Capocelli_StrategicPlanning

Strategic Planning: InterContinental Hotel Group
Prepared by
Dominic Capocelli
INTB 409-01
Dr. Mueller
April 28th
, 2016

Table of Contents
Executive Summary…………………………………………………………………………………………………………………………………3
Introduction…………………………………………………………………………………………………………………………………..….……5
I. Situation Analysis
i. Company Description………………………………………………………………………………………………….……………5
ii. General Business Environment………………………………………………………………………………………………8
• Political…………………………………………………………………………………………………………….………….8
• Economic………………………………………………………………………………………………..…………………..8
• Social………………………………………………………………………………………………………….……..…………9
• Technological…………………………………………………………………………………..……..………………….9
iii. Industry Analysis……………………………………………………………………………………………………………..…….9
• Characteristics……………………………………………………………………………………..………………..…..9
• Success Factors…………………………………………………………………..……………………………………..10
• Customers…………………………………………………………………………………….…………………………....11
• Competitors………………………………………………………………………..……………………………………….12
• S.W.A.T. Analysis………………………………………………………………………………………………………..12
II. Articulation/ Evaluation of Strategy Statements
i. Vision……………………………………………………………………………………………………………………………………....13
ii. Where will IHG be in the future? ……………………………………………………………….…………………………13
III. Strategic Alternatives, Choice, and Implementation
i. Alternatives……………………………………………………………………………………………………………………………..14
ii. Recommendation…………………………………………………………………………….………………..…………………..15
iii. Implementation Plan…………………………………………………………………….…………….………………………..15
IV. Works Cited

Executive Summary
• IHG is one of the top global hotel companies with a wide portfolio that includes
InterContinental, HAULUXE Hotels and Resorts, Kimpton Hotels and Restaurants,
Crowne Plaza, Hotel Indigo, Even Hotels, Holiday Inn, Holiday Inn Express, Staybridge
Suites, and Candlewood Suites.
• IHG uses a superior operating system to attain their goal to be the first hotel that
customers think of when searching for a place to stay.
• IHG implores its strategic priorities to create growth and use their low-cost and asset
light strategy to thrive in growing markets.
• Their business model includes franchising, managing, and owning hotels.
• IHG has been experiencing financial growth over the last five years with increases in
total gross revenue (+5.3%) and total operating profit (+$807 million since 2011). By
acquiring Kimpton Hotels and Restaurants, IHG now leads the boutique segment.
• Based on the PEST analysis, IHG is in good condition. There is risk associated with
threats of terrorism and economic turmoil, but with an expected increase in travel,
the hotel business will continue to thrive.
• The global hotel industry is separated into branded and independent hotels. IHG is in
the branded segment, which is dominated by a few large competitors. This industry
will see growth into the future because of a high demand for global travel.
• Critical success factors in this industry include portfolio range, brand recognition,
hotel locations, ownership competence, and quality management.

• Customers include business travelers, pilots, and anyone who needs a hotel room.
Also, two of the major competitors for IHG are Wyndham Hotel Group and Marriott
International. They have high brand awareness and are located all over the world.
• The SWAT analysis concludes that IHG has more positive attributes than negative,
with their strengths and opportunities outweighing the weaknesses and threats.
• Unless certain actions are taken, IHG will continue to be a leader in the global hotel
industry and stay in a similar relation to their competitors.
• Some suggestions that this paper makes in order to expand their brand awareness and
attain their goals include expanding the operating system, partnering with carnival
cruise lines, and to implement hostels into the portfolio.
• It is suggested that IHG implements hostels into their portfolio because of a lack of
competition in North America and the potential to gain an entire new market of
customers.
• IHG will first need to enter into the European market, where there is currently
demand for hostels, with five hostels in the next two years. Based on their success,
new regions can be entered based on their attractiveness and potential for growth.

