Intercontinental hotels group swot analysis

SWOT Analysis

How does the Intercontinental Miami compare with its key competitors in Miami? Execute a SWOT analysis using a SWOT Matrix (SWOT analysis stands for: strengths, weaknesses, opportunities, and threats).

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IHG SWOT & PESTLE ANALYSIS

IHG

CONTENTS

Company Overview ...............................................................................................................................................3

Operating Geography ...........................................................................................................................................3

Revenue ...................................................................................................................................................................3

Ownership ...............................................................................................................................................................3

SWOT Analysis: .....................................................................................................................................................4

Strength ........................................................................................................................................................5

Weakness ............................................................................................................................................................6

Opportunity .........................................................................................................................................................7

Threat ....................................................................................................................................................................7

PESTLE Analysis: ..................................................................................................................................................9

Political .............................................................................................................................................................. 10

Economic .......................................................................................................................................................... 10

Social ................................................................................................................................................................. 11

Technological .................................................................................................................................................. 11

Legal ................................................................................................................................................................... 12

Environmental ................................................................................................................................................. 12

Major Competitors .............................................................................................................................................. 13

Major Brands ....................................................................................................................................................... 13

Business Sectors / Diversification ................................................................................................................. 14

Top Acquisitions / Mergers / Alliances / Joint Ventures / Divestitures ................................................ 14

IHG

Company Overview

InterContinental Hotels Group (IHG) Plc is a British hotels group established in 1946 by JuanTrippe.

The group is one of the leading hotel companies with 12 different brands, presence in 100 countries

and 766,837 available rooms worldwide. The company has its headquarters in Denham in U.K and has

more than 28,000 employees as of 2016.

Business Sector

Oil and Gas

Operating Geography

UK, Global

Revenue

$4,337m - FY ending 31st Dec 2018 (y-o-y growth 6.4%)

$4,075m - FY ending 31st Dec 2017

Ownership

Name of the Shareholder % (Stake)

Capital International Investors (39.16%)

FMR LLC (36.12%)

Renaissance Technologies LLC (2.76%)

Parametric Portfolio Associates LLC (2.21%)

Arrowstreet Capital, Limited Partnership (1.58%)

IHG

SWOT Analysis:

The SWOT analysis for IHG is presented below:

Strength Weakness

1. Asset light business model

2. Wide geographical presence with focus on

priority markets

3. Customer experience & relationship focus

4. Occasion wise brand portfolio

5. Strong digital outlook and implementation

6. Strong financials and high RevPAR

1. No economic hotel brand

2. Poor information security systems

3. Slipped to 3rd position worldwide

Opportunity Threat

1. Fragmented branded hotel market

2. Increased international tourist travel

3. Technology facilitated bookings

1. Sharing Economy in Hotel Industry

2. Unprecedented events leading to market

instability

3. Increased dependencies on Intermediaries

IHG

Strength

1. Asset light business model: One of the key strengths of InterContinental Hotels Group is the

asset light business model. The Company is implementing this by adopting predominantly franchise

model in US, managed model in AMEA and reducing owned hotels to 8 globally. In this way it is

becoming asset free, cash generative and is returning the surplus cash to shareholders post

strategic investments. It has returned £5.9 billion of funds to shareholders since 2004 till date.

2. Wide Geographical Presence with Focus on Priority Markets: The group has presence in 100

countries with 766,837 rooms. It has 87% of total open rooms and 89% of pipeline rooms in priority

markets of US, Middle East, Germany, UK, Canada, Greater China, India, Russia and CIS, Mexico

and Indonesia. It has an established and strong presence in the emerging economies where spend

on travel and hotel is increasing. The lifestyle brand Kimpton Hotels & Restaurants has been made

global and strategically positioned as an upper middle class lifestyle brand.

3. Customer Experience & Relationship Focus: IHG trends report reveals that the consumer

preferences are shifting towards personalization and uniqueness of services unlike traditional

preference on availability and cost. IHG is equipped to handle the change with the Guest

Reservation System which provides cloud-based booking platform that offers guests a more

personalized experience. “Your Rate by IHG Rewards Club” provides access to exclusive,

preferential rates to loyalty members booking through direct channels & the “Guest Journey” is

building loyalty relationships and strengthening their competitive advantage. IHG also supports the

needs of travelers through wellwellwell.com to nurture long lasting relationships with their

prospective customers.

4. Occasion wise Brand Portfolio: IHG has followed a unique approach of segmenting and

popularizing different brands of hotels (12 in number) on the basis of guest occasions which helped

them in a differentiated brand experience for guests that better meets their expectations. As an

example The Indigo Hotel Brand which reflects the rhythm of the place it is located in & is specially

catered for people inspired by newness. The Holiday Inn which is becoming popular mostly in Asia

market especially in China is focused on family time & social identity. The Staybridge Suites Hotels

is with differentiated focus on business productivity.

