Chapter 24

Puttin’ On the Ritz and Renaissance

At the same time as he was retooling his own company for future
growth, Bill Marriott was doing the same for General Motors. He did this as an activist member of the board of directors that engineered a coup to save America’s largest company.

Founded in the early 1900s, GM became the world’s number-one auto manufacturer in the post–World War II years, when its American market share exceeded 50 percent. But GM sat on its success for two decades while its market share slowly diminished. The company seemed totally unprepared for the challenge of Japanese compact cars. In 1982, before Bill joined the GM board, he said in a speech that a key reason GM was sliding was that the company wasn’t listening to its customers or employees. One GM board member, Ross Perot, resigned in frustration, saying that trying to change GM was like “teaching an elephant to tap-dance.”1

When GM Chairman Roger Smith asked Bill to join the board in August 1989, Bill was both honored and intrigued. His son John summarized Bill’s acceptance in this way: “He couldn’t say no. My dad loves cars and this was a chance to see up close how America’s biggest company worked—or didn’t work, as the case turned out to be.”

GM was not just an American behemoth; it was the world’s largest manufacturing company, with 775,000 employees. In 1988, GM’s sales reached $110 billion and included a record $4.9 billion profit. But a closer examination by Bill revealed systemic weaknesses. Most of that profit had been made by its nonauto businesses. Smith seemed relatively unconcerned about GM’s declining U.S. auto sales, and nominated like-minded GM executive Robert Stempel to succeed him as chairman and CEO in 1990.

A trio of board members—Bill Marriott, former Procter & Gamble CEO John Smale, and former Secretary of Labor Ann McLaughlin—began meeting secretly to plot an insurrection. The trio carefully drew in other outside directors, and by the time the board met in April 1992, the revolutionaries were the majority. At that meeting, the board stripped Stempel of his chairmanship of the board’s executive committee and put him on probation. The board then chose John F. “Jack” Smith, Jr., as the new president. Smith had been instrumental in studying and borrowing Japanese auto-manufacturing practices and applying them to GM’s European operations, putting them on an increasingly profitable upswing.

Stempel failed to use his probationary period well. Bill summarized: “We told Bob Stempel we didn’t think he had a good team of managers. He defended his team and was unwilling to make any hard choices. No matter how hard we pleaded and confronted him, he refused to act. He ended up going down with his team. In eighty years, GM had never fired a chairman, but we fired Bob Stempel because it was necessary to save GM.”

Not only did they fire Stempel, but the board voted in director Smale as the new chairman, stunning the business world with the unprecedented election of a non-GM executive as chairman. The New York Times predicted the board’s revolutionary action would have serious “reverberations far beyond Detroit. [This] awakening of the once sleepy G.M. board will redefine the cozy relationship that often exists between the nation’s top executives and the hand-picked members of their boards.” The Washington Post agreed, quoting an expert: “When the chairman of the largest industrial company in the world gets fired for nonperformance, that reverberates through every executive suite in the country.”2

With Stempel out, Jack Smith was promoted from president to CEO. He radically shook up the company, focusing on the core auto business and decentralizing GM’s management structure to encourage innovation. For the first time in four years, GM made a profit ($2.5 billion) in 1993. Smith continued the company’s upward trajectory for the next decade, and Bill remained on the board at Smith’s request until 2002.

The GM experience was additional evidence to Bill that complacency was the archenemy of success. “Success breeds failure unless deliberate steps are taken to avoid it. We know that the results of not changing are continual decline and eventual disappearance from the marketplace,” Bill said in one speech.3 He was testing that principle as his new company, Marriott International (MI), began business in October 1993. With the separation from the “original” company (retitled Host Marriott), Bill knew his employees were nervous and unsettled, wondering what their future would be. So he made the rounds of the company with a series of pep talks.

Released from the shackles of real-estate ownership, which was now with Host Marriott, Bill envisioned unparalleled growth for MI with assistance from hotel conversions and franchising. It had taken him thirty-nine years to expand from the company’s first hotel to its 1,000th. When the 1,000th hotel opened in Lihue, Kauai, in 1995, Bill said he was intent on doubling that number over the next five years; “2,000 by 2000” became MI’s goal, even though many thought he was reaching too far.

