Andrew Cosslett knew surprisingly little about InterContinental Hotels when he joined the company, but was that an advantage?


WHEN Andrew Cosslett read about the dismissal of Richard North as chief executive of InterContinental Hotels Group (IHG) in September 2004, he was surprised to see that it was a British company — he had assumed, like many people, that it was American.
He was also surprised to discover that IHG owned not just the InterContinental brand but a whole number of names, such as Holiday Inn, Crowne Plaza and Staybridge Suites.

This knowledge was to come in handy a few weeks later when Egon Zehnder, the headhunter, contacted him to see whether he would be interested in the chief executive’s job at IHG. That December he was named North’s successor. Three months later he found himself at the helm of what is, by number of rooms, the world’s biggest hotel company.

In the wake of North’s sacking, David Webster, the IHG chairman, had made clear that he planned to go outside the hotel industry into the world of consumer goods for a replacement, declaring that candidates must have “strong brand development skills and strong operational skills”.

That is Cosslett down to a tee. The rugby-loving 51-year-old spent the first 11 years of his career at Unilever, working with such brands as Walls ice cream and Birds Eye frozen foods, before joining Cadbury Schweppes. When he was recruited to IHG, he was president of Cadbury’s Europe, Middle East and Africa region.

Given the mixed success of previous outsiders brought in to run big hotel companies, his appointment was greeted with scepticism. Yet Cosslett says that he was comfortable with his lack of experience in hospitality: “I think the industry is moving into this new phase. There is a very clear change in the way the majority of people are approaching maximising value out of the industry.”

For IHG, that “new phase” has involved selling almost £3 billion of hotel assets — most of which has ended up in shareholders’ pockets — although, in the vast majority of cases, the group has signed a management contract or franchise deal with the purchasers that keeps its brand name over the door.

Cosslett says that the shift of emphasis away from asset ownership has played to his strengths. “When you consider the move towards managing and franchising hotels rather than ownership, the experiences and the skills that you need to lead an organisation like IHG into that new world are the ones I’ve spent 20 years developing. The international nature of our business is one of its primary charecteristics and it’s something that I’m very familiar with.

“I’ve worked or lived in most major markets of the world over the last few years, from Russia to China to Australia through America and most of Europe. This is a global business with global brands and it helps to know the terrain. The strategic brand management and how you take an organisation that’s got brands as its main selling asset, how you get the most out of those brands, develop the brands and link them to your organisation is something I’ve done for many years and that’s what IHG is about.”

It is clear that Cosslett has not been terribly impressed by the marketing skills that he has found, not just in IHG but in the wider hotel industry. “It’s not that it’s bad, it’s just that it’s not as developed as other industries have become,” he says.

One way he believes that the industry lets itself down is the physical appearance of hotel properties. “When you drive past most hotels, it’s clear they give less regard to their outside appearance than you would expect in a marketing-led business. It ought to be seen as a billboard or shop window.”

He concedes that some of the concrete blocks within the Holiday Inn chain will present a challenge, but insists that with a bit of landscaping, less drab colour schemes and better graphics on the signs any hotel can be made to look better.

Another facet of the business that he is keen to beef up is innovation. Given his background, it is no surprise to learn that he has commissioned detailed consumer research into how guests’ tastes are changing in different parts of the world.

“There’s been precious little innovation in this sector. But I think the hotel market is an industry where you’re going to see a lot more innovation coming through in the next five to ten years.”

Cosslett expects the United States, where limited service and extended stay hotels were first developed, to be the source of many of the new ideas. IHG has used America to test Indigo, a design-led limited service concept, and Staybridge Suites, an extended stay product. Both eventually will appear in the UK — indeed, the first Staybridge property is due to open at the end of next year at Heston, on the M4.

One trend that he reckons will gather pace is the development of niche concepts. “The history of this industry is about not offending anyone. The way people sought to make the best returns out of a particular asset was to make it OK for anyone to stay there. But as we know looking at the car industry or the alcoholic drinks industry or the holiday industry, there’s much more fragmentation. People want to be able to choose what’s been developed for them. I think you’ ll start to see hotels develop offers that are specific to particular groups of people.”

One example that he cites is the concept of a limited service deluxe hotel. “A lot of business travellers don’t necessarily need all the accoutrements you see in five-star hotels. What they want is an outstandingly comfortable, quiet bedroom and great electronics and communication access. They also want the ability to get some food, but they don’t need haute cuisine.”

One gap in IHG’s portfolio of brands that he has identified is for a budget hotel concept. This would be in the “premium economy” market, a notch below Express by Holiday Inn, although his poor impression of the established operators suggests that IHG will develop its own brand rather than buy an existing one.

For the time being, though, he is putting the emphasis on making sure that IHG’s existing brands are correctly positioned. To this end, the focus has been sorting out the “jumble” of different Holiday Inn sub-brands, while on expansion he has set an ambitious target of adding 50,000 to 60,000 new rooms by the end of 2008 to its current total of 538,000 rooms in 3,600 hotels.

Given the lacklustre growth of IHG’s room stock in the past few years, the new target might be seen as decidedly ambitious. An easy way to have upped the ante would have been to lower the management fees and franchise royalties that IHG charges the hotel owners, but Cosslett insists that has not happened.

“If anything, we’ve seen some movement in the other direction. In the States, probably the most competitive market in the world, the Express brand, which is our biggest brand by number of rooms, was able to put its royalty up by 5-6 per cent last year and it stuck. If you’ve got a good enough brand, that’s what this game is all about.”

To achieve its growth goals, IHG is looking to developing countries such as China, where the growth in travel associated with the economic boom has created a need for new hotels. “China is going to be enormous for us in the future,” he says.

There is little doubt that the transformation in IHG’s fortunes since it was demerged from the old Bass pub empire three years ago has gathered pace during Cosslett’s brief tenure. There are even rumours that the revival has attracted possible bid interest from the likes of Starwood Hotels & Resorts, Permira and Prince Alwaleed bin Talal, the Saudi billionaire.

Yet the Mancunian, who is still famous in the ice cream world for launching Vienetta, professes to be unconcerned at such suggestions. “I can see how we could be viewed as attractive to a potential buyer and anything is possible, but as far as we are concerned we’re not planning on making any changes to our current strategy.”
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