IHG's Derek DeCross talks:
- The sharp growth of new Business Edge accounts this summer
- Pandemic-era demand differences between SMEs and larger enterprises
- IHG's business travel demand outlook
InterContinental Hotels Group in 2018 introduced its Business Edge product, geared toward small and midsize companies, and the company says it has quickly grown, even during the pandemic. BTN senior lodging editor Donna M. Airoldi spoke with IHG SVP of global sales Derek DeCross about the program and developments in the works. This interview has been edited for length and clarity.
BTN: How many clients have you signed since launching Business Edge?
Derek DeCross: I can safely say we doubled the size of the program since the beginning of this year. We knew in February it was going to be a good year, but then when things started to go off the rails with the pandemic and demand falling off a cliff, I didn't know what to expect. [As of Nov. 6, there were more than 35,000 Business Edge accounts, according to a spokesperson.]
BTN: Between June 1 and Aug. 31, IHG signed more than 5,300 new Business Edge accounts. How does this pace differ from pre-Covid, and what is driving it?
DeCross: That is outstanding growth even in a normal year, but in the face of a pandemic, it's extraordinary. In terms of what could be under the hood of that, localization of the program has been a key driver to engagement. Our program materials are not just in English, but also in German, Spanish, French and Chinese. Speaking of China, we had a tremendous response over the summer when we launched the Chinese-language registration utilizing WeChat.
Another driver is linked to the dynamic discount program. In a world where most larger companies are at least including dynamic pricing as a key element of their relationship with their hotel suppliers, the IHG Business Edge rates had already been set up with a dynamic discount, which enables participating companies to instantly take advantage of those saving at all participating hotels globally. And we're at over 5,600 [properties]. Many companies of course are struggling to survive in the pandemic and with the global economy, so this discount and the many other benefits of the program really make a big difference to them and their success. [IHG has registered accounts from about 125 countries, with 40 percent in the Americas, 30 percent in Greater China, and 30 percent across Europe, the Middle East, Africa and Asia, according to a spokesperson.]
BTN: IHG has seen less of a decline in SME travel than large corporate travel. Why is that, and what are the numbers to support this?
DeCross: IHG's broader SME segment revenue has not been as negatively impacted from a travel perspective as much as its larger counterparts. Without giving absolute percentages, what I can say is our SME segment is down 15 to 20 percentage points less year over year than our larger managed accounts. Some of it has to do with the fact we added more SME accounts, as they saw the strong value proposition in the program. But it's also because many of our existing SMEs are less likely to have some of the very stringent travel restrictions that larger companies have imposed since the pandemic. Often, SME accounts need to continue traveling to meet their financial obligations in order to survive. From an internal travel approval perspective, the leaner an organization is, it can resume its operations much more quickly than larger, more complex companies.
The other element perhaps is that [SMEs] tend to be more focused on regional, or shorter-distance domestic travel and not international long-haul travel. That is not an absolute statement by any stretch, but the latter has been more severely hit during the pandemic. And we tend to see the SME traveler primarily being domestic-travel-focused. Finally, from the corporate vertical perspective, where we see particular areas of strength are in essential services: supply chain logistics, health care, construction, energy and utility companies.
BTN: Who are you working with at these companies?
DeCross: Many customers for IHG Business Edge will not have a managed program per se, which is one of the compelling reasons we have this portal … and [accounts for] much of the growth we've seen over the summer. One area where we are looking at is partnerships with select travel management companies [to provide] a personalized experience for our mutual customers. IHG Business Edge is, I believe, the only major SME hotel program that allows booking over [global distribution systems]. We are indifferent in that case. If you want to book via your online booking portal, great. If you want to book via your travel advisor, great. If you want to be on the app, if you want to be on IHG.com, whatever it may be. … There is absolutely some of the managed components within that SME space that would greatly benefit from the IHG Business Edge program. It just takes the right course of business model between [us] and the TMCs to make that truly compelling for all the partners involved.
BTN: But none have been announced yet?
DeCross: We are actively in conversations with them.
BTN: What are customers asking for? What parts of the product are the most popular?
DeCross: First, it's free to join. Second, we include this guaranteed dynamic discount across. Typically, that is where our competitors stop with their SME programs. But then we go beyond that. No. 1, we said we are always flexible on where our customers want to book. We also automatically upgrade our registered travelers to IHG Gold Elite status after their first Business Edge stay. That is very popular. We've found that these customers truly become some of our most loyal, which was one of the surprises. We also understood that many of these customers don't have professional TMCs on their behalf. That is why we rolled out this one-stop-shop portal to allow them to access their spending and savings data, receive premium content and manage their travelers and bookings directly through the portal. Too often before, people were managed in spreadsheets or in Post-It notes or in their Outlook calendar. This portal [tells companies], here's where people have traveled, here's where they are now, here's what their savings have been, and that has been really compelling for them.
BTN: Does the program still offer participants networking opportunities?
