Did you stay at a Holiday Inn Express last night?
Holiday Inn Express provides a reasonably priced, no-hassle experience for everyday travelers.
I may not be in the hospitality business, but I did stay at a Holiday Inn Express last night.
Holiday Inn Express is a hotel chain owned by Intercontinental Hotels Group (IHG). IHG is an international hospitality company that franchises and manages a number of hotel chains around the world. However, I’m focusing on Holiday Inn Express because I believe that it offers an interesting value proposition and is a highly effective organization. It is IHG’s largest chain making up about half of the company’s portfolio.
Value Proposition
Holiday Inn Express offers cost-conscious travelers a no-hassle, no-frills option when booking short term hotel stays. The chain also makes sure to provide 24-hour business facilities in order to satisfy business travelers. The official chain motto is “everything you need, nothing you don’t”. When compared to other hotels at similar price-points, Holiday Inn Express locations are typically viewed as more upscale.
In short, the chain promises to give travelers the best value for their money. This was spelled out in the well-known “Stay-Smart” advertising campaign that debuted in the late 1990s.
Business Model
IHG makes the majority of its revenue by managing and franchising hotels. The company owns less than one percent of its hotels in order to maintain an “asset-light” strategy. This strategy provides for high return on investment and numerous opportunities for growth. However, this model only holds if the hotels themselves are profitable. IHG also offers a comprehensive reward program that offers benefits across all of its branded hotel chains.
Holiday Inn Express’s business model stands out not for what it does but for what it does not do. The chain primarily earns its revenue through reasonably priced room rentals. However, it does not follow many other hotels in charging for wireless internet, breakfast, or other amenities. Additionally most locations in the US do not seek alcohol and/or food revenue. The no-frills model along with the tremendous number of locations across the US is specifically geared to attract business travelers and short-term stays.
Operating Model
The operating model is oriented towards minimizing costs and providing convenience for guests. Customer facing labor costs are kept to a minimum by only requiring personnel to man the front desk. There is no concierge service or bellhop. Most US locations do not contain a bar or restaurant, and food is only provided during breakfast. Most of the locations also maintain between 60-80 rooms which also reduces the number of necessary personnel. However, the chain does not cut back on cleaning staff which allows it to maintain a position above most economy hotels. Wireless internet, 24-hour business center access, and breakfast are all offered free of charge.
Conclusion
The operating and business models appear to be in complete alignment. Holiday Inn Express is able to offer competitive prices while appearing to be positioned above economy motel by trimming amenities that do not attract its core customers. The quality of the hotel is maintained even though the hotel offers less than competitors. Business travelers and short-stays are typically looking for convenience, and everything about the chain is designed to provide just that.
Sources
1. http://www.ihgplc.com/files/pdf/corporate_review.pdf
2. http://www.ihgplc.com/index.asp?pageid=410#ref_holidayinnexpress
3. http://www.ihgplc.com/index.asp?pageid=40
4. http://www.ihgplc.com/files/pdf/factsheets/factsheet_worldstats.pdf
I couldn’t resist commenting since I am staying at a Holiday Express when I first get to South Africa for FIELD 2 in Cape Town… I chose it because of a) trust in the brand b) availability c) cancellability until a few days before the reservation and d) ratings. This seems very consistent with the value proposition that you identified early in your post. It was not the luxury travel experience I was hoping to find, but the luxury hotels in Cape Town were exorbitantly priced, required full payment upfront (limits flexibility) and occasionally lacked basic amenities without paying for them such as wi-fi. Especially as an international traveler, I need these amenities to be able to coordinate details and communicate with other travelers once I no longer have a phone and data plan. As you correctly noted, convenience is key.
Interesting read Tyler. I’ve never really thought about it before, but Holiday Inn’s do seem to be a step above competition for the price range. It makes sense to me that they reduce labor wherever possible yet strategically keep labor headcount high in areas such as cleaning. How does removing the bar fit into this picture? To me, it seems like a bar would only increase revenue / margins. Maybe their customer base isn’t interested in an in-house bar? Although there may not be much to do at a Holiday Inn due to their lack of service, the product is such a good value that you will continue to see me doing nothin but chillin at the Holiday Inn.