Power of Purpose - CEO's on Purpose with Elie Maalouf, CEO, Intercontinental Hotel Group

Hello Mary Lee, and thank you for that very kind introduction. And thank you to all the members of the British American Business for joining us today. I know you're very busy wherever you are in the world. Really, really appreciate the opportunity to spend some time with you today. Although it's virtual, I hope that we can meet in person someday soon. As you said, Mary Lee, our purpose at IHG is True Hospitality for Good, and every one of those words is weighted carefully. It's not generic hospitality. We think our hospitality at IHG is distinguished. That's why we call it True Hospitality. And it's for a good purpose. Now, there are a range of purposes that we all think are good purposes, and we're not embarrassed to say that one of our main purposes is delivering results for our investors. I start with that because it's usually not where purposes start when CEOs are talking about their businesses. But I'm also not ashamed to say that we are very trusted by the families, individuals that invested in IHG. And yes, if you look at our register of largest shareholders, you're going to see Fidelity and BlackRock and all the large institutions. But they are just conduits. They're agents for individuals like you, like me. Young people saving for the future, old people saving for healthcare, middle-aged people saving for retirement, families saving for their children's university or for their future dreams, schools and institutions saving their endowments so they can take care of patients, so they can take care of students. And so there's a lot of trust, billions of dollars that are trusted to IHG from people whose dreams, whose hopes, whose futures rely upon our faithful stewardship of that trust. So making good on that through our hospitality business is a major responsibility. It's not just about earning more for fat cats. Sure, there are bankers and lawyers and others that benefit, and executives when they do well and not when they don't. But ultimately the rewards of our success as a company come to everyday, ordinary people around the world that have trusted us, and that's a responsibility we feel greatly. We also make a huge difference to our owners, who are for the most part individuals that own Holiday Inn Expresses and Holiday Inns and Candlewood Suites, or come together to invest in a Crowne Plaza or Staybridge Suites hotel or InterContinental Hotel. And that's even more so than our shareholders. There are people for whom that's their family business. Their families will work in these hotels and it's their entire existence, around the world, whether it's in Asia or Europe or North Africa or the Middle East or Latin America or the United States and Canada or of course the United Kingdom. Families, for the most part, individuals, private investors own these hotels, and they've trusted us to make those hotels successful for them. And it's thousands of people around the world that have trusted IHG for generations, and we need a good, good result for them too. And then of course there are communities, our communities, for which the hotels are a central part of their community. I mean, so many important things happen in hotels, not just business people coming to stay or people going on vacation, but important meetings in people's lives, weddings, anniversaries, celebrations, but even some critical sad moments, funerals, receptions. Everything in life that's important happens at a hotel, and communities cherish their hotels and they trust us to bring hotels that are centers of their community, of their society, that not only create jobs but create careers, create aspiration, and create a reason for people to stay in their community, not have to move somewhere else to work, and gives them a hope of staying in their community. That's why we feel like we're a force for good across many of our constituents, all of our constituents: our investors, our owners, our colleagues that work in hotels, and our communities that depend on hotels as a central fabric of their society. When we're doing our job well, and most times, if not almost always, we're doing it very well in our 6,500-plus hotels around the world, over 80 years, we're a central member of that community, we're central to the lives of our owners who invest in our hotels, we're central to our shareholders who trust us, and when it goes well, and it has been for the most part, we're a force for good in their lives.

That's where it starts to get harder. It's easy to put on paper what your purpose is, even if it's a simple slogan, and then execution is always the hard part of it. The nice thing in our business is you're very close to the business. Hotels are living, breathing creatures, they're living, breathing organisms in our community, and one million people on average stay at an IHG hotel every night of the year, one million around the world every night. And we hear from them, and we hear from their owners, and we hear from their communities, and so it's not hard to stay close to the business. The business doesn't let you stay away from it. People feel very emotionally about their hotel brands, about their hotel stays, about their experiences. When it goes well, they let you know, and in the rare times where it doesn't, they let you know too. So you're very close to the business, and you can pretty well measure if you're meeting the expectations of that trust that your communities, your employees, your owners have placed in you. You get feedback very openly and regularly. It's not a closed loop. You see, we're 100% asset-light, which means we don't own any of the hotels. They're either managed or franchise, mostly franchise, around the world. So third parties, mostly individual investors, own these hotels, and I spend, I personally spend a lot of time with many of these ownership groups. Many of our people spend a lot of time with them because they're the ones that own and operate these properties. And so you're getting constant feedback from them: are we meeting their expectations, are we meeting the guest expectations, and they're members of their communities. And the question many times is: are we meeting the community's expectations? So executing on those expectations is very hard. It's a very competitive industry. People's expectations for their travel experience, for their return on investment on investing in a hotel, communities' expectations on how a hotel can transform their community are very high. Their willingness and ability to give us that feedback is also very high. We're in constant dialogue on how that's happening, and we measure it very carefully. We measure our guest satisfaction, we measure our owner satisfaction. If they're pleased with us, they return and do more hotels with us. 80% of our new transactions every year are with existing owners. And we measure and we track our impact in our communities very closely. And of course, our shareholders let us know every day how they feel about our company and its performance. So whether we're executing our purpose for guests, for owners, for colleagues, for communities, and for investors is a constant feedback loop, and we are quite aware of it. We work hard at it every day.

