Holiday Inn In Europe

-- Hotels, 6/1/2007

The new prototype for the Holiday Inn brand in Europe incude a new facade and continued effort to make food and beverage a profit center with minimal labor issues.

ATLANTA InterContinental Hotels Group's (IHG) Holiday Inn and Holiday Inn Express/Express by Holiday Inn brands are taking a graphic approach to keeping their pipelines on a record growth track. Demographics, geographics and psychographics are driving international expansion for both fl ags.

The April 20 rollout of a franchising program for Holiday Inn Express in China gives IHG a powerful tool for carving another demographic niche in this giant market. IHG laid the foundation for the launch with a "support platform" of six Holiday Inn Express properties already in operation and another 20 management contracts that are "close to signing."

Patrick Imbardelli, chief executive, IHG Asia Pacifi c, hopes to tap relationships with "a broad base of partners" to jumpstart Holiday Inn Express' penetration into gateway cities and major economic centers. To push the pace, IHG intends to partner with franchisees on a multiproperty basis.

Plans For New Europe

Looking at the geography of Europe, Holiday Inn is thinking laser focus, not scatter gun. "This next push will be about key markets and key cities," says Robin Wicks, the Brussels-based chief operating offi cer, continental Europe, Holiday Inn and Crowne Plaza.

With more than 200 hotels in the UK, further expansion in Great Britain is a "no-brainer," according to Wicks. "We're looking for scale, but we're still evaluating where our focus will be." France, Germany and Italy, as well as strategic cities in Eastern Europe and across Russia, are on the radar.

Wicks says the appetite for expansion by UK franchisees gives IHG a leg up toward reaching its European targets. "We're seeing some of our UK owners churning other assets to get into Germany because of the upside," he says. With construction costs that franchisees estimate to be 20% to 25% below the UK, British investors are seeing "a long way to grow RevPAR" in markets such as Hamburg, Nuremburg and Munich.

Wicks also sees opportunistic UK investors moving into Eastern Europe with new openings, such as a 150-room Holiday Inn in a business park near Sofi a. Locals are monitoring this trend. Wicks predicts smaller investors from Eastern Europe could be in the next wave of new owners, along with institutional investors making their debut in the hotel sector and real estate funds crossing over from other asset classes.

Localized, Customized

In Europe, Middle East and Africa, as well as in North America, IHG hopes to leverage the psychographic and fi scal appeal of the new Holiday Inn prototype to fuel interest in core brand development. The model sells to two key trends: owners' concerns about rising building costs and customer demand for spaces that "live" and work like their homes and neighborhood places.

Modular meeting space components, varying numbers of fl oors, reduced minimum room counts, decreased investment in non-revenue generating spaces and revamped restaurant concepts are lowering construction costs 15% to 20% on average to as much as 30% in prime real estate markets. "Owners challenged us by pointing out that construction costs were rising dramatically, but that, at the same time, they didn't want 'less building' if it meant less revenue potential," says S. Kirk Kinsell, senior vice president, chief development offi cer, The Americas.

Responding to customer research, the new prototype repositions restaurants as revenue generators by creating modern foodservice offers that are "executable" without a chef. Bars are pushed out front, giving them more of an all-day feel for work, meetings or socializing. Swimming and fi tness features are being combined to deliver space-saving destinations for families or fi tness fanatics.

How is the takeup? Kinsell says that in the Americas, IHG sold 264 Holiday Inn franchises in 2006 and 2007 is on track to build on that. "That should shut up people who thought mid-tier with food and beverage was a dying concept," Kinsell says.