Rapid Rise of the Host with the Most

LET'S stop right-cheer," drawled the sandy-haired American speeding in a car along a bumpy highway outside Sao Paulo, Brazil. What had caught his darting blue eyes was a sign on an open lot proclaiming Vende-Se. "That means 'for sale'--and those are the only words I understand in this language," the American explained. Then he bounded out of the car and swiftly paced off the dimensions of the property, rattling a staccato of questions to a tag-along group of aides: "Who is the owner? What's the tax rate? How many cars go by here?" After several minutes of inspection and interrogation, he hopped back into the car and called out impatiently: "Well, let's get going. Daylight is running out, and you can't look at land in the dark."

Charles Kemmons Wilson, 59, founder and chairman of Holiday Inns, Inc., was doing what he likes best: scouting new locations for the world's largest and fastest-growing lodging chain. Wherever he may be--paddling down the Amazon in a canoe, riding along the Riviera in a Mercedes or poring over maps in his computer-crammed headquarters at Memphis--Kemmons Wilson is always seeking new sites. "Looking for land," he says, "is like going on an Easter egg hunt, and sometimes you find the golden egg."

Wilson has been finding so many of them lately that he seems to have a patent on the golden goose. On the average, a new Holiday Inn is opened every three days--or one new room every 36 minutes. Already Wilson has 1,405 inns in 50 states and 20 foreign countries or territories. The inns are a catalyst and a reflection of the age of mass travel; last year alone they served 72 million guests. The Holiday Inn sign, a 43-ft.-tall tower in screaming green, orange and yellow, is almost inescapable on American highways, and it is well on its way to becoming a Pop symbol of U.S. enterprise abroad.

Spreading round the world, Holiday Inns have opened in places as varied as Greece and Swaziland, Switzerland and Hong Kong, Morocco and Nassau. Last month the company opened an eleven-story inn in Monte Carlo. On his Brazil trip, Wilson closed deals to build six inns, with local investors putting up most of the capital in return for Holiday Inns' name and know-how. Over the next five years, Holiday Inns will build seven outlets in Israel alone, some of them in kibbutzim.

Putting Up the Dog. Capitalist Wilson is also moving into Communist countries. He has licensed Intertower, a joint venture of Cyrus Eaton Jr. and Occidental Petroleum, to put up 36 inns in Yugoslavia, Bulgaria, Hungary and Czechoslovakia; in most cases, the governments will own the inns. Encouraged by the talk of expanded East-West trade that surrounded the Nixon-Brezhnev summit, Wilson plans to travel to Moscow, probably in July, to sound out authorities about putting up motels in the Soviet Union. Says William Stratton, a Holiday Inns franchise director: "We haven't got to Antarctica yet, but who knows . . . ?"

Indeed, few corporations dominate their industries the way that Holiday Inns dominates the fast-growing business of lodging. Its success has lured a host of imitators into the motor-inn field: Howard Johnson's, ITT Sheraton, Marriott. Despite this competition, Holiday Inns has more than four times as many rooms as its closest rival in the hotel or motel field, Ramada Inns (see chart, page 81). Right now Wilson's company counts 208,939 rooms, with a total of more than 300,000 double beds.

Holiday Inns has ridden out front by offering a host of new services that Wilson devised to lure more and more travelers. Wilson's company was the first national chain to put up children at no cost when they share a room with parents, the first to offer free cribs for babies, as well as free TV sets and telephones in every room, a swimming pool at every motel and a kennel for traveling dogs. It was also the first to place ice machines and soft-drink machines in hallways, thus sparing the traveler the cost of room service. Today every Holiday Inn has a local doctor and dentist on call to treat guests at almost any hour. The chain even employs a full-time chaplain, the Rev. W.A. ("Dub") Nance, a Methodist. Among other things, he oversees a nationwide network of clergymen who volunteer spiritual counseling for guests at 820 inns; this group claims to have talked about 235 people out of committing suicide.