Bill still believed that quality was more important than quantity, so he instituted a companywide TQM (Total Quality Management) program and stuck to its guiding principles into the new millennium. When it came to serving customers, Marriott conducted continuous guest surveys, which produced surprising results.

“We have always assumed that being friendly and nice was a major competitive advantage, but business travelers say ‘no,’” he explained in one speech. “Of course, we know that if we weren’t nice, they wouldn’t come back. But nice is not enough for our core business customers.” Bill summarized the opinion of business travelers: “We are not travelers excited about being away from home. We are on the road to get the job done so treat us that way. If we needed ‘nice,’ we’d send our mothers. And our needs are changing rapidly, so if you want our business, you’d better change fast too.”4

Critical among those changes were registration improvements. Bill had opened Marriott’s worldwide reservation center in Omaha in 1971, which became the largest single-site reservation operation in U.S. hotel history. In 1990, Marriott opened a second reservation center in Salt Lake City. Along the way, the company constantly invested in more efficient computer programs for automated reservations.

Over the years, Bill found that the majority of guest complaints involved the speed of checkin and checkout. With the latter, Marriott was the pioneer of express checkout in the 1980s. “We found that slow checkout was a major problem, so we put the bill under the door at four a.m. When they check out, all they have to do is sign the bill and hand it to a clerk. Complaints were cut in half,” Bill said.

In 1991, the company instituted the “First Ten” program to speed up check-in as well. “A customer’s first ten minutes at a hotel set the tone for their entire visit,” Bill explained. “Nobody likes to wait in line, especially hotel guests who have been in lines for airplanes and rental cars all day. They don’t like to be handed off from the doorman to a bellman to a busy front desk clerk and back to a bellman. With ‘First Ten,’ we preregistered guests through their credit cards when they made their reservation, and then met them at the front door with their key.” Just as with express checkout, this Marriott preregistration practice hailed by the New York Times soon became an industry standard.5

In the 1990s, no one exemplified Marriott service better than Albert “Smitty” Smith, the Atlanta Marriott Marquis concierge captain. He specialized in catering to sports teams, making them loyal Marriott customers. “Smitty knows every coach and player and what they like, even a sportscaster who wanted his English muffins burned black,” Bill explained. His biggest challenge came when a Hilton opened up nearby, offering half-price rates and causing many sports teams to switch hotels. “But whenever a team stayed at the Hilton, Smitty would find out when the team was arriving. Then he would wait in the lobby of the Hilton for the team’s arrival.”

Once, Smitty greeted the Dodgers and their manager Tommy Lasorda when they arrived at the competitor hotel. “Smitty, it’s great to see you—do you work for Hilton now?” Lasorda queried.

“No, Coach,” Smitty replied, “I’m still at the Marriott, but I just wanted to come over and welcome you to Atlanta. Also, I know that after every game you order a double cheeseburger, onion rings, and strawberry milkshake. Since you have a game tonight, it could go into extra innings, and room service closes at eleven p.m. at the Hilton. So I’m going to bring up your special order from the Marriott.”

Taken aback, Lasorda asked, “That’s awful nice, Smitty, but why would you do such a thing?”

“Well, Coach, because I want you to know that even though you can’t afford to stay at the Marriott anymore, we still love you!”

Bill reported that “with this attitude, Smitty was able to bring every single sports team back to the Marriott because he cared!”

Along the way, the veteran bellman was promoted to concierge, where he became so appreciated by Atlanta’s leading lights that they made sure when the International Olympic Committee (IOC) visited Atlanta in 1987, they stayed at the Marriott Marquis and experienced the Smitty touch. When Atlanta won the bid for the centennial Olympics, the Atlanta Journal and even IOC President Juan Antonio Samaranch acknowledged that Smitty was second only to the Atlanta Olympic Committee in closing the deal with the IOC. And Samaranch designated the Marriott Marquis the official IOC host hotel.6

That may have also had something to do with the “lucky chestnut” talisman Samaranch carried around with him. During a stay at the hotel, Samaranch called the manager frantically to say that he thought he had left the chestnut on his room-service tray. The director of room service climbed into the kitchen dumpster to look for it—a task made more difficult by the fact that he didn’t know what a chestnut looked like. He found it and returned it to the grateful Samaranch. Then came another call the next morning. He had left the chestnut on the room-service tray again. So, again, the manager went dumpster diving to retrieve it. Bill told the story to an employee conference and concluded, “To our customers, let me say, ‘We may not be able to pull your chestnuts out of the fire, but we will go into the dumpster for you!’ Every time.”7

As Bill moved aggressively toward the goal of 2,000 MI hotels by the year 2000, he worked hand in hand with Host Marriott’s CEO, Steve Bollenbach. Though he was a first-time CEO, the 52-year-old Bollenbach did not always dance to Bill’s tune, but they were in agreement more often than they disagreed.

