InterContinental, ANA Form Japanese Hotel Venture

InterContinental Hotels Group and All Nippon Airways last month announced a joint venture to operate 31 hotels in Japan, making it the largest international hotel operator in the country. The parties plan to close the deal, in which IHG will invest $14.5 million to acquire a 75 percent interest, in December.

For business travelers headed to Japan, the deal means an improved hotel product, said chief executive of IHG Asia/Pacific A. Patrick Imbardelli.

"By merging the respective strengths of IHG and ANA, business guests can look forward to enhanced product and service offers and a robust global reservation system. Anywhere they travel within Japan, we will be able to offer accommodation and meeting options that address their needs," Imbardelli said. "IHG's Priority Club members will have another 31 hotels at which they will be able to earn points and be able also to earn air miles on ANA."

The new arrangement, to be called IHG ANA Hotels Group Japan, is expected to heighten an already-spirited competition between ANA and Japan Air Lines, which itself manages 12 hotels in Japan, with a 13th coming into its fold Dec. 4.

"The joint venture will be a strong position from which to compete in the local Japanese market, as well as internationally," Imbardelli said. "It puts us in a unique position to serve Japanese and international customers in a way no other hotel operator can emulate."

IHG, he said, needed to be robust in the Japanese market. "Tokyo is the largest financial center in Asia, so it's critical for any global hotel company to have a strong presence in this market. With inbound travel to Japan set to increase in the years to come, and with the availability of new hotels and services, the real winners will be inbound as well as domestic travelers. Our goal is to become the strongest hotel operating company in Japan."

IHG currently operates 11 hotels in Japan. When combined with the new partnership's 31 hotels, IHG ANA Hotels Group will have 42 properties with more than 12,000 rooms.

ANA said it will sign new 15-year management contracts with the new group for its 13 owned and leased hotels, adding these rooms to IHG's system upon completion of the deal. The 13 properties will be rebranded with one of three names created for the Japanese market: ANA-InterContinental, ANA-Crowne Plaza and ANA-Holiday Inn.

The flagship ANA Hotel Tokyo will be the first to be branded as the ANA-InterContinental Tokyo in April 2007, while the 12 remaining hotels will be branded in the following 18 months.

In addition, IHG will lend up to $13 million to the joint venture to fund part of the implementation of an enhanced IT platform designed to improve operating performance, Imbardelli said.

After this investment, and transaction and integration costs, Imbardelli expects the joint venture to turn a profit in its third year of operation.

ANA selected IHG as its partner after a highly competitive process, an airline spokesperson said, based on the strength of its brands, its robust growth pipeline, international outlook and established operating systems.

"This is a superb platform from which to strengthen our hotel business, grow the co-brands and develop our people, in order to benefit our guests, our shareholders, our employees and our business partners in Japan," said Mineo Yamamoto, ANA president and CEO. ANA will have a 25 percent stake in the deal.

Japan is the world's second-largest hotel market, with 10 percent of the world's hotel rooms. The Japanese hotel market is dominated at present by domestic hotel companies, with approximately 70,000 traditional inns, each with an average of 15 rooms, and 9,000 domestic hotels with 700,000 rooms that are mostly owner-run.

Japan's outbound travel market is huge, IHG's Imbardelli said. "Even more important for IHG hotels around the world is the fact that Japan is the world's third-largest outbound travel market. "

"As we continue to build affinity for our brands among customers in Japan, we look forward to the positive effect that this will have for IHG hotels across the globe," Imbardelli said. "With 30 million Japanese expected to travel abroad each year by 2008, there are significant opportunities for IHG's hotels worldwide to gain from the IHG ANA joint venture."