IHG recently signed a deal with Novum Hospitality in Germany, adding 119 properties and about 17,700 rooms to the company’s portfolio. This move is expected to significantly increase IHG’s presence in Europe’s largest economy and facilitate stronger growth opportunities. CEO Elie Maalouf highlighted the importance of growing IHG’s distribution in the valuable German market, which currently has limited deals with global hotel groups. The deal with Novum Hospitality represents a franchise agreement, although the financial details were not disclosed.
In addition to expanding its presence in Germany, IHG also announced a cost-saving initiative that benefits hotel owners. The company has reduced the critical fee assessed to hotel owners by slightly lowering the contributions to its system fund. This fund is shared by owners and IHG, with contributions from both parties used for various purposes such as brand marketing campaigns, reservation software enhancements, and loyalty program operations. The fund has grown by 27% since 2018, reaching $1.6 billion, and is expected to contribute $25 million to IHG’s bottom line this year. The increased value of the loyalty program has allowed IHG to reduce the fees paid by franchisees and other hotel owners.
IHG’s strategy of reducing fees to hotel owners is driven by the success of its loyalty program. The relaunch of the program a year ago has led to a significant increase in members and engagement, resulting in higher sales for the company. This success has enabled IHG to open 46 new hotels with over 6,200 rooms, representing a 5% growth in its net count of open properties. The company also reported a 2.6% growth in revenue per available room year-over-year, indicating positive performance in key financial metrics. The strong performance of the loyalty program has allowed IHG to leverage additional revenue to benefit its hotel owners through reduced fees.
Overall, IHG’s recent initiatives in Germany and cost-saving measures demonstrate the company’s commitment to expanding its presence in key markets while ensuring mutual benefits for hotel owners. With the addition of 119 properties in Germany through the deal with Novum Hospitality, IHG is poised for significant growth in Europe’s largest economy. The company’s focus on enhancing its loyalty program has resulted in increased engagement and sales, enabling IHG to provide additional value to its franchisees and hotel owners. By leveraging these strategies, IHG is positioning itself for continued success and growth in the competitive hotel industry.
