GLOBAL HOTEL PERSPECTIVES 2014 - Hotel Analyst
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
GLOBAL HOTEL PERSPECTIVES 2014 www.hotelanalyst.co.uk
Contents 1. Introduction 1 2. Overview of the Global Hotel Industry 2 3. Current ownership trends 10 4. Hotel ownership 14 5. Brands 19 6. Development strategies 23 7. People 36 8. Technology and innovation 41 9. Corporate social responsibility 54 10. 2014 and beyond – at a glance 59 Chain profiles InterContinental Hotels Group 63 Marriott International 79 Hilton Worldwide 88 Wyndham Hotel Group 93 Choice Hotels International 100 Accor SA 107 Starwood Hotels & Resorts Worldwide 117 Best Western International 125 Jin Jiang Hotels Group 128 Home Inns Group 132 Magnuson Hotels 135 Carlson Rezidor Hotel Group 138 Hyatt Hotels Corporation 147 Platinum Tao (Plateno) Hotels Group 152 Westmont Hospitality 155 China Lodging Group 156 G6 Hospitality 159 GreenTree Inns 161 Meliá Hotels International 162 Louvre Hotels Group 167
1. Introduction
1.1 Objectives 1.2 Structure
The purpose of this report is to provide the The report is split into two sections: firstly, an
reader with an insight into the global hotel overview of the key trends in the global hotel
industry in terms of company strategies and industry and secondly, a section which provides
key trends that are emerging. The report detailed profiles on leading industry players. The
investigates the leading hotel companies Hotel Giant’s listings were used to choose these
and analyses their strategies. It then uses this key players, with additional research providing
information to identify the key trends in the more timely room counts.
industry and how they will impact the industry
The decision was taken not to split the major
moving forwards. This report is not concerned
players by geographic region as in the previous
with measures of financial or operating
edition of Global Hotel Perspectives 2012, as
performance except in circumstances where it
many of them no longer perceive themselves as
explains a point. This report concentrates on
regional companies.
the strategies being used and trends occurring
in the hotel industry at present. This is updating Each of the profiles of the companies looks
the Global Hotel Perspectives report published briefly at: the company’s history; its strategies;
in 2012. its stance on the ownership of its assets; its
brands; development pipelines in terms of
ownership model and geography; operating
models in terms of marketing/distribution and
online strategies; people – leadership and
employee initiatives and, finally, corporate
responsibility. By investigating each of these
areas, it has been possible to draw out some
interesting trends with a significant impact on
the hotel industry. These trends are discussed in
more detail in the front section of the report.
Global Hotel Perspectives 2014 1Global hotel brands
According to MKG Hospitality, the leading worldwide hotel brands are as follows:
Table 3: Leading worldwide hotel brands (2013)
Hotels Hotels Rooms Rooms % change
Rank Brand Group 2013 2012 2013 2012 rooms
1 Holiday Inn & Express by Holiday Inn InterContinental Hotels Group 3,392 3,347 424,612 421,944 0.6
2 Best Western Best Western 4,024 4,018 311,611 295,254 5.5
3 Marriott Marriott International 558 555 204,917 205,595 -0.3
4 Comfort Choice Hotels International 2,509 2,590 194,262 199,875 -2.8
5 Hilton Hilton Worldwide 551 562 191,199 197,311 -3.1
6 Hampton Inn by Hilton Hilton Worldwide 1,880 1,847 184,765 181,087 2.0
7 ibis (Megabrand) Accor 1,667 1,519 182,496 163,484 11.6
8 Home Inns Home Inns 1,438 1,119 164,325 128,621 27.8
9 Sheraton Starwood 427 415 149,784 144,648 3.6
10 Days Inn Wyndham Hotel Group 1,826 1,864 147,808 150,436 -1.7
11 Super 8 Motels Wyndham Hotel Group 2,314 2,249 147,512 142,254 3.7
12 Courtyard by Marriott Marriott International 929 911 136,553 134,428 1.6
13 Quality Choice Hotels International 1,479 1,410 133,515 128,753 3.7
14 Ramada Wyndham Hotel Group 850 845 115,811 114,306 1.3
15 Crowne Plaza InterContinental Hotels Group 392 387 108,307 105,104 3.0
Source: MKG Hospitality – March 2013
2.5 Global hotel performance
Table 5: Global hotel performance (2013)
Europe Asia-Pacific Americas MENA
% change on 2012 % change on 2012 % change on 2012 % change on 2012
Occupancy 56% 4 68% 0 62% 2 67% 3
ADR EUR96 1 USD122 (4) USD113 4 USD207 3
RevPAR EUR54 5 USD83 (4) USD70 5 USD138 7
Source: STR & STR Global
Americas Europe
The region recorded increased occupancy and rate to see a rise in 2013 served as the beginning of the recovery for most of Europe’s
revPAR of 5% over the previous year. economies and the hotel industry as a whole.
The slight declines of the three major indicators throughout Central RevPAR remains EUR 4 below pre-recession levels achieved in 2007.
and South America were in part led by the negative effect currency Southern Europe’s 6% RevPAR growth was one of the pleasant surprises
exchange rates had for hotels in Brazil and Argentina. of 2013. It is coming from a low base; however, STR Global stated it
was encouraging to see some growth in occupancy and ADR in the
Panama’s new supply continues to grow at a higher pace than the
countries from these regions.
demand is growing with more than 1,800 new rooms in 2013 and
3,500 more in STR Global’s active pipeline. The biggest pipeline is in Europe’s hotel pipeline also has some interesting trends, including:
Brazil with more than 30,000 rooms, of which more than 70% are in
• The UK has 38% of the total share of rooms to come online within
the Economy, Midscale and Upper-Midscale segments9.
Europe in 2014.
• Russia, where all eyes have been on the Winter Olympics in Sochi, has
an expected supply increase of 96%.
• Spain is among the top five European countries with the largest
pipelines, with an additional 4,000 rooms scheduled to open10.
9 http://www.hotelnewsnow.com/Article/13034/STR-Global-Americas-results-for- 10 http://www.hotelnewsnow.com/Article/13036/STR-Global-Europe-results-for-December
December#sthash.E8htzJm3.dpuf
Global Hotel Perspectives 2014 53. Current ownership trends
3.1 Transition from ownership model INDUSTRY INSIGHT: Paul Slattery & Ian Gamse, Otus & Co.
to asset-light discuss the question – Asset-light hotel companies:
where next?
