IHG Hotels & Resorts’ home UK market has a healthy 22 hotels in the pipeline as of 30 September 2022, so where does the group currently stand on the country’s development direction?
TOPHOTELNEWS caught up with the firm’s senior development director, UK and Ireland, Matt Walton, to get a clear picture.
How has IHG’s UK pipeline progressed over recent years?
With a family of 17 hotel brands, IHG has over 6,000 open hotels in over 100 countries, and more than 1,800 in the development pipeline. In the UK we have continued to sign and open a number of hotels, despite interruptions due to the pandemic.
Recent and imminent openings include Holiday Inn Express – Cambridge West, voco Edinburgh – Haymarket, Hotel Indigo Exeter and voco Edinburgh Royal Terrace.
IHG’s latest trading update showed that overall, conversions have grown to around 30% of the group’s openings – is this the same in the UK?
Yes, this is very much the case for the UK with around 30% of hotel openings being conversions. There are currently a large proportion of conversions in the UK market due to the cost of construction, supply chain issues and funding opportunities.
Is the conversion to newbuild ratio changing in the UK pipeline?
The conversion to newbuild ratio depends very much on the current environment. At present it is challenging to get funding for newbuild properties due to the increased labour costs and supply chain issues.
Investors want to generate income as soon as possible and conversions allow investors to earn quicker. Newbuilds often take 18 months to two years to come to fruition and start earning money, whereas conversions can operate before they complete the full brand alignment.
Newbuilds still play a part in IHG’s long-term strategy as they are important placeholders on the high street, they generate local employment, and they contribute to the ESG agenda by being built to be fully carbon neutral.
Which brands and segments are poised for the speediest growth in the UK?
Holiday Inn Express has historically been more of a newbuild brand but due to the current economic climate, conversion properties are becoming more prominent, too.
In the luxury and lifestyle space, Hotel Indigo, Vignette Collection and Kimpton Hotels & Restaurants are all responding well to the current ‘bleisure’ trend where guests combine leisure and work – perhaps adding on a day’s holiday to a business trip or enjoying a weekend away but working from the hotel for an extra day. We are finding that guests are choosing to book a premium space to enjoy a bleisure experience.
In addition, conversion brand voco Hotels is also positioning itself as another premium lifestyle option.
Which UK regions do you see as having the largest development potential?
There isn’t one set region but often a series of micro-locations within towns and cities that are pinpointed through our detailed data analytics – often it is so localised we are looking at opportunities within a specific postcode.
Have the volatile economic conditions in the country influenced IHG’s development decisions at all?
The fundamentals still remain the same. We are continuing to look at micro-locations around the UK. Key things remain such as the right management team, the right capital structure for the deal and the right brand on the door.
How interested are investors in partnering with IHG for UK development projects at the moment?
There is a strong appetite for investment in the UK. Since the pandemic, shareholders have seen a return, our development strategy is working really well with data analysis pinpointing specific locations or gaps for us to invest in. We are also not afraid to say no if a project is not viable. Collaboration is key as is the plan to stick to our clearly defined strategy.
What criteria do you use to choose which FF&E suppliers to partner with on upcoming hotel projects?
IHG has an approved FFE supplier list across all the key product categories and there are currently over 70 suppliers with formal contracts in place. In order for a supplier to become approved, they must meet the following core requirements as a minimum:
o Adhere to IHG Supplier Code of Conduct and evidence sustainable processes and practices
o Supplies fit for purpose products/hospitality/contract grade items that: adhere to IHG brand standards, meet agreed specifications and have the correct certifications, and bring innovation to design, engineering and improve the guest experience.
How do you see IHG’s UK portfolio developing over the coming years?
Our data analysis really helps to steer our strategy. In the UK and Ireland we have a clearly defined strategy which highlights the gaps across our brand family. Consumer habits have also changed in terms of our way of working and reflects what product works in certain locations.
Many TOPHOTELNEWS articles draw on exclusive information from the TOPHOTELPROJECTS construction database. This subscription-based product includes details of thousands of hotel projects around the world, along with the key decision-makers behind them. Please note, our data may differ from records held by other organisations. Generally, the database focuses on four- and five-star schemes of significant scale; tracks projects in either the vision, pre-planning, planning, under-construction, pre-opening or newly opened phase; and covers newbuilds, extensions, refurbishments and conversions.
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