Europe on the up: IHG's Angela Brav targets continental expansion

In a world fixated on fast-developing economies, new markets, global footprints and meteoric growth forecasts, we Europeans could be forgiven for developing something of an inferiority complex.

With operators seemingly focused on the eastern horizon, where exactly does hospitality's ancien régime sit within this brave new world? The Chinese economy may be developing at its slowest rate in six years, but EU members can only dream of 7% GDP growth. And as the eurozone crisis continues to unfold - with shockwaves from the fallout likely to be felt across the continent - and Russian sanctions and spiralling oil prices severely affecting an economy that was for so long considered Europe's hotbed for new hotel development, good news sometimes feels like something that happens to other people.

Often it takes an outsider to pull us out of the doldrums and remind us that things really aren't all that bad. In fact, they might be a whole lot better.

"I don't want you to think I'm being the happy-clappy American here," Angela Brav begins by way of a caveat, "but this is an exciting time for Europe, with guests and investors coming in huge numbers. People talk about new markets, but without great global brands here in Europe, you're not playing with the big boys."

A crescendo year

Such optimism comes as something of a culture shock, but IHG's chief executive for Europe has the numbers to back her up. The group saw European revpar growth of 5.8% (7.7% in its core UK market) in the first quarter of what Brav is calling "a crescendo year", with eight openings and three signings in the same period. IHG now has close to 650 European properties in operation and more than 100 in the pipeline.

Things did not always look so rosy. When Brav arrived from her role as chief operating officer for North America in 2011, the markets were in flux, liquidity was low and the fallout from the global financial crisis was in full swing. Received wisdom cautioned consolidation, minimising risk and hedging bets. Instead, the newly installed chief executive decided to gamble.

"I had to make a choice," Brav reflects. "Companies too often divide their capital equally across the region. My thought was that Europe was way too diverse and complicated for that; we needed to make some big bets on a few big markets. I knew the risk, and if it didn't pay out they might have had to find someone else to come in and rethink the whole thing."

The result was a key market strategy focused on the UK, Germany, Russia and the CIS, while continuing to expand the group's presence in gateway European cities. In a global hotel environment that can appear to value growth above all else, this required some difficult decisions.

"If something opportunistic came up beyond these core markets, we had to be willing to turn it down, knowing that we might not have the bandwidth to fully support the project," Brav explains. "People are buying a service from you, and if you stretch yourself too thinly, which is very easy to do in Europe, you can't provide the necessary infrastructure and support to drive and get behind your brands."

The three pillars of expansion

The three pillars supporting this new strategy were a strengthening of the franchise proposition, focusing on operational excellence and ensuring that all brands were "globally clear and locally relevant". One imagines that this led to further difficult discussions with HQ; not only was Brav turning down growth opportunities, now the chief executive was actively removing properties from the portfolio.

"In some cases we had hotels that over time became in wrong locations," she explains. "We went to those owners and explained that we were unlikely to renew their licences."

It is one of many examples crystallised by a term Brav returns to time and again: clarity. A huge amount of work has been invested by the chief executive and her leadership team defining and articulating a clear delineation between IHG's brands and creating an environment that leaves little room for uncertainty.

"Growing up, my mother's house rules were crystal clear," Brav recalls. "'This is when we eat; that's the time you go to bed; and don't wear skirts that are more than two inches above the knee. That's just how things are so long as you live under this roof.'

"I had friends for whom the boundaries were less marked, the rules were forever shifting and they'd constantly be getting in trouble. It never made any sense to me. Brands work the same way. You have to be extremely clear about what you stand for and where the expectations lie. Otherwise it's unfair to hold somebody fully accountable should they fail."

Russian relations

With the UK performing so well and IHG increasing market penetration in Germany - 2014 witnessed a year-on-year doubling in German signings - the only big question mark surrounding the European strategy emanates from developments within the Russian market. At IHIF earlier this year, Brav acknowledged some inevitable slowing of Russian development, but the chief executive remains bullish.

