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Intercontinental Hotels Group

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Laura Gambrill

on 3 December 2013

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Transcript of Intercontinental Hotels Group

InterContinental Hotels Group
IHG is a British multinational hotels company headquartered in Denham, UK
Mission and Vision
Vision Statement:
Internal Environment
Driving Brand Preference
Company Goals
“Grow by making our brands the first choice for guests and hotel owners.”
Brands Include:
Candlewood Suites
Crowne Plaza
Holiday Inn
Holiday Inn Express
Hotel Indigo
Staybridge Suites
Mission Statement;

To become the greatest company in the
world through creating great hotels guests love.

Our Vision is to become one of the world’s great companies and the actions we have taken in 2010 have reaffirmed that we are on the right path. We continue to focus hard on our strategic priorities to drive market share and improve margins, and with industry trends set to be positive, we look forward to a successful 2011.

Has over 4,600 hotels across over 100 countries
Analyzing the External Environment
Crude Oil Prices
- Travel demand fluctuates up and down as crude oil prices fluctuate up and down
Energy Conservation
- Consumers are increasingly tying their purchasing decisions to a company’s energy conservation initiatives.
Unemployment Rates
- The hospitality industry relies largely on entry level labor. The higher the unemployment rate, the lower the cost of employing entry level workers
ADA Laws/Regulations
- Conforming to ADA laws/regulations can mean large capital investments in infrastructure in order to maintain code
Social Media
- The number of social media users who post reviews and research hotel properties is estimated to be as much as 72%.
Software- Big Data
- Collecting, sorting, and analyzing data can lead to huge savings in marketing initiatives and amenity offerings
Analyzing the General Environment of the Firm
IHG is staying in line with environmental trends in order to stay ahead in the industry, while also using continuous innovation to improve their competitive strategies
Wyndham Hotel Group
Properties in the US: 5, 889
International Properties: 1,312
Wyndham Guaranteed Rewards
Incorporate TripAdvisor reviews into their website
Mobile booking
Competitive Set
Hilton Worldwide
Mariott International
Starwood Worldwide
Wyndham Hotel Group
Hilton Worldwide
Properties in the US: 3,290
International Properties: 511
Rooftop bars
Home 2 Suites new lobby design to bring business travelers out of their rooms
Sweet Pea Spa menu for kids
Begins to eliminate room service and replaces it with grab-and-go store called Herb N’ Kitchen

Marriott International
Properties in US: 3,407
International Properties: 583
One of the Top 50 Companies for Women
The Bistro - Eat. Drink. Connect, in Courtyard brands
Up and coming hotel restaurants
Next generation meeting spaces
Mobile check-in in U.S. & Canada
JW Marriott launched Nightly Refresh Program

Starwood Worldwide
Properties in the US: 478
International Properties: 593
One of the industry’s leading loyalty programs, Starwood Preferred Guest (SPG)
Smart Check In using RFID
Locavore options
Starwood Vacation Ownership, world-class vacation experiences
US Veteran Recruitment Initiative
Supplier Diversity Program: maximize contract opportunities for minority owned businesses
Starwood Foundation: providing opportunities for employees in their communities
Threat of New Entrants
Power of Buyers
Buyers are very sensitive to prices charged by hotels in the industry. Consumers can easily compare prices between different brands by using the Internet. Buyers can even compare quality and ratings posted by fellow consumers using various Internet websites
Power of Suppliers
Only a few suppliers hold the most power and these include electricity, water and telecommunication costs, which vary between countries. Other suppliers such as food supplies, furniture, amenities, etc. have less power because the variety of different suppliers is so vast. IHG can easily bargain with different suppliers in each country to get the lowest prices
Threat of Substitutes
The availability of substitute products limits on the prices market leaders charge. If consumers feel the price is too high they can easily switch substitute. An increase in research and development of global businesses that use innovation as a way of creating competition has also increased the threat of substitutes
Rivalry Among Competitors
These large hotel chains offer similar products and services, meaning customers are willing to substitute. Customers have such common needs that it is difficult for these chains to differentiate themselves which in turn increases competition
"We are in the people business. It’s the people in our hotels that really bring the brands
to life for our guests. So in 2011 we are rolling out a world class suite of tools that give
our owners the opportunity to immerse their people in our brands still further. The
tools will help them hire the best person for their brand, clarify their understanding
of what a guest is looking for in that brand and give them the tools to motivate and
recognise their people. These tools will help us to drive consistency in brand delivery
and help our owners to engage, develop and retain good people."

Global Opportunities
"We are always looking for new opportunities around the world. There are, however,
huge opportunities for our existing brand portfolio. We are focused on quality not
quantity. The Holiday Inn relaunch has been one of the biggest initiatives in hotel
history and we are now preparing to refresh Crowne Plaza. We have been pleased
with the results of our boutique brand, Hotel Indigo, this year and are looking forward
to an escalated roll-out next year. Our brands are benefiting from the opportunities
opening up in emerging markets where we are building a strong position."

