TABLE OF CONTENTS

INTRODUCTION.................................................................................................................................1

TASK 1.............................................................................................................................................1

Historical background..................................................................................................................1

Legal and Financial......................................................................................................................2

Size and Structure of the Company..............................................................................................2

Product and Services....................................................................................................................2

Customers and Markets................................................................................................................2

TASK 2.............................................................................................................................................3

SWOT Analysis of IHG...............................................................................................................3

Horizontal and Vertical Integration.............................................................................................4

TASK 3.............................................................................................................................................4

TASK 4.............................................................................................................................................5

TASK 5.............................................................................................................................................8

TASK 6.............................................................................................................................................9

CONCLUSION..................................................................................................................................10

REFERENCES...................................................................................................................................12
TABLE OF FIGURES
Figure 1 InterContinental Hotel.......................................................................................................2
Figure 2 List of EU nations.............................................................................................................8
INTRODUCTION
The current economical situation has been very dynamic and has particularly affected the
hotel industry of UK. The local hotels have witnessed significant changes in their performance
due to the price war against a critical economic backdrop. One of the major trends in the United
Kingdom is the swift mushrooming of medium budget hotels which are offering competitive
prices to travelers. The impact of current economic environment has been addressed in this
report on the Intercontinental Hotels Group of UK (Adams, 2006).

TASK 1
Historical background
Intercontinental Hotels Group is a multinational hotels company with its headquarters in
United Kingdom. It is touted to be the largest hotel organization throughout the world. This
group boasts of around 4500 hotels in over 100 nations. The roots of the group can be traced
back to the period of 1777. This was the time when William Bass had launched the Bass
Brewery in Burton-upon-Trent. After spending almost a century in the brewing business and
acquiring many breweries, the company made its first international move and penetrated the
hotel industry (Welcome to Our Hotel Development Website, 2013). The hotel business was
becoming increasingly brand focused and hence Bass acquired the Intercontinental Hotel
Company which added an upper high-scale brand to the portfolio. The Intercontinental brand
was established as a division of the Pan American Airways. Its founder was Juan Trippe. The
first hotel was opened in Brazil in the year 1946. The company was sold to Grand Metropolitan,
a UK based company in the year 1981. This company further sold Intercontinental Group to
Saison Group which was a Japanese company in a bid to focus on its core business. Finally in the
year 1998, IHC was sold by the Saison Group to the Bass. The self governing organization
InterContinental Hotels Group was created in 2006 after the splitting of the Six Continents into
two firms. IHG’s core focus was on hotels and soft drinks (Palmer and Hartley, 2009).

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 Figure 1 InterContinental Hotel
(Source: Welcome to Our Hotel Development Website, 2013)

The major brands of the group are Crowne Plaza, Candlewood Suites, Holiday Inn Hotels
and Resorts, Holiday Inn Express, Intercontinental, Staybridge Suites and Hotel Indigo. The
mission statement of the group is to become the leading hospitality brand in the world by
focusing on its franchising, management and branding strengths. The several horizontal
integrations of the group have facilitated its rapid expansion (Welcome to Our Hotel
Development Website, 2013).

Legal and Financial

Intercontinental Hotels Group is a Public Limited Company. It is the holding company of
many other hotel brands. The Group has been capable of growing its revenues from $1.6B to
$1.8B year after year. Apart from this, the hotel corporation has also been successful in reducing
the sales percentage committed towards the cost of goods sold, income tax expenses and SGA
expenses. All such enhancements resulted in a growth at the bottom line from US$293M to
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US$460M. The company recorded annual revenue of US$1768M in the year 2011. The
operating income of the group in that year amounted to US$559M. The revenue has been
showing an upwards trend as compared to the financial year 2009 and 2010 (Enz, 2009).
Recently the Office of Fair Trading of UK alleged that IHG, Booking.com and Expedia
violated the competition laws by entering into rate parity agreements which restricts an agent’s
capacity to discount the hotel’s rooms as IHG was trying to keep prices on its own channel
relatively competitive. However, this was just an allegation and no action was taken against the
company. IHG has formed a Vendor Code of Conduct to ensure proper compliance of both
national and international laws relating to conducting business (Wymer, 2007).