"The strategy is long-term and it's not going to change," she declares. "If I pulled out of every market that suffered a hiccup, I'd be nowhere. Our brands are absolutely relevant and right for Russia, and our hotels are performing well. Russians continue to travel, and the rouble taking a hit is affecting the luxury segment more than anything. Our main engines of growth are Holiday Inn and Holiday Inn Express. It's important we remain patient, stay focused and avoid any kneejerk reaction."

And there's plenty to keep Brav and her team occupied in the meantime. IHG has been enjoying particularly strong results in Spain, where it has outperformed the industry-wide double-digit rise in revpar, and the chief executive brims with enthusiasm when the conversation turns to developments in France, a major beneficiary of the key city strategy. Earlier in June, the group announced the signing of the 143-room InterContinental Lyon Hotel Dieu, a fifth property to join the French InterContinental portfolio. It's unlikely to be the last.

"We are on our way to becoming one of the strongest and most sought-after operators in that market," Brav says. "By the end of the year, InterContinental will have at least one property in Paris, Lyon, Marseilles, Cannes and Bordeaux. We can then back-build with Hotel Indigo, Holiday Inn and Holiday Inn Express. No other operator will have that kind of presence."

The quality question

A renewed emphasis on quality across all brands has, Brav believes, struck a chord with investors and opened new avenues of development within France and beyond, but one wonders whether such clarity might come at the expense of flexibility. With competition fierce in already crowded markets, to what extent can operators afford to be so stringent?

"I hear it a lot, that to grow in Europe you need to be flexible," Brav replies with an almost audible eye roll. "If we're talking about structuring a deal, it's certainly true that there are differences from market to market. But when it comes to the brands themselves, consistency is everything. If you're buying a Burberry trench coat, how flexible do you want Burberry to be? It can easily get to the point where people don't recognise you anymore. There are elements of the product that can be localised, but other standards must always remain. You want flexibility where it benefits your guests, not your owners."

A sense of locale is just one thing today's guest is demanding. With international operators scrambling to win the attention and loyalty of the coveted millennial, we have witnessed an unprecedented number of tech-driven, lifestyle-led brand launches over the past 12-18 months. Brav acknowledges the importance of appealing to Gen Y guests, but also believes this is as much of a pan-generational shift.

"People are different; they use technology in a more sophisticated way and their expectations are higher," she says. "I see people in their seventies Skyping in our lobbies. On my plane just the other day, a woman who looked to be in her eighties was showing her husband pictures of the dog back at home: 'See, he's doing just fine.'

"Technology is better enabling us to connect with our guests and build long-term relationships. That's exciting, but it's also scary. Standards and expectations are now higher and, if you're not able to deliver consistently, it starts to look as though you don't care. That means our staff have to be better trained than ever; tech is only the medium through which guests tell you what they want, but our people still need to deliver it."

This applies not only to luxury and boutique brands, but across all segments. While some operators can seem overly keen to define ever-narrowing demographic trends, Brav clearly still sees more that connects rather than differentiates one's guests.

"All brands now have to contain a lifestyle element," she explains. "The open lobby concept at our Holiday Inn in Frankfurt - if that's not a lifestyle space, I don't know what is. Our next-generation Holiday Inn Express also leans that way. Lifestyle hotels don't necessarily mean crazy boutique and 'out-there' design; it's about looking at how people live, work and engage with one another, then making a hotel that's conducive to that. Fail to invest those elements into your brand, and you'll fail to remain relevant."

Keeping Europe relevant has been a key feature of Brav's four years in the role, and it's an approach that appears to be paying dividends, with chairman Patrick Cescau just one of many high-profile acolytes.

"He's beside himself," the chief executive says with an affectionate laugh. "There's not an event going on in Europe that Patrick won't make a priority to attend as proudly as I am when talking about what we're doing here.

"This region shines, and it puts a shine on all brands. It's something I saw as soon as I got here: the right presence in Europe puts you at a level where nobody can touch you."

Any European looking to shake an inferiority complex could do a lot worse than spend a little time in the company of Angela Brav.