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IHG adds 100 German hotels in one day – and what it tells us about the state of the industry

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Monday was a busier-than-usual day for IHG Hotels & Resorts. It added over 100 hotels in Germany in one go, through a franchise deal with NOVUM Hospitality.

It will see two IHG brands – Candlewood Suites and Garner – make their debut in Europe. It will also see the introduction of a new sub-brand – Holiday Inn the niu.

The UK will gain one new hotel as ‘the niu Loom’ in Manchester is rebranded. There are also a handful of hotels across Austria and the Netherlands included.

IHG gains over 100 German hotels in one day

Why is this significant to the whole industry?

NOVUM Hospitality is not a small business. It is one of Europe’s largest privately owned hotel groups with its own established brands:

  • the niu – 43 hotels (3-4 star) in 31 cities
  • Select – 23 hotels (3-4 star) in 19 cities
  • Yggotel – a new Scandi-inspired chain
  • Novum – 35 hotels (3-4 star) in 17 cities
  • acora Living The City – 4-star apartment hotels in 12 cities

The group also operates two franchised hotels for Accor, one for Hilton and five for IHG. However, this has always been a very small part of the group.

And yet ….. NOVUM has thrown in the towel. It is abandoning its own brands (I suspect those initially called Holiday Inn the niu will become pure Holiday Inn hotels very quickly) and committing itself to paying chunky fees to IHG for every room sold for the next 30 years.

the niu properties will become Holiday Inn the niu. Select, Yggotel and Novum will become Garner hotels. acora Living The City will become Candlewood Suites sites.

This isn’t the only deal like this we’ve seen in the last year or so:

IHG gains over 100 German hotels in one day

What we are seeing is midscale European hotel operators admitting defeat when it comes to building their own brands and, importantly, distribution systems.

The loyalty programmes have driven this

Whilst you may think that Marriott, IHG, Hilton etc are competing against each other, what they are really doing is building a joint front against independent operators. The key thing driving this is the loyalty programmes.

When Marriott Bonvoy launched, it took a new approach to hotel loyalty. As far as Marriott is concerned, Marriott Bonvoy IS the business. It offers attractive perks and benefits to draw guests into its ecosystem, and with 34 brands to choose from you will find something suitable for every stay.

IHG eventually woke up and started taking loyalty equally seriously via IHG One Rewards. This is a real step change to the previous iteration of IHG Rewards.

Look at Accor. Again, Accor Live Limitless IS the business. Take a look at the Paris Saint Germain football kit for 2019 to 2022. It wasn’t the corporate Accor logo that appeared on the shirt front – it was Accor Live Limitless.

Both Marriott Bonvoy and Hilton Honors recently hit 200 million members. Whilst neither scheme is willing to admit what percentage of these 200 million people are ‘active’, you can’t deny that this is a huge potential audience.

Amazingly, Hilton claimed this week that 20% of all hotel rooms currently being built on the entire planet are contracted to one of its brands.

IHG gains over 100 German hotels in one day

What do you do if you are NOVUM Hospitality, building out your own brands like ‘the niu’ but finding you can’t cut through the noise made by the big boys?

In particular, what do you do when Expedia, Hotels.com, Booking.com etc demand 22% commission for selling your rooms on their platforms? Especially when your own website gets little traction and you have no loyalty programme? Suddenly those IHG fees don’t look too bad.

The NOVUM website may claim to have ‘5 million satisfied guests every year’ (no jokes about how many unsatisfied ones they have, please) but clearly it isn’t enough. NOVUM has decided that writing huge cheques to IHG every month for the next 30 years will make it more money overall.

Conclusion

NOVUM Hospitality may be the latest hotel group to abandon its own brands and its own disribution system but it won’t be the last.

The percentage of branded hotels in Europe is well below the percentage in the US. There are plenty more NOVUMs out there.

Will Scandic throw in the towel in Scandinavia (Hilton owned this once)? Ibis would make a good home for Germany’s InterCity brand. IHG’s Hotel Indigo brand is already a clone of Malmaison and Hotel du Vin in the UK and could integrate them overnight. Millennium & Copthorne has little traction these days. As for the hodge-podge of brands in the Thistle / The Cumberland / ex-Guoman portfolio …. You should expect more announcements like the IHG / NOVUM deal.

You can see the full press release here.


IHG One Rewards update – May 2024:

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Comments (93)

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

  • Damian says:

    If it’s 22% for Expedia etc., do we know what % IHG (or other big chains) take when “acquiring”?

    • Rob says:

      No idea of the exact number but it’s a lot of thin slices – you get the pure franchise fee (the ‘money for nothing’ bit) and then additional slices for the ‘system fund’ – which is meant to be break-even for IHG (by law) and covers marketing, loyalty etc – and I suspect there are booking fees for guests that come through the website etc. It does add up. You also have the cost of giving up nights for rewards.

    • memesweeper says:

      Royalty fees might be single digit percent, but there are fees for using services like booking systems, and additional marketing fees, and buying the approved model of bed, etc etc.

  • Dirtyneedlebluesky says:

    Never heard of the niu Loom in Manchester before. Looks pretty decent but the location is hardly central & very residential.

    Hopefully might attract lower points stays or good value cash rates.

  • Peter says:

    I live in Austria, worked in the hotel industry 10 years ago, and have never heard any of these Novum brands mentioned, ever. Some problematic brand recognition there indeed…

  • His Holyness says:

    Numbers don’t seem right. Booking fees tend to be fixed low dollars for App/website per booking, a bit more for call centre. This is all franchising for low cost brands, normally that means no revenue sharing which is typically <3% at this level, again, unlikely to be relevant. There will be base fee, let's say $200-250k pa. Franchising is cheap and profitable for owners. Why do you think Hampton's are being built left, right and centre? You frame it like Novum came cap in hand, but it looks like a way to make more money for a brand with no recognition and probably with a good deal for a new to Europe IHG brand to not tarnish the group if they are indeed dumps.
    The book direct campaigns are a failure, Booking and Expedia still are number 1. Get rid of them and you can close up shop tomorrow, that includes the chains.
    You're right that Scandic was owned by Hilton International/Ladbrokes, and it was sold when Hilton Corp acquired Hilton International and Hilton was re-united.

    • His Holyness says:

      To be clear, the fees for using the chain booking system, not OTA.

      • Boaby says:

        If they were paying Expedia as much as 22% you could even half that for the IHG negotiated one on each brand, that would pay the IHG brand fee. Highly likely it’s cheaper to be a IHG franchise than stay as they are.

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