LONDON—With the race for expansion in full growth mode, InterContinental Hotels Group CEO Keith Barr isn’t content to sit and watch.
The Denham, England-based company launched its 13th brand, called Avid Hotels, in September. During an interview at IHG’s central London office, Barr said the company will look at adding more brands to its portfolio.
As of 30 September, IHG’s portfolio included 5,272 hotels comprising 785,544 guestrooms. The company’s pipeline included 1,553 hotels comprising 234,700 guestrooms.
Barr, who was appointed IHG’s CEO on 1 July, made it clear that the company’s first focus is simple.
“My focus will be scaling up our existing brands in the markets where we believe we can attain the scale,” Barr said, adding that the goal doesn’t include taking every brand to every market in which IHG operates.
However, he said he recognizes there are growth opportunities outside of internal expansion. Filling the gaps between existing brands is a road the company will investigate.
“There are about five or six spaces that we can explore and it’s a question of timing and availability,” Barr said. “Some white spaces you’re only going to fill through (mergers and acquisitions)—you’re not going to build it yourself. It’d be really hard to build Kimpton (Hotels & Restaurants) from scratch.”
IHG acquired Kimpton, a boutique hotel chain based in San Francisco, in 2014.
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Barr said brand growth could come in the form of regional launches—something the company has done in the past with Hualuxe Hotels and Resorts in China, and Even Hotels and Avid Hotels in the U.S.
“We do have gaps in luxury … there are gaps in luxury resort brands,” Barr said. “You can look at luxury sitting above InterContinental. Clearly there’s opportunity for conversion and collection brands to sit up there as well, too.
“We’re going to closely look at our brand portfolio and determine how do we round it out appropriately so as to create value as a company, but value for our owners, too, making sure we’re very confident by putting one of these brands on the hotel is going to be a success for that owner,” he added.
Technology could drive portfolio expansion
The implementation of a new cloud-based guest reservation system—which the company is beginning to roll out—as well as other technology improvements will help IHG grow its stable of brands, according to Barr.
“We’ve focused a lot on getting the enterprise strong in the last three to five years, through strengthened loyalty contribution, through strengthened distribution, technology—we’re about to launch GRS—and now we have the ability to launch new brands to be driven by the enterprise,” the CEO said. “The stronger that you’ve got the enterprise that delivers highly profitable revenue to owners, the easier it is to launch new brands.”
Barr said he likes what new brands can bring to the table and used Avid as an example. The brand is designed to sit below the company’s Holiday Inn Express brand on the chain-scale segmentation list from STR, parent company of Hotel News Now.
“It’s going to be the next big driver of growth for IHG, and I’m really excited about the work the team did to find a really sharp customer proposition,” Barr said. “When we looked at the customer segmentation in the U.S., we realized there was (a) $20-billion revenue segment, 14 million customers out there that were really dissatisfied with the current offering of the branded experience at that price point.”
Barr cited inconsistent customer service, inconsistent experience and the mediocre price/value ratio in the upper economy/lower-midscale segments as big reasons consumers said they didn’t like the existing offerings.
Despite the urge for growth, Barr said he is aware that excessive brand proliferation can be bad.
“It can absolutely dilute your brand portfolio if you don’t do it well,” Barr said. “It’s really understanding customer need segmentation and cannibalization.”
That’s why reaching between existing brands is such an important concept for the company to pursue, he said.
“It’s quite easy to launch a brand that actually takes most of its customers from your existing brands,” Barr said. “What you have to be able to really understand is overall the travel landscape. How’s this brand going to fit in your portfolio? Who are those customers? … Getting the positioning right, getting the part of experience right … it’s critical.”
Having a clearly defined brand portfolio is more critical than ever, Barr said.
“Customers are more concerning, they’re more segmented and they expect consistency, too,” he said. “It’s really understanding what (you are) trying to drive consistency for in each brand. You may not have exactly the experience you’re going to have in Shanghai as you’re going to have in Sydney, or as you’re going to have in San Francisco.”
Barr added the key is “making sure that essence of that brand carries through around the world wherever you are” and it’s delivered in the right way for any particular market.
Breakfast offerings are a prime example of that, according to Barr. For instance, Holiday Inn Express breakfast in China is quite different than in the U.K. or in the U.S., “but it’s right for the market and is consistent with the brand proposition,” he said.
Anticipating and recognizing changing consumer preferences is a key component to having a successful brand portfolio, Barr said.
“You’ve got to get close to customers, you’ve got to have to really understand what’s important, and then make sure you’re marketing it appropriately as well so that customers really understand what they’re going to get,” Barr said.
Source: IHG. Numbers current as of 30 September 2017. *Figures include IHG’s 95 unbranded, Privatization of Army Lodging and InterContinental Alliance hotels.