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InterContinental Hotels Group in recent years has focused on expanding the use of dynamic pricing in corporate transient programs, including an aggressive push of the model in the Asia/Pacific region and an effort targeted at making the concept more palatable for large-market buyers. IHG senior vice president of worldwide sales Stephen Powell-- recognized by Business Travel Newsas one of 2010's most influential executives--recently spoke with Management.travel's Michael B. Baker about the success of those efforts. He also detailed the impact on corporate travel of the $1 billion Holiday Inn relaunch and the upcoming IHG leadership change in which CFO Richard Solomons this summer will succeed Andrew Cosslett as CEO of the company. Excerpts follow.
Did you reach your goal of 20 percent of corporate travel buyers to some degree using dynamic pricing?
We had a realistic objective for the conversion of accounts to strategic pricing. We met that and exceeded it by about one percentage point. Interestingly, in the proposal we provided to our clients, there was savings for them but there also was a moderate rate increase for us. Our dynamic pricing accounts are producing for us better than the flat-rate accounts, as far as volume and rate, though that was not our intent. Our intent was to try to have longer-term contracts, to have more price transparency and rationalizing, and to simplify it. The reason dynamic pricing got such a bad beat from the very beginning was that everyone said the hotels were going to try to jack it to you. Well, we can't, because if it's tied to the best available rate, if you get it wrong in a hotel, then you don't get reservations from the leisure transient business. Not every client is a good client for dynamic pricing. If we're the third choice or one of four, if we're sort of a benchmark choice, then it doesn't work as well. You need to be engaged with us, working with us, utilizing our hotels on a very regular basis, and then it works for you. If you're only coming during high-demand periods, then you're going to pay the most and are not going to like what you get.
How are corporate transient volumes overall?
Corporate transient is having a good rebound. We're doing better in Asia with rate increases. Asia dropped really quick, really hard, but it's coming back fast. Europe and particularly [North] America are a little bit slower. Our hotels are driving high occupancies. We're doing very well on Tuesday, Wednesday and Saturday nights, which is the reason dynamic pricing works. If you can get off those nights and deliver to hotels across the board, across the week, you're going to do well with us. If you're always going to be on Tuesday or Wednesday night, those are the high-demand periods.
Are you seeing the same pattern with group business?
The group business is picking up again. The windows of consideration are getting a little bit longer, so that tells us that people are getting back to planning their events and meetings again. Inquiries are up, conversion is up--though not to the levels we would have like to have seen in the past. But rate is still an issue. Recovery is underway, but it's led in a big way through volume, through occupancy. Rate is not returning as quickly as occupancy. You know how we always talk about whether it's a buyer's market or a seller's market? In this one, it depends. In some locations or segments, it's more of a seller's market than it has been, but you can't blanket it anymore. If you look at all the segments, it really varies quite a bit. We're all getting lots of inquiries, but the reason is because it's from a lot of agencies and intermediaries. Whereas if you were with XYZ company you would look at only at six properties, if you were with an agency, you'd look at 16.
Have you seen any impact on the corporate travel side from the Holiday Inn relaunch?
We've had more acceptance of Holiday Inn and Holiday Inn Express on the corporate travel side as the result of the relaunch. In some cases, we've had customers that just buy that brand. Most of our customers buy us at several different levels, across all the brands, but we had more acceptance of Holiday Inn and Holiday Inn Express, throwing those two in together, as a brand without going through an arduous RFP process--just a percentage off the rate because of what the brand had done. I wish we'd had more of that, but we did have some of our big customers say, "OK, I'm ready to accept the brand." We found those Holiday Inns that had relaunched--before we had relaunched everything--were having better revenue per available room performance than those that had not, and their customer scores were better. Now, the whole brand is relaunched, and we've seen good results for that. We have to keep it going. You can't let the luster wear off.
Do you expect any strategic shifts with a new CEO coming on board in a few months?
[Cosslett] leaves June 30. He was with us about six years and did a lot of changes to the company. He really changed the culture of IHG. Richard Solomons is a great guy and is going to continue with the strategy that we've had. We've all been through changes, but he said he believes in the strategy and the corporate vision, and we're going to continue with that. The article originally was published in Business Travel News.
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