For years it seems to have been the Marriottjor hotel groups Strive for growth at all costsregardless of the customer experience. It’s refreshing to see a large hotel group countering this trend.
IHG terminates contracts with below average hotels
shift has the story of InterContinental Hotels Group (IHG) dropping more hotels than it opened as part of a plan to improve customer service and brand awareness. In the first quarter of 2021, IHG removed 61 hotels with a total of 9,500 rooms. Half of the hotels that are being dropped are owned by either the Holiday Inn or the Crowne Plaza.
This follows comments from IHG’s CEO earlier this year, in which he indicated that the hotel group plans to remove around 200 poorly performing hotels from its network in order to improve customer service and better position the company for growth. As the IHG CFO recently described:
“This is the right time to talk to the owners. The expectations of the guests have changed. We worked with the owners to remove the hotels in the system that did not meet our vision for the brands as it progressed. “
Even if the hotels have already been dropped, we should expect a few more hotels to be renamed in the coming months.
With over 5,900 hotels, IHG is one of the world’s largest hotel groups, from InterContinental to Hotel Indigo and Holiday Inn Express. The brand has expanded in the premium segment in recent years between acquisitions of Kimpton, Regent and Six Senses.
IHG recently acquired Six Senses
What is IHG’s real motive for dropping hotels?
The large hotel groups earn money through management and franchise agreements with the hotels that belong to their portfolios. Most of the hotels are independently owned and the hotel groups typically generate some of the income from the properties they manage or franchise.
For the hotel groups, bigger is usually better, which is why we see so many brand inconsistencies and also that the “independent” hotel portfolios have become so popular because they offer hotel owners so much flexibility. Hotel groups have a hard time saying no to new hotels, even if they’re not great.
Could IHG really be so committed to brand awareness and customer experience that it would be willing to give up such revenue? Yes and no.
For IHG, this is part of a bigger gamble:
- IHG hopes that cutting hotels with low customer service ratings will improve the brand profile and make IHG more desirable
- IHG sees great potential for hotels that are not currently affiliated with large hotel groups. Around 60% of hotels in the Middle East and Southeast Asia are independent
- IHG hopes that by improving the brand profile, the company can more easily convince independent hotels to partner with IHG
Ironically, IHG has what I consider to be the weakest loyalty program of any major hotel group. So you’d be sure to believe that investing in a better loyalty program could go a long way towards building customer loyalty and thereby attracting new customers. Hotel owners become members of IHG. But that doesn’t seem like IHG’s thinking.
IHG wants to drop around 200 hotels
Bottom line
IHG plans to drop around 200 underperforming hotels that have poor customer feedback. The aim is to make IHG’s hotel brands more consistent and in return get more independent hotels to join.
All of the major hotel brands have some inconsistencies. However, if you ask me, it will take a lot longer for IHG to really reposition itself.
What do you think of IHG’s plan to eliminate underperforming hotels?
