Content Page

Content Page 1

1. Introduction 2

2. Strategic Profile 2

2.1 Vision 2

2.2 Mission 3

2.3 Core Values 4

2.4 IHG’s Financial Statement in Three years trend 5

3. Strategic Environment 5

3.1 Strategic Capabilities/Competitive Advantage 5

3.2 SWOT Analysis 7

3.3 PESTEL Analysis 9

4. First Theme: Technology 10

4.1 Second Theme: Innovation/Porter’s Generic Strategy 10

5. Conclusion 11

References 12

Appendix 1 14

Appendix 2 15

Appendix 3 15

Appendix 4 16

Appendix 5 16

Appendix 6 17

Appendix 7 17

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1. Introduction In 1946, Pan American World Airways launched one of the current top ten international luxury hotel group in the world, InterContinental Hotel Group. The first InterContinental Hotel was open in Belém Brazil, then IHG start launching more and more hotel all around the world, and became the top ten international luxury hotel group in the world, with the impressive guest list, from Louis Armstrong to Princess Grace, to become today a pioneer in the hotel industry in terms of quality, service and responsibility. And each property has different style or theme, from heritage elegance to urban hotel and even on the sea shores (InterContinental Hotel Group, 2014).

2. Strategic Profile Vision, mission, and core values are what makes IHG success in the hotel industry.

(Source: Queen Margaret University, 2014)

2.1 Vision

(Source: Annual Report, 2010)

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The vision of IHG is not only a simple vision, it is also a guide to the method of how they can do this business successfully and use this vision to stand out of the crowd. ‘Great Hotels Guests Love’ its definitely put all IHG guest in prior of everything. It is about build a great hotels and improve brand reputation, in order to beat their competitors, by providing the best and unique service to the guest. It is about taking guest by surprise, go the extra miles to go beyond what they expect, so that the guest can enjoy their stay in IHG and recommend InterContinental to their friends or family.

2.2 Mission According to InterContinental Hotel Group, the mission of IHG is their five winning ways.

(Source: Annual Report, 2013)

This mission explain that IHG always have the courage to practice what they think is right, whether it is more difficult or complicated, and they always keep their promise without letting anyone down including all the hotel staff and their guest. IHG always show that they understand their guest’s needs better than any other brand in this industry, they treat all their guests as individuals, always pay attention on every little things of their guests need or wants, and use their experience to find a new way to deliver the great service the guest want to have. IHG always into learning new things, and always challenge themselves when applying new things on the way they do business, in order to keep improving themselves. IHG believes that what makes this brands huge is the knowledge of their employees, and therefore IHG always listen to people’s idea and learn from each other, they work hard to create a better relationships with others and trust and support each others, that’s how the mission make IHG success today (Holiday Inn Kuwait, 2014).

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2.3 Core Values

(Source: Google Image, 2014)

The core values of InterContinental Hotel are ‘independence, self-knowledge, family first, fulfilment and fun,’ says Kevin Kowalski, which can summarise as ‘Great Hotels Guest Love’. The core values shows the goal of IHG is to tap into people’s emotions, it is because that IHG wants people to love the Intercontinental brand because it understand the core values of their target customer (ADWEEK, 2010). What IHG try to achieve from 2013 - 2017, is to cut down 12% of carbon footprint per occupied room across all properties (see appendix 4), and also to lessen 12% of the water use per occupied room (see appendix 5), and most importantly is to provide training programs to 20,000 employees through IHG Academy (IHG Corporate Responsibility Report, 2013). According to the guest feedbacks from Agoda, some of the guests complained that the check in time was too long, and also there are one guest mentioned that one of the receptionist in InterContinental Singapore was wearing a sunglasses during working hours, another guest also complained that the staff was aware of that one of the hotel room was under renovation, however they still assigned the room next to it to the guest, especially the guest was staying with the children and the guest has asthma history. Based on all this negative feedback to the Intercontinental hotel, meaning that sometimes the hotel was not doing what their vision said, it does not meet the standard which is why one of IHG’s key objectives is to improve employability.