The company also lures traveling groups by welcoming them in big, bold letters on the marquee that adorns the towering sign at almost every Holiday Inn; WELCOME CICERO ELKS and similar greetings have become familiar sights. Says Wilson, who has a natural flair for crowd-pleasing showmanship: "People love to see their names on a billboard. Hell, they even come out and take pictures of it." Often the signs carry catchy, outrageously corny messages taken from a company book of sayings:

WE WORK FAST AND ACCURAT

THE MEDICAL SOCIETY IS CUTTING UP TONIGHT

KILROY WAS HERE, WHY DON'T YOU STOP TOO?

Wilson has built this empire in only 20 years, having started out with little more than an idea. A risk-taking entrepreneur in the age of prudent professional managers, he is a visible refutation of the common belief that a self-made man can no longer pile up great wealth in the modern, highly developed capitalist economy. Now Wilson has a personal fortune estimated to exceed $200 million. Three years ago, the Sunday Times of London listed him among the 1,000 most important men of the 20th century, along with Winston Churchill and Franklin Roosevelt.

This accolade came to Wilson because he practically created the modern motor-inn industry. He has transformed the motel from the old wayside fleabag into the most popular home away from home. Until 1952, when he founded Holiday Inns, most motels were of the "no tell" variety, generally shabby and faintly disreputable places that catered mainly to casual lovers and transient salesmen. Wilson was among the first to foresee that the fast post-World War II rise in U.S. personal income would lead to a rapid expansion in both business and leisure travel. He also sensed that people on the move would prefer to stay in lodges that offered, in addition to a place to park their car, a standardized level of cleanliness, comfort and food at moderate prices. (In 1971, the average price for a room in a Holiday Inn was $15.06, v. $16.60 for motels nationally and $20.33 for leading hotels.)

Today, largely standardized motor hotels are proliferating, but many traditional hotels in large and medium-sized cities are scratching for business. Hurt not only by the new competition from motor hotels but also by rising crime and declining business activity in downtown areas, many city hotels are all but empty on weekends. Their average occupancy rate has shriveled from about 80% two decades ago to 63%, which is below the break-even point for many large hotels. There are profitable exceptions, particularly in New York City and Chicago; Manhattan's 2,153-room New York Hilton and the 2,000-room Americana are often sold out.

For the most part, however, urban hoteliers have had to fight a rearguard action by offering free parking, snack bars and other appurtenances of motor inns. Motel owners have retaliated by adding nightclubs, saunas and haute cuisine (of sorts). As a result, the difference between motels and hotels is blurring. In general, motels have more self-service, more attractions for auto travelers and families, and lower prices.

Though the recession cut into the profits of most motel chains in the past couple of years, the lodging business is now surging in the midst of a sharp economic rise. An alltime high of 123.5 million Americans will hit the road on overnight trips this year. Meanwhile, a record 14.7 million foreign visitors will travel to the U.S. Every night, close to 200,000 of these travelers will stay in Holiday Inns.

For 1972, Wilson's company aims to raise its occupancy rate to 75%, up from 68% last year. During this year's first quarter, occupancy was up by three percentage points. In Europe, the company's bookings are running three times as high as last year. At that rate, Holiday Inns should have little trouble topping last year's after-tax earnings of $42 million on revenues of $708 million. This total greatly understates all the money that is spent in Holiday Inns. The parent company owns about one-fifth of the motels in the chain and gets all their revenues. Beyond that, it collects royalties from the rest of the motels, which are the property of franchisees, many of whom have become millionaires.

The originator and chief executive of the chain is a bluff, zesty man who believes absolutely in the company motto that is imprinted on the necktie that he wears: "It's a wonderful world." Kemmons Wilson likes to make points with maxims. One favorite: "The only people who don't have problems are the people who don't do anything." A high school dropout, he is also fond of remarking with put-on bad grammar: "When you ain't got no education, you just got to use your brains." Like many visionaries, he takes an uncomplicated view of the world that leaves little room for doubt. "When you get an idea," he says, "you've got to think of a reason for doing it, not of a reason for not doing it."

At work, Wilson runs mostly a one-man show, insisting on the last word in most major decisions and many small ones. For example, he can quickly thumb down a motel site proposed to him by an aide after weeks of study because "I don't like the smell of it." But he will listen to almost anyone with an idea and has been known to strike a deal with "some good old boy" without even discussing it with other high company officers. When he found the price of marble in Brazil to his liking, he made a snap decision to use some of it in his new inns there, calling to an aide: "Buy--that's my language." Says Wilson:

"I've been accused of lots of things, but never indecision."

