Ship Shape

Speaking at its annual conference in Chicago last October, InterContinental Hotels Group Americas President Stevan Porter minced no words in describing the company's frenetic recent past: “Two years ago, our company was bloated, uncoordinated, and slow to react. Today, we're leaner and more nimble…aligned across regions and brands.

“Two years ago, the relationship with our owners and the IAHI (the company's association of franchisees) was at an historic low. Today, it's my belief it's the best it's ever been…a recognized industry model for franchisee-franchisor relationships.”

Since the company broke free in 2003 from the unwieldy reign of its previous owner, UK-based Six Continents, this legacy brand company has rediscovered the spirit and drive of what it does best — hotel brand management — and is courting new and existing business with a vengeance. With more than a half-million rooms worldwide, it now lays claim to the world's largest hotel company and with that title has come a new-found clout and clarity of vision.

2004 was a very good year for the Americas Region, reports the company. Consider these highlights:

  • With the completion of its acquisition of Candlewood Suites, IHG became the world's largest hotel company, measured by number of rooms, with more than 550,000 in more than 3,500 hotels.

  • Nine-percent growth in franchise business was achieved; in the second quarter of 2004 the Americas franchise sales group had a record-setting quarter closing 81 franchise and relicensing agreements.

  • The company is aggressively expanding into Latin America, particularly with the Holiday Inn brand. It plans to continue expanding throughout key cities in central and South America.

  • Last April, Hotel Indigo was born, IHG's new “lifestyle experience” brand. In less than five months and without even having a hotel opened, IHG claims it received more than 80 inquiries regarding franchising.

  • Rapid rollout of several brand initiatives was accomplished, including Holiday Inn Express's Express Start Breakfast Bar and Crowne Plaza's Sleep Advantage, with reported positive feedback from franchisees and guests.

  • Priority Club Rewards became the largest hotel loyalty program with more than 23 million members (by March of this year, that number had grown to 24 million members).

IHG's core brands — Holiday Inn, Holiday Inn Express, Crowne Plaza, StayBridge Suites and InterContinental — are evolving with lodging trends. The company is also building market share through acquisitions and new brands.

And, reflecting this new-found confidence, the company last month announced a bold new feature for its customer loyalty program, Priority Club Rewards. Its “Any Hotel, Anywhere” card allows members who reside in the U.S. to redeem their points towards stays at more than 500,000 hotels worldwide — any hotel, any hotel company or independent, anywhere. No blackout dates or capacity restrictions, either.

Other signs of its strength and influence: last year IHG faced down the third-party intermediary machine, cutting ties with those TPIs that didn't meet its standards for selling or re-selling hotel room inventory.

Finally, IHG touts its leadership in e-commerce, as the first company to offer online reservations, the first to launch the Lowest Internet Rate Guarantee and the first to earn the TRUSTe certification for its online security and privacy protections. It was recently recognized by an Internet assessment performance company, Keynote Systems, for having the fastest website in the industry and was voted the best international hotel website in the most recent Freddie Awards (the frequent traveler's version of the Oscar, Emmy and Grammy Awards).

LEADERSHIP MATTERS

Credit a strong and deep management team for much of the drive. Atlanta-based President Porter, Senior Vice President Kirk Kinsell, Senior Vice President Mark Wells and COO Tom Murray bring a wealth of industry experience to their roles, supported by highly regarded industry veterans in each brand. Recently hired CEO Andrew Cosslett reflects the company's brand-centric focus, coming from outside the industry but with valuable brand marketing experience at Unilever and Cadbury Schweppes.

“When we launched the new company we already had some wind in our sails,” says Porter, “in the form of strengthening our leadership, and broadening the assignments for some internal key talent.”

It didn't happen overnight. “This is a company that was not sure of its place in the industry or its role or purpose,” reflects Porter. “Two years ago, our owned and managed estate lacked focus, identity and resonance with key measures of success as desired by our owners. Today, under the leadership of Tom Murray, we have added sales development and revenue management support, expanded internal controls and reporting, and more fully integrated our Hotel Management Group into the organization. We're focusing on three things — growing revenues as a fee-based business; strengthening the capability of our people and reducing overhead; and moving from an asset-heavy company to asset-light company.

