Maximise your Avios, air miles and hotel points

IHG launching ANOTHER new hotel brand – but this one should be good

Links on Head for Points may pay us an affiliate commission. A list of partners is here.

IHG, owner of the Holiday Inn, InterContinental, Crowne Plaza etc hotel brands, published its interim results for 2021 yesterday. You can download them as a PDF here.

I don’t intend to go into the numbers in detail, suffice it to say that the company is now profitable everywhere except Europe and the Middle East. The issue is IHG’s massive interest payments on its $2.5 billion of net debt, which are caused by loans it took out purely to pay dividends to shareholders.

Let’s look at this new hotel brand.

IHG launching a luxury collections hotel brand

IHG is launching its own version of Hilton’s Curio, Marriott’s Autograph or Hyatt’s Unbound Collection. We don’t know the name yet.

These brands all target upmarket hotels which want to remain independent but wish to become part of a ‘marketing system’. In return for IHG funnelling them bookings via ihg.com, the hotels agree to join IHG Rewards and to honour member benefits.

The hotels keep their existing branding and the senior hotel management will not become IHG employees.

IHG Rewards offers no benefits and that’s why this idea is genius

We have seen considerable ‘churn’ with Hilton’s Curio Collection in recent years, admittedly less so with Marriott’s Autograph Collection.

I think this is because the hotels that join Curio and Autograph have to give three things:

  • top elite members must get free breakfast, which cuts out a revenue stream
  • top elite members are due upgrades, which some hotels prefer not to offer in an attempt to make guests pay for premium rooms if they want one
  • top elite members are automatically (with Marriott) or offered (with Hilton) late check-outs which can interfere with day to day room management

IHG’s new brand will appeal to all hotels who struggle with the above:

  • IHG Rewards doesn’t offer guaranteed upgrades, or even promise to make much of an effort to give you one
  • IHG Rewards doesn’t give free breakfast to anyone
  • IHG Rewards doesn’t guarantee late check-out to anyone

Which luxury hotel could say ‘no’ to all this?! They can join IHG Rewards without having to give anything up, except for the requirement to offer 5% of their standard rooms as reward nights. No messing about giving away breakfast, upgrades or late check-out ….

IHG Hotels launching luxury collections brand

Here is the official announcement

Keith Barr, IHG’s CEO, said in the introduction to the accounts published yesterday:

“We’re also excited to announce that we’ll soon be launching a new Luxury & Lifestyle collection brand to provide further choice for guests and owners. Over the last four years we’ve added five new brands to create a portfolio of 16, each targeting a specific segment and enhancing our market reach. The addition of a collection brand will provide high quality independent hotels access to the many benefits of IHG’s system, whilst retaining a property’s distinctive identity. There are currently around 1.5 million independently run rooms in the market segments we are targeting, and we expect the collection to attract more than 100 hotels within 10 years.”

This is the detailed explanation given further on:

“Building on IHG’s position as the world’s #2 Luxury & Lifestyle player in terms of both system size and pipeline, IHG plans to launch a new collection brand in the coming weeks. The upscale and luxury segments currently represent 31% of our system size and 41% of our pipeline (midscale being 69% and 59%, respectively).

The new collection brand will complement our existing Luxury & Lifestyle brands consisting of the more recently acquired Six Senses, Regent and Kimpton brands, along with InterContinental and Hotel Indigo, whilst also offering a different price point to our upscale conversion brand voco – our fastest ever brand to rollout globally since its launch in 2018.

Owners of independent hotels and small chains are increasingly attracted by the opportunity to benefit from the scale, expertise and investment of a global system, illustrated by conversions growing to represent a quarter of IHG’s signings over the last 18 months. Owners that join IHG’s new collection brand will gain access to our world class revenue delivery systems, technology platforms, loyalty offering, operational expertise and procurement savings, without high upfront costs or any compromise on their hotel’s distinctive identity or name.

For guests, the addition of more unique, exclusive hotels in sought after resort and city locations will add further choice to our Luxury & Lifestyle offer, where we already have more than 400 hotels and 100,000 rooms, and will increase the attractiveness of our IHG Rewards loyalty programme to its more than 100 million members.

The new collection brand will help fast-track IHG’s growth in market segments worth over $100bn in rooms revenue globally in 2019, and where over 40% or around 1.5 million rooms are currently independent. Over the next 10 years, we anticipate the collection to attract more than 100 properties globally, helping contribute to our ambition of delivering industry-leading net rooms growth.”

IHG launching a luxury hotel collections brand

Ambassador may now be a dead duck

InterContinental’s Ambassador loyalty programme, which has a $200 annual fee, does work well for many people because of the guaranteed benefits.

As IHG has added Kimpton, Regent and Six Senses in recent years, Ambassador has begun to look a little lost. Kimpton has retained its Inner Circle programme whilst Ambassador benefits are not consistent across Regent and Six Senses.

