INTERCONTINENTAL HOTEL GROUP'S ENTRY INTO CHINA
Organizational Background
The International Hotels Group (IHG) is a British multinational hotel chain. The history of IHG dates back to 1777 when William Bass founded the company originally as a beer brewing company in England, called the Bass Beer PLC. After nearly two centuries predominantly in the beer industry, Bass entered the hospitality industry in 1970 by purchasing hotel assets. Three decades later, Bass sold all of his beer assets to focus completely on the hospitality industry, renaming the company to Six Continents PLC. To focus even more completely on the hospitality industry, the company demerged is hotel and soft drink assets and rebranded itself to International Hotels Group PLC in 2003.
Keen on making the IHG brand the first choice for travellers and hotel owners, the chain has become one of the largest hotel chains worldwide. Through management contracts, franchise agreements, and direct ownership, the group presently has over 750,000 rooms in more than 5,000 hotels spread across 100 countries around the world. Some of the major brands associated with the group include Holiday Inn, Intercontinental Hotels and Resorts, Hotel Indigo, Candlewood Suites, Kimpton Hotels and Restaurants, Holiday Inn Express, and Crowne Plaza Hotels and Resorts. In China alone, IHG currently has 277 hotels and more than 89,000 rooms, making it the largest hotel chain in the country. This case study explores IHG's operations in the Chinese market, with a specific focus on major strategic issues, strategic direction, macro and micro-environmental factors, diversification issues, competitive advantage, and market entry strategy.
Question 1: Major Issues
IHG was among the first international hotel chains to offer services in the Chinese market. Under the management of IHG, Lido Holiday Inn was established in Beijing in 1984, becoming the first hotel in China to be managed by an international hotel chain. One year in business, Lido had exemplified tremendous success, and within 10 years, the hotel had become a popular brand in China with an impressive financial performance. Today, IHG has over 270 hotels in China under its different brands. IHG's entry into China came against the backdrop of increased economic liberalisation in the late 1970s and early 1980s, which opened the country's doors to international tourists and businesses. Increased international tourism to China created the need for hotels with standards that would measure up to the people travelling from across the world. This provided an ideal opportunity for IHG.
What added to the attraction of the Chinese market to IHG were the following factors:
• China's massive population
• China's impressive economic growth
• China's crucial role in the global
Impressive economic growth increased consumer incomes, consequently resulting in the rise of the middle class. This in turn increased the demand for domestic travel, further providing a lucrative opportunity for IHG. The pronouncement by the Chinese Government that the Tourism Sector would be one of the key drivers of economic growth and the introduction of Vacation Incentives, further propelled the domestic travel segment....
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