Karin Sheppard is SVP & managing director, Europe, at IHG Hotels & Resorts, responsible for driving sustainable long-term
growth and the performance of its hotels across the region. Over the course of
her more than 15 years with IHG, Sheppard has held several senior roles in
Europe, Australasia and the Middle East, spanning commercial, operations and
brand development.
According to its Q3 results published last month, IHG systemwide RevPAR in the quarter increased 1.5 per cent year over
year to $95, while ADR increased 1.7 per cent to $132.72. Systemwide
occupancy declined 0.1 percentage points to 71.6 per cent. In EMEA, RevPAR increased 4.9 per cent, with occupancy up 0.9 per cent to
74.6 per cent, and average daily rate up 3.6 per cent.
BTN Europe: We last spoke in January 2021, almost a year
into the pandemic, for a BTN Europe podcast when travel was pretty much
grounded. It’s difficult to talk about business travel recovery without referring
back to 2019, but tell us what you’re seeing now.
Karin Sheppard: We have all become so used to going back to 2019 as the
benchmark of recovery and it probably is relevant in the context of corporate
travel because we have spoken multiple times about how corporate was the slower
segment to recover. But in the last 12 months we’ve really seen that pattern
starting to shift and at the end of 2023 we were at 89 per cent of 2019 [for business travel] and that is now
projected to get to 95 per cent this year, so we would say we have normalised
in corporate.
That is great to see because I think there were a lot of
concerns around what might happen to corporate travel. There are some
variations in that normalisation… we saw an initial pattern of fewer trips, but
longer stays, and that seems to have shifted back to shorter stays
again. And, interestingly, we’re also seeing longer advanced booking windows, probably
driven by a financially cautious environment.
BTN Europe: Before Covid, IHG reported that corporate travel
accounted for 60 per cent of its business. Where is that now?
Karin Sheppard: We have definitely seen leisure remain very strong. What
makes it hard to nail those numbers now is that we continue to see a blend [of
trips] – the trackability of corporate versus leisure has actually become harder and
harder. [IHG has since told BTN Europe that business demand accounted for around 52 per cent
of IHG’s revenue in Europe in H1 2024.]
I think another interesting segment is business
events. We have been positively surprised in terms of just how strong that
segment has been. That’s where we’ve seen the strongest increase year-on-year
from 2023 to 2024, both in the volume of meetings bookings and also in the
rate. What’s behind that is that there is likely to be some impact from the
fact that there are still a lot of people that work remotely or flexibly, which
then leads to an increase in small meetings and events. But we see that
[growth] in some of our very large meetings hotels too. So if you take an Intercontinental
in Berlin where the core business is large events, that’s really starting to
come through quite strongly.
BTN Europe: The cost of travel has risen rapidly in recent years. How does
that affect corporate appetite?
Karin Sheppard: We are focused on how we deliver value for those rate increases. We have to
remember that all the cost lines have gone up in hotels, whether that’s payroll,
energy, or just general inflationary pressures. So it’s important that we price
ourselves accordingly. Our focus is on making sure that we deliver the best
possible experience for whatever the rate of the day is.
BTN Europe: What are you seeing in terms of sustainability demands from
corporates?
Karin Sheppard: We are really focused on how we can reduce our
own carbon footprint and how we can help clients do that too. Interestingly, nine
out of ten corporate accounts in 2023 included ESG-related questions in their
RFPs. We build business partnerships by being able to actually demonstrate what
we are doing and how we can help people travel responsibly. We are definitely
seeing enhanced attention to being able to hold sustainable meetings too.
Despite the worst predictions about the end of corporate travel, we are all enjoying travelling again and realise that face-to-face meetings is the way business gets done
BTN Europe: Is there any sense that they are just going through the
motions with those, or are they meaningful questions?
Karin Sheppard: They are definitely meaningful and I think another
interesting stat which supports why I believe it’s meaningful is because 90 per
cent of our top global customers have made their own net zero or carbon neutral
commitments. Corporates are making active decisions to stand by the commitments
they’re making publicly.