Any serious criticism of Bollenbach as architect of the controversial Marriott corporation split was forgotten after he had been on the job only a year. Shareholders and security analysts loved him. One calculated that if he was a company, and a shareholder invested in him in 1982 when he worked for Marriott the first time, then followed him from job to job until he became CEO of Host, the “Bollenbach stock” would have increased 1,300 percent in just a decade.8

Host Marriott necessarily developed a different personality from Marriott International. It had less bureaucracy, by virtue of fewer people, and those people made quicker decisions. The biggest disagreement Bollenbach had with Bill was about Host’s potential acquisition of Circus Circus, the Las Vegas casino company. Bollenbach had solid experience with gaming operations. When he was CFO at Holiday Inn, he had expanded their Harrah’s gambling empire. He raised the Circus Circus proposal with Bill, who said he wanted to think about it for a couple of days and discuss it with his brother. A few days passed, and he met with Bollenbach again.

“I’ve thought a lot about this, and I understand that it’s a good deal,” Bill said. “You’re the CEO of Host, so if you want to do it, you should go ahead and do it.” Then the other shoe dropped: “But if you do go ahead, I will resign [as a director of Host] and sell my stock. And so will my brother.”

Bollenbach was not caught entirely by surprise. He knew Bill had avoided casino operations at all his hotels except when he had been required to include them in partnerships with governments, as in Egypt. “Since I was the CEO of Host,” he said, “I had to consider, ‘Would we be better served being in the gaming business but losing the close affiliation with Marriott International?’ There was no question it was more important to have that connection with Marriott International. So we passed up the deal. I respected that Bill had considered it seriously and was prepared to let it happen—he just wouldn’t personally be a part of it.”

A bigger deal, which Bill easily approved in 1995, was the spin-off of the terminal and thruway business from Host Marriott. Bollenbach engineered the restructuring with the same deftness he had applied to the Host-MI split. The $1-billion food-service and concessions business had been an odd fit for Host; it was added only in an attempt to appease bondholders. As it turned out, it didn’t matter to the stockholders, so it was again apparent to both Bill and Bollenbach that if they spun it off, the predicted stock value of the two companies would once again be greater than its value with Host Marriott alone.

Thus was created a new, independent entity known as Host Marriott Services (HMS), with Bill Shaw as chairman of the board. In less than a year, the combined stock value of Host Marriott and HMS was, indeed, greater than if it had not been spun off. And Host Marriott was finally the exclusive hotel-owning real-estate company first envisioned.

When Bollenbach became CEO of Host Marriott, there was casual betting at Marriott headquarters about how long he would stay. The biggest money was on five years, when his stock options would vest and make him quite wealthy. To his own surprise, the restless Bollenbach didn’t even make it two years.

In 1995, Disney’s Michael Eisner called and proposed that Bollenbach become the troubled company’s CFO, and he accepted. Bill wished Bollenbach well publicly, but privately predicted that he wouldn’t stick around at Disney for long. After ten impressive months on the job, during which he engineered the $19-billion acquisition of Capital Cities/ABC Inc., Bollenbach accepted another offer he couldn’t refuse. Barron Hilton asked him to become the hotel company’s first non-Hilton CEO, where he stayed for a decade.

• • •

One of the little-known facts about the Marriott hotel empire is that the Ritz-Carlton chain is a highly profitable and integral part of it. The company’s 1995 Ritz acquisition coup happened because Bill had a bright star—Jim Sullivan—who was able to seize the opportunity when the perfect timing arrived, and who possessed the extraordinary skills to pull off the complex deal.