Introduction
The following sections of this document are designed to highlight the most important aspects of the
InterContinental Hotel Group`s (IHG) business and ways that they may be able to improve in the future
based on certain factors. The scope of these aspects include the industry that IHG operates in, how they
compete, what makes them competitive, who they compete against, what strategies they use to execute
their business model, and some strategic alternatives. By explaining what the company is currently
implementing and how they are planning to succeed in the future, it will be possible to think critically
about ways that they may be able to improve their business and attain long term goals.
I. Situation Analysis
i. Company Description
The InterContinental Hotel Group (IHG) is a global hotel company based in Denham, UK. The
company has a rich history of successful business ventures and acquisitions since its inception as ‘Bass Red
Triangle’ in the late 1700s. IHG`s business structure is divided into four reporting geographic regions: the
Americas, Europe, Asia, Middle East, Africa, and Greater China. By building the industries strongest
operating system, they can drive demand for their brands and “focus on the biggest markets where scale
really counts…concentrate our resources on the opportunities that will provide the greatest return.”1
Additionally, since becoming a distinct company in the UK and US stock markets in 2003, it has had a
mission “to create great hotels guests love”.2
This entails being the first choice for guests and hotel
owners and using an operating system that includes “advertising and marketing campaigns, 11 global call
1
Donnelly, RR, Patrick Cescau, and Richard Solomons. Annual Report and Form 20-F 2015. Annual Report. Addison Group, 2015. Web. 23
2
“Overview.” InterContinental Hotels Group PLC : About Us-.Web.26 Apr. 2016.<
http://www.ihgplc.com/index.asp?pageid=16>

centers, 13 local language websites…global sales team of more than 17,600 professionals, IHG rewards
club…advantages that IHG`s global hotel distribution and scale brings to brand awareness.”3
IHG has more than 5,000 hotels and 744,000 guest rooms spanning over roughly 100 countries. Their
hotel portfolio includes InterContinental, HAULUXE Hotels and Resorts, Kimpton Hotels and Restaurants,
Crowne Plaza, Hotel Indigo, EVEN Hotels, Holiday Inn, Holiday Inn Express, Staybridge Suites, and
Candlewood Suites. According to IHG`s website, their main task is improving the performance of all of
their brands across the globe through several strategic priorities:
Improving the performance of their brands
• Using insight to make their brands the first choice for guests
• Delivering consistent customer experiences
Generating excellent returns from their hotels
• Improving hotel revenue by encouraging guest visits
• Improving the efficiency of their hotels and operating processes
Putting their market scale and knowledge to good use
• Using their worldwide scale and expertise to convert more hotels to their brands
• Making the most of their global presence
Strengthening the organization
• Investing in their people and ability to do business
• Building strong partnerships within their own company and with owners across the
world4
By executing these priorities, IHG can maintain high quality growth, use low-cost and direct
channels, and use an asset light strategy to focus on the markets with the highest growth potential
in order to “deliver superior shareholder returns over the long term.5
3
4
5
Donnelly, RR, Patrick Cescau, and Richard Solomons. Annual Report and Form 20-F 2015. Annual Report. Addison Group,
2015. Web. 23 Apr. 2016. <http://www.ihgplc.com/files/reports/ar2015/files/pdf/annual_report_2015.pdf>

IHG has a business model that “focuses on managing and franchising hotels, whilst our
business partners own the bricks and mortar.”6
Consequently, they operate in three different ways.
They can operate as a franchisor, a manager, and on an owned and leased basis. Franchising is the
most prominent with 4,219 hotels, managing is next with 806 hotels, and owning only takes up 1%
of their total portfolio with 7 hotels worldwide.7
Over the last five years, IHG has seen an improvement in its financial situation. Its total
gross revenue increased by 5.3% up to $24 billion this year. Additionally, total operating profit has
increased by $807 million since 2011. Total underlying profit before exceptional items and tax
increased by 11.5% in the last year and revenue per available room increased by 4.4%.8
IHG also
made two very important financial and strategic decisions this year. The first of which included the
sale of InterContinental Paris- LeGrand and InterContinental-Hong Kong for $1.25 billion. This was
in line with IHG`s asset light model and caused a decrease in revenue by 3.0% for the year. The
second decision was to acquire Kimpton Hotels and Restaurants for $430 million, which officially
made IHG the “clear market leader in the boutique segment.”9
Also, IHG`s current ratio is 1.17,
which is a quick indicator that they are able to pay off their liabilities with their assets. Although
this is true, it is important to be aware and understand the types of current assets the company has
and their ability to be converted into cash. Ultimately, “the directors confirm they have a
reasonable expectation that the company has adequate resources to continue in operational
6
7
8
9
Donnelly, RR, Patrick Cescau, and Richard Solomons. Annual Report and Form 20-F 2015. Annual Report. Addison Group, 2015.
Web. 23 Apr. 2016. <http://www.ihgplc.com/files/reports/ar2015/files/pdf/annual_report_2015.pdf>

