The UK-based hospitality chain, InterContinental Hotels Group (IHG), is changing its India strategy. From a franchisee model, it is shifting to a 100 per cent management control over the operations.
IHG had started reassessing its ties with partners in India from 2008 and removed many hotels from its portfolio. “In certain cases the franchise agreement expired, so we did not renew them. In other cases like with Lalit group, we had a mutual separation. They wanted to go forward with their own brand and we wanted to have full control over the InterContinental brand. It was in both our interest,” Chris Moloney, chief operating officer - South East Asia, IHG, told Business Standard.
It is perhaps the only hospitality chain operating in India to have reduced the number of hotels by 24 in the last four years. It’s down to just 11 properties now in the country.(BIG PLANS FOR INDIA)
Having decided on a full management control model, the group has chalked an aggressive expansion plan for the India market. It’s targeting to open 47 hotels by 2015-16. This is the third largest pipeline for IHG global, right next to the US and China.
The company is clear it did not want to share control when it came to managing hotels. “We have been here with a lot of different partners. At the time, it probably made a lot of sense and if you look back historically now, they were not great moves,” said Moloney. In fact, the group took the InterContinental brand out completely in India, except for one hotel — InterContinental in Mumbai.
While the InterContinental brand is not its focus area at this point, the chain sees big opportunity in the mid and the upper mid-market segment. Almost 80 per cent of its upcoming hotels are going to be Holiday Inn and Holiday Inn Express, operating in the same category. The Group is also consulting its legal team to figure out trademark issues for getting its luxury brand IndiGo into India. The brand clashes with existing businesses by the same name, including IndiGo Airlines.
With the first Holiday Inn Express, a limited service hotel ready to debut this September in Ahmedabad, the company has introduced a new business model for the brand. The hotel would have a shared service system with all the back-office operations centralised at one location.
“We can add hotels and reduce construction costs because you don’t have to add office space,” Moloney said. Also, the company has outsourced its restaurants, to be operated within the hotel, to third parties at local and state level. “The independent restaurants provide a very different experience from the hotels,” Moloney told Business Standard.
IHG has invested $30 million in a joint venture with Duet India hotels for opening 19 Holiday Inn Express hotels in the next three years.
Besides, the company recently completed a rebranding exercise called Refresh for all its Holiday Inn hotels with an investment of about $1 billion at a global level.
As part of the exercise, it has refurbished all hotel rooms, added new signage and logos. In the process of aligning all its properties with the global Refresh programme, many franchisees refused to invest money to bring the property up to the franchise level--one of the reasons why the company moved out of some partnerships.
“We had a two per cent increase globally in satisfaction and 3.5 per cent in RevPar (revenue per available room) post the rebranding exercise,” Moloney said.