“We protect and promote the integrity of our brands, supporting performance gains through global sales, revenue management, direct hotel support and low-cost, easy-to-use reservations channels, topped off by Priority Club Rewards,” adds Porter.

At last fall's conference, Porter reflected on other challenges and opportunities: “Two years ago, the Holiday Inn brand was feeling its age. Now, under the leadership of Mark Snyder, it's been revitalized and re-energized, with a new prototype, a new branded guest experience, and improving clarity and definition of the SunSpree and Select sub-brands.”

To that end, Porter acknowledges that profitable growth isn't just about adding hotels but “it's also about rationalizing our estate and improving its quality. We've introduced the new GUEST evaluation system to rapidly strengthen gains in quality and at the same time, we've removed close to 200 hotels with unacceptable quality ratings over the past two years.”

Its management company is undergoing an image makeover of its own, under the guidance of COO Murray. The Hotel Management Group is looking to increase the visibility of the country's third-largest hotel management company, with plans in the works to brand the division.

“We've been thinking,” says Murray, “that if we were a brand, what would be our ‘cinnamon roll’ (referring to Holiday Inn Express's ubiquitous cinnamon roll amenity)? “Our mission as a management company is to create value for owners and their hotels,” says Murray. “And we have ‘cinnamon rolls’ that help them get there; things like our revenue management organization, our sales organization that provides structure for hotel's sales forces; our great food and beverage abilities; our talent; our access to 80,000 employees worldwide. So we're working on bringing the fundamentals of branding to our management company. It's about communicating our mission to the customer more.”

BUILDING ON A LEGACY

“Momentum is fueling our growth,” echoes Kirk Kinsell, senior vice president, Americas Franchising & Business Development, “and that momentum is both an internal practice and an external viewpoint of the company.”

Considering the next logical step for the company, IHG leaders considered the evolution of the boutique concept and the industry's response to this growing segment. In addition to consumer demand, “developers were looking for other products from our company to do business with and an ability to drive more RevPAR and there was a group of hotels out there with physical structures that were underbranded, ill positioned and cosmetically challenged,” says Kinsell. The result was Hotel Indigo, the flagship of which converted a dilapidated old flophouse in midtown Atlanta to a bright, hip, thriving new enterprise. It's ahead of plan on profit and the customers love the hotel, Kinsell reports.

Indigo, while backed by the enterprise strengths IHG proffers, will not be cookie-cutter, pledge its developers, despite required standards common to other brands. Graphic panels and wall treatments will periodically change out to reflect the retail sensibility that defines the look. “When we open the next Indigo in Chicago in a few months, the look and the feel will be similar to the one in Atlanta but it will be more based on Midwest themes than the southern themes played out here,” says Mark Wells, senior vice president, Americas Brand Performance. “The background logistics and the way things work will be common from property to property but the way in which they're played out will be very much personalized to that location.”

As for that iconic brand itself, Holiday Inn is evolving to meet changing marketplace needs while dispelling an image of outdated and irrelevant to today's traveler. Its prototype “is very relevant for today's traveler,” insists Kinsell, “because it's design-savvy. The guestrooms are very spacious with lots of natural lighting and updated furnishings. It's contemporary looking and it's been very successful for us.”

As senior vice president, brand management for Holiday Inn, Mark Snyder just might be Holiday Inn's greatest cheerleader, with a boundless enthusiasm for the brand and its history (“he bleeds green,” joked one colleague). “In our rejuvenation strategy for Holiday Inn, my key opportunities as a brander are to make sure we are taking the brand story and some of the things that are hallmark to being the Holiday Inn brand and transferring that into a new relevancy in 2005,” says Snyder. “The challenge with a legacy brand like Holiday Inn is to find ways to take the story and the legacy and not have it be baggage that holds you back; to figure out how to use it in a new realm of relevance to take the brand forward.

“To our target customer, Holiday represents something that is familiar, straightforward, very authentic in terms of what they're looking for in a hotel travel partner. And this is true in the business and leisure share where we're dominant. You don't want to take this brand into territory that is too unfamiliar to that.”

In developing the new prototype, the challenge was taking the new product and adapting the story of Holiday Inn and at the same time getting the new product and the freshness and appeal that go along with it, says Snyder. “We deliberately placed specific elements of the Holiday Inn story that gently remind you of where you are and connect you in a compelling way — i.e. the artwork with references to the brand's past,” like the retro-cool black and white photos of past movie stars in Holiday Inns and the Great Sign reinterpreted in a color saturated Peter Max-esque print. “It's trend forward and fresh with gentle reminders of the story,” enthuses Snyder.

