IHG’s Strategy For Growing Along With the Global Tourism Market

InterContinental Hotels Group (IHG) Americas CEO Elie Maalouf says there is no end in sight to the escalating global tourism market powered by a growing middle class with the means and desire to travel. He shared with LODGING his thoughts on the industry and how IHG is growing along with it, saying, “It is our overall strategy to invest in our existing brands to keep them as leaders in their segments, but also launch new brands when we see unmet needs in the market, and make acquisitions that strengthen our portfolio.”
CAN YOU GIVE AN OVERVIEW OF WHAT’S GOING ON NOW IN THE INDUSTRY?

Globally, ours is a healthy, growing industry. One in 10 jobs worldwide is supported by travel and tourism, which constitutes about 10 percent of the global GDP. Very few industries have this level of penetration, broad and deep across multiple socioeconomic strata. This globalization of travel and emerging market expansion is powered by the growth of the middle class around the world, which grew from 2 billion to 3 billion people over the last 20 years. This market of international travelers will also see the growth of another half billion in the upper class over the next 20 years. That’s the main reason we’ve seen international travel grow about 4 percent year-over-year consistently, a trend we expect to continue. These forces continue to propel the presence across the world of branded hotels, which are taking share from the unbranded market.

HOW IS IHG FARING IN THIS ENVIRONMENT?

That opportunity for growth has been very good in recent years and looks to continue in the future. In this favorable global climate, IHG has executed a strategy of growth and strong returns that continues to deliver. We now have over 5,600 hotels in our global portfolio, with more than 1,900 in pipeline. In the Americas alone, there are 4,200 open hotels and 1,100 hotels in pipeline.

This year has continued on the successful trajectory of 2018, when we had our best year of openings and signings in a decade—globally and in the Americas. Last year, we reached 4.8
percent net system growth year-over-year, opening 362 hotels and signing over 690 hotels globally.

Advertisement
WHAT IS THE GROWTH STRATEGY YOU APPLY TO YOUR EXISTING BRANDS?

First and always, our goal is to enhance and expand our existing brands, from Holiday Inn and Holiday Inn Express, to our extended-stay brands, to our luxury and lifestyle brands.
Our largest brand, Holiday Inn Express, which is also the largest and fastest-growing brand in the world, launched its Formula Blue design over four years ago and has been adopted by almost 1,500 hotels in the Americas, and we achieved a full rollout of the new breakfast in the United States last year.

We also continue to expand and have redesigned our extended-stay brands Candlewood Suites and Staybridge Suites, and our lifestyle and luxury brands. With Hotel Indigo, we reached the 100-hotel milestone, which we have since crossed, and there are another 100 in pipeline, so this brand is set to double in the next three to five years, making it the largest and fastest-growing lifestyle brand in the world. Also in this segment is Kimpton Hotels & Restaurants. It was the best boutique brand in the U.S. when we acquired it over four years ago, and we are making it the best boutique brand in the world, with now over 25 hotels either open or under development in 20 new global destinations—like Tokyo, Paris, London, Amsterdam, Barcelona, Bangkok, and Bali.

Our Crowne Plaza brand continues execution of the Accelerate program with the patented WorkLife Room design, with 30 percent of the estate under renovation right now and new flagship hotels in markets such as Atlanta, Midtown Manhattan, and Denver.
Also among our existing brands, our flagship brand InterContinental Hotels and Resorts last year reached the milestone of 200 open hotels around the world, with another 60 under development.

WHAT ABOUT THE NEW BRANDS THAT IHG HAS RECENTLY LAUNCHED?

Just as we invest in our existing brands to keep them leaders in their segments, we also launch new brands when we see unmet needs in the market. This is the case with avid hotels, Atwell Suites, and voco—all of which were created to meet guest needs and owner desires where they have not been satisfied in the market.

Two years ago, we launched avid hotels to serve a $20-billion market segment that exists for the basics delivered exceptionally well. It’s become the fastest brand launch in the history of IHG, and among the fastest in the industry. We opened two at the end of June, have over 180 hotels signed, and nearly 50 projects under construction or approved for construction.