IHG

5. Strong Digital Outlook and Implementation: Crowne Plaza is a fully digital brand of the IHG

focused to be a front runner in the digital adoption race. IHG’s mobile app has driven $1.3B (0.34%

of the total revenue) revenue and has helped in securing flagship locations. Data driven targeted

marketing across various channels, Mobile check-out and Wi-Fi offer IHG Connect all are initiatives

to satisfy the digital consumer and fast forward the adoption.

6. Strong Financials and High RevPAR: The company has market cap of around $ 10.64B, while

profit before exceptional items ($707m) increased by 4.0%Groups’ gross revenue, Underlying

revenue($113m) and underlying operating profit($67m) increased by 2.1% , 8.0% and 11.5%

respectively in 2016 compared to 2015. Comparable Group RevPAR (revenue per available room,

which is a key performance metric for the Hotel Industry) increased by 4.4%, with growth across all

regions. This shows that the company is extremely cash rich and has strong financial base.

Weakness

1. No Economic Hotel Brand: IHG group is serving all types of customers except the economy class.

This segment cannot be underestimated as this forms a major component of the population

especially when the emerging economies are turning to be priority markets for the Hospitality

Industry. Also in case of a sudden economic turndown the luxury/upper middleclass customers

would shift to the economic segment.

2. Poor information security systems: Recently in May 2017 the group was attacked by a malware

in 1200 locations with 12 hotels affected. The Group has to deploy efficient systems to protect guest

and employee financial and personal data such incidents would deteriorate the brand value.

3. Slipped to 3rd position worldwide: Post the merger of Marriott & Starwood, IHG was downgraded

to third position globally with Hilton and Marriott occupying the first two places. IHG stood second in

the European Union. The rankings are based on the number of rooms available in the system. In an

industry where scale influences profitability this is a serious concern for IHG.

IHG

Opportunity

1. Fragmented Branded Hotel Market: Branded hotel market which is 53% of total rooms supply

globally is fragmented with only 24% of total rooms available with first 5 players and the rest in

pipeline. So IHG has huge opportunity to consolidate the remaining pie and scale up.

2. Increased International Tourist Travel: International tourist travel is expected to increase from 1.2

billion to 1.9 billion tourist arrivals by 2026 mainly due to the increase in GDP, change in

demographics, low cost airlines & fewer travel restrictions which offer tremendous opportunity for

IHG’s family time brands like HolidayInn, Kimpton & Indigo.

3. Technology Facilitated bookings: Mobile bookings to account for 40 per cent of online travel

sales by 2020 and with people planning travel on social media, IHG group has to develop systems

and applications which can support and augment this technology aided sales. Also they can use Big

Data Analytics to create personalized & unique experiences for their guests.

Threat

1. Sharing Economy in Hotel Industry: Companies like Airbnb are a biggest threat to IHG business

model as Airbnb focuses only on the experience and have adopted a zero asset model. They had

10 million stays in 2016 and are able to attract the short break experience segment with value for

money as Unique Selling Proposition (USP)

2. Unprecedented events leading to market instability: Events like actual or threatened acts of

terrorism or war, political or civil unrest, epidemics or threats thereof, travel-related accidents are

major external environment factors which might reduce the domestic and international travel which

adversely affects the group’s revenue. Europe has been targeted in a series of terrorist attacks over

the last two years with attacks in UK, France, Germany, Spain and Belgium and the threat level of

future attacks has been raised. This will impact the tourism business in the region impacting IHG.

3. Increased dependencies on Intermediaries: 60% of the Group’s revenue originate from large

multinational, regional and local online travel agents, owners, vendors, suppliers who might gain

market share and might impact profitability or can become competitors by vertical integration.

IHG

IHG

PESTLE Analysis:

The PESTLE analysis for IHG is presented below:

Political Economic 1. Impact of Brexit referendum

2. Terrorist attacks in Europe

1. Influence of oil prices

2. Effect of GDP growth on sales

Social Technological

1. Influence of Cultural Differences

2. Increase in propensity to travel due to

change in demographics, lifestyle, etc.

3. Impact of epidemics like Zika virus spread

1. Digital bookings

2. Social media listening platforms

3. Using big data for personalisation

Legal Environmental

1. Travel restrictions

2. Data breach law suits

1. Green engage system – sustainable business

practices

2. IHG’s water risk assessment

IHG

Political

1. Impact of Brexit referendum: Currency fluctuations due to Brexit might not impact the IHG group

as 2/3rd of the group’s investment and 70 percent of the company’s debt as on June30th 2016 are in

sterling which shields it from the currency fluctuations. But the change in immigration laws might

reduce tourist travel in the U.K and modifications to worker visa rules will definitely impact its

current operating structure.

