A history of the InterContinental Hotels Group
Article added on January 31, 2007

Difficult beginnings

After the Second World War, jet-engine technology was just around the corner and, therefore, civilian air travel would soon be within the reach of millions of people around the globe.

In 1946, Juan T. Trippe, the chairman and founder of Pan American World Airways (Pan Am) with its headquarters in New York City anticipated the need for additional hotel accommodation and decided to create, what is today known as, the InterContinental Hotels Group.

Since 1933, in the early days of the first term of President Franklin Delano Roosevelt, the U.S. government had decided to encourage business and travel within Latin America. Mutual respect and trade should replace the image of the United States as the "big stick-carrying-bully" from the north.

Roosevelt's Good Neighbor policy was accompanied by generous government loans with attractive interest rates. The policy still needed vision and courage, however, and to encourage the building of a hotel chain the help of a $25 million credit was enlisted from the government in 1946. This amounted to 50% of the total project cost at a time when the cost of a single 200-room hotel was the equivalent to the asking price of four of the latest passenger aircraft models. Pan Am invested $50 million when it only had a net profit of $3 million.

Among the key managers within the InterContinental Hotel Group was Byron Calhoun, a self-made man, who at the age of 14 took his first job in a hotel. Having worked for the Radisson Hotel in Minneapolis, together with a University of Chicago professor, he made a discovery about the hotel industry years ahead of its time: "Employees only perform at their best when they feel the security of knowing precisely what their jobs consist of, and why each element of their work is necessary. Training was the key..."

The predominant user of an InterContinental Hotel was the medium-income business traveler. In this sense, one-bedroom suites designed for extended stays and trunks full of clothing would become obsolete. Instead, the new traveler would need basic comforts: cleanliness, a good bed, reliable hot and potable water, a private bathroom, fast laundry, a valet service, safe food, telephone and wire service provided in the guest's own language, all at an affordable price for the business traveler and his company.

The plans for a Pan Am owned international hotel group almost ended on December 31, 1948 because the Pan Am board had set this as the deadline for terminating support for the hotel company. The decision was reversed because just before Christmas in 1948, an InterContinental manager finally managed to conclude a $4 million loan agreement with the Colombian government for a 400-room hotel in Bogota. This ensured the continuation of the project.



Years of growth and anecdotes

In the 1950s, the InterContinental Hotel Group quickly developed. First in the Americas and, in the 1960s, it expanded to Europe, Asia and around the globe. In 1954, the group recorded its first, admittedly small, profit. Many of the hotels were purpose-built and avant-garde at the time of their construction. Today, some of the architecture is less appealing, but for many years it was fashionable and InterContinental was considered the hotel of the future, attracting not only businessmen and tourists, but also celebrities.

The success of a hotel can also become a burden. In San Juan in the 1950s, for example, the new InterContinental and its casino and show room, the Tropicoro, featured stars such as Eartha Kitt, Harry Belafonte, Paul Anka as well as Marlene Dietrich accompanied by Burt Bacharach. The island was always overbooked. It became such an attraction that the management was forced to have guests sign a formal declaration at check-in confirming their check-out date and their agreement to leave as scheduled; the hotel manager was repeatedly forced to charter aircrafts, ferrying surplus guests to the InterContinental Embajador in the Dominican Republic. The starlets aside, the political instability in some Latin American countries was a factor for concern, some turbulences and even hotel closures here and there.

As for the future development of an InterContinental hotel in Frankfurt, the representative of a prestigious, small, private Frankfurt bank was mindful of the accepted wisdom in banking circles that "hotels are only profitable after the third bankruptcy" when they can be purchased at a fraction of their initial cost.

Among famous investors in several InterContinental properties, for instance in Geneva and in Ireland, names such as the American Countess Mona Bismarck, the French Baron Edmond de Rothschild or the Prince Sadruddin Aga Khan, crop up.

Some InterContinental Hotels organize special events once a year. A remarkable one takes place (or at least took place until the mid-1990s) at the InterContinental Medellin in Columbia, which was opened in 1970 during the high growth years of the group. On Journalists' Day, "La Maccarenita", a bullfight was staged in the hotel's own bullring. Local journalists would take on young cows, not bulls, and cheer each other's style and bravery.