Size and Structure of the Company

The sector in which the company operates is hospitality. The group is mainly involved in
the management of hotels owned by third parties and also in franchising its hotel brands. This
implies that it sells its proficiency in hotel marketing, system and management whilst leaving
other capital intensive procedures to its partners. The company has over 4500 hotels of different
brands in over 100 nations. About 3900 hotels are operating under the franchisee agreement
while 652 are separately owned but managed by the group and about 10 are under direct
ownership. The group has hotels in both upscale and medium segment (Lago and Pofley, 1993).

Product and Services

As the company is in the hospitality industry its major business activity is to provide
hospitality services to its guests and clients.

Customers and Markets

The customers of IHG are mainly high class elite businessmen, professionals and leisure
travelers. The company is the largest hotels group in the world in terms of number of rooms. The
hotel industry is highly fragmented and has projected 8 million branded hotel rooms which is
around 45% of the entire market (Jones, 2012). In this IHG has about 8% share in the branded
rooms market and approximately 3% of the entire industry. The leading six hotel companies
which also include IHG enjoy almost 8% share in the branded rooms market. IHG runs a strong
loyalty program in name of Priority Club Rewards. Apart from this, it has recently launched real
time email marketing program through which it aims at initiating communications with its guests
who are not the members of the Priority Club. Apart from this, there are other traditional

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marketing and promotional programs of the company (Welcome to Our Hotel Development
Website, 2013).

TASK 2
SWOT Analysis of IHG

Strengths
The hotel group boasts of a varied portfolio of hotel brands in different economic
segments which cater to the demands and needs of upscale customers, international business
travelers, leisure travelers and business travelers. Company makes a lot from the royalty fees
earned from the management fees of the brands it manages plus fees from its franchises. One of
the major strengths of the hotel company is its selected brands and a large portfolio which
commands leadership in their respective market segments. Quality services from its all the hotel
brands foster company’s market position and gives it an edge over its competitors. The
development of innovative brands is also assisting in meeting the unique demands and
expectations of its guests (Pike and Barlow, 1998).
The group has recently opened up the EVEN hotel brand which is the earliest mainstream
hotel emphasizing on good health and wellness. This hotel has been launched to capitalize on the
growth in wellness industry worldwide. The geographically diversified presence of the group’s
hotels mitigates the risks and threats related with operating in a specific area because of demand
fluctuations, economic situations and geo-political conditions. The group has been making the
most of the opportunities offered in emerging nations. Development in these areas is helpful in
countering the sluggish growth rate in the traditional marketplaces. The international scale and
systems of the Group are also its major strengths which have helped in garnering a leadership
position ().

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Weaknesses
High debt pressure elevates business risk for the hotel company has it has a high
operating leverage i.e. the amount of debt employed in the capital is more. Hence, when times
are bad, it is at the risk of defaulting. The employee attrition rate of the hotel company is also
very high which results in increased expenditure on recruitment and training of the new staff
(Jones, 2012).

Opportunities
There are various market expansion opportunities in emerging economies which can be
capitalized by the company and new tourist destinations can be developed. There are prospects
of introducing new services in hotel offerings (WTO welcomes EU enlargement as a stimulus for
tourism, 2004).

Threats
The major threats are in the form of Euro zone crisis and the economic downturn. In
addition to this, volatile currencies may make planning difficult. A change in consumer
preferences and tastes is also a major threat. There is high risk of substitution as hotels providing
quality services are everywhere (2010 risk factors, n.d).

Horizontal and Vertical Integration

Horizontal integration is employed when a company acquires or merges with another
organization on the same level of the chain. The main benefit of this type of integration is that it
increases the market share of the company. Horizontal integration happens when a company
attempts to bring in the resources of its rival firms and enlarge its customer base as well as
market share. IHG has a huge portfolio of various hotel brands and this was the result of
company’s horizontal integration (Kaplan and Haenlein, 2010).
Vertical integration takes place when an organization is the owner of firms on more than
two levels in the buying chain. It is the process in which distinct steps are resorted to in
production as well as distribution of products and services which are managed by a single
company. IHG in terms of vertical integration provides various holiday packages to its guests
(Jones, 2012).

