In an industry left crippled by the procession which followed the heavy real estate speculation and development of the Sixties, Quality Inns International was a quiet victim - innotuous enough to avoid headlines and defaults but bleeding just the same.
As stock values spiralled, other hotel and motel chains used funds from some properties to speculate on other properties. Silver Spring-based Quality Inns joined in the development boots, and almost developed itself out of business. The economic downturn, which left hotel rooms empty nationwide, hit Quality Inns hardest in 1974 and 1975. The steady profits of the prior decade took a plunge and the company registered a $2.6 million loss in 1975.
As the deficits deepened in the first half of 1976, the directors - whose expertise rested in the construction and real estate fields - agreed to try a new approach in the management of the oldest oldging chain in the country by turning it over to experienced hotel operations men. Board chairman Steward Bainum handed over his chief executive reins to Joseph W. McCarthy last June. McCarthy, a Bostonian, had been senior vice president and director of North American operations for Sheraton Hotels.
McCarthy's solution to turning around a losing company in a depressed and overdeveloped industry was the recruitment of other experienced hoteliers - like Robert D. McGrail, a fellow Bostonian and former vice president of sales for Sheraton who now heads the marketing division. Other Sheraton managers and top level executives from Holiday Inns were brought in by McCarthy to strengthen weak links in the operations and franchise divisions.
"I had the feeling and obviously still do - that there is opportunity here," McCarthy said of his decision to take over a faltering - operation.
The new president and cheif executive officer decided to "give it a run for the money."
By discountinuing the operation of the chain's furniture manufacturing division, The Revere Group, which had drained $800,000 from operations in 1975, and by selling other real estate holdings, losses were halved by the end of 1976 and revenues jumped $2.8 million to a record $54,057,000. But the losses sustained by the remaining four international motels - in Germany, Belgium and Canada - and foreign exchange accounting debits took their toll on the bottom line, leaving a 51 cent a share loss for the year.
While McCarthy tightened the operating budget and sold off losing properties, McGrail mapped out a million dollar comparative advertising campaign taking on the 1700 Holiday Inns and launched a major franchising program to bring 500 independent hotels and motels under the Quality Inns logo by 1980. The francise program brought the prestigious Blackstone Hotel in Chicago into the chain last winter and more in-city affiliations are planned.
"The company had suffered from a lot of under exposure," McGrail said. "There has never been much advertising some here and most travelers, especially businessmen, just didn't think of us when they went to make a reservation.
Seizing upon the favorable ratins of its lodged compared to Holiday Inns, Ramada Inns and Sheraton proerties by the Mobil Travel Guide and the American Automobile Association's Tour Book, the chain initiated a national television and magazine advertising campaign with the theme "Quality Innays, the other guys."
While the television spots were aimed at the major city markets, McGrail and McCarthy included Memphis - the headquarters of Holiday Inns - in the campaign "just to tweat them a little."
The image-polishing effort, has apparently been working, Revenues escalated 13 per cent during the first quarter of fiscal 1977 to nearly $13 million.
"Our income only increased 5 per cent in the second quarter (which ended Feb. 23)," McGrail noted, "but the severe winter weather had a major impact on the travel industry in general."
McCarthy added that the company expects the normal gains made during the spring and summer months combined with the sale of additional real estate holdings to bring Quality Inns back into the black by the end of fiscal 1977. He cited preliminary figures for March showing 18 per cent higher revenues as evidence that his expectations are firmly based.