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Patrick Imbardelli, InterContinental Hotel Group’s Managing Director for Asia Pacific, Is ‘Divorcing’ Owners
Who Don’t Fit In with the Group’s Values

OWNERS: there’s some we love, and there’s some ….

By Steve Shellum, Publisher/Editor, HOTEL Asia Pacific

There are some hotel owners that Patrick Imbardelli loves, and some he - well let’s just say - does not have much time for. And the regional Managing Director of global giant InterContinental Hotels Group (IHG) is more than happy to say “adios” to the latter.

The youthful Imbardelli, (42), who took over the reins of the region from Richard Hartman during IHG’s restructuring earlier this year [Hartman was promoted to the IHG board and now oversees Europe, Africa and the Middle East], makes no bones of the fact that, when it comes to building relationships with owners, he is after quality, not quantity.

“Some owners are harder to deal with than others, and I don’t have a problem with that,” he says. “With some, you have a point of contact, meet every month, agree on the strategy and get on with it. Others want to be more involved, and I don’t have a problem with that, either. 

“What I have a problem with is non-quality owners, who are usually involved in other businesses and, all of a sudden, find themselves with cashflow issues. Or they are fragmented and don’t really know the hotel industry, but try to suck your resources out. 

“We have some terrific owners and want to make sure we give those relationships our best, and extend on them. On the other side of the coin, we have made the decision to get divorced from some owners.”

He cites the former Holiday Inn Manila as a “classic” parting of the ways, which he instigated shortly after taking over as MD. 

“We had issues there with quality, safety and the whole focus. IHG is a FTSE-100 company with 3,300 hotels worldwide, and I’m not going to jeopardise our reputation, especially when it comes to fire, life and safety.

“Forget the legal arguments - we have a moral obligation to our staff and guests and, in the 50 years of Holiday Inn, there has not been a tragedy because of bad management or lack of focus on safety issues.

“There was a value to the contract, but I said, ‘No, enough – 30 days and we are out of there’.

“We walked, they threatened to sue us and I said fine. I would rather spend a million dollars in a court of law in the Philippines to prove what was right.”

He adds: “But even if they had rectified those particular issues, we would have been out in 90 days because the quality was not there.”

[Shortly after ending the Manila contract, IHG was approached by Robinson Land to manage two new builds, which will be branded as a Crowne Plaza and a Holiday Inn.]

Imbardelli is also not impressed by penny-pinching owners who want to take advantage of IHG’s global branding, marketing and reservations strengths, but start nickle-and-diming when it comes to upgrading their properties to the group’s standards.

“I’m talking about the type of owner who says he can’t afford to paint the peeling ceilings. We tell him that if he can’t afford to have a Holiday Inn, then let’s not have a Holiday Inn. 

“Every management company faces this, and you must have the gumption and strength to say that you are not about the short-term dollar, but long-term reputation.”

As an owner itself – [the company has nearly US$1 billion invested in properties in Asia Pacific, including 100% equity in 16 hotels, as well as 20 JVs] – Imbardelli says one of the main strengths of IHG is that it understands the problems faced by other owners.

“Many are under immense pressure, and this is when the strength of a brand really comes in,” he says. “SARS has strengthened the value proposition of branded hotels. We have had more calls, as I’m sure our competitors also have, from independent hotel owners saying, ‘I’m bleeding. I’ve suddenly lost all my groups, and I have no international FIT business’.”

During SARS, Imbardelli sat down with a Chinese owner, who told him: “Listen, Patrick, you have got to understand. I’m going through a really tough time.”

Imbardelli looked him straight in the eye and said: “I understand. I’m going through it as well. I know the pressures, so let’s look at doing this ...”

He says IHG’s market share during the bad times has increased, mainly at the cost of independent hotels, and regional chains. “I’m not talking about the Shangri-Las of this world, but the ‘national’ chains,” he adds. 

This emphasises his point about getting into bed with the wrong kind of owner. “When times are good, he thinks he doesn’t need you, and when times are bad he thinks he can’t afford you. There’s no upside.”

The kind of owner that Imbardelli respects is from a different mold altogether. “They really want to buy into our strategy. They want to understand the strategy and customise it for their hotels. They want good rapport and relationships with the financial controller, GM and DOM.

“In the old days, management companies would take, say, 3% off the top and 10% off the bottom. There was not much responsibility, and they would visit the owner once a year - if they had the time. 

“That’s all changed. There’s much more professional asset management now, and it’s not just about paying us to perform a task. Previously, the owner would talk to the GM once a month, and say. ‘How much money have we made this month, and how much will we make next month?’

“Now it’s not uncommon - and we certainly leave it open – for owners to pick up the phone and ring the DOM, and say, ‘Hey, what’s the market looking like? Tell me what’s happening.’

“Owners have moved a lot from asking us how much money they have made, to what we see for the future. There’s been a shift in their focus. Finance issues with banks are playing a heavier role, and they need accurate projections.”

IHG’s US$346 million purchase in 2001 of the landmark former Regent Hong Kong and its rebranding as the InterContinental Hong Kong is proving its worth as a showcase for owners contemplating branding – or rebranding - their own properties as InterContinentals.