existence for the foreseeable future, and accordingly, they continue to adopt the going concern
basis in preparing the Parent Company Financial Statements.”10
ii. General Business Environment
Political Risk
Through several factors like the use of its asset-light business model, diversity of its brands,
and global presence, IHG can avoid some major external risks. However, business risk is often times
unavoidable. Some political factors that could negatively affect IHG`s hotels include threats of
terrorism, natural disasters, political turmoil, fraud, pandemics, and small scale crime that can
negatively affect customer experience.11
Any of these factors could hurt demand for travel and
cause a decline in sales, especially with the risk of losing a building in the wake of a terrorist
attack.
Economic Risk
The principal economic threats include “recession, inflation and availability of credit, and
currency fluctuations that could lower revenues and reduce income.”12
Since many regions of the
world are interconnected, worsening of the economies in China and Europe could result in a
decrease in travel and subsequently decrease “income-generating activities.”13
Exchange rate risk
is also inherent when conducting international transactions. Therefore, it is vital for IHG to
continue hedging and conducting forward purchases in order to minimize the risk.
10
Donnelly, RR, Patrick Cescau, and Richard Solomons. Annual Report and Form 20-F 2015. Annual Report. Addison Group, 2015.
Web. 23 Apr. 2016. <http://www.ihgplc.com/files/reports/ar2015/files/pdf/annual_report_2015.pdf>
11
12
13

Social Risk
Ethical behavior and responsible practices account for much of the risk in this category. IHG
currently has a strong Corporate Social Responsibility campaign to work with the community, help
with disaster relief, education, human rights, and environmental sustainability to help minimize
the risk of damaging their reputation.14
There is expected to be an increase in international travel
through “competition and capacity amongst airlines, lower fares, and the relaxation of travel and
immigration restrictions in many regions.”15
An expected 3.3% rise in travel per year will have a
positive effect for IHG.
Technological Risk
The evolution of technology in the coming years will present some issues for IHG if they do
not stay up with the current trends. Some investments may have to be incurred in developing
systems that keep them competitive in a global marketplace that is seeing an increasing amount of
travelers staying in hotels like Airbnb that can avoid some expenses and have lower operating
costs. Customer service is key in the hotel industry, so it is important to make sure that evolving
operating systems do not harm the quality of experience at an IHG hotel that may result in a loss or
failure to attract new customers.
iii. Industry Analysis
Characteristics
IHG competes in the global hotel industry, which is divided into branded and independent
hotels. The branded hotel segment comprises 53% of the total rooms available and is dominated by
14
15

five leading companies that include Hilton, Marriott, Accor, and Starwood, in addition to IHG. This
part of the hotel industry continues to grow and remain strong through difficult economic times, as
it has increased its global market share over the last ten years. The ever-increasing demand for
global travel keeps demand high and remains paralleled with gross domestic product. Revenue per
available room (RevPAR) and rooms supply growth are the best indicators for success in this
industry and have seen a strong trend upward over the last five years.16
Furthermore, IHG
maintains an 8% share of the branded market (3% of total) while IHG and their six top competitors
hold 41% of the branded sector.
The main trend in the branded hotel industry is the evolution of technology. These changes
in technology are also changing the needs of the customers, which are“creating a more dynamic
competitive environment.”17
Growth drivers are also an important consideration in looking at
future trends. An aging population that has more money and time to travel can impact demand,
growth in the commercial airline sector will create increased travel, and the advancements in
technology that we see trending will hasten globalization.18
Success Factors
Every industry has certain success factors that make them competitive against other
companies and the global hotel business is no different. Some success factors include the range in a
company`s portfolio and their recognition, where the hotels are located, ownership competence,
and quality management. Having a strong portfolio is important because customers tend to stay at
hotels that they recognize. Owning many different and recognizable brands will lead to more sales.
16
17
18
“Market and Competitive Environment.” – IHG Annual Report and Financial Statement 2009. Web. 26. Apr. 2016.
<http://www.ihgplc.com/files/reports/ar2009/market-and-competitive-environment.html>

