IHG Takes Aim at Upscale and Luxury Markets

InterContinental Hotels Group (IHG) is ramping up momentum after a strong 2017, particularly in the upscale and luxury segments.

After reporting a four percent increase in group revenue last year, up to $1.78 billion from $1.71 billion in 2016, CEO Keith Barr discussed plans on the company's fourth quarter earnings call to further develop IHG’s portfolio in those categories.

In the luxury space, Barr intends to further accelerate the growth of Kimpton Hotels – which IHG acquired in 2014, in the U.S. market and globally, for $430 million.

“One of our key objectives has been to take the brand global,” Barr said, noting it opened its first international Kimpton last May with the Kimpton De Witt in Amsterdam. With signings in China, Indonesia, and Taiwan, Kimpton will soon makes its debut in Asia as well.

Barr sees even more opportunity within the $60 billion global luxury sector that is projected to grow by 50 percent over the next decade.

To add other luxury brands to its portfolio, the company is looking to acquire one or two small, asset-light brands, he said. They would operate at a price point above InterContinental Hotels, and potentially also in the resort space.

The upscale segment, valued at $40 billion, is also expected to grow by 50 percent over the next 10 years.

“Our guest research has highlighted that many consumers are looking for something other than the traditional big-box upscale hotel,” Barr stated. “They want a more unique experience. We think that there is a real opportunity for an upscale brand that offers the guest something more informal and differentiated, combined with the reassurance and quality standards of a branded chain.”

A franchised upscale brand will launch later this year, and initially focus on Europe, the Middle East, Africa, and Asia.

This comes on top of IHG’s previously announced plans to target the midscale market. Last September, it revealed plans to launch its 12^th brand, Avid Hotels. 

Rates are expected to be about $10-15 less than IHG's upper-midscale Holiday Inn Express brand. Guest rooms will include “sound-reducing features,” workspace, open storage units, and in-room entertainment options that allow guests to cast content from their smart devices to in-room televisions.

IHG has already signed 75 franchise agreements for the brand in the U.S. and Canada, and recently announced it will launch in Mexico. The first Avid Hotels property, located in Oklahoma, began construction and is anticipated to open in the third quarter of this year.