2. 1. Introduction
In 1946, Pan American World Airways launched one of the current top ten international
luxury hotel group in the world, InterContinental Hotel Group. The first InterContinental
Hotel was open in Belém Brazil, then IHG start launching more and more hotel all
around the world, and became the top ten international luxury hotel group in the world,
with the impressive guest list, from Louis Armstrong to Princess Grace, to become today
a pioneer in the hotel industry in terms of quality, service and responsibility. And each
property has different style or theme, from heritage elegance to urban hotel and even on
the sea shores (InterContinental Hotel Group, 2014).
2. Strategic Profile
Vision, mission, and core values are what makes IHG success in the hotel industry.
(Source: Queen Margaret University, 2014)
2.1 Vision
(Source: Annual Report, 2010)
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3. The vision of IHG is not only a simple vision, it is also a guide to the method of how they
can do this business successfully and use this vision to stand out of the crowd. ‘Great
Hotels Guests Love’ its definitely put all IHG guest in prior of everything. It is about build
a great hotels and improve brand reputation, in order to beat their competitors, by
providing the best and unique service to the guest. It is about taking guest by surprise,
go the extra miles to go beyond what they expect, so that the guest can enjoy their stay
in IHG and recommend InterContinental to their friends or family.
2.2 Mission
According to InterContinental Hotel Group, the mission of IHG is their five winning ways.
(Source: Annual Report, 2013)
This mission explain that IHG always have the courage to practice what they think is
right, whether it is more difficult or complicated, and they always keep their promise
without letting anyone down including all the hotel staff and their guest. IHG always
show that they understand their guest’s needs better than any other brand in this
industry, they treat all their guests as individuals, always pay attention on every little
things of their guests need or wants, and use their experience to find a new way to
deliver the great service the guest want to have. IHG always into learning new things,
and always challenge themselves when applying new things on the way they do
business, in order to keep improving themselves. IHG believes that what makes this
brands huge is the knowledge of their employees, and therefore IHG always listen to
people’s idea and learn from each other, they work hard to create a better relationships
with others and trust and support each others, that’s how the mission make IHG
success today (Holiday Inn Kuwait, 2014).
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4. 2.3 Core Values
(Source: Google Image, 2014)
The core values of InterContinental Hotel are ‘independence, self-knowledge, family
first, fulfilment and fun,’ says Kevin Kowalski, which can summarise as ‘Great Hotels
Guest Love’.
The core values shows the goal of IHG is to tap into people’s emotions, it is because
that IHG wants people to love the Intercontinental brand because it understand the core
values of their target customer (ADWEEK, 2010).
What IHG try to achieve from 2013 - 2017, is to cut down 12% of carbon footprint per
occupied room across all properties (see appendix 4), and also to lessen 12% of the
water use per occupied room (see appendix 5), and most importantly is to provide
training programs to 20,000 employees through IHG Academy (IHG Corporate
Responsibility Report, 2013).
According to the guest feedbacks from Agoda, some of the guests complained that the
check in time was too long, and also there are one guest mentioned that one of the
receptionist in InterContinental Singapore was wearing a sunglasses during working
hours, another guest also complained that the staff was aware of that one of the hotel
room was under renovation, however they still assigned the room next to it to the guest,
especially the guest was staying with the children and the guest has asthma history.
Based on all this negative feedback to the Intercontinental hotel, meaning that
sometimes the hotel was not doing what their vision said, it does not meet the standard
which is why one of IHG’s key objectives is to improve employability.
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5. 2.4 IHG’s Financial Statement in Three years trend
From the IHG’s group income statement (see appendix 1 & 2), we can see that their
revenue has been increasing significantly for the past three years, from 1,768 USD
Million in 2011 increased to 1,903 USD Million in 2013, which including the cost of
sales, administrative expenses, and other operating income and expenses, also their
operating profit were also increased rapidly, although there was a decreasing of
operating profit from 2011 to 2012, however they still manage to gain more profit in
2013 to cover their lost in 2012, which from 605 USD Million in 2011 drop down to 601
USD Million in 2012, and increased again to 673 USD Million in 2013 (Annual Report,
2013).