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2.4 IHG’s Financial Statement in Three years trend

From the IHG’s group income statement (see appendix 1 & 2), we can see that their revenue has been increasing significantly for the past three years, from 1,768 USD Million in 2011 increased to 1,903 USD Million in 2013, which including the cost of sales, administrative expenses, and other operating income and expenses, also their operating profit were also increased rapidly, although there was a decreasing of operating profit from 2011 to 2012, however they still manage to gain more profit in 2013 to cover their lost in 2012, which from 605 USD Million in 2011 drop down to 601 USD Million in 2012, and increased again to 673 USD Million in 2013 (Annual Report, 2013).

3. Strategic Environment

3.1 Strategic Capabilities/Competitive Advantage

(Source: Johnson et al, 2011; Create for this assignment)

InterContinental Hotel Group have their own way or strategy to compete with others and win in the hotel industry. IHG’s developed their core capabilities by compete with others in having a appropriate business model.

Strategic Capabilities

Resources: What IHG have, e.g. Competences: What IHG do well, e.g.

Hotel Property, Computer Systems, IHG Academy, IHG Storm Shelter Physical

Train employees, improved employability, support local communities

Group income statements, cash flows, staff costs Financial Revenue increased, profit declined,

staff costs increased

Managers, employees, guests, suppliers, partners Human

great service deliver through IHG people, through selection and evaluation

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(Source: Annual Report, 2013)

A business model can deliver a clear image on managing hotels, it enable IHG to grow with limited investment. Nowadays, 88% of the operating profit is earning by managing operation (Annual Report, 2013). This business model helped IHG to focus more on stronger their brand portfolio based on guest needs from online feedback. IHG business model also does create more opportunities to build stronger relationships with other independent hotel owners and generate more revenues by letting them to use IHG global demand delivery systems, which guest can book their hotel through IHG booking systems and call centres also. One of the example is that their relationship with Summit Hotel Properties Inc., now IHG have the rights to earn fee revenues through supporting demand for the hotel that are purchased by Summit (Annual Report, 2010). To compete in the best markets in the hotel industry, IHG must sustain their leadership position, because the future supply of hotels is important to the world. IHG nowadays owned 204,859 rooms in 1,275 hotels in over 64 countries, which IHG is now the largest branded hotel pipeline channel in the world (Annual Report, 2010). To win by focused on current consumer segmentation, In InterContinental Hotels and Resorts, their quality, service and facilities, with the true interest in guests differentiate it in a competitive segment, which IHG trained their staff to fulfil guests needs by introducing local attractions to create unique experiences, it allow their guests to have the enjoyment during their stay.The other capabilities or competitive advantage that IHG have is that their scale and expertise. The major benefits that guests who stay with IHG, and owners who invest with IHG, is their systems where guest can book through it to stay with IHG, in order to maintain their relationship with their guest by looking through their history with the hotel.

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By having that benefits, first IHG must have a great locations that is convenience for different type of guests, and a great brands, efficient booking systems, along with other elements. Together, these benefits and elements are the key to run the business, which generated 68% of total rooms revenue (see appendix 6) (Annual Report, 2010).The most important capabilities or advantage is IHG’s people and their core values, which it can only be truly recognise if they fully engaged with their employees, providing the best service to the guests through their values and brands, to provide the best environment for their staff to be successful, which it indicated the five winning ways:

• do the right thing;

• show we care;

• aim higher;

• celebrate difference;

• work better together.(Source: Annual Report, 2013)

3.2 SWOT Analysis

(Source: World Market Intelligence, 2014; Create for this assignment)

IHG’s strong brand portfolio provided more choice for customer to choose which type of hotel they want to stay, with the seven key brand under IHG: InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn Express, Hotel Indigo, Staybridge Suites and Candlewood Suites, which all are luxury brands. A strong brand portfolio did help the company to attract a variety type of guest. The Priority Club Rewards Programs helps

Strength:

• Brand portfolio• Priority Club Rewards

Programs• Strong Operating Performance

Weaknesses:

• Limited Liquidity Position

Opportunity:

• Strategic Growth Initiatives• Growing Youth and Student

Travel Market

Threats:

