Set to retire, Solomons looks back on legacy at IHG
 
Set to retire, Solomons looks back on legacy at IHG
27 JUNE 2017 8:25 AM

Richard Solomons retires as IHG’s CEO on Friday. His memories of the company are bountiful; his future plans are still in the works—but they won’t include working for a hotel company.

NEW YORK—Six years to the day after he assumed the CEO role of InterContinental Hotels Group, Richard Solomons will awake on 1 July with time on his hands.

First stop upon retiring from IHG: vacationing with his family. Then will come life after spending 25 years with the Denham, England-based company, including the last six years as its CEO.

“I’ve got some ideas,” he said about his future during an interview with Hotel News Now conducted at the 39th annual NYU International Hospitality Industry Investment Conference in early June.

Solomons did offer a glimpse of what he will be up to once he unwinds from the rigors of being a hotel company CEO. That future does not include working for another hotel company, he said.

“No, they’d never want me, but I’d never go and work for a competitor,” Solomons said. “I’ve been here at IHG and worked with great people. I’m very proud of what we’ve done. But I’m looking for maybe a bit more variety in my life, both on the personal philanthropic and business side in the next few years.”

Solomons assumed the top job at IHG on 1 July 2011 after Andy Cosslett stepped down. Cosslett also served as CEO for six years, and like Solomons, was 55 when he left. Keith Barr, who has been with IHG for 17 years including the past four as chief commercial officer, assumes the CEO mantle after Solomons leaves.

As Solomons reflected on his career at IHG and its predecessor companies, he said there’s an “enormous list” of satisfying moments. However, he holds a special place in his mind for the day in 2003 when the company spun off from conglomerate Six Continents PLC (formerly Bass PLC). Bass had acquired Holiday Inn, the core brand of the company today, in 1989. (View IHG’s historical timeline here.)

“We spun out of our previous parent … in a way Holiday Inn was seen as, I don’t know, maybe even use the word poison pill,” he said. “It was not a brand that necessarily was properly understood.”

The IHG portfolio includes more than 5,200 hotels around the world. Solomons spends about half of the year on the road—and doesn’t always stay in a Holiday Inn Express (or any other IHG-branded hotel for that matter).

“I spend a lot of time in IHG-branded hotels—obviously such good value and some of the best hotels in the world—but I like to take the opportunity to stay elsewhere and experience some of the other brands, depends by market what it might be,” he said. “That’s an important thing for us in our industry, which is to keep that external perspective in all sorts of areas. But certainly at a minimum, understanding what your competitors are doing, what works well, what doesn’t work well.”

Owner-centric, asset-light approach
The role of the owner is essential for success in that equation, the CEO said, adding that there’s no such thing as the standard owner.

“We think about it in context of ultimately return on investment,” Solomons said. “So, relationship is important, history is important, liking or engaging with a brand is important, but without returns it doesn’t make any sense.”

Owners look at returns in different ways, so IHG looks at everything it does through the lens of the owner as well as guests, according to Solomons. Key questions include:

  • But what does it do for the owner?
  • What’s it going to cost?
  • What’s the value being created?
  • Is the company working with the right sort of owner?

“There’s no question if you want to go out and sign a very short-term deal for very low fees, you can do that—you know the brands that will do that,” Solomons said. “That’s not the business we’re in. We recognize we’re not the cheapest, but we do think we create a lot of value, and the number of deals we’re doing, which is at an all-time high, reflects that.”

The company owns eight hotels in that global footprint. Solomons, as the CFO and director of commercial development under Cosslett, was among the first executives to recognize the value of the asset-light model that has swept through the industry during the past 15 years. He traces the asset-light concept back to Holiday Inn founder Kemmons Wilson, who launched and popularized the franchising model in the hotel industry in the 1950s and 1960s.

“Even in the peak, we only owned something over 200 hotels, so our business has always been, really, an asset-light business,” Solomons said. “We just purified it because it had gotten a little too far towards real estate.”

