Holiday Inn 2012 Annual Report Download - page 13

OVERVIEW BUSINESS REVIEW GOVERNANCE
GROUP FINANCIAL
STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS OTHER INFORMATION
Industry overview and Our strategy 11
With a portfolio of preferred Brands in the most attractive markets, our talented
People are focussed on delivering Great Hotels Guests Love and executing a clear set of priorities
to achieve our Vision of becoming one of the great companies in the world
A good strategy makes clear choices against a range of business
opportunities in order to achieve a set of defined goals. An
organisation needs to be able to execute these decisions and
measure its success using a clear set of comprehensively
aligned metrics.
IHG’s strategy determines a set of choices to balance the quality of
IHG branded hotels and the speed at which we grow. We measure
this through key performance indicators (KPIs) such as growing
RevPAR, System size and fee based margins. In addition, we ensure
we continue to improve employee engagement, guest and owner
satisfaction and increase the proportion of hotel room demand that
we generate for our owners through our proprietary distribution
and reservation systems.
Where we compete
Where we compete
Relevant consumer segments
Most attractive markets
Appropriate business model
How we win
Portfolio of preferred Brands
Talented People
Best-in-class Delivery
Responsible Business
Delivering the elements of our strategy
Competing in relevant consumer segments
The hotel industry is usually segmented according to price point and IHG is focussed on the three segments that generate over 90 per cent
of branded hotels revenue, namely midscale (broadly three star), upscale (mostly four star) and luxury (five star). However, to build preferred
Brands, we believe we need to advance our understanding of our guests and their needs to ensure our brands remain contemporary
and relevant.
We have therefore completed a fundamental occasion-based needs segmentation analysis to understand why guests book hotels – looking at
who they are, the occasion they are travelling for and their needs when travelling. Many guests no longer have a single purpose for their hotel
stay – for example, business trips turn into family holidays, and we need to meet these demands, focussing more on the needs of our guests, to
deliver loyalty and brand preference. We used this analysis to develop the brand proposition for our two new brands, HUALUXE Hotels & Resorts
and EVEN Hotels, and we continue to work on this needs-based segmentation to help inform our view of the hotel market and our brand
strategies going forward.
Competing in the most attractive markets
Our strategy is to build preferred Brands with scale positions in the most attractive markets globally. Concentrating growth in the largest
markets means IHG and owners can operate more efficiently and benefit from enhanced revenues and reduced costs. Our key markets include
large developed markets such as the US, UK and Germany, as well as emerging markets like China and India.
The US is the largest market for branded hotels, with 3.38 million rooms, accounting for 69 per cent of all US rooms available. The segment in
the US with the greatest share is midscale, with 1.38 million branded hotel rooms, and IHG’s Holiday Inn brand family, comprising Holiday Inn,
Holiday Inn Express, Holiday Inn Club Vacations and Holiday Inn Resort, is the largest brand in this segment.
In China, IHG sees the greatest opportunity for growth of any single country and our strategy has been to enter the market early, to develop our
relationships with key local third party owners and grow our presence rapidly. In a country with 659,000 branded hotel rooms, IHG is the largest
international hotel company with over 61,000 rooms across our brands and more than 50,000 in the planning phase or under construction. This
rapid pace of openings for IHG has been in anticipation of increasing demand for hotels, driven by a large, emerging middle class and growing
domestic and international travel.
IHG is also focussed on developing in other high priority markets. We seek to develop our portfolio of brands in those markets which will be
sources of strong hotel demand in the future. We have continued to build our position in these markets in the last year. For example, we
increased the distribution of our core brands in India, building upon our leadership position of Holiday Inn. In Russia and the Commonwealth
of Independent States (CIS), there are opportunities for new construction and conversions as well as strong demand for branded hotels. IHG
continues to adapt its business model by market, choosing partnerships and joint ventures where appropriate.
Outside the largest markets, we focus on building presence in key gateway cities where our brands can generate revenue premiums from
high business and leisure demand.
During 2012, we opened 33,922 rooms in 26 countries and territories, and signed a further 53,812 rooms into our development pipeline (hotels
in planning and under construction but not yet opened) across 33 countries and territories. As part of our ongoing commitment to maintaining the
quality of our brands, we removed 16,288 rooms during the year. As at 31 December 2012, IHG had the second largest pipeline in the industry, with
169,030 rooms in 1,053 hotels across 60 countries and territories. This represents a market share of 12 per cent of all hotels under development,
including those that are independent or unaffiliated with a brand.
Business Review
Our strategy