Holiday Inn 2015 Annual Report Download - page 18

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We operate in the most attractive markets for IHG and in
the highest opportunity segments based on guests’ occasion
needs, with an asset-light business model – franchising
and managing hotels rather than owning them.
Attractive markets
Achieving scale and driving growth requires
IHG to focus on the most attractive markets,
where there is the best fit with our strategy
and business model. These markets have
large inbound and domestic demand for
branded hotels or show great potential to
have this in the future. Whilst we operate in
nearly 100 countries and continue to expand
our presence globally, we primarily focus
our efforts on 10 priority markets in which
we either have a strong existing competitive
position or have a compelling opportunity
to build one. These include a number of key
emerging and developed markets – US,
Middle East, Germany, UK, Canada, Greater
China, India, Russia, Mexico and Indonesia.
These currently represent 87 per cent of the
IHG System and approximately 90 per cent
of the pipeline.
Our focus on 10 priority markets ensures
that we are able to concentrate investment
in brand-building and developing critical
infrastructure – for instance, by adapting our
websites to the local language and deploying
dedicated sales teams. This approach helps
to drive greater brand awareness, stronger
channels and economies of scale, which,
in turn, deliver margin growth. Outside
of these 10 markets, we are also focused
on building hotel distribution in a network
of key global cities with high numbers of
international travellers, where we benefit
from global brand awareness.
Highest opportunity segments
Typically, the hotel industry is segmented
according to price point, and IHG is focused
on the three segments that generate over
61 per cent of branded hotel rooms revenue
– namely, upper midscale, upscale and
luxury. We believe these segments have the
highest growth opportunity and strongest
resilience to industry and economic cycles.
However, we also recognise that guests
choose a hotel based on their needs and the
occasion, resulting in the possibility of the
same guest, at different times, staying across
multiple hotel segments.
Our portfolio of brands is targeted around
differing occasion segments. We tailor each
of our brands to meet guests’ needs, looking
at the occasion they are travelling for and
their need for travelling. This approach and
segmentation analysis has been used to
refine the brand positioning of our existing
brand portfolio, was used to develop brand
propositions for both the HUALUXE Hotels
and Resorts and EVEN Hotels brands, and
was an important consideration in the
acquisition of Kimpton Hotels & Restaurants.
Franchised and managed model
We focus our business model on franchising
and managing hotels, thereby enabling us
to concentrate on building strong, preferred
brands based on guest needs. As discussed
on pages 12 and 13, we will choose to
franchise or manage hotels depending on a
range of factors, including market maturity,
owner preference and, in certain cases, the
particular brand. We also seek to adapt this
business model by market as necessary – for
example, through the use of managed leases,
partnerships and joint ventures.
Priority markets
10
US, Middle East, Germany, UK, Canada, Greater China,
India, Russia, Mexico and Indonesia
Representation of the IHG System
87%
Representation of the IHG pipeline
90%
High-quality growth in the most attractive markets
(from top to bottom) Holiday Inn Hotel & Suites Bengaluru
Whitefield, India; Holiday Inn Express Jakarta Wahid
Hasyim, Indonesia; and InterContinental Chennai
Mahabalipuram Resort, India, all of which opened in 2015.
16 IHG Annual Report and Form 20-F 2015