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Facing Business Challenges at Holiday Inn Worldwide

Sending Invitations Across the Globe

In the 1960s a family vacation in the United States usually meant loading the kids into the station wagon and driving off down the highway toward a tourist destination. And when weary vacationers needed to rest for the night, they often looked for the familiar green signs with “Holiday Inn” written in script and a colorful star for emphasis. All across the United States, this sign welcomed travelers to Holliday Inn hotels with promises of quality, comfort, and value.

By 1968 Holiday Inn was so well known in the United States that it began opening franchises in Europe. In 1973 the company opened its first Asian hotel in Japan, and in 1984 it became the first U.S.-based hotel to open for business in China. For 25 years Holiday Inn enjoyed great success in the European and Asian markets, opening 600 hotels and earning a reputation as upscale , professional, and well run.

However, in the 1980s Holiday Inn’s fortunes were beginning to fade in the United States. Many of the franchises were outdated and substandard . Family vacationers were being replaced by business travelers as the hotel industry’s bread and butter , and aggressive competitors with superior marketing strategies were targeting this growing segment . In addition, overbuilding had set off a wave of price discounting . As a result, both Holiday Inn’s share of the lodging market and its image took a nosedive .

But in the 1990s this icon of the U.S. highway was brought back to life after being purchased by Bass PLC, a British conglomerate. Bass moved quickly to make Holiday Inn Worldwide the leading hotel chain, not just in the United States but around the globe. In the United States, Holiday Inn pursued a strategy that segmented the market into different types of travelers and created a unique type of lodging for each group. Under names like Holiday Inn Express, Holiday Inn Select, Sunspree Resorts, and Crowne Plaza, the company offered different accommodations and amenities at different prices to suit the diverse needs of business and leisure travelers. Combined with a campaign to bring all of the franchises back up to a high standard of quality, the strategy quickly began to pay off.

Even so, the top brass at Holiday Inn Worldwide knows that the greatest growth potential is not in the saturated U.S. market but in the evolving markets of Europe, Asia, and Latin America. With increasing tourism and business development in these regions, the demand for comfortable, consistent, and affordable accommodations is booming . Holiday Inn needs a strategy for tapping this vast potential. Would the strategies that fueled Holiday Inn’s turnaround in the United States bring similar results internationally? Large-scale construction of new hotels will play a major role, so what kinds of hotels should they be? How can the company best meet the needs of a wide variety of international travelers? Should Holiday Inn expand through franchises or by opening

company-owned hotels? Should the same type of promotion be used for the entire global market or should it be localized to each geographic area? These are questions that Raymond Lewis faces daily as vice president of marketing. If you were Lewis, how would you answer them?

Meeting Business Challenges at Holiday Inn Worldwide

Part of Raymond Lewis’s job is to monitor and predict changes in the ever-evolving global market . Among the trends he has observed is the increasing similarity between the needs and desires expressed by consumers and businesses around the world in certain product categories such as lodging. On the other hand, Lewis knows that various countries and cultures approach purchases differently, and that people of various cultures respond differently to product promotion . His challenge, then, is to figure out how to satisfy both the similar and the diverse needs of each new market.

Lewis also knows that all travelers, regardless of where they are from or where they are going, share many of the same desires, fears, and expectations when they are traveling. They may not speak the same language or live the same lives while at home, but when they’re on the road, all travelers are (1) away from home and out of their personal comfort zones, (2) in different and often unfamiliar surroundings, and (3) subject to the same hassles and hardships. Therefore, Holiday Inn focuses on delivering a consistent product around the world. This way, whether the hotel is in South Korea, India, Buenos Aires , or Israel, travelers know that they will always receive a comfortable room at a fair price.

In addition, the strategy of segmenting the market by types of travelers that proved so successful in the United States also works abroad, but in a different way. Segmentation in the hotel industry is a relatively new concept in Europe, and in Asia it is virtually nonexistent. This is largely because in many of the developing nations of Asia, travel has only recently become an option for the majority of people. As a result, not every type of Holiday Inn hotel will be successful in every country. The company must know each market very well before it decides which type of hotel to open. Does the area draw mainly tourists or business travelers? How long do visitors usually stay? Do people from surrounding areas travel often? What types of accommodations do competitors offer in the area? By knowing the answers to questions like these, Holiday Inn is able to decide which type of hotel will best serve the needs of travelers to the area. For example, the company opened a SunSpree Resort in Arequipa, Peru, close to Machu Pichu, a popular international tourist destination. Holiday Inn’s management team feels that Sunspree has a great chance for success in this location because the hotel caters to tourists.

In the same way, Holiday Inn management expects a mix of business and leisure travelers to visit Seoul, South Korea. Therefore, the new Holiday Inn Seoul appeals to a broad range of travelers by offering a business center, banquet facilities , four restaurants, a fitness center , and a gift shop. Just as in its early days of expansion in the United States, Holiday Inn is accomplishing its international expansion through a mix of wholly owned facilities and franchises, depending on the availability of resources and potential for profit in each local market. Although franchising agreements place less risk on Holiday Inn Worldwide, they also require the company to give up more control than it would by opening wholly owned facilities. However, franchises must adhere

to strict quality standards if they intend to operate under Holiday Inn’s famous name.

Lewis and his team also recognize that even though travelers have similar expectations for the quality and value they get in a hotel, sometimes they like to stay in places that don’t feel like hotel chains. Therefore, the company has opened hotels in Europe, Australia, and South Africa that have a style and character unique to their locations. In this way, Holiday Inn is able to tailor its global product to local markets.

Nonetheless, Holiday Inn’s promotion strategy is decidedly global, regardless of which markets it enters. Lewis bases the strategy on two themes: “Welcome” and “Stay with somebody you know.” Although the ad copy is translated when necessary, even the visual format is the same from country to country. Of course, cultural differences must be accommodated from time to time. For example, travelers in Britain preferred an ad that focused on a friendly doorman, whereas U.S. and German travelers preferred a more sentimental ad showing a businesswoman receiving a fax of a drawing from her child.

The inspiration for this global strategy came to Lewis, not surprisingly, while he was traveling. When boarding a plane at Dulles Airport outside of Washington, D.C., he passed a group of Russian teenagers gathered around a guitar player singing “Puff the Magic Dragon,” a folk song that was popular in the United States a few decades ago. This connection between cultures helped convince Lewis that the world’s people were alike in many ways, particularly in the field of pleasure and business travel.

It remains to be seen how successful Holiday Inn’s global strategy will be in the long run . The company is off to a flying start. However, competitors such as Marriott and Choice Hotels are moving quickly to make sure Holiday Inn doesn’t outpace them in the hot new global markets. But one thing is sure, Lewis and the rest of the management team are not content with Holiday Inn being a leading hotel chain in the United States. They want Holiday Inn to be the leader around the world.

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