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TASK 3
The existing economic conditions of the whole of Europe have had both a negative and
positive influence on the hotel. Challenges such as euro zone crisis, economic downturn,
modifications in visa regimes and etc. have severely impacted company’s business. While on the
other hand, opportunities and bright prospects in form of removed trade barriers, increasing
inflow of tourists, last year’s Olympics and etc. have also been wisely capitalized by Group’s
hotels. All these factors need to be examined for having a comprehensive overview regarding the
overall impact (Economic factors will affect hotel investment, 2012).
As per the marketing and management journal of hospitality, hotels fall in the category of
late cycle sector and their chief personnel decide the policies. Hence, the changes in the
environment might not show their real impact in less time. On examining the demand and supply
trends of Intercontinental hotels it is clearly evident that the major customers are upscale tourists
and international plus domestic business travelers. A number of economic elements have been
examined as per the industry analysis which have an impact on the profitability and sustenance
of the hotel in the long run. It is quite noteworthy that hotel revenues are highly influenced by
the incomings and outgoings of guests who are the main source of revenue (Wymer, 2007).
Economic turnaround is one such aspect which has posed considerable economic as well
as financial challenges in front of the company. Due to the Euro zone crisis, the revenue of the
group fell by almost 18% in the year 2009 together with occupancy. As per the statistics
provided by IBIS World, the hotel sector of UK has trimmed down by 1.1% on an annual basis.
This has also blemished the performance of IHG’s hotels which led to the decline in revenues.
Considerable decline in the inflow of both international and domestic travelers was witnessed as
they were finding it increasingly difficult to finance their holidays (Barth, 2011).
Inflation is yet another significant factor which led to the decline in the purchasing power
of customers because of a hike in commodity prices. This has significantly influenced the
consumer spending in tourism and hospitality industry. People traveling for leisure purposes are
very price sensitive and even a slight increase in prices reduce their travel related spending.
There has been a considerable fall in the same as result of increase in interest rates. Inflation has
both encouraged and discouraged travelers and tourists from selecting the services of the IHG
hotels. There has been a great increase in the older population of UK. This also serves as a
roadblock as if the major population composition involves elderly people then the number of

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domestic tourists will decline resulting in fall in revenues of the hotel (Economic factors will
affect hotel investment, 2012).

TASK 4
Various kinds of hospitality related laws are present that are relevant to managers of
Intercontinental hotel.
 The hotel managers must follow privacy law regarding allowing unregistered individuals
to make an entry into guest rooms.
 It is also essential to have awareness about disability law regarding appointment of
human resources in hotel. As this is one of the most common areas which leads to a
number of lawsuits.
 The manager is also expected to make its employees get well versed with fire regulation
procedures.
 They must have a brief overview regarding the possible crimes that can be committed and
what is the procedure of reporting to concerned authorities (Barth, 2011).
 There should also be awareness in the manager regarding insurance regulations when the
issue is about clients of Intercontinental hotel.
 Laws related to construction should also be kept in mind with respect to materials and
architecture that is being chosen by hotel.
 Proper norms related to licensing are also required to be followed to avoid any
mishandling of procedural guidelines (Economic factors will affect hotel investment,
2012).
There are about 27 member states to European Union in which six core states were in
form of predecessors to Economic Community of Europe in the year 1957 while the rest states
joined after subsequent enlargements. The major states and the year of joining are presented in
following table.

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 Figure 2 List of EU nations

(Source: The European Union, n.d)

There are a large number of advantages and disadvantages that are linked to hotel
industry especially Intercontinental Group of hotels if United Kingdom adapts to Euro currency
which are listed below.
Advantages
 There will be elimination of transaction cost with respect to operations of Intercontinental
hotel.
 There will be transparency in pricing as people will not have to calculate what price it is
in the respective currency. This will increase the spending power of tourists and other
visitors.
 Uncertainty caused due to exchange rate fluctuation will also be eliminated.
 It will help to reduce costs within the hotel firm as there will be no requirement to buy
foreign exchange to be used within the European Union.
Disadvantages
However there is also a presence of large number of disadvantages which must be taken
into account that may be faced by economy and the hotel firm. There are three core issues that
will be affecting the operations of hotel. Adoption of Euro may be seamless from guest point of

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view but firm should be able to bring clarity to decisions regarding conversion so as to meet the
requirements of concerned parties. The firm might face issues with respect to liaison structures
which may not ensure that conversion is able to meet the necessities of owners. The single euro
may not even get consistent with the procedures placed by hotels (Pike and Barlow, 1998).

Enlargement of European Union

Enlargement of EU will help in creation of a complete as well as coherent tourism
industry in Europe which will directly benefit Intercontinental hotels as well (Hall, Smith and
Marciszewaska, 2001). This will also lead to liberalization of international trade which will
eliminate non tariff barriers which will aid in entry of tourist flow. This will also increase clients
to Intercontinental Hotel which will stimulate growth, productivity and provide new chances for
creation of opportunities (WTO welcomes EU enlargement as a stimulus for tourism, 2004).