2. Terrorist attacks in Europe: Previously IHG has “significant” declines in revenue per available

room (RevPAR) in the countries of France, Turkey and Belgium in the third quarter of the 2016 due

to the terrorist attacks. There was 1.3% rise in global RevPAR but was flat in Europe due to the

decrease in domestic & international travel with fear of a terrorist attack. Similarly, recent

Manchester Blasts in May 2017 might impact the revenues negatively.

Economic

1. Influence of Oil Prices: IHG performance was impacted in the second quarter of 2016 as RevPAR

was down by 6 percent in the oil markets, compared to the non-oil markets up almost 4 percent.

Also due to the imbalance in the supply growth and low oil prices the RevPAR for the Middle East

fell by 8 percent in Q2 of 2016.Major impact of high oil prices is on the cost of airline travel and road

trips which adversely affect the demand and this has a ripple effect on the Hotel Industry.

2. Effect of GDP Growth on Sales: Over the long term, the lodging industry has grown broadly in line

with gross domestic product (GDP).Real GDP in the U.S. grew at an annual rate of 1.2 percent in

the second quarter which is reflected in the Q2 RevPAR up to 2.6% and an increase in operating

profit by 9%.With increase in per capita income and spend on travel, GDP growth is positively

affecting the business growth with ceteris paribus. Also with only 63% of workforce employed

(remaining 37% to be potential customers) the imbalance in supply & demand in this industry might

reduce in the near term.

IHG

Social

1. Influence of Cultural Differences: Varying cultures are of great interest to customers as they want

to travel to a specific destination to experience a particular culture or use religion as a reason to

visit a country to practice their faith and beliefs. This requires the culture of place to be preserved

and reflected in the hotel, exactly what the Indigo brand (revenue of $0.4B) of IHG is serving.

2. New trends due to change in demographics, lifestyle: With the increase in world population and

12% of world’s population of age above 60 years, there is an increasing desire to travel. Moreover,

IHG trends report suggests that millennial want personalized experiences and old age people are

looking for humanity in travel.

3. Impact of epidemics like Zika virus spread: With the news of spread of Zika virus in Miami &

Florida the tourism Industry witnessed a decrement in occupational rate by 3.3% in the winter

months of 2016. This resulted in decline in demand for the IHG. The crisis management system of

IHG was able to effectively handle the situation

Technological

1. Digital bookings: According to industry research forecasts, 45% on travel sales by 2020 would be

through online channels. Supporting this currently 20% of group’s revenue i.e. $4.2B is from digital

channels, of which $1.33B is from mobile app bookings. Guest Reservation system which allows

users to pick and customize their rooms is just around the corner according to a recent survey by

McKinsey.

2. Social media listening platforms: IHG trends report quotes that Social networks are being used

to plan trips and share experiences. There is a definite need to develop social media listening

platforms which can analyze the social media data and describe what customers would like to have

and IHG’s brand perception among customers. IHG Rewards is one such program in this regard

and has driven 64% of millennials to the group.

3. Using big data for personalization: Big Data and predictive analytics can be used to create

personalized experience for the guests with personalized greeting at the hotel entrance, custom

IHG

offers, tailored hospitality; etc. Guest Reservation System (GRS) of IHG is constantly evolving in

this regard.

Legal

1. Travel Restrictions: Recent travel restrictions imposed by the US have reduced the bookings from

seven countries by 80% according to the research firm ForwardKeys which will impact the

hospitality industry. Though the restriction appears to be a temporary but still the impact was 17%

less searches on US flights which shows a direct correlation of reduced sales.

2. Data Breach Law Suits: With data laws becoming stringent across countries IHG have had to

deploy systems and should be double conscious in protecting consumer data. IHG is facing a data

breach class action lawsuit for failing to protect customer debit & credit card data. The plaintiff is

seeking actual & punitive damages which would adversely affect the demand of IHG & deteriorate

its brand perception in the digital channel.

Environmental

1. Green engage system – sustainable business practices: Sustainability is an important practice

for the hospitality industry as it enables the organizations to share their values with their customers.

IHG has created an online sustainability platform - IHG Green Engage system which enables its

hotels to measure and manage their environmental impact. Further the hotels can choose from over

200 ‘Green Solutions’ which help them across their environmental initiatives. The IHG Green

Engage system also has four levels of certification which the hotels can achieve and Level 1

certification is a mandatory requirement for all IHG hotels which includes ten best sustainability

practice solutions.

