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Intercontinental Hotel Restructures Strategic Structure and Expands Globally

Release date: 5/13/2019 Source: Journey Booking
Core Tip: Intercontinental Hotel Restructures Strategic Structure and Expands Globally

In the process of global economic integration, how will InterContinental Hotels Group (hereinafter referred to as IHG) formulate its future growth strategy? After acquiring the Regent and Six Sense brands, how will InterContinental Hotels maintain the value proposition of its luxury brands?

In response to the above issues, Keith Barr, CEO of InterContinental Hotels Group, accepted an exclusive interview with CEO of Global Travel News during the participation in the 2019 WTTC Global Summit in Spain.

China is Intercontinental's "Second Home Market"

IHG underwent a strategic restructuring in 2018 to meet its global expansion needs.

InterContinental Hotels has set up Central Functions to provide technology and other related services to its global business. Its global business is divided into three regions: Americas, Europe, Middle East, Asia and Africa (EMEAA), Greater China.

In April 2019, the 400th InterContinental Hotel Greater China opened. Since entering the Chinese market in 1984, IHG has been operating in China for 35 years.

Keith Barr said the United States is the main market for InterContinental Hotels and China is the "second home market."

Regarding how IHG is seizing opportunities in the Chinese market through its brand layout, Keith Barr said, "China is different. We need to build different digital technology infrastructures to interact with Chinese customers."

"We are accelerating the growth of the Chinese market by building the right brand portfolio. IHG's brand portfolio in the Chinese market includes mainstream brands such as Holiday Inn, Holiday Inn Express, and InterContinental And top luxury hotel brands such as Regent. "

IHG focused on building a brand portfolio last year to ensure that the brand meets the needs of consumers and hotel operators, Keith Barr said. The British-based Intercontinental Hotel acquired a 51% stake in the luxury hotel brand Regent Hotels and Resorts in 2018, and earlier this year acquired the luxury hotel brand Six Sense Health and Hotel Group.

InterContinental will transform InterContinental Hong Kong into a Regent Hotel and accelerate the development of the Regent Hotel brand in Asia, Europe and the world. "Our current brand portfolio is fairly complete across all price ranges and works well globally," Keith Barr said.

There have been reports that the voco ™ brand of InterContinental Hotels will soon enter the Chinese market, but Keith Barr said, "The Group believes that there are already many new hotels in the Chinese market and it is not necessary to introduce voco ™ to China for the time being."

Keith Barr believes that InterContinental currently has sufficient brand layout in China and has a lot of room for growth. It will take time for the Group to introduce more brands into the Chinese market. "From the perspective of the population and economic development goals of the Chinese market, the current size of the hotel industry is not large. We have sufficient market opportunities for our existing brand layout, but we may also selectively introduce more brands in the future."

During the three-year period from 2009 to 2013, Keith Barr was the CEO of Intercontinental Hotel Greater China, laying the foundation for the group's development in China. In 2012, IHG launched the HUALUXE? brand, an international luxury hotel brand for Chinese guests. The Huayi brand currently has eight hotels in China, and three are under construction.

InterContinental Hotels is currently promoting Holiday Inn Express in the Chinese market. The brand has gradually opened a hybrid franchise model called Franchise Plus. InterContinental Hotels employs hotel general managers.

Will the InterContinental Hotel be fully open to franchising in China with reference to European and American models? Keith Barr said that he will develop a long-term strategy for the Chinese market, including promoting franchising in China.

"To advance the franchise model, we need to train hotel owners, hotel managers, and operations teams," Keith Barr noted. "Over the years, we have invested heavily in human resources in China and established a talent academy to cultivate the development and management teams needed for Holiday Inn Express. The general managers we train have a clear understanding of Holiday Inn Express management standards. And Under a pure franchise model, hotel owners can hire general managers themselves. "

When asked if the group has a timetable for launching a franchise in China, Keith Barr said: "In the United States, 90% of our hotels are franchise models, and 99% of hotels in China are directly managed. Some Holiday Inns (Holiday Inn and Crowne Plaza have signed a franchise. Now the fastest growing part of the business is Franchise Plus. Soon, our proportion of directly managed hotels in the Chinese market will drop from 99% to 80% -90%. "

Ctrip's hotel operation is "learning"

Will China's OTA giant Ctrip create its own high-end hotel chain, Li Cheng, will it affect the traditional hotel industry? Keith Barr said that Ctrip's own hotel is "learn."

"I don't think Licheng Hotel will become Ctrip's core business. Ctrip has been very successful in the traditional OTA distribution business areas such as aviation, railways and hotels. I think Ctrip is trying to understand the hotel experience and explore other ways to establish cooperation with us. "

"OTA giants can test the traditional physical hotel business, but this is different from their main business after all." Keith Barr believes that OTA is a digital platform that connects hotels and customers through product inventory, but it will face a lot when actually operating hotels challenge.

Operating hotels cannot take advantage of Ctrip's core competitiveness in the digital field. In addition, the establishment and training of the hotel operation team will also be a major problem in actual operation.

