Skift Take
CEO Elie Maalouf pointed to early results suggesting that IHG’s recent marketing efforts and brand development work are leading to growth in a virtuous flywheel for the hotel group.
IHG provided a strategy update to investors Tuesday, with executives forecasting rising growth for its loyalty program and its hotel development pipeline.
“We are very intentional about our focus on growth and its importance,” said CEO Elie Maalouf.
Here are key takeaways from the two-hour strategy presentation from IHG, the third-largest Western hotel group by room count and owner of brands such as Holiday Inn and Crowne Plaza.
IHG Sees Loyalty Gains
The company’s executives said their 2021 revamp of their loyalty program has delivered results.
- IHG had “over 130 million” members of its loyalty program at the end of 2023.
- “Enrollments in 2023 were up by an exceptional 50% on the prior year, a record, and up 24% compared to 2019 levels,” Maalouf said.
- The company’s co-branded credit card that helps travelers earn loyalty points saw 60% year-over-year growth in the opening of new accounts.
IHG Says Brand Awareness Is Rising
In 2021, IHG launched a multi-million dollar marketing campaign and ad blitz for its 19 brands plus its “masterbrand” of IHG and the group’s loyalty program. The early results are positive, executives said.
- “In the U.S., brand awareness has improved 4 percentage points, leading to a 3-point improvement in favorability and a 4-point improvement in consideration,” Maalouf said.
- Like all hotel companies, IHG wants more guests to book directly with it to avoid the high costs of working with online travel agencies. IHG has kept business contribution from online travel agencies to a “relatively flat” level of “about 20%” of the total since 2021.
IHG Touts Hotel Development Pipeline
Analyst are always eager to talk about the pace of growing the footprints of their empire, and IHG hotel executives spoke optimistically.
- IHG grew its net rooms in the second half of last year grew by 3.8% year-over-year, to 946,203. It has a global pipeline of about 297,000 rooms.
- IHG said that Garner, a conversion brand launched in mid-2023, had signed 7 hotels and opened two as of year-end.
- IHG has placed a huge bet on China, claiming to have more of a foothold there than any of its Western competitors. The group has 19% of its rooms in China. It’s the largest international hotel operator in the country, with 180,000 rooms open, and a further 106,000 in the pipeline.
- Executives argued their business in China is more lucrative than the businesses of some of their Western peers. They don’t rely on master licensing agreements with third parties to drive their development, which is common with their peers, they said. That means they don’t have to share fees with a local third party when signing management and franchise deals in China.
- “India is a huge opportunity,” Maalouf said. We’ve got 50 hotels in India, and 50 or so under development, plus or minus. … I’m not saying we’ll achieve this same scale [in India as we have in China], but it shows you the headroom there is over a long period.”
Growth Forecasted to Translate Into Profit
IHG executives predicted that their current hotel development pipeline would translate into a roughly 30% growth in fee income from owners and franchisees after they have all become operational.
- “The nearly 300,000 rooms in the pipeline, if open today, would have an estimated annual fee revenue of $500 million after taking into consideration the geographic mix and brand mix of the pipeline [as other potential sources of further revenue growth],” Maalouf said.
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