Location is possibly the most important success factor. The company needs to understand the
demand associated with tourism in the area, the size and population, and general necessity for a
hotel to have success.19
Third, the quality of ownership is paramount. Franchised owners operate
the majority of hotels in this industry, so it is necessary for the company to build relationships that
include feedback from owners and train them on how they can succeed in their area. Last, quality
management is important because guests are the single most important part of owning a hotel.
Hotels should focus on employee satisfaction and customer service in order to make sure
operations at the hotels are efficient and pleasing to the guests.20
Customer Analysis
IHG`s customers include tourists/travelers, employees who travel for business, airlines who
have contracts for their pilots to stay at their hotels, and anyone who may need a hotel room for
any reason. IHG has many different brands that target different types of travelers. For example,
the Holiday Inn targets all guests and positions its self to have a modern, relaxed, home-like feeling
and the Hotel Indigo targets people who seek luxury at an affordable price.
Competitor Analysis
The Wyndham Hotel Group and Marriott International are two of IHG`s biggest competitors.
Wyndham Hotel Group is currently the largest in the industry with 7,800 hotels spanning over 72
countries. Their many brands are highly recognizable and range from low price to upscale. Some of
their brands include Super 8, Days Inn, and Baymont Inn and Suites.21
Marriott International is also
19
“Critical Success Factors in the Hotel Industry.” Small Business. Web. 26 Apr. 2016. <http://smallbusiness.chron.com/critical-
success-factor-hotel-industry-72378.html>
20
“Critical Success Factors in the Hotel Industry.” Small Business. Web. 26 Apr. 2016. <http://smallbusiness.chron.com/critical-
success-factor-hotel-industry-72378.html>
21
“Wyndham Hotel Group Wyndham Worldwide.” Wyndham Hotel Group Wyndham Worldwide. Web. 26 Apr. 2016.
<http://www.wyndhamworldwide.com/category/wyndham-hotel-group>

large, having 4,400 hotels in 87 different countries. Some of their brands are Fairfield Inn and
Suites, Residence Inn, and the Ritz-Carlton.22
IHG stacks up well against them in terms of operating
margin, net income, and earnings per share.
Hotel Group Operating Margin Net Income Earnings Per Share
IHG 0.38 1.22 Billion 5.13
Wyndham 0.19 612 Million 5.14
Marriott 0.48 859 Million 3.15
Source: yahoofinance23
S.W.O.T Analysis
The following section contains some areas that IHG may deem as positive or negative and
have potential for growth or utility.
22
“About Marriott Hotels Marriott Corporate Business Information. “Www.marriott.com. Web. 26. Apr. 2016.
<http://www.marriott.com/marriott/aboutmarriott.mi>
23
“IHG Competitors Intercontinental Hotels Group A Stock – Yahoo!Finance.” IHG Competitors Intercontinental Hotels
Group A Stock – Yahoo!Finance. Web. 26. Apr. 2016. <http://finance.yahoo.com/q/co?s=IHG>
Strengths
Brand Recognition
Rewards Program
Wide Portfolio
Prices
Weaknesses
Staff turnover rate
Languages on websites
Opportunities
Future market expansion
Food and Beverage
Rebranding hotels
Thorough website info.
Threats
Economic downturn
Terrorism
Third party sites
Competitors
Political Strife

II. Articulation/ Evaluation of Strategy Statements
i. Vision
“Our strategy is to build the hotel industry`s strongest operating system focused on the
biggest markets and segments where scale really counts.”
ii. Where will IHG be in the future?
IHG will continue to be a world leader in both affordable and upscale hotels around
the world if they continue on their current path. This will be done through their efficient
operating system that takes advantage of language differences, telephone assistance,
rewards, and advertising campaigns. Luckily, the market for global hotels is expanding and
IHG will continue to implement its current asset-light and low cost strategies and use its
business model to capitalize on the future generations of travelers, both young and old, and
to grow in the global market. Moreover, IHG may fail to overcome Wyndham Hotels in terms
of revenue and assets owned and Accor Hotels, who dominates the European market.
III. Strategic Alternatives, Choice, and Implementation
i. Strategic Alternatives
Alternative 1: Expand the current operating system
IHG prides itself on being able to drive demand through its advanced and smooth
operating system. However, IHG can penetrate new markets and gain customers by
increasing the amount of languages on their websites and increasing the amount of their
global call centers. This would be a permanent addition to the system and would increase
sales in regions where local languages were not offered.