Swiss hotelier César Ritz founded the chain in the 1890s, most notably with the Paris Ritz and a Carlton as well as a Ritz hotel in London. He was known as “the king of hoteliers and hotelier to kings.” Among the famous people who preferred his hotels was Ernest Hemingway, who declared: “When I dream of afterlife in heaven, the action always takes place in the Paris Ritz.” By the time Irving Berlin penned his famous song “Puttin’ on the Ritz,” the word ritzy had become an adjective meaning fashionable, luxurious, or elegant.

In 1983, restaurateur William B. Johnson bought the Ritz-Carlton Boston, which included rights to the name in North America. Johnson founded The Ritz-Carlton Hotel Company and put his trademark on thirty-one hotels. But in late 1994, he was in serious financial trouble. Former Marriott executive Fred Malek tried to put together a consortium of investors to buy out Johnson, but he failed.

Meanwhile, acquisition of Ritz-Carlton wasn’t in the realm of possibilities for Bill or Jim Sullivan, Marriott’s vice president of Mergers, Acquisitions and Development. Jim was temporarily sidelined with tremendous grief over the back-to-back deaths of his oldest daughter, Patricia, and his father.

Though he was still on leave, Sullivan decided to go ahead with his friendly quarterly get-together with former Marriott executive Fred Malek, who had provided an invaluable assist with Marriott’s earlier Residence Inn acquisition. Of that fateful February 1995 lunch, Sullivan recalled: “We spent a very nice two hours talking about my family, about his business and any deals that might be going on. I was putting my coat on when he said, ‘By the way, you’re not interested in Ritz-Carlton, are you?’ I took my coat off and said, ‘I’ve tried to buy that one or two times, but Bill Johnson won’t even talk to me.’ Fred smiled and said, ‘Well, he needs financial help now.’”

Ritz-Carlton had been hammered by the 1990–91 recession, and Johnson had a $60-million debt coming due. Sullivan jumped on the information. Without telling Bill, he flew to Atlanta on a Sunday to have dinner with Johnson, who candidly revealed that if he didn’t get $60 million by Friday, the Ritz-Carlton Company would be in default. By the end of the meal, the two had a verbal agreement for a Marriott acquisition that would include paying the debt.

Sullivan called Bill at home that night. “I’m in Atlanta, and I just shook hands with Bill Johnson to buy the Ritz-Carlton Hotel Company.”

“What?” Bill came back.

Marriott acquired Ritz-Carlton beginning in 1995.

Sullivan outlined the terms, and Bill promised to put thirty Marriott people on the first flight to Atlanta Monday to make it happen in a deal that would include Malek and his group of investors. The negotiations leaked to the press, and Marriott stock jumped.

“This is one of the most significant developments in the hotel industry in the last decade,” said Joseph J. Doyle, a market analyst. “You have the best hotel management company in the world buying what is arguably the classiest luxury brand in the world.” Added a Kidder, Peabody & Co. analyst who followed Marriott: “You’re combining Marriott Corp., which is known for lean management and profitability, with Ritz, a company that is known for excellent service—but not for making money. When you put the two together, you potentially come out with one chain that has both exceptional quality and profitability.”9

Marriott bought 49 percent of the Ritz-Carlton management company, with an option to buy the remaining 51 percent in three years.

One problem was that four Ritz-Carltons—in New York City, Houston, Aspen, and Washington, D.C.—were owned by Saudi Sheik Abdul Aziz al-Ibraham, brother-in-law of King Fahd, who was scrimping on funds for repair and upgrade. Worse, Aziz had filed a $250-million suit in the U.S. District Court in Manhattan against Ritz-Carlton, alleging mismanagement. Although Marriott was still just a minority owner, Bill wanted the suit settled as soon as possible.

For that he turned to litigator Rick Hoffman. It was clear early on that Judge John S. Martin was unhappy with the sheik. At one hearing, Martin realized the sheik in the court was not even Aziz. “Wait a minute, you’re not the sheik I subpoenaed?” the judge demanded. “No, your honor, he’s in Saudi Arabia. He’s very busy.” According to Sullivan, “The judge went ballistic. He said, ‘What am I? Chocolate chips? I’m busy. The next time I send a subpoena, you have that son of a bitch in my court or we’ll extradite him and put him in jail!’”

