Read the case and explain the appropriateness of the strategies of Holiday Inn throughout time in

the light of its strengths, weaknesses, opportunities and threats.

Holiday Inns on Six Continents

The History of the Holiday Inn motel chain is one of the great success stories in United States
business. Its founder, Kemmons Wilson, vacationing in the early 1950s, found motels to be
small, expensive, and of unpredictable quality. This discovery, along with the prospect of
unprecedented highway travel that would come with the new interstate highway program,
triggered a realization: there was an unmet customer need – a gap in the market for quality
accommodations. Holiday Inn was founded to meet that need. From the beginning, Holiday Inn
set the standard for offering motel features such as air-conditioning and icemakers while keeping
room rates reasonable. These amenities enhanced the motel’s popularity, and motel franchising,
Wilson’s invention, made rapid expansion possible. By 1960, Holiday Inns could be found in
virtually every city and on every major highway. Before the 1960s ended, more than 1,000 were
in full operation, and occupancy rates averaged 80%. The concept of mass accommodation had
arrived.

                The service Holiday Inn offered appealed to the average traveler, who wanted a
standardized product (a room) at an average price – the middle of the hotel room market. But by
the 1970s, travelers were beginning to make different demands on hotels and motels. Some
wanted luxury and were willing to pay higher prices for better accommodations and service.
Others sought low prices and accepted rock-bottom quality and service in exchange. As the
market fragmented into different groups of customers with different needs, Holiday Inn was still
offering an undifferentiated, average – cost, average – quality product.

                Although Holiday Inn missed the change in the market and thus failed to respond
appropriately to it, the competition did not. Companies such as Hyatt siphoned off the top end of
the market, where quality and service sold rooms. Chains such as Motel 6 and Day’s Inn
captured the basic-quality, low-price end of the market. In between were many specialty chains
that appealed to business travelers, families, or self-caterers (people who want to be able to cook
in their hotel rooms). Holiday Inn’s position was attacked from all sides. As occupancy rates
dropped drastically with increasing competition, profitability declined.

                Wounded but not dead, Holiday Inn began a counterattack. The original chain was
upgraded to suit quality-oriented travelers. Then, to meet the needs of different kinds of
travelers, Holiday Inn created new hotel and motel chains; the luxury Crowne Plaza; Hampton
Inn serving the low-priced end of the market; and the all–suite Embassy Suites. Thus, Holiday
Inn attempted to meet the demands of the many niches, or segments, of the hotel market that
have emerged as customer’s needs have changed over time. These moves were successful in the
early 1990s, and Holiday Inn grew to become one of the largest suppliers of hotel rooms in the
industry. However, by the late 1990s, falling revenue made it clear that with intense competition
in the industry from other chains such as Marriott, Holiday Inn was once again losing its
differentiated appeal.

                In the fast-changing hotel and lodging market, positioning each hotel brand or chain to
maximize customer demand is a continuing endeavor. In 2000, the pressure on all hotel chains to
adapt to the challenges of global competition and become globally differentiated brands led to
the takeover of Holiday Inn and its incorporation into the international Six Continents Hotels
chain. Today, around the globe, more than 3,200 hotels flying the flags of Holiday Inn, Holiday
Inn Express, Crowne Plaza, Staybridge Suites by Holiday Inn, and luxury Inter-Continental
Hotels and Resorts are positioning themselves to offer the services, amenities, and lodging
experiences that will cater to virtually every travel occasion and guest need. In the 2000s, the
company has undertaken a massive modernization campaign in the United States to take existing
full-service Holiday Inns to their next evolution. Holiday Inn plans to have a room to meet the
need of every segment of the lodging market anywhere in the world.

Your Answer:

Holiday Inn's business model and strategies changed over time to stay relevant and remain
profitable in the hotel market industry.

Since the brand's inception in the 1950s, Holiday Inn have morphed its strategies appropriate
with the needs of the market at that time. Key significant events and conditions have shaped
Holiday Inn brand and its founder Kemmons Wilson and made Holiday Inn among the great
success stories in the US hotel/motel business.  These key business hallmarks in are outlined in
the following decades:

 1950s – Opportunity Presents Itself

Given the case's facts about Holiday Inn in its early days, presented below is a SWOT analysis
for Holiday Inn's case.

STRENGTH

 Offers set of standard motel amenities (air conditioning and icemakers) at reasonable
room rates
 Motel franchising that enabled rapid expansion possible
 Brand popularity

WEAKNESS
  Offered undifferentiated and standard hotel service in the middle segment of the hotel
market

OPPORTUNITIES

 Prospect of unprecedented highway travel brought by the interstate highway program in

THREATS

 Competition from other hotel chain operators paired with declining occupancy rates
o Many options are available for travelers and substitutes are high from the product
offerings of their competitors
 Ever changing customer needs and tastes in the hotel market that challenged is business
conditions

During the 1950s, the motel brand Holiday Inn was conceived from the realization of it founder,
Kemmons Wilson, who saw a gap in the market for standard, quality accommodations at a
reasonable cost. This was a hit to customers at that time.

Their amenities of air conditioning and icemakers offered at relatively reasonable costs are loved
by customers. This led to the brand's popularity and, with the help of motel franchising, made
Holiday Inn grow in number at a rapid rate by the end of 1960s.

However, in 1970s, Holiday Inn's offering to travelers and customers remained undifferentiated.
Their product at that time remained standard and appealed to average travelers while the market
was evolving to suit the needs and tastes of clients at that time. There were customers who are
willing to pay higher accommodation costs for better service and amenities. There were also
people who would value low prices in exchange with bare-minimum quality of service and
amenity offerings. Competitors were also across all market segments at that time - high, mid and
basic-quality, low-price end market.

Holiday Inn realized this and in order to stay relevant and keep up with the competition, the
chain upgraded to suit quality-oriented travelers. They also created differentiated new hotel
segments targeted to meet the needs of different customers - from low-priced end market up to
the luxury segment. It targeted to meet the demands of different segments and proved to be
effective in the 1990s.

The 2000s gave pressure on Holiday Inn to adapt to the challenges of global competition and
become globally differentiated brand led to the takeover of Holiday Inn and its incorporation into
the international Six Continents Hotel. Positioning themselves to offer the services, amenities,
and lodging experiences that will cater to virtually every travel occasion and guest need, the
company had evolved and took modernization efforts and take Holiday Inn to their next level.

These successful implementations with their strategy changes have helped Holiday Inn maximize
their profits and remain in the market to this day.