BERLIN — The European hotel industry will continue to perform well due to its unique selling points, said Elie Maalouf, CEO of IHG Hotels & Resorts.
That is the main reason IHG acquired its 20th brand, Ruby Hotels, in February.
IHG paid €110.5 million ($121 million) for the Munich-based hotel firm, which currently has 20 hotels and 3,483 rooms, all in Europe, with a pipeline of 10 hotels and approximately 2,200 rooms throughout Europe.
Maalouf said Europe has three major selling points that inspire travelers: culture, climate and cuisine. But Europe-based hotel firms might continue to grow in the Middle East and Asia regions.
“Europe will always do well. From a percentage-growth prospective, revenue is moving east, although IHG’s second and third InterContinental hotels were in Beirut and Saudi Arabia, and they are still open,” Maalouf said during the recent International Hospitality Investment Forum EMEA in Berlin. “Branded hotels in Germany remain low in the overall percentage, so there are opportunities, even if the German population is not growing.
“We will always be very strong in Europe and North America but we’re very focused on the East where we think the percentage rates are higher,” he said.
The demand for international travel in parts of the world — including in Southeast Asia — is just too big to ignore, Maalouf said. He pointed to Japan, where global hotel brands are just 5% of total hotel supply in the country. India and China have similar growth opportunities for global hotel brands.
“In Japan, that number is 5%, and it is getting record numbers of international travel. One-hundred percent of openings there last year were conversions. India is on a similar trajectory to China, where we opened our 800th hotel last year. India will lag China by 10 to 15 years, but where else can you get a population of 1.5 billion,” he said.
IHG’s hotel pipeline in China is approximately 600.
Maalouf said IHG has progressed from having a full portfolio for everyday mainstream travel to a broader portfolio over every price point in every geography.
“If you want to be a global leader in hospitality, you have to be in the Americas, Europe and China, as that is where the companies are, and that is where the wealth is,” he said. “Behind that is very strong ownership relations. We’re on the front foot in the industry, and I think our best days are yet to come.”
Despite conversations on tariffs raging at the conference — which was held March 31 to April 2 — Maalouf said all hotel segments can be confident of seeing increased growth potential. The growth of global middle class over the next 10 years will fuel this growth, with another 1.2 billion to 1.5 billion people expected to join that class. He added brands such as IHG’s Holiday Inn family are poised to capitalize on the growth of the middle class.
“Holiday Inn means travel. It means life. It means hotels, but, yes, it is über-luxury that is unconstrained by price. As long as the experience is there,” he said.
Returns strategy
When asked about hotel fees as a part of IHG's overall revenue strategy, Maalouf said the British firm remained focused on returns.
“I started in real estate. We understand owner returns. We’re only asset-light if someone else is asset-heavy,” he said.
IHG's acquisition of Ruby is part of that strategy, he said.
“Ruby with [founder] Michael Struck — they designed that brand with owner returns in mind. Efficiency, effectiveness, low operating and labor costs, no gym but a great room, and with higher costs borne by willing guests,” he said. “Five years ago, 50% of our bookings came from loyalty, now it is 60%. One million guests per day, so 600,000 are loyalty, and that is 70% in the U.S.”
Operating with margins in mind, the hotel industry will not follow the airline industry, Maalouf said. He referenced how Southwest Airlines’ will soon charge higher prices for preferred seating and is juggling the seat mix to further increase revenue. Hotels are on a different trajectory to airlines, he added.
“We are on a curve to get the highest yield for owners, but with a different approach. [Airlines are charging] for things they used to give you for free, and they are not adding value. I am not saying it is a bad business model, but it is just not ours,” Maalouf said. “We have a better model that grows travel around the world. We will charge more for a higher floor, more for a bigger room, more for a connected room, things guests see value in. We are not going back to charge for Wi-Fi.”