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InterContinental Hotels Group

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InterContinental Hotels Group was overtaken in 2016 as the world's biggest hotel company by total room numbers, following the merger of rivals Marriott and Starwood. However, it remains a giant concern with more than 730,000 rooms worldwide in 100 countries. IHG's biggest brand is the extensive Holiday Inn network comprising almost 3,600 properties around the globe and gross annual sales of over $12bn. The company has undergone a series of transformations since the mid-1980s. Under the name Bass, it was best-known as the UK's second biggest brewer, but over the following years the group gradually repositioned itself as a global hotel and leisure company, acquiring the Holiday Inn and InterContinental portfolios and selling off its extensive pub and brewery network. Bass became Six Continents in 2001, before adopting its current name in 2003 following the demerger of UK pubs and leisure business Mitchells & Butlers.

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Competitors

IHG's competitors include Marriott International, Starwood Hotels & Resorts, Hilton Hotels, Choice Hotels, Best Western, Hyatt, Wyndham Worldwide, Four Seasons and Accor. See Travel Hotels & Leisure Sector index for other companies

Contact

InterContinental Hotels Group
Broadwater Park
Denham
Buckinghamshire UB9 5HR
United Kingdom
Tel: 44 (0) 1895 512000

Brands & Activities

IHG controls a strong and varied brand portfolio with a broad global footprint, but hospitality is a tough and fiercely competitive business. The industry as a whole was hit by a series of regional crises between the late 1990s and 2010, including economic instability, terrorism fears, disease epidemics and natural disasters. That pressure was reflected in soft profit margins, which IHG countered by offloading ownership of its remaining properties in favour of high margin management or franchise contracts.

InterContinental Hotels Group is the world’s most global hotel company and currently the largest by number of rooms. At the end of 2014, it represented 4,840 owned, leased, managed and franchised hotels across 100 countries with a combined total of over 710,295 guest rooms. Its biggest region by outlets is the Americas where it has 3,699 hotels, owned or run by IHG under management contracts or licensed out to franchisees. These are supported by 647 hotels in the EMEA region, 253 in the Asia Middle East Africa region, and another 241 in China. IHG is among the top three hotel operators by room numbers in the US, UK, Canada, Mexico, China and Australia. In 2006, the group agreed to pool its existing hotels in Japan into a joint venture with All-Nippon Airways (ANA) which is the country's largest international hotel operator. ANA already controlled a sizeable hotel portfolio of its own, and these also fall under the remit of the new joint venture, IHG ANA Hotels Group Japan.

Recent stories from Adbrands Update:

Adbrands Weekly Update 18th Dec 2014: Hospitality giant InterContinental Hotels Group agreed to acquire smaller rival Kimpton Hotels, which manages around 60 urban boutique hotels across the US, for $430m. Kimpton will sit alongside IHG's existing boutique brands Indigo and Even, and is likely to retain its separate identity.

Adbrands Weekly Update 29th May 2014: InterContinental Hotels Group disclosed that it had rejected a $6bn approach by an unnamed American competitor, widely believed to be Starwood Hotels & Resorts.

Adbrands Weekly Update 27th Mar 2014: IHG named former British Airways marketer Jayne O'Brien as SVP, global brands, overseeing the group's portfolio of hospitality businesses, from InterContinental and Crowne Plaza to Holiday Inn. She reports to chief commercial officer Keith Barr.

More from Adbrands Weekly Update

Like other global chain managers (such as McDonald's, for example), IHG runs a management system rather than a real estate operation. All of the group's Holiday Inn properties are run and owned by independent franchisees who use the hotel brand names under long-term license. Their respective interests are represented by an independent owners' association, the IAHI (formerly the International Association of Holiday Inns), which acts as the main collective point of contact with IHG. With its other properties, IHG is increasingly positioning itself as a management services provider, selling off properties to franchise operators or to investment partners while retaining a management contract to run them. Around 200 hotels have been sold since 2003, raising around $6bn in cash, with most continuing to be managed by the group under contract. Since the end of 2012, IHG has physically owned only nine of its hotels. Of the rest, around 735 are independently owned but run by the group under management contract, and all of the rest - almost 4,100 properties - are franchised to independent owners and managers. As a result, IHG's key assets are its brands and its IHG Rewards scheme, the industry's largest with over 84m members, as well as HolidexPlus, the global reservation system which links all outlets and centrally allocates rooms.

