Holiday Inn ramps up, talks business

The InterContinental group will bet on the mid-segment corporate traveller for traffic at its new hotels, having got positioning lessons from a failed franchise model

The UK-based InterContinental Hotels Group (IHG) is gearing up to expand like never before, despite having entered the country before its independence. It is betting on its Holiday Inn sub-brand called Holiday Inn Express. Most of the 19 hotels it has planned for the next four years would sport the badge and a majority of the 150 hotels lined up for the next 10-15 years would either belong to Holiday Inn or its Express sub-brand.

IHG, a $1.8-billion (Rs 11,200 crore) company, has had a muted presence despite its stint of five decades in the country. At a time when other hotel brands are keen on bringing their sub-brands to a market that is expected to overcome the slowdown faster than western markets, IHG is only now slotting into expansion mode.

Of the 18 hotels it has, one is a premium InterContinental property in Mumbai, seven are luxury Crowne Plazas, eight are Holiday Inns and two Holiday Inn Express hotels, of which one was launched in Chennai last week. The group seems to have addressed its biggest hindrance by finding the right partner.

It has struck a joint venture with Duet India Hotels where it has invested 24 per cent equity. While Duet would pick and execute the land deals and construction, IHG would manage the properties. Not for it the managed-properties strategy with multiple partners, with no stake in construction, neither the franchise model that it had tried out earlier, say senior executives.

"Our equity commitment shows we want to be a long time player," says Pascal Gauvin, chief operating officer, India, West Asia and Africa, IHG. The JV would invest Rs 1,600-2,000 crore in the next four years.

The mid-market brands of Holiday Inn and Express would be spruced up. Gauvin says, "Through these, we will cater to the business traveler." Naveen Jain, president, Duet India Hotels says that the demand for hotel rooms in this segment is growing rapidly.

"We are planning to set up 150 hotels, over the next 10-15 years, of which 85 per cent would be Holiday Inn and Holiday Inn Express properties," says Gauvin. He ruled out entry into the budget and super-luxury segments because he sees them as unviable.

IHG had also found the franchise model unviable because of the inability to maintain consistency across its properties. The company re-established its operations a few years ago with Duet.

Jain reckons, of the 850 million people who travel every year in India (which is expected to double by 2018), even if five per cent comprise business travellers, it would lead to a large market. Apart from major cities, the focus will also be on lower tier towns. "We want to be present wherever domestic low-cost airlines go," says Gauvin.

The Express brand would consist of 150-275 rooms, with tariffs ranging between Rs 4,000 and Rs 6,000. The USP of the brand would be consistency, which Gauvin says is absent in mid-segment business travel, having spent considerable time at competitors' hotels as a guest to study them. The brand would be consistent in the services offered, the look and furniture. The amenities for sleeping, showering and round-the-clock, free wi-fi would be replicated across hotels. Harish Bijoor, CEO of Harish Bijoor Consults, says that it is a good strategy for IHG to look at business hotels, as business travellers are on the rise. But the challenge would be rejuvenating the brand. Holiday Inn has become an over-the-hill brand, with competition flaunting a contemporary look.

IHG would be looking at investing in people as the key brand initiative and would use social media and mobile application to carry out its campaigns. It would take the direct marketing route to reach customers and depend on their recommendations to grow for now.

While China and the US will continue as IHG's biggest markets, India would be one of its major ones in the MENA region. The company is expecting to launch an average of 12-15 hotels every year.