Strategic Management Report: InterContinental Hotels Group (IHG)

This report provides a strategic analysis of InterContinental Hotels Group (IHG), examining its business environment based on a 2016 research report. It evaluates IHG's position within the global hotel industry, considering market dynamics, competitors, consumer behavior, and internal factors. The analysis includes PESTEL and Porter's Five Forces frameworks to assess the external and competitive landscapes. The report highlights IHG's strategic priorities, including brand portfolio management, revenue generation, and asset-light strategy. It also addresses the impact of factors like Brexit and technological advancements on the industry. The report concludes with a strategic plan, justified by the findings, outlining recommendations and a timeline for implementation to enhance IHG's competitive advantage and drive sustainable growth in the international hotel market.

Running head: MANAGEMENT
Strategic Management
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Executive Summary:
The report aims at providing a review of the 2016 research report of InterContinental Hotels
(IHG) on the international hotel industry including the UK market. IHG represents an
internationally renowned hotel brand that manages sub brands like the Holiday Inn Express,
Holiday Inn and Crown Plaza. The report provides an update on research report from the point of
view of a strategic consultant working on contract with IHG. The report also puts forward a
critical evaluation and analysis in context of the business environment of IHG at the multiple
levels that included the perspective of the global industry, competitor and market level,
consumers and the internal dynamics of IHG. All these factors acted as stimuli for strategic
change. The report also presents a strategic plan justified by the findings and analysis of the
research along with a mention of the timescale for strategic plan depending on the opportunities
and issues understood through analysis.

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Table of Contents
Introduction:....................................................................................................................................3
Updates of Information of 2016 IHG Research Report:..................................................................4
Analysis and Critical Evaluation IHG Business Environment that Determined Stimuli for
Strategic Change............................................................................................................................10
Global Industry Perspective:..........................................................................................................10
Market Level:.................................................................................................................................13
Competitors:..................................................................................................................................15
Consumers:....................................................................................................................................18
IHG Internal Dynamics:................................................................................................................20
Strategic Plan Justified by Findings of the Analysis and Research...............................................22
References:....................................................................................................................................25
Appendices....................................................................................................................................29

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Introduction:
Intercontinental brand had been established after the Second World War by Pan Am, an
US based airline. The brand had its initial hotel opening in Brazil. During 1980s, Pan Am landed
in severe financial trouble that forced it to sell off the Intercontinental brand to Grand
Metropolitan which represented a conglomerate of the UK property. In the year 1998, Inter
Continental was acquired by Bass, an UK based brewing and the hospitality giant whose roots
could be traced to 1777. It was acquired at the time when Bass had been undertaking an
expansion in hotel industry and had already bought the chain of Holiday Inn in the later part of
the 1980s. The brewing business of Bass was sold in the year 2000 and in the year 2003, the
entire group had been divided into different entities; the retail business of Pub known as Mitchell
and Butlers plc and the hotel business came to be known as the InterContinental Hotels.
However, Denha remained the headquarters of the Inter Continental Hotel in UK while the US
headquarters in remained in Dunwoody, Georgia.
Nevertheless, the IHG possess quite a number of international brands, eight of them had
over10, 000 rooms across the world. Holiday Inn Express and Holiday Inn have been the best
known and the largest (ihg.com 2019). It also included others like Staybridge Suites, Crown
Plaza and the Candlewood Suites. The key business of IHG lies in operating under complicated
franchising model that allowed the company in maintaining its asset light strategy thereby
enabling them in effectively competing in the high growth, most attractive and the industrial
segment. Management at the IHG is further looking forward to the profitability and its further
growth as successful brand for maintaining its position as the leader in the international group of
hotels. The report provides a critical evaluation and detailed analysis of 2016 IHG report.

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Updates of Information of 2016 IHG Research Report:
According to the reports published in the year 2016, IHG possess a diverse portfolio of
the differentiated brands that are not only renowned but is loved by clients across the world. The
group remains focused towards strengthening the portfolio of the preferred brands, leveraging,
building and delivering revenue to the hotels through lower cost and direct channels. However,
the proposition to the third party hotel owners remains competitive and helps in driving superior
returns. With the focus on most attractive market industry segment and the higher growth
market, IHG is found to execute asset light strategy. Besides, IHG also undertakes disciplined
approach towards the allocation of capital thereby investing in the future growth of the brands.
This helps the hotel brand in driving towards sustainable growth thereby delivering superior
levels of the shareholder returns over long term.
The IHG has been one of the reputed hotel companies of the world with the purpose of
creating greater hotels through the delivery of promise that stood for true hospitality for
everyone. IHG franchises the individual brand with the aim of targeting different markets
(ihg.com 2019). The focus remains in building the preferred brands and generating stronger
revenue. IHG has been strongest hotel group across the world during the period 2009 to 2013
although it remained behind the Hilton Worldwide and the Marriott International. It left behind
the Starwood and the Accor Groups in the fourth and the fifth position respectively. The IHG
experienced an overall growth in North America and China measured on the basis of revenue
generated per room. However, the largest market of IHG has been North America where the
company planned to re-position the Crowne Plaza brand in business productivity segment and
prioritize quality amongst Holiday Inn brands through removal of more than 50 hotels. The