In fact the group's principal brand is also one its smallest by properties. InterContinental Hotels connects a chain of around 180 five-star hotels in 60 countries around the world. (Another 50 hotels are under construction or refurbishment). The brand is positioned in the "upper upscale" or premium segment, catering primarily to business or wealthier leisure customers. Most InterContinental hotels are located in prime city-centre locations or in resorts. The chain has been named as the World's Leading Hotel Brand for six consecutive years in the World Travel Awards. Gross revenues for the InterContinental chain were $4.7bn for 2014, or an impressive average of $26m per hotel. Crowne Plaza was initiated in 1983 as a slightly more luxurious four-star spin-off from the main Holiday Inn chain, and now extends to 406 hotels worldwide, mostly targeting business guests and groups and located in urban centres or resort destinations. Gross systemwide revenues were $4.2bn in 2014 ($10.3m per hotel).

The group's biggest business is as the ultimate owner of the Holiday Inn group and its associated brands. The biggest brand is Holiday Inn itself, positioned as a family hotel, offering a range of child-friendly services as well as uniform standards of simple but high quality service and cleanliness at affordable prices. The Holiday Inn Express sub-brand offers similar facilities but without a full food and beverage offering, and is now tending to take precedence over the original brand. In Florida, the group opened the first of a series of Nickelodeon Family Suites by Holiday Inn in 2005, as a partnership with the Viacom-owned kids cable channel. Holiday Inn Select is a collection of better upscale outlets. There are currently around 1,212 Holiday Inn and 2,365 Holiday Inn Express locations worldwide. The entire family of hotels was relaunched in 2007 with a new logo and marketing approach, and the group has obliged all franchisees to renovate their properties - at their own cost - if they wish to keep the Holiday Inn name. By the end of 2009, around 300 hotels had not taken part in the overhaul by the year end, and were warned that they could be ejected from the group. As a result, by the end of 2010, almost 90% of outlets had completed the renovation. Gross revenues from Holiday Inn were $6.4bn (or $5.2m per hotel), with an additional $5.7bn ($2.4m per hotel) from Holiday Inn Express.

Staybridge Suites are a more recent upscale spin-off brand from Holiday Inn, catering to extended stays with in-room self-catering facilities. It is the biggest of the group's secondary brands, generating gross revenues of $0.7bn in 2014. In 2003 the group acquired Candlewood Suites, a midscale extended stay brand in the US, with 322 hotels and gross revenues of $0.6bn. The group launched its newest brand, Hotel Indigo, in 2004, targeting more style-conscious guests. Positioned as design-conscious boutique hotels, but at an affordable price, the brand extended to 61 locations by the end of 2014, mostly in North America but also with outposts in London, Shanghai and St Petersburg. Revenues jumped by 50% in 2014 to 0.3bn. The group's two newest brands launched in 2012. Even Hotels is positioned as a wellness hospitality concept with its first location in New York, while Hualuxe is an upscale brand specifically aimed at the Chinese market.

In Dec 2014, the group agreed to acquire smaller rival Kimpton Hotels, which manages around 60 urban boutique hotels across the US, for $430m. Kimpton will sit alongside IHG's existing boutique brands Indigo and Even, and is likely to retain its separate identity.

Financials

Since several difficult years in the later 2000s, revenues have steadily risen as a result of a global hotel boom. Systemwide gross revenues rose 6% in 2014 to $22.8bn. Group revenues slipped 2% as a result of currencies to $1.86bn. Pretax profits were unchanged at $600m. Almost half of net revenues and two-thirds of operating profits are generated in the Americas.

InterContinental was formerly the controlling shareholder in Britvic Soft Drinks, the UK licensee for Pepsi, which also owns the Robinsons and Tango soft drinks brands. Its 47.5% stake was sold in an IPO of Britvic in December 2005.

Management

Andrew Cosslett stepped down as CEO in summer 2011, to be replaced by Richard Solomons, previously CFO and head of commercial development. Patrick Cescau is non-executive chairman. Paul Edgecliffe-Johnson is CFO with Keith Barr as chief commercial officer. Regional presidents include Elie Maalouf (Americas), Angela Brav (Europe), Jan Smits (Asia, Middle East & Africa) and Kenneth McPherson (China).

Former McDonald's CMO Larry Light was appointed as chief brands officer in 2012. However that role was discontinued the following year at the same time that Keith Barr became chief commercial officer. A version of the role was resurrected in 2014 with the appointment of former British Airways marketer Jayne O'Brien as SVP, global brands. Other senior marketers include Mark Wills (VP, global marketing services), Bruce Lahood (VP, global loyalty consumer marketing) and Heather Balsley (SVP, Americas brand family).

Brand managers include Simon Scoot (VP, global brand strategy, InterContinental Hotels & Resorts), Janis Cannon (VP & global brand leader, Crowne Plaza & Indigo), Robert Radomski (VP, global brand management, extended stay), Maurice Cooper (VP, global Holiday Inn brand family) and Adam Glickman (head of Even Hotels & director of lifestyle experience).