The secret to winning the case turned out to be simple: attorney Hoffman advised Bill that Aziz’s four hotels were not good ones, and the Ritz-Carlton brand would be better off without them. Ritz-Carlton declared the sheik to be in breach of contract because of delinquent fee payments. At midnight on Friday, August 1, 1997, a note was placed under the door of every guest in those hotels informing them that they were no longer staying at a Ritz. Cancellations poured in, particularly from brides-to-be who had wanted to be married at the Ritz. Without the name, it was just another hotel.

Sullivan and Hoffman were also the point men for negotiations with Egyptian businessman Mohamed al-Fayed for better access to the Ritz name. Fayed owned the Paris Ritz, which included ownership of the Ritz name, and Marriott wanted a long-term license on the name outside North America. Fayed’s outsized ego got in the way of negotiations. To sweeten the deal, Sullivan proposed that Marriott could manage the hotel Fayed was building in London. But Fayed wanted Marriott to build the hotel, pay him £50 million, and manage it for free. “Why would we ever do something like that?” Sullivan sputtered. “Because then you could tell the world you have me as your partner,” Fayed responded.

The stalemate continued until the tragedy that rocked the world. Fayed’s son Dodi and Princess Diana died in a car crash on August 31, 1997, when they sped away from the Paris Ritz to escape the paparazzi. The subdued Mohamed al-Fayed soon let Sullivan know that he would come to terms with Marriott if Bill himself flew to Paris to sign the deal. When Bill and Sullivan arrived at the Paris Ritz, Fayed announced that he had changed his mind again. Patience paid off, though, and Hoffman was later able to negotiate favorable terms for international Ritz trademark rights.

In Bill’s view, “The determination to acquire the Ritz-Carlton management company was probably the quickest major decision that we ever made, but it was one of the best. We had been thinking about getting into the luxury tier of lodging beyond our own JW Marriott hotels, and this opportunity was right on target.”

• • •

On a Tuesday in February 1996, Bill received a call he never expected to get. A producer at the 60 Minutes TV show wanted to schedule an interview with their grand inquisitor Mike Wallace to talk about Bill’s religious beliefs as part of a larger segment on The Church of Jesus Christ of Latter-day Saints. Bill had two days to prepare.

Wallace’s reputation was formidable. At seventy-seven years old, he was “the king of TV’s ambush interviews.” No American television newsman was more feared. The New York Times called him “the scourge of 60 Minutes.” He flame-broiled presidents, badgered world leaders, and interrogated both criminals and CEOs with equal fervor. In fact, a prosperous cottage industry of well-paid public-relations experts had expanded to offer high-priced training programs for corporate chiefs about to face “Mean Mike” Wallace.

For more than two decades, there were two “white whales” that Wallace tried to harpoon for an interview—the Pope and the President of The Church of Jesus Christ of Latter-day Saints. The men filling those positions had repeatedly refused his requests for years, until, in 1995, Gordon B. Hinckley became the fifteenth President of the Church.

President Hinckley knew there was no greater opportunity—or risk—than appearing on 60 Minutes, the most-watched television show in America. In late 1995, he turned the tables and invited Wallace to meet him for a lunch at New York’s Harvard Club to discuss a possible interview. Wallace wrote that he was “totally unprepared for a cordial, even a sunny greeting. . . . His bespectacled eyes literally twinkled as he good-naturedly allowed that it sounded like an appealing notion [to appear on 60 Minutes].”10

If President Hinckley had agreed, Bill could hardly refuse to be part of that segment. He would not have worried so much during the two days between the request and his own interview if it had been about the hotel business. But the focus of the interview was his faith. “I had no time to prepare,” he recalled. “Obviously, they didn’t send the questions in advance. I could only get on my knees and pray to my Father in Heaven and ask for His guidance.”

When Bill arrived at his office, where the interview was to take place, it had been turned upside down by the film crew. Furniture was pushed aside. Wallace had claimed Bill’s comfortable desk chair, and Bill was directed to a hard, straight-back chair and wired with a microphone. Still, when the interview began, an unexpected peace settled over him.

WALLACE: Why does the church come first in your life? Is it God, is it Jesus, is it Gordon B. Hinckley—what is it?

MR. MARRIOTT: It is our strong belief that we know why we’re here, we know where we came from, and we know where we are going. We are taught from a very early age to develop a strong belief and strong testimony of the divinity of our church.

WALLACE: What is there in Mormonism that gives Mormons the desire, the willingness to work hard and develop that kind of a reputation?