According to data from the Intercontinental Hotel's 2018 annual report, the group has 12,812 direct employees and the overall global team number exceeds 400,000. "People often think that the hotel industry is very simple, but it only provides sleeping places and catering services for guests. However, InterContinental Hotels operates 5,600 hotels in more than 100 countries around the world, and there are too many things to do to provide satisfactory services to guests every day. "

Airbnb and OYO-they are not in the same field as Intercontinental

On the issue of disruptive accommodation platforms, Keith Barr said that Airbnb had a small marginal impact on the hotel industry. Airbnb has reduced the pain points of short-stay rental with the help of digital platforms, and seized the market share of other short-stay rental companies.

"For five years, people have been telling me that Airbnb will be the terminator of the hospitality industry," Keith Barr said. "Airbnb brings new accommodation inventory and meets some demand. But in general, it has not actually made any real difference to the hotel industry. I believe there will be no actual impact in the future. There are very different accommodation scenarios between the two, Airbnb pricing and hotels are different. "

Aiming at Indian budget hotel brand OYO, Keith Barr believes that OYO is a new case of budget hotel, but the price positioning of Intercontinental Hotel and OYO is different.

"OYO spends money on renovating hotels and establishing a distribution model. If a suitable way is found, OYO will have synergies with Airbnb. However, they are not in the same competitive field as us," Keith Barr commented.

Keith Barr said that InterContinental has invested heavily in creating a consistent experience for its guests, including hotel design, hotel facilities and furniture procurement. In contrast, the two startups don't care about "consistency," Keith Barr said, "at a certain price range, people don't care about consistency."

Will Airbnb and OYO eventually upgrade to enter the mid-range hotel sector, or even the high-end hotel sector? Keith Barr doesn't think this is realistic in terms of its model.

"I think their model will work in a fragmented distribution environment. But from the experience of the world over the past few decades, it is difficult for such companies to enter the mainstream high-end market. They are built with the positioning of economic brands and then It seems impossible to enter the high-end brand. "

Keith Barr also believes that Airbnb may acquire some traditional hotel companies after completing its IPO in the future, and its valuation is indeed high compared to traditional hotel companies. But traditional hotels are not Airbnb's core business and they lack relevant experience. "Airbnb is a distribution platform, and we design hotels, build hotels, train employees, and have a global sales network that sells hotel rooms to large corporate customers."

What can traditional hotel companies learn from emerging digital platforms? Keith Barr believes that "successful digital platform companies have eliminated long-standing obstacles in the hotel transaction process" and this is a place to learn from.

In the past, homestay homes were usually placed on different websites. Guests need to search four or five websites to find out that the available rooms are available on the market. Platform companies such as Airbnb have well addressed this pain point for travelers.

Is it possible for IHG to distribute its high-end or boutique hotel rooms on the Airbnb platform? Keith Barr responded that this possibility was not ruled out, but he also said that no matter what booking channel is used to ensure that the passenger has the best experience.

Future opportunities

Will IHG launch new hotels or acquire more hotel brands to seize more growth opportunities?

Keith Barr said that as one of the world's most successful hotel companies in terms of overall financial performance over the past decade, IHG needs to be "very cautious."

"We want to accelerate the pace of growth, including accelerated expansion and launch of new brands in China," Keith Barr said. "We will invest more in technology platforms to drive the performance of existing brands and increase customer loyalty. We will continue to invest in these areas."

As of December 31, 2018, InterContinental Hotels has opened 5,603 hotels worldwide, and 1859 hotels are under construction. Keith Barr said that InterContinental will focus on its core business and enhance the hotel experience, and its investment will focus on how to provide hotel customers with a quality experience and ensure that the hotel operates well.

After the merger of Marriott and Starwood, will the hotel industry continue to undergo large-scale consolidation? In response to this "frequently asked question," Keith Barr said, "Everything can happen. But it must be considered, what synergies can integration bring?"

Keith Barr believes that IHG already has a competitive advantage in scale, as do many competitors. "But the real challenge is for small hotel companies. Small hotel companies that cannot afford the technology, loyalty, and distribution costs alone will continue to integrate. They lack competitiveness because they do not have sufficient scale and layout coverage. Therefore, small companies There will be increasing pressure. "

China's large hotel groups Jinjiang and Huazhu are actively seeking expansion and development through global mergers and acquisitions. Will they compete with IHG in the near future in the international market?

Keith Barr believes that it is not easy for Chinese hotel brands to go global. "I respect Jinjiang and Huazhu very much. But their initial positioning was the Chinese domestic market. I think IHG will compete fiercely with them in the Chinese market. They are very good and we are constantly evaluating them. But in the international market, I'm not too worried. "

With the new distribution capabilities of NDC and the development of ONE Order in the aviation industry, Keith Barr believes that hotels and airlines may be directly connected in the future, providing consumers with a one-stop shopping solution and a seamless experience.

Keith Barr noticed that many startups are researching data sharing across the hotel, car, rail, and airline industries. "I think data sharing between the various segments of the tourism industry will be realized in the future. The most likely is that cross-industry joint ventures find a consistent way to share customer data." InterContinental Hotels also remains concerned in this regard.

Key words of this article: Intercontinental Hotel restructures its strategic structure and expands globally