Growth Under Pressure: The Decisions Hotel Brands Are Making Now

0:00Jeremy Kressman: Hey everybody, Jeremy Kressman here. Welcome back to Skiff's Take Sessions. We are coming to you live from the floor of Skiff Global Forum 2026. Yes, that is right. In this segment, I am joined by Heather Balsley. She is the Chief Commercial and Marketing Officer at IHG Hotels and Resorts. And Peter Manoogian, he is a partner at ZS. We get into how hotels can help support the changing economics for property owners, how IHG thinks about strategy for conversions versus new builds, and what a loyalty program is for in a world where AI is doing the searching. Check it out.

0:52Jeremy Kressman: Heather, Peter, welcome to Skiff Global Forum and the Skiff Take Sessions booth. We're happy to have you both here.

0:58Peter Manoogian: Thanks for having us.

0:58Jeremy Kressman: How did everything go this morning? You hearing any interesting conversations?

1:01Peter Manoogian: Yeah, no, I mean, a great morning, lots of energy, really interesting conversations, AI, top of mind across the board, which seems to be the case across the industry right now.

1:11Jeremy Kressman: Absolutely. We'll circle back to AI, but let's start first with one of the topics that I heard this morning, which was owner profitability. So it's been challenging this year, I know. Costs are rising, margins are compressing at the property level. Heather, given IHG's role, you support a lot of owners. What does your brand have to do differently when owner margins are under pressure?

1:30Peter Manoogian: Yeah, and Chris Nassetta gave a great overview this morning of this topic. As hotel companies, we're an asset light hotel company. So we rely on our owners' investments to drive not just the customer experience, but ultimately growth. And for that reason, our owners' returns are our top priority. And that's why a few years ago, IHG continued to push the cost of ownership for our owners, lowering some of our marketing assessments, lowering our loyalty assessment, increasing the reimbursement to hotels for reward nights. Sure. And we continue to invest in that space. In fact, we are this year launching lower cost commercial services for all of our hotels in the Americas.

2:14Peter Manoogian: And that's unlocked through our AI enabled revenue management platform. And so AI is definitely helping us to continue to drive even more value, not just to the top line, but to the bottom line for our hotel owners.

2:27Jeremy Kressman: That's great. And I think it's another benefit of being part of the IHG brand as a property owner. You know, Heather, one of your big areas of focus has obviously been finding areas of growth for IHG. You run a lot of the commercial functions for the brand. Two of the most obvious types of growth, when I think about hospitality, you've got conversions, you've got new builds. Each of them has their own pros and cons, right? From your point of view, how are they different and how do you think about the balance between them for growing your revenue?

2:52Peter Manoogian: Yeah, I mean, I'll start with how we think about growth overall, which is that growth has to be high quality growth. We are putting over 21 brands into over 100 markets around the world, 7 ,000 hotels. We need to ensure that each hotel that we open is delivering a great experience for the customer and also returns for our owners. And there's a role for both new build and conversion in that equation. I think this first half of this year, about 40 % of our openings were conversion and half of our signings. And so conversions are a massive trend in the industry. And some of that's because of, you know, rising interest rates, higher build costs.

3:35Peter Manoogian: All of our brands are more conversion friendly than they've ever been. But brands like Voco or Garner or Vignette that are geared towards being conversion oriented brands are really what's driving a lot of growth for us. But you do have to think differently about the commercial ecosystem that you put around a conversion versus a new build. Because that demand environment is different. So a conversion, which is an existing hotel, which potentially with a relatively light renovation is very quickly moving from independent or a competing brand into our ecosystem. You've got to move really quickly.

4:11Peter Manoogian: Sure. To shift demand, to train the on-property teams for how to welcome guests, how to capitalize on our demand engines.

4:21Heather Balsley: where with a new build, you just have a little bit more time to pre-sell and train and educate

4:27Peter Manoogian: and build that base business before opening. And so it does present unique challenges.

4:32Jeremy Kressman: Yeah. The scaling is really important, making sure the consistency is there. Peter, I'll ask you a version of the same question. Looking across hospitality more broadly, which of these hospitality growth strategies do you think is more underutilized? Is it expanding your footprint or is it raising the yield of an existing property?

4:47Heather Balsley: Yeah. Yeah, and I would reframe it a little bit, Journey, because expanding footprint and yields, they don't necessarily need to be at odds with money.

