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Cover Story: InterContinental Hotels Group


AN IHG PROMOTION

In late December 2007, The Washington Post columnist George F. Will described McDonald’s as a millionaire factory. “McDonald’s has made more millionaires… than any other economic entity ever, anywhere,” he said.

In so saying, Will was describing a business built on low operating costs and high returns, designed to capture broad demand.  While his comments were an observation on a brand that is somewhat removed from building and running a hotel in Australia or New Zealand, the model he describes demonstrates the possibilities with any business that has relatively lower startup costs, but potential to capture significant market share.


IHG’s Bruce McKenzie

IHG Australasia’s Chief Operating Officer, Bruce McKenzie is championing that potential in Holiday Inn Express.

Over the coming weeks, IHG will be finalising several agreements to establish the first of what McKenzie hopes will be a rapidly-expanding network of Holiday Inn Express hotels across Australia and New Zealand.

If the brand’s growth rate in other parts of the world is any indication, these hopes are well-founded.  Since it was introduced as an extension of the mid-market Holiday Inn brand in the early 90’s, Express has become an international powerhouse in its own right.  Today, there are more than 2,090 Holiday Inn Express hotels worldwide – equating to over 190,000 rooms – and another 515 confirmed hotels in the pipeline.

While the vast majority of this network is in the Americas, the brand’s inexorable international march continues to gain momentum.  The Express concept was first introduced in China as late as 2006; there are now 25 Holiday Inn Express hotels operating as part of IHG’s ever-expanding network in the People’s Republic of China.

Prior to taking on the top job with IHG Australasia in early 2009, McKenzie was – as Regional Senior Vice President of Operations for IHG Greater China – a key player at a critical time in the introduction of Holiday Inn Express to the Asia Pacific region.  It was during that period that IHG coined the phrase focus service to describe what Holiday Inn Express stood for.

“The generally accepted term for this class of asset is limited service, but we don’t believe that applies to this brand.  Limited service to us, has always carried a negative connotation – like you’re apologising for poor attention to detail, location, build quality and services before the guest has even walked in the door.  It sets up a false image of what we’ve created,” McKenzie said.

“Focus service denotes a brand where the guest only has to pay for what they need.  It provides customers with what’s most important to them – a handy location, a fast check-in, fast internet, a great night’s sleep and a good breakfast. 

“They’re not paying extra for a giant ballroom they’re never going to use, or a gym they don’t have time to visit.  Holiday Inn Express guests are either business road warriors or leisure guests who are pragmatic about what they need, but want the best possible value for their dollar,” he said.

This isn’t the first attempt IHG has made to bring Holiday Inn Express to this region.  A lapsed preferred supplier agreement several years ago prompted a re-think on the brand’s viability for Australia and New Zealand, and a review of the model to best account for the region’s market conditions.

“Being part of the team that introduced Express in China gave me us much better appreciation of the realities of making it work here,” McKenzie said. “I think last time we tried, there was still work to be done on making sure the model best addressed the relatively high build and running costs in this region. 

“In that time, we’ve created an end product best placed to appeal to a broad audience and command strong RevPAR.  It also leverages off the existing profile of the Holiday Inn brand in this market, without the risk of cannibalising that business. 

“The developers and investors we’ve been working within Australasia on Holiday Inn Express are very familiar with the challenges of bringing new full-service hotels into the market.  They’re equally aware though, that over the last five years new inventory has grown at rates below GDP.

“They’re looking for ways to meet increasing demand, and a focus service model provides more opportunities to do that.  This is great news for us, as it’s a brand that we want to scale rapidly,” McKenzie said.

By the end of this year, IHG will have reached the climax of its US$1 billion Holiday Inn refresh program – the biggest brand relaunch in hospitality history, driving consistency across nearly 3,300 Holiday Inn brand family hotels worldwide.  In that time, IHG will have laid the groundwork for its next growth phase in Australasia.

 “We know partners are looking for new opportunities that offer lower construction and operating costs resulting in higher returns, and we know there’s a significant market for focus service accommodation in Australasia,” he said. “The next few months are going to be exciting.”