Each region has its own executive committee. Senior officers include Oliver Bonke (chief commercial officer, Americas), Jolyon Bulley (COO, Americas), Matt Luscombe (chief commercial officer, Europe), Stephen McCall (COO, Europe), Nick Barton (chief commercial officer, AMEA), Jean Tan (VP, communications, AMEA), Emily Chang (chief commercial officer, China), Heather Balsley (SVP, Americas brands), Errol Williams (VP, Americas brand operations), Jim Anhut (SVP, Americas brand management), Del Ross (VP, US sales & marketing), Gina LaBarre (VP, brand delivery Americas, Michael Menis (VP, interactive marketing), Seth Freeman (marketing director, Holiday Inn Express, Candlewood), Raul Ortiz (marketing director, Holiday Inn & Staybridge), Karyn Sarago (brand director, Holiday Inn Express Americas) and Hannah Carter (global brand manager, Crowne Plaza).

Background

The first Bass brewery was established in 1777 by William Bass, with the aim of producing lighter ales with local Burton-on-Trent water. By the end of the century, more than half of the Bass ale produced by the company was being shipped to Scandinavia, Russia and Germany. The painter Manet included two bottles of Bass in his 'Bar aux Folies Bergere', and the company's red triangle logo became Britain's first registered trademark. Under the control of the founder's grandson, Michael Bass, the business had become the world's biggest brewer of ale and bitter by the late 19th century.

Unlike other brewers who sold beer through their own pub networks, Bass distributed mainly to independent or "free-house" pubs. This proved a lucrative market for many years until a change in consumer drinking habits in the early 20th century. The growing popularity of the cinema in the 1920s had a damaging effect on this market, with many customers opting for a night out at the pictures instead. Many of Bass's customers went out of business, and the brewer responded by acquiring rivals which already had their own tied-house pub networks. Worthington & Company was the first purchase in 1926, followed by others including Mitchells & Butler and Charrington United. By the late 1960s, Bass had come to dominate the British beer market, controlling close to a quarter of the country's pub estate, as well as a number of popular beers including Charrington and Carling.

It also gave the group the basis for a small hotels business. Several of the enlarged company's pubs also offered accommodation, and Bass Charrington relaunched this business under the name Crest Hotels, expanding its footprint through a series of acquisitions including a small network of hotels in Europe from Esso. Pub hotels were gradually divested in favour of more modern but affordable three and four-star outlets, and in 1987, the group forged its first links with the Holiday Inn brand, then controlled by global giant Holiday Corporation.

One of the best-known names in the worldwide hotel industry, Holiday Inn was founded in 1952 by Kemmons Wilson, an entrepreneur who had already made a fortune building homes in and around Memphis, Tennessee. On a family trip to Washington, DC in 1951, he was outraged that the guesthouses in which he and his family stayed along the way were not only usually dirty, but also charged extra for his two kids. As a result he decided to set up his own motel chain, offering high standards of cleanliness and charging a flat rate per room irrespective of how many people stayed in it. He also set out to offer a few basic amenities as standard, such as air conditioning in every room, free parking, free ice and in-room phones. In the process he completely transformed the American hospitality industry, establishing uniform standards which had never existed before.

Wilson's first hotel opened outside Memphis in 1952. He borrowed the name Holiday Inn from a popular Bing Crosby movie. Another three followed in and around the city soon afterwards, and the growth of America's new network of interstate highways fuelled a rapid expansion of the chain from cost to coast. In 1957, the first Holiday Inn opened in Canada. In 1960, the chain opened its first European outlet in Holland. Although Wilson continued to own some of the hotels himself, the majority were franchised to other owner-operators, but all under strict conditions of comfort, cleanliness, quality service and good food at moderate prices. The huge success of the chain inspired numerous competitors, such as Howard Johnson, Red Roof, Best Western, Days Inns, Ramada Inns and many others. But Holiday Inn remained the leader of the pack. At its peak in the mid-1970s, Wilson's Holiday Corporation oversaw the operation of some 1,700 Holiday Inn outlets, located throughout North America as well as a small number of outlets in Europe, South America and Africa. In 1983, the group introduced a secondary, midscale brand, initially as Crowne Plaza Holiday Inn, offering higher quality accommodation in major cities for business travellers.