3. Strategic Environment
3.1 Strategic Capabilities/Competitive Advantage
(Source: Johnson et al, 2011; Create for this assignment)
InterContinental Hotel Group have their own way or strategy to compete with others and
win in the hotel industry.
IHG’s developed their core capabilities by compete with others in having a appropriate
business model.
Strategic Capabilities
Resources: What IHG have, e.g. Competences: What IHG do well, e.g.
Hotel Property, Computer Systems,
IHG Academy, IHG Storm Shelter
Physical
Train employees, improved
employability, support local
communities
Group income statements, cash flows,
staff costs
Financial
Revenue increased, profit declined,
staff costs increased
Managers, employees, guests,
suppliers, partners
Human
great service deliver through IHG
people, through selection and
evaluation
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6. (Source: Annual Report, 2013)
A business model can deliver a clear image on managing hotels, it enable IHG to grow
with limited investment. Nowadays, 88% of the operating profit is earning by managing
operation (Annual Report, 2013). This business model helped IHG to focus more on
stronger their brand portfolio based on guest needs from online feedback. IHG business
model also does create more opportunities to build stronger relationships with other
independent hotel owners and generate more revenues by letting them to use IHG
global demand delivery systems, which guest can book their hotel through IHG booking
systems and call centres also. One of the example is that their relationship with Summit
Hotel Properties Inc., now IHG have the rights to earn fee revenues through supporting
demand for the hotel that are purchased by Summit (Annual Report, 2010).
To compete in the best markets in the hotel industry, IHG must sustain their leadership
position, because the future supply of hotels is important to the world. IHG nowadays
owned 204,859 rooms in 1,275 hotels in over 64 countries, which IHG is now the largest
branded hotel pipeline channel in the world (Annual Report, 2010).
To win by focused on current consumer segmentation, In InterContinental Hotels and
Resorts, their quality, service and facilities, with the true interest in guests differentiate it
in a competitive segment, which IHG trained their staff to fulfil guests needs by
introducing local attractions to create unique experiences, it allow their guests to have
the enjoyment during their stay.
The other capabilities or competitive advantage that IHG have is that their scale and
expertise. The major benefits that guests who stay with IHG, and owners who invest
with IHG, is their systems where guest can book through it to stay with IHG, in order to
maintain their relationship with their guest by looking through their history with the hotel.
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7. By having that benefits, first IHG must have a great locations that is convenience for
different type of guests, and a great brands, efficient booking systems, along with other
elements. Together, these benefits and elements are the key to run the business, which
generated 68% of total rooms revenue (see appendix 6) (Annual Report, 2010).
The most important capabilities or advantage is IHG’s people and their core values,
which it can only be truly recognise if they fully engaged with their employees, providing
the best service to the guests through their values and brands, to provide the best
environment for their staff to be successful, which it indicated the five winning ways:
• do the right thing;
• show we care;
• aim higher;
• celebrate difference;
• work better together.
(Source: Annual Report, 2013)
3.2 SWOT Analysis
(Source: World Market Intelligence, 2014; Create for this assignment)
IHG’s strong brand portfolio provided more choice for customer to choose which type of
hotel they want to stay, with the seven key brand under IHG: InterContinental, Crowne
Plaza, Holiday Inn, Holiday Inn Express, Hotel Indigo, Staybridge Suites and
Candlewood Suites, which all are luxury brands. A strong brand portfolio did help the
company to attract a variety type of guest. The Priority Club Rewards Programs helps
Strength:
• Brand portfolio
• Priority Club Rewards
Programs
• Strong Operating Performance
Weaknesses:
• Limited Liquidity Position
Opportunity:
• Strategic Growth Initiatives
• Growing Youth and Student
Travel Market
Threats:
• Foreign Currency Fluctuations
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8. maintain the growth of revenues, which is also the largest hotel loyalty program in the
world, member of this program can redeem points and free accommodation or other
hotel benefits. From the financial statement, we can see that IHG’s revenues has been
growing since 2009 (see appendix 2), revenue growth result of the improvement of hotel
operating performance, the operating margin of IHG (35.37%) was also higher than
Accor (5.67%) and Hyatt (4.80%) (World Market Intelligence, 2014).