Changes of hands and fortunes

Then, in 1980 the world's airlines suffered the worst decline in traffic and earnings in their history, resulting in drastic change at Pan Am. It sold its New York City headquarters, the famous Pan Am building. InterContinental was still making profit, but Pan Am was not only in the red, but soon out of cash. Ten years later, Pan Am's demise finally became reality.

On September 10, 1981 Pan Am was forced to sell InterContinental with its 83 hotels (only 6 of them fully owned) in 47 countries for $0.5 billion to Grand Metropolitan, a major British conglomerate, which had begun as a collection of London hotels which were put together by Maxwell Joseph, a successful English property agent.

In 1988 Grand Met moved the InterContinental headquarters from New York City to suburban Montvale, New Jersey. For most employees, commuting to New Jersey was impossible. Even with generous relocation allowances by Grand Met only three people, from the head office marketing group, remained; one from development; but not a single secretary.  And so, for the new staff, the learning curve was steep.

On December 15, 1988 Grand Met sold InterContinental to Saison, a group of Japanese companies engaged primarily in retail trade (the flagship being the Seibu department stores) for some $2.2 billion. A year later this deal would have been impossible and certainly not at this price.

In April 1989 the airline SAS acquired 40% equity participation in the InterContinental group. In 1990 the Montvale office was abruptly closed and the headquarters moved to London's Devonshire House, which resulted in another immense loss of know-how, and the desired net reduction in operating costs was also not achieved.

In 1991 the Iraqi invasion of Kuwait and "Operation Desert Storm" nearly brought international travel to a standstill. In addition, the Japanese economy was in a recession. SAS and Saison interests were too far apart. In early 1992 Saison reorganized its group and Seiyu Ltd., a Saison Group company became the chief shareholder of InterContinental. In April 1992, Seiyu bought out the SAS position in InterContinental, which was reorganized again. Inter-Continental Hotels and Resorts was introduced as the company's new corporate name (the hyphen dropped later).

In February 1998, Seiyu sold InterContinental Hotels and Resorts to the British Bass PLC for $2.9 billion. InterContinental Hotels Group PLC was formed by the separation of Six Continents PLC (previously Bass PLC) on April 15, 2003. The restaurants and pubs part of Six Continents became Mitchells & Butlers PLC.

Today, InterContinental has still a good reputation and I have visited many of them. The hotels are not uniform and each has its own style and flavor. In addition to the purpose-built structures, which were often the most modern hotels in a city or even an entire country, you can find gems of historic architecture: the small Amstel InterContinental in Amsterdam with its 2 Michelin-star restaurant or the Hotel de la Ville in Rome with terraces overlooking the eternal city!

Unfortunately, Giuseppe Vincelli never sent me the promised detailed information about the architecture, design and history of the hotel, which I normally collect on the spot. Therefore, I could not write my usual detailed article. A colleague reviewed the Willard InterContinental in Washington. In 2003, I wrote an article about the InterContinental Paris, which has changed hands since my visit and become the Westin Paris; InterContinental still runs another elegant historic hotel in Paris.

Among the purpose-built InterContinental Hotels which I have visited, the new one in Warsaw is a gem, with its fitness studio and spa on the top floor. In 2004, the one in Hamburg offered gourmet cuisine by a young ambitious chef. The InterContinental in Vienna - both in 2003 and in early 2007 - has had one of the liveliest, best accepted hotel bars and cafés I know, frequented by locals and hotel guests alike.

Measured by the number of 3,600 hotels in over 100 countries offering over 537,000 hotel rooms, the British InterContinental Hotels Group PLC is the world's largest hotel chain in 2007 - InterContinental Hotels & Resorts its flagship brand. Other hotel chains of the group include Crowne Plaza and Holiday Inn.

Further reading and main source for this article: James E. Potter: A Room With A World View: 50 Years of Inter-Continental Hotels and its People, 1946-1996. Weidenfeld & Nicolson, London, 1996, 240 p. Get it from Amazon.com or Amazon.co.uk.