e20vf
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 20-F
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(Mark One)
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o
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
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or
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2010
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
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Commission file
number: 1-10409
InterContinental Hotels Group
PLC
(Exact name of registrant as
specified in its charter)
England and Wales
(Jurisdiction of incorporation
or organization)
Broadwater Park,
Denham, Buckinghamshire UB9 5HR
(Address of principal executive
offices)
Securities registered or to be registered pursuant to
Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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American Depositary Shares
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New York Stock Exchange
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Ordinary Shares of
1329/47
pence each
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New York Stock Exchange*
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*
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Not for trading, but only in
connection with the registration of American Depositary Shares,
pursuant to the requirements of the Securities and Exchange
Commission.
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Securities registered or to be
registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a
reporting obligation pursuant to Section 15(d) of the
Act:
None
Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close
of the period covered by the annual report:
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Ordinary Shares of
1329/47
pence each
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289,472,651
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Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act: Yes þ No o
If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934: Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject
to such filing requirements for the past
90 days: Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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Indicate by check mark which financial statement item the
registrant has elected to follow:
Item 17
o Item 18 þ
If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in
Rule 12b-2
of the Exchange Act):
Yes o
No þ
Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this
filing:
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US
GAAP o
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International Reporting Standards as issued by
the International Standards Accounting
Board þ
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Other o
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INTRODUCTION
As used in this document, except as the context otherwise
requires, the terms:
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ADR refers to an American Depositary Receipt, being
a receipt evidencing title to an ADS;
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ADS refers to an American Depositary Share, being a
registered negotiable security, listed on the New York
Stock Exchange, representing one InterContinental Hotels Group
PLC ordinary share of
1329/47 pence
each;
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Board refers to the Board of directors of
InterContinental Hotels Group PLC or, where appropriate, the
Boards of directors of InterContinental Hotels Limited or Six
Continents Limited;
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Britvic refers to Britannia Soft Drinks Limited for
the period up to November 18, 2005, and thereafter,
Britannia SD Holdings Limited (renamed Britvic plc on
November 21, 2005) which became the holding company of
the Britvic Group on November 18, 2005;
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Britvic Group refers to Britvic and its subsidiaries;
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Company refers to InterContinental Hotels Group PLC,
InterContinental Hotels Limited or Six Continents Limited or
their respective Board of directors as the context requires;
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EMEA refers to Europe, the Middle East and Africa;
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Group refers to InterContinental Hotels Group PLC
and its subsidiaries or, where appropriate, InterContinental
Hotels Limited or Six Continents Limited and their subsidiaries
as the context requires;
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Hotels refers to the hotels business of the Group;
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IHG refers to InterContinental Hotels Group PLC or,
where appropriate, its Board of directors;
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IHL refers to InterContinental Hotels Limited,
previously InterContinental Hotels Group PLC, former parent
company of the Group and re-registered as a private limited
company on June 27, 2005;
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ordinary share or share refers, before
April 14, 2003, to the ordinary shares of 28 pence each in
Six Continents Limited; following that date and until
December 10, 2004 to the ordinary shares of £1 each in
IHL; following that date and until June 27, 2005 to the
ordinary shares of 112 pence each in IHL; following that date
and until June 12, 2006 to the ordinary shares of 10 pence
each in IHG; following that date until June 4, 2007 to the
ordinary shares of
113/7
pence each in IHG; and following June 4, 2007 to the
ordinary shares of
1329/47
pence each in IHG;
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Six Continents refers to Six Continents Limited;
previously Six Continents PLC and re-registered as a private
limited company on June 6, 2005;
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Soft Drinks refers to the soft drinks business of
InterContinental Hotels Group PLC, which the Company had through
its controlling interest in Britvic and which the Company
disposed of by way of an initial public offering effective
December 14, 2005; and
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VAT refers to UK value added tax levied by HM
Revenue and Customs on certain goods and services.
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References in this document to the Companies Act
mean the Companies Act 2006 of Great Britain; references to the
EU mean the European Union; references in this
document to UK refer to the United Kingdom of Great
Britain and Northern Ireland; references to US refer
to the United States of America.
The Company publishes its Consolidated Financial Statements
expressed in US dollars following a management decision to
change the reporting currency from sterling during 2008. The
change was made to reflect the profile of the Groups
revenue and operating profit, which are primarily generated in
US dollars or US dollar-linked currencies.
In this document, references to US dollars,
US$, $ or ¢ are to
United States currency, references to euro or
are to the euro, the currency of the European
Economic and Monetary Union, references to pounds
sterling, sterling, £,
pence or p are to UK currency. Solely
for convenience, this Annual Report on
4
Form 20-F
contains translations of certain pound sterling amounts into US
dollars at specified rates. These translations should not be
construed as representations that the pound sterling amounts
actually represent such US dollar amounts or could be
converted into US dollars at the rates indicated. The noon
buying rate in The City of New York for cable transfers in
pounds sterling as certified for customs purposes by the Federal
Reserve Bank of New York on March 25, 2011 was £1.00 =
$1.6086. For further information on exchange rates please refer
to
page F-23.
