The Big Interview: Stephen McCall of InterContinental Hotels Group

Stephen McCall started his career in hotels after studying accountancy and business finance in what he says 'was not a carefully thought through strategic plan'.

McCall admits he has a low boredom threshold, so “being in an industry where I’m always thinking on my feet and which is ever-changing is exactly what I need”.

The Glaswegian heads IHG’s operations and performance support across its 660 managed and franchised hotels (its brands include Holiday Inn, Crowne Plaza and InterContinental Hotels & Resorts) in Europe and the 32 it has in Scotland.

The latter includes three branches of Hotel Indigo, a brand that launched in 2004 focusing on a more localised, boutique-style experience.

“We’re very pleased with Indigo actually – it’s taken a lot of traction in the market,” says McCall.

The brand focuses on what he describes as the “more accessible” boutique end of the market, while he believes one of the top priorities for people travelling is a sense of place.

If you’re staying at an Indigo branch in Edinburgh, “we want to make sure that our guests feel like they’re in Edinburgh, that the hotel reflects some character of the local neighbourhood – but also that it connects you with that neighbourhood”. For the Princes Street branch, that means Tunnock’s Teacakes in the rooms, bedside lamps made from typewriters, and bookshelves covering walls.

“Indigo is still relatively small for us but it’s growing very quickly,” he adds.

The hotel sector overall is experiencing a sea change in consumer appetite, and while previously, big brands “carved out their place in the market” with standardisation, he continues, guests are now looking for something that gives them a story to tell when they get home.

Indigo is looking to harness this growing and lucrative desire, and the Hotel Britain 2017 report from accountant and business adviser BDO found that the top-performing segment was townhouse and boutique hotels with rooms yield up by about 8 per cent to £255.03.

McCall notes that for IHG, the UK including Scotland is among its “scale” markets, which in Europe include Ireland, Germany and Russia, and in such areas “we try to grow in all the key locations across our key brands”.

This includes an ambition for growth “right across” Scotland, he adds, highlighting Edinburgh, Glasgow and other key cities.

“I would love to see an InterContinental in Edinburgh and we’re actively exploring a couple of opportunities around that. I think for both Glasgow and Edinburgh, particularly probably Aberdeen too, I think Indigo is a great brand and a great opportunity.

“I’m biased, obviously, but I’d love to see our full brand staple right across Scotland. I’d also like to understand how the travel flows are changing in the country over the next few years – we want to make sure we’ve got hotels where people want to stay,” he adds, also pointing out the potential of attracting overseas customers from the likes of China.

But with the hospitality and tourism sector so closely linked with the fortunes of the economy, McCall is vocal on the need to support the UK’s fourth-largest industry, which directly employs 4.6 million people. “We don’t always see the acknowledgement and recognition from the [UK] government [given] the size and scale and importance on the industry,” he says

However, he praises Scotland, where 20 per cent of staff in accommodation services are from elsewhere in the EU, for being “clearer and more vocal than other parts of the UK about the importance of tourism not just to the economy but to the growth of the country”.

The issue of staffing after the UK leaves Europe is also pivotal in an industry where service plays such a key role.

And regarding Brexit, he echoes the comments of many that it is still early to understand the consequences. “I think it would be premature of me to call it – there are smarter people than me out there who are still scratching their heads.

“But what I can tell you is that anything that damages this country’s attractiveness to foreign markets and its accessibility, or anything which prevents us from recruiting the best talent… would be a concern for us and we hope that’s not going to happen.

“It’s absolutely essential that the UK has a big ‘welcome’ doormat,” he continues, stating that if people want to come here, they must be able to do so “easily and relatively cheaply”, enabling the economy to prosper.

Hospitality is also dependent on consumer spend, which in the UK is tightening as inflation overtakes wage growth, but McCall says: “I don’t really have any particular concerns around the economy.”

He flags plenty of liquidity in the market and says hotel investments “are still attractive”.

Looking at Scotland specifically, McCall recently met Lord Thurso, chairman of VisitScotland, to discuss growth and opportunities across the hospitality spectrum. And McCall views great potential north of the Border. “I’d love to see better infrastructure, better routes into the market both from London and from other key cities,” he explains, with more flights connecting key gateway locations also on his list.

He also notes that IHG is the only British-listed major global hotel company, and which has its global headquarters in Buckinghamshire. “The UK’s our home market and we feel quite a keen sense of duty and responsibility to promote hospitality, not just as an industry but also as a career in the UK.”

McCall is also a board member of the British Hospitality Association, which is targeting the creation of 300,000 new hospitality and tourism jobs in the UK by 2020. “Our main goal is to help our government understand the potential of this industry and the support that we need from it,” he says.

Also on the UK Tourism Industry Council, he stresses that the UK is very much a service economy, in fact accounting for about three-quarters of GDP.

“We don’t really manufacture a great deal any more,” he states. “It’s the service businesses including hospitality that are the engine of this country and we’ve got to get a bit more realistic about that.”

McCall is also chair of the global operations council at IHG, and the plc became a standalone company in 2003, now encompassing nearly 5,200 hotels and almost 770,000 guest rooms in almost 100 countries, pursuing an “asset-light” strategy.

The group’s history can be traced back to 1777 when William Bass opened a brewery in Burton-on-Trent, and the firm acquired the InterContinental Hotels & Resorts brand in 1998 after focusing on hotels and pruning back its pub estate.

McCall joined when the group was still known as Bass, signing up to train as a chartered management accountant, and having started his career at Glasgow-based hotel and leisure group Stakis.

This came after studying accountancy and business finance in what he says “was not a carefully thought through strategic plan”, but had been prompted by being encouraged to get a business qualification.

There was a spell away from hospitality, working in fund management with Baring Asset Management and living in the Channel Islands, but while he enjoyed banking, he saw that it was “essentially moving money from left to right – and I really missed hotels”.

McCall moved to what is now IHG in 2000, including a period in Dubai as divisional chief financial officer for the Middle East and Africa region, also covering managed operations in the Northern Gulf region.

His duties now include heading IHG’s restaurants and bars strategy in Europe, a key revenue-driver, overhauling it in the last three years. “People really understand what they want and they never used to, so we’ve got to be a lot more in tune with that – we’ve got to be creating restaurants and bars that you would go to because [you want to]. I’m always focused on that side of the business because I think it’s a huge opportunity”.

He is also enjoying working with Kimpton Hotels & Restaurants, which IHG acquired in 2015, while the group last month announced a new hotel brand targeting a “vastly underserved segment of the US midscale market”.

Overall, he says IHG is “in a very strong place in Europe and we’ve seen some of the best performances across the market in the last year to 18 months than we’ve seen for a long time so we’ve got really good tailwinds”.