TASK 5
A large number of social and cultural trends have been observed in last few decades all
over United Kingdom. These are in form of growth in disposable income, increase in standard of
living followed by demand in goods and services. United Kingdom is also considered as third
highest GDP per head. Because of this a significant change is lifestyle pattern has been observed
in form of increased spending on famous hotels by UK consumers which also include
Intercontinental Hotel. These changes are driven by and have an influence on consumers as well
as operating firms in hotel industry (Wymer, 2007). Changes towards enhancement in demand
for health foods, customized service offering, online shopping will make a deliberate impact on
hospitality industry. In such a scenario, various drivers of change in form of marketing and
promotional strategies maintain customer relationship management needs to be taken into
consideration by Intercontinental hotel. From the human resource point of view, there is a
movement towards work flexibility in form of ability to choose how, when and where to work
(2010 risk factors, n.d).
Thus intercontinental hotel must focus on this trend to keep the valued employees within
the boundaries of organization. In the last decade consumers, employees as well as regulatory
bodies of hotel industry have become aware towards environment. Thus they discourage
wasteful consumption of resources and do not prefer hotels that follow environmentally
unsustainable practices. The present firm has so far been successful in its efforts and has

9
implemented sound environmental practices in its hotel so as to encourage reuse and recycling of
resources. There is a need to move more forward in this area to match the requirements of
consumers and develop a competitive edge over rival firms who are operating on the same
principles of environmental sustainability (Economic factors will affect hotel investment, 2012).
Due to this consumers have started preferring services of luxury hotel like the present
firm. There has been 10 percent rise in loyalty of consumers towards service and hospitality
sector which is advantageous in present case. Population growth within United Kingdom has a
positive influence on the overall demand of Intercontinental hotel. But the problem of ageing
population is still a matter of concern. It is defined as systematic shift in the distribution of age
towards old age. The aging population represents a substantial and underdeveloped consumer
group. It represents that group of residents which is substantial as well as underdeveloped. This
is expected to be one of the most rapidly growing trends in the demographic area is expected to
change the socio economic scenario that is a part of UK hotel industry (Aging Population to
Impact Future, 2011).
There is going to be a drastic increase in the percentage of ageing population over 65
which was 15 percent in 2000 and is expected to reach up to 25 percent by 2015. Hence there is a
requirement to handle talent management issues by the growing age as is likely to hamper with
the process of recruitment of sufficient staff in some regions. The overall demographic factors of
ageing population are very impressive. But there is a demographic variability with respect to
health status, income and family structure which is critical to future scenarios of Intercontinental
Hotel. Moreover the ageing population is educated and more experienced consumers of
hospitality. They also reflect good measures of loyalty with respect to Intercontinental hotel.
Thus the hotel must develop products and services that are more intended towards sophisticated
as well as the ageing client base of coming future. This change in demand of consumers will lead
to more demand towards healthy food in Intercontinental Hotel. The ultimate result will be
increased pressure on catering department to supply healthy food to consumers (Lago and
Pofley, 1993).

TASK 6
A mixture of technological inputs has affected the hospitality industry. These factors
have also undergone many changes in the last five years. There has been an increased usage of

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computerized booking in form of online reservation in Intercontinental hotels. Better transport
facilities provided by UK government have increased the inflow of tourists to Intercontinental
hotels. There has also been rise of promotion by present hotel via use of social networking sites
that provide for customization of service offering. Increased usage of internet has played both
positive as well as negative role in attracting consumer base and cost structure of Intercontinental
hotel (Welcome to Our Hotel Development Website, 2013).
The technological innovations have sometimes hindered the progress of firm. Thus it is
required that the hotel gets in tune with these changes by creating a human resource team that is
upgraded with the necessary skills and also provided by specific infrastructure to beat the
competitors. Up till now the firm has been in tune with changes in technological factors and has
also utilized the basics of information technology in its everyday operations. The novice
concepts like internet promotion, increased presence on social networking sites have helped in
targeting the required consumer base, assessed potential franchising, identified labor markets,
kept track of employee performance etc. Various kinds of technological inputs have aided the
operational process of Intercontinental hotels For example in case of the present hotel many
guest visitors are booking the rooms by utilizing mobile devices which form the major chunk of
business class travellers. Increased booking has also been observed through website that is being
accessed through mobile, palmtops, laptops and desktop computers (Corporate Responsibility
Report, 2013).
The need in present case is to optimize the operational feasibility of websites to be cost
effective and ensure timely access by visitors. New technologies can be utilized further to tap
customer satisfaction and increase performance of employees. Factors like data mail campaigns,
seasonal promotions, advertisement scheduling and designing of personal advertisements can be
done via varied kinds of internet technology. This can increase the growth of hotel to many folds.
It can also provide assistance to employees to speed up the reservation process (Kaplan and
Haenlein, 2010).