It's even harder, Mary Lee, because most of those 375,000 employees aren't actually directly IHG employees. Most of them are employees of franchised hotels where they're wearing the uniform of IHG, Holiday Inn Express, Kimpton Hotels and Resorts, Candlewood Suites, InterContinental, Staybridge Suites, but they are not employees of IHG. They're employees of the ownership group. And yet the customer doesn't know that, and they expect the same experience and the same delivery and the same purpose and the same passion that we bring in our own managed hotels. And so it's even harder. But I think we do a good job at it. I think it comes through first the tone at the top of what our purpose is and how it flows through every one of our decisions: decisions about what brands we have and how they make an impact in their communities, decisions about how we hire in a broad, diverse, inclusive way, decisions about who we do business with and the reputation that we maintain, decisions about the standard that we set in the community for quality, for customer service, and for the quality of our properties. And when employees see not just the purpose but they see you acting consistently with those, and look, it's not easy. We're not perfect. It's our aspiration to act consistently with our purpose. We're flawed individuals and human beings like everybody else is, and I know it's a challenge for most organizations. But the more you act consistently with your purpose, if we believe that high-quality hotels enhance our reputation and enhance the work environment of our colleagues, then if we act upon it, then they believe us. If we believe that having a diverse and inclusive workforce, look, if we're in 100 countries plus, and by the way within those 100 countries it's probably multiples of cultures within those countries. I mean, India is not a country, it's a continent. China is not just one country, it's a continent with multiple cultures. The US is multiple cultures within a country. And so yes, we're 100 countries, probably 250 cultures and even more languages. But if we say that inclusivity and meritocracy is truly a value that we have, and then we act upon it and people see a diverse workforce and a diverse leadership team and an inclusive mindset and opportunity, then that's different than just talking about it. I think we do act in accordance with the values that we set forward. And I think so first what's important is to act upon it, and then you can start to see examples of your colleagues actually behaving that way. We operate, of course, our biggest operations is the United States, and this summer you had two major storms come through the South. And one of our responsibilities in society when there are natural disasters: one or two things happens to a hotel. They're either the victim of a natural disaster and they're destroyed or they're closed, or they become the refuge during the natural disaster. So they were either closed and destroyed or they were full and busy with people that are escaping sometimes near-death experiences. And I got this letter, actually this email, some people still write letters though, I just, to be fair, and it's lovely when you get them, actual handwritten notes, but this was an email from a woman in North Carolina where they had devastating, devastating floods that killed hundreds of people, and they were victims of Hurricane Helene. And they escaped from North Carolina to the suburbs of Georgia, and they stopped in Dawsonville, Georgia, where they knew that there was a Holiday Inn Express. And they were bringing with them their 90-plus-year-old elderly relative who suffered from Alzheimer's and was in a pretty tired state. But they called ahead and they spoke to Brandy, who worked in our Holiday Inn Express, and explained the situation that their father was exhausted, confused, unable to walk. So when they reached the hotel, Brandy was waiting at the door. She had a wheelchair for the father. And the little things that really embody the culture: this woman remembered that Brandy rolled over the carpet so that the wheelchair could move smoothly across, and got them to a handicap-accessible room and took care of them. And for them it was sort of a saving grace, shelter from the storm, as we say at IHG. And so when I see that, when I read that, I read that our values and our purpose are translating through even to a franchise employee who isn't a direct employee of IHG. She works for a family business in a small town of Dawsonville, Georgia, but has taken on our values and our purpose and is delivering that True Hospitality for Good at a time of difficulty, for no extra benefit to them other than the pride of what they do. Now look, we're not perfect. Of a million people that stay with us every night, even if we're 99.9% right, we still get it wrong for a thousand people. And I probably hear from 500 of those at night. But I think we get it mostly right.

