IHG Expects Hotel Rates to Stay Strong Thanks to Digital Investments
25.08.2023 - 14:09
/ skift.com
/ Ihg
/ Sean Oneill
/ Keith Barr
For InterContinental Hotels Group (IHG), soaring hotel rates owing to a post-pandemic surge in pent-up demand for travel have been a boon after the pandemic bludgeoned the travel sector. But IHG Hotels & Resorts said its pricing power would last beyond the present moment thanks partly to its investments in digital technology. The company also anticipated future growth as China, the world’s second-largest economy, reopens.
“Pricing power is here to stay,” said CEO Keith Barr in an interview on Tuesday after the company released its earnings.
In the second half of the year, the Windsor, UK-based hotel operator — which has 18 brands, such as Holiday Inn and Six Senses — saw its rates recover to pre-crisis levels. In the fourth quarter, average daily rates worldwide were 13 percent above pre-pandemic levels. The amount IHG could charge per available room went up each quarter throughout the year.
In the fourth quarter, IHG saw pricing strength even though occupancy remained five percentage points behind 2019 levels worldwide. In the Americas, rates were 11.7 percent ahead of 2019 levels, and occupancy was just 1.5 percentage points below 2019.
“While there are economic uncertainties, we expect continued strong leisure demand in many markets, alongside the further return of business and group travel and the ongoing reopening of China,” said CEO Keith Barr.
The company said that its corporate rate negotiations for 2023 so far looked set to drive further increases in average daily rate as demand from groups, meetings, and events rebounds.
When the pandemic struck, IHG slashed costs. During the recovery, it has shifted proportionally some of its expenditure, investing more in its digital capabilities, with a strategic goal of “creating a digital advantage.”
“We’ve spent well over $300 million in the recent years investing in our technology platforms,” Barr said in an interview. “Part of that is the guest reservation system, the new mobile app, the all-new IHG.com, brand.com websites for five brands so far. We’ve also invested in moving into the cloud for data analytic capabilities. We’ve just built a new demand forecasting model for revenue management. We’ve improved the tech for our loyalty program. All of these pieces come together.”
Last year IHG revamped its app to let guests book rooms and check in faster and also choose and redeem many rewards through its loyalty program. Since its launch, the percentage of people who start the booking process and complete a purchase is up two percentage points versus 2019. Revenue driven by its mobile app in North America and Europe is 30 percent higher than the pre-crisis level.
Looking ahead, IHG sees significant potential in its test with a new pricing and booking