PERSPECTIVES

A Room With a View … Forward

2021-05-20


The pandemic hit the hospitality industry hard, but IHG Hotels & Resorts is well positioned for a recovery.

By George Turner, Chief Commercial & Technology Officer, IHG Hotels & Resorts

In my 12 years at IHG Hotels & Resorts, I’ve always had great confidence in our business model, management team and specifically our resilience. I never thought we would be tested as dramatically as we were starting in early 2020, when COVID-19 swept the world.

The pandemic has been — and continues to be — tragic. Throughout all that, I’m proud that I can say my confidence in our team was well founded. IHG effectively managed through the initial shock of COVID — including record low occupancy — and rapidly pivoted to initiatives to first and foremost make our guests, employees and hotel teams feel safe and comfortable, as well as centralize many operations and focus on digital and contactless solutions. As a result of this approach, we’ve learned a lot of important lessons that will help us continue to navigate our still-challenging environment.

Locked down, but not out

With nearly 6,000 properties in more than 100 countries, and half a million guests (pre-pandemic) each night, IHG and its hotel owners were hit hard by travel restrictions and national lockdowns. As we move into 2021 and hear news of vaccine rollouts, we cannot lose sight of the immeasurable impact COVID is having on consumers and employees worldwide — even those fortunate enough to remain healthy.

At IHG, we are still managing the day-to-day challenges of the pandemic, while simultaneously focusing on what comes next. Our rapid response was enabled by numerous factors, starting with a strong management team, trusted by investors and other stakeholders, which took a measured approach to the problem. We immediately focused on the fundamentals behind our business — our guests and owners. We also looked internally at how we could reduce our costs to get through the uncertainty of the months ahead.

A strong balance sheet meant we could take the time to evaluate the situation, and did not immediately have to furlough colleagues. Our fiscal soundness provided IHG hotel owners with an increased level of support. We halted all nonessential work and expense and were able to focus on solution delivery and enterprise security. Importantly, we leveraged data and data-driven insights in making all these decisions.

As a result, IHG finds itself well positioned for the recovery once travel flows return to a new normal.

Early days, tough decisions

In the spring of 2020, as the magnitude of COVID became clear, we faced difficult decisions — like all enterprises. Given our strength, we were able to take a more measured approach than many. Our CFO and treasury organization quickly and efficiently engaged with our supportive banks to ensure that our finances were managed in a way that aligned with the significant fall in trade all travel industry players were experiencing. We clearly had to reduce costs, which included any expenses deemed nonessential and meant cutting back drastically on agency support. We looked at all areas to find where and how we could best reduce our costs in such an uncertain environment, operating for a few months in “keep the lights on” mode.

Despite the actions we were forced to take, it’s a testament to our culture and the way we operate that feedback from our colleagues has been very positive. A recent survey of our teams found that an overwhelming majority agree that we are providing the right level of support and flexibility to our colleagues, guests and owners.

Naturally, we also made significant shifts in our operating model, with colleagues — notably 1,500 call-center team members — going virtual around the world almost overnight. Coincidentally, about 18 months ago, I spoke with our IT team about this very eventuality — call-center colleagues working remotely. But when a crisis hits, you have to find a way to push through more quickly than you might have thought possible, previously.

IHG has more than 2,000 reservations and customer care agents located across five global customer reservation offices and four partner sites, of which 1,500 transitioned to remote work. Lessons learned from our initial experiences in China allowed our teams to work quickly in other parts of the world, so our agents could work remotely and still provide a high level of service for our guests without compromising the resilience or strength of our networks.

Clean and contactless with a promise

Our colleagues make up one vital group of stakeholders. It goes without saying that our guests form another. There, too, we had to make immediate adjustments. In the wake of the pandemic, our guests’ and business clients’ top priorities shifted to cleanliness and flexibility — something that had previously been table stakes. They need to feel safe and comfortable staying in our hotels, and in this unpredictable time they had many questions about cancellations, rescheduling and refunds. We’ve ensured that guests who still need to travel or are thinking further ahead can book with confidence thanks to flexible booking/cancellation policies.

We’ve also established new cleanliness procedures and protocols: the IHG Clean Promise and the expansion of our IHG Way of Clean. Pre-COVID, no one would have thought that cleanliness would ever be one of our top marketing points — but that became the reality. Our commercial and technology teams worked collaboratively with our marketing teams to implement a new cleanliness program. Through both marketing and operations, we continue to communicate the painstaking steps we take to keep our properties clean and give our guests the reassurance they need to stay in our hotels.

Additionally, we had to find ways to make the travel process safer by limiting contact. A new digital check-in system, developed in just months, helps limit guests’ contact with the hotel team as well as provide a more seamless check-in, which will be hugely positive to our guest experience long after the pandemic is merely history. As with our work-from-home call center, the check-in system was a move we had long contemplated, but the pandemic made it a top priority.

Advocating for support

Our hotel owners are an essential part of our business, and many of our hotels are owned by small to medium enterprises. COVID’s impact on them was immediate. One of our top priorities has been to do everything we can to support our owners and help their businesses survive this crisis. For example, we reduced many of their costs by using our leverage with suppliers, relieving fees wherever possible and giving them more flexibility to meet brand standards. And we’re also constantly working with governments around the world to advocate for support and promote policies that help our owners survive the pandemic. In the US, for example, we developed resources to ensure they knew how to apply for the CARES Act and other relief.

