New phase begins at InterContinental Hotels Group

18th November 2011 (Last Updated November 18th, 2011 07:57)

Taking charge of the world’s largest hotel company sounds daunting but Richard Solomons, CEO the InterContinental Hotels Group’s (IHG), seems relaxed.

New phase begins at InterContinental Hotels Group

Richard Solomons is in fine spirits. I am talking to the new chief executive of InterContinental Hotels Group (IHG) on the back of it having just reported a strong first-half performance for 2011.

Enjoying a 17% profit increase – revenue for the six months was £520 million, compared with £472 million for the same period in 2010 – results have been driven by a surge in occupancies and room rates. Other factors behind the group’s impressive returns this year have been the performances of brands such as Holiday Inn and Holiday Inn Express, Crowne Plaza and boutique line Hotel Indigo. Today, its business model comprises 4,400 hotels with another 1,100 in the pipeline.

It has been an auspicious start, although you could argue that Solomons is in the fortunate position of inheriting an impressive legacy from Andrew Cosslett, whose decision to step down in March was met with surprise across the entire hotel industry. Having succeeded Cosslett in July, Solomons, while paying respect to his predecessor, extols IHG’s wealth of human resources, which has buttressed the company’s achievements over the years.

"I recognise the contribution that Andy made to IHG’s success in his time here," he says. "However, there is also a strong team on the executive committee, many of whom have been here for many years, and have been key to our successes."

"I have looked upon it more as an extension of my previous role rather than a fundamental change"

Solomons appears to be very much the team player. In his previous incarnation as CFO and head of strategy, the 49-year-old, who has been with the group in various guises since 1992, played an integral part in both backroom and frontline activities, working closely with Cosslett on global strategy and development. One would therefore assume that it was a natural passing of the CEO baton, especially given the common trend of CFO-CEO transitions within the corporate landscape in recent years.
"I can understand that argument," he says. "When the board asked me to step up to the role, it was quite an easy decision, as for most of the company it was a question of continuity behind the strategy. I have looked upon it more as an extension of my previous role rather than a fundamental change."

That’s not to say that Solomons is taking this seemingly seamless transition for granted. While markets continue to show signs of recovery, the hotel industry is still not out of the woods. Having undergone successful reconstruction after the demerger from former parent company Six Continents in 2003, and weathered the storm of the downturn – it managed to maintain its dividend, something many of its competitors failed to do – IHG has progressed, as Solomons defines it, to the next ‘phase’ of its development.

"We’re now into the third phase of IHG’s independence, which is defined by high-quality growth," he says. "This requires us to really deliver consistently and rigorously against our plans, not only because our investors expect it, but also because we have thousands of owners of hotels who rely on us to make their businesses successful. That’s a clear focus for me."

So what will galvanise this growth? Similar to other global hotel brands, all eyes appear to be on China.
Currently, IHG is the largest international hotel company in the country with 142 hotels already in operation and another 150 scheduled to be built. As we speak, the group is in the process of developing a new brand, as yet unnamed, with a view to capitalising on existing growth in the upscale sector by offering opportunities to domestic Chinese brands to operate under the IHG umbrella.

"We’ve already signed letters of intent with hotel owners interested in the brand, even through we haven’t yet named it, let alone defined its exact specifics," says Solomons. "But they have an interest in it and recognise that as the biggest international hotel operator in China, we are probably a good person to partner with."

That is not to say that IHG is set to forsake its other historically profitable regions. The US still represents two thirds of its business, while emerging markets are also set to play an integral part – it currently has 14 hotels open in India with another 42 due to be built. However, while being a global group, Solomons is adamant that the key to future success will be to differentiate between regional projects rather than taking an en-masse approach.

"You have to be really clear about what your brand stands for and what the hallmarks of a global brand are while tailoring it appropriately to the local markets"

"If you look at India, it is often bucketed with China even though it shouldn’t be – they are different countries with different cultures and are in different stages of development," he says. "Therefore, you have to be really clear about what your brand stands for and what the hallmarks of a global brand are while tailoring it appropriately to the local markets. This is something we really focus on; you’ll find that if you walk into a Holiday Inn Express, whether in China or North America, they will share many of the same characteristics, but will also be different. Getting that balance right is the trick in a global-branded business."

So does this mean moving further away from non-descript cookie cutter models? "In some respects, yes, in others, no," he says. "It really depends on how you define a cookie-cutter model. What we tend to think about is the overall guest experience and what that brand stands for. This could be whether it is a boutique hotel or something more homely. Yes, this sometimes manifests itself in some hotels having quite similar buildings because that’s what makes sense in terms of brand experience and the owner’s returns.
"It’s really about recognising what your consumer wants.

"It might sound trite but you don’t turn around a big business in a sustainable way with short-term decision-making"

The Hotel Indigo is a great example; when we launched it in 2004, it was one of our very first lifestyle brands. We now have 100 properties, opened or planned, which is pretty fast growth for an upscale hotel brand. Those are definitely not cookie-cutter properties but there is a proposition there that is consistent."

Solomons’ enthusiasm for the future is palpable, as you would expect from a man in charge of the world’s biggest hotel company.
When readdressing development in China, he is confident that it will become a springboard to successful expansion in other Asian regions. Throughout our conversation, he frequently alludes to the ‘long term’.

Is this something that underpins IHG’s business strategy? "I very much believe in making the right strategic decisions that are long term," he says. "The reason that the results were strong and that we gained a market share is the outcome of things that we have been doing for many years. It might sound trite but you don’t turn around a big business in a sustainable way with short-term decision-making.

"It’s going to be a fascinating era as we move from being an industry dominated by global western brands – often American – to one where Asian brands, or brands created in other markets, are going to be a very important part of the future."
Towards the end of our exchange, Solomons tells me of his proclivity for "travel and working in a business where there is a lot of change". Given his recent promotion and the latest market movements, he appears to be in the right job.