Considering the prototype on an ROI basis, more revenue space has been built in to the prototype Holiday Inn, says Kinsell, while reducing the non-revenue producing space. “That means to think through the whole food and beverage function,” says Kinsell. “Kitchen space has been reduced, and the amount of labor required has been reduced to serve that function. We've also developed a cooking platform that is much easier to operate. It doesn't require a chef and it uses much simpler cooking methods with well-defined menus with great promotional packages under the name Kem's Café. Some operators have struggled with the notion of full service and we were able to put that into something they can deliver cost effectively and in an easier way.”

Considering development overall, Kinsell see coastal areas as strongest at the moment, particularly Florida and led by the condo-financed structures, “despite tough barriers to entry. Also, there's the tertiary markets and what I'd call micro-markets — 5,000 person communities 15-20 miles from another micro-market and the aggregate of those communities gets a Holiday Inn Express, Candlewood and some Holiday Inns going into those smaller markets.”

THE BIG IDEAS

Brand Snapshots

InterContinental Hotels & Resorts — IHG's upper-upscale brand targets the frequent international traveler with 132 hotels globally and 21 in the pipeline. Its challenge is to make a stronger showing in the U.S. where it faces stiff competition from better-known brands like Hyatt and Westin. There are 44 InterContinentals in the Americas with four coming on board. The $115- million flagship InterContinental Buckhead, Atlanta, opened last November in a 21-story high rise — the first newly built luxury hotel to enter the market since 1991.

Crowne Plaza Hotels & Resorts — Appealing to the traveler seeking upscale accommodations at a good value, Crowne Plaza is an emerging brand with more than 140 hotels located in major cities and in growing secondary markets around the world. Crowne Plaza hotels showcase a clean, contemporary design with their Sleep Advantage program and an emphasis on hosting small- to medium-sized meetings and group functions. Its challenge is creating an upscale identity after removing the Holiday Inn identifier from its name a few years ago.

Hotel Indigo — IHG's entry into the burgeoning boutique arena, Hotel Indigo is touted as the company's “lifestyle brand.“ It aims to offer an upscale hotel experience at an affordable price. Developed primarily for conversions in urban, midtown and near-urban markets proximate to businesses, restaurants and entertainment venues, Indigo's first property opened last October in Atlanta's Midtown area. The second is due to open in Chicago's Gold Coast area in June and the first new build is slated to open in Sarasota, FL in early 2006.

Holiday Inn Hotels & Resorts — The legacy brand with 1,484 hotels worldwide, 1,074 in the U.S and 104 properties in the pipeline here, Holiday Inn is the full-service, mid-tier brand. Its first “next generation Holiday Inn“ opened in Gwinnett County, GA last year and features a prototype full-service reception kiosk that allows guests to check into or out of their rooms and change hotel reservations as well as access airline system to print boarding passes. The prototype hotel has served as a testing ground for other brand updates, including a modernized “Great Sign“ and new interior design elements like iconic artwork, as well as eHost, Holiday Inn's electronic menu and concierge service, and Kem's Café, a modernized comfort food restaurant featuring signature dishes.

Holiday Inn Express — Launched in 1991, this brand is a force in the midscale without food and beverage tier, with more than 1,500 hotels worldwide and 318 in the Americas pipeline. Brand initiatives include a $20-million-plus bathroom makeover featuring new shower-heads, curved shower rods, and new towels and bath amenities.

Staybridge Suites — An upscale, extended stay brand, Staybridge Suites boasts 79 properties with 52 more in development. Last month it announced plans to introduce the brand in the UK, making it the first major hotel company to launch an extended stay brand in the UK. Two new-build Staybridge Suites will open in London in late 2006.

Candlewood Suites — IHG acquired the midscale extended stay brand from Candlewood Hotel Corp in 2003 together with an agreement to enter into a management contract with Hospitality Properties Trust to manage 76 Candlewood Suites properties. With 109 hotels and 46 in development, IHG approved more Candlewood Suites license agreements in the first six months of 2004 than were approved in the previous three years.

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