• Foreign Currency Fluctuations

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maintain the growth of revenues, which is also the largest hotel loyalty program in the world, member of this program can redeem points and free accommodation or other hotel benefits. From the financial statement, we can see that IHG’s revenues has been growing since 2009 (see appendix 2), revenue growth result of the improvement of hotel operating performance, the operating margin of IHG (35.37%) was also higher than Accor (5.67%) and Hyatt (4.80%) (World Market Intelligence, 2014). IHG’s current ratio was 0.72, which is lower than 0.84 in 2012 (see appendix 3), and also lower than its competitor like Accor (1.25) and Hyatt (1.34) (World Market Intelligence, 2014). Lower ratio indicates that the liquidity position of the company is weaker than its competitors, moreover the company assets was decreased in 2013 and its liabilities increased. Therefore, limited money and liquidity position will create disadvantage to the company while the company wants to compete with others in the market. IHG using one of their opportunities which is various strategic initiatives currently driving their business growth. IHG are taking one step ahead than others, they opened four hotels in a year, which not much company can do that due to shortage of money or other factors. The growing youth and students travel market are currently benefiting IHG. According to the World Youth Student & Educational Travel Confederation (WYSE Travel Confederation), around 70% of students are travelling for different purpose such as study, working, or learning different cultures. WYSE Travel Confederation revealed that the average expenditure of students is US$2,600 in 53-days trip, and IHG operates over 4,000 hotels in the world, this is a great opportunity for IHG to increase their revenues and gain more profit from the students (World Market Intelligence, 2014).Changes in foreign currency exchanges rate will likely to increase the expenses of the company, which it may impact the company to compete with other competitor due to it may affects the profit of the company.

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3.3 PESTEL Analysis

(Source: Queen Margaret University, 2014)

A stable politic is a key factor that can bring success to any company or organisation in any industry. Political and legal factors can affect the number of tourist travel to a destination, and this will directly influence the hotel occupancy and will eventually affect the hotel profit and revenue. For example an election in US will result in a changes of issuing VISA to the tourist who wants to travel to the states, which where most IHG properties in. National economic factors could be affect by local international events, for example like all hotel properties like IHG in UK or Beijing, hotel rate will increase significantly due to international events like Olympics, same as the situation UK and Brazil, the hotels rates will be affected by the World Cup events. Social factor could influence hotel industry as well, due to the growth of world population and characteristic of human being, people will have different needs because of different lifestyle. Hotel must change their style, in order to meet the current consumer needs and expectations.

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Environment factors could also impact the hotel industry, for instance like more population or more tourists destination or attractions area could create more pollution in the nearby area, which people do not like to go to place with full of pollution, it will affect their moods while they travelling. An example of Indonesia burn trees and haze was all around Singapore, it can shows that people’s mood were affected due to the haze in Singapore. Hospitality company doing innovation like hotel website, booking system, or change to using green technology could affect their customer decision in booking a hotel, people nowadays are somewhere particular in the way of booking a hotel or hotel that are using green technology, this can impact the hotel profit and revenue as well.

4. First Theme: Technology In one of the CSR program that IHG currently doing is the ‘IHG Green Engage’, one of the field that they are doing in this program is water conservation and efficiency. IHG green engage provided a guide and new technologies of how to save water to protect the environment. From the corporate responsibility report 2014, 85% of the water were used in hotel room like shower, toilet, and also kitchen in the suit room, and after using the new technology, which is the low flow fixtures (Corporate Responsibility Report, 2014). A case from one of the Holiday Inn hotel in Australia shows the evidence of after using the low flow technology, the water usage was cut down by 50% after 18 months (Corporate Responsibility Report, 2014).

4.1 Second Theme: Innovation/Porter’s Generic Strategy IHG launched ‘Shelter in a Storm’ program in 2013 (see appendix 7), the purpose of this program is to promote awareness of how to respond or avoid a disaster. IHG raised $1.2 million and supporting over 15 disasters over eight countries through this program, and IHG have around 60,000 employees was involved in this program supporting local communities, which make them the innovators of this field, because they are the first company who launch this type of program (Corporate Responsibility Report, 2014).

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Porter’s generic strategy is use to analyse the external factors that could impact IHG business.

(Source: Google Image, 2014)

Using Porter’s generic strategy, IHG should be in differentiation box, because they are one of the luxury hotel brand in the world, which means that their price are higher than normal hotel company and also they have a lot of properties all over the world, which means they are selling to the broad market. Like mentioned before, IHG have more than 1,275 hotels in over 65 countries, they earn revenue and profit not only benefit themselves, but also its about give back to the communities by launching the shelter in a storm program, and open IHG Academy program to train their staff, in order to deliver better service and experience to their guests.

