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

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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 One Rewards update – February 2023:

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

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Comments (61)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Colin MacKinnon says:

    IHG Free Night certificates; I have the credit card one and the Stay Two Nights one (meant to be limited to up to 40,000 points per night redemptions).

    If I look at midweek, mid-September in Edinburgh, I get availability at the Kimpton and IC for “Reward Night Just For You” with a £45 surcharge. Is this reward night the “limited to 40k per night” one?

    If so, seems a bargain! And does it apply across IHG – ie in Europe?

  • Chris says:

    The flippant way that Rob lists the things you won’t get really puts into stark focus how poor IHG’s loyalty scheme is compared to it’s rivals.

  • IHGNowSucks says:

    How have they managed to twist dynamic pricing to look like members are getting a better deal !
    We’re not.
    I don’t see many hotel nights I can get for fewer points than in the past.
    I guess they’ve put their cash prices up !

  • Sam says:

    The benefit of joining a hotel chain is the brand effect and the new customer base from the membership scheme, but this new brand virtually doesn’t add any reputation to the hotel (name unchanged), if the new hotel doesn’t offer some perks to elite members it wil simply defeat existing members from trying the new brand out. Where is the point of joining this brand then?

    The hotels which are joining will definitely need to give some perks to IHG elite members even if these perks are not guaranteed per policy. Otherwise, why letting these big chains milk revenue when everything stays the same.

    • David says:

      I think it will depend on location.
      Id love to be able to book a decent hotel in Cornwall and earn points from it. I wouldn’t actually care if I got an upgrade, itd just be nice to be able to earn (Or spend) some points.

      There are a lot of provincial towns where your only points earning option is a run down Hilton or a HIX, where good 4 star or 5 star independents would benefit from being on a larger platform.

      • Sam says:

        Earning points will certainly be an incentive but areas like Cornwall have historically never had international chain hotels which presumably because properties with unique features do not have to rely on the infrastructure of these international chains. If this new brand is set up in London, chances are I’ll already have picked a Kimpton, an IC or even other chains. Perhaps time and market mechanism will tell us if IHG will succeed in this luxury collection brand as it has a lot of be desired in terms of membership benefits and brand reputations, compared with the equivalent of the rivalries.

        • David says:

          but that’s kind of the point of what Marriott and Hilton have done.
          the hotels would remain basically independent by name, appearance, service etc etc. but would benefit from the international chain backing and the marketing and pool of loyalty customers that come with it.

      • OP says:

        The Artists Residence in Penzance is wonderful and bookable through IHG via Mr and Mrs Smith!

  • Alan says:

    I wonder if this new concept of giving people what they pay for will catch on.

  • David says:

    Rob, where will this leave Mr and Mrs Smith?

    • Rob says:

      This has always sat on its own. Could be at some risk if the new brand took off – IHG would be chasing similar hotels.

      • TGLoyalty says:

        I reckon IHG now has a list of hotels to target ..

        The properties M&MS book aren’t exclusive to them so they could always continue their relationship with the Hotel even when it’s IHG affiliated.

  • Harrier25 says:

    I will continue staying in Hilton’s over IHG branded hotels, when available, for the free breakfast.

  • DaveL says:

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

    That’s given me the best laugh of the week so far, thanks Rob!!!

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