Primary and Support Activities
Current Competitive Strategies
IHG Rewards Club
World’s largest hotel loyalty program
3 levels of membership
Earning structure with different brands
Countless ways to redeem points
IHG Rewards Club Credit Card
Co-Branded credit card with China CITIC Bank

Future Competitive Methods
- Continuing Green Engage to reduce the carbon footprint
- Implementing a social media monitor for marketing purposes
Green Engage
Automatic nightlights
Advertise re-use of towels and linens for guests staying multiple nights
Motion activated sensors for heat/AC/lights
Green” innovations are becoming more respected
Drives new business through sustainability efforts
Sustainability methods may become required in the future

Social Media
Having a social media presence that will respond to posts will increase reputation and mediate damages
The responsibility of keeping up with social media is costly but necessary.
This method is still a growing trend but the position can take over social responses for individual hotels
Investment and Profits for Future Strategy
Financing Plan
Risk-free rate = 1.4%
Interest rate of debt = 5%
Equity risk premium = 5%
Beta of stock = 1.5
Corporate tax rate = 35%
Leverage ratio = 5%

WACC = 6%
NPV = $41,117,161.42
Summary Analysis Given Financial Report
Matching Competencies with Future Strategies
Green Engage:
- Helps to create a strong brand recognition
- Corporate responsibility
- Marketing trends of consumer awareness

Social Media:
- Follows marketing trends
- Guest feedback more accessible
- Promotion of strong brand recognition
- Position would have top training programs
Evaluation of Firm's Strategic Leadership and Corporate Governance
Final Conclusions and Recommendations
IHG should continue its "Green Engage" program to its full potential
Increase usage of mobile apps as well as social media in it's marketing efforts
Further development and usage of IHG Rewards as well as IHG Academy
To assess trends in the environment
Determine the strategic group
Relation of performance to the competitive set
Porter's Five Forces
The barriers to entry into a global hotel industry are high. These barriers include access to supply and distribution channels, legislation and government regulations, differentiation, high capital requirements, high fixed costs, and resistance from existing markets.
Primary Activities
- 3,955 hotels operating under franchise agreements
- strong brand portfolio
- strong set of tools in the industry
- developing the strongest general manager talent
Marketing and Sales
- Mobile apps
- Social media
- almost 100 countries and territories through mobile apps covered
- Customer care
- IHG Rewards Club
- Holiday Inn was ranked 'Highest in Guest Satisfaction Among Mid-Scale Full Service Hotel Chain, Two Years in a Row' by J.D. Power and Associates

Support Activities
Human Resources
- Wide range of employment
- High job satisfaction
- Employment awards from Aon Hewitt and The Job Crowd as well as more
- Online systems deliver 70% of room nights
- Media placement and text links
- Social media usage
- Mobile Apps
General Administration
- Brand consistency
- Quality Assurance program
- Based on guest feedback

Focus on the mutual benefits of the brand and stakeholders while also creating a sustainable business with a reliable reputation
Focus on creating the best system for driving demand in the largest segments and markets within the hotel industry
IHG Academy
Sustainable Communities
Larger employee pool
More engaged employees, higher morale, better customer service
Key pillar in Corporate Responsibility (CR)
Raises job skills
Creates more economic opportunity

- Research shows that 40% of hotel guests leave the bathroom lights on at night costing hotels an additional $50 per room in energy costs annually.
Cost of Implementation:
658,348 (# of IHG guestrooms) x $20.95 (cost of installing nightlight) = $13,792,390.60
658,348 x .40 (bathroom lights left on) = 263,340 (# of rooms bathroom lights left on)
263,340 x $50 (annual cost of leaving bathroom lights on) = $13,167,000
263,340 x $0.50 (annual cost of nightlight use) = $131,670
the annual savings for installing the nightlights would amount to $13,035,330

We believe that the $13,792,390.60 capital investment needed to finance the company wide project will not have an effect on the firm’s current capital structure due to the large amount of cash/cash equivalents listed on the balance sheet.
Marketing & Sales
Human Resources
General Admin
- The company pioneered the travel industry’s first collaborative response to environmental issues as founder of the International Hotels and Environment Initiative (IHEI)
- The environment and local communities remain at the heart of IHG’s global corporate responsibility focus.
- Top management is a mix of airline industry revenue management experts and professionals in risk mangement
Laura Gambrill, Craig Bishop, Ali Koger, Christina Wingfield, Lexi Genovese

Internet Research:

Relevant Articles:
"Corporate Responsibility." IHG Business Source. InterContinental Hotels Group, n.d. Web. 14 Nov. 2013. <http://www.ihgbusinesssource.com/corporate-responsibility.aspx>.
"What Is IHG Academy?" IHG Academy. InterContinental Hotels Group, n.d. Web. 14 Nov. 2013. <http://www.ihgacademy.com/what-is-ihg-academy.aspx>.

Research Question:
Would installing automatic nightlights save IHG money in the long run?
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