InterContinental Hotels Group is looking to push its Crowne Plaza brand upmarket to compete with Hilton, Hyatt, Sheraton and Marriott in the so-called "upper upscale" sector, where IHG currently is not represented.
To help move the brand into the upper-upscale segment, IHG said that over the next few years, as many as 40 of Crowne Plaza's 394 properties could be eliminated for being "below required standards."
The brand, launched as an offshoot of the Holiday Inn chain in 1983, generates about $3.5 billion in gross annual revenue.
IHG, which didn't specify what measures would be used to shed below-standard properties, will emphasize the rebranding effort in the Americas. IHG plans a combination of room and property upgrades, promotions and more vigorous service training.
"The relaunch of Crowne Plaza is one of IHG's highest brand priorities," said IHG spokeswoman Caroline Counihan.
Crowne Plaza, which IHG says has 115 hotels in the development pipeline, is currently considered an upscale chain, a sector that also includes Hilton Garden Inn, Wyndham, Courtyard by Marriott and Four Points by Sheraton.
IHG is looking to get more revenue out of a Crowne Plaza brand whose performance has lagged behind that of the parent company so far this year.
Through June, Crowne Plaza's revenue per available room in IHG's Americas region rose 5.7% from a year earlier, compared with the 7.6% RevPAR increase for all of IHG's Americas hotels. In fact, Crowne Plaza's Americas RevPAR of $63.56 lagged behind that of IHG's Staybridge Suites extended-stay brand and was 17% less than that of IHG's 39-unit Hotel Indigo, which also competes in the upscale market.
According to Al Calhoun, managing director at Jones Lang LaSalle Hotels, one of the challenges of working a brand upmarket is raising room rates at properties associated with a lower tier of hotels. While Crowne Plaza's year-to-date average room rates in the Americas region are about $104, upper-upscale competitors such as Marriott's flagship brand and Starwood's Sheraton badge are fetching $170 and $135 a night, respectively.
Additionally, IHG faces the challenge of getting Crowne Plaza owners to fork over the $20,000 to $40,000 per key to upgrade their hotels. With Crowne Plaza hotels in the Americas region averaging about 270 rooms, that could mean an $8 million outlay for a typical Crowne Plaza owner in the U.S.
That said, IHG's timing could be far worse, according to Calhoun. With hotel construction slowed by the most recent recession and the high cost of building in areas near existing Crowne Plazas, IHG may be poised to move upmarket by taking advantage of the brand's real estate, which make the upgrades anywhere between 10% and 20% of the cost of building a new hotel.
"It's the perfect time to take advantage of the lack of new construction in the industry," said Calhoun, adding that IHG's "phenomenal" global reservation system may help with the transition. "If they went in there with great leadership and really got the capital into these properties, I think they could do it."