IHG builds Asian inroads with Japan partnership

TOKYO— As global hotel companies seek increased visibility in key Asian markets, most pursue the direct route. They either build new hotels or convert existing hotels on the continent under their brands. While proceeding on both these fronts on a case-by-case basis, InterContinental Hotels Group is also taking a third, considerably less common path. Last month, the United Kingdom-based multi-brand hotelier signed a hotel operating joint venture, effective next month, that will see its distribution in a key Asian market— Japan— grow significantly by the third quarter of 2008. Whether other global players of the size and scope of IHG choose to follow suit remains to be seen. But what is not in doubt is that the large multi-brand companies are under pressure to expand further internationally and quickly with Asia a prime target. IHG’s joint venture partner in the agreement is Tokyo-based ANA Hotels, which is a unit of All Nippon Airways, Japan’s largest domestic airline and the seventh largest carrier in the world. The deal calls for ANA’s 13 owned and leased hotels in Japan, which total 4,943 rooms, to be co-branded with one of three IHG brands: ANA-InterContinental, ANA-Crowne Plaza, and ANA-Holiday Inn. ANA’s flagship, the ANA Hotel Tokyo, will be the first to undergo rebranding. It will become the ANA-InterContinental Tokyo in April. The remaining 12 hotels will be co-branded over the following 18 months. Meanwhile, ANA has 18 other hotels in Japan that total an additional 4,127 rooms. These operate under management contracts, franchise agreements or marketing referral agreements. They’ll now be offered the opportunity to co-brand with one of the IHG brands as well. Given the highly competitive marketplace in which IHG competes around the world, CEO Andrew Cosslett spelled out the benefits of the arrangement to HOTEL BUSINESS®. “Co-branding combines the domestic strength of the ANA brand with the international power and domestic potential of the IHG brands,” he said, noting that the two brands together create “a compelling proposition.” A lot of the underlying rationale for the deal has to do with the particular nature of the Japanese hotel market, the second largest in the world, according to IHG. Yet the Japanese hotel market is almost entirely unbranded. IHG already operates 11 hotels in Japan totaling 3,100 rooms. Consequently, the joint venture gives the IHG brands even greater name recognition. It becomes the number one international hotel company in the country and provides IHG with considerable growth potential, Cosslett noted. ANA stands to benefit as well. In explaining the rationale for the deal from ANA’s perspective, the company’s president and CEO Mineo Yamamoto cited IHG’s “industry-leading operating systems.” An increasingly important marketing tool throughout the industry has become the power of frequency programs and ANA will now be able to offer its guests in Japan access to IHG’s Priority Club Rewards. Through membership in the program, guests will be able to redeem their points for stays at IHG-branded hotels worldwide. In another synergy, All Nippon Airways will become a Priority Club Rewards global airline partner, while members of the airline’s frequency program, ANA Mileage Club, will be able to earn air miles when they stay at IHG hotels worldwide. Both Cosslett and Yamamoto pointed out that their respective brands share similar service standards and approaches to guest service. Cosslett specifically noted ANA’s “reputation for high quality.” Consequently, the alliance makes sense in this regard as well. For their part, IHG’s competitors, at least at the luxury level, aren’t wasting any time trying to get their own foothold in the Japanese market, starting in its key gateway, Tokyo. For example, Mandarin Oriental Hotels, itself an Asian-based company, opened a 179-room luxury property in the city in a mixed-use development last December. And the Ritz-Carlton Hotel Co. will open a 250