IHG claims rewards revamp is shifting growth to direct from OTAs

InterContinental Hotel Group‘s half-yearly results have a couple of asides around its tech and digital performance among the details around signings and pipelines, currency fluctuations and medium-term per annum capex guidance.

Headline figures highlight an increase in digital revenues of 7% year-on-year, accounting for more than $4 billion-worth of gross room bookings. Mobile revenues are up by 32% year-on-year. Mobile web and apps generated more traffic to the IHG web site this half  than desktop for the first time.

And the slides for investors add that mobile revenues for the previous twelve months were $1.4 billion, compared with less than $50 million a year as recently as 2010.

But the most significant digital move IHG has made is the global roll-out of  the “Your Rate by IHG Rewards” initiative following a successful trial around pricing in some key European and America markets.

Your Rate gives members access to exclusive rates and benefits when they book direct. IHG said it is already having an impact on its channel mix. On the earnings call, CEO Richard Solomon said: “Since we launched Your Rate we have seen a material 2% shift in growth rate to direct away from OTAs.”

When asked about this on the earnings call with analysts, he said: “It varies by region, by brand, by month, but overall the growth of our direct digital channels is greater than the growth we’re seeing from OTAs.”

He added that “we are not having a battle with the OTAS, we’re trying to optimise the mix. We’re happy with our OTA business but it is expensive.”

Elsewhere on the call he said that OTAs were “an efficient way to attract price-sensitive brand-agnostic leisure guests”.

The impact of discounted rates for members on the group’s revPAR was played down by Solomons,  who said that the discounts were not “massive” and that members tended to be higher spending than non-members. The insights it gains from dealing direct with guests “is a net benefit to the group”.

Elsewhere, a question from an analyst about Accor’s digital transformation strategy was met with short shrift by Solomons, who didn’t want to be drawn into a conversation about a competitor. However, he did say that “there is some interesting cool stuff around the  margins, but the real money is made where we are already.”

Questions about a credit card breach at its Kimpton Hotels was met with a similarly circumspect response. “The statement is the statement,” he said.

Here’s what the statement says:

“Kimpton Hotels and Restaurants announced that it had been made aware of a report of unauthorised charges occurring on payment cards that were previously used legitimately at Kimpton properties. Due to the recent discovery of these occurrences and the investigation process being in the early stages, it is not practicable to make a reliable estimate of the possible financial effect on the Group at this time. ”

Finally, Solomons said that IHG’s “innovative cloud-based guest reservation system [is] on track for pilot and phased rollout starting in  2017.” This new system is being developed by Amadeus Hospitality.

Click here to access IHG’s financial library from where the 2016 H1 earnings statement, slides for analysts and archived recording of the analysts call can be accessed.

Related news from Tnooz:
Expedia sees no hit from hotel chain direct booking campaigns (July 2016)
Amadeus Hospitality’s new CEO discusses the hotel tech landscape (July 2016)
At ALIS, Hilton, IHG, and Google execs talk mobile tech (Jan 2016)


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