Lehman Brothers Collection - Contemporary Business Archives

Harvard Business School Baker Library Historical Collections

Lehman Brothers Collection

Twentieth-Century Business Archives

Inter-Continental Hotels Overseas N.V. - Lehman Brothers Collection

Inter-Continental Hotels Overseas N.V.

List of Deals

Intercontinental Hotels Corporation was created in 1946 as a wholly owned subsidiary of Pan American World Airlines. Pan American went into the hotel business at the behest of the U.S. State Department. The idea grew out of the U.S. government's hope that increased tourist and business travel would bolster the dollar balances of Latin American republics.

The company's early expansion was developed along Pan American's airline routes into Latin America and later throughout the world. The creation of this hotel chain complemented the growth of Pan American by providing accommodations for tourists and businesspeople who were previously reluctant to travel to these areas of the world because facilities there did not meet first-class American standards.

Tourism boomed with the end of World War II, and Intercontinental, like other major American hotel chains such as Hilton and Sheraton, expanded to accommodate this demand. Beginning in 1948 and through 1951, the company built eleven hotels for $80 million throughout Latin America, ranging from a 150-room facility in Guatemala to 1,000-room hotels in Mexico City and Rio de Janeiro.

The business strategy that Intercontinental pursued over many years when developing these hotels was to take a small equity interest in the hotel with the remainder owned by local businesspeople or government. The company earned profits by providing sales, advertising, and promotion services in addition to managing the property.

In the 1950s Intercontinental expanded its hotel operations to other parts of the developing world, including Bangkok, Beirut, and Puerto Rico. It also opened new hotels in major cities such as Paris and London, which were experiencing hotel shortages created by increased tourist and business traffic.

Intercontinental added hotels in Vienna and Frankfurt in 1960, and in 1961 it built three more in Ireland. This type of expansion continued unabated through the remainder of the decade. Pan Am strengthened the ties between the airline and its car rental and Intercontinental hotel subsidiaries in 1962 by acquiring a $25 million worldwide electronic reservations and communications system that allowed customers to make multiple reservations.

By 1964 Intercontinental had thirty-four hotels on six continents, including countries such as Pakistan, Indonesia, and Ghana. That number increased to sixty-three hotels by 1969 and seventy-four hotels in 1971.

Harvard Business School Harvard Business School Baker Library Histrorical Collections