IHG’s Mike DeFrino and JMI Realty’s Greg Clay discuss the upside of owner-support strategies that unlock new opportunities for exceptional performance.
When making a branding decision, hotel owners, developers and investors are looking for more than a flag. They’re focusing on finding a partner who can give them the tools to succeed. Forging a mutually enriching relationship among owners, operators and franchisors is the key, enabling new opportunities for exceptional performance, market growth and revenue potential. That’s why owners continue to turn to IHG Hotels & Resorts (IHG) for collaborative engagements that focus on improving the guest experience and delivering brands that boost performance and growth.
IHG’s strategic priorities put its brands at the heart of its business, and its owners and guests at the heart of its thinking. It’s clearly working, with the breadth of IHG’s portfolio the strongest it’s ever been through the addition of seven new brands in the past five years and continued growth across all industry segments, says Mike DeFrino, managing director, Luxury & Lifestyle for the Americas at IHG.
At the very core of this growth lies the company’s synergy and relationship with its owners.
“We selected IHG because of its ability to collaborate with an owner in designing a brand-appropriate and efficient hotel, whether we’re creating that property through a renovation or a ground up development,” says Greg Clay, president of JMI Realty and a longtime owner who currently owns three IHG hotels. “In our experience, IHG has done the best job helping owners build a product that’s brand appropriate and with an eye to creating value. It’s done that initially through assistance in development, programming and design and ultimately with a focus on marketing and operations. It’s done that through hiring and training. It's done that through programs that open up incremental revenue opportunities. The end result is that IHG helps owners find ways to build a better business, improve profitability and create real value.”
What differentiates IHG’s owner support?
With so many brands flooding the hotel market, it may seem daunting to sift through all the potential suitors for a project. But the proof is in the results: owners choose IHG for its strong commitment to collaborate and go the extra mile to generate greater returns on their investment through its ability to help run efficient hotels. IHG continues to expand the benefits of its system while also improving the guest experience.
IHG’s recipe for success is a mix of reputable brands, powerful platforms and familiar faces that owners continue to grow more comfortable with. By entering the IHG network, owners receive access to high-performing, low-cost distribution systems, operating models and brand standards that support seamless operations, along with the reach of the IHG One Rewards loyalty program that includes more than 115 million members.
The net result is that IHG helps owners find ways to build a better business, improve profitability and create real value.
Greg Clay
However, the company’s purpose of delivering “True Hospitality for Good” is founded in the attraction, development and retention of top talent to bring those systems to life–and make them work for owners. DeFrino specifically cites recent global sales team leadership changes as a critical component for driving business and establishing the strong and efficient relationships already paying off through new highs in group penetration, among other benchmarks.
Driving owner engagement
While IHG’s hotel guests are its ultimate customers, its owners are its primary customers. IHG only has ownership interest in a small share of its portfolio, with the rest operating within a managed or franchise model.
As travel demand accelerates, IHG continues to balance the needs of owners with the guest experience and guests’ expectations. Some of the company’s post-pandemic implementations focus on day-to-day savings improvements, such as ongoing favorable pricing negotiations with vendors and the introduction of new scale and procurement programs. In other cases, IHG has taken more extreme and foundation-shaking measures, such as modifying brand standards to help owners manage costs or developing new prototypes (such as the recently updated blueprint for its EVEN Hotels brand) that reduce material and construction needs.
“We’re doing all we can to provide the right services and cost structures at the right time. Where we can, we’re leaning into lower costs for insurance premiums or lower costs for goods, and our purchasing and procurement departments are always looking for ways to keep costs down,” says DeFrino. “We’re constantly evaluating all of our vendors to make sure we have the lowest pricing and the right product, and our scale and ability to procure goods across our system–which includes more than 6,000 hotels—gives us a great amount of buying power.”
Luxury & Lifestyle: A major part of IHG’s future growth
As investors, smart owners always want to be where the market is headed. Much of the current momentum and future growth in hospitality can be attributed to the luxury and leisure segments, and in accordance, IHG maintains one of the industry’s largest luxury and lifestyle portfolios globally. Across its six Luxury & Lifestyle brands, the company boasts a global portfolio of 464 hotels totaling nearly 108,000 rooms, with an additional 300-plus hotels and more than 60,000 rooms in pipeline (as of Q1 2023).
These brands now represent 13% of IHG’s global system and 20% of its global pipeline.
Perhaps even more compelling is how geographically widespread that demand has become, opening the door for broad new development and engagement opportunities.
“We’re seeing secondary and strong tertiary markets increasingly interested in adding luxury and lifestyle hotels. Those places are taking off,” says DeFrino. “We opened a hotel in Bozeman, Montana, during the pandemic, and it’s done well so far. And we’re entering sub-markets of established markets. Near Atlanta, we’re going into Roswell, Georgia; in Denver, we’re going to the Denver Tech Center and in Austin, we’re going to the North Austin area. We’re seeing demand and potential for rates that will support those types of hotels.”
Making it happen
As of Q1 2023, IHG has more than 6,100 global hotels spanning 18 brands, and overall has emerged from the pandemic a stronger, more resilient business. Moving forward, IHG foresees continued strength in its mainstream brands, along with the increasing momentum and growth from its upscale and luxury brands.
“(IHG has) a broad range of products. A developer can meet with them and say, ‘Here’s what I’m thinking this market needs and what this real estate should be,’ and because they have a portfolio of brand alternatives, they can provide alternatives to meet that need and help determine the best fit for the market,” says Clay. “After determining the appropriate brand, they then execute on the operation of the hotel to perform in an efficient manner and produce the value that you’re looking for.”
As Clay adds, hotel development requires frequent and complex conversations to identify opportunities for growth. The breadth of IHG’s brand portfolio and commitment to long-term owner engagement intersect with the developer’s goals more frequently than most. For example, many owners begin their relationship with IHG through a midscale or essentials brand (such as Holiday Inn Express) and then later develop other mainstream hotels or move up the chain scale. As that relationship grows over time, the value of IHG’s support becomes even more apparent.
Why IHG and its owners are bullish
Thankfully, better days have returned. Now with the pandemic in the rearview mirror, IHG continues to seek opportunities for growth across all geographic and portfolio segments, confident that its business model and attractive hotel industry fundamentals will drive long-term sustainable growth.
Owners have also remained interested in new development, despite the current headwinds. Most experienced hotel developers have a long-term view and will build through a down cycle to take advantage of the inevitable upswing. They also see value in the strength of operations and the long-term positive sentiment for the industry.
“All of these luxury and lifestyle brands and other brands have robust pipelines. The credit market is starting to normalize to a point where people are beginning to get comfortable again and breaking ground on new hotels. We’ve got a lot planned for the second half of 2023,” says DeFrino. “So, we’re bullish on where there’s going to be growth, but we’re also bullish on pipeline hotels that have been signed.”
Owners also remain confident in the long-term cash generation and value IHG brands offer. Guests trust IHG brands, and owners continue to see the strength and investment value in IHG’s growing portfolio. But most importantly, successful owners are seeking strong relationships with operators and franchisors to make these projects come to life.
“The complexity and amount of effort that has to be put into the operating side of this business is extreme,” says DeFrino. “Part of the reason that IHG is so good is because many of its luxury and lifestyle properties are managed and not just franchise agreements, so we’re responsible for all of it. It offers insights on how to best support a franchisee and translate that to benefit owners across the system.”
Brendan Manley is a writer, editor and digital marketer specializing in hospitality content creation based in Warrensburg, New York.
The views and opinions expressed in this column do not necessarily reflect the opinions of Hotel Investment Today or Northstar Travel Group and its affiliated companies.