John Q. Hammons Hotels, Inc.

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John Q. Hammons Hotels, Inc.

300 John Q. Hammons Parkway
Suite 900
Springfield, Missouri 65806
U.S.A.
(417) 864-4300
Fax: (417) 864-8900

Public Company
Incorporated: 1969
Employees: 5,200
Sales: $302 million (1997)
Stock Exchanges: New York
Ticker Symbol: JQH

SICs: 7011 Hotels, Motels; 6552 Land Subdividers & Developers; 6719 Holding Companies

John Q. Hammons Hotels, Inc. owns and operates 45 full-service, upscale hotels across the United States. The majority of these hotels are franchised under license to Embassy Suites and Holiday Inn, but the company plans to open and manage many more hotels within the next 10 years, some under its own auspices. Designed to appeal to an extremely broad range of customers, including large groups, convention guests, frequent business travelers, leisure travelers, and senior citizens, the company has more than 10,000 rooms for occupancy at any given time. Bucking the trend toward limited service, inexpensive accommodations such as Motel 6, or Days Inn, John Q. Hammons Hotels emphasizes in-house restaurants, room service, and cocktail lounges, and focuses on what is termed secondary or tertiary markets, cities with populations between 100,000 to 300,000 that usually have a university, major airport, or corporate headquarters in them or nearby. In 1995, the company added the Radisson franchise; in 1996, it added the Marriott franchise; and in 1997, the firm developed two first class resorts, World Golf Village, in St. Augustine, Florida, and Chateau on the Lake, in Branson, Missouri.

Early History

The history of John Q. Hammons Hotels is inextricably interwoven with the fortunes and talent of one man, John Quentin Hammons. Hammons was born in 1920 in Fairview, Missouri. His father, an industrious and prosperous dairy farmer during the 1920s, provided his family with all the necessities of life, and then some. As John attended school during the later years of the decade, it appeared as if he were destined to follow in the footsteps of his father and become a dairy farmer.

Yet the stock market crash of 1929 and the coming of the Great Depression changed everything, including the direction of John Hammons’s life. Social upheaval and economic chaos characterized the entire decade of the 1930s. Businesses across the United States went bankrupt, and many banks were unable to pay out the money individuals had deposited in their institutions. Suicides were not uncommon, especially among those entrepreneurs who gambled in the stock market and lost their entire holdings. Perhaps the most adversely affected of all the people across the nation, however, were the farmers. Due to an unusual drought across the plains states and the American Southwest, and the lack of proper crop rotating techniques, what was once one of the most fertile growing areas in the world became a dustbowl. Strong winds compounded the problem, eroding the topsoil, and many farmers were faced with both the loss of their farms and malnutrition of their families. Hammons’s father was one numbered among these unfortunate people, and lost his dairy farm during the mid-1930s. John watched his father cry at night over the loss of the family farm, and the sight was seared into the young boy’s memory.

The decade of the 1940s was no less disappointing to Hammons. Although his family recovered from the loss of the dairy farm, Hammons was determined to make his own fortune, but not in the farming business. In the late 1940s, Hammons started his own concrete concern, providing material to construction companies and development firms located in Missouri. Much to his dismay, the firm never prospered as he expected it would, and the young entrepreneur was forced to close down the operation. Avoiding bankruptcy by the thinnest of margins, Hammons admirably spent two years repaying all his creditors and wiping out the remaining debt incurred by his venture into the concrete business.

Rise to Prominence

Determined not to fail again, Hammons carefully considered all his options and finally decided to enter into real estate development. Unlike his foray into the concrete business, however, Hammons approached this new enterprise with a more detailed look at the industry. Convinced that he could find a lucrative niche, Hammons began to study “Highway Houses,” a chain of motels developed by one of the most well-known individuals within the real estate development market, Del Webb. Webb, an entrepreneur who focused on the West Coast of the United States, had built a motel chain empire. Webb’s strategy was simple. During his era, street comers in both large cities and small towns across the country were occupied by either banking institutions or gas stations. Since these locations were highly visible, and easily located, Webb came up with the idea of purchasing the sites and building motels on them. Not long afterward, many street corners throughout the western part of the nation had inexpensive, budget motels on them. Not only did this idea garner large amounts of money for Webb, but it stimulated a tourist trade that brought additional and unexpected revenue to many of the western states. Soon Webb had numerous competitors, and the budget motel became a piece of western Americana.

With his homework completed, Hammons negotiated a loan from a local investor and entered the real estate development market. Still situated in Missouri, Hammons did not immediately jump into the motel or hotel business, but bided his time and built up his operation by constructing subsidized housing projects and a wide variety of duplex homes in the growing suburbs around Springfield, Missouri. Even though colleagues, financial advisers, friends, and industry analysts tried to convince him to enter the hotel business, he adamantly refused until he was ready. By the end of the 1950s, having built numerous housing projects and constructed duplex houses across the state, Hammons was a millionaire. With a secure financial base, and an astute management team around him, Hammons finally decided it was time to go into the hotel business.