IHG’s current ratio was 0.72, which is lower than 0.84 in 2012 (see appendix 3), and
also lower than its competitor like Accor (1.25) and Hyatt (1.34) (World Market
Intelligence, 2014). Lower ratio indicates that the liquidity position of the company is
weaker than its competitors, moreover the company assets was decreased in 2013 and
its liabilities increased. Therefore, limited money and liquidity position will create
disadvantage to the company while the company wants to compete with others in the
market.
IHG using one of their opportunities which is various strategic initiatives currently driving
their business growth. IHG are taking one step ahead than others, they opened four
hotels in a year, which not much company can do that due to shortage of money or
other factors. The growing youth and students travel market are currently benefiting
IHG. According to the World Youth Student & Educational Travel Confederation (WYSE
Travel Confederation), around 70% of students are travelling for different purpose such
as study, working, or learning different cultures. WYSE Travel Confederation revealed
that the average expenditure of students is US$2,600 in 53-days trip, and IHG operates
over 4,000 hotels in the world, this is a great opportunity for IHG to increase their
revenues and gain more profit from the students (World Market Intelligence, 2014).
Changes in foreign currency exchanges rate will likely to increase the expenses of the
company, which it may impact the company to compete with other competitor due to it
may affects the profit of the company.
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9. 3.3 PESTELAnalysis
(Source: Queen Margaret University, 2014)
A stable politic is a key factor that can bring success to any company or organisation in
any industry. Political and legal factors can affect the number of tourist travel to a
destination, and this will directly influence the hotel occupancy and will eventually affect
the hotel profit and revenue. For example an election in US will result in a changes of
issuing VISA to the tourist who wants to travel to the states, which where most IHG
properties in.
National economic factors could be affect by local international events, for example like
all hotel properties like IHG in UK or Beijing, hotel rate will increase significantly due to
international events like Olympics, same as the situation UK and Brazil, the hotels rates
will be affected by the World Cup events.
Social factor could influence hotel industry as well, due to the growth of world population
and characteristic of human being, people will have different needs because of different
lifestyle. Hotel must change their style, in order to meet the current consumer needs
and expectations.
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10. Environment factors could also impact the hotel industry, for instance like more
population or more tourists destination or attractions area could create more pollution in
the nearby area, which people do not like to go to place with full of pollution, it will affect
their moods while they travelling. An example of Indonesia burn trees and haze was all
around Singapore, it can shows that people’s mood were affected due to the haze in
Singapore.
Hospitality company doing innovation like hotel website, booking system, or change to
using green technology could affect their customer decision in booking a hotel, people
nowadays are somewhere particular in the way of booking a hotel or hotel that are using
green technology, this can impact the hotel profit and revenue as well.
4. First Theme: Technology
In one of the CSR program that IHG currently doing is the ‘IHG Green Engage’, one of
the field that they are doing in this program is water conservation and efficiency. IHG
green engage provided a guide and new technologies of how to save water to protect
the environment. From the corporate responsibility report 2014, 85% of the water were
used in hotel room like shower, toilet, and also kitchen in the suit room, and after using
the new technology, which is the low flow fixtures (Corporate Responsibility Report,
2014). A case from one of the Holiday Inn hotel in Australia shows the evidence of after
using the low flow technology, the water usage was cut down by 50% after 18 months
(Corporate Responsibility Report, 2014).
4.1 Second Theme: Innovation/Porter’s Generic Strategy
IHG launched ‘Shelter in a Storm’ program in 2013 (see appendix 7), the purpose of this
program is to promote awareness of how to respond or avoid a disaster. IHG raised
$1.2 million and supporting over 15 disasters over eight countries through this program,
and IHG have around 60,000 employees was involved in this program supporting local
communities, which make them the innovators of this field, because they are the first
company who launch this type of program (Corporate Responsibility Report, 2014).
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11. Porter’s generic strategy is use to analyse the external factors that could impact IHG
business.
(Source: Google Image, 2014)
Using Porter’s generic strategy, IHG should be in differentiation box, because they are
one of the luxury hotel brand in the world, which means that their price are higher than
normal hotel company and also they have a lot of properties all over the world, which
means they are selling to the broad market. Like mentioned before, IHG have more than
1,275 hotels in over 65 countries, they earn revenue and profit not only benefit
themselves, but also its about give back to the communities by launching the shelter in
a storm program, and open IHG Academy program to train their staff, in order to deliver
better service and experience to their guests.