IHG now needs to decide how to handle the 100+ luxury hotels it believes that its new ‘collections’ brand will bring into the fold.

I don’t think IHG will be rushing to give up the revenue that Ambassador generates, but at the same time it needs to become a programme which sits equally well across InterContinental, Regent, Six Senses and the new brand. The conversion of InterContinental Hong Kong to Regent Hong Kong next year may be a trigger as the hotel risks losing revenue from Ambassador members to the other InterContinental in town.

Conclusion

I am a big fan of Hilton’s Curio Collection and Marriott’s Autograph Collection. Some hotels in Hyatt’s Unbound Collection are also on my wish list.

If IHG gets this right then it will be a valuable addition to the brand and to IHG Rewards, but for this to work there has to be some reason for guests to stay. If they are not going to get free breakfast, upgrades or late check-out, what are they going to get?

We’ll tell you more once the new brand is unveiled, expected in the next few weeks.

PS. Here is another titbit from the IHG accounts:

“An increase in assessment revenue was broadly offset by offering increased Reward Night value to IHG Rewards members through dynamic pricing, which impacted net revenue (after redemption costs) as well as unfavourable year-over-year breakage.”

Put simply, dynamic reward pricing has actually cost IHG more money. It isn’t clear if this is more money on average – ie IHG has extinguished fewer points for every $1 paid to hotels to fulfil free nights – or if it is more in aggregate, ie dynamic pricing has led to more redemptions.

Stopping your points expiring during covid has also cost IHG money, hence ‘unfavourable year-over-year breakage’.


IHG Rewards update – October 2021:

Get bonus points: You can earn up to triple IHG Rewards base points with IHG’s new Autumn promotion. It runs from 1st October to 31st December. You can register here and our full article on the offer is here.

New to IHG Rewards?  Read our overview of IHG Rewards here and our article on points expiry rules here. Our article on ‘What are IHG Rewards points worth?’ is here.

Buy points: If you need additional IHG Rewards points, you can buy them here.

Want to earn more hotel points?  Click here to see our complete list of promotions from IHG and the other major hotel chains or use the ‘Hotel Offers’ link in the menu bar at the top of the page.

Comments (61)

  • Dominic Barrington says:

    I’m not quite sure I see the reason for the enthusiasm, Rob. Much of your article suggests that, when compared to Hilton and Marriott, the properties will have freedom to offer rather less than we might expect. Is this really a positive development?

    • Paul Pogba says:

      My take from the article is that IHG have always offered less but this will at least bring more hotels (and more redemption and earn opportunities) into the fold.

  • Nick says:

    They make an interesting point about their ‘Dynamic Pricing’, namely,

    “An increase in assessment revenue was broadly offset by offering increased Reward Night value to IHG Rewards members through dynamic pricing, which impacted net revenue (after redemption costs) as well as unfavourable year-over-year breakage.”

  • Chrisasaurus says:

    I presume there’s more to consider than that – what’s IHG’s percentage on bookings/revenue?

    • Rob says:

      Less than Hotels.com etc, probably under half.

      • Chrisasaurus says:

        So, next question – is it based on bookings through the platform or based on room/other revenue?

        Eg since most IHG hotels are on hotels.com anyway are they paying hotels.com commission for the booking and also IHG 15% off the top line in costs for being in the system?

        • Rob says:

          You would pay IHG the c5% franchise fee but not the booking commission.

          • Sam says:

            Though on top of the franchise fee IHG will also charge another fee for each booking made by an IHG rewards member. I have heard that recently, in some cases charges from IHG official bookings to the hotel can be higher than the OTAs.

  • Dan says:

    Last time I stayed at a Kimpton in Edinburgh we got a double upgrade to a suite with free minibar, check in at 9am and checkout at 6pm. Couldn’t fault the experience. IHG perks may not be guaranteed but my experience is they generally offer them.

    • Harry T says:

      Did you ask for an upgrade and 6pm checkout? Did you book via Emyr or another preferred partner?

      • Dan says:

        Booked direct via IHG website – paid got £100 off via Amex offer. Asked to check-in early when we arrived at 9am. Concierge showed us choice of 3 different rooms – we didn’t ask for upgrade, though I would have done. Late checkout requested. They had only just reopened after Covid and I think they were all just super happy to be back at work.

    • Matty says:

      Whereas, as a Spire Ambassador, I got nothing. I was put in an accessible room, no recognition of status, no raid the bar, no drink vouchers. The social hour was cancelled over the 3 nights I was there and when I asked to speak to the manager, I was told to email. I received an apology about 5 weeks later.

      • Jonathan says:

        Edinburgh Kimpton or another? I think there’s normally fairly consistent treatment in the same hotel but a huge difference between venues especially with the ancillary bits as room upgrades will depend on occupancy.

