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Gambling is Only Sure Bet for Hilton

"…Hilton's share price, along with those of its competitors, has halved since the peak of the last trading cycle in mid-2000, but hotel property prices have remained buoyant.

"…The biggest brand issue facing Hilton, however, is its relationship with Hilton Hotels Corporation (HHC), the California-based owner of the Hilton brand in the US.

"…Another oft-touted deal is the spin-off of Hilton Group's 1,900-strong Ladbrokes betting shop operation. But, as with HHC, this is a long way from the top of the company's agenda. Despite admitting that there are no synergies between gaming and hotels, Michels declares that there is no intention of splitting.

"Right now, betting looks a healthier business to be in than upscale hotels. For Hilton, gaming is a third of its operating profit and an even bigger portion of cashflow.

"Two things in particular are benefiting betting: deregulation and technology. The introduction in October 2001 of 15 per cent tax on the gross profits made from running the betting business rather than a 9 per cent duty on the placing of bets has helped to boost sales.

"…Technology is also boosting betting shop turnover by enabling bookies to take bets faster. Most punters place wagers in the last few minutes before a race: failing to process these bets quick enough means business is lost. The latest technology is now installed to sweep up these last-minute flutters.

"Ladbrokes has proved a sure bet for Hilton in the current downturn. Until the uncertainty in the hotel business lifts, Hilton's management is unlikely to gamble on separation."

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