InterContinental Hotels Group (NYSE: IHG) faced a potentially existential crisis in 2020 when the COVID-19 pandemic led to global travel restrictions that almost entirely halted business in the hotel industry. InterContinental has bounced back sharply, though, and it has pursued an expansion strategy that has largely focused on building out its Holiday Inn brand to become a ubiquitous presence across the globe.
Yet InterContinental is far from the only hotel company pursuing similar aspirations. With hospitality company rivals like Marriott International (NASDAQ: MAR) and Hilton Worldwide (NYSE: HLT) also looking to capture greater market share in some of the fastest-growing areas of the world, the industry is wide-open for disruption. In this third and final article about InterContinental for the Voyager Portfolio, you’ll learn more about the exact plans that InterContinental executives have in store to try to fend of its rivals.
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China remains one of the fastest-growing regions in the world, and InterContinental sees the market as a key one for fostering its overall growth. As top InterContinental regional executive Daniel Aylmer noted recently, this dynamic market is seeing new ways of traveling, and a relatively young consumer class is exploring various ways to use hotels as part of their travel plans.
Already, InterContinental has over a dozen brands in the Greater China region, including over 1,400 existing or planned hotels across more than 200 cities. The company anticipates further hotel openings in the first half of this year that should show the extent of its diverse product lineup, offering a mix of different cities that will bring out the different kinds of local traditions that travelers seek. InterContinental’s strategy is broadening beyond tier-1 cities to develop a wider footprint both on the Chinese mainland and in Taipei.
InterContinental might not strike most investors as a tech stock, but that doesn’t mean the hotel company isn’t trying to put new technology to use. Earlier in January, InterContinental appointed Wei Manfredi as a top executive in artificial intelligence, with the task of guiding the company’s AI strategy to strengthen its IT architecture and foster partnerships with leading tech companies to ensure continued competitive advantages.
AI has several roles to play at InterContinental, ranging from helping hotel property managers maximize revenue and streamline operations to bringing AI-powered apps that can enhance the traveler experience and bring more repeat business. Manfredi’s experience with major consumer-facing companies including McDonald’s (NYSE: MCD), Lululemon (NASDAQ: LULU), and Visa (NYSE: V) will be a valuable asset in guiding InterContinental’s ongoing aspirations on the tech front.
Perhaps most importantly, InterContinental recognizes that its midmarket reputation in its core Americas market has room for an upgrade. The recent appointment of Mark Sergot as regional chief development officer included hints that the new leader will pay more attention to luxury and premium properties as well as those with suites. That could help InterContinental complete more effectively with Marriott and Hilton, which already have extensive portfolios in the U.S. that cover every tier of the hotel market.
It’s that room for improvement that makes InterContinental look attractive. Moreover, although the travel stock has rebounded nicely over the past five years, it’s still lagging behind the performance you’ve seen from similar hotel chains. Further emphasis on growth initiatives could help InterContinental close that gap and generate superior shareholder returns.
Therefore, expect to see the Voyager Portfolio add shares of InterContinental once the relevant mandatory disclosure and trading guideline periods have run. I’m looking forward to renewing my childhood memories of InterContinental’s hotels in the years to come.
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Dan Caplinger has positions in Lululemon Athletica Inc. The Motley Fool has positions in and recommends Lululemon Athletica Inc. and Visa. The Motley Fool recommends InterContinental Hotels Group Plc and Marriott International. The Motley Fool has a disclosure policy.