5. Conclusion
InterContinental Hotels Group is a multinational company, and they will remain confident
to keep growing their business in the hotel industry, with the strong brand portfolio which
recognise by the world, and the IHG academy program put a lot of effort in training
employees to deliver the best service to their guest, which make them the best top 100
companies to work for in Fortune magazine (IHG PLC, 2012), with such a strong
operating performance, in order to keep their revenue and operating profit increase. If
IHG continue doing business with their own strategy, promote more CSR program, and
using more new technology to cut down the energy usage, continuing IHG will become
more sustainable in the hotel industry and be able to compete with their competitors.
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12. References
CSR Lebanon. 2013. Corporate Social Responsibility at IHG cluster hotels. [Online]
Available at: http://www.csrlebanon.com/CSR-at-IHG%20.html. [Accessed December 15
2014].
Hospitality Net. 2013. IHG Announces New Corporate Responsibility Targets. [Online]
Available at: http://www.hospitalitynet.org/news/4062327.html. [Accessed December 15
2014].
IHG PLC. 2009. Annual Report and Financial Statement 2008. [Online] Available at:
http://www.ihgplc.com/files/reports/ar2008/index.asp?pageid=19. [Accessed December
19 2014].
IHG PLC. 2012. IHG Ranked Among 100 Best Companies to Work For By Fortune
Magazine. [Online] Available at: http://www.ihgplc.com/index.asp?
PageID=116&NewsID=2730. [Accessed December 19 2014].
IHG PLC. 2011. IHG Annual Report and Financial Statements 2010. [Online]. IHG PLC.
[viewed 29 December 2014]. Available from: http://www.ihgplc.com/files/reports/ar2010/
docs/ihg_annual_report_2010.pdf.
IHG PLC. 2014. Corporate Responsibility Report. [Online]. IHG PLC. [viewed 20
December 2014]. Available from: http://www.ihgplc.com/files/pdf/2013_cr_report.pdf.
IHG PLC. 2014. IHG Annual Report and Financial Statements 2013. [Online]. IHG PLC.
[viewed 20 December 2014]. Available from: http://www.ihgplc.com/files/reports/ar2013/
docs/IHG_Report_2013.pdf#page=70.
InterContinental Sanctuary Cove Resort. 2013. Corporate Social Responsibility. [Online]
Available at: http://www.intercontinentalsanctuarycove.com/resort/corporate-social-
responsibility. [Accessed December 15 2014].
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13. Johnson, G, Scholes, K and Whittington, R. 2011. Exploring Corporate Strategy, Text
and Cases, 9th ed. London, Financial Times and Prentice Hall.
Johnston, G., Whittington, R. and Scholes, K. 2012. Fundamentals of strategy. 2nd
Edition. London: FT Prentice Hall.
Research Methodology. 2013. Hilton Hotels PESTEL Analysis. [Online] Available at:
http://research-methodology.net/hilton-hotels-pestel-analysis/. [Accessed January 01
2015].
World Market Intelligence. 2014. InterContinental Hotels Group Plc (IHG) : Company
Profile and SWOT Analysis. [Online]. London: Progressive Media Group. [viewed 31
December 2014]. Available from: http://search.proquest.com/docview/1552298826?
accountid=12269.
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14. Appendix 1
IHG’s Group Income Statement in Three Years Trend
(Source: Annual Report, 2013)
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15. Appendix 2
InterContinental Hotels Group Plc - Revenue and Operating Profit
(Source: World Market Intelligence, 2014)
Appendix 3
InterContinental Hotels Group Plc - Solvency
(Source: World Market Intelligence, 2014)
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16. Appendix 4
Carbon Footprint kg CO2e per occupied room (kg CO2e)
(Source: Corporate Responsibility Report, 2014)
Appendix 5
Water use per occupied room in water scare areas (m3 per OR)
(Source: Corporate Responsibility Report, 2014)
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17. Appendix 6
IHG’s System delivers 68% of Total Rooms Revenue
(Source: Annual Report, 2010)
Appendix 7
IHG Shelter in a Storm Program
(Source: Corporate Responsibility Report, 2014)
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