I think the questions will only get sharper and sharper and
our responses will only get sharper and sharper as we all start coming up with common
measurements and the ability to be as transparent as possible – and that is a
journey across the industry.
At the moment we partner with third party accreditation
schemes, including Green Key, which means that in RFPs we can say that this
hotel or that hotel is compliant with Green Key standards. There are many other programmes
too and we try and map against them, but that’s one of the challenges – that there
are multiple platforms.
BTN Europe: Are you witnessing any other particular trends in corporate
RFPs or demand for particular sectors?
Karin Sheppard: I think there’s definitely a desire to become as digitally
enabled as possible in terms of booking portals which
absolutely makes sense. And I would say we’re seeing demand across all sectors. When
we go through perhaps more uncertain economic times, we always see our
mainstream brands do really well – Holiday Inn and Holiday Inn Express are consistently
in a strong place as companies face perhaps uncertain times.
At the other end
of the scale, luxury certainly had a moment after the pandemic, particularly
driven by leisure and that pent-up demand there. And then with meeting and events
coming back, the premium categories, which for us is our Crowne Plaza and VOCO
brands, they do very well in terms of having an offer that is very fit for
purpose for meetings and larger conferences, and a choice that is perhaps not
as elaborate as if you went for one of our luxury brands.
BTN Europe: You signed a partnership with Novum Hospitality in Germany
earlier this year. What does it do for IHG?
Karin Sheppard: It will essentially double our presence in Germany in a very
short period of time. We are adding 108 already open hotels and there’s
another 11 in the pipeline. Out of those 108, half of them are under the Holiday
Inn – the niu brand which are fabulous new-built hotels and very aligned with the Holiday
Inn brand, but with some nuances that we want to retain from an aesthetic and design
perspective.
The other half, over 50 hotels, will become Garner properties which
is a new brand that we launched globally at the end of last year. It’s a
mid-scale brand offer with a more flexible and very conversion-friendly offer
for owners. Where Holiday Inn Express is very consistent, there will be far
more flexibility in terms of the design and the footprint of the hotel, but
with some common quality denominators and some consistent threads through it.
The third element of the deal was Candlewood Suites, where we are rebranding Novum’s existing Acora serviced apartments or aparthotels and making
them Candlewood Suites. If you think about our Staybridge Suites brand, Candlewood
is more in the mainstream segment at a more affordable price point. It’s a less
elaborate offer than Staybridge Suites, but very fit for purpose for project
workers that go on extended stays in key cities.
BTN Europe: Does the proliferation of hotel brands cause confusion among customers?
Karin Sheppard: We have 19 brands currently which probably puts us on the
more moderate end of the scale among branded chains. We’ve always had the view
that there has to be a clear purpose for each brand and if we add a brand it
must fill a space where we are not currently set up for success, either because
owners tell us they have opportunities for us or guests tell us that we are not
meeting their needs.
BTN Europe: Where in Europe is IHG looking to expand its presence?
Karin Sheppard: Southern Europe is definitely where we are seeing
accelerated growth. There is definitely investor interest in those markets, much
of it driven by leisure destinations, it has to be said. We see great
opportunity for further growth in countries like Spain, Portugal, Italy and
Turkey, and we have many new brands entering those markets.
BTN Europe: Is staffing still an issue for the hospitality industry or has that passed?
Karin Sheppard: It has gotten a lot better. I think there are markets, like
the UK, where it is a continued reality that we need more people to
come in and there are still certain skills gaps – trained chefs, we all want more of
them – but we are fortunately in a situation where it has stabilised and we are
no longer in that crunch time we were in straight after the pandemic.
BTN Europe: What did the pandemic teach you about the travel and
meetings industry?
Karin Sheppard: I think we’ve seen the resilience of the hotel industry. Despite
the worst predictions about the end of corporate travel and large meetings, we
are all enjoying travelling again and realise that face-to-face meetings is the way
business gets done. So while I’m sure the unpredictable economic outlook means corporates will be rigorous in how they allow their people
to travel, there is a realisation that it is serving a purpose that really
drives future growth for companies around the world.