The Companys fiscal year ends on December 31. The
December 31 fiscal year end is in line with the calendar
accounting year ends of the majority of comparable US and
European hotel companies. IHG will continue to report on a
December 31 fiscal year-end basis, as the Group believes this
facilitates more meaningful comparisons with other key
participants in the industry. References in this document to a
particular year are to the fiscal year unless otherwise
indicated. For example, references to the year ended
December 31, 2010 are shown as 2010 and references to the
year ended December 31, 2009 are shown as 2009, unless
otherwise specified, and references to other fiscal years are
shown in a similar manner.
The Companys Consolidated Financial Statements are
prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International
Accounting Standards Board (IASB) and in accordance
with IFRS as adopted by the European Union (EU).
IFRS as adopted by the EU differs in certain respects from IFRS
as issued by the IASB. However, the differences have no impact
on the Groups Consolidated Financial Statements for the
years presented.
In keeping with UK practice IHG believes that the reporting of
profit and earnings measures before exceptional items provides
additional meaningful information on underlying returns and
trends to shareholders. The Groups key performance
indicators used in budgets, monthly reporting, forecasts,
long-term planning and incentive plans for internal financial
reporting focus primarily on profit and earnings measures before
exceptional items. Throughout this document earnings per
ordinary share is also calculated excluding the effect of all
exceptional operating items, exceptional interest, exceptional
tax and gain on disposal of assets and is referred to as
adjusted earnings per ordinary share.
The Company furnishes JPMorgan Chase Bank, N.A., as Depositary,
with annual reports containing Consolidated Financial Statements
and an independent auditors opinion thereon. These
Consolidated Financial Statements are prepared on the basis of
IFRS. The Company also furnishes to the Depositary all notices
of shareholders meetings and other reports and
communications that are made generally available to shareholders
of the Company. The Depositary makes such notices, reports and
communications available for inspection by registered holders of
ADRs and mails to all registered holders of ADRs voting
instruction cards with specific reference to the section of the
Companys website on which such notices, reports and
communications can be viewed. During 2010, the Company reported
interim financial information at June 30, 2010 in
accordance with the Listing Rules of the UK Listing Authority.
In addition, it provided quarterly financial information at
March 31, 2010 and at September 30, 2010 and intends
to continue to provide quarterly financial information during
fiscal 2011. The Consolidated Financial Statements may be found
on the Companys website at www.ihgplc.com.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Form 20-F
contains certain forward-looking statements as defined in
Section 21E of the Securities Exchange Act of 1934 with
respect to the financial condition, results of operations and
business of InterContinental Hotels Group and certain plans and
objectives of the Board of Directors of InterContinental Hotels
Group PLC with respect thereto. These forward-looking statements
can be identified by the fact that they do not relate only to
historical or current facts. Forward-looking statements often
use words such as anticipate, target,
expect, estimate, intend,
plan, goal, believe, or
other words of similar meaning. These statements are based on
assumptions and assessments made by InterContinental Hotels
Groups management in light of their experience and their
perception of historical trends, current conditions, expected
future developments and other factors they believe to be
appropriate.
Such statements in the
Form 20-F
include, but are not limited to, statements under the following
headings; (i) Item 4. Information on the
Company; (ii) Item 5. Operating and financial
review and prospects; (iii) Item 8.
5
Financial information; and (iv) Item 11.
Quantitative and qualitative disclosures about market
risk. Specific risks faced by the Company are described
under Item 3. Key information Risk
factors commencing on page 10.
By their nature, forward-looking statements are inherently
predictive, speculative and involve risk and uncertainty. There
are a number of factors that could cause actual results and
developments to differ materially from those expressed in, or
implied by, such forward-looking statements, including, but not
limited to: the risks involved with the Groups reliance on
the reputation of its brands and the protection of its
intellectual property rights; the risks related to identifying,
securing and retaining franchise and management agreements; the
effect of political and economic developments; the ability to
acquire and retain the right people and skills and capability to
manage growth and change; the risk of events that adversely
impact domestic or international travel; the risks involved in
the Groups reliance upon its proprietary reservations
system and increased competition in reservations infrastructure;
the risks in relation to technology and systems; the risks of
the hotel industry supply and demand cycle; the possible lack of
selected development opportunities; the risks related to
corporate responsibility; the risk of litigation; the risks
associated with the Groups ability to maintain adequate
insurance; the risks associated with the Groups financial
stability, its ability to borrow and satisfy debt covenants;
compliance with data privacy regulations; the risks related to
information security; and the risks associated with funding the
defined benefits under its pension plans.
