Luxury Hotels

IHG Hotels extends franchise model in China to Crowne Plaza brand as it chases expansion

The company says it will also open its Holiday Inn and Holiday Inn Resort brands to franchise contracts after a successful trial

PUBLISHED : Tuesday, 28 November, 2017, 1:07pm
UPDATED : Tuesday, 28 November, 2017, 11:29pm

InterContinental Hotels Group (IHG) is extending its franchise business model in the China market to its Crowne Plaza and two Holiday Inn brands, as it looks to accelerate expansion in a country it sees as the largest source of growth.

The company said on Monday that it would seek Chinese operators for Crowne Plaza, Holiday Inn and Holiday Inn Resort hotels, after a successful trial of the franchise model for the budget Holiday Inn Express brand.

“This new franchise model is an addition to our proven and successful management model in the market. Both are important to us and they will address different owner types and needs,” said Jolyon Bulley, who took on the role of CEO for IHG in Greater China this month.

“IHG has confidence in the maturity of the industry and the sophistication of Chinese owners, and believes that the market is ready for the franchise model,” said Bulley, speaking in Beijing at the official launch of the franchise expansion plan.

Under the franchise model, IHG provides licences to franchisees, allowing them to operate hotels under the IHG brand name. The franchisees are responsible for the operation of the hotel while IHG provides regular audits and training to ensure its standards are met.

The model is common in developed markets, with over 80 per cent of IHG’s around 5,300 hotels globally operating under franchise models. But in developing countries many hotel brands have been hesitant to adopt the model because of concerns over substandard service from third-party operators.

IHG has been operating a franchise model for its Holiday Inn Express brand since last May in a trial. It said the model had proved quite popular with Chinese owners, with 68 deals signed and six hotels already open.

“With the immediate success, we are even more confident that it is the right thing to open up the franchise model,” Bulley said.

IHG has made China one of its three global subdivisions in a sign of the importance of the country to the company. Bulley was formerly chief operating officer of IHG Americas, and has been tasked with leading the Chinese operation for franchised and managed hotels.

The group has 316 hotels in China, Hong Kong, Taiwan and Macau, and another 285 in the pipeline.

Competition remains stiff in China, but according to a Savills report in February, foreign hotel brands remain bullish on the country and are likely to look for partnerships with local players to expand or create new hotel concepts catering specifically to local customers.

With a growing domestic tourism industry, subluxury hotels offering discounted rates or packages as well as family-friendly venues will expect to see the largest growth in the next several years, the report said, while the top end luxury sector remains oversupplied.

In two of the first franchise contracts, HK CTS Hotel, a subsidiary of state-owned China National Travel Service Group, will rebrand its Metropark Lido Hotel Beijing as Holiday Inn Beijing Lido in late 2018, while IHG’s existing Crowne Plaza Beijing Lido will transfer from direct management to a franchise in early 2018.

Both hotels will be managed by Kew Green Hotels, a subsidiary of HK CTS Hotels, and one of IHG’s largest partners in Europe.