Jim Abrahamson, president of the Americas region for
InterContinental Hotels Group, spoke recently with BTN senior associate editor Michael B. Baker about rate
negotiations, group travel expectations and a brand-by-brand overview of the
company, the world's largest in terms of revenue and number of rooms.
Business Travel News:
How are corporate rate negotiations progressing?
Jim Abrahamson:
We're seeing a lot of strength on Tuesdays and Wednesdays, and that really
signals a return of more business transient travelers.
We're in the season right now. We're in the early legs of a
recovery cycle. It will be demand-based, and we'll likely see shifting segments
first, which will have a positive influence on average daily rate. If we
continue to see strength in Tuesday/Wednesday occupancy levels in key markets,
I don't know that we'll see widespread rate pressure, but we'll see the
opportunity to yield rates more effectively in key markets during the
request-for-proposals season. We're certainly well into a recovery cycle, at
the front edge of it. With these demand patterns continuing, we do see that
environment returning at some point.
BTN: What sort of
bounce-back are you seeing with group business?
Abrahamson:
Booking windows are still relatively short. It takes a while for the major
events to return. Regional conferences have clearly commenced, and that is a
trend that started back in the second quarter. Our outlook is for that to
continue. We've seen some decent pre-bookings for this fall. There's not a lot
of transparency into 2011 yet, other than seeing momentum, and we have no
reason to believe that will subside.
BTN: What are you
seeing with your specific brands?
Abrahamson: In
looking at all of our brands this year, the general factors we've seen are
improved performance across all of our brands. That's been largely
occupancy-led. We're seeing improvements in marketshare across all of our
brands. That's the factor that drove all of our results as we look at the first
half this year. This has been what we're describing as a quality-led recovery,
meaning quality hotels in quality markets with quality ownership seem to be
leading in terms of revenue per available room recoveries and marginal
improvements. Those with a higher quality of distribution have seen higher
earnings than those with lower quality.
Specifically to the InterContinental brand, we've seen both
improvements in occupancy and in average daily rate. Part of the average daily
rate increases were influenced by improvements of segmentation, meaning from a
year ago, less reliance on some of the discounted channels that were available
to us and necessary during the recession period. They're generally located in
key gateway markets, and those key markets seem to be responding more favorably
than secondary and tertiary markets.
BTN: How has your
new New York property been performing so far?
Abrahamson: New
York has been a headline property. Our Times Square property opened July 12,
and New York has been exceptionally strong this summer. Our timing couldn't
have been better. There is a lot of compression in that market, driven by
international demand, so we've been enjoying a very strong performance, and
that's ramping up very quickly. It looks like it will continue into the fall as
pre-booked groups and meetings kick in.
BTN: How about
the Crowne Plaza brand?
Abrahamson:
Crowne Plaza is exceptionally well positioned. It has a very strong business
travel and meetings offering. With business travel returning, we're seeing the
same dynamics I mentioned with InterContinental. Crowne Plaza is more focused
on midsized regional meetings. We're not necessarily a convention brand. We're
a lot more widely distributed, in nearly 200 markets across the Americas, and
we're seeing that pay dividends.
BTN: What sort of
corporate interest have you seen for your new Indigo brand?
Abrahamson: When
we looked at our distribution and the number of hotels we've had open during
the recession, we've now picked up some key locations, such as New York City.
We're doing a lot more in the way of cross-selling and cross-promoting our
brands internally, so the corporate traveler is discovering the Indigo brand in
those locations. The corporate traveler is looking for that boutique brand,
something different from the cookie-cutter brands.
BTN: What's the
status of the $1 billion Holiday Inn relaunch?
Abrahamson: I
think it was a very bold move for us to relaunch Holiday Inn, given the size,
scale and history of our brands. Some would have said our timing was miscast as
we headed into the recession, but we stayed the course. Other companies may
have pushed some deadlines back, but we didn't vary one bit from our deadlines.
While having some trepidation about the recovery in 2009,
our decision served us well because of the response of our customers. Those
hotels that invested in repositioning, relaunching and renovating have seen
dividends almost immediately. The performance gap for Holiday Inn is enormous.
Those hotels that have done the relaunch are showing a significant advantage in
terms of quality and performance. The reception has been phenomenal.
We have a much higher appeal to corporate travelers today,
and because the recession has put focus on value, some are rediscovering or
revalidating their commitment to Holiday Inn. The strength of Priority Club as
a program with business travelers, the triangulation of all those events has
given us a strong competitive positioning. We're very pleased with the results
and are thankful we've stayed the course. We've opened more than 150 hotels
year to date in the Americas, and 80 percent of those are Holiday Inn hotels.
We've removed about 1,000 hotels in the last five to seven years. That cyclical
updating has caused the average age of our hotels to decline significantly.
BTN: Are you
seeing much benefit from businesses trading down in their hotel programs?
Abrahamson: It's
not always about price. If it were all about price, McDonald's would be the
best hamburger in America. It's about value for the services. It comes with
distribution, having availability and business travelers like the loyalty
program and the points that come along with it. They want consistency in
product quality. They're not price-driven.
BTN: How is the
extended stay tier faring?
Abrahamson: We
often look to the extended stay tier as providing leading indicators in market
recovery. As our customers start to rebuild their inventories, they're
sometimes slow to begin hiring processes, so they bring in contracted
employees, and project work commences. People start moving around again.
We've seen a return to our longer-term stays, and we're also
seeing corporate accounts gear up again, and we can feel that. They're responding
as we would expect them to do in the early stage of recovery. Because of our
positioning strategy, with Candlewood being in the lower midscale tier, it's a
great value play, particularly for these new locations and company startups. Staybridge
also is a supreme value in its position against Residence Inn and Homewood
Suites.
BTN: What's the
latest with your overall pipeline?
Abrahamson: We
continue to maintain the largest pipeline in the world. We've opened 150 hotels
year to date in the Americas alone. We're on track to open 300 hotels globally.
That's 40,000 rooms.
The openings continue to move forward. In the first half of
the year, we signed 86 deals in the Americas. That was largely conversional adds,
with the healthy performance of the Holiday Inn brand. We're seeing a decided
move from new construction, because of the financing issues.
This report appeared in the Oct. 11, 2010, edition of Business Travel
News.