Karin Sheppard, SVP & Managing Director Europe for IHG shares her experience and vision of the sector in this time of crisis. An interview with Vanguélis Panayotis, CEO MKG Consulting.
Could you share how IHG has managed this very specific period?
It is fair to say that we have never quite experience anything has profound and impactful as this. I’ve joined the hospitality industry one week before the September 11th attack. I was in Asia during SRAS. I experienced the global financial crisis. But this is something quite unprecedented.
For IHG and the rest of the industry, our first and primary concern was about safety and care for our colleagues, for our guests and for our partners. Through that period, our focus was really on how we could help our franchises partners and our owners in going about a temporary closure in the most professional and thoughtful way. We had to respond quickly, adapt fast and share learnings. That was something well-appreciated.
Our hospitality industry is engaged in a path to give strong confidence to the guests. What did you have implemented?
We have introduced what we called the “IHG Clean Promise” working with leaders in hygiene technology and making sure that we have constructed a program that is easy for the hotels to implement and provides that reassurance to the guests. So heighten sanitation, appropriate distancing, always respecting local laws and regulations.
We are backing that up with a verification program because it’s one thing to go out and talk about it, but we want to make sure that in every IHG hotels around the world we live up to that promise for the guests. We have just implemented that, and I have to say that I’m confident that it would help raising that sense of security and safety for a traveler that might be travelling again the first time.
We have to provide an experience at any touchpoints and most specifically when we are in the upscale or upper-upscale segments. Do you have some feedback from the guests who have return to the hotels? Do they feel comfortable with all the measures you’ve taken so far?
The great thing about the hotel industry is that we employ people that love delivering hospitality. And while it might take a little getting used to do it in a different way, it’s amazing how you can actually evoke the human sentiment through the smile that’s create through the eyes, through the gestures and the warm welcome. I was reading a customer review just the other day of someone who experience exactly that. They described this wonderful mix between feeling very safe because they saw that they were protocols that were put in place, but still absolutely feeling that human touch.
We were very fortunate to reopen InterContinental Lyon which is such a wonderful landmark in its local community and as they reopen their doors, they were such excitement […].
Regarding this very challenging business situation, what kind of relation or discussion you had during that time?
I would say that we have probably never communicate so frequently and openly with our franchises partners as we have during this period of crisis.
We are very fortunate to have a well-functioning IHG owners association where we have representation across Europe. Our partners had been fantastic in working with us to make sure we find new ways of operating hotels. We have been very mindful that for our franchise’s partners cashflow has been a real issue and will continue to be so as we have low occupancies.
We had various pay reliefs and pay deferrals. We have worked with them on how to adapt our brand standards to lower occupancy levels, to make sure that we deliver on what is most important for the guest but that we’re mindful of the sensitive climate we are in.
I’m a bit curious about your personal feedback on how to manage people during such a situation. Was it something new?
I think we all had to adjust to the digital world that we are finding yourself in. I think communication has been key during this period of uncertainty.
We have really quickly gone into very regular daily calls with the team around Europe. I had to rely even more on my intuition about how each and every one of my leaders were feeling day by day and knowing when it was time to give someone a call, encourage them, support them and listen to them. I think it has been very important to us all as leaders.
Similarly, I’ve been delighted with the pace which we have been able to make decisions, despite being dispersed and never seeing each other face to face. And I would say that it is amazing when you go through the crisis, you absolutely see the strength in your team. Leaders step up and when they feel empowered, they go and do amazing things. I had many moments of sheer pride in how my team has responded while we worked through some tough times together.
We know that some changes will probably last. What do you think will be similar with the hospitality industry?
First of all, we know that we will have measures in place for the feasible time that would cause us to operate differently. This is not something that is a short moment in time and then it is gone. We have to acknowledge that. We will be living with social distancing and additional security and safety measures for a while longer. I think we will adapt to that and we will embrace it, because it’s becoming a part of how we operate.
When we look at who’s going to travel first. It will clearly be a very strong tendency towards domestic travel first so domestic leisure will probably have the biggest speed of recovery. With corporate travel it will take a little bit longer. People are a little more hesitated still, but similarly a lot of governments are initiating many projects to stimulate the economy. The world largest economies know that they need to pop money to the economy to avoid job losses. Here in UK, we expect to hear more about larger infrastructure projects that will create jobs and will induce travel. And we also know and acknowledge that it will take a little bit longer before we see the meetings and events at the larger scale. Overall, I would say that we all have a passion for travel. We crave human connections. We will return to the love of travel and frequency of travel, but it will take just a little bit longer this time.
There is a lot of equipment and services that could be address to the local community; specifically, in Europe. Do you believe there is a way to update our industry software to be more oriented to locals?
I think that we’re going to see an amazing amount of creativity in the local communities. We are rethinking about how we set up restaurants. We maybe are going to see more pop up restaurants occur more spontaneously as we adapt. And yes, I agree I think that in the local communities, they will be a renewed interest in supporting what is right under a doorstep. I think you will see local food which was already one of the trends. In general, I think time like this can foster enormous creativity and we know that hoteliers are very creative people […] I think we will continue to see more engagement and support from the community back to our hotels.
What kind of other services could we see any time soon in the hotels?
I think that we will probably see some new challenges that lead to opportunities about space. I think we will see larger companies rethink how they use office spaces, that could bring an opportunity for hotels in terms of how we might convert space into coworking […].
How long do you believe this situation will last?
I wish I had this crystal ball. We all would and this is a difficult question to ask because of all those different phases of recovery.
I’m really encouraged by the continued interest in the hotel industry. We’re still signing deals which is a sign of whether you put 18 months, 2 years, 3 years on it, the faith and the belief in the role of hospitality is absolutely there. Globally IHG signed 104 hotels in the first quarter. Here in Europe we signed a beautiful InterContinental in Rome and when we think about Italy was at that point, it shows the continued faith and confidence in the market.
The continued interest will come from two sides. One is the continued belief that there is actually money to be made in hotels. I absolutely believe that because there is evidences of it in the discussions we are having. Secondly, we will see unbranded hotels seek out branded partners. The conversion market will pick up and we are seeing that happening right now.
At the moment there is a lot of momentum in Southern Europe. We just signed a Holiday Inn Express in Corsica. So, this sort of continued interest in proven brands that can deliver the right experience wherever we are going through the crisis or where are at the boom. And the continued interest in the hotel industry should give us confidence that we will absolutely work our way through this period and continued to enjoy what we do.
In terms of investment, what makes the hospitality industry so dynamic and appealing to investors?
I think that there is universal agreement foundational in terms of desire to travel and explore, the fact that the world has become more connected than ever, the fact that there is a younger mobile generation coming through that is grow up with travel and desire it.
I have the confidence that those drivers are not going away. They have taken a very hard hit let’s be honest. We’re one the industry that has taken the hardest hit. But we can also predict that it will be temporary because the underline drivers are there.
You mentioned our franchises partners, I am hearing from them. The fact we were the first to go out and acknowledge that we needed to generous cancelation policies in place, that we needed to protect our loyalty members and make sure that they would retain their status. The fact that we can mobilize fast in terms of risk management, safety procedures, helping them in their operations. That all has enormous value and has now been put to the test.