Holiday Inn chain gives itself a face-lift
Barbara De Lollis, USA TODAY, 7/21/2007 (excerpted)
The roadside Holiday Inns that became fixtures in towns across the USA beginning in the 1950s are disappearing.
London-based InterContinental Hotels Group, current owner of the brand that pioneered franchised motor hotels, is in the process of shedding roughly half the nearly 1,100 properties that it had in 2004, mainly by ending franchise agreements with operators of substandard properties.
Among the first to go: those two-story low-rises with exterior corridors that defined the early years of Holiday Inn. In their place: multistory, contemporary-style hotels with fewer rooms and smaller restaurants.
The multiyear campaign to remove the brand from outdated hotels — the largest cutback of its kind ever undertaken by a single chain — is expected to be complete in 2009. By the time the campaign ends, Holiday Inn will have removed about 100,000 rooms and opened about 35,000 new ones in the USA.
With the effort, management hopes to revive the aging chain's image, which has suffered as newer competitors have cashed in on Holiday Inn's traditional strength: consistent quality at an affordable price.
Andy Soule, a broadcast engineering consultant from Bangor, Maine, stopped staying often at Holiday Inns three years ago partly due to what he calls their unpredictable quality. "With Holiday Inns, you never really know what you're going to get," Soule says. Today, he usually stays in midprice Hilton brands such as Hampton Inns and Embassy Suites.
Frequent traveler David Zangenberg, a gourmet food salesman from Lake Helen, Fla., says he, too, avoids Holiday Inns. He finds everything from restaurants to bedding to be inconsistent.
"I haven't been impressed for many years with any of the (Holiday Inns) I've stayed at," he says.
Criticism like that is what InterContinental CEO Andrew Cosslett hopes to silence with the massive campaign to modernize the Holiday Inn chain and to restore consistency and predictability for travelers.
"The saddest thing you want to hear (from travelers) is, 'This is one of the good ones,' " Cosslett said in an interview. He calls the Holiday Inn brand the "No. 1 opportunity" for the global hotel company that also owns Crowne Plaza, InterContinental, Hotel Indigo, Staybridge Suites, Candlewood Suites and Holiday Inn Express brands.
Seeking guidance
Before the hotel-closure campaign, Holiday Inn franchisees for years had complained about a lack of direction. Many felt that InterContinental, the owner of the brand since 2003, and its predecessor, Six Continents, lavished more attention on the higher-end Crowne Plaza chain and the high-growth, limited-service brand, Holiday Inn Express.
Even as Holiday Inns became shabby with age, Six Continents kept them going, because they made money even if they weren't reaching their full potential, says Holiday Inn franchisee Kemmons Wilson Jr. Wilson's late father launched the chain in 1952 just before Americans started to explore the nation through a new interstate highway system.
InterContinental began to recognize how much the brand had slipped after travel began rebounding in 2003 from the post-9/11 doldrums.
That year, InterContinental decided to stop renewing franchise agreements with operators of inferior or outdated sites, beef up Holiday Inn quality inspections and develop a prototype for future hotels. The chain mainly franchises hotels; it owns just five in the USA.
Factors that forced InterContinental to act:
•Outdated hotels. In 2002, the average age of a Holiday Inn was 20.2 years. Many in the Southeast — where the chain got started — were more than 30 years old. About 10% of Holiday Inns at the time were the old-fashioned variety with exterior corridors, which are now viewed by many travelers as unsafe. Because of their age, many were in declining commercial districts.
•Consumer expectations. Holiday Inn had to react to changing customer expectations that evolved at a rapid pace after 9/11. Customers began demanding more from hotels, even those charging about $100 a night. Limited-service brand hotel chains such as Marriott Courtyard and InterContinental's own Holiday Inn Express began offering free breakfast, Internet access and better fitness centers.
•Less demand for full service. Holiday Inn, long categorized by the industry as having midprice, full-service hotels, was the biggest player in that shrinking category. Of the midprice category's 534,000 rooms, Holiday Inn's share is about 26%, and exceeds the number of rooms controlled by rivals such as Ramada, Quality and Howard Johnson. The category declined earlier this decade as more travelers opted for limited-service chains that served free breakfast buffets.
Bringing confidence back
By dropping so many of its hotels, Holiday Inn is starting to restore confidence in the industry, says David Mumford, a Newport News, Va., hotel broker. Nonetheless, he says, "I don't think they're there yet."
Mumford says Holiday Inn has been getting more aggressive in forcing franchisees to upgrade or lose the Holiday Inn name. "That's painful to the existing owner because it has a detrimental impact on the value of the asset," Mumford says. "But that's a reality of a changing marketplace, where the consumer demands newer and nicer."
In newly built Holiday Inns, customers are seeing nothing that resembles the kitschy roadside hotels that had become the chain stereotype. They'll also pay more. Newer Holiday Inns cost around $120 a night, more than the chainwide average of about $92.
The lobby in Good's new Battle Creek, Mich., hotel, for example, boasts rich cherry wood, black-and-white marble and large, highly polished tiles.
Each of the 120 rooms in the five-story hotel has a flat-screen television. There's high-speed wireless Internet throughout the hotel, and it has a black marble bar with glass pendant lamps and modern bar stools, and a restaurant with a high-end menu. It also offers room service, which continues to be a chain requirement. The hotel's fitness center is about three times the size of a guest room, bigger than average for Holiday Inns. A midweek night's stay costs about $122, and it was sold out for its first two weeks after opening on June 15.
"This is an upscale hotel," Good says.
CEO Cosslett says the closure campaign, though not complete, is having the desired effect. Holiday Inn has restored consistency. The notion of "one of the good ones" is "almost a bygone phrase."