Chinese hotel owners rebel over Intercontinental's $1bn revamp

Demand for rebranding delay as economy slips.

By Simon Evans
Sunday 23 November 2008 01:00

Intercontinental, the world's biggest hotels group, is facing a revolt by its Chinese hotel owners over its planned $1bn (£675m) Holiday Inn rebranding programme – the biggest in the history of the industry.

The rebranding, which will involve a raft of changes including new signs, is scheduled to be completed by 2010. More than 3,000 Holiday Inns around the globe will be affected.

Intercontinental, which largely manages hotels now, rather than owning them, has put up $60m towards the $1bn cost, with individual owners having to foot the bill for the rest.

But Martin Jia, the head of the Intercontinental hotel owners association in China, said that some of his members were seeking a delay in the overhaul because of the financial crisis and the impact on business in the region.

"Some of the association's members believe that the period for rebranding is too short and we will ask Intercontinental's management if the period for completion can be delayed for one or two years," said Mr Jia.

"The rebranding programme was launched in 2007 before the financial crisis really began. With Intercontinental asking hotel owners to cut costs, coupled with falls in cash flows because of the crisis, I think a delay to the programme may be appropriate."

Mr Jia, who works for a state-owned hotel company that owns an Intercontinental outlet in Shanghai, said that his hotel had recently experienced a fall in occupancy rates. "Foreign companies in Shanghai have cut back a bit on travel policies," he added, "but with the Expo coming to Shanghai next year, we are confident about the long-term outlook."

Intercontinental currently operates around 100 hotels in China and has another 100 in the pipeline. Just last week, China overtook the UK to become the group's second-most important market after America.

Intercontinental is planning to run an ad campaign in 2009 on the back of the rebranding, but if concerns in China are mirrored across the rest of the company's hotels, it is likely to be delayed.

Earlier this month, chief executive Andy Cosslett began a review of costs at the company in the wake of a sharp downturn in October trading.

The key industry measurement, revenue gleaned per room, known as revpar, fell by 4.5 per cent compared with the same period last year.

October's decline overshadowed a strong third-quarter trading statement, with revpar climbing by 1.6 per cent over the period.

Shares in Intercontinental have lost 70 per cent of their value in the past year, though it remains one of the better-performing listed leisure chains.

An Intercontinental spokesman said: "It is our job to ensure hotel owners understand the benefits of the relaunch and the improved financial performance and customer satisfaction it will bring."

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