6
PART I
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ITEM 1.
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IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
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Not applicable.
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ITEM 2.
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OFFER
STATISTICS AND EXPECTED TIMETABLE
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Not applicable.
SELECTED
CONSOLIDATED FINANCIAL INFORMATION
Summary
The selected consolidated financial data set forth below for the
years ended December 31, 2010, 2009, 2008, 2007 and 2006
has been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB) and
in accordance with IFRS as adopted by the European Union
(EU), and is derived from the Consolidated Financial
Statements of the Group which have been audited by its
independent registered public accounting firm, Ernst &
Young LLP.
IFRS as adopted by the EU differs in certain respects from IFRS
as issued by the IASB. However, the differences have no impact
on the Groups Consolidated Financial Statements for the
years presented. The selected consolidated financial data set
forth below should be read in conjunction with, and is qualified
in its entirety by reference to, the Consolidated Financial
Statements and Notes thereto included elsewhere in this Annual
Report.
For the year ended December 31, 2010, the selected
consolidated financial data differs from the consolidated
financial statements issued to UK listing authorities on
February 15, 2011, as explained in Note 1 of Notes to
the Consolidated Financial Statements.
7
Consolidated
Income Statement Data
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Year ended December 31,
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2010
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2009
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2008
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2007
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2006
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($ million, except earnings per ordinary share)
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Revenue:
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Continuing operations
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1,628
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1,538
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1,897
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1,817
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1,487
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Discontinued operations
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33
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278
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1,628
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1,538
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1,897
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1,850
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1,765
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Total operating profit before exceptional operating items:
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Continuing operations
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444
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363
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549
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|
488
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374
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Discontinued operations
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3
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50
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444
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363
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549
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|
491
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424
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Exceptional operating items:
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Continuing operations
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(7
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)
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(373
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)
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(132
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)
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60
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48
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Discontinued operations
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(7
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)
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(373
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(132
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60
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48
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Total operating profit/(loss):
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Continuing operations
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437
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(10
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)
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417
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548
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422
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Discontinued operations
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3
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50
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437
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(10
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417
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551
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472
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Financial income
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2
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3
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12
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18
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48
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Financial expenses
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(64
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)
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(57
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)
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(113
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)
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(108
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)
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(68
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Profit/(loss) before tax
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375
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(64
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316
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461
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452
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Tax:
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On profit before exceptional items
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(98
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)
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(15
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)
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(101
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)
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(90
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)
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(97
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On exceptional operating items
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1
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112
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17
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(11
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Exceptional tax credit
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|
175
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25
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60
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|
184
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|
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|
|
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|
|
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(97
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)
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272
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(59
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)
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(30
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)
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76
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Profit after tax
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278
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208
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257
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431
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528
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Gain on disposal of assets, net of tax*
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2
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6
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5
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32
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226
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Profit for the year
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280
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214
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262
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463
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754
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Attributable to:
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Equity holders of the parent
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280
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213
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262
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463
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754
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Non-controlling interest
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1
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Profit for the year
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280
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|
214
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262
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463
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754
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Earnings per ordinary share:
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Continuing operations:
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Basic
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96.5¢
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72.6¢
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89.5¢
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134.1¢
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127.5¢
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Diluted
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|
93.9¢
|
|
|
|
70.2¢
|
|
|
|
86.8¢
|
|
|
|
130.4¢
|
|
|
|
124.3¢
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
97.2¢
|
|
|
|
74.7¢
|
|
|
|
91.3¢
|
|
|
|
144.7¢
|
|
|
|
193.8¢
|
|
Diluted
|
|
|
94.6¢
|
|
|
|
72.2¢
|
|
|
|
88.5¢
|
|
|
|
140.7¢
|
|
|
|
189.0¢
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Relates to discontinued operations.