Wilson generally sleeps about five hours a night and fortifies himself with catnaps the rest of the time; at a dinner party a few weeks ago he dropped off for two full minutes while still holding his fork. His main diversion is tennis, and he plays as often as he can at home or on business trips round the world. "Just call me an international tennis player," he quips. Despite an old leg injury, which has left him with a slight limp, he plays a strong, fast game and above all loves to win.

For all his wealth, Wilson remains determinedly middle class in his values, tastes and habits. He drives a $2,100 Japanese-made Suburu, a stubby, yellow compact car; typically, he owns the Suburu distributorship in ten Southern and Southwestern states. His taste in food is to haute cuisine what motel design is to Renaissance architecture. He greatly admires the kosher hot dogs sold by Nathan's Famous in New York City "because they snap when you bite into 'em," and, with his deep interest in the inner workings of almost everything, he can easily discourse on the best way to put a natural casing on a frankfurter.

Wilson also savors blackly well-done steaks and hamburgers, as well as spaghetti. He favors expensive bourbon but violates it with Tab to kill the alcoholic flavor. "I couldn't drink whisky if I had to taste it," he says. He sloshes everything except dessert with Tabasco sauce and keeps a quart bottle of it on the lazy Susan in the dining room of his home. When traveling, Wilson saves time by ordering his apple pie first and eating it while his steak is cooking. When in Memphis, he likes to take friends to the Little Pigs Barbecue, which has plastic-topped tables and a bathroom-tile floor.

Wilson has lived in the same house in the Red Acres section of East Memphis for the past 26 years. It is a comfortable but far from palatial six-bedroom ranch. Here he raised his five children, Spence, 29; Bob, 27; Kern Jr., 25; Betty, 24; Carole, 22. Wilson and his wife Dorothy, whom he married five days before Pearl Harbor in 1941, are openly affectionate; he likes to hold her hand in public or squeeze her knee when sitting beside her. He also talks over many of his big plans with her. A handsome, energetic woman, Mrs. Wilson was named Mother of the Year by the American Mothers Committee in 1970. Both Methodists, the Wilsons are regular churchgoers, though he occasionally nods off during a sermon.

Born in Osceola, Ark. (pop. 7,204), Wilson had a youth that was laced with adversity. His father died when he was nine months old, and his mother Ruby brought her infant to Memphis, where she took a job as a dental assistant at $11 a week. An only child, Wilson idolized his mother, who died three years ago. When she lost her job during the Depression, Wilson, who had held part-time jobs almost since he could walk, quit high school and went to work for good. He bought a $50 popcorn machine--nothing down, $1 a week--and set up shop inside a Memphis theater. As he recalls: "I was soon making more than the theater manager, so he threw me out and took over the popcorn concession himself." Wilson sold him the machine in 1931 for the original $50, then invested the money in five pinball machines. (He later bought the popper back, and it now stands in his office.) By 1933 he had saved $1,700--all from nickels pumped into his machines--and used it to build a house. Soon after, Wilson was able to borrow $6,500 on the house from a bank. "Right then," he says, "I decided to go into the building business."

Fateful Vacation. He went on to build more houses, buy apartments, acquire theaters and take over the regional Wurlitzer jukebox distributorship. By the time World War II hit, Wilson was rich. But he sold out everything for $250,000, joined the Air Transport Command and piloted C-47s over the Himalayan hump, probably the hairiest air route of the war. After being mustered out, he bought an Orange Crush distributorship, but it soured, and he lost $100,000. So he went back to construction and built a fortune of about $1,000,000, all the while sharpening his skills in choosing real estate that had the potential for large increases in value.

In 1951 Wilson packed his family into a car and drove to Washington, D.C., for what turned out to be a fateful vacation. The family stayed in motels, but all were costly, cramped and uncomfortable. Wilson sensed a need for decent accommodations for the growing number of motorists and says that "as soon as I got back to Memphis, I decided to build a motel that had all the things we missed." The draftsman who designed it, Eddie Bluestein, scrawled a title across the bottom of the plans: Holiday Inns. He got the name from an old Bing Crosby movie that he had seen the night before.

