5 Minutes With Andy Cosslett, IHG Chief

By Derek Gale, Senior Editor -- Hotels, 9/26/2008 11:47:00 AM

At the 2008 IHG Americas Investors & Leadership Conference in Los Angeles, IHG Chief Executive Andy Cosslett took time to meet with members of various media outlets and answer questions about the company, its brands and the business moving forward.

Question: Is it realistic to realize incoming IAHI Chairman Tom Corcoran’s stated goal of re-imaging Holiday Inn as an upscale brand?

Cosslett: Moving Holiday Inn up a segment, to compete with Courtyard By Marriott and Hilton Garden Inn—I agree with Tom. I prefer not to classify the segment—midscale, upscale, etc. But I share the principles and philosophy behind Tom’s point. What we do as a brand manager is upgrade and uptrade customers through innovation. If we do it right, the brand will be able to take an increasing premium over others in the competitive set not doing those things.

We’re positioning Holiday Inn as a very different product than it has been for the previous 10 to 15 years. I think over time, [moving up] is a very good target to give ourselves. It’s a good ambition to start to manage Holiday Inn’s relative position against the brands considered above it. So yes, it is realistic given the quality of what we’ve done.

Question: Tell us about the performance of the already relaunched Holiday Inn properties...

Cosslett: Anecdotally, where we’ve seen hotels move to the new look and feel and training, we’ve seen good success in being able to move rate. Guests reappraise the hotel as they drive up. It makes local competitors look old and tired, and people over time will respond to that and be prepared to invest a bit more.

Question: Was getting into the timeshare business an objective, or was the Orange Lake Resorts partnership an opportunistic move?

Cosslett: We were looking hard at how develop the Holiday Inn brand beyond the relaunch. We knew the value of the brand, and you want to see how far you can stretch a brand to get value from it. So we were starting to think about it playing in other places, but timeshare was not of particular interest to us until we met the Wilson family and talked to the management about what was going on. We had dismissed timeshare previously for various reasons—the model didn’t work, the financing didn’t work. But this venture was unique and an obvious way to use our strength. So timeshare wasn’t on our strategy as such, but it was definitely part of our strategy to develop the Holiday Inn brand.

Question: Will you look to grow the timeshare business beyond the initial four resorts? If so, what markets are attractive and how quickly will you look to grow?

Cosslett: There have been conversations about where this goes. We’ve talked in principal about the desire to grow, and we have a sense of the opportunities that exist. There’s been markets where I think Orange Lake have been looking to get into over time, markets in which we certainly believe our brands have less representation than they should have, given their scale and opportunity. We can talk about Las Vegas and Hawaii—where Holiday Inn can and should play and the brand should be seen. With this particular vehicle, we could consider those at some point, but our immediate focus is on the rebranding. If this venture is as successful as we believe it will be, opportunities will be there.

Question: Is it correct that about 70% of your total pipeline is financed at this time? What impact does the current economic situation and the lack of available debt have on your projections?

Cosslett: As far as we can ascertain--we don’t get the details of financing arrangements. But [the 70% figure] is the best we can establish. What we see is normal rates of attrition for the pipeline. The normal rate is 10% per annum fallout, and at the half year we are running below that level. And since then, I am not aware of any projects coming out of the pipeline. Things could turn—who knows what the next week is going to bring? Because our pipeline is so large, we could imagine a world with more attrition, but we could absorb that because we have 242,000 rooms in the pipeline. It also helps that we’re in the mid-scale business, where financing is more available than at the top end.

Question: What is the biggest challenge IHG faces, besides the economy and the credit crunch?

Cosslett: The biggest issue and challenge for us and our focus is attracting more people to the business—we’ll need 200,000 people around the company in the next few years. How we do that is something we talk about a lot. We’re trying to [promote] IHG’s culture, the way the company thinks and does business, and the way it presents itself—as a company that’s creative, that has buzz. We’re the most international hotel company, and if we present all those interesting facets of our business right, and lump onto that our growing corporate social responsibility agenda, which is a big driver of young people joining companies today, [we should succeed].

Question: Now that you’ve achieved growth of 60,000 rooms more quickly than the desired 3-year timeframe, what are your goals from here?

Cosslett: We don’t have any quantified targets set out, because we’re still in the three years. The fact that we’ve beaten the upper end of the target is good, but we want to reach the end of this year with as much distance between the target and our actual numbers as possible. We have to finish our race before we do anything else. We have momentum, and that’s great. We’ve set out our purpose—'great hotels guest love,' and we are in the process of defining what that means and how we measure that. What can we do in hotels and the organization to deliver on that so it’s not just a slogan, but actually a way of operating right down to front line? That will get clearer expression in 2009.