The move from owned to asset-light began in the 1990s as ‘traditional’ If the global major hotel companies had not made the transition to
hotel companies looked to dispose of their asset intensive portfolios for asset-light, the valuation of their shares and thus their corporate
a lighter portfolio of managed/leased and franchised hotels. This trend valuations would have collapsed. However, the transition to asset-
has been driven by a number of factors: light has not delivered much of a re-rating of their shares in spite of
• Recognition of hotels as an asset class for property investors. reducing the risk profile of the companies, accelerating the growth of
the companies, focussing more on the hotel business and generating
• Increasingly high prices paid due to cheap debt and a large surplus more free cash. The companies are now faced with complex strategic
of oversupply for more traditional commercial property investments. issues about the performance of their portfolios and about how they
• Shareholder demands for owner/operators (especially listed companies will be able to achieve a medium- to long-term rate of growth that
such as IHG, Hilton and Accor) to release capital from their balance will sustain and enhance their valuation multiples. These are very
sheets to return to shareholders and improve return on capital adult issues that will require the main boards of the global majors
employed. to analyse, more creatively than they have done in the past, the
economies in which they operate and aspire to operate. It will also
Thus hotel companies embarked on a series of sale and leaseback, and require them to capture greater market share of hotel supply and
sale and manageback deals. Sale and leasebacks have been used for demand in ways that does not impede hotel and chain performance.
a long time as a way of releasing value from a real estate investment The most able managements will be those that deliver faster sustained
and hotel companies have certainly not been the only sector where growth than their global major competitors. Sadly, there is little sign
this was common. Sale and managebacks became common as part of that, thus far, they have had many good ideas.
the disposal programmes of the big owner/operator chains that were
Source: Hotel Analyst, Volume 8, issue 2
moving towards becoming asset light hotel management companies
rather than owners of real estate18. Hotel ownership is still extremely diversified, differing significantly from
Publicly quoted hotel operating companies began divesting of owned region to region. Despite the well reported trend which separates hotel
real estate and focussed on management as they were unrewarded ownership from management, the owner/operator model prevails in
for ownership stakes in hotels. Asset-light strategies enabled them to several key markets, particularly in private hotel companies20. Hyatt and
release capital, lighten their balance sheets and execute share buybacks, Meliá each own 25% of their hotel portfolios in comparison to IHG and
consequently increasing their share price. Practically speaking, hotel Marriott, which each own less 1% of their portfolios.
owners were focussing on building a base of long-term management Global hotel companies are the most advanced with their asset disposal
contracts and stronger brand footprint in order to attract new capital programmes, due in part to their early starts, Marriott in 1993 with its
sources and develop more predictable revenue streams19. IHG has separation from Host Marriott and IHG in 2003 when it undertook a
pursued this strategy, and by the end of 2013 had disposed of 191 detailed review of its hotel stock. IHG and Marriott own less than 1%
hotels with a net book value of USD 6.2bn. IHG now owns less than of their hotel assets, with Hilton owning/leasing 9% of its hotels.
1% of its hotel portfolio; management contracts account for about a Of those properties Hilton actually owns itself, a number are its ‘brand
quarter, and franchising the remaining three quarters. builders’, which include the Waldorf Astoria, Hilton Hawaiian Village,
Reasons for adopting an asset-light strategy include: and the New York Hilton, which are among its biggest profit earners.
Choice International and Wyndham Worldwide operate a fee-based
• Higher capital turnover as a result of lower capital invested means that franchise model.
the return of invested capital is greater.
The leading US players have differing levels of hotel ownership, with
• It helps to ease system growth and expansion of brands, and the Hyatt at the highest with nearly a quarter of its hotel assets owned/
brand awareness among customers, as it requires less capital. leased, followed by Carlson who owns 10% and Starwood with 7%.
• Financial risks for hotel operators are normally lower in hotels under The leading European hotel companies profiled have much higher ratios
management and franchise contracts without guarantees, compared of owned estate than their US counterparts. This is due in part to the
with hotel ownership. maturity of its hotel industry. Louvre Hotel Group owns a third of its
• Separation of hotel operations and property ownership implies less portfolio and Meliá a quarter, previously both family-run enterprises.
financial leverage and increased focus on hotel operations instead Accor has undertaken a huge asset disposal programme, which it has
of property asset management. recently curtailed under its new strategic direction.
Marriott’s emphasis on long-term management contracts and
franchising provides more stable earnings in periods of economic
downturn, while the addition of new hotels to its system generates
growth. The strategy has allowed substantial growth while reducing
financial leverage and risk in a cyclical industry. Marriott also increases
its financial flexibility by reducing capital investments and recycling the
investment it makes.
18 Journal of Retail and Leisure Property (2007) 6, Page, ‘Asset-light – managing or leasing’ 20 Jones Lang LaSalle Hotels, The Hotel Ownership Pendulum in Motion, 2006
19 Jones Lang LaSalle Hotels, The Hotel Ownership Pendulum in Motion, 2006
10 Global Hotel Perspectives 20144. Hotel ownership
4.1 Background 2004
• Significant changes in buyers of portfolio and single assets.
Obviously, since the advent of the popularity of the asset-light model,
there have been changes in hotel ownership patterns. So if ‘traditional’ • Main buyers private equity, hotel operators and HNWI (or syndicates
hotel companies are selling the bricks and mortar, who are becoming of HNWI).
the new owners of hotel real estate? • Hotel operators were still active in acquisition of single assets.
