BRANDING

Branding

Branding

Introduction

Intercontinental Hotels Group (IHG) announced last week that 1,400 Holiday Inn brand hotels have already been re-launched this month. Part of IHG's strategy to expand in the next few years, the $1 billion global relaunch program aims to upgrade the quality and consistency of the 3,300 Holiday Inn and Holiday Inn Express hotels while removing lower quality hotels.

Features of re-launched hotels include upgraded and decluttered lobby areas, new bedding, upgraded showered and bathroom amenities, new exterior lighting and landscaping as well as a new redesigned logo. According to IHG re-launched hotels are already showing positive signs, delivering high RevPAR and gaining excellent guest satisfaction scores.

Discussion

The economic environment has changed since we started the re-launch program. Now, more than ever, value has become critically important to guests said Kevin Kowalski, senior vice president, Global Brand Management, Holiday Inn Brands. Research has shown that companies, who invest in their brands during an economic downturn, actually increase their market share and end up being more profitable on the other end, further demonstrating the viability of the Holiday Inn global brand re-launch during this time (Marty and Johnson 2007 547-697).

General Environment

With annual sales approaching $65 billion (Refer to Appendix 1 for the remainder of this section), on an average day the hotel industry accommodates over 2.6 million guests in 3 million available rooms (and growing) in over 44,000 properties around the world . Growing at an annual rate of approximately 2-3%, the industry is divided into four tiers, consisting of budget/economy, mid-scale, first-class and luxury (Lynch 2003 52-97). Though there are countless hotels around the globe, the major players in the industry are the 10-12 parent companies that operate a chain of hotels, often with brands that are spread across the four tiers. In addition to international players, each tier also contains an abundance of smaller hotels that competes in its respective tier.

Five Force Model of Competition

The rivalry among competitors is high because guests have many choices of hotels to select from (Refer to Appendix 2 throughout this section). Rivals within this luxury hotel segment are relatively equal in size and capability, making it difficult for any one firm to significantly rise above the competition. The competing hotels must struggle for the same guests within the luxury segment (Shankar Carpenter and Krishnamurth 1999 269-76). Switching costs are minimal, thus, loyalty is low unless a competitor differentiates itself, and thereby increases their odds of attracting return guests. Rivalry also exists on a different level, namely, competition amongst management operation firms for preferred real estate. Due to September 11th, the potential market for luxury hotels has shrunk, and this has consequently increased the competition for the smaller number of guests.

Key Driving Forces

As a result of intense competition, there must be continuous differentiation within this industry as each firm engages in aggressive campaigns to gain market share. The industry driving forces within this segment include (Refer to Appendix 3) increasing globalization, marketing effectiveness to increase customer loyalty, product and service differentiation/innovation, and changing societal ...