According to Datamonitor (October 22, 2005), there are three major strengths that the InterContinental Hotels Group (IHG) enjoys above all the competitors in their market. These are: 1. Leadership position and multiple branding – IHG is the third largest operator of hotels in the world, based on number of rooms. The company’s hotel segment has a wide range of excellent brands, supported by high quality and service standards which deliver an exclusive guest experience and encourage brand preference.
IHG pursues a multiple brand strategy with a portfolio that essentially splits into two parts, upscale and midscale. Each of the brands caters to a specific customer segment. The group’s properties range from luxury, economy and business, enabling the company to cater to a larger number of customers. The company’s vast portfolio of brands offers unique quality service to their guests. Also, the company’s customer-loyalty program, the largest in the industry, ensures repeat traffic in its hotels. 2. Wide geographical spread – IHG owns, leases and manages more than 3500 hotels in about 100 countries.
The company’s hotels and resorts are located in the UK, other parts of Europe, Middle East, Africa, Asia Pacific, US and other parts of Americas (IHG Website). The wide geographical spread of the company covers key market segments and places IHG in a good position to weather economic downturns and take advantage of strengthening economies. 3. Ownership in leading soft drinks business in UK – One of the unique things that IHG is doing is to venture in, manage and control Britvic, which is one of the two leading manufacturers of soft drinks (by value and volume) in the UK.
Britvic owns a number of leading brands, including Robinsons, Tango, Britvic juices, R Whites and J2O, across all sectors of the soft drinks market. It also has the exclusive right to bottle and distribute the Pepsi and 7-UP brands in Great Britain until 2018. At present, IHG is on a restructuring process (over ? 2 billion of assets up for sale) that will radically change the structure of its business. Future IHG will be focused on managed and franchised hotels and is determined to use third-party capital (and no longer its own) to fund its unit expansion.
This will give it access to the capital of a large range of property developers, against whom it used to compete in the past. This business model is less capital intensive, less cyclical and less risky, thus, providing a steady stream of earnings, higher returns and cash flow generation than owned and leased hotels. As the business model will be focused on management and franchise contracts, there will be limited capital expenditure requirements.
Limited capital spending and a small asset base mean that returns on invested capital will be much higher. With all those mentioned, IHG seeks not to create value for the company and shareholders alone, but it will also be beneficial for its customers because of their widening of available brands that offers quality hotel service suitable for their needs.
InterContinental Hotels Group PLC: Company Profile. Datamonitor. UK: Marketline Business Information Center, 22 October 2005. https://www.ihgplc.com/