Wilson borrowed $300,000 from a bank, and in 1952 the first Holiday Inn opened on Summer Avenue, one of the main approach roads to Memphis. Business was so strong that within 20 months he built three almost identical inns on other roads leading into the city. "You just had to go by a Holiday Inn to get into Memphis," he says.

Restlessly, Wilson dreamed of building a national franchise chain of 400 motels. He turned for contacts and credit help to a fellow Memphian, Walter Johnson, one of the country's biggest real estate developers and then a director of the National Association of Home Builders. Johnson became vice chairman of Holiday Inns, a job he still holds, and helped recruit franchisees from among his business friends all over the country. Wilson and Johnson sold the first franchise in Clarksdale, Miss., for $500 and a flat fee of 5-c- per night for each occupied room. In return, the franchisee got Holiday Inns' plans and national advertising. Applications began to flow in, many from investment groups made up of doctors and dentists. Meanwhile, the start of the $76 billion federal interstate highway-building program in 1956 gave a great lift to Holiday Inns and its rising competitors.

Franchise Deals. Today, Holiday Inns fields about 10,000 requests for franchises a year, but only 200 or so are granted, mostly to people who already own inns and are proven winners. The cost of land and construction is entirely financed by franchisees, who put up about a quarter to a third of the amount and borrow the rest from banks, insurance firms or mortgage companies. Lenders prefer prospective franchisees over independent owners because there is less risk of failure with a motel (hat is backed by the resources of a chain.

A typical 100-room motor inn in southern Illinois can cost up to $1,100,000, of which the franchisee group puts up $350,000 or less; on this it can expect an after-tax return of just over $50,000--a handsome 15% or more on its investment. For such a motel, Holiday Inns charges an initial fee of $15,000, plus royalties and fees of 6% on the annual gross. In return, the franchisee gets the marketing advantage of a household name, national advertising and a steady flow of customers provided by the chain-wide referral system. The massive Holidex reservations system at Memphis headquarters is the largest on-line civilian computer system in the world. Lines run from every Holiday Inn in the U.S. to two IBM 360 computers in Memphis, which keep tab on every room in the system. In a few seconds, a guest at one inn can get confirmed reservations at other inns anywhere in the U.S. If one motel is full, a desk clerk can punch a few buttons on a panel and find out what openings are available at other Holiday Inns in the area.

To ensure the viability of each new franchise. Holiday Inns has a rigorous screening process. The company passes on all construction plans and runs a market test on each proposed site. These tests rate the flow and pattern of traffic, the surrounding road systems, the distance to airports, average income in the area, the potential for new business and the strength of competing motor inns near by. The price of land is critical because rising real estate and construction costs keep pressing room rates up. Wilson figures that the cost of land should amount to no more than 10% of the total cost of a new motel. Thus if an inn costs $1,000,000 to build and furnish, the price of the land on which it is constructed should not top $100,000. One industry rule of thumb calls for charging the guests at least $1 a night for every $1,000 invested in a room. In practice, the formula would work this way: if a 100-room motel costs a total of $1,100,000, the investment per room would amount to $11,000, and the innkeeper would charge $11 or more a night for it. In big cities, construction costs are climbing so fast that some hotels cost $60,000 a room to build.

Holiday Inns has opened in many downtown areas, but it is unlikely to put up large numbers of new inns within cities at any price because crime and urban blight have frightened customers away. Says Wilson: "The day of the downtown motel is on its way out, except in cities like New York and Chicago." Airport motels are also in decline because owners have overbuilt near many airports and business is spread thin. In fact, motels have multiplied so thickly in the U.S. that there are few choice locations left, and that is one reason Holiday Inns is making a large expansion drive abroad.