5. Conclusion InterContinental Hotels Group is a multinational company, and they will remain confident to keep growing their business in the hotel industry, with the strong brand portfolio which recognise by the world, and the IHG academy program put a lot of effort in training employees to deliver the best service to their guest, which make them the best top 100 companies to work for in Fortune magazine (IHG PLC, 2012), with such a strong operating performance, in order to keep their revenue and operating profit increase. If IHG continue doing business with their own strategy, promote more CSR program, and using more new technology to cut down the energy usage, continuing IHG will become more sustainable in the hotel industry and be able to compete with their competitors.

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References CSR Lebanon. 2013. Corporate Social Responsibility at IHG cluster hotels. [Online] Available at: http://www.csrlebanon.com/CSR-at-IHG%20.html. [Accessed December 15 2014].

Hospitality Net. 2013. IHG Announces New Corporate Responsibility Targets. [Online] Available at: http://www.hospitalitynet.org/news/4062327.html. [Accessed December 15 2014].

IHG PLC. 2009. Annual Report and Financial Statement 2008. [Online] Available at: http://www.ihgplc.com/files/reports/ar2008/index.asp?pageid=19. [Accessed December 19 2014].

IHG PLC. 2012. IHG Ranked Among 100 Best Companies to Work For By Fortune Magaz ine . [On l i ne ] Ava i l ab le a t : h t t p : / /www. i hgp l c . com/ i ndex .asp?PageID=116&NewsID=2730. [Accessed December 19 2014].

IHG PLC. 2011. IHG Annual Report and Financial Statements 2010. [Online]. IHG PLC. [viewed 29 December 2014]. Available from: http://www.ihgplc.com/files/reports/ar2010/docs/ihg_annual_report_2010.pdf.

IHG PLC. 2014. Corporate Responsibility Report. [Online]. IHG PLC. [viewed 20 December 2014]. Available from: http://www.ihgplc.com/files/pdf/2013_cr_report.pdf.

IHG PLC. 2014. IHG Annual Report and Financial Statements 2013. [Online]. IHG PLC. [viewed 20 December 2014]. Available from: http://www.ihgplc.com/files/reports/ar2013/docs/IHG_Report_2013.pdf#page=70.

InterContinental Sanctuary Cove Resort. 2013. Corporate Social Responsibility. [Online] Available at: http://www.intercontinentalsanctuarycove.com/resort/corporate-social-responsibility. [Accessed December 15 2014].

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Johnson, G, Scholes, K and Whittington, R. 2011. Exploring Corporate Strategy, Text and Cases, 9th ed. London, Financial Times and Prentice Hall.

Johnston, G., Whittington, R. and Scholes, K. 2012. Fundamentals of strategy. 2nd Edition. London: FT Prentice Hall.

Research Methodology. 2013. Hilton Hotels PESTEL Analysis. [Online] Available at: http://research-methodology.net/hilton-hotels-pestel-analysis/. [Accessed January 01 2015].

World Market Intelligence. 2014. InterContinental Hotels Group Plc (IHG) : Company Profile and SWOT Analysis. [Online]. London: Progressive Media Group. [viewed 31 December 2014]. Available from: http://search.proquest.com/docview/1552298826?accountid=12269.

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Appendix 1 IHG’s Group Income Statement in Three Years Trend

(Source: Annual Report, 2013)

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Appendix 2 InterContinental Hotels Group Plc - Revenue and Operating Profit

(Source: World Market Intelligence, 2014)

Appendix 3 InterContinental Hotels Group Plc - Solvency

(Source: World Market Intelligence, 2014)

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Appendix 4 Carbon Footprint kg CO2e per occupied room (kg CO2e)

(Source: Corporate Responsibility Report, 2014)

Appendix 5 Water use per occupied room in water scare areas (m3 per OR)

(Source: Corporate Responsibility Report, 2014)

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Appendix 6 IHG’s System delivers 68% of Total Rooms Revenue

(Source: Annual Report, 2010)

Appendix 7 IHG Shelter in a Storm Program

(Source: Corporate Responsibility Report, 2014)

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