IHG’s Kenneth Macpherson Offers a Positive Outlook
The CEO of the hotel group’s 79-country EMEA region shares his optimism on sustainability and the return of business travel
September 15, 2021
Kenneth Macpherson is the chief executive officer for Europe, Middle East, Asia and Africa. In that region of 79 countries, IHG Hotels and Resorts has 1,134 IHG-branded properties open, out of a global portfolio of 5,994 IHG hotels. Another 407 hotels are in development in the region, part of a pipeline of 1,805 hotels worldwide.
Business Traveler spoke to Macpherson at the recently-concluded International Hotel and Investment Conference in Berlin.
BT: When do you think business travel will return, and is there anything a hotel company can do to encourage it?
MACPHERSON: Firstly, I am optimistic. I think the primary driver at the moment [that is restricting travel] is all the regulations put in place with the great intention of governments’ care for public health. And we all have to respect that governments are trying to work their way through an incredibly challenging situation and trying to find the right way to do it.
Hotels can play a role around how we can make travel easier and simpler, but ultimately there’s a primary purpose in those regulations and it has put restrictions around travel. So some routes are possible, some not, some are simple, some are not. I believe those rules and regulations will relax; we’re starting to see evidence of that already. And where they are relaxed, we are seeing evidence of business travel starting to come back and larger group meetings starting to come back.
It may be that some things in travel don’t happen the same way in the future. Technology like Microsoft Teams and Zoom may have affected shorter business meetings, and so travel might change, but then other things may fill in those gaps. I would see more bleisure come in, beginning to mix business and leisure. And [for longer trips] people will have realized they can travel and then comfortably do business from that location. So it’s not necessary to travel and then hop, going back and forth. They can stay on the trip and work from there.
Has the overriding need for a market disappeared? I think there is an overriding value and we have all missed it so much. Yes, sure it will come back evolved, but I believe it will come back. And we will follow the routes as they open. And it’s important for us to provide that care and service that’s expected.
BT: What about the announcements from some companies that they will cut their travel?
MACPHERSON: I think individual companies will adjust, but overall there will be demand. There will be historic businesses and there will be new businesses, and it’s for us to be sensitive to who has adjusted and be proactive where the new business travel and other travel comes from. I don’t think we’ve got a situation where we can passive and assume that the old pattern will be the new pattern. But we offer that market insight – conversations with corporate clients, with travel agents, with multiple organizations which drive demand into the marketplace – to really understand how they are developing. So we have to be agile, market-facing, sensitive to what’s going on. But I don’t think any of us will be served by taking the view that business travel will go away.
I’m a self-declared optimist, but I’m realistic as well. I don’t think you can click your fingers and it’s all going to come back. It will take a while. People are nervous and trying to work out the mechanics of how things are going to work as routes reopen. So we will be realistic about the pace of the recovery, but the industry is well aware of that.
BT: IHG has made big environmental commitments, but you don’t own the hotels, so a lot of that will be about convincing the owners.
MACPHERSON: The industry is a long term asset industry. My view on it is that there is a good understanding now that there is an obligation for anything that operates to not just talk about sustainability and the environment, but to be able to demonstrate it for real. That means serving up measures which are being increasingly required by investors and also corporate clients who need to know how all sorts of people they procure from are performing against these measures.
The asset owners get that, and that it is going to be important for operating costs and important for asset value. We’ve actually done the work on the economics. For owners, if you are going to do a refurbishment and looked what you were going to do anyway, and then [considered] the difference if you really brought sustainability and the environment to the forefront and then looked at the difference in the cost, the view is that it fully pays back in five years. And that’s a combination of a greater view of the value of the asset, the fact that it can actually drive demand because corporate clients and increasingly other clients are demanding that, it can bring an advantage to the asset. And also if you can see the energy usage and minimizing wastage and water use, you can bring in a lower OPEX (operating expenses).
It’s for to us to serve up the best practice and collaborate with the owners on how we play the best role we can around sustainability, and that’s what we’ve said with the ‘Journey to Tomorrow’ and the commitments we’ve made worldwide, but also do the right thing by them since it’s in their interest. So it’s about collaboration and obligation as well. We need to drive this as best we can, and recognize we are in a long term asset heavy industry and some of these programs take time and there’s an asset cycle.
And it’s a combination of refurbishment and new build hotels. If you look at projections through to 2050, about 80 percent of real estate has already been built, so the refurbishment of those buildings is important, and 20 percent is new. What we are saying is that by 2030 we want those new builds to be as close to being net zero and being icons of sustainability as you can get them to be. And on the refurbishments side, we collaborated on the joint report with Arup and Gleeds and Schneider. That’s about how you can bring in best practice into refurbs we are working on, the best standards and practices, and then how you get that in to the new builds. So it’s about partnership: The asset owner, us and other credible bodies, and government where it’s possible. But it’s a core part of what we do.