CONCLUSION
Changing economic equations play a widespread role in determination of the future
capabilities of hotels so as to enhance consumer base and ensure profitability in long run. Factors
like technology, laws, social and cultural ethos are having a profound impact on deciding the

11
future and present success of Intercontinental hotel. Hence it is required to undertake a brief
overview regarding the strengths and weaknesses of present firm so as to assess how the hotel
can deal with present opportunities and threats. Each and every factor is likely to have an impact
on the smooth operations of hotel (Jones, 2012).
The intercontinental hotel has a vast potential to face the underlying challenges and has been
successful in its previous efforts as well. The requirement is to adapt a rational thinking approach
so as to adapt according to changing situations.
The future of hotel looks bright but it is required to be in tune with present threats to have
an edge over its competitors. Structural changes have started taking place in hotel and it is
essential to take care of future trends to develop an edge over competitors and maintain a
strategic advantage over firms with similar operations (Waddingham, 2002). New policies are a
key to expand the scope of operations within the Intercontinental hotel.

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REFERENCES
Books and journal articles
Adams, D., 2006. Management Accounting for Hospitality, Tourism, and Leisure Industries: A
Strategic Approach. 2nd ed. Cengage Learning EMEA.
Barth, S.C., 2011. Hospitality Law: Managing Legal Issues in the Hospitality Industry. Wiley.
Benson, A. M., Tilbury, J. and Wickens, E., 2012. Sustainable Tourism Management and
Marketing. Journal of Hospitality Marketing & Management. 21(7). pp.703- 709.
Bowie, D. and Buttle, F., 2012. Hospitality Marketing. 2nd ed. CRC Press.
Enz, C. A., 2009. Hospitality Strategic Management: Concepts and Cases. 2nd ed. John Wiley
and Sons.
Hall, D. R., Smith, M K., and Marciszewaska, B., 2001. Tourism in the New Europe: The
Challenges and Opportunities of EU Enlargement. Wiley.
Kaplan, A. M., and Haenlein, M., 2010. Users Of The World, Unite! The Challenges and
Opportunities of Social Media. Business Horizons. 53(1).
Lago, D., and Pofley, J.K., 1993. The Aging Population and the Hospitality Industry in 2010:
Important Trends and Probable Services. Journal of Hospitality & Tourism Research.
17(1). pp. 29-47.
Palmer, A., and Hartley, B., 2009. The Business Environment. Berkshire: McGraw-Hill Education.

Tribe, J., 2004. The Economics of Recreation, Leisure and Tourism. Oxford: Butterworth-
Heinemann.
Wymer, T. D., 2007. A Map for the Emerging Workplace: The Y in the Road. Knoll.
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January 2013].
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<http://www.thematuremarket.com/SeniorStrategic/aging_population_travel_market-
7261-5.html>. [Accessed on 12th January 2013].
Corporate Responsibility Report. 2013. [Online]. Available through:
<http://www.ihgplc.com/index.asp?pageid=733>. [Accessed on 12th January 2013].
Economic factors will affect hotel investment. 2012. [Online]. 6th February. Available through:
<http://www.hotelnewsnow.com/Articles.aspx/7463/Economic-factors-will-affect-hotel-
investment>. [Accessed on 12th January 2013].

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Jones, B., 2012. Euro crisis impacts hotels in different ways. [Online]. Available through:
<http://www.hotelnewsnow.com/Articles.aspx/8142/Euro-crisis-impacts-hotels-in-
different-ways>. [Accessed on 12th January 2013].
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online.com/Trends/Andersen/1998_TheEuro.html>. [Accessed on 12th January 2013].
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<http://glencoe.mcgraw-hill.com/sites/0078693160/student_view0/unit5/
portfolio_activity__lesson_99.html>. [Accessed on 12th January 2013].
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<http://development.ihg.com/>. [Accessed on 12th January 2013].
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http://ehotelier.com/hospitality-news/item.php?id=A1447_0_11_0_M >. [Accessed on
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