We took that same approach in May when we launched Atwell Suites—a brand targeting the $18 billion guest segment for those planning a longer stay, but who don’t need the kind of extended-stay facilities designed for stays of a week or more. The Atwell Suites brand integrates flexibility throughout the property, with spaces and programs to encourage social interaction and foster a spirit of kinship among guests. The last brand we launched in the last 12 months is voco, which premiered in Europe and Asia. This brand, which combines the informality and charm of a lifestyle hotel with the quality assurance of a global and respected brand, is expected to grow to more than 200 hotels over 10 years.

WHAT HAS BEEN IHG’S APPROACH TO ACQUISITIONS?

Our strategy for growth is built predominantly on our highly differentiated portfolio of brands. Sometimes we find the opportunity to acquire new brands and fill out or strengthen our portfolio and, mostly, that’s been in luxury.

Over a year ago, we acquired Regent Hotels & Resorts, the brand from Asia that we have positioned in the upper-luxury segment. Already, we see great interest with new deals in places like Kuala Lumpur and Bali. More recently, we acquired Six Senses Hotels Resorts Spas, one of the world’s leading operators of luxury resorts, hotels, and spas, which we plan to grow to over 60 properties in the next 10 years. We already have more than 50 deals under active discussion on top of the 18 resorts that are currently open.

HOW DOES IHG MAKE SURE NEW BRANDS AREN’T TAKING BUSINESS AWAY FROM ITS ESTABLISHED ONES?

When we develop new brands, we follow a broad and comprehensive process. In many cases, it’s the same process used to update and redesign existing brands. We solicit broad input from our most important constituents—guests, corporate customers, and owners—to make sure we’re developing designs and brands that meet distinctive, differentiated new needs.

As with avid, this may include forming owner advisory boards with key owners who have experience owning and operating hundreds of IHG hotels to make sure we’re developing brands and designs that make the hotels not just successful commercially, but also efficient to build, maintain, and operate.

HOW ARE YOU COURTING THE DEVELOPMENT COMMUNITY WITH THESE NEW BRANDS, AND WHERE IS THE GREATEST INTEREST COMING FROM—INSIDERS OR OUTSIDERS?

It’s both. We are always in conversation with existing and new owners. I probably spend 30 percent of my time working either with owners or our development team that is working with our owners to understand their needs and how we can grow together.

At our recent Las Vegas conference, we had 6,000 owners, investors, and operators join us for several days, during which we discussed the state of the company and presented new designs for existing brands and the launch of new brands. But mostly, we spent a lot of time together to engage, deepen our relationship, hear about their needs, and learn what we can do to improve their performance and results. It is most often the deep engagement and support we offer owners that leads to new opportunities. That word of mouth also spreads to others in the industry who are currently not IHG owners.

For example, with avid hotels, over 70 percent of new deals are with existing owners and another 30 percent are with new owners. And that’s pretty much what we want—a growing IHG franchise community that continues to expand.

DOES ANYTHING IN THE INDUSTRY KEEP YOU UP AT NIGHT?

It’s a great industry with strong fundamental tail winds. The good and bad news is that the strong economy here in United States, which is leading to record-low unemployment, also means we have to work harder to find, train, and retain great colleagues to deliver true hospitality.

That’s a challenge for the entire industry. Given that it’s easy enough for prospective employees to find a job, we need to deliver a purpose and passion in what we do to keep them inspired, to stay in our industry and at our hotels. This includes creating meaningful roles and experiences for our colleagues; having a vibrant and engaging workplace and culture; and rewarding and recognizing good work. We also need to be true to our culture of diversity and inclusion—we want the best and most talented people and want to invite them without hesitation.

This is a people-based business and we should never forget that technology is no substitute for humanity. At its best, technology can empower colleagues to more quickly perform routine tasks so they can more effectively spend time with our guests and each other to continue to deliver true hospitality, the thing that matters most to our guests.

WHAT ABOUT HOSPITALITY DO YOU FIND MOST EXCITING?

In the nearly five years I’ve been with IHG, I’ve seen the strength of this industry, the opportunity it brings, and the endless desire of people around the world to travel. I look at what’s driven our growth over the last 20 years—the rise of the middle class and the expansion of global GDP, which has led to growth in global travel. Then, I look at the next 20 years and see that’s projected to continue, with the middle class expected to grow to 5 billion.

The strategy and brand portfolio we’ve developed— leading the world with our mainstream
brands and being highly differentiated with our lifestyle and luxury brands—places us squarely at the heart of this opportunity. That’s what gets me excited every day.

LEAVE A REPLY

Please enter your comment!
Please enter your name here