4:55Jeremy Kressman: Sure, you could do both.

4:56Heather Balsley: You know, unit growth, we've talked about whether that's building new hotels or converting existing hotels, whereas RevPar is really about ensuring that you are capturing the demand that you have at the highest quality revenue possibly. So I think about it as demand growth or demand generation versus demand capture. And of the two, I think that demand capture is relatively underutilized. And we've talked about the high interest rate environments, economic environment that makes it more challenging for that footprint growth to necessarily come through. So we've already covered that. I think it's also because some of the aspects of demand capture are relatively unglamorous.

5:37Heather Balsley: There's things like ensuring that your rates stay current. They don't expire. It's things like converting or responding to group RFPs within 12 hours versus two days. Because if it's past 12 hours, it's as good as gone. And we've seen that time and time again with suppliers. And it's making sure that your rates stay intact even after a GDS migration. So these opportunities we found consistently mid-single-digit revenue uptick by really fixing this foundation. and that's why it's such an important part of the commercial agenda. And it's something that as connecting back to what Heather said around engaging with owners, it's an important capability to show to owners that are thinking about driving growth or conversions.

6:25Jeremy Kressman: Yeah, it makes it a little bit like a podcast. Everybody has to hit their beats. You got to have crossing your T's and dotting your I's to make sure you're growing that revenue at a commercial level. Let's talk about another driver of hotel growth, which is, of course, loyalty programs. Heather, you were on a panel just before now. You were looking at how AI is appending traveler behavior, how people are booking and searching is changing. When I think about loyalty programs and what is happening with AI, it was this great push to book with your brand. You earn points and perks when you do that.

6:56Jeremy Kressman: IHG, of course, has its One Rewards program, very popular program. From moving towards this world where AI is playing a bigger focus, how does that change what One Rewards needs to offer?

7:05Peter Manoogian: Yeah, so, and I shared this on the panel this morning, no question that how customers are searching, how they're getting inspired, eventually how they book is going to change. It is changing.

7:18Heather Balsley: But the why is not going to fundamentally change.

7:21Peter Manoogian: That comes back to trust, trust in our brands, trust in the customer experience. And at least for IHG, where 70 % of our nights come from loyalty members in this market, those customers are still looking for points for free nights. They're looking for how a loyalty program enhances their experience on property. And more and more, they're seeing a more personalized experience from search all the way through to booking stay and beyond because we know so much about who they are, how they behave, how and why they travel with us. And so for that reason, I actually think loyalty, loyalty programs, but how we use our insight about our loyalty members is going to be more important than ever in the AI world.

8:08Jeremy Kressman: So you think the loyalty brand will cut through the noise of AI and people still will go back, direct, or find you through the force?

8:15Peter Manoogian: I mean, it has to, but it's actually one of, I think, our biggest challenges in this moment, which is how hotel content, but also booking content flows through into AI-enabled search so that a customer knows when they're clicking on a listing, are they booking direct? Where they're going to get the most flexibility, their loyalty benefits, or are they booking with a third party where they may be foregoing those benefits?

8:42Jeremy Kressman: Right.

8:43Peter Manoogian: And that's still evolving.

8:45Jeremy Kressman: Yeah, I mean, there's a lot of interesting distribution questions here we could talk about on a separate podcast completely. So far, we've covered a lot of strategies that the hotel industry can use to pursue growth. New hotel conversions, we just talked about loyalty, AI. Nobody can do all of these things, right? I want to ask you both about limits. Heather, what is something that IHG was investing in maybe two years ago that you pulled back on? And conversely, what's something that's getting more of your attention now?

9:12Peter Manoogian: Yeah, I mean, I would frame it less about like pulling back, but more just how our platforms are being built and continuing to evolve. So, for example, at IHG, the last, you know, seven, eight years, we've been investing in a massive technology replatforming, starting with our GRS, but then quickly moving to replatforming our loyalty program, customer relationship management. We're in the midst of rolling out a next-gen cloud-based PMS. We've moved all of our data to the cloud and structured that data so that it can help us leverage AI more efficiently. So we're now pivoting from investing in those platforms to activating those platforms.

9:57Peter Manoogian: So whether that's, you know, an AI-enabled revenue management system, how we're marketing differently, how we are displaying our hotel's content very differently in a more sophisticated way. It's about how we commercialize those investments in this new environment.

