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The have been a flurry of deals in recent months involving hotel companies investing in the alternative accommodation market.
Not everyone is convinced by the argument, though. InterContinental Hotels Group, one of the most traditional of the big chains, says it won’t be getting involved in the buying spree any time soon. Instead it plans on continuing to focus on expanding its core hotel portfolio.
InterContinental executives love to use the jargonistic phrase “white space” to describe holes in their business and aside from the deal to buy Kimpton Hotels and Restaurants, the company has been content to try to fill these in-house.
Much of InterContinental’s focus is now on developing the as-yet-unnamed midscale brand, which the company announced in June.
“We look at this area and we evaluate the opportunities there and whether it could become scale and whether it really works with our revenue delivery platforms and our loyalty etc.,” said chief financial officer Paul Edgecliffe-Johnson on an earnings call Tuesday following the company’s first-half results announcement.
“In reality you could probably do something there but it’s just looking at which is the biggest opportunity for us and certainly something like our new midscale brand is a huge opportunity and then we’ll look at the others that are out there and think, where does it fit within the white space that [CEO] Keith [Barr] talked about.
“It’s probably not top of our list, not to say that we would never do something there if the right opportunity came up but there are some that probably fit better with our revenue channels than getting into that space.”
Edgecliffe-Johnson’s comments echo those of former CEO Richard Solomons, who referenced at Skift Forum Europe earlier this year the different strategies employed by InterContinental’s rivals.
New Chief Executive
Barr took over from Solomons in July and when there is any change in leadership there it is an open question about whether there will be a new direction.
At least on the surface this seems to have been an orderly, managed transition and as such there has been no hint at a major divergence in IHG’s approach.
The move to an asset-light strategy through the sale of a number of iconic hotels has largely been completed, meaning that Barr’s focus will be on growing the brands that the company already has, as well as the aforementioned new midscale offering.
Barr will also preside over the replacement of the antiquated Holidex guest reservation system with a system developed in partnership with Amadeus. Incredibly, Holidex has been around since 1965.
“Having been at the company for 25 years and worked around the world I think I have a broad perspective on what we do well in the company and where we can improve and again one of my areas of focus is on continuing to figure how we can accelerate growth to drive net system size,” Barr said.
“Fundamentally that’s one of the keys areas we have to be focused on and so its looking at how can we think about accelerating growth, launching… new brands and developing new brands and strengthening the performance and return on investment for our owners in our existing brands.”
In the first-half of its financial year InterContinental made a pre-tax profit of $326 million, an increase of 9.4 percent on the prior year. Revenue per available room, a key hotel industry metric, grew by 2.1 percent.
“In our view IHG’s strategy is appropriate and already being well-executed, but realistically, the hotel cycle will be the biggest determinant of earnings in the short to medium term,” analysts at Numis said in a note to investors.