InterContinental Hotels Group (IHG) is facing a challenge as investors currently prefer midmarket and extended stay brands due to high interest rates, operational costs, and insurance premiums. Despite IHG’s long-term plan to focus on more premium, lifestyle, and luxury brands, investors are hesitant to invest in these properties. As a result, IHG is downplaying its upmarket dreams and focusing on optimizing its offerings for hotel owners to meet their current demands.
IHG operates over 6,300 hotels and resorts, with a goal to add 2,000 more properties in the next several years. The company aims to have more than 40% of these new hotels fall under its luxury, lifestyle, and premium brands. Moving upmarket has its benefits, including higher fees and more attractive redemption opportunities for loyalty program members. By making its loyalty program more popular, IHG can increase direct bookings, which are typically cheaper than bookings through online travel agencies.
Responding to the current market demand, IHG is shifting its focus to midmarket and extended stay brands based on feedback from hotel owners and investors. Candlewood Suites, a midscale extended stay brand, saw the most deals for IHG in recent quarters. Conversions are becoming more appealing to investors due to market obstacles, with IHG seeing conversions making up a higher proportion of new hotel signings last year.
IHG introduced Garner as a conversion brand, positioned just below Holiday Inn Express in terms of amenities and average rate. The brand has garnered attention from owners worldwide, leading to deals such as a partnership with hotel group Novum in Germany that will double IHG’s presence in the country. Additionally, IHG plans to bring Garner to Japan by opening three conversion hotels in Osaka before the end of the year.
While IHG is shifting its short-term strategies to meet the current demands of the market, the company is not abandoning its long-term plan. Luxury and lifestyle deals are still being pursued, with growing interest in these brands in Latin America. Outside of the U.S., IHG has over 100 hotels in the Americas, with recent openings including luxury and lifestyle hotels in Mexico and the Caribbean. Despite the current focus on midmarket and extended stay brands, IHG remains committed to its luxury and lifestyle offerings.