Training Films. For now, Holiday Inns is no threat to the well-established overseas hotel chains like Trans World Airlines' Hilton International or Pan American Airways' Intercontinental, which are located mainly in major cities. Wilson is concentrating on smaller communities, where city fathers are eager to attract traveler-drawing motels and offer tax breaks and free land to get them. The European motel scene is wide open for an all-out marketing war. Local chains--including France's Novotels, Britain's Trust Houses Forte and Italy's AGIP--are all expanding. The toughest competition for Holiday Inns is likely to be Esso Motor Inns, owned by Standard Oil of New Jersey, which pioneered in American-style motels in Europe starting in Sweden in 1963. It is now the main chain in Scandinavia and has 47 inns throughout Western Europe. Esso caters mostly to businessmen and tries to fit its services to local demands. For example, cafeterias are put in most Swedish inns because Swedes do not like to be served by waiters. In contrast, Holiday Inns intends to stick with the same standardized features in Europe that it offers at home.

Keeping this global enterprise running smoothly is an exquisite exercise in managing millions of minute details simultaneously--something like building an Eiffel Tower out of matchsticks, without glue. Success is measured in holding costs to a minimum while seeming to stint on nothing, and guaranteeing about the same level of service at all inns. The standards are maintained by 40 full-time investigators who make surprise calls at most inns four times a year. They check everything--swimming pool, restaurant, even the carpeting--according to a strict point system. If carpets are worn or dirty, for instance, the inspector takes off 30 points. Should the inn fail to get at least 850 points out of a possible to tal of 1,000, the manager is given a month to make things right. If a follow-up check finds no improvement, the manager is fired. In the case of a franchise, the contract is canceled, the motel can no longer call itself a Holiday Inn, and the sign and reservation system are removed. So far, more than 30 franchises have been voided.

The key to efficiency is the performance of employees, notably the innkeepers. All managers, Americans or foreigners, must attend training courses in Memphis lasting up to three weeks. Along with classes in industrial insurance and reservation policy, the training stresses the Holiday Inn attitude--a mixture of homespun verities and relentless optimism wrapped in a kind of revivalist fervor. In September these classes will move from Memphis to the Holiday Inn University in nearby Olive Branch, Miss.

The facility, complete with dormitories, classrooms and meeting halls, will be set in a landscaped 88-acre campus.

To improve productivity and prof its, the company also produces and distributes to its inns more than 35 job-training film strips with titles like Care and Control of Swimming Pools and A Race for Space. One strip, titled You Are the Star, takes waitresses through the entire process of serving a meal properly. For new waitresses, there are also written instructions: "Bathe daily and use a good deodorant, use a hair net, clean and brush your teeth (watch out for halitosis)." A film strip called Once Around teaches chambermaids to make a bed in less than three minutes by stacking linens in the order that they are used and finishing one side of the bed at a time.

Sandwich Art. Food is an important revenue source at motels, and the payoff comes in making a little seem like a lot. Building sandwiches is an art: meat slices are piled in the center and fluffed up to give the illusion of thickness. Chicken Tetrazzini is known as a "stretchy dish" because, unlike chops or steaks, portions can be reduced if necessary. At Holiday Inns, food revenue is about 50% as much as the income from rooms, and company chiefs are working to get it higher by urging innkeepers to improve their menus and advertise their restaurants more.

Except for hot dogs and other processed meats, much of which comes from Holiday Inns' Chicago commissary, the motels buy most food locally, but according to strict specifications. T-bone steaks must be either choice or prime, weigh between 12 oz. and 16 oz., and be an inch thick. To keep the meals uniform, company manuals urge local managers to buy certain preferred brands, including Dole pineapple juice, Campbell's soups and General Mills pancake mix (under the company formula, a 5-lb. box should make 100 pancakes). All food portions are carefully measured. The manuals even give the standards for a grilled cheese sandwich:

INGREDIENT PRICE

4 1/2 oz. American cheese 4 1/2-c- 2 slices bread 3 1 oz. cooking oleo 1 potato chips, pickle 5 TOTAL COST: 13 1/2-c- SELLING PRICE: low 45-c- high 75-c-

