(7 of 10)
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.