Keen to establish an international hotel business of its own, Bass formed a partnership with Holiday Corporation in 1987 to take over control of Holiday Inn's 180 or so properties outside North America and also expand its footprint into new territories. Two years later, it agreed to acquire Holiday Corp's business in the US, Canada and Mexico as well, taking over full control of the Holiday Inn brand worldwide by early 1990. (Holiday Corporation's remaining hotel interests, including Harrah's Casinos and Embassy Suites, were spun off into what is now Harrah's Entertainment).

While Bass focused on its leisure business, rival brewer Scottish & Newcastle seized pole position in the UK with the 1995 purchase of Scottish Courage. Bass responded the following year by attempting to buy Allied Domecq's half-share of Carlsberg-Tetley for £200m, but the deal was subsequently vetoed after a year of deliberation by government regulators. Bass was forced to sell its stake on to Carlsberg, making a £40m loss in the process. Keen to make up for wasted time, the group set about amassing an acquisition war-chest through a frenetic series of further sales in late 1997 and early 1998. Bass sold 61 of its North American hotels to franchisee Bristol Hotels and Resorts for $391m and pulled out of the gaming business altogether, offloading its bingo clubs, Barcrest amusement machines and 900-strong Coral betting shop chain, as well as 1,400 tenanted pubs. But the most significant deal was a move into upscale hospitality, with the purchase in 1998 of InterContinental Hotels for £1.8bn.

One of the great names in international hospitality, the InterContinental brand was first launched in 1947 by Pan American World Airways. Already a pioneer in international travel, Pan Am introduced the first ever round-the-world service in 1942, and set out to provide suitably luxurious accommodation for its passengers (and crew) on their various stopovers along the route. The first selected location was Belem, Brazil, en route to Africa, and other hotels were opened in Latin America, Europe and the Near East. In 1981 the company was acquired by British hospitality group Grand Metropolitan (later Diageo), who expanded it with the addition of their own portfolio of luxury hotels. They in turn sold the business on in 1988 to Japanese group Seibu Saison who ran it for 10 years until the purchase by Bass. This deal was a superb coup, stolen from under the noses of rival bidder Marriott Group.

The portfolio was swelled further by four hotels in Australia, the UK-based Browns Restaurants chain and German bar and restaurant operator Alex. In 1999, Bass backed Punch Taverns' bid for Allied Domecq's 3,600-strong pub estate. It also announced plans to expand its hotel groups by widening its portfolio of strategic partnerships with UK hotel groups. Bass said its aim was to quadruple the size of its Crowne Plaza and InterContinental businesses by 2004 and double European Holiday Inns to around 800 hotels. Just a few weeks later the group acquired the Westin Central Park South Hotel in New York, rebranding its as the Central Park InterContinental Hotel. In 2000, the group acquired Southern Pacific Hotel Corporation, the owner of 60 Parkroyal and Centra hotels in Australia and the Asia-Pacific region. These were all converted to the InterContinental, Crowne Plaza or Holiday Inn brands. Soon afterwards the group also bought out US group Bristol Hotels and Resorts, then the largest franchisee of Holiday Inn outlets.

The group finally made its exit from brewing in 2000. Despite strong competition from Heineken, Anheuser-Busch and South African Breweries, fast-growing Belgian brewer Interbrew acquired Bass Brewers for £2.3bn. Yet Interbrew's subsequent purchase of Whitbread as well triggered a regulatory investigation, and the Belgian company was eventually forced to sell on most of Bass to what is now Molson Coors. Meanwhile Bass itself continued to restructure as a hotel and leisure company. In early 2001 the group sold off its entire unbranded retail pub estate to Nomura International private equity, then went shopping again, acquiring UK chain Posthouse (rebranded as Holiday Inn) and The Regent Hong Kong Hotel (rebranded as InterContinental). In 2001 the group adopted the new name Six Continents, and announced plans to spin off its pubs, bars and restaurants as an independent company.

Like all businesses in this sector, the group's performance was devastated from 2001 onwards by the triple whammy of 9/11, the war in Iraq and the SARS outbreak. Between 2001 and 2002 alone, revenues from the US market virtually halved as a result of the terrorist threat. The following year saw a significant dip in revenues from continental Europe as a result of challenging trading conditions, a more than 50% plunge from the Asia Pacific business as a by-product of SARS fears. Several investors objected to the spin-off of the pubs division, leading to angry scenes at the group's annual meeting in 2003. This generated speculation that rival hospitality groups might table a hostile bid for Six Continents or its pubs division. Despite the fuss generated by the demerger, no bids were tabled, and Six Continents went ahead with its plans, successfully splitting into two in April 2003. The pubs, bars and restaurants were spun out as Mitchells & Butler, and the remaining Six Continents business was renamed InterContinental Hotels Group. Group CEO Richard North left the business in 2004.

Last full revision 17th November 2015

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