Liquor sales are highly profitable. To squeeze the most from each bottle, Holiday Inn bartenders are enjoined from giving freebies to customers, no matter how much they spend. Another taboo: pouring liquor directly into a mixed drink without using a 1 1/4-oz. shot glass. Thus the bartender must be able to show in his receipts the equivalent of the price of 20.5 drinks for each fifth bottle of liquor sold. Most distillers offer cut-rate prices to get their brands into hotels and motels, but Holiday Inns goes one better: it buys bourbon and Scotch in bulk from Schenley at substantial savings and sells it under the Holiday Inns brand. Last year the company saved another bundle with volume buying by issuing a single order for 40,000 Motorola television sets. Cutting costs extends to the smallest things, like using nonwrinkle sheets to save on pressing. Instead of buying expensive rugs, Holiday Inns' chiefs save money by ordering cheaper rugs and chucking them out after three or four years. At many inns the soap bars that guests rarely use up are ground down and used in floor-cleaning liquid.

Holiday Inns has a products division that makes and markets a myriad of goods: furniture, bologna, kitchen equipment--everything that is needed to start a motel from scratch. The division even manufactures prefabricated bars. One popular item is a $25,000 Club Escadrille bar, complete with World War I flying decor, wing emblems, portraits of Rickenbacker and Von Richthofen, and a muted sound track of planes landing and taking off. Though franchisees are free to get their equipment anywhere, most choose to avoid the bother of shopping around and buy from the parent company. Last year the products division sold $133 million worth of goods to its own inns and those of rival motel chains, as well as to hotels. Competitors seek expert advice from the division; Billionaire O.K. Ludwig paid it a $250,000 consulting fee for help in planning his Princess Hotel in Acapulco. "We saved him millions," boasts Wilson.

Gifts for Brides. Holiday Inns' canny management is matched by its aggressive marketing. For example, it uses its Holidex reservation system to find out which areas produce the most bookings, then directs its heaviest advertising to them. Each motel manager is expected to make at least five sales calls a week, visiting local civic and fraternal clubs to hymn the benefits of using his inn for meetings. Some managers cull newspapers for engagement announcements, and send bracelets and other gifts to prospective brides, along with a pitch to honeymoon at Holiday Inns.

That touch of larceny that is supposed to be in everybody costs Holiday Inns a substantial amount each year in missing sheets, towels and utensils. Most inns have some defenses. For example, pictures are usually screwed tightly to the wall. At many motels, a light goes on at the front desk if a television set is unplugged. All bills are presented when they reach $50; though most people do not have to settle until they leave, this policy gives the desk clerk a chance to demand immediate payment if the guest looks like a deadbeat.

Protecting its guests against thieves is difficult for any hostelry. Clothing and behavior are not the social indicators they once were, and security men are reluctant to move on any but the most suspicious-looking characters. Meanwhile, thieves are getting ever more sophisticated. Until it was caught, one ring, operating out of Montreal, made regular sweeps by jet, knocking over airport motels in New York, Washington, Miami or Puerto Rico--and getting home each day in time for dinner.

Permissive social values have reduced promiscuity as a problem for motel men. Often an unmarried couple will register for the same room under their own names and dare the clerk to say anything. Holiday Inns' policy is to turn down couples only when they are from the local community and known not to be married. Many motels and hotels make no effort at all to check. Loew's Corp. President Preston Tisch remembers ruefully when his teen-age son was working behind the desk of the Americana in Manhattan. Says Tisch: "He wouldn't check in one unmarried couple. They went to the Hilton and we lost $30. I fired him."

More Than Money. For Wilson, the challenges of the motel business remain even more tempting than charred steak dripping with Tabasco sauce, and he expects to remain in the top job at Holiday Inns for many years. He also has a sense of mission and sees the role of his company as more than a great money machine. Says he: "I think we can do more for world peace through tourism and building Holiday Inns around the world than anything else. We get to know other people and they get to know us and that's good."

There is one other thing keeping Wilson from retirement. Inside the dynamic, socially committed tycoon lurks a youngster who never quite got over his love affair with land. "There's no one who loves land more than me," he admits. For that kind of man, no job in the world could offer more: a chance to chase daylight round the world, clambering over hills, slogging through rain forests, stalking through prairie grass in a never-ending hunt for the perfect motel site, Kemmons Wilson's ultimate golden egg.

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