IHG Seeks to Convert Current Hotels to New Midscale Brand
Joe Cortez August 10, 2023
Hotel Investment Today reports the company announced a new midscale brand will join the company’s portfolio, hoping to drive existing properties from their current affiliation to IHG.
Midscale Brand Focused on Conversion Among Existing Hotels
With flyers returning to travel after the pandemic in a questionable economy, more people are prioritizing value. Midscale hotels are once again driving revenue from travelers who are on a budget and don’t need all the amenities of an upscale hotel.
According to IHG chief executive Elie Maalouf, the new, unnamed brand would be focused on the midscale audience, which would live a step below the Holiday Inn and Holiday Inn Express brands. He says he’s received interest from at least 80 hotel operators and 100 properties who would potentially convert to the new IHG brand. From a revenue standpoint, the conversions would be discounted by 25% compared to moving to a Holiday Inn Express.
“Conversions represent a major growth opportunity for us, generating around 40% of first half openings and signings globally,” Maalouf said, as quoted by Hotel Investment Today. “And we see an increasing desire from owners to quickly realize the benefits of IHG’s scale and strong enterprise.”
Current hotel conversions are only one step in IHG’s plan to grow their global footprint. The CEO is leading a drive to open 500 new hotels over the next decade, increasing their property count by 1,000 in the next 20 years.
Announcement Latest Step in Hotels Finding New Audiences
With hotels filling up once more, the move by IHG to find new guests is the latest among brands seeking to improve their offerings. In April 2023, Hyatt Hotels announced Hyatt Studios, a new brand catering to the Upper Midscale Market.
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So looks like IHG is ready to offer their existing properties that are dropping their brand a way to keep them. But the problem with property conversations is that unless you throw some serious dollars at them to make them all uniform and consistent (aka full renovation), it's just lipstick on the same pig. And this new 'segment' can be crushed by the competition by a simple price war. This whole idea reminds me of the Hampton Inn Limited concept back in the 1990s when this was to be the same concept--a limited version of the existing brand that would be cheaper for the customer, but ultimately cost the same for the developer/operator so no one built them.
The hospitality industry is still reeling from the impacts of covid and this just looks like a money grab by IHG to introduce a new brand since new hospitality project developments are running at an all time high right now and there's only so many brands out there.
I recently ran the numbers on building a new property with my uncle (both of us being in the business a majority of our lives), and the numbers don't make sense anymore because of the high costs, extreme demends by brands, and lending requirements. You're actually better off to park your money in a mutual fund than build a new property.
Thumbs up. Hell, I am converting every investment I can into cash and parking it in a money market fund at 5.36% with no downside risk.
I hope that is bad article writing, Holiday Inn Express is NOT even Mid-scale. A mid-scale would have to be ABOVE Holiday Inn Express. For that matter, Holiday Inn itself is just mid-scale. IHG has no concept of value-experience it appears. Or they are just blowing smoke.
That's how IHG classifies Holiday Inn & Express, not me. I don't make the rules.
Holiday Inn Express is a step above midscale? Excuse me?
That's what I said, too. ¯\_(ツ)_/¯
below HI, understandable.
but below HIX?
HI vary so hugely that it's impossible to slot each one.
Curious what they'd call "midscale" and below Holiday Inn. SF tent?