“If you buy something, you have to really cost in where the asset has to be, and not just what you are acquiring. You have to show how you can add value,” says Imbardelli. 

“This is very much a showcase for us, and it put is in a position to do the Bangkok deal [IHG has taken over management of the two former Le Meridiens and rebranded them as an InterContinental and a Holiday Inn].”

IHG is in negotiations with several owners who have expressed interest in the InterContinental brand, but Imbardelli is in no rush to sign them up unless they really understand what makes the brand tick.

“There is one Sydney-based Indonesian owner who really wants to do business with us and we really want to do business with him. But we really want to be sure he understands what we are about, so we have brought him to Hong Kong to enable him to get the full picture of who and what we are.”

The group is also – for the first time – taking equity in two China hotels [both InterContinentals, scheduled to open in Shanghai in 2004 and Beijing in 2005]. “This hotel [InterContinental Hong Kong] contributed to getting those hotels. It’s lifted the bar, because other owners understand that it’s our own money we’re spending and it gives them a feel of what we have done and what we are doing.”

Why has IHG decided to invest in these two particular China properties? “They are going to make so much money and we want a piece of the action,” says Imbardelli, simply.

But he is quick to point out that IHG will normally only use capital to enter markets that it could not otherwise do via pure management contracts. 

“We are not a property company that wants to be in hotel management. We are a hotel brand management company that needs to use capital to extend its reach.”
That strategy “works really works”, says Imbardelli, but the only downside is that, at times, owners might have a project in mind and suggest that IHG takes a 30% stake in return for the management contract. 

“If it’s a non-strategic location, we tell them that it’s not where we want to be. But even if we might not want to invest in a particular property, we might still be interested in the management contract if we felt we could add value to the asset.”
Imbardelli describes IHG’s management contracts, in commercial terms, as “more than fair, but not negotiable”. 

“We tell owners that, to manage their business, we will take this percentage of base-management fee and this percentage of incentive – which could be, say, 12% at one hotel and 15% at another, depending on the circumstances. 

“We are not being arrogant by saying, ‘Here’s the contract - if you want it, get your lawyers to send it to us signed’. It’s more like, ‘If you want to have a say in the appointment of a financial controller, tell us why.’

“But if they say, ‘It’s our money and we want a say in it’, that’s not the attitude we want to hear.

“We have really stayed firm. The moment we break the mold, we divide and conquer [ourselves].”

© Copyright HOTEL Asia Pacific

Contact:

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Hotel Asia Pacific
Steve Shellum
158 Wong Uk Tsuen
Yuen Long
New Territories
Hong Kong
Tel: +852 2882-7352
Fax: +852 2882-2461
http://www.hotelasiapacific.com
steve@hotelasiapacific.com

 
Also See Terrorism: Who’s Liable? The Legal Status of Hotel Owners and Management Companies / Andrew MacGeogh, HOTEL Asia Pacific / October 2003
The Inside Story on How InterContinental Hong Kong Managing Director Jennifer Fox Teamed Up with Michelin Chef Alain Ducasse to Create a/ HOTEL Asia Pacific New Benchmark for Hotel Restaurants in Asia / Steve Shellum, HOTEL Asia Pacific / October 2003
Preview of the Wonderful and Wacky World of the W Seoul; Aiming to Break the Mould of Asia's Traditional Hotels / Steve Shellum, HOTEL Asia Pacific / October 2003
Chiller Replacement Project; How The Grand Hyatt Singapore Applied a Holistic Commercial View / HOTEL Asia Pacific / October 2003
Assessing Hotel Security; HOTEL Asia Pacific Magazine / Pertlink Re-Issue Hotel Security Checklist / August 2003
Pressure Cooking: Florian Trento, Executive Chef at the Peninsula Hong Kong, Explains How He and His Team Coped During the Bleakest Days of the SARs Crisis / HOTEL Asia Pacific / June 2003
Crisis Management: Could You Cope if the Unthinkable Happened / HOTEL Asia Pacific / June 2003
Back to Normal After SARS? Let’s Hope Not.../ HOTEL Asia Pacific / June 2003
Fighting Spirits! Rank-and-file Staff at Bali InterContinental Resort Talk About Their Hopes, Fears, Dreams / HOTEL Asia Pacific / April 2003
On the Chopping Block; Are You Prepared If You Get Your Marching Orders? / HOTEL Asia Pacific / April 2003
Trevor Bilney, Executive Chef at the Bali InterContinental Resort, Fights Hard Since Last October 12; Keeps Morale Up  and Costs Down / HOTEL Asia Pacific / March 2003
Hotels Stepping Up Security; Learning to Live with the Threat of Terrorism as Part of Conducting Everyday Business / HOTEL Asia Pacific Survey / March 2003
50% of Hoteliers Have Not Increased Investment in Security – More than a Year After the September 11 Attacks / HOTEL Asia Pacific Survey / December 2002
Security: Something No Hotel Can Ignore / Geoff Griswold / Summer 2002
Biometrics Lend a Hand to Hotel Security / Feb 2002
Hotels Near Airports Provide Better Safety and Security Features According to The Center for Hospitality Research - Cornell Hotel School / Dec 2002


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