REPORT FROM THE U.S.—With a robust pipeline, many hotel company executives might be concerned about coming on too strong in a down market. But Jim Abrahamson, president of The Americas for IHG, is confident the company has plenty of demand for its product—particularly in the midmarket segment.
“We’re opening hotels at a record pace,” he said. “We’ll open 350 hotels this year. We opened 40 hotels in May alone.”
These properties are coming online in what Abrahamson called appropriate market positioning—Holiday Inn, Holiday Inn Express, Candlewood and Staybridge Suites.
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Jim Abrahamson |
It’s been almost a year since the passing of Stevan Porter, former president of the Americas. Abrahamson has been on board since 5 January. In his first months with the company, the industry veteran, who also has held positions with Hilton and most recently Hyatt Hotels, took inventory of the existing team and resources.
“Taking over this job was unique because it was an exceptional organization,” Abrahamson said. “I come into a highly motivated work team with brands that are well positioned for the downturn.”
That said, there were some minor adjustments made to the roster as one would expect with any leadership change. Angela Brav is now senior VP, franchise services & operations support. Eric Pearson is now senior VP, brand performance, the Americas. Jim Anhut is senior VP, chief development officer, the Americas. The responsibilities formerly held by COO Tom Murray are now handled by this team.
The US$1-billion reimaging of the Holiday Inn brand, which began in 2007, is moving along, according to John Merkin, senior VP, brand management for Holiday Inn brands, Americas.
The brand has 800 hotels worldwide that have made the updates as of May, which is one-third of the total system, Merkin said, during a break at the NYU International Hospitality Industry Investment Conference earlier this month.
In a one-year study, properties that had gone through the relaunch had a 6-percent, revenue-per-available-room premium over those Holiday Inns that did not.
“This is mainly achieved through occupancy,” Merkin said.
For properties that have not already made the change with reserve cash, Merkin said owners typically expect to have more cash flow during the summer and plan to make changes later this year.
The deadline is 31 January, 2010 for Holiday Inn owners to reimage. Merkin said the total cost is around US$150,000.
Abrahamson attributed published reports that IHG RevPAR was decreasing less than its competitors to this brand and its select-service sister Holiday Inn Express.
“The performance of Holiday Inn and Holiday Inn Express during the down economy—which is the bulk of our hotels—has done well.”
By the 2010 deadline, one-third of the system will have been “refreshed” through license expirations, exiting properties and removals, Abrahamson said.
“As part of this renewal, we want to have the right hotel in the right location,” he said.
Pipeline strength
The company has the greatest percentage of properties and rooms in the active pipeline, according to the latest data from STR/TWR/Dodge for April 2009. This represents 1,015 hotels (20.2 percent of the total active pipeline) with 99,739 guestrooms (18.7 percent).
IHG will open 350 hotels this year and opened 40 hotels in May alone, Abrahamson said.
“It appeals to the largest segment of customers traveling,” he said, addressing the company’s strength in the midscale segment existing inventory and pipeline. “It hits business and leisure as well as group/meeting. The demand is so heavy in these segments … customers are not giving up anything, and the industry transitions to a new normal. Customers are more appreciative of value.
“Midscale is a very resilient segment; it tends to recover more quickly and has in previous recessions.”
Merkin said the Holiday Inn brands will open 300 properties this year, with 95 percent coming from new build.
The InterContinental Hotels and Resorts brand won’t open any hotels in the U.S. this year but will bring a Times Square property online in 2010.
“The brand positioning is good,” Abrahamson said. “We’re still running a fairly good occupancy. Rate is seeing more pressure but it’s very difficult to get a new InterCon built in today’s market.”
He said the conversion opportunities will be the most likely growth source. This will be driven by the liquidity of banks.
“We’re hoping that happens in the next 12 to 18 months, and we’re studying (opportunities) right now.”
Crowne Plaza, the company’s upscale product, has 200 properties open worldwide with 40 projects in the pipeline. Growth will come from conversions, Abrahamson said.
Staybridge Suites and Candlewood Suites, both extended-stay offerings, are poised to grow by 100 percent.
“The financing for smaller hotels allows us to be more nimble,” Abrahamson said.
Hotel Indigo, a boutique upscale product, has 26 properties open and 55 in the global pipeline.
Looking forward
Abrahamson said the biggest challenge is facing the economic headwinds, but things are getting “less bad” and leveling from an occupancy side.
“As a company and an industry, we need to look at how we promote tourism,” he said. “The consumer is going to lead us out of this.”
The new Americas leader also is keeping his eye on changes in consumer behavior, in what he called “the new normal.”
“We will see buying and behavior may change, and we’ll try and read into the future—try and understand what those changes are.”
Also see IHG’s Kirk Kinsell discuss the company’s presence in Europe, the Middle East and Africa.