10:16Jeremy Kressman: It's kind of stitching together the tech stack that's always been there. Yeah. And that's actually a great segue for you, Peter. I would love to ask you, working with a lot of hotel companies, they're all running these big multi-year efforts, whether it's, you know, upgrading CRS systems, launching new brands, loyalty program overhauls. How many of these can you do before the execution starts to suffer? How do you prioritize?

10:37Heather Balsley: Yeah, they're all really important initiatives. And so I think I will give you an answer. The number is maybe the less important part, but I think the answer is something like two. because it has to do with the individuals to whom the change is being affected. So if I have a loyalty program relaunch plus a new reservation system plus new branding or content management or content service systems, all of those changes might be delivered within the organization, within headquarters, but they all rest on that same general manager on property. And so we like to think about it in terms of the number of changes that you impart on an individual in a given year.

11:23Heather Balsley: And that's where the two number comes from. Because how many times can you ask somebody to change their jaw or adjust what they're doing within a given year? I think the answer is about two. But what's more important is what Heather described also around making sure that the initiatives are done in a real high quality way, that they're delivered flawlessly. Because the last I checked, IT organizations within suppliers, they're running day jobs too. There's four run the business initiatives that are also stretched and strained in many ways. So I think that's really the sweet spot that we've observed.

12:01Jeremy Kressman: Isn't it ironic in this era where AI is taking over everything? We have these tech stacks that run our hotel businesses. It's still about the frontline workers that put it in place and the hospitality of the property. It really delivers things. Let's just wrap things up. One more question for each of you. Heather, what is one decision that an owner who is a commercial leader should make differently as they're thinking about the next year of their operations?

12:24Peter Manoogian: All right. Well, I'm going to cheat and say two, but they're connected. But the first is that content is key. And I think in this industry, hotels have thought about their content as just like something they put out there to display on different channels. And it's now a demand driver.

12:41Heather Balsley: Yeah.

12:41Peter Manoogian: And it's not just the quality of the content. It's the structure of the content. Is it machine readable?

12:46Jeremy Kressman: Yes.

12:46Peter Manoogian: And that's actually where hotel companies who have invested in those platforms and IHG is in the midst of rolling out a new hotel content management platform. That's what's going to drive demand in the future. Yeah. But that content has to be relevant, accurate, and it has to represent a high-quality experience on property. And so that's the second over-artime theme is view delivery of the customer experience as a demand generator.

13:13Jeremy Kressman: And that's because we see it time and time again.

13:16Peter Manoogian: That's what drives revenue outperformance. It's what drives return rates. And ultimately, LLMs are displaying not what the hotel companies are saying.

13:26Heather Balsley: Yes.

13:26Peter Manoogian: They're displaying what customers are saying about your profit. Yeah. And hotels need to sweat that every day.

13:31Jeremy Kressman: Yeah. Yeah. It's not just about the owned piece of things, which has the visibility. It's also about that all that user generated content that contributes to whether people come back.

13:39Heather Balsley: And I would say it's also about the consistency of the content that the brand or your franchisees have control over. Because we've had clients where the content from headquarters or from your own properties might be different from that of what's on OTAs. You know, now all of a sudden the merchandising logic is different. The customer might be at best confused. At worst, it's just not being shown to the traveler as they're searching through LLMs and in that discovery phase.

14:08Jeremy Kressman: Yeah, it gets back to that consistency point. Peter, one final thought here. What is something hospitality brands are funding right now that they should stop?

14:15Heather Balsley: Oh, man. You know, we've talked a lot about funding initiatives. I would say it is a branded AI experiences that are really just marketing projects. Sure. And so you have organizations have chatbots on their websites. There's a lot of online search agents that brands are running. And these are important. But as search and discovery does begin to collapse a little bit outside of what a brand might always control, it's going to be important that the content, as Heather has mentioned, That the content is actually machine readable, that it is delivered in a way that's going to be meaningful for the customer in their context.

14:59Heather Balsley: And so that's where the high quality investments pay off, being very context relevant, and also ensuring that suppliers can still own the framing of their experiences and of their products to travelers.

15:13Jeremy Kressman: Yeah, just doing AI as vaporware doesn't work. We need that consistency point. I think this is a great place to leave it. Heather, Peter, thank you so much for joining us today. If you want to learn more about what ZS is up to, you can head to zs.com.

15:26Heather Balsley: Thanks. See you.