        Being a return guest will often count for a lot more than status even if they don’t acknowledge that is the reason.

        • JohnT says:

          Trying the Manchester Kimpton (via Emyr) next month. How do they fare?

          • Kai says:

            Upgrade is generous, rooms are dire.

          • Clubx says:

            Excellent rooms and the bar is a must try

          • Anna says:

            I like the rooms, they are huge and the air con is fantastic! As Spire got 2 free cocktails plus goodies in the room. The Refuge restaurant is very good and the public areas very attractive. Corridors and staircases are a bit scruffy but how long do you actually spend in them?

        • Matty says:

          Edinburgh Kimpton. It was as if I’d booked a discounted rate on a cheap OTA website. I’ll not be back.

      • Dan says:

        I am also a Spire Ambassador.

        • Roy Donaldson says:

          I’d recommend the Kimpton Blythswood Square in Glasgow. Lovely hotel rooms, great restaurant and a bar you just want to not leave.

          Roy.

  • Alex W says:

    If it’s costing them money then one can only hope they will revert to sensible points caps, at least for the top IHG brands. I booked 14 nights at the IC Rome for 40,000 points per night, it’s now gone up to 100,000 points.
    Mr & Mrs Smith I can understand being dynamic, but at least you get a consistent 0.4p per point.

    • Peggerz says:

      So it was you that got the 40k rooms for my rugby weekend? 😎

    • TGLoyalty says:

      That’s an IT error rate when dates are first released …

      They are meant to be 70k.

      • meta says:

        IC Rome is actually 100k standard. I booked it for 40k as well. It was available at that rate for about 3/4 days May along with all ICs and Kimptons in Western Europe (Barcelona, Paris, Amsterdam, London…).

        I’ve checked now, but it seems though that IC Rome opening will slip up to June 2022 as no rooms available till then. Better think of an alternative trip then.

        • meta says:

          And it wasn’t just for when the dates were first released. It was for every day of the year…

  • Blair says:

    It’s always been a scheme for people who like to earn and burn. The devaluation (dynamic pricing, but in effect a devaluation because it hits the hotels I actually want to stay at) has turned me right off IHG. I’ll still mop up points with the black Creation card but I won’t go out of my way. Buying points definitely dead for me. As for benefits on site: nice when it happens but never expected and as such I’d cleave towards Bonvoy.

  • Alan says:

    “caused by loans it took out purely to pay dividends to shareholders” – this seems nuts, can you explain a bit more what they were playing at, Rob?

    • Patrick C says:

      This is typical modern corporate finance strategy to optimise the capital structure (i.e. lower cost of debt & tax deductible), generates higher earnings per share. (usually done to do share buybacks and not dividends, but this can be ignored in this forum)

    • Alex W says:

      Sounds like it should be illegal!

    • Rob says:

      Totally normal behaviour, often done by businesses under pressure from shareholders to boost returns.

      You have £100 of profit which is stable (assuming no pandemic). Bank offers to lend you £1000. You take the £1000 and pay it to shareholders as a special dividend. You are stuck with £1000 of debt to repay with your £100 of annual profits.

      The shareholders who were pushing for the cash sell as soon as the dividend is paid, moving on to a new target, leaving new shareholders with the risk if the company does hit the rocks and cannot repay.

      This is basically running a PLC like a private equity investment, adding more debt each year as profits grow and handing it to the owners.

      • Colin MacKinnon says:

        Since others were giving stock tips earlier, that’s why I like AG Barr – makers of Scotland’s famous Irn Bru.

        No debt, cash in hand and a unique product.

        Financially inefficient, perhaps, but the way I run my business too.

        (You can tell that the 1970s were my formative years!)

      • Alan says:

        Thanks for the explanation, Rob – pretty depressing really to hear that’s how they’re running things. Yet again seems like the lessons of RBS et al haven’t been learned and the taxpayer will be left footing the bill when the house of cards collapses!

  • Andrew says:

    Rob, you’ve missed out the key benefit of being a Gold member at an IHG Hotel.

    The guest will have the standard white mug swapped out for an IHG Gold mug at the breakfast table. It always makes me smile.

    • Fraser says:

      I’ve never had that!

      The dynamic pricing has probably led to a fall in redemptions as nobody has a clue what the price will be, or if it will change after you’ve booked.

    • Aston100 says:

      I’ve never seen one of those mugs.
      What brands are you seeing that at?

    • MonkeymaN says:

      I’m Spire. I nearly took my eye out with the mug!

    • John says:

      I’ve never had that because I’m not paying for an overpriced breakfast

The UK's biggest frequent flyer website uses cookies, which you can block via your browser settings. Continuing implies your consent to this policy. Our privacy policy is here.