IHG adds 100 German hotels in one day – and what it tells us about the state of the industry

Monday was a busier-than-usual day for IHG Hotels & Resorts. It added over 100 hotels in Germany in one go, through a franchise deal with NOVUM Hospitality.

It will see two IHG brands – Candlewood Suites and Garner – make their debut in Europe. It will also see the introduction of a new sub-brand – Holiday Inn the niu.

The UK will gain one new hotel as ‘the niu Loom’ in Manchester is rebranded. There are also a handful of hotels across Austria and the Netherlands included.

Why is this significant to the whole industry?

NOVUM Hospitality is not a small business. It is one of Europe’s largest privately owned hotel groups with its own established brands:

• the niu – 43 hotels (3-4 star) in 31 cities
• Select – 23 hotels (3-4 star) in 19 cities
• Yggotel – a new Scandi-inspired chain
• Novum – 35 hotels (3-4 star) in 17 cities
• acora Living The City – 4-star apartment hotels in 12 cities

The group also operates two franchised hotels for Accor, one for Hilton and five for IHG. However, this has always been a very small part of the group.

And yet ….. NOVUM has thrown in the towel. It is abandoning its own brands (I suspect those initially called Holiday Inn the niu will become pure Holiday Inn hotels very quickly) and committing itself to paying chunky fees to IHG for every room sold for the next 30 years.

the niu properties will become Holiday Inn the niu. Select, Yggotel and Novum will become Garner hotels. acora Living The City will become Candlewood Suites sites.

This isn’t the only deal like this we’ve seen in the last year or so:

• another German group, Lindner Hotels, made a similar deal with Hyatt. Whilst the Lindner hotels have kept their names, they have all joined the Hyatt ‘system’ under a long term franchise deal and are part of the ‘JdV by Hyatt’ brand

• Iberostar signed a deal with IHG to franchise its 70 beach resorts outside of Cuba. ‘Iberostar Beach Resorts’ is now an official IHG brand after Iberostar signed a 30 year deal with IHG.

What we are seeing is midscale European hotel operators admitting defeat when it comes to building their own brands and, importantly, distribution systems.

The loyalty programmes have driven this

Whilst you may think that Marriott, IHG, Hilton etc are competing against each other, what they are really doing is building a joint front against independent operators. The key thing driving this is the loyalty programmes.

When Marriott Bonvoy launched, it took a new approach to hotel loyalty. As far as Marriott is concerned, Marriott Bonvoy IS the business. It offers attractive perks and benefits to draw guests into its ecosystem, and with 34 brands to choose from you will find something suitable for every stay.

IHG eventually woke up and started taking loyalty equally seriously via IHG One Rewards. This is a real step change to the previous iteration of IHG Rewards.

Look at Accor. Again, Accor Live Limitless IS the business. Take a look at the Paris Saint Germain football kit for 2019 to 2022. It wasn’t the corporate Accor logo that appeared on the shirt front – it was Accor Live Limitless.

Both Marriott Bonvoy and Hilton Honors recently hit 200 million members. Whilst neither scheme is willing to admit what percentage of these 200 million people are ‘active’, you can’t deny that this is a huge potential audience.

Amazingly, Hilton claimed this week that 20% of all hotel rooms currently being built on the entire planet are contracted to one of its brands.

What do you do if you are NOVUM Hospitality, building out your own brands like ‘the niu’ but finding you can’t cut through the noise made by the big boys?

In particular, what do you do when Expedia, Hotels.com, Booking.com etc demand 22% commission for selling your rooms on their platforms? Especially when your own website gets little traction and you have no loyalty programme? Suddenly those IHG fees don’t look too bad.

The NOVUM website may claim to have ‘5 million satisfied guests every year’ (no jokes about how many unsatisfied ones they have, please) but clearly it isn’t enough. NOVUM has decided that writing huge cheques to IHG every month for the next 30 years will make it more money overall.

Conclusion

NOVUM Hospitality may be the latest hotel group to abandon its own brands and its own disribution system but it won’t be the last.

The percentage of branded hotels in Europe is well below the percentage in the US. There are plenty more NOVUMs out there.

Will Scandic throw in the towel in Scandinavia (Hilton owned this once)? Ibis would make a good home for Germany’s InterCity brand. IHG’s Hotel Indigo brand is already a clone of Malmaison and Hotel du Vin in the UK and could integrate them overnight. Millennium & Copthorne has little traction these days. As for the hodge-podge of brands in the Thistle / The Cumberland / ex-Guoman portfolio …. You should expect more announcements like the IHG / NOVUM deal.

You can see the full press release here.

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