Its brand name started out as a joke, as great ideas sometimes do, and became one of the first coast-to-coast motel chains. As a concept, it filled a need for clean and reliable accommodations along the fragmented American roadway system that preceded the Interstate highway network. From it’s roots in a plumbing shed, it continued on a 50-year arc of success, but in the new century found itself steadily losing market share and failing at the very business it pioneered beginning in the Eisenhower administration.
The brand is Holiday Inn, and it is indeed named after the Bing Crosby movie, a suggestion made by the company’s architect in jest, but which eventually became a seriously profitable franchised chain of more than 3000 hotels and motels. However, by 2005 the chain was in danger of becoming a zinger once again. Long gone were the days when “air conditioned rooms” or “Color TV” were added-value selling points. Today’s travelers, whose own cars often include zoned A/C, satellite radio and DVD players, expect all the basics and demand affordable rooms with amenities like luxury mattresses, contemporary styling , free Internet and hot breakfasts.
In an article on MarketWatch.com, John Fareed, a partner in an Orlando, Fla.-based hospitality industry consultancy, put it this way, “When we ask people about Holiday Inn, especially the younger set, they don’t think about it as a place where their parents stay but as a place where their parents used to stay.”
Oh, snap! Sounds too much like that slogan for Oldsmobile that has outlived the brand itself. Somewhere around 1990, Holiday Inn must have missed a wake up call as Inns Hampton, Comfort and Fairfield, among others, all rose to prominence as mid-priced, limited service hotels located off seemingly every exit on the interstate. Ironically, one of the most successful, Hampton Inn, was actually started by the parent company of Holiday Inn, InterContinental Hotels Group (IHG), and then sold off a few years later. At about the same time, IHG also began developing the Holiday Inn Express brand, which in some ways painted its mother brand into an even smaller corner.
So around 2005, IHG and Holiday Inn realized its venerable brand was quite vulnerable as well. Occupancy was continuing to slide, and room rates were stagnant at best. Holiday Inn was simply a has-been brand in danger of joining its once fierce competitor, Howard Johnson’s, on the hotel/motel scrap heap. IHG, owners of successful brands like InterContinental and Crowne Plaza, decided to take drastic steps.
2007 marked the beginning of a self-described major “rebranding effort” and makeover that is expected to cost its franchisees close to a billion dollars in total upgrades. You can replace a lot of velvet paintings for a billion dollars and further investments are being made in redesigned rooms, top-to-bottom remodels including higher quality bedding, flat panel TVs, lobby renovations, and staff retraining. Upgrading a brand doesn’t happen overnight, and franchisees were given until the end of January 2011 to comply or put a tarp over their sign.
Yes, IHG is playing hardball and demanding an average of millions of dollars per location in upgrades, or they will void the franchise contract. They expect to lose hundreds of operators from their 2800 or so locations. But those that have already ponied up the cash are reporting higher room and occupancy rates, and are attributing some of their success to the value perception of the Holiday Inn brand among corporate travelers on tighter expense account budgets.
Ultimately, their biggest challenge could be to differentiate themselves from their own sub-brand, Holiday Inn Express. There are worse problems than competing with your own successful spin-off, but the Express version has managed to establish itself with the Stay SmartTM slogan backed by an entertaining series of commercials that typically end with the refrain “…no, but I did stay at a Holiday Inn Express last night.” The promise of a good night’s sleep is often at the heart of a hotel’s brand proposition, but few have executed it as well as Holiday Inn Express.
Allowing a brand to slowly become less relevant makes for a much steeper climb back to competitiveness. Perhaps Holiday Inn was allowed to decline for a little too long to make it all the way back against much improved competition. But credit IHG with making a bold move to save a brand that started as a joke from becoming nothing more than a punch line.