In 1959, Hammons established a partnership with Roy Winegardner, a man who had worked in the building and construction, and real estate development industries for years. Hammons focused on making the financial arrangement for their deals, while Winegardner concentrated on the actual construction of the hotels. From the very beginning of their partnership, the two men worked well together, and their new enterprise grew rapidly. During the early 1960s, the partners purchased 10 Holiday Inn franchises, and built a number of the hotels in secondary or tertiary city markets across the United States. Their strategy was to build a high-quality, full-service hotel in a city which wanted to attract more business, for example. From his study of Del Webb, and the proliferation of too many budget motels on American street corners, Hammons was convinced that the full-service hotel concept was destined to succeed.

Growth and Transition

When Winegardner accepted an offer to become chairman of the Holiday Inn chain of hotels in 1969, Hammons formed his own company and continued in the same tradition. Unfortunately, Hammons hit a brick wall during the early 1970s. Countries that had been producing oil for years at low cost suddenly formed their own umbrella organization and increased the price of oil per barrel. An oil embargo hit the United States and, as a result, many real estate developers halted their planned construction of hotels since they thought there would not be enough money to keep the available rooms occupied. Not one to follow trends, Hammons kept building hotel after hotel. When the effects of the oil embargo ended, and people flocked back to stay at high-quality hotels, the buildings that Hammons had constructed were filled to capacity. By the end of the 1970s, Hammons had earned a reputation as one of the most courageous, determined, and shrewd men in the hotel business.

During the early 1980s, real estate developers gravitated toward building hotels in big cities, such as New York, Chicago, Los Angeles, Boston, and Washington, D.C. Not having done enough market research, however, by the mid-1980s these developers discovered that those cities were overwhelmed with surplus rooms. Consequently, many of them began to lose money, while some were even forced out of the business. In contrast, Hammons was expanding his hotel empire across the United States. By focusing on state capitols and university and college towns, Hammons was building a four or five-star hotel which enjoyed a distinct advantage over budget hotels in the area. Hammons correctly predicted that people would choose to stay at his high-quality hotel rather than a budget hotel, when his hotel was the nicest one in town. Not only statistics, but profits proved him correct. The regionalization of business also aided Hammons. Companies located in smaller cities and towns where a Hammons hotel was operating enabled their business associates to stay in big-city type suites, with all the amenities, at small-town prices. Hammons had found his niche, and developed his company into a multimillion dollar business.

Company Perspectives

As always, our mission is to provide outstanding products, reasonable prices, and extra amenities to enrich our customers’ experience. Our well-known “signature elements” including larger guest rooms, spectacular atriums, and top quality meeting room space are three additional amenities we offer to add more value to each guest’s stay. By stressing superior customer service at every level, we earn the loyalty necessary to keep guests coming back.

The 1990s and Beyond

When the recession of 1990 hit the real estate development industry, particularly hotel construction, Hammons was well-prepared for the economic downturn. During the mid- and late 1980s, a large number of American cities received federal grants to build convention centers. Due to the recession, however, there was no one to develop and build the hotels that normally adjoined such structures, providing ready access to the convention site for thousands of participants. Hammons was ready and willing to fill the gap, and cities throughout the country were beating down the company’s door to build next to the local convention center. By the mid-1990s, Hammons had built the Holiday Inn Pyramid Hotel and Convention Center in Albuquerque, New Mexico, the Capital Plaza Atrium Hotel and Convention Center in Jefferson City, Missouri, and the Embassy Suites Hotel located at the Kansas City International Airport in Kansas City, Missouri. By the end of 1995, Hammons’s personal fortune was worth over $400 million, his company owned and operated 42 hotels in 20 states with approximately 10,500 rooms, and employed about 8,000 men and women.

One of the most important reasons that can be provided to explain the company’s profitability is the concept of “bundling.” During the early and mid-1990s, management made a commitment to revamp its food and drink operation. Previously, many hotels within the industry, including those operated by Hammons, had major lounge facilities with impressive facades and external entrances that focused on alcohol consumption. But as the social climate within the United States changed, and alcohol no longer played the part it previously had in business deals, Hammons changed with it. Rather than focusing on alcohol consumption, the company bought franchises from Damon’s, Pizza Hut, and T.G.I. Friday’s to operate within Hammons Hotels. By changing its beverage and restaurant orientation from the consumption of alcohol to a family-friendly, major restaurant franchise, the company increased its profits dramatically. In 1994 alone, the food and beverage component accounted for almost 40 percent of the company’s profits.

In 1994, Hammons decided to take his hotel company public, and raised over $500 million to continue an aggressive expansion strategy. This strategy included the addition of the Radisson franchise in 1995, and the Marriott franchise in 1996, to enhance the company’s position in the upscale, full-service hotel business. The year 1997 was a watershed mark for the company: six new hotels were opened, increasing the firms’s overall growth by 15 percent; $302 million in revenues was reported, an increase of 12 percent over the previous year; and two first class resort hotels were added to the list of Hammons Hotels properties, Chateau on the Lake, in Branson, Missouri, and World Golf Village, in St. Augustine, Florida.

Although more rooms are added to the hotel business every year, the average hotel has less than 90 rooms, and the majority of this new space is a result of new construction in the budget, economy, and mid-priced sectors. By maintaining its focus on the upscale, full-service hotel, however, Hammons has been able to take advantage of the lack of new rooms being added to the upscale and luxury sector. Large guest rooms, spacious and high-quality meeting facilities, and amenities such as pools, gyms, and popular franchise food are attractive to both the business traveler and the vacationing family. John Q. Hammons Hotels knows this, and as long as the company remains loyal to its roots, there is no doubt revenues will continue to increase.