MR. MARRIOTT: We realize we are on the earth to perfect ourselves as much we can, to develop our talents, to improve and to make something of ourselves. My father . . . had demanding church assignments when he was building his business from nothing. The church always came first in his life and it comes first in mine. Families and church are our priorities.

WALLACE: Young Joseph Smith—fourteen years old—upstate New York and God and Jesus come to see him? Do you believe that?

MR. MARRIOTT: Yes!

WALLACE: Why did they choose him and what did they say?

MR. MARRIOTT: The Father said, “This is my son, hear him.” The Savior told him that in answer to his prayer looking for the right church that he should join none of the churches on the earth but that things would be revealed to him in which he would be involved in reestablishing the church of Jesus Christ on this earth.

And so it went for forty-five minutes. Though his questions were tough and incisive, Wallace was always respectful. As the cameras were packed away, Wallace told Bill he had his own questions about an afterlife. He told Bill that he never had gotten over the grief of losing his oldest son, Peter, who had fallen to his death during a hike in Greece thirty-four years earlier. “I don’t know where he is and I don’t know if I’ll ever see him again. I wish I had your faith that I would see him again.”

The biggest problem in agreeing to a 60 Minutes interview was that the interviewee had no control over how the footage would be edited. The producers could make anyone look like a saint or a fool. The show aired on Easter Sunday evening, April 7. As the Marriotts and thirty-five million other Americans gathered around their televisions, they watched President Hinckley deftly handle Wallace’s questions. Then, to Bill’s delight, 60 Minutes aired his own testimony about Joseph Smith after this Wallace voice-over introduction: “You’d expect the head of the church to believe it, but so does Bill Marriott, chief of the Marriott hotel chain, a hardheaded businessman, and he’s a Mormon.”

The most potentially uncomfortable question Wallace asked Bill was about his underwear. Temple-worthy Latter-day Saints wear special undergarments to remind them of their covenants with God, much in the manner of orthodox Jews, whose knotted tassels remind them of God’s commandments.

WALLACE (Voice-over): Mormons know that some outsiders think they are weird. Why? Well, for one thing, devout Mormons wear sacred undergarments for protection from harm—cotton undershirts with undershorts that reach to their knees.

(Question) Do you wear the sacred undergarments?

MR. MARRIOTT: Yes, I do. And I can tell you, they do protect you from harm.

WALLACE: Really?

MR. MARRIOTT: I was in a very serious boat accident. The boat was on fire. I was on fire. I was burned. My pants were burned right off me. I was not burned above my knee. Where the garment was, I was not burned.

WALLACE: And you believe it was the sacred undergarments?

MR. MARRIOTT: Yes, I do, particularly on my legs because my—my pants were gone. My undergarments were not singed.

When Bill offered those unhesitant comments during the interview, he felt this was fulfillment of the blessing he had been given after the accident, which said he had been preserved “for a wise purpose.” Of course, there were many purposes for Bill’s continued life, including his service in the Church and his leadership of his family and company. But when Wallace asked him that question in the interview, he felt that the purpose had been fulfilled. The terrible accident had allowed him to testify on national television about the tender mercies of God and the validity of the priesthood of his church.

Positive reaction poured in to Bill and the Church after the show aired. Some responses were moving, including a letter sent to a Church leader from an ex-Mormon who was prompted in part by “the testimony of Bill Marriott on 60 Minutes” to rejoin the Church.11

At the following October general conference of the Church, President Hinckley publicly thanked Bill and the two other prominent Latter-day Saints, Senator Orrin Hatch and NFL quarterback Steve Young, who had also appeared on the 60 Minutes program. President Hinckley concluded it had been a great risk for all of them and was not “an enjoyable experience” for any one of them. But, “as Paul said to Festus and Agrippa, ‘This thing [the Christian church] was not done in a corner’ (Acts 26:26). We have something that this world needs to hear about, and these interviews afford an opportunity to give voice to that.”12

• • •

In the summer of 1992, Bill’s son-in-law Ron Harrison was promoted to a headquarters position as vice president of financial planning and analysis. With the launch of the new Marriott International in late 1993, Bill asked Ron to focus on the long view for the company. Ron formed two competing teams of the company’s best and brightest to come up with the first drafts of Marriott’s future strategy. When the Red and Blue teams turned in their assessments, Ron convened the “Plum Team” to merge their best ideas.