The hotel investment market saw unprecedented levels of transactional • Major shift in investor profile with greater number of HNWI eg. Quinn
activity during the early to mid-noughties, during which hotel Group, Barclay Brothers, Quinlan Private.
ownership has changed significantly. The traditional buyers, hotel
companies, were replaced. In the early stages, private equity and Real • Private equity also showed interest in single asset deals as opposed to
Estate Investment Trusts (REITs) took preference with the advent of the portfolio – started to acquire assets in high yielding emerging markets.
sale and leaseback financing model that took the hotel industry by • Institutional investor activity far less than in previous years, however
storm in the early noughties. It had actually already been an established DIFA acquired several assets.
financing model in France and Germany, but its popularity spread as
companies began to dispose of their assets, preferring management • Private equity active in portfolio market, but fewer acquisitions made
contracts instead. Specialist hotel investors and real estate investors by US-based funds.
moved into the transactions arena in the heady days of mid-noughties. 2005
In the last couple of years, the economic downturn has had implications • Main buyers were real estate investors, hotel investment companies
for some owners, with many high profile property companies and hotel and private equity.
owners going into administration. By 2012, the age of banks ‘putting • Private equity remained major source of hotel acquisitions, eg. sale of
up and pretending’ came to an end, more property was seen to be IHG-owned assets in UK and purchase of B&B Hotels in France.
coming on to the market and ownership was again from a different set
of owners – experienced owners of hotel real estate. • Hotel operators that did acquire assets were mainly smaller hotel
companies in the UK and Spain, trying to increase their market share.
Investment activity during 2013 has seen increased activity, with all
the regions recording strong investment markets. The main sellers • Greater number of real estate investors interested in single assets, for
continued to be the hotel companies as they continue with their asset- example London & Regional, the Statuto Group, Thon Gruppen and
light strategies. Sovereign Wealth Funds and private equity continued to Wenaas Gruppen.
be the main buyers of hotel assets. And in a move not seen for the past • Main buyers of portfolio transactions were Hotel Investment
few years, Hilton and Extended Stay America were both subject to IPOs. Companies, eg. Le Meridien by Starman, 11 Hiltons by Stardon UK
Ltd; 13 UK Accor hotels by Tritax.
4.2 Key trends in invesment
• Private Equity represented quarter of portfolio transactions, such
Key trends in investment activity (2000-2014)
as LGR Acquisitions’ purchase of 73 UK InterContinental Hotels;
2000/01
Eurazeo’s acquisition of B&B Group.
• Sale and leaseback transactions were predominant methods of
financing acquisitions. • Real Estate Investors continued to invest, eg. Condor Overseas
Holdings acquisition of 46 Whitbread Hotels.
• Sources of funding from open- and close-ended funds, pension funds,
property companies. 2006
• Hilton International/Hilton Hotels Corporation acquisition, proving
• Was less interest from trade buyers.
hotel operators were still capable of acquisitions.
• Shift from public equity to private equity in form of private equity,
• Private equity active with, for example, the Alternative Hotel Group’s
property companies & institutional funds.
takeover of De Vere.
• Direct institutional funds eg. Norwich Union; MWB Hotel Fund.
• Single asset transactions, main buyers were real estate investors. Major
2002/03 investments were Hilton London Metropole and Hilton Birmingham to
• Cross-border activity was on the increase. Tonstate, and Four Seasons Milan to Statuto Group.
• Capital for hotel investment became available from wider source of • Hotel operators continue to buy single assets, eg . Hyatt Corporation
investors. and JER Partners’ acquisition of Great Eastern Hotel, London.
• Trend towards indirect property investment became prominent.
• Private equity capital dominated portfolio activity.
• Whilst hotel operators were the largest selling group, still active buyers
were looking to build global presence.
• Sale and lease activity was significantly less in 2003.
• Growing trend for German open-ended fund to invest in hotel
development projects.
50
Hotel Analyst, volume 7, issue 4
14 Global Hotel Perspectives 20146. Development strategies
6.1 Company pipelines
With respect to pipeline growth, US brands are now very much focussed abroad. Europe is one of the main choices as it is the second most mature
after the US, as well as being the most culturally similar and therefore better suited to the products.
Asia-Pacific, in particular China, India and Indonesia, and the Middle East are hot development markets.
Table 6: Development pipelines of profiled companies
Company Pipeline Comments
InterContinental Hotels Group 180,000 rooms Americas account for 42%; Greater China 32%;
AMEA 17%
Marriott International 195,000 rooms under development (End-2013) Grows through franchise & management contracts
36% of pipeline is outside US
Hilton Worldwide 176,449 rooms under construction or approved 52.4% of its development pipeline is under
for development (mid-2013) construction. 61% of the pipeline was located
outside the US. Substantially all of the hotels are
within its management and franchise segment
Wyndham Hotel Group 110,700 rooms (End 2012) 56% were international and 59% were new
construction
Choice Hotels International 37,077 rooms (Q3 2013) 80% of developments are in US
Accor SA 117,700 (Mid-2013) 84% are under management and franchise
contracts,
50% in the Asia-Pacific region 47% in the
“ibis family”
Starwood Hotels & Resorts
Best Western International 400 hotels (End-2013) Nearly 50% are outside North America
Jin Jiang 32,000 (Mid-2013)
Home Inns 450 hotel openings planned for 2014
Carlson Rezidor Hotel Group plans to grow the portfolio to nearly 1,500 hotels
in operation and under development by 2015
Hyatt Hotels Corp 175 hotels Much of development is in emerging markets of
China and India
China Lodging Group 455 hotels (Q3 2013)
GreenTree Inns
Meliá Hotels International 15,000 rooms (Late-2013) Expansion is focussed on upscale and luxury
hotels, which account for 84% of the pipeline
95% will be added outside Spain
Source: Individual company profiles
It is well known in the industry that hotel companies can be accused of playground antics such as “mine is bigger than yours” with regards to
pipelines, but the difficulty is that it is very hard to make comparisons as companies report their pipelines differently. Some may only count those
that are signed, others that are under development, others can be quite vague. The figures should be treated with caution as not all may actually
come to fruition.
STR has attempted to standardise the pipeline data from hotel companies, and many of the major players are now reporting their pipelines in
similar format, which will allow for comparisons.
Global Hotel Perspectives 2014 237. People
7.1 Consumers Growth in hotel demand: Hotel Analyst Emerging Markets discusses
the fact that there is a real risk in viewing hotel demand growth in
7.1.1 New middle classes from emerging markets127 emerging markets in the same way it is viewed in the developed world.
Emerging markets with populations with growing disposable incomes While hugely flawed when taken in isolation, there is a correlation
are taking to travel as never before, providing hotel companies with not between GDP growth in the developed world and hotel demand.
only potential markets for their products across the globe, but also in
their home markets. But in emerging markets, there remains massive potential for hotel
demand growth even during a comparative slow patch in overall
These domestic travellers are the most important factor in the expansion economic growth. China is the best example of where there are real
of the emerging hotel market. The increase in their numbers is being opportunities. The consensus view on GDP outlook is that growth is
driven by the strength of underlying economic development and going to continue but, as Goldman Sachs says, “not like the old days”.
prosperity which results in a growing ‘middle class’. However, this rising Double digit growth is done, but what remains is likely to be 8% or so.
income is relative and far from the equivalent to Western perception of Pretty healthy by most standards.
a middle class income.
