Group.
The portfolio was swelled further by four hotels in Australia, the UK-based Browns Restaurants chain and German bar and restaurant operator Alex. In 1999, Bass backed Punch Taverns' bid for Allied Domecq's 3,600-strong pub estate. It also announced plans to expand its hotel groups by widening its portfolio of strategic partnerships with UK hotel groups. Bass said its aim was to quadruple the size of its Crowne Plaza and InterContinental businesses by 2004 and double European Holiday Inns to around 800 hotels. Just a few weeks later the group acquired the Westin Central Park South Hotel in New York, rebranding its as the Central Park InterContinental Hotel. In 2000, the group acquired Southern Pacific Hotel Corporation, the owner of 60 Parkroyal and Centra hotels in Australia and the Asia-Pacific region. These were all converted to the InterContinental, Crowne Plaza or Holiday Inn brands. Soon afterwards the group also bought out US group Bristol Hotels and Resorts, then the largest franchisee of Holiday Inn outlets.
The group finally made its exit from brewing in 2000. Despite strong competition from Heineken, Anheuser-Busch and South African Breweries, fast-growing Belgian brewer Interbrew acquired Bass Brewers for £2.3bn. Yet Interbrew's subsequent purchase of Whitbread as well triggered a regulatory investigation, and the Belgian company was eventually forced to sell on most of Bass to what is now Molson Coors. Meanwhile Bass itself continued to restructure as a hotel and leisure company. In early 2001 the group sold off its entire unbranded retail pub estate to Nomura International private equity, then went shopping again, acquiring UK chain Posthouse (rebranded as Holiday Inn) and The Regent Hong Kong Hotel (rebranded as InterContinental). In 2001 the group adopted the new name Six Continents, and announced plans to spin off its pubs, bars and restaurants as an independent company.
Like all businesses in this sector, the group's performance was devastated from 2001 onwards by the triple whammy of 9/11, the war in Iraq and the SARS outbreak. Between 2001 and 2002 alone, revenues from the US market virtually halved as a result of the terrorist threat. The following year saw a significant dip in revenues from continental Europe as a result of challenging trading conditions, a more than 50% plunge from the Asia Pacific business as a by-product of SARS fears. Several investors objected to the spin-off of the pubs division, leading to angry scenes at the group's annual meeting in 2003. This generated speculation that rival hospitality groups might table a hostile bid for Six Continents or its pubs division. Despite the fuss generated by the demerger, no bids were tabled, and Six Continents went ahead with its plans, successfully splitting into two in April 2003. The pubs, bars and restaurants were spun out as Mitchells & Butlers, and the remaining Six Continents business was renamed InterContinental Hotels Group. Group CEO Richard North left the business in 2004.
Last full revision 17th January 2018
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