IHG Expands Despite Global Economic Gloom

At a time when profits are falling and other hotels are abandoning expansion plans until a rosier economy, InterContinental Hotel Group, the London-based owner of Holiday Inn and Crowne Plaza brands, continues its global expansion.

Today the company announced an alliance with a group of Florida-based resorts to create a new timeshare brand -- its first foray into the timeshare market, Holiday Inn Club Vacations.

The news comes on the heels of several other aggressive moves by IHG in recent weeks, including launches of properties in Costa Rica, Vietnam, India and Ecuador. IHG also said it will take over two hotels in Wuhan, China.

"The hotel industry is very sustainable, and there is still a lot of demand with only 30,000 rooms in the organised segment," Jan Smits, IHG's chief operating officer for Southern Asia and Korea, told reporters in India.

IHG's aggressive expansion is somewhat curious, given the U.S. downturn and increasing worries about a global recession. The company itself recently issued a lackluster earnings report which indicated flat growth in its hotel sector. But in this economy, flat is better than rocketing downward.

In a note to investors, David Katz of Oppenheimer wrote that while InterContinental's results "reflect some weakness" they also "outperform the industry across the board," adding that Smith Travel Research recorded an average 1.1 percent decline in U.S. hotel revenue per available room over the summer.

"What's different now is the behavior of the industry -- systems are better, more sophisticated," Smith president Mark Lomanno told the Guardian. "It doesn't work to employ a discounting strategy in a declining market."

IHG said its new timeshare brand will launch in December with The Family of Orange Lake Resorts' 2,412 villa property in Orlando, Fla., which it claims to be the largest single site timeshare resort in the world. Christian Hempel, a former vice president of strategy in the Americas, will head the new Holiday Inn Club Vacations.

"This deal reinforces the strength of the Holiday Inn brand as we are able to move into the timeshare market with a good partner who knows the business well," IHG CEO Andy Cosslett said in a statement. "We believe that timeshare is a natural progression for Holiday Inn due to our scale and customer base in North America."

Time will tell, but it looks like IHG has something that few hotel chains seem to have nowadays -- confidence.