2. IHG’s water risk assessment: InterContinental Hotels Group (IHG) has a global portfolio of more

than 5,000 hotels, thus it is imperative that the group implements efficient water management

practices. IHG has entered into a partnership with the Water Footprint Network which has allowed it

to map all its open properties and hotel against water related risks. The assessment also identifies

the action plan to counter the risks within a sustainable framework.

IHG

Major Competitors

 Belmond Ltd.

 Boyd Gaming Corporation

 Caesars Entertainment Corporation

 Century Casinos, Inc.

 Choice Hotels International, Inc.

 Civeo Corporation

 Eldorado Resorts, Inc.

 Extended Stay America, Inc.

 Full House Resorts, Inc.

 GreenTree Hospitality Group Ltd.

 Hilton Grand Vacations Inc.

Major Brands

 Regent

 Intercontinental hotels and Resorts

 Kimpton

 Hotel INDIGO

 Even Hotels

 Hualuxe

 Crowne Plaza

 Voco

 Holiday Inn Express

 Holiday Inn Club Vacations

 Holiday Inn Resort

 Holiday Inn

 Avid

IHG  Staybridge Suites

 Candlewood Suites

 IHG Rewards Club

Business Sectors / Diversification

Top Acquisitions / Mergers / Alliances / Joint Ventures /

Divestitures

Name of the

Company

Business

Segment Year Type Objective/Synergy achieved

Starwood Capital

Group (under the

Principal Hotels

and De Vere

brands.)

Hospitality

Group 2018 Acquisition

The deal was worth US$ 1.1 billion.

The hotels will convert to brands

under the IHG umbrella, reportedly

either its luxury InterContinental flag,

its upper-upscale Kimpton Hotels or

a new upscale conversion brand that

is still under wraps. The deal should

help spur expansion of the Kimpton

brand in Europe, where currently

there is only one hotel, in

Amsterdam.

Regent Hotels and

Resorts

International

luxury hospitality 2018 Acquisition

The deal is worth US$ 39 million

wherein IHG bought 51% stake in

IHG

Regent Hotels and Resorts. IHG will

bring Regent within its own luxury

hotel brand portfolio, with the aim of

growing it from six hotels today to

over 40 in key global gateway cities

and resorts over the long term.

Toledo

International Real Estate 2018 Partnership

Led to signing of a new property in

Singapore: Holiday Inn Express

Singapore Serangoon

TripAdvisor Travel Site and

App 2017 Partnership

The App will include all the

company's hotel brands in the

TripAdvisor instant booking

marketplace. In the coming months,

consumers will be able to instantly

book rooms at IHG properties

directly, without leaving the

TripAdvisor site or app.

SAMHI Premier Lodging

Real Estate Firm 2017 Partnership

Rebranding approximately 2000

rooms (operating and under

construction) within its India hotel

portfolio, to Holiday Inn Express

hotels. The partnership has

strengthened IHG’s presence across

India, with the newly signed hotels

located across 11 key cities,

resulting in 90% of the Holiday Inn

Express portfolio being concentrated

in Tier 1 cities.

IHG

Amadeus

Provider of

advanced

technology

solutions for the

global travel

industry

2015 Partnership

Together, IHG and Amadeus will

develop a next-generation Guest

Reservation System (GRS) that will

revolutionize the technological

foundations of the global hospitality

industry.

AWH Partners

LLC

Real Estate

investment,

development

and

management

firm

2014 Acquisition

The all-cash acquisition led to the

renovation and conversion of the

former Hotel Melia in Atlanta. The

501-room hotel officially converted to

the Crowne Plaza brand and

immediately underwent a total

renovation, ultimately creating a

360-room Crowne Plaza hotel.

Kimpton Hotel &

Restaurant Group

Independent

boutique hotel

and restaurant

business

2014 Acquisition

The acquisition was done for $430

million in cash. The acquisition was

another step in IHG’s well-

established asset-light strategy of

investing in high-quality growth,

building on a strong track record of

developing iconic global brands.

This acquisition of IHG was aimed at

creating the World’s Largest

Boutique Hotel Business

Norland College Provider of early

years training 2014 Partnership

The partnership will see Norland

College provide all InterContinental

Hotels & Resorts around the world

with expert guidance on babysitting

IHG

and staff recruitment to ensure

families have the best quality care

when they stay at an

InterContinental hotel or resort.

Orange Lake

Resorts Resorts 2008 Alliance

Launch of Holiday Inn Club

Vacations.

International Hotel Groups (IHG) SWOT & PESTLE analysis has been conducted and

reviewed by senior analysts from Barakaat Consulting.

IHG

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IHG

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