InterContinental Hotels Group (IHG) has kept busy the past few years, rolling out a bevy of midscale and upscale brands while also bolstering its portfolio at the luxury end with its acquisition of the wellness-focused Six Senses flag early last year. The expansion efforts appear to be paying off, with the company recently reporting companywide revenue growth of 8%, to $2.1 billion, for full-year 2019. Hotels editor Christina Jelski interviewed Elie Maalouf, CEO of the Americas region at IHG, at the Americas Lodging Investment Summit in late January, to talk about growth opportunities and some of the group's newer brands.
Q: With myriad geopolitical threats swirling in recent months, what's your big-picture outlook on the global economy?
A: I [attended] the World Economic Forum in Davos [in January], and there were probably two big themes that we discussed there. The key points were 1) macro geopolitical concerns and 2) how do we keep growing globally in a sustainable model that is good for society and good for the environment? On the geopolitical front, the key concerns have been around trade tensions, around isolationism. On trade tensions, I think what we've seen is the recent agreement with China is promising and diffuses that a little bit. In the U.K., we've seen clarity on Brexit, so that brings some stability, we think. So some of those most concerning geopolitical issues seem to be finding clarity and resolution.
And then we spent quite some time talking about, yes, the opportunity for growth in the future. I can't tell you what's going to happen quarter to quarter, year to year, but just [recently], CBRE released a report saying that there were 580,000 hotel rooms brought to market in the U.S. in the last 10 years. They're projecting a million rooms over the next 10 years -- that's almost double [the number in] the last 10 years. Similar tailwinds suggest that, globally, over the last 20 years, the middle class grew by a billion people, which is fundamental to the growth of hospitality around the world. Projections for the next 10 years are for 2 billion in growth of the middle class around the world. The middle class, once it gets to a level of welfare, tends to start traveling, which fuels hospitality. So those are sort of the big-level opportunities for us.
Q: Looking more closely at the U.S., where a record-long RevPAR growth cycle appears to be coming to an end, is there any worry over the longer-term health of that market in particular?
A: Well, clearly, after 10 years of expansion, we've seen that the RevPAR growth isn't the same as it was at the beginning of the cycle, or even at the middle of the cycle. That's not surprising. We're still at very high levels of occupancy, but after 10 years, I don't think we should be surprised that we've seen a different trajectory of growth. At the same time, when you talk about the general economic conditions in the U.S., we still have a GDP growth. We have the lowest unemployment [we've seen] in a long time. We have low interest rates, we have strong financial markets, we have high consumer confidence. Those are generally supportive of long-range health for the industry. But in the short term, we are going to get some variations in certain markets, especially after 10 years of expansion.
Q: IHG has been quite aggressive with brand development. Can you provide an update on some of the company's more recent innovation activity?
A: We're a mainstream hotel leader, not just in the U.S. and the Americas but around the world with Holiday Inn, Holiday Inn Express. We're really the largest mainstream brand family in the world. And despite our strength in mainstream, we still found opportunities. Two years ago, we found an opportunity in midscale transient for the everyday traveler and launched Avid, which is the fastest brand launch in our history. We're now at 200 signings and rapidly scaling openings. Then we found that there was still another opportunity, in the all-suites, upper-midscale segment, which was the fastest-growing segment in this industry we were not yet playing in. And so, we launched Atwell Suites, which is an all-suites concept with a contemporary design for travelers looking to spend a little more time in the community for slightly longer stays but who are also looking for a terrific experience with a restaurant, a bar and great communal spaces. We announced the franchise sales [for Atwell Suites] in September, and the first few markets we're going to see openings in 2021 for Atwell Suites [are Charlotte, N.C.; Phoenix; Denver; and the San Francisco Bay Area.] We've gotten off to a good start.