Andy Cosslett, a burly, street-smart packaged goods marketer with companies like Cadbury Schweppes and Unilever, took the top job at InterContinental Hotels Group in February 2005. His immediate goals were to stabilize the London-based hotel company, revitalize its iconic brands, nurture its growth flags and find innovative new products. It was a tall order, but the ebullient Cosslett took the challenge to heart and has made a number of key decisions to strengthen the company on a worldwide platform.
Lodging Hospitality chatted with the 52-year-old IHG chief executive during the recent New York University International Hospitality Industry Investment Conference.
Q What kind of process does IHG management go through to make sure it is creates products that guests really want, not what brand management perceives they want?
A It struck me quite forcibly when I came to this business, after spending 20-odd years in other industries, that a lot of decisions get made, a lot of so-called innovation happens, on the basis of no evidence of what the benefit it brings. I find that highly irresponsible because we're trusted by our partners to bring to them successful brands and to bring to them innovation that's going to make a difference and help them improve their performance.
Going forward, IHG will be known as a company that's very innovative but on the basis of a few, very well-thought-out initiatives that really make a difference.
Q What kind of expertise did you bring from the packaged-goods marketing world to IHG?
A It's not about technique; it's about a mindset, about how much rigor you're going to put against developments and initiatives and then how you mobilize them. It's an approach which sees things through the owners' eyes, through the guests' eyes and really tries to pull it together in a thoughtful way. In the future, we'll be doing our share of brand building, but it won't be gratuitous, self-indulgent or ad hoc; it will be considered.
Q Even when you conduct a lot of research, how difficult is it to get owners and franchisees on board with your conclusions?
A It shouldn't be if the process is working correctly. You must have the message right and the financial model right. It's a challenge but you can succeed if you continually think about your messaging and about the other person's needs. The way we make decisions needs to be a bit schizophrenic — half the time we're looking at what guests want but also looking at how it will affect our owners and how we can get the same impact for our owners at less cost.
Q Some people believe the industry is beginning to reach the top of its cycle. If that's the case, what does it mean for your development plans and for your owners and partners?
A You're looking at it from an American context, but the global cycle is very different, particularly with the arrival of China and Russia on the world scene.
Our job is to drive quality growth. Because we set a rooms growth target for our company 18 months ago, some people think we're just engaged in driving deals. While we've been successful in that, it's not what we're here to do; it's to drive the performance of the hotels already in our system. The job of a marketing-led company is to get consistently superior performance from the brands relative to your competitors.
Everything we do is all about how to improve return, no matter the cycle situation. If you can get that moving and get the rooms growth at the same time, your top line will survive any cycle change. When the downturn happens, brands actually become more important. It's even more important for potential partners to take a brand to the bank. If we're thoughtful about what we ask our owners and partners to do then we should be able to manage ourselves through any situation.
Q What are some of IHG's greatest global opportunities?
A In a world of almost limitless opportunities, the challenge is to determine where to place your bets. We spend a lot of time trying to understand where we get the best returns, where are the best opportunities that play to our strengths.
The growth potential of this country remains phenomenal. But if you put that to one side, we think there is resurgence in the European market. Northern Europe particularly is a place where we've had a lot of success. We recently removed the Marriott Courtyard brand out of the U.K. There were only 11 of them but we converted them to Holiday Inns.
We also have good, strong platforms in northern Europe, so you'll see us moving in there with some of the brands from the states, such as Staybridge Suites (now under construction in the U.K.) We're also doing final evaluation of Hotel Indigo and we think that will come in next year and do really well.
Q What about the rest of Europe?
A We're the biggest hotel company in Moscow. We have four Holiday Inns which are knocking down $200 a night-plus. We signed an InterContinental deal for a new property just off Red Square. We're well established in Russia.
There are other big opportunities in certain pockets for our brands. In some cases, the opportunities are whole countries where we can build scale; some are more tactical in terms of specific cities.
Q What about Asia?
A An audit done last year by an independent company showed that 40 percent of all rooms traded in China last year came through IHG. You can't do that in a country like China unless you have stature and credibility. China is a long game. You can't just show up and start selling your wares. You must take a very thoughtful, long-term relationship-based approach in those markets.
