IHG CEO Draws Line Under Latest Brand Growth Strategy

IHG appears to have called time on its most recent expansion blitz, which has seen it add five new brands over the last two years.

CEO Keith Barr didn’t entirely rule out buying or launching new brands in the future but it sounds like he is pretty content with the progress the company has made and will instead turn his attention to other areas.

In a relatively short period of time, the company has launched Avid and Atwell Suites in the mainstream segment, Voco in upscale, as well as buying two luxury businesses: Regent and Six Senses.

“We will continue to look at whitespace where we think we could launch a brand that we can use our consumer insights, that we can scale. But we’ve addressed the kind of the key areas that we highlighted 18 months ago,” Barr told analysts on an earnings call on Tuesday.

“We will always begin to look at other options out there, but we’re very focused on the cash generative nature of the model, return on capital and future markets, so we want to do what we’ve historically done. We want to grow quickly, but intelligently and really leverage our scale and think that we have a strong business model to do that today.”

While launching new brands and buying companies is big news, Barr said the bulk of IHG’s growth was coming from existing brands and he identified a number of new initiatives that have helped refresh some of the more established names in the portfolio.

These include a new guest room design at Holiday Inn Express and its open lobby concept at Holiday Inn.

“All of these are elevating the guest experience and enhancing owner returns,” Barr said.

One area where Barr still feels there is work to do is on its loyalty program, IHG Rewards Club. Earlier this year IHG became then official hotel and hotel loyalty partner of the US Open Tennis Championships, which Barr said would offer “fantastic exposure for all of our brands and give our most important guests a once-in-a-lifetime experience.”

IHG intends to introduce variable pricing on reward night redemptions as well as offering guests more ways to use their points during their stay, such as spending them on food and beverages and spa sessions.

First-Half Earnings

IHG’s pre-tax profit rose 25 percent to $375 million with revenue up 8 percent to $2.3 billion.

Revenue per available room —a key hotel industry performance metric — dipped 0.5 percent in the second quarter and was pretty much flat for the first half.

“Our flat RevPAR in the half, as anticipated, reflected a strong comparable from last year and a slower RevPAR growth environment where our hotels maintained near record occupancies and rate,” Barr said.