Exceptional, by any standards, is where the growth in hotel demand is
Factors which have helped to fuel this growth in domestic and heading provided economic development continues at this ‘subdued’
international travel are: level. There are likely to be some significant bumps along the road get
Stronger economic growth: Another of the significant characteristics there, not least politically, but the potential for bringing so much of the
of emerging markets is their GDP growth forecasts compared to world’s population ‘online’ as hotel consumers in countries like China,
developed economies such as US, UK and Japan. They are expected to India, Russia and Brazil remains huge128.
record much stronger growth, even given the economic slowdown of Changes in demographics: Across the world populations are growing
recent years. and ageing, but many of the emerging economies have a better
In its latest World Economic Outlook 4, the IMF said advanced demographic outlook than the developed world and their median age
economies were projected to grow by 1.3% in 2012, compared with is considerably lower. Individuals tend to consume most in their lifetime
1.6% in 2011 and 3.0% in 2010, with public spending cutbacks and between the age of 16 and 40 – the period when income levels rise,
the still-weak financial system weighing on prospects. homes and families are being built, and before consumers really begin
saving for retirement. Countries such as Philippines, India, Egypt and
Growth in emerging market and developing economies was marked Saudi Arabia all have populations with a median age of 25 or under.
down compared with forecasts in July and April 2012 to 5.3%, against These young people with growing incomes are getting ready to shop,
6.2% last year. Leading emerging markets such as China, India, Russia, in stark contrast to the ageing populations in countries such as Italy,
and Brazil will all see slower growth. Growth in the volume of world Germany and Japan129.
trade is projected to slump to 3.2% this year from 5.8% last year and
12.6% in 2010. However, that growth is still above that of its US and Consumers in Emerging Markets
Western European counterparts. By 2025, McKinsey Global Institute estimates that annual consumption
in emerging markets will rise to USD 30 trillion, up from USD 12 trillion
In the next 20 or 30 years or so, the list of leading countries ranked by in 2010, and account for nearly 50% of the world’s total, up from
GDP is expected to change, with US and developed countries moving 32% in 2010. As a result, emerging market consumers will become the
down the rankings and more of the emerging countries entering the dominant force in the global economy. Even under the most pessimistic
ranks. In estimates provided by PwC of countries listed by nominal GDP scenarios for global growth, emerging markets are likely to outperform
in 2050, seven out of the top 12 are emerging markets. developed economies significantly for decades.
GDP (nominal at market exchange rates) in 2009/2050 Leading the way is a generation of consumers, in their 20s and early
2050 2009 CAGR
No Country US$bn US$bn 2050/09 30s, who are confident their incomes will rise, have high aspirations and
are willing to spend to realise them: travel is a key aspiration on which
1 China 51180 4909 they want to spend. These new consumers have come of age in the
2 US 37876 14256 digital era. Already more than half of all global internet users are in the
emerging markets. Brazilian social networking, as early as 2010, was
3 India 31313 1296 the second highest in the world.
4 Brazil 9235 1572 The preferences of emerging market consumers will drive global
5 Japan 7664 5068 innovation in product design, distribution channels and supply chain
management, all areas that hotel companies are trying to address.
6 Russia 6112 1231 Companies failing to pursue consumers in these new markets may
7 Mexico 5800 875 squander crucial opportunities to build positions of strength that could
well be long-lasting.
8 Germany 5707 3347
9 UK 5628 2175
10 Indonesia 5358 540
11 France 5344 2649
12 Turkey 4659 617
Source: www.wikipedia.com
127 Emerging Markets and their impact on the global hotel industry, 2013 published 128 Hotel Analyst Emerging Markets; issue 34, December 2012
by Hotel Analyst 129 HSBC Global Research; Consumer in 2050: the rise of the EM middle class, October 2012
36 Global Hotel Perspectives 20148. Technology and innovation
8.1 Introduction 8.2 Mobile138
Few would disagree that the technological revolution has become 8.2.1 Ownership and Booking Patterns
embedded in the travel industry, but is the industry really taking the bull The trend towards the increased usage of mobile technology never
by the horns? The majority of global hotel operators are engaged in ceases to slow down. The numbers of mobiles and tablets that are used
programmes to decipher real time information and experiences and to for business and pleasure rises year-on-year and in fact many travellers
define their particular brands with consumers. no longer take their laptops with them, relying solely on their other
‘two screens’ – smartphone and tablet.
“Crowdsourcing” – the use of a defined crowd to provide input into
a particular problem – is a methodology which the likes of IHG and With more than 285 million Americans now subscribing to wireless
Starwood Hotels have already utilised and, in the case of the latter, was services and 790 million Europeans, many marketers view mobile
instrumental in helping them develop what has become their successful phones as the next big direct-marketing medium. Currently 21% of US
Aloft brand. However, the speed and scope of technological change is a mobile phone subscribers use their mobiles to access the Web139 and
difficult quandary for the hotel industry. 53% of Europeans have active mobile broadband subscriptions140.
