Quality & Quantity

IHG Makes Progress on its 360 Strategy for Growth

If you want to know what kind of progress IHG is making toward its goal to add 50,000 to 60,000 net organic rooms to its portfolio by the end of 2008, the company’s SVP, Chief Development Officer – the Americas Kirk Kinsell can give you a lot of numbers:  over 1,200 hotels and nearly 158,000 rooms in the development pipeline… 80 percent in the Americas… and 90 percent new build hotels.

However, IHG’s 360 strategy for growth is not just about numbers. In fact, the most important thing Kinsell wants owners to know about the strategy is that it’s aligned and built around them.

“IHG aspires to be the very best company in the world, not only for employees and guests, but especially for owners,” Kinsell said. “We’re continuing to improve our processes and working hard to earn owners’ trust and investment. I think a good measure of our success is the fact that our pipeline translates into roughly a $12 billion investment that owners around the world are making in new hotels to be operated under an IHG flag.

“Our pipeline today is the largest it has ever been, and larger than what most of our competitors operate in total. Franchisee interest in our brands and willingness to take a risk and invest capital in them, shows just how powerful our brands are.” 

Kinsell says that IHG also benefits from the power of its brands outside of the Americas. In China, the company has 55 hotels with over 21,000 rooms in development. And, after entering a  joint venture with All Nippon Airways late last year, IHG now has 42 hotels and is the largest international hotel operator in Japan – the world’s second largest hotel market. In EMEA, growth is strong with the region’s pipeline totaling over 22,000 rooms in 143 hotels.

Quoting one of his favorite movies,  Spinal Tap, Kinsell says that IHG is “turning the volume up to 11” to target new owners. “We have a large presence at industry investment conferences around the world, and we’ve worked very hard on a minority ownership development program to appeal to new owners. We’re also working on a development, marketing and business-to-business strategy, which will help us bring greater awareness to the development community, as well as influencers, whether they’re lenders, equity players, architects or brokers.”

“The Holiday Inn brand, including Holiday Inn Express, accounts for 70 percent of the growth in our pipeline globally,” Kinsell said. “And within that, nearly 90 percent are new build hotels. We’re really proud of the work that’s been done to advance the Holiday Inn brand. In fact, Lodging Econometrics’ recent report on hotel development referred to Holiday Inn as ‘resurgent’ and called it the leader in the mid-scale with food and beverage segment.” 

When it comes to growth, Kinsell believes you can’t have too much of a good thing. He says that growth creates brand awareness, which benefits existing franchisees.

“For example, growth in China under the Holiday Inn flag is fantastic for US owners, because one of these days the Chinese are going to be traveling in very large numbers, and when they come to the US, they’re going to look for a familiar name – Holiday Inn. So not only do individual franchisees benefit from growth, but we benefit as a system because of economies of scale, purchasing power, and economies of know-how. When it comes down to it, the more hotels that join the system, the more marketing dollars and Priority Club Rewards dollars will be available, and we’ll be able to do more things that big brands do – like our NASCAR, Major League Baseball, and PGA sponsorships.”

Of course, IHG isn’t limiting its growth to new owners. Kinsell says he appreciates the fact that owners have a choice. That’s why he says the company puts such an emphasis on delivering a set of enterprise values like Priority Club Rewards, worldwide reservation systems and distribution channels, and e-commerce strategy.

“With our enterprise values, we focus on delivering profitable revenue, not just top line revenue,” he said. “The IAHI helps us make sure that the investments made in our hotels, either in services or products, have a return. And working directly with the IAHI through its Committees helps us define how we can leverage owners’ investments. That’s another large differentiator for us. The IAHI has a high level of involvement and dedication from our senior management team. I think that relationship is critical, because for owners it’s not just about what they get for their money, but it’s also about who they can trust with their money.”

One of IAHI Chairman Mike Hoffman’s goals is to ensure that all new owners entering the system are committed to quality. Kinsell says he believes that running a quality hotel has as much to do with having the right owner, as it does having the right location and market.

“That’s why we have an exhaustive process for assessing owners’ success profiles, looking at things like whether they have experience in the hotel industry or a related industry, and whether they’ve demonstrated stewardship of another company’s brand. We tour their properties and investments and do extensive interviews. And once they join our system, IHG hosts an array of classes teaching owners how to manage things like PMS systems, pricing and marketing. He also said there are new investor orientation classes, and new hotel opening classes for owners and general managers.” 

While Kinsell is focused on the quantity of new hotels entering the system, IHG’s VP of Franchise Operations John Merkin is responsible for quality, specifically for ensuring brand integrity and consistency.

“In our efforts to expand our distribution, we aren’t going to bring sub-par franchisees into our system,” Merkin said. “In fact, we’re ratcheting up our quality efforts by doubling the size of our Quality Department. This means that starting in April every hotel will be inspected once or twice each year, not just those hotels with quality issues.”

Merkin says that when there is a quality or performance problem, his department works to find the cause – whether it’s an issue with the owner, product, location, financial investment or competition.

“We make every effort to help them fix the problem, but if those issues are too great, we remove the hotel,” Merkin said. “In fact, over the last three years, we’ve removed 120 hotels a year on average. We either terminate the owner’s license, or decide not to renew it when it expires. The most important thing to know is that we’re moving quickly to fix any issues so we ensure the integrity of our brands.

“When we looked at what IHG can do to be a world-class franchisor, one element that came through loud and clear was the need to place an ongoing and increasing emphasis on quality. This is important for IHG, because we don’t want to be just a great hotel franchisor, but we also want to be among the truly great branding and franchising companies in the world.”

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