Yes, I'm glad you bring that up, Mary Lee. Journey to Tomorrow, or as we abbreviate, of course we always have to abbreviate everything, JTT. It's really at the center of our True Hospitality for Good, is how do we take True Hospitality for Good into action in the communities. And we have three major areas that we focus on: people, communities, and planet. You raise planet, and there we have very clear targets around sustainability, which is reducing energy consumption. Literally, we have a target to reduce it by 46% in total by 2030. This is very hard, reducing energy consumption and carbon footprint. Every company's working hard on it. It just gets harder. You need new technologies, you need government collaboration, you need the grid to decarbonize. But we're making a very significant impact at IHG. I'm very proud of the hard work we do. I'd say the more passionate, emotional aspects of our JTT around people and communities: we strive and we maintain very high standards for achieving a diverse and inclusive culture. Look, we're by DNA, by definition, a very multicultural company. Yes, our biggest business is in the US, and many of our brands bring their heritage back to the US, like Holiday Inn, Holiday Inn Express, but InterContinental, Six Senses are global brands. And we're the largest foreign, international company in China, we're the largest international company in the Middle East, we've been, of course, we're listed in the UK. We're multicultural. I mean, even myself, I'm, as I say, more American than my name but less American than my accent. And so we're multicultural, inclusive by design, by DNA, and we strive to welcome people from all backgrounds, all identities. I don't think we could succeed and strive and be relevant in all these countries where we do business and to all the guest profiles in the world that we welcome to hotels if our own leadership and workforce weren't as broad, diverse, and inclusive. And we strive to do that. Then for our communities, you have very specific goals to make a difference in the lives of 30 million people between now and 2030. One of the key and recent initiatives was entering into partnership with Action Against Hunger, that seeks to work on improving the malnourishment state of children around the world, of the highly malnourished children around the world. And we think that Action Against Hunger working against hunger is a global cause, a common cause. People can differ on so many causes around the world, have different views, but everybody unites when it comes to taking action against hunger, especially when it comes down to children. I think that's a universal cause that can unite all of our people, all of our demographics, all of our nationalities around the world. And that's the most recent activity that we have. So we can't do everything. We obviously are a large business but not infinitely resourced, and we've picked the areas where we think we can make the most impact and we can rally the most effort around our colleagues. We've picked sustainability around carbon, water, and food waste and energy, of course. And we've picked making an impact for our colleagues through a diverse and inclusive culture. And we've picked making a difference in our communities by improving the lives of 30 million people, and this year really focusing on hunger and reducing that around the world.

Similarly, it's not easy, first of all. We're a very busy organization. We don't run with a lot of slack. There are two places that never close in the world: institutions, hospitals, and hotels. Every other structure or business in the world closes at some point, either between midnight and 4:00 a.m., even most airports close for a period of time. All restaurants and retail shops close at some point somewhere, some day of the year. Hospitals, the emergency room is always open, but hotels never close at all. I mean, we're always on, always open, and so our people are constantly working all the time. And even if you're not working on property, which many of our people don't, including myself, because the hotels are always open, you're always in the flow of work. So we have to pick activities and messages and engagements that they can relate to. When we can show that we're making a difference, and we can show that we're making a difference on energy reduction, on food waste, because by the way, reducing energy consumption has a payback to our hotel owners, not just to the environment in general, not just to society in general, but reducing energy consumption benefits the hotel itself, the right payback. So we pick, I'm not embarrassed to say that we don't do everything that reduces energy consumption. If you need to spend $10 million to reduce only a few watts of energy consumption, that's probably not something we're going to recommend a hotel does. If you can, however, install sensing thermostats that adjust the temperature automatically and reduce energy consumption for a few hundred dollars a room, that's something we are going to recommend. It's got a high payback, so we're going to steer you to the right vendors and to the right form of procuring it. Just some small examples, but to illustrate the fact that we find things that can get buy-in, because we know that if you're pushing a rock uphill, it eventually is going to roll over you. You're going to get tired of pushing and the rock will roll over you. So we know that our colleagues, because they're in hospitality, they're passionate about helping people in communities, whether it's disaster relief or hospitality training or taking care of people, improving the lives of people. We know that hospitality brings people in that are passionate about feeding, about hunger, about helping their society. So yes, we are strategic in picking activities, objectives that we think we can rally our people around and that are aligned with the purpose of a hotel in a community to begin with. I would add to that that we maintain a strong senior-level engagement. The tone at the top, activities that we participate in, the things that I talk about, the recognition that we give. I think when they see it flowing from our leadership, then, and by the way, our long-term comp, a part of our long-term compensation at the senior executive team is tied to some of these objectives that I just talked to: in sustainability, in communities, and with people. And so there's an alignment. It's never perfect, especially when you get turnover of people that you do in hospitality, but if you continue the same consistency of picking activities and objectives that are aligned with what your business actually does, we're not going to do something in the cloud or something that's so technologically focused that is outside of our natural DNA, but things that are aligned with your business, and you align senior management with it, you have a higher chance of getting people to follow you.