In late 1994, he presented the sobering Plum Team report to Bill and other executives. Their conclusion was that the company was not prepared for the future. The team identified trends that required immediate attention, highlighting the need for Marriott International to become truly international. The formerly Communist Eastern Bloc of Europe was poised to embrace the free market. And the biggest emerging markets in the world were China, South Africa, Indochina, Mexico, India, Poland, Brazil, Argentina, South Korea, and Turkey. However, according to the report, MI may have had international in its name, but it was only “a domestic company, doing business internationally with some of its lodging products. New businesses are always conceived and developed domestically. [Our] products and services are not positioned where future economic growth will occur.”13

The Plum Team’s conclusions were no surprise to Bill. The truth was that few at Marriott were comfortable with going global. They didn’t have the expertise in different cultures and languages. Relatively minor capital had been put into hotels in Mexico, Europe, the Middle East, and Hong Kong. When Jim Sullivan joined Marriott in 1991 as chief of International Development, he thought the title was almost laughable. The company was struggling to survive; there wasn’t any money for hotels abroad. Hence, in 1992, he counted it a major victory when the strong relationship he and Bill developed with the Canadian Scott’s Hospitality led to a major initiative in the United Kingdom. In short order, Scott’s Hospitality opened ten Courtyard by Marriott hotels in the U.K.; most of them were converted from Holiday Inns.

Several years later, Sullivan returned from a London lodging conference with an even better prospect. He had connected with David Thomas of the diverse British hospitality company Whitbread, and they had talked well into the night about the potential of a Whitbread-Marriott alliance. Whitbread had been founded as a London brewery in 1742 and was a multibillion-dollar company with pubs, restaurants, budget hotels, and leisure operations. Whitbread then bought out Scott’s Hospitality’s Marriott franchise and signed a deal in 1995 to develop dozens of Marriott hotels in the U.K.14

In a speech to assembled Whitbread executives, Bill noted that David Thomas “is fond of pointing out that the heritage of Whitbread predates the U.S. Declaration of Independence, while the heritage of Marriott is just short of seventy years—but we do share common values. Among these are strong family involvement, attention to the bottom line, and a commitment to our customers, our associates, and outstanding quality.”15

The Whitbread alliance was a good start for Marriott’s globalization efforts, but it wasn’t where the company most needed to go.

Once the Plum Team finished its work, Ron Harrison led another group, the Jade Team, to focus on opportunities in the Far East. The team’s most important conclusion was that Marriott must acquire management contracts for an already-established Asian hotel chain to jump-start its growth there. Sullivan and Bill agreed and felt the best acquisition would be the Renaissance Hotel Group (RHG), owned by the ultrawealthy Cheng family of Hong Kong. Henry Cheng had divided his hotel empire into two companies, much as Marriott had—a real-estate holding company and a separate management company (RHG).

Marriott approached the Chengs about a possible merger with the management company in mid-1996, but they shut the door firmly in Sullivan’s face. They were not for sale. Then, in late December, Henry Cheng changed his mind. He secretly engaged in negotiations with a new chain called Doubletree. On New Year’s Day 1997, Bill was reading the business section of the New York Times when he came upon the unexpected news on page 61 that Doubletree and RHG were making a deal. He assigned Arne Sorenson, now senior vice president of business development, to see if Marriott could make a better one.

And so, Sorenson became the point man in the acquisition, which was privately considered to have less than a 40 percent chance of succeeding. But Arne went all out; he had been with Marriott only nine months, and this was a major opportunity to prove that Bill’s faith in the former litigator was justified. Even so, it was stunning that Arne pulled off the biggest deal in the company’s history in just forty-nine days.

The RHG board was required to review Marriott’s offer in early January because they were a public company and the shareholders had not yet voted on the Doubletree deal. As it turned out, not only did Marriott outbid Doubletree, but so did Starwood and Wyndham hotel groups. Bass, the British parent of Holiday Inn, was making inquiries as well.16 At a critical point in late January, Arne advised Bill that the pair should meet with Cheng in Hong Kong in order to advance negotiations. Bill’s Chinese-speaking son-in-law, Ron Harrison, was recruited to provide assistance on the trip.17

The trio met Dr. Henry K.S. Cheng in his unostentatious high-rise office. The usually taciturn forty-nine-year-old Henry was welcoming but not warm at first. “He was kind of quiet, even though he was personable. But considering his business was worth billions and he was such a big player in Hong Kong, he didn’t carry himself with much arrogance,” Sorenson recalled.

