March 25th, 2006
Rest for the weary business traveler: more regional business travelâ€â€and more mid-priced propertiesâ€â€help InterContinental Hotels Group weather a drop in corporate travel by US executives - Intercontinental Hotel Group
Between US corporations cutting way back on international travel and airlines culling their flights between the US and the rest of the hemisphere, the number of business travelers going from the US to Latin America and the Caribbean has dropped dramatically. That’s difficult news for a company like InterContinental Hotels Group, whose InterContinental, Crowne Plaza and Holiday Inn brands have made their name in Latin America by catering to international business travelers.
The US before 9/11 represented something like 60 percent of our business [in the region]. Now it’s around 32 percent,” says Alvaro Diago, ICH’s Miami-based area president of Latin America. ICH has responded by turning to a growing segment–business travelers within the region–catering to them by emphasizing the growth of its mid-scale brands, building hotels in secondary business markets, and lowering rates at its more upscale properties.
Although the InterContinental brand hotels are iconic properties in the capitals of Latin America, it is the Holiday Inn brand, and a new introduction to Latin America: the extended-stay Staybridge Suites, that Diago is most bullish about expanding. “The mid-scale brand is the one that actually is more suited for growth in this market, especially when it comes to rates,” he says. “And the cost to build one of these hotels is in the neighborhood of 50 or 60 percent less than what it would cost to build an InterContinental, so the rate of returns that we see … is just wonderful.” With 44 hotels in the region now, and 14 new ones in the pipeline, Diago expects to hit 50 hotels in 2004, and 60 by 2006.
Much of the growth will come in Brazil, where the company will soon open a 780-room Holiday Inn and the first Staybridge outside North America, both in Sao Paulo. “The capacity of Brazil, its sheer size as a market, its high level of regional travel, the many cities one would consider business centers… There is a demand for a new generation of hotels,” says Diago. He plans to keep growth in the region measured, in order to keep tight control over quality standards, for everything from room size to amenities to security.And, when the corporate market in the US comes back, ICH will be well-positioned to take advantage of it. From his offices inside the downtown Miami InterContinental, Diago and his team maintain relationships with the US corporations that once sent the company most of its Latin American business. From there he keeps in contact with Latin American customers, too, many of whom have businesses, bank accounts or investments in South Florida. “So, we’re standing on a platform that has the opportunity to interact with the decision makers,” he says, “Those who decide where the corporations actually put their people.”