Three IHG brands seek growth amid reaching milestones
 
Three IHG brands seek growth amid reaching milestones
09 NOVEMBER 2018 8:43 AM

While the Avid, Even and Indigo brands have been launched organically by InterContinental Hotels Group over the years, each of them have different stories to tell as they aim for controlled but aggressive expansion, according to company executives.

PHOENIX—Three InterContinental Hotels Group brands in various stages on the road to critical mass continue to cover ground in a way that positions them for long-term success, according to the executives in charge of mapping their routes.

The Avid, Even and Indigo offerings are at different stages of their existence but share at least one major thread—robust growth plans fueled by consumer and developer interest—the executives said during September’s Lodging Conference at The Arizona Biltmore.

Avid Hotels celebrated its first anniversary in September with one property opened by Champion Hotels in Oklahoma City, Oklahoma, in August. Brand executives weren’t expecting the brand’s first hotel to open until the first quarter of 2019, said Chris Drazba, IHG’s VP of mainstream brands & Mexico development for the Americas.

With 130 signed agreements as of the end of September, overall deal activity has far exceeded expectations, according to Drazba.

“We have been surprised by where some of the Avids have been,” he said. “We’ve been approached regarding urban markets, we’ve had Avids contemplated in various dual-brand scenarios. These are things we didn’t necessarily anticipate when we were launching the brand.”

Avid launched faster than anticipated in Mexico—it has four projects under contract there—because of developer interest, Drazba said.

“Everything in Mexico tends to be a little more vertical because you’re dealing with higher-density locations,” Drazba said. “Structure parking is oftentimes part of the equation in Mexico.”

The Oklahoma City Avid has been a boon for the brand as prospective developers have been able to see the finished product, according to Drazba. Avid’s target construction costs have always been approximately $88,000 per key without land, he said, and the 95-room prototype requires 18 full-time employees.

IHG and the Avid owner advisory board did a lot of rapid iterative prototyping prior to the launch to ensure it had what it wanted, said Jennifer Gribble, VP of Holiday Inn Express and Avid. There have been a few small tweaks on furniture, fixtures and equipment pieces, but no major re-engineering has taken place.

“Because it was designed in a tough environment, it forced some decision-making that allowed us to get in this cost range,” she said. “We’re pretty well-positioned having just done this prototype work in a competitive and difficult environment.”

The iterative prototype process allowed the brand to make tough decisions and force trade-offs, according to Gribble.

“We were constantly having our plans costed out throughout the design process to make sure we netted out at the right cost,” Gribble said. “That’s been critical. I’m excited about it for the future of IHG to help us hit our cost targets.”

“One of the things that was critical in our planning process was to talk about how we were going to learn and modify once we had one and more open units,” Drazba said. “We’re going to be learning throughout the coming weeks and months about what other adjustments do we need to make to either the operating model, the outside, the inside, the room, the common area. It all comes down to how the hotel is being used and what, if anything, we need to do to modify Avid.”

Seventy-five percent of signed agreements are with existing owners and franchisees of other IHG brands, according to Drazba.

“That’s higher than I expected,” Drazba said. “I thought this was the entry-level brand for IHG to talk to new parties with. What we found was that a lot of owners, especially owners of Holiday Inn Express, wanted to own the Avid in their markets.

“All that is great news, and as you look toward the next year, it’s going to be seeing performance—what’s the consumer reaction and how does that translate into heads in beds. Owners are going to react to that and that’s going to push the next wave of signings.”

Avid pairs nicely with other brands in the IHG portfolio, Gribble said, so owners are looking at it for dual-brand and campus settings.

“Our vision is it will be a large-scale brand in the industry,” she said. “We see it being a brand that can fit in many different types of markets so we’re going after it pretty aggressively.”

Hotel Indigo searching for neighborhoods
Hotel Indigo, which launched as an “urban oasis” concept in 2004, has established itself globally with 54 properties open in North America and 40 open elsewhere. The pipeline includes 33 in North America and 60 elsewhere around the world, according to Jason Moskal, VP of lifestyle brands including Hotel Indigo and Even Hotels.

“We’re going to more than double our size in the next three years,” Moskal said.

The brand has slightly shifted its focus since debuting 14 years ago.

“It has evolved,” Moskal said. “The neighborhood is at the core of our strategy now. Everything we do for each Hotel Indigo around the world is looked at through the lens of the neighborhood story—what is unique about this five-block area that has made this neighborhood what it is today and how do we incorporate that into design, the F&B, the music, the service culture.”

Hotel Indigo has used a combination of new-builds, conversions, mixed-use projects and adaptive-reuse projects to grow, Moskal said.

“We truly love that this brand can thrive in a big market like New York or LA, and it can thrive in a smaller market like Athens, Georgia,” Moskal said.

On the development front, the brand is looking at developers who like programmatic brands as well as boutique/lifestyle brands that have fewer requirements.

“What we see in the development community is that they love a brand that they can put their thumbprint on,” Moskal said. “It’s something that you can infuse your way of telling that neighborhood story.”

The brand’s ownership demographic has included independent owners, institutional owners and partnerships.

Moskal said he doesn’t see the brand’s footprint ever reaching “thousands and thousands” because neighborhood locations aren’t always easy to find.

“I see it as a 500- to 700-unit brand over the course of the next 15 years or so,” he said.

Wellness trend spurs more interest in Even Hotels
With nine hotels open, the quest for IHG’s Even Hotels brand is to rapidly but strategically expand its footprint, Moskal said. The lack of understanding of what an Even Hotel is makes the issue less problematic.

“As paradigm shift continues to take hold, there are less and less questions about it and more and more intrigue about it,” Moskal said. “More people want to stay at a hotel that helps prioritize health and wellness.”

Launched in 2014, Even spans the country after Noble Investment Group opened the dual branded Even/Staybridge Suites project in Seattle in late 2017. That property has spurred interest in Even on the West Coast as nearly 20 developers have toured it and the company has “six or seven discussions going on from that,” Moskal said.

“We’re working with our development team to go out and do more education with prospective owners, developers and lenders to understand it a little bit more,” he said. “Any time you have a new brand that hasn’t traded, they always want to know what this means, what does this look like and what are the numbers, so we’re in the process.”

Moskal said amenities such as the in-room workout zone do slightly increase the cost-per-room to build as well as the square footage of the room footprint.

“We’re obviously looking to make sure the construction costs are as low as possible,” Moskal said. “How do we make sure it meets the consumer needs and not be a burden on the owner, so we’re constantly looking at it, but if you look at our construction costs, they are right in line in what a Courtyard is, what an Aloft is, what a (Hilton Garden Inn) is.”

Sixteen Even Hotels are in the global pipeline, including nine in the U.S., six in China and one in New Zealand, Moskal said. The company has an agreement in place with Sydney-based Pro-invest Group to develop 10 Even properties in Australia and New Zealand. The dual-branded Even/Holiday Inn Express project in Auckland broke ground about two months ago. Moskal said that when it’s completed, the building will be the fifth largest building in Auckland.

Properties in Miami and Pittsburgh are scheduled to open during the first quarter of 2019.

“With any new upscale brand, the challenge is ‘hey, let’s get some traded,’” Moskal said. “More and more owners are getting interested.”

The brand is open to conversion opportunities. It has converted Holiday Inn Express hotels in Denver; Omaha, Nebraska; and Ann Arbor, Michigan, as well as a Holiday Inn in Sarasota, Florida, Moskal said.

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