There was a time when technology in a hotel was better than that at Analyst Forrester is predicting tablet ownership in Western Europe will
home. This trend has somewhat reversed lately due to the domestic quadruple by 2017 – with the percentage of online adults owning
spread of technology, such as smartphones and tablets, tied with a slate projected to increase markedly from less than a fifth (14%)
the significant infrastructure costs for hotels to “get connected” and last year to more than half (55%) in 2017. In 2011, the tablet-owner
offer guests the experience they now take for granted. The prospect figure stood at just 7%, underlining how quickly digitally connected
of seeing guest tablets in rooms now seems possible, and research consumers are adopting slates.
suggests there are potential benefits for operators, where data suggests
Forrester Research said it expects the consumer-owned installed base of
guests are more likely to use services such as room service or treatments
tablets to reach more than 147 million in Western Europe in 2017, up
if the services are made available electronically via tablet app or
from 33 million in 2012. Its tablet growth forecast is based on a survey
similar. Other services, such as F&B or more retail related experiences
of 13,000 consumers in France, Germany, Italy, Netherlands, Spain,
(click & collect stores already exist in city centres) could equally be
Sweden, and the UK. The polled nations with the largest proportion of
offered through partnerships with other brands that resonate with the
tablet owners, as a percentage of their total online population, were the
hotel. In the context of brands and customer loyalty, these additional
Netherlands, with 20% tablet penetration in 2012; Spain with 18%;
services offer themselves as potential “micro brands” that could be a
Italy with 16%; and the UK with 15%. France was lowest with just 9%.
differentiator for the operator. The possibilities for operators seem vast
and it will be interesting to see how operators seize the initiative. 8.2.2 Booking patterns
• Tablet owners are more likely to make a purchase on their devices
Whilst adoption of technological change is seen as “a must”, the legal
than smartphone owners, with those purchases likely to be of a higher
implications of doing so are numerous. The bigger players have the
value, according to a study from eDigital Research with IMRG.
resources to invest in new media platforms, mobile booking systems,
data harvesting and wifi access, but they will have to be cognizant of • According to the paper, 66% of tablet owners have made a purchase
the e-commerce, privacy and data protection, licensing, security, cookies on their device compared with 44% of smartphone owners. The
and numerous advertising issues associated with it. report commented: “This is hardly surprising given that the main
purpose of a tablet is to browse the web and apps. The results also
Cyber security and cyber crime are topical issues, which the hotel
show that more shoppers have purchased larger ticketed items or
industry must deal with, given guests’ demand for constant
products with a higher price tag through a tablet device rather than
uninterrupted internet access. Equally, mobile booking systems create a
smartphone”.
conundrum in the context that the virtual world is a multi-jurisdictional
world and thus it can be difficult to establish what e-commerce rules • The study found that over half (56%) of UK consumers now owned
and regulations should be complied with as multi-jurisdictional terms a smartphone, whilst 21% had access to a tablet device. It said:
and conditions are feasible, but can be complicated. The use of social “Perhaps as would be expected, however, there is a higher percentage
media is fraught with risks and liabilities and can operate both for of younger consumers who own a smartphone, whilst tablet devices,
and against the interests of the operator, but generally the rewards on average, seem to resonate more with a slightly older audience”.
outweigh the risks if utilised appropriately137.
• The travel (flights and holidays) segment showed only a slight
preference for shopping via a tablet.
137 Hotel Analyst newsletter, Volume 8, issue 6 138 Hotel Sales & Marketing: Key Trends & Issues, published by Hotel Analyst
139 Kotler P, Bowen JT & Makens JC, Marketing for Hospitality and Tourism, Sixth Edition,
Pearson
140 http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats/a#subscribers
Global Hotel Perspectives 2014 418.4 Use of OTAs OTAs v. the hotel chains
• InterContinental Hotels Group has had an interesting relationship
OTAs conduct business through the internet with no physical locations with OTAs. It was during the early 2000s that the problems between
or shops. hotel companies and internet intermediaries first appeared as third
According to TravelClick, generally OTAs account for 12% of a hotel’s parties identified the hotel sector as a potential source of high margin
reservations in the US. In 2005, OTAs accounted for just 2% of IHG’s business.
revenues generated. By 2012 this had risen to 8%158. Accor’s share of • In May 2004, in order to control the online space, IHG issued its own
revenues to OTAs in 2012 accounted for EUR 1bn, some 17% of the code of conduct for third-party websites. At that time, only 2% of
total revenues. room revenue came through third-party intermediaries. Around 70%
OTAs became popular after 9/11, when the travel industry suffered of bookings went through its own websites.
a decline and hotels were looking at ways to sell their rooms. During • In August 2004, IHG severed its relationship with Expedia and Hotels.
this period it was common for OTAs to sell rooms at a price that was com and pulled its hotels from their websites. IHG felt that the
less than a customer would pay on brand.com. Rather than attracting sites failed to meet its code of conduct. It continued to work with
new customers to the brand as was envisaged, the result of this heavy Travelocity, which became IHG’s main online travel agency.
discounting led to brand.com customers using the OTAs attracted by
the lower rates. To correct this error, hotel companies changed their • IHG and Expedia settled their differences in November 2006, with the
agreements with the OTAs so they could not undersell them. The brand. signing of a multi-year agreement. IHG pays both per booking and for
com sites guaranteed the lowest rates, IHG introduced its ‘Best Price clicks on its hotels made by visitors to Expedia’s websites159.
Guarantee’ in 2011. Hotel companies also do not give loyalty points to • IHG still has some issues with OTAs, with CEO Richard Solomons
customers to book rooms on OTAs, thus encouraging loyal customers to describing them as having “a power and influence which is beyond
book through brand.com. what they really are.” He continued, “They have their place and we’re
One important feature of an OTA is people often search through the very happy to work with them, we have relationships with them. But
hotel choices and then go to brand.com to book the reservation. This not if they basically take dollars out of the mouths of our owners.”
is known as the billboard effect. Hotels should have a good presence in • However, as HADT points out, for most companies, working with the
terms of photos and descriptions on the OTAs. However, more recent right OTAs does add value, particularly in terms of market visibility
research by HSMAI has called this billboard effect into question. and geographical reach. Few companies have the capital, personnel
OTAs can be divided into: and technical resources to be able to set up and promote a direct web
presence in multiple languages and taking multiple local preferences
• Opaque sites, which reduce the cannibalisation of brand.com sites by into account. In contrast, working with OTAs allows them to be
not disclosing the brand and specific hotel that is being bought until distributed in markets that they could not possibly otherwise target in
it is purchased in a non-refundable transaction with the consumer. a cost-effective, performance-based, manner.
Examples of these sites are Hotwire, Priceline.