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company had a prominent presence in the global regions for ensuring that it is well positioned to
benefit from the global growth particularly the fastest developing markets.
IHG is keen on generating and sustaining competitive advantage in Chinese market in the
future years (Legrand, Chen and Sloan 2013). The company aims at building a stronger domestic
appeal through the creation of Hualuxe brand thereby trying to provide the Chinese visitors
luxuries having a Chinese touch and then targeting the outbound traveler who uses network of
the global brands when travelling abroad. IHG also consider itself to be well positioned for
taking advantage of emerging middle class in India and Russia where it had prominent hotels in
pipeline since it had been aiming at an expansion of the Holiday Inn Express and Holiday Inn
brands from a comparatively lower base.
It has been found that in UK there has been higher awareness level in regard to Holiday
Inn Express and the Holiday Inn but a lower usage rate compared to the rivals (Salvioni 2016).
There has been mixed perceptions of consumer in regard to the Holiday Inn brand especially if
the regular or the occasional customer of full service Holiday Inn checks into a budget friendly
Holiday Inn express and discovers that it lacked certain facilities as expected. Even if the
Holiday Inn is perceived as functional, accessible, friendly and reliable by the potential
customers however, the express sub brand results in perception of being very basic. Hence, it has
lower ratings as far as user experience is concerned. Nevertheless, it is relatively considered
good value compared to the higher end chains for satisfying those looking for comparatively
cheaper experience in relation to full service.

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Figure 1: Brands of IHG
Source: (Petrović et al. 2013)

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Figure 2: Map Showing the Operations of IHG
Source: (ihg.com 2019)

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Figure 3: Pie Diagram Showing the Group Revenue and Number of Rooms
Source: (Zech 2014).
Figure 4: Bar Diagram showing Operating Profit of the Group
Source: (Zech 2014).
In accordance with the viewpoints of the chief executive officer, the company continued
to aim at delivering the proven strategy of higher level of growth along with enhancing the offer
for the owners and the guest. The report showed how IHG demonstrated the ability of
delivering sustainable growth. As far as the success is concerned, IHG have track record of
being successful within changing world. As globalized business with footprint in close to 100
countries, IHG has managed through uncertainty and change. The success results from having a
focused, proven and clear strategy that delivers value with the environment (Jones, Hillier and
Comfort 2014). In fact, it is also due to the presence of portfolio of brands, stronger long term
relationship with owners and prominent global scale.

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As far as the strategic priorities are concerned, IHG makes sure that it delivers the
strategy in a manner that takes into consideration of the different geographies and the markets
thereby aligning the resources behind the greatest of opportunities (Jones and Comfort 2019).
This involves staying closer to the trends that shape the industry. The priority of the board also
remained in ensuring that the business remains focused on not only staying agile but also moving
at a pace while maintaining the strategic direction and continuing in nurturing a culture of
stronger values and maintain integrity and trust with the stakeholders.
Analysis and Critical Evaluation IHG Business Environment that Determined Stimuli for
Strategic Change
Global Industry Perspective:
As far as the global hotel industry is concerned, it comprises of close to 16.4 million
rooms with broad segmentation into the branded and the independent hotels. The growth in the
demand is driven solely by the economic growth and a rising trend for the domestic and the
global travel(Sainaghi, Phillips and Corti 2013). With time, there has been a growth in the
lodging industry that remained in line with the gross domestic product. There are various
metrics that finds wide recognition and is used for tracking the performance includinng the
revenue per room availability (RevPAR) and the supply growth of rooms(Noone, Enz and
Glassmire 2017). Thus, stronger fundamentals of the global hotel industry have led to the
continued growth in key indicators. In the past five years, the RevPar of the global industry that
averaged to about 3.9 percent growth has been unpinned by higher demand levels and increase in
the supply below average.

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In the year 2016, the RevPAR of the entire industry showed a continued growth although
at slower pace following a record of sustained growth in the demand. This trend reflected
cyclical nature of hotel industry where long term fluctuations reflected interplay between hotel
supply, demand and the generalized economic environment (Noone 2016).
The IHG operated with branded hotel market and accounted for close to 53 per cent of
the total supply of rooms on the global scale. In spite of the industry consolidation and the
fragmentation of the market into five leading player including Hilton, Marriot, Wyndham, IHG
and Accor Hotels, IHG accounted for close to 24 percent of the open rooms in totality and 61
percent of overall development in the pipeline(Sheresheva, Polyanskaya and Matveev 2016).
According to a travel research, it was found that renowned hotel companies have been
able to consistently increase the share in the globalized hotel market mostly aided by the trust of
the customers in the brand’s ability of delivering consistent experience. Larger hotel companies
are found to benefit from the economies of thee scale and where the branded hotel companies
portrayed enhanced resilience all through the economic cycle.
PESTEL Analysis:
The IHG relies on the PESTEL for managing the macro environment since it is the framework
that helps in identifying the structural changes to the business environment that seems relevant to
a particular business.
P Political Factors:
 Brexit & Tourism taxation
 Increase in the number of visitors due to the reduced value of the pound

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after the Brexit
E Economical Factors:
 A’Staycation boost towards the UK economy where millions of people
have avoided foreign holidays
 Faster growth of the UK economy post Brexit
S Social Factors:
 Growth in gluten free market
 Presence of ‘free from food’ trends in the market
T Technological Factors
 Increase in the smart phone users
 Improvisation of hi-tech hotels
E Environmental Factors
 Reduction of waste from the hotel helps in protecting the environment
 Take measures in preserving the environment
L Legal Factors
 Implementation of the health and the safety laws
 Implementation of employment laws
Porter’s Five Forces:
The five forces model introduced by Porter has been used widely by hotel industry for analyzing
the competitiveness of the present and the customer market