We have 68 hotels there now, and we'll have 125 open by the end of 2008. It's a big challenge for us because we manage them all. We're just launching the Express platform there now through franchising. But we didn't just turn up and say we do it in America like this and we'll do it the same way here. We took three years to figure out how to bring the Express brand into China through franchising.
Q What about India? There is lots of potential but huge infrastructure issues.
A We have a commitment to the country, but I wouldn't be honest if I said it is as strong as China. Hotels follow infrastructure, ever since the '50s when Kemmons Wilson started in the U.S. While people will be moving about China like never before, India is much more complicated. In the past three years, they've opened 20 or so provincial airports in China; during the same time, they relicensed one in India. It's just very difficult to get things done in the Indian culture. But because there is huge unmet demand, there are big rewards if you can navigate it and find a way to get your product in front of the people who want to use it.
Q What are the opportunities in North America from a brand perspective?
A Holiday Inn Express has been our express train, and we have 519 properties in the pipeline. While people tend to focus on that success, the story of Holiday Inn in the past two or three years has been very interesting.
We've removed 60,000 rooms from Holiday Inn in this country in the last three years. In the next couple of years, there will be another 40,000 rooms gone. Under Steve Porter, we've had a sustained attack on what was a long tail of Holiday Inns. We have 224 Holiday Inns in the pipeline, mainly the new prototype and other new builds. So within five years, Holiday Inn will be a completely new brand with a repositioned marketing story that employs fresh and relevant innovation without breaking the bank.
Q What are the plans for Crowne Plaza and InterContinental?
A Crowne Plaza is a success story. And while it is doing well in America, it is on fire in the rest of the world. It's the fastest growing upscale brand in Asia. In markets overseas, it's been positioned as a cutting-edge contemporary business-led brand.
We have 147 InterContinentals open. In the past three years, we've gotten rid of some of the poor hotels and replaced them with outstanding properties like the one in L.A. We've got new builds, and Buckhead led the way. Now we have the Moscone Center in San Francisco opening next year, and three more new builds coming up. Boston just opened and we've opened more resorts. We have seven open in China and six in the pipeline. In Europe we've signed eight deals in the last year.
Q There has been a lot of buzz about Hotel Indigo. Are you pleased with the progress of this brand?
A In a worldwide study we did in the last 18 months, we found common resonance in the importance of design, the importance of well-being, the sense of personal renewal. Indigo is a good example of how we can do that in the sense of place, sense of peace and sense of renewal you get. And it creates a good return because it commands upscale rates at limited-service cost structures. We have eight open now and 50 in the pipeline or in active discussion in this country.
And because it is mostly a conversion brand, we can put Indigos into a lot of places, big spaces, small spaces. What we're selling is a personal experience, not a cookie-cutter clone.
Q Unlike some companies, particularly here in the U.S. that are pure franchise companies, IHG has a management component. What advantage is that for the system and for your franchisees?
A It's not just management; we also own and it's likely that we will always own because we want to invest in assets if it helps drive our strategy. Having some skin in the game helps build the confidence of your owners in your brands and your company. You can show that you're sharing their pain and their reward.
Not to manage means that we're seeing the world through our eyes, not the eyes of our owners. And in some countries, the franchising culture is just beginning or there isn't one. In those markets, we manage.
Q What are the biggest challenges ahead for IHG?
A Our people, although the challenges are different around the world. In China, for example, it's a struggle to get great people. And it's not just the hotel business. Every company in every industry wants English-speaking, educated people. We must make it easy for them. We created alliances with several universities. They'll have about 400 graduates in hospitality coming out which we hope to bring to our system.
In developed markets, it's about engaging people. At the management level, the industry has to work harder to get more of the brightest and the best. The industry hasn't been getting the brightest and the best out of the universities, and I don't think we've ever asked why that is. Why would anyone volunteer to join GE or P&G? They don't do it to sell nappies or motors; they do it because they know they're going to get fantastic management training. IHG is going to take the lead in creating opportunities to bring people into hotel management and then to corporate management and train them as world-class managers and leaders.
For more information and related articles, go to LHonline.com.
The fact is that this is a fantastic industry and much sexier, nicer and more exciting than any of the other places I worked. If you can couple the management development opportunities of the old-style packaged goods business with the appeal of working in hospitality, you have a dynamite combination.
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