Advantages: Reaching new customers, showing cultural diversity, increased sales and
revenue in the long run, brand awareness
Disadvantages: Increased wage expenses for new employees, land and building costs for call
centers, possibility for translation error
Alternative 2: Partner with Carnival Cruise Lines
IHG can differentiate itself from other global competitors by entering into
partnerships with Carnival. For example, in Charleston the cruise ship terminal is roughly
one mile away from several IHG hotel lines. Carnival and IHG can enter into an agreement
that connects the cruise ship guest with the nearest IHG hotel of their choice and allows
them to receive certain rewards points or discounts on rooms for future cruise ship vacations
and for their stay in the hotel during the nights leading up to or after the cruise.
Advantages: Increased sales, differentiation and uniqueness, brand awareness, mutually
beneficial
Disadvantages: not all cities have cruise ship ports, possibility for negative experience on
one end to translate to the other
Alternative 3: Implement Hostels into the portfolio
Many young people traveling in Europe would rather stay in cheap hostel rooms than
expensive hotel rooms. By expanding into this business, IHG can make headway into
overtaking Accor in the European market. Additionally, opening hostels in the U.S. could
encourage Europeans to travel and stay in the U.S. for cheaper than hotels.
Advantages: provide cleaner alternatives to dirty European hostels, penetrating new market
and gaining new customers, increased long run revenue and sales, stimulate travel to the
U.S.

Disadvantages: untested market for global hotel companies, possibility for failure in U.S.
because of lack of demand, land and infrastructure costs associated with building hostels
ii. Recommendation
The recommended alternative is to implement hostels into the portfolio. There is risk
associated with this decision, but the rewards could prove to be immense because of the
severe lack of competition in the U.S. and small competition in Europe. This will prove to be
an extension of IHG`s goal to build brand awareness and strategy to build the industries
strongest operating system and take advantage of market size and scale.
iii. Implementation
IHG should penetrate the market for hostels in Europe where there is currently
demand. The first hostel should be opened in a city with high volume and proven success of
current hostels. From there, IHG can advertise that they offer a cleaner and more luxurious
stay than their competitors while maintaining the low prices that make hostels attractive.
IHG can continue to use their current operating system and structure to maintain and build
on their brand image and increase demand for their newest portfolio addition. IHG can start
planning immediately for which country they want to open into, and target to open five
hostels within the next two years. From there, they can project how much success they will
have in future years based on the demand and growth of the five hostels. If they succeed,
IHG should look at opening an additional five hostels per year and increase or decrease
depending on the height of industry success factors. If the hostels do succeed, IHG can look
at opening hostels in the United States, their biggest market for hotels. These hostels can
prove to increase brand awareness, differentiate their portfolio in order to gain an

advantage over rival competitors, and show all of their potential customers that they care
how they live while they are away from home

Works Cited
“About Marriott Hotels Marriott Corporate Business Information. “Www.marriott.com. Web. 26. Apr.
2016. <http://www.marriott.com/marriott/aboutmarriott.mi>
“Critical Success Factors in the Hotel Industry.” Small Business. Web. 26 Apr. 2016.
http://smallbusiness.chron.com/critical-success-factor-hotel-industry-72378.html
Donnelly, RR, Patrick Cescau, and Richard Solomons. Annual Report and Form 20-F 2015. Annual
Report. Addison Group, 2015. Web. 23 Apr. 2016.
http://www.ihgplc.com/files/reports/ar2015/files/pdf/annual_report_2015.pdf
“IHG Competitors Intercontinental Hotels Group A Stock – Yahoo!Finance.” IHG Competitors
Intercontinental Hotels Group A Stock – Yahoo!Finance. Web. 26. Apr. 2016.
http://finance.yahoo.com/q/co?s=IHG
“Market and Competitive Environment.” – IHG Annual Report and Financial Statement 2009. Web.
26. Apr. 2016. http://www.ihgplc.com/files/reports/ar2009/market-and-competitive-
environment.html
“Wyndham Hotel Group Wyndham Worldwide.” Wyndham Hotel Group Wyndham Worldwide. Web.
26 Apr. 2016. http://www.wyndhamworldwide.com/category/wyndham-hotel-group

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