Three things drive an asset-light model for hotel companies, according to Solomons:

  • Driving a return on equity.
  • Staying true to core strengths, which in IHG’s case is managing brands and managing hotels. “The business of real estate ownership sits better with other people,” he said. “So it’s not just about not owning real estate. It’s actually saying ‘let’s play to our strengths.’ If you are working with third-party owners, you don’t want to be, in my opinion, in competition with them. So if you own a lot of real estate or lease a lot of real estate yourself, you are effectively in competition with your third-party owners. How do you make those choices in the marketplace? If you want to go and buy an asset or lease an asset, how do you think about that in competition with one of your third-party owners?”
  • It’s no coincidence the vast majority of real estate is privately owned. “There (are) reasons for that,” Solomons said. “The nature of returns mean that private ownership enables you to do things to drive returns in a way that as public companies in most markets, it’s really difficult to do. Obviously there are REITs, obviously there are property investment companies, but actually as a proportion of real estate it’s very small.”
InterContinental Hotels Group CEO Richard Solomons (Photo: IHG)

Driving the guest experience matters
Equally important to hotels is theirs guests, which the industry as a whole has been somewhat slow to understand, according to Solomons.

“Our industry has been a little fixated on the supply side, on the physical product,” he said. “I was in the soft drinks business, and I came over to hotels in ’99. One of the things that struck me was how little we talked about guests. We talked about brands, but a lot of us saw brands as just the sign on the building.”

Solomons said his career background in the soft drinks industry was helpful in steering IHG down the guest-centric path.

“It’s about customers, guests, segmenting your guests properly, understanding their needs, understanding their occasions, understanding what they want, understanding how you deliver it and your brand, your experiential brand. Then it’s all about what are you doing to deliver against that need, on that occasion, for that guest,” he said. “That’s what’s driven really all of our thinking.”

Technology plays a major role in that equation, Solomons said.

He cited mobile check-in and digital room keys as the latest technology that enables experience, but said it should be tailored to the experience being created. It’s one thing for harried business travelers to want to bypass a front desk to get to their room when they arrive; it’s quite another thing for leisure travelers to want the check-in experience to be part of the overall experience of their trip.

“Technology is about how you deliver the experience, and that’s what drives us,” Solomons said. “It is absolutely crucial to our business—it’s one of the things I think the bigger companies have benefit from because we have the capacity to invest. We spend hundreds of millions a year on technology, running our technology systems, on innovation.”

That’s why the company has moved away from Holidex, its legacy central reservations system that was launched in the 1960s.

“We had Holidex—fantastic, but it’s old and we need a new platform, a new infrastructure to deliver all the guest experience aspects of what we see going forward as well as benefitting the owner,” Solomons said. “How do we make life easier and cheaper for the owner? How do we use the cloud? How do we provide better revenue opportunities? How do we provide better data collection and use of data?”

Steering clear of consolidation rumors
At the end of the day, hotel companies are in the business of providing quality experiences every step of the way. Size matters when it comes to being able to spend money on essential services while developing the next big thing, Solomons said. That’s what has led to the consolidation in the global hotel industry.

“The interesting thing is: what drives that, what’s the need for it?” Solomons said, adding that the five largest hotel companies in the world have about 20% of the inventory and more than 50% of the pipeline.

Solomons shrugged off recent rumors and speculation that IHG is being targeted for acquisition by another company, or planning to buy a competitor like it did in 2015 when it acquired Kimpton Hotels & Restaurants.

“The things that drive value for owners and attractive propositions for guests are benefitted by scale and a good brand portfolio, which IHG has, so I think that will continue,” he said. “In terms of (mergers-and-acquisitions) and consolidation, there are different things that drive that, and for the smaller players, there will be more demand for that. For IHG, we have significant scale and sufficient scale. So it’s not something we spend too much time thinking about.”

1 Comment

  • Shay Baranowski June 27, 2017 11:04 AM Reply

    Mr. Solomons has been a fantastic leader. IHG is definitely all about the guest and the owner in every thing that is done. I wish you well and much happiness!

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