We have a portfolio of 19 brands. They serve many different purposes, from entry-level, every-day affordable travel, all the way to ultra-luxury for those who are extremely fortunate or want to celebrate an extremely unique experience. Each of our brands has a distinct personality, and they're all powered by our master brand, which is IHG Hotels and Resorts. And if we're executing on our values and our purpose, I think they're all infused with that purpose. Each of them has a reputation on its own that goes back decades. I mean, Holiday Inn was the brand in the United States that welcomed everyday travelers at its inception. It means travel. It means everyday travel for ordinary people, forever. I remember hearing Colin Powell, the late general, former Secretary of State, Secretary of Defense, an icon in American leadership and government, actually say that when his family, back in the days where there was legal discrimination in the United States, when his family would first travel, Holiday Inn was one of the few hotel chains that would welcome everybody and anybody. And when somebody of that stature comes to one of our events, and actually it's in one of his books, that says something about us, right? Says something about our brands, that they come with a heritage of trust in their communities, they come with a responsibility to maintain that trust. And then that's wrapped by IHG Hotels and Resorts, where we at a corporate level follow through. But it's something we have to continue to maintain. Now, if your question is can I prove that it makes a financial difference to the company, I think it's more we believe that we are better for it, and we wouldn't want to know what the absence of that trust would be like. Because you'd have to be in the negative state to prove that it makes a difference, and we don't believe so. But more so, I don't think that we would need to prove a financial advantage to do what we're doing. Like, we pick things that we think are fundamentally right to do and feasible for us and affordable for us to do. We're not going to save the world from every ill, but we don't believe that it all has to stand the test of being to our commercial advantage. As long as it's something we feel like we can be successful doing, we think that having an inclusive, diverse culture is fundamentally the right thing to do. We believe that being a force for good in our community is fundamentally the right thing to do. We believe it advances our commercial objectives. I don't think we can prove it, and I don't think we need to prove it.

We hope so. We hire with it, we train it, but look, there's a lot of turnover in frontline hotel business, and it's getting a bit better, but over the last four years there's a lot of turnover. You know what the labor markets were like, especially in Europe and in North America. We were understaffed in many cases, there was a lot of turnover. So we have to keep training people. But as long as our training is going on, our tone at the top is the same, our brand purpose is the same, we're repeating it to everybody regularly, we believe we get a very high adoption. And we measure our guest satisfaction, we measure how our customers are feeling about us to make sure that it's coming through. We spend a lot of time with our owners to make sure they live our values too. But yeah, it's something you have to constantly sustain because the membership of the IHG family, of employees, of owners, of leaders, is not constant. It's a very fluid membership.

I mean, look, we're blessed to be in an industry that has strong tailwinds, structural tailwinds that we didn't create. We're capitalizing on. We didn't create them, which is the growth of the middle class globally and the growth of economies, growth of GDP basically globally. And as long as those two continue, travel grows. Travel is a natural, genetic, unavoidable, irrepressible behavior of the growth of middle class and growth of economic well-being. As soon as people cross over a certain stage of economic well-being where they've taken care of the essentials, shelter, healthcare, sustenance, then they start to want to explore and travel, whether for profit or for pleasure. It's just been happening since the beginning of mankind, and it just continues to grow. I don't have a forecast for the next 12, 13 months. I can tell you over the next five years and 10 years it's going to continue to be larger, because the middle class around the world is going to grow by over a billion, even if the population of the world doesn't grow by a billion. The middle class is going to grow by a billion, as it did over the last 10 years, and when they cross over that, they're going to travel. And then of course the fortunate upper classes continue to expand as people move up the ladder and they want different experiences. And then as travel networks grow, mostly airline networks grow around the world, some airlines aren't growing, but there are vast aircraft orders around the world. The largest being in the East, whether it's the Gulf carriers, the two largest aircraft orders in the world are in India, Air India and Air IndiGo, and then AirAsia Malaysia. They're building low-cost networks around Asia. That's going to rapidly increase travel. So the convergence of growing travel networks and air capacity and growing middle class and GDP just means there's going to be more travel. And not a guarantee for IHG, but an opportunity which we feel well-positioned to capitalize on. It's very competitive, it's not easy. We've got to keep earning our right to take care of customers and earn their trust in that of hotel investors and hotel developers. But I'm confident we will.