• The majority of hotel chains and individual properties do in fact gain a
• Non-opaque OTAs, which include merchant, retail and referral models. lot by working with the major OTA players, provided they can obtain
The most popular non opaque sites are merchant agencies that collect balanced terms.
payment from the customer and include well-known names like
Hotels.com, Travelocity, and Expedia. • Marriott International: continues to watch the OTA market “very
carefully”. Sorenson, president and CEO said, “the OTAs are partners
• Another type of OTA – a retail agency, which is similar to the of ours particularly in the leisure space and they are disproportionately
conventional travel agency, where commission is paid to the agent more relevant in leisure destinations.160”
and the room payment is collected directly from the guest. They also
sell rental cars, flights, cruises and tours. • Choice Hotels International: has had some issues with internet
distribution sites, for example Expedia. In 2009, Choice Hotels and
Expedia finally agreed terms. At the height of the disagreement,
Expedia removed all of Choice’s hotels from its website. The row
appeared to be about Expedia attempting to assert itself regarding
terms in North America and Choice Hotels wanting to yield and
manage the channels it uses.
• Choice Hotels’ CEO, Joyce, claimed: “OTAs are an expensive business
channel, but they play a role. They’re not a big part of our business,
Expedia is the largest OTA we use and it’s 3% of our business.
However, for a number of our hotels that are in resorts or destination
markets they can be a much higher percentage than that. And so they
are an important channel.”161
158 www.ihgplc.com 159 Global Hotel Perspectives 2012
160 http://files.shareholder.com/downloads/MAR/0x0x639230/a7b5e296-c27e-4d99-8221-
b502b9dfb025/MAR_Transcript_FINALQ4_2-20-13.pdf
161 Global Hotel Perspectives, 2012 published by Hotel Analyst
Global Hotel Perspectives 2014 458.5 Social media162 Industry examples
• Four Seasons Hotels and Resorts won the 2013 Social Hotel Award for
Social media refers to the means of interaction among people in which best Facebook page by brand. Four Seasons refreshed its Facebook
they create, share, and/or exchange information and ideas in virtual page’s tone of voice with a more conversational and personal
communities and networks. Another definition from Andreas Kaplan approach it calls “the voice of the traveller,” which shares inspirational
and Michael Haenlein define social media as “a group of internet-based content and highlights one-of-a-kind experiences. Four Seasons
applications that build on the ideological and technological foundations employs a corporate social media marketing team of four and a
of Web 2.0, and that allow the creation and exchange of user- dedicated social media monitoring/guest relations team of two – in
generated content.” Furthermore, social media depends on mobile and addition to more than 80 property-level social media marketers – to
web-based technologies to create highly interactive platforms through apply a 24/7 monitoring approach to adhere to the brand quality
which individuals and communities share, co-create, discuss, and standard and nurture a deeper engagement with the Facebook
modify user-generated content. It introduces substantial and pervasive community. Social teams work in tandem with operations to ensure
changes to communication between organizations, communities, and coordination of digital and on-property guest experiences. The fan
individuals163. page encourages the posting and sharing of user-generated content.
Traditional advertising methods are not considered appropriate for the The brand’s Facebook fan page followers increased more than 50%
new global online community. It is all about communicating the brand from April 2012 to April 2013. An increase in fan engagement
rather than advertising. And the methods used to get this message resulted in 59,517 “shares” of Four Seasons brand Facebook content
across are changing. The focus is now on social networking, on sites from January 2012 to April 2013166.
such as Facebook, and Twitter. • In 2012 Accor made its first appearance on FB to share the Group’s
However, this is not just a fad, it is already considered a large market recruitment information and in 2013 Accor added five new pages
and one which can prove to be a legitimate way to conduct business to the international page. India, New Zealand, Australia, Japan and
for hotels. France were the first countries to open their national pages, providing
Accor candidates with information specific to their country and in
their own language167.
• Wyndham Worldwide, in August 2013, announced that the Wyndham
Championship Facebook page increased its online fan base by nearly
400% through the recent Wyndham Championship Trivia Contest.
Facebook is one of the most important forms of media for hotels, and
is probably currently one of the best opportunities to directly improve
hotel online bookings. The majority of hotel FB pages encourage their
guests to interact with them. A hotel can put details of its property on
its page along with photos and contact details.
Hotel Analyst, on discussing the links between FB and TripAdvisor, The acquisition of Spindle will make Twitter ever-more important to
propose that as the major social media systems become increasingly hospitality marketing strategies, as the site continues to work on
interconnected, the possibilities to leverage user-generated content figuring out how to monetise its massive user base.
expand exponentially. Nowhere can this be seen better than with the For hotels, involvement with local services is important in terms of
links between FB and TripAdvisor, whose unique combination of where making visitors aware of their presence, the facilities they offer, special
you have been and who you know is proving very powerful in terms of offers, as well as giving them a chance to interact. With Spindle
influencing consumers164. discovery through maps as well as alerts, the marketing possibilities
Online user-generated travel reviews are already highly influential, around Twitter are starting to become deeper.
falling behind only personal recommendations from friends and family SoLoMo (Social Local Mobile) has vast potential for hotels and other
in terms of credibility according to a 2011 study by Nielsen. But what hospitality suppliers. Until now, even though highly interesting in
TripAdvisor’s use of Open Graph does is effectively combine these two theory, SoLoMo has been very difficult to implement in practice. But
factor’s together, allowing the user to see what their friends, and friends all that could change if Twitter succeeds in integrating seamlessly with
of their friends , think and recommend, thus creating a very powerful Spindle168.
recommendation tool165.
162 Hotel Sales & Marketing: Key Trends & Issues, published by Hotel Analyst 166 http://www.hotelsmag.com/Industry/News/Details/45356#sthash.voIKfx1m.dpuf
163 http://en.wikipedia.org/wiki/Social_media 167 Accor press release; Launch of country specific AccorJobs Facebook pages; May 2013
164 Hotel Analyst Distribution & Technology, Issue 22, June 2013 168 Hotel Analyst Distribution & Technology Issue 23, July 2013
165 Hotel Analyst Distribution & Technology, Issue 22, June 2013
Global Hotel Perspectives 2014 479. Corporate social responsibility
9.1 Introduction Sustainability began to gather momentum as an issue in 2006, with
the launch of the environmentally conscious luxury brand ‘1’ by Barry
Today’s consumers are increasingly environmentally aware and expect Sternlicht, CEO and Chairman of Starwood Capital Group. Since
the brands they affiliate with to be likewise engaged. The combination then, almost all major hotel chains have launched some form of
of regulatory pressures and guest requirements for sustainable and environmental sustainability programme.
value for money options make the hotel industry extremely challenging.