We continue to navigate the recovery, build confidence in travel and work even harder to deliver relevant, timely and cost-effective solutions and services for our hotels. We have received positive feedback from owners on the level of support we have provided in addition to the tools and resources we created for them.

Innovating with cloud & automation

Surviving the crisis was job one. But for IHG, for others in the industry and indeed, I believe, for business in general, the challenge now is to take learnings and apply them going forward.

Technology has a huge role to play both in recovery and beyond, and we’ve shifted our approach. We have to ruthlessly prioritize to what will drive the most value, then move with speed and agility. We are focused on solutions that improve the guest experience, increase operational efficiency and speed-to-market, and increase revenue while reducing costs. To make this a reality, a strong foundation is essential. We’re investing in our cloud-based technology infrastructure, ensuring that it’s reliable, resilient and secure.

The coronavirus prompted us to accelerate adoption of automation tools and AI, especially in the revenue management area, where we’re focused on driving revenue that maximizes our and our owners’ long-term and short-term commercial performance. By making better use of historical performance data, we can better predict estimates and ultimately make decisions that drive revenue for our owners and IHG.

IHG’s revenue-management system relies on historical booking data to run demand-forecast and optimization models for recommending optimal room rates. To protect the system from a sudden shift in demand and booking patterns during the pandemic, we developed an automation tool that monitors data anomalies and improves historical booking data quality, all with an AI/machine-learning algorithm. This has never been more critical than it is now, during such a volatile and unpredictable period.

In this podcast, George Turner shares how the pandemic impacted IHG and how his team turned innovative ideas into practical, prudent solutions.

Firming the foundation

We’re pressing forward with IHG Concerto, the most sophisticated platform in the industry. Concerto hosts the guest reservation system, developed in partnership with Amadeus, as well as price optimization software; it provides the foundation on which we will build out our technology architecture in coming years. Already, initial functionality is live across all our hotels.

We’ve also begun deployment of our Concerto for Owners portal, which provides the top 12 business metrics to our owners in real time on any device. That rollout was first completed in Greater China (in Mandarin) and will extend to all other regions in 2021.

The contact center is another area rife with opportunity. We’re pushing to use more voice-recognition technology so we know what customers are calling about and can direct them to the right place. This will bypass the hotel, wherever possible, as many of those inquiries do not require on-property support. It allows our colleagues on property to focus on what they do best — provide a great guest experience at the hotel.

The need for speed

From a technology perspective, one of the prime learnings from the COVID crisis is speed, speed, speed. Specifically, we learned that once we became laser-focused on the outcome, we could work far more quickly than we thought possible just months earlier.

The key? Well, necessity is the mother of invention, as millions now working from home can attest. But beyond that, we shifted from a project mindset to a product mindset.

In my experience, projects often take on a life of their own, with changing views of the necessary supporting infrastructure or no end-state in sight. But when you shift to a product mindset, expectations change. Products require support to survive and thrive. You create the best product you can, anticipating that it won’t be perfect immediately but will, rather, require incremental improvement. That’s fine; you adjust on the fly. This is a lesson many organizations could and should continue to learn through their experience.

Speaking of mobility, IHG’s substantial presence in Greater China has brought several lessons. In that nation, more than anywhere else, consumers are mobile-focused in virtually everything they do. A mobile-first approach is essential in China, and this is increasingly true worldwide. In Greater China, we’ve launched Alipay for both the IHG app and Alipay Mini app. IHG is the first international hotel group to provide full-function Alipay, which is the most popular digital payment method for Greater China consumers. The solution proved immediately popular with our guests and IHG Rewards members. We are also now looking to our team in China to serve as a center of innovation, particularly when it comes to operating in a digital-first mindset.

The growing reliance on digital platforms to manage the whole travel experience (not only booking but checking in, transacting while at the hotel, and so forth) serves as the glue that bonds many of the themes I’ve discussed. Guests achieve greater control over their stay and, at present, can feel more comfortable at an IHG hotel because they can maintain social distance. Hotel operators can improve the customer experience by having more time to focus on their guests. IHG colleagues may work flexibly for as long as necessary, safeguarding their health. And at the corporate level, we maintain our commitment to excellence, serving our many invaluable stakeholder groups.

Pivoting to recovery

The hospitality industry, and the travel sector more broadly, has faced down the biggest crisis in its history. The resilience of our business was tested like never before. Consider travel restrictions, social distancing and closed borders, and the following realities are no surprise:

  • Historic low occupancy (especially in April 2020 when the full force of the pandemic took effect)
  • Largest decline in revenue per available room (RevPAR), a common industry metric, that we’ve ever seen

And keep in mind the importance of the travel industry to the global economy. In 2019, travel and tourism accounted for more than 10% of the world’s GDP. That year, the industry accounted for nearly 16 million jobs in the US, generating $2.6 trillion in economic output.

IHG has positioned itself to thrive in a global recovery. What will that recovery look like? It varies from region to region due to disparate travel restrictions, but we’ve seen signs of improvement. Some of our hotels in Greater China have already experienced their best performance post-pandemic. Worldwide, research shows a desire for getting back to travel, given all we’ve missed out on in the last year.

As vaccination percentages increase and consumers feel safe traveling once more, we look forward to welcoming more and more guests back to our hotels and resorts around the world.

This article was written by George Turner, Chief Commercial & Technology Officer of IHG Hotels & Resorts.

To learn more read the latest Cognizanti Journal, "The resiliency reset," or contact us.