With the lodging industry at the peak of the cycle, Joel Eisemann, IHG’s chief development officer, the Americas, sees plenty of growth ahead for the hotel giant. His immediate to-do list includes growing Even Hotels, rolling out the new Formula Blue prototype for Holiday Inn Express, and growing recently acquired Kimpton Hotels. Eisemann says he’s up to the challenge.
What are you seeing when it comes to IHG’s unit growth in the United States this year? We’re seeing very strong demand across each of our brands and each is well positioned to attract in a certain type of market and certain type of guest. We have a robust pipeline at this point in time and significant interest from our franchise community. Even our newest brand, Even Hotels, has a healthy pipeline. We have two hotels open now with a number under construction, and we’re seeing very positive reaction from the franchise community regarding the brand. And, of course, the Kimpton pipeline is extremely strong, and we’re very pleased with that acquisition and how things are moving forward.
Are there any particular areas you’re targeting? We’ve always been a brand company that had suburban growth because a lot of our franchisees had smaller projects, so we’re benefitting from that, but we’re also seeing that a lot of our franchisees are now gravitating toward the urban markets. The other thing we’re seeing is a number of franchisees looking to do dual-branded hotels due to the efficiency that comes from building them and sharing back-of-house resources as well as health club facilities, swimming pools, and parking. A great example is the old Melia Hotel in Atlanta that’s being converted to a Crowne Plaza and Staybridge Suites. It’s a 501-room property that was too big to be just a full-service hotel. And bringing the Staybridge Suites brand to a market that has significant demand for extended stay really provides a balance to the overall project. It’ll be a great combination that will position the hotel really well.
For Even Hotels, how big a footprint do you think the brand needs to really get momentum going? It’s really not so much the numbers as it is the markets that we’re in. We launched Even Hotels using our balance sheet to show our commitment to the brand and to focus on primary markets like New York City and Washington, D.C., since they have with high visibility. There’s also the matter of the rate potential you can get in those markets, which is why we’re going to continue that strategy while growing the brand in select secondary markets.
So what’s going on with Kimpton? We have over 60 Kimpton hotels open and operating today and an excellent pipeline, so you’ll see continued growth and more importantly, what you’ll see us focusing on international growth. The one thing that the Kimpton team really didn’t have the opportunity to do was grow internationally, and I think the platform that we have at IHG with the presence we have in a variety of global markets and with our development teams internationally, is we’ll be able to help drive international growth for Kimpton.
Financing is back and hoteliers are able to get more deals done, but there still seems to a lack of appetite for full-service suburban properties. What’s your take on this? I think it’s an evolution of the market. Larger full-service suburban hotels really have to rely on group business and need to build up their meeting spaces. What you’re going to see meeting the demand for the traditional 300- to 325-room, full-service properties are dual-branded, select-service hotels with extra meeting space. With this model, you get the meeting space and the rooms, and you have two different reservation systems driving business to the property. You also have the customer who likes the location but on this trip they want this type of room and that trip they want a different type of room. I think developers find this model more efficient to build and to operate, and I think lenders like it as well.
Regarding the Holiday Inn Express prototype, Formula Blue, has IHG seen any pushback in terms of how it’s being rolled out? There are always comments from owners, but I think that’s one of the reasons why we spent so much time with the owner community vetting what we were doing with the new prototype and making sure that we really received the right feedback. Still, with any change you make, there’s always a portion of the group that says, “Well, why change at all? We like the way things are.” Based on the research we did on guest expectations, we think this is the appropriate direction to go and we have consensus from our franchisees.
Still, we expect about 80 to 100 conversion or new-build hotels to open this year with Formula Blue, and most have opted into the full package. Since late Q4 of 2014 until now, almost 80 percent of owners going through a property improvement plan have opted into Formula Blue, reinforcing our strong support from that community.
How much flexibility is there in how franchisees might implement some of the prototype’s key elements? There’s some options in terms of what they can do, but there really aren’t that many moving pieces in a Holiday Express. Part of making this work comes down to making the lobby more effective. We’ve gone from guests that come to a hotel and then go work in their rooms to guests that want to hang out in the lobby and work because they like being around other people and having the big flat-screen TV and have more of a living room experience. So that’s something we’ve incorporated into the new prototype.