It can be seen from the table below that most of the leading hotel
Whilst not specifically targeted at the hospitality industry, governments companies profiled address the issue of corporate social responsibility.
around the world are using both a carrot and stick approach on All of those profiled, with the exception of the emerging markets,
sustainability, with incentives such as tax credits and deductions for provide extensive information on their policies in either printed
sustainable development on the one hand and schemes like the UK’s company information or on their website.
Carbon Reduction Commitment (CRC) energy efficiency scheme (which
commits operators of both managed and franchised hotels to be There is an argument that trying to introduce sustainable development
responsible for the carbon emissions of those hotels) on the other. in ‘non-green’ countries such as China is a waste of time, but industry
observers note that as China becomes increasingly Westernised and
Implementing sustainability policies across a portfolio of hotels is developed it will note the benefits of hotels providing local employment
particularly demanding for hotel operators and achieving the right blend and using local suppliers. Also international hotel companies developing
of eco-friendly brand with commercial realities and local regulatory in the country have sustainable / CSR policies in place, so will slowly
compliance is no mean feat. bring these practices to China.
In a recent Harvard Business Review, Simon Zadek discussed ‘the path to
corporate responsibility and how companies go through certain stages
on the path to being socially responsible’.
The path to corporate responsibility
Stage What companies do Why they do it
Defensive Deny existence of problematic practices, To defend against attacks that could affect short-
“It’s not our job to fix that” or responsibility for addressing them term sales, recruitment, productivity and brand
Compliant Adopt a policy-based compliance approach To mitigate the erosion of economic value in the
“We’ll do just as much as we have to” as a cost of doing business medium term because of ongoing reputation and
litigation risks
Managerial Give managers responsibility for the social To mitigate medium-term erosion of economic
“It’s the business, stupid” issue and its solution and integrate responsible value and achieve longer-term gains
business practices into daily operations
Strategic Integrate societal issues into their core To enhance economic value in the long run
“It gives us a competitive edge” business strategies and gain first mover advantage over rivals
Civil Promote broad industry participation To enhance long-term economic value and
“We need to make sure everyone does it” in corporate responsibility realise gains through collective action
Source: Harvard Business Review, The Path to Corporate Responsibility, Simon Zadek
54 Global Hotel Perspectives 2014GLOBAL
HOTEL
PERSPECTIVES
2014
CHAIN
PROFILES
Global Hotel Perspectives 2014 61InterContinental Hotels Group 63 Marriott International 79 Hilton Worldwide 88 Wyndham Hotel Group 93 Choice Hotels International 100 Accor SA 107 Starwood Hotels & Resorts Worldwide 117 Best Western International 125 Jin Jiang Hotels Group 128 Home Inns Group 132 Magnuson Hotels 135 Carlson Rezidor Hotel Group 138 Hyatt Hotels Corporation 147 Platinum Tao (Plateno) Hotels Group 152 Westmont Hospitality 155 China Lodging Group 156 G6 Hospitality 159 GreenTree Inns 161 Meliá Hotels International 162 Louvre Hotels Group 167 62 Global Hotel Perspectives 2014
InterContinental Hotels Group
Background Strategy
IHG’s stated strategy is, “to be first choice for hotel guests and owners,
InterContinental Hotels Group (IHG) is an
by building the best operating system in the industry, focused on the
owner, operator and franchisor of hotels and biggest markets and segments3.”
resorts. The company owns, leases, manages IHG’s strategy is based around the following:
and franchises 4,600 hotels and 675,000
Competing with an appropriate business model: IHG’s business
rooms in nearly 100 countries worldwide1. model is focussed on franchising and managing hotels, rather than
The company is listed on London and owning them, enabling them to grow at an accelerated pace with
limited capital investment. This allows IHG to focus on building strong,
New York Stock Exchanges. At mid-February preferred brands based on relevant consumer needs, leaving asset
2014, its market capitalisation was GBP5.27bn2. management and real estate to its local third party owners with the
necessary expertise. With this asset-light approach, IHG also benefits
from the reduced volatility of fee-based income streams, as compared
timeline
with the ownership of assets.
1940s – InterContinental brand was created by Pan Am.
A key characteristic of the franchised and managed business model is
1950s – Holiday Inn brand created.
that it is highly cash generative, with a high return on capital employed.
1980s – IHG is the first international operator to enter China (1984); It enables IHG to focus on growing its fee revenue (Group revenue
Bass acquired Holiday Inn International (1988). excluding owned and leased hotels, managed leases and significant
liquidated damages).
1990s – Bass acquired North American Holiday Inn business (1990);
Holiday Inn Express launched (1991); Crowne Plaza launched (1994); Currently 86% of its Group operating profit [before regional and
First hotel company to introduce online booking on the internet (1995); central overheads and exceptional items] is derived from franchised
Staybridge Suites launched (1997); Acquired the InterContinental brand and managed operations. In some situations, IHG supports its brands
(1998). by using its capital to build or support the funding of flagship assets in
high-demand locations in order to drive growth. IHG plans to recycle
2000s – The company changed name to Six Continents in 2000 as
capital by selling these assets when the time is right and to reinvest
the Bass name was sold along with its brewing interests; Acquired
elsewhere in the business and across its portfolio.
Southern Pacific Hotel Corp; Acquired Bristol Hotels & Resorts
(2000); Six Continents separated into two distinct listed companies: The company continues to invest for growth, strengthening both its
IHG, comprising the Hotels and Soft Drinks, and Mitchells & Butlers, existing brands and launching new ones.
comprising the Retail and Standard Commercial. Acquired Candlewood
Most attractive markets: Its strategy is to build preferred brands with
Suites (2003); Launched Hotel Indigo brand (2004); Britvic, soft drinks
scale positions in the most attractive markets globally. Concentrating
business was disposed of by IPO (2005); Formed a joint venture with
growth in the largest markets means IHG and owners can operate more
the Japanese airline, ANA, which owns the ANA hotel group, making it
efficiently and benefit from enhanced revenues and reduced costs.
largest international operator in Japan (2006); Global re-launch of the
Key markets include large developed markets such as the US, UK and
Holiday Inn brand (2007). This was completed in 2011.
Germany, as well as emerging markets like China and India.