DeCross: The thing we've had the most positive feedback on is this peer-to-peer network and premium content. This is where SMEs can really learn about topics most relevant to their business. [The B2B forum is moderated by IHG Business Edge staff. Some of the most popular topics are how to best access and leverage the benefits of Business Edge, including IHG Rewards Club upgrades, the chainwide discount and the Business Edge support team, according to a spokesperson.]
BTN: Is your discount on rates for Business Edge clients a set percentage for all subscribers, or does it vary by company or geography? Has this changed?
DeCross: It varies. It's market-appropriate based upon the volume of the business, and similar to how we would work with our other larger managed companies. [In order to qualify, the applicant has to be a business versus an individual traveler, according to a spokesperson. IHG then determines their level of benefits based on the amount they spend on travel each year. IHG also monitors production and reviews discount levels on an annual basis. Regardless of production, it will carry the same discount levels forward for 2021.]
BTN: What services in Business Edge have you changed based on customer feedback?
DeCross: It's the partnerships.
BTN: Such as with American Airlines.
DeCross: Our initial focus was on a travel partner, which is why American Airlines Business Extra [American's small-business program] was the first partnership, and we will be doing more there. In essence, what that initial program was around was providing Business Extra members an opportunity to earn even more points in their program by signing up and participating in IHG Business Edge. The sign-up and the quality of the customer set surpassed our expectations. … [In 2019,] we had a partnership with the Wall Street Journal where we had very specific SME-appropriate content to help them do their jobs better.
BTN: Anything additional besides the TMC conversations, or that you've learned?
DeCross: One is expanding the geographic reach. That was the partnership with WeChat in China. That has been very successful. Then it's exploring other partnerships, whether with some of these companies looking to leverage Business Edge and/or partnerships with third parties, such as the TMCs. And I'm happy to say that on the partnership side, we are now having other partners coming to us to investigate ways to leverage IHG Business Edge to bring in new customers to their offerings, which thereby establishes more value for our members as well. So absolutely there is a lot more opportunity on the partnership side.
In terms of learnings, when we looked at this segment, we knew having a lack of a structured travel program meant that these customers would be tougher to influence. But what we've learned is that when you provide this meaningful programming that delivers the value of targeted messaging, these companies respond well and they create some of our most loyal relationships. The other thing we learned was how many of these rich relationships already existed at the individual hotel level, with so many local customers. One of the benefits of having huge distribution is taking these local relationships across these 5,600 hotels and turning those local relationships into a global IHG Business Edge relationship. That pays off handsomely. The customer [can travel to] 5,600 hotels around the globe and get this discount. But it also allows IHG to increase its share of wallet. Finally, we were talking about the fact that they are still traveling. It's inspirational to see is the resiliency of the SME.
BTN: In the U.K., you offer Business Edge Pay. When might that expand to other regions?
DeCross: It's a great offering, and it's something that we considered. It's just a matter of course of priorities. It launched earlier on, even before Business Edge. That was something we incorporated into the wider Business Edge program. Today it's just in that U.K. geography. But obviously there's a compelling value proposition for it, it's just a matter of when we can get that into the pipeline.
BTN: How is overall business travel recovering and changing across the market?
DeCross: That first step of getting travel ramped up and our economy for that matter is really instilling confidence around the cleanliness and safety procedures. And this is an industry issue. This is not one brand, not one element of the industry versus another. This is all brands from the moment you leave your house to the time you get to the airport, through the airport, onto the aircraft, to the car service, to the hotel, and back again. Every step of that has to be reliable. And our customers and those that manage travel must have confidence in that entire travel chain, and that is the most critical component to getting people comfortable traveling and meeting again. That is why you saw IHG take such strong measures to ensure our customers and guests know how we are building on our already long-standing commitment to cleanliness across our portfolio … as a global brand standard to reassure guests that they will experience high levels of cleanliness when they check into their rooms. If not, we will make it right. Again, it all starts with cleanliness.
We began to see the industry recovery back in late spring. And that started with the small and midsize enterprise and other essential service segments, like some of the ones we were talking about earlier, like trucking, emergency housing and the like. Anything dealing with infrastructure and enabling our government and such to mobilize against the pandemic. We saw that recover first. We also saw especially coming into the Memorial Day and into the summer leisure travel start to return as well as families felt more comfortable taking weekend road trips and short getaways. Then because of our diverse product mix, distribution and ability to accommodate small meetings, we also started to welcome that business. We've had quite a bit of success in the sports and entertainment segments already. This is on the small group meetings. And we've seen recent positive signs out of the auto industry, pharmaceuticals, and medical verticals as well when it comes to small meetings. The larger group meetings will be slower to recover for evident reasons. But as I read the various industry observers and experts out there, I strongly believe people will be ready to come together more than ever once there is a successful vaccine that has been widely distributed and this crisis is behind us. For early 2021, I believe it will continue to focus on a range of 10 to 50 rooms when it comes to small groups. I don't think you see the larger types of groups begin to manifest until the latter half of 2021 and into 2022.