It was the Friday of the 10th Formula 1 weekend in Singapore. One assumes all visitors coming to town that weekend are here for the race but no, not the new group CEO of Intercontinental Hotels Group, Keith Barr. Barr was making a lightning visit to Singapore and the region to “spend time with the teams in Asia, Africa and Middle East”. He has to.
Keith Barr: “This new reservations system will change the way we go to market.”
IHG recently announced it is carving out a new region combining Europe, Middle East, Asia & Africa (EMEAA) that will be headquartered in the U.K.. It will “operate through strong sub-regional divisions based in a number of locations, including Singapore, to ensure the business remains close to hotel owners, guests and colleagues.”
By bringing two strong, established regions together as one, the company will focus on further growth through increased agility and effectiveness, it said.
With the restructure came the resignation of longtime IHG stalwart Jan Smits, the current AMEA CEO, regarded as the face of IHG to owners in Asia. It is understood Smits, after 30 years with the company, had also decided to move on.
When the news came out, messages immediately arrived in my Whatsapp. “Crazy, no company has ever succeeded running Asia from London,” said a former IHG employee in the region.
On the surface, it doesn’t look like a rational move. When everyone is putting more focus and resources in Asia, IHG is doing the opposite. I asked Barr if he was one of those who liked to buck the trend and he said yes.
“We believe in bucking the trend. After the financial crisis, when I was here in Asia, China was part of APAC but I recognised in 2008 that China was going to be huge and we made it a standalone division, and we have strengthened business across Asia.”
Added Barr, who became group CEO on July 1 after clearly impressing the board with his performance as CEO of Greater China and then its chief commercial officer, “We are not going away. Europe is not taking over AMEA, AMEA is not taking over Europe. It’s a matter of reallocating resources. We will have stronger market presence, maybe not corporate presence. Regions are constructs companies make.
“We want to make sure the right resources go to the right strategy. As business grows in scale, many markets that were small have grown and matured. We are reallocating resources to accelerate growth across the company. We couldn’t have done this five years ago – we didn’t have enough scale to restructure.”
He said what mattered was strong leadership on brands. “With 100 Intercontinental Hotels, we are looking at how to run our luxury business. Marketing, loyalty, branding – these are critical factors to success.
“We are a brand company – 5,200 hotels and we only own a handful. Our biggest assets are brands and people, so we need an incredibly strong brand marketing organization. We have to have the right structure to drive demand, with the increasing importance of tech and data. It’s not just TV advertising anymore, but data-driven technology and marketing to build brands.
“We need to deliver a consistent guest experience, it is easy to come up with a logo, but it’s more than that today.”
Despite the fact that it has several brands – Candlewood Suites, Crowne Plaza, EVEN Hotels, Holiday Inn, Holiday Inn Express, Hotel Indigo, Hualuxe, InterContinental, Kimpton Hotels and Resorts, Staybridge Suites – Barr said, “We have very focused segments, clear swim lanes, for our brands. So we need a strong enterprise that knows how to leverage scale and technology.”
It’s piloting a new global hotel reservations system, developed in partnership with Amadeus, which will “change the way we go to market”, said Barr. “It will help us drive direct business and give us creativity and flexibility in how we price. It breaks with the traditional model of pricing, and changes how we manage our channels going forward.”
Barr said with 100 million loyalty members, IHG will not have a problem with customer acquisition. “That’s what scale is.”
“How you use the data is more important than who owns the data,” he said, when asked who would own the data, Amadeus or IHG.
This week, it launched a new midscale brand, Avid Hotels, in the US following research that showed that 14 million of its members were underserved by its current brands. It is aimed at a lower price point than its Holiday Inn Express brand.
It will bring Kimptom Hotels & Restaurants to Europe and Asia, and look at brand entry country by country. “We’ve just launched Eden in Australia and New Zealand for the health and wellness segment. Holiday Inn Express is growing well in Australia, and we see a trend towards longer stays.”
While he said the future will not be “a winner takes all” because the travel market is so massive, there will be challenges in the future for small companies. “How do you compete for the need in technology and loyalty? Distribution is changing, consolidation is happening, technology plays a critical role.”
Asked what he would do if he were running a smaller company, he said, “I’d be looking at selling myself to a bigger player. It will be harder to compete going forward.”
As to whether IHG would consider acquisitions along the lines of what AccorHotels has been doing, he said, “We are constantly looking at hotel companies, and capabilities out there and asking, should we consider buying? But we feel we don’t need to buy anything, there’s no impetus to buy anything.”
On the growth in alternative accommodation, he said, “Five or six years ago when the sharing economy first raised its head, everyone said it was going to be the end of hotels. It’s been around as long as hotels have been around, it’s just that tech distribution is being done in a different way.
“It’s had minimal impact on the hotel industry – maybe there’s a little bit of loss on the top of the biggest hotel markets.”
The restructure puts Kenneth Macpherson, currently IHG’s CEO of Greater China, as the new chief of EMEAA. Replacing Macpherson as CEO of Greater China, which remains as a regional office, is Jolyon Bulley, currently COO of Americas and was COO of Greater China.
Barr said, “The strategy I put in place in China is paying off. It is one of the most exciting markets for growth. We have huge confidence in the market. The biggest concern is human capital to deliver the consistent brand experience. We are putting focus on talent and training to build a great brand organization.”