2010s – Announced plans to refurbish the Crowne Plaza portfolio
Portfolio of preferred brands in relevant consumer segments:
(2011). IHG launched Even Hotels, the first mainstream hotel brand
The hotel industry is usually segmented according to price point and
focused on wellness and fulfilling the demand for healthier travel; then
IHG is focussed on the three segments that generate over 90% of
unveiled the first upscale international hotel brand designed for the
branded hotels revenue, namely midscale (broadly three star), upscale
Chinese traveller, Hualuxe Hotels and Resorts (2012).
(mostly four star) and luxury (five star). However, to build preferred
brands, IHG believes it needs to advance its understanding of its guests
and their needs to ensure its brands remain contemporary and relevant.
Winning with its best-in-class delivery: The major benefit IHG brings
to guests and owners is the extent of its global hotel network and the
demand they deliver through its system. This system is the combined
efforts of its scale and networks, websites, call centres, loyalty schemes
and sales and marketing expertise to help guests book and stay with
them, and then maintaining the relationship with them after they leave.
Together, these tools form one of the largest such ‘systems’ in the
industry and are the engine of its business, delivering on average 69%
of total rooms revenue.
Talented people: IHG believes that its preferred brands are brought
to life by its talented and passionate People. Therefore, to deliver on
its brand promise, the company must attract, retain and develop the
very best talent in the industry to service its guests and bring its brands
to life.
1 IHG Annual Review & Summary Financial Statement, 2013 p.3 3 http://www.ihgplc.com/index.asp?pageid=3
2 http://uk.finance.yahoo.com/q?s=IHG.L
Global Hotel Perspectives 2014 63InterContinental Hotels Group continued
Strategic priorities include: Approach to assets
In 2003, IHG undertook a detailed review of all its owned and leased
• Competing in relevant consumer segments
properties to identify opportunities to lower capital intensity.
• To accelerate profitable growth of its core business in its most
Subsequently, IHG began a programme of asset disposals. By the end of
attractive markets where presence and scale really count using the
2013, the company had disposed of 191 hotels with a net book value
right business model to drive its fee revenue and income streams.
of USD6.2bn5.
–A
ccelerate growth strategies in quality locations in agreed scale markets
The reason behind the asset disposals was to allow IHG to focus on
– Continue to leverage scale hotel operations. The asset-light model allows for:
• Operate a portfolio of preferred, locally-relevant brands attractive • Lower capital expenditure requirements
to both owners and guests that have clear market positions and
• Faster hotel growth and organisational focus
differentiation in the eyes of the guest
• Flexibility to operate in more markets
– Invest to build long-term brand preference for the Holiday Inn brand
family • Local partner expertise
– Continue the repositioning of the Crowne Plaza brand • More resilient fee stream6
– Support growth of its new brands: Even, in the US, and Hualuxe, IHG only owns assets that support the growth of the brand, have
in Greater China strategic value or generate particularly high returns. In some situations,
the Group supports its brands by using its capital to build or support the
– Continue to deliver a consistent brand experience and increased
funding of flagship assets in high-demand locations in order to drive
guest satisfaction through its needs-based segmentation analysis
growth. The Group plans to recycle capital by selling these assets when
• Create hotels that are well run, with brands brought to life by people the time is right and to reinvest elsewhere in the business and across its
who are proud of the work they do portfolio.
– Empower its frontline teams with the tools and training to Three quarters of IHG’s room portfolio are franchised, as they have been
consistently deliver great guest experiences that build brand for the last 15 years at least. Management contracts currently account
preference, advocacy and repeat business for a quarter of the portfolio and owned accounts for less than 1%7,
compared to 5% in 19968.
– Continue to strengthen its talent pipeline and succession planning
to meet its growth ambitions On a regional basis, the majority of rooms in the Americas and Europe
are franchised whereas over four fifths in AMEA are managed and
– Instil a winning culture through strong leadership and performance
in China, some 96% of rooms are managed. In the Americas, 91%
management
of rooms are franchised primarily in the mid market (Holiday Inn and
– Build on its strong employer brand to make IHG a magnet for talent Holiday Inn Express) and upscale (Crowne Plaza)9.
• Generate higher returns for owners and IHG through increased IHG Owner’s Association10
revenue share, improved operating efficiency and growing margins The IHG Owner’s Association was established in 1955 and its members
own and operate IHG branded hotels worldwide. It has more than
–C
ontinue to strengthen IHG’s system of delivering profitable demand
2,000 owners and operators, representing more than 3,000 member
to hotels
hotels globally. IAHI’s intention is to represent its members by working
– P ut in place the required technology infrastructure to enable growth with IHG to maintain highest standards for its brands.
– Continue to increase business from its loyalty programme Reflecting its Mission Statement, the IHG Owners Association
concentrates its efforts and activities in three key areas. It:
• Take a proactive stance and seek creative solutions on environmental
sustainability and sustainable communities in a way that drives shared • Advocates, ensuring that it represents the long-term interests of its
value for IHG, owners, guests and the communities in which it operates diverse membership to IHG, to the industry and to its communities.
– Work to ensure all its hotels that are enrolled in Green Engage • Collaborates, with IHG and with its members, to bring innovative
effectively use the tool for greatest impact ideas and comprehensive resources to bear for the success of IHG’s
brands and its individual businesses.
– Continue to drive awareness and engagement around the IHG
Shelter in a Storm Programme • Educates, providing financial, leadership and operational tools and
information that enrich the unique brand culture and help ensure the
– Continue to expand the IHG Academy programme throughout the
optimum engagement and performance of both members and their
world
employees.
– Focus on driving awareness of IHG’s approach to corporate
responsibility across internal and external stakeholder groups using a
variety of channels, to maximise employee pride and reinforce IHG’s
reputation as a Responsible Business4
4 Strategic priorities ; Annual Report and Financial Statements, 2012 p.11-17 5 IHG Investor & Analyst Educational Event presentation, November 2013
6 Andrew Cosslett Investor & Analyst Event presentation, Where we play – building profitable
scale, November 2010
7 IHG Annual Report and Financial Statements, 2012 p.19
8 IHG, Form 20-F, 1998
9 IHG Hotel and Room World Stats, September 2013
10 http://www.owners.org/Home/WhoWeAre.aspx
64 Global Hotel Perspectives 2014You can also read
