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 News
as one of 2010's most influential executives—recently spoke with BTN'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.