Caterer and Hotelkeeper Interview: Angela brav, InterContinental Hotels

17 May 2013
Caterer and Hotelkeeper Interview: Angela brav, InterContinental Hotels

With the number of bedrooms in the hundreds of thousands, InterContinental Hotels Group's brands are household names worldwide. Chief executive, Europe, Angela Brav talks to Janet Harmer about the challenge of modifying local branding in a global marketplace and how her bullish growth strategy for 2013 will move the company forward

What is the focus of your responsibilities as chief executive, Europe, for InterContinental Hotels Group (IHG)?
To grow high-quality brands and people, along with high profitability in the region, which stretches from the UK and Ireland to Israel, Turkey and Russia, as well as Algeria in north Africa. We have 628 hotels with 102,027 bedrooms in 34 countries across the region.

In which countries are you achieving the strongest growth?
We rolled out our strategy last year, which identified the UK, Germany and Russia as our major markets with a focus on a number of key cities in France and Turkey, as well as the likes of Barcelona and Rome.

Growth is focused on our Holiday Inn, Holiday Inn Express and Indigo brands, primarily in major cities such as London and Manchester. In the UK we have 293 hotels with 41,037 bedrooms and a pipeline of 20 hotels (about 3,000 rooms). We work with 13 or 14 owners, with one company - LRG Hotels - being the owner of 70 hotels, which we manage.

Why is Germany such a strong market for 
IHG's growth?
Value brands do exceptionally well in Germany as they resonate well with consumers. It has the largest outbound market in the world, and we want the Germans to understand our brands so they look for them elsewhere. We could easily open another 80 hotels in
Germany, particularly in towns and cities with a population of more than 100,000.

IHG is now largely asset light, owning just nine hotels among 4,600 worldwide. How do you operate the properties?
We only want to manage certain brands in key locations, such as InterContinental, Indigo and Crowne Plaza. The Holiday Inn properties are largely franchised, although we manage several key Holiday Inns in London, such as the Holiday Inn Mayfair, Holiday Inn Kensington Forum and Holiday Inn London Heathrow M4/J4.
As we move east and enter new markets, we initially like to manage the hotels as it is better for consistency. We make sure we train and transfer knowledge, often through the universities, enabling us to eventually open the door to franchise agreements. People in countries such as Russia have an entrepreneurial spirit and they want to operate the hotels themselves.

Has the expansion of IHG been hampered by the lack of available finance?
Securing capital is tough, but last year was a record year for Europe. We signed 22% 
more deals, involving 48 hotels (over 7,000 bedrooms), than the year before. We only sign with companies with the proof they can secure the finance and complete the deal.

What is the significance of brands to hotel investors?
Brands are becoming more and more important, not only to investors, but also to financial institutions and customers. They provide security and a means of growth.

What are the strengths of IHG's key brands?
Indigo is a lifestyle brand which provides a neighbourhood story. It really gives customers what they want as it reflects the hotel's location - not just the city, but the actual neighbourhood, such as Kensington or Paddington in London. There are brand standards, but the detail is locally driven. It is a fabulous brand to grow, and we expect to see major expansion.

Holiday Inn, which is focused on mid-scale business, doesn't have the same creativity, but it is still a great brand which is 60 years old. We are currently identifying and working on the unique selling features of Crowne Plaza, which we will announce later this year.

What are your thoughts on the sale of the InterContinental Park Lane in London, which has just taken place? We had a lot of interest from everywhere - 
particularly the Middle East and Asia - which is not surprising as it is an exceptional hotel 
in a location that cannot be bettered. People have wanted to buy it for years and, if I had 
the money, I would have liked to have bought 
it myself.

Personally, I am sad to see Park Lane go, 
but all of the hotels within the group will 
eventually be sold - we only have nine which we still own. Our strategy is to be asset light - it is a model that the City appreciates - and it would take something particularly amazing to change that.

How does the relationship with a hotel change once you sell the freehold? The economics change. When the hotel does well, the owner makes a lot of money; when business is down, you take it on the chin.

How are the details of a management contract worked out? There is no standard management contract - terms are agreed through negotiating with owners as the hotels involving management contracts tend to be more complex.

A management contract is made up of two separate fees: base and incentive. The base 
fee is a percentage of the hotel's total revenue paid to cover management costs. A typical 
contract would have 1-3% of total revenue as the base fee. However, this can vary by country and brand.

The incentive fee is a share of profits. 
A sample contract would have 5-10% of gross operating profit or other agreed measure of profit as the incentive fee, although the mechanics vary considerably. This is in place to align the interest of IHG with the owner of the property and rewards us for running the hotel profitably.

How significant was it for IHG to have Holiday Inn as the first-ever official hotel provider for the London 2012 Olympics? It was hugely successful as it enabled Holiday Inn and Holiday Inn Express to be put in front of a global market. We have also benefited from our management of the Olympic Village. Although we couldn't brand the Village, people knew it was us.

The hotels in London all had occupancies of over 90% during the games. We used the Olympics as a platform to build relationships with sporting venues, city football teams and sporting associations, such as British Swimming. The Holiday Inn brand was previously thought of as a business hotel, but we have shown how well it works with leisure and sporting guests. We are now the preferred hotel partner of the Lawn Tennis Association.

Hosting the team behind the Olympic Torch Relay gave us a lot of exposure to local markets, while our involvement with the games also provided huge opportunities for employees to shine. Our connection with the athletes has even resulted in some of them joining our team. Ben Hawes, captain of Team GB's men's hockey team, is now working in the UK and Ireland marketing department.

What are you doing to ensure you have the right staff in place to support IHG's growth? Training is a huge focus for IHG and we are affiliated to lots of universities to help develop the next generation of hoteliers. We want 
graduates who might not initially consider hospitality as a career to think about working in the industry. For instance, there is a huge opportunity for people with law degrees to consider joining us. It is part of my role to speak to these students and get across that a career in hotels is something they should consider. Working with us can seem like running a marathon, but you can enjoy the greatest rewards and travel anywhere in the world.

How are hotels within IHG currently trading and what is your forecast for 2013? The first two weeks of the year were really tough - scarily tough. But we picked up at the end of January and we're now on budget. We are quite bullish about 2013, with some quite aggressive targets. However, I say that with some hesitation - who knows what is in store for the year ahead? We are expecting revpar growth of 2.1% across the European hotels. The uncertainty means that we need to make sure our brands are consistent, the sales teams are working harder, the general managers are the best in class, we recruit the very best people and the company is a place where people want to work. We need to do this day in, day out, and always be better than our competitors. We've got to get through 2013 first, but I believe 2014 will be a better for the industry.

How much of your like is spent travelling? I spend 70% of my time travelling. I like to be in our head office in Denham, Buckinghamshire, a couple of days a week, but in March I was there for just five days in the whole month.

Intercontinental hotels group in the UK and worldwide

- Hotels(worldwide)Bedrooms(worldwide)
InterContinental 2 (170) 703 (57,314)
Crowne Plaza 22 (392)4,937(108,307)
Hotel Indigo8 (50) 715 (5,661)
Holiday Inn 134 (1,200) 19,816(218,981)
Holiday Inn Express124(2,192) 14,444 (205,631)
Staybridge Suites 3 (189) 422(20,696)
Others 0 (409) 0 (41,182)
Total 293 (4,602) 41,037 (675,982)
Pipeline 20 (1,053) 2,950 (169,030)
Revenue $1,835m (£1,180m)
Profit before tax$556m (£358m)
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