The meeting turned decidedly friendly when Bill reviewed the similarities between their company’s histories and cultures. Bill pointed out that both he and Henry were the sons of founders. Both of them, though, had changed the origin of the companies into more profitable enterprises—in Bill’s case, from Hot Shoppes restaurants to hotels, and in Henry’s, from jewelry shops to hotel and infrastructure development.

Bill scored important points in the overseas meeting, and then it was up to Arne to carry the ball back in America. Normally, the seller is enthusiastic about sharing company information with a prospective buyer, but with an offer already on the table, Henry told Arne, “Here’s what we’re going to show you. It’s not all you asked for, but if you’re interested, make a proposal by [a certain date].”

Sorenson’s best case was that Marriott would be much better at managing the Renaissance group hotels than Henry would—or any of the competing bidders. The average occupancy of a Marriott-run hotel was then 78 percent, while RHG could only achieve a 67 percent occupancy. In addition, Arne said the strategic alliance for the future would be invaluable with Cheng to advise MI on future expansion in Asia. With Bill’s consent, he invited Henry to join the Marriott board, and the offer proved as pleasing to Cheng as it was unexpected.

When Arne and Henry sat down for a third meeting—this time in Palm Springs, California, on Monday, February 17—Cheng told him he believed RHG and Marriott were “a perfect fit.” But he insisted Marriott increase its $29 per share offer to $30 a share. Arne thought it was too high, and, in any event, he had no authority to proceed further. A bit disconsolate, he drove back to his Renaissance hotel room in Los Angeles and called Bill with the bad news.

After Arne briefed the CEO, Bill asked, “What do you think we should do, Arne?”

“I think we should go to $29.50 but no further. I’ve worked hard on this deal, but I’m ready to walk away,” Sorenson responded.

There was a notable pause and then a response that Arne has not forgotten: “You know, Arne,” Bill said, “this is a billion-dollar deal, so the only difference between $29.50 and $30 is $15 million. Why do you want to risk it for 50 cents? Give him 30 bucks a share. Let’s get this deal done!”

Arne quickly called Henry at Palm Springs. “All right, 30 bucks a share.” Henry’s one-word response was about as enthusiastic as Arne ever heard from him: “Okay!”

Bill called an emergency board meeting at 3:30 p.m. EST, which was 12:30 p.m. in California. All nine board members were located and connected by conference call to vote on three matters: a $30-per-share cash tender offer for RHG stock, an increase to MI’s bank credit line to $1.9 billion to help pay for the deal, and a seat on the board for Dr. Cheng. All three proposals were unanimously approved, and, after Doubletree declined to raise its bid, the Renaissance-Marriott deal was signed that afternoon.

The next day, Tuesday, February 18, Bill was grinning from ear to ear as he announced the $947-million deal to a packed press conference. “It’s a big price,” he laughed, but it was also a very big boost for Marriott. The company’s management portfolio was expanded by 150 hotels and three new brands—Renaissance, New World, and Ramada International. “With the addition of these outstanding brands, we will immediately reach customers in 40 new markets including Russia, China, Japan, India, Italy and Turkey. We will more than double our presence outside of the United States.”18

Wall Street analysts were unanimous: RHG was an ideal marriage for Marriott. Heavy trading in the market pushed the Marriott stock price ever upward.

The day after the Marriott-Renaissance announcement, China’s longtime Communist leader Deng Xiaoping died. Four months later, on July 1, 1997, the long-awaited event known as “the Handover” occurred: Hong Kong officially became part of China again. Though “the Handover” had been feared by market analysts for years, it was fairly uneventful. There was no Chinese nationalization of any Hong Kong business. There were no new regulations and no rapacious new taxation by the Chinese government. At the same time, China itself began expanding its adjacent mainland zones of Western-style free trade.

The prospect of enormous future growth for Marriott International was thus insured. As Bill declared without a hint of hyperbole or refutation at the press conference: “We are now a global hotel company.”