|
8
Consolidated
Statement of Financial Position Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
|
($ million, except number of shares)
|
|
Goodwill and intangible assets
|
|
|
358
|
|
|
|
356
|
|
|
|
445
|
|
|
|
556
|
|
|
|
516
|
|
Property, plant and equipment
|
|
|
1,690
|
|
|
|
1,836
|
|
|
|
1,684
|
|
|
|
1,934
|
|
|
|
1,956
|
|
Investments and other financial assets
|
|
|
178
|
|
|
|
175
|
|
|
|
195
|
|
|
|
253
|
|
|
|
251
|
|
Retirement benefit assets
|
|
|
5
|
|
|
|
12
|
|
|
|
40
|
|
|
|
49
|
|
|
|
|
|
Deferred tax assets
|
|
|
88
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
466
|
|
|
|
419
|
|
|
|
544
|
|
|
|
710
|
|
|
|
892
|
|
Non-current assets classified as held for sale
|
|
|
|
|
|
|
|
|
|
|
210
|
|
|
|
115
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
2,785
|
|
|
|
2,893
|
|
|
|
3,118
|
|
|
|
3,617
|
|
|
|
3,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
943
|
|
|
|
1,040
|
|
|
|
1,141
|
|
|
|
1,226
|
|
|
|
1,261
|
|
Long-term debt
|
|
|
776
|
|
|
|
1,016
|
|
|
|
1,334
|
|
|
|
1,748
|
|
|
|
594
|
|
Net assets
|
|
|
278
|
|
|
|
156
|
|
|
|
1
|
|
|
|
98
|
|
|
|
1,346
|
|
Equity share capital
|
|
|
155
|
|
|
|
142
|
|
|
|
118
|
|
|
|
163
|
|
|
|
129
|
|
IHG shareholders equity
|
|
|
271
|
|
|
|
149
|
|
|
|
(6
|
)
|
|
|
92
|
|
|
|
1,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares in issue at period end (millions)
|
|
|
289
|
|
|
|
287
|
|
|
|
286
|
|
|
|
295
|
|
|
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
InterContinental Hotels Group PLC paid an interim dividend of
8.0 pence per share (equivalent to 12.8 cents per ADS at the
closing exchange rate of August 6, 2010) on
October 1, 2010. The IHG Board has proposed a final
dividend of 22.0 pence per share (equivalent to
35.2 cents per ADS at the closing exchange rate on February
11, 2011), payable on June 3, 2011, if approved by
shareholders at the Annual General Meeting to be held on
May 27, 2011, bringing the total IHG dividend for the year
ended December 31, 2010 to 30.0 pence per share
(equivalent to 48.0 cents per ADS).
The table below sets forth the amounts of interim, final and
total dividends on each ordinary share in respect of each fiscal
year indicated. Comparative dividends per share have been
restated using the aggregate of the weighted average number of
shares of InterContinental Hotels Group PLC. For the purposes of
showing the dollar amount per ADS in respect of the interim and
final dividends for each of 2006 and 2007, such amount is
translated into US dollars per ADS at the Noon Buying Rate on
the UK payment date. In respect of the interim and final
dividends for each of 2008, 2009 and 2010 such amounts are
translated from US dollars into GBP at the prevailing
exchange rate immediately prior to their announcement.
Ordinary
dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pence per ordinary share
|
|
$ per ADS
|
|
|
Interim
|
|
Final
|
|
Total
|
|
Interim
|
|
Final
|
|
Total
|
|
Year ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
5.10
|
|
|
|
13.30
|
|
|
|
18.40
|
|
|
|
0.096
|
|
|
|
0.259
|
|
|
|
0.355
|
|
2007
|
|
|
5.70
|
|
|
|
14.90
|
|
|
|
20.60
|
|
|
|
0.115
|
|
|
|
0.292
|
|
|
|
0.407
|
|
2008
|
|
|
6.40
|
|
|
|
20.20
|
|
|
|
26.60
|
|
|
|
0.122
|
|
|
|
0.292
|
|
|
|
0.414
|
|
2009
|
|
|
7.30
|
|
|
|
18.70
|
|
|
|
26.00
|
|
|
|
0.122
|
|
|
|
0.292
|
|
|
|
0.414
|
|
2010
|
|
|
8.00
|
|
|
|
22.00
|
|
|
|
30.00
|
|
|
|
0.128
|
|
|
|
0.352
|
|
|
|
0.480
|
|
Special
dividend
|
|
|
|
|
|
|
|
|
|
|
Pence per
|
|
|
|
|
ordinary share
|
|
$ per ADS
|
|
June 2006
|
|
|
118.00
|
|
|
|
2.17
|
|
June 2007
|
|
|
200.00
|
|
|
|
4.00
|
|
9
RISK
FACTORS
This section describes the principal risks that could materially
affect the Groups business. The factors below should be
considered in connection with any financial and forward-looking
information in this
Form 20-F
and the cautionary note regarding forward-looking statements
contained on pages 5 and 6.
The risks below are not the only ones that the Group faces. Some
risks are not yet known to the Group and some that the Group
does not currently believe to be material could later turn out
to be material.
The
Group is reliant on the reputation of its brands and the
protection of its intellectual property rights
Any event that materially damages the reputation of one or more
of the Groups brands
and/or
failure to sustain the appeal of the Groups brands to its
customers could have an adverse impact on the value of that
brand and subsequent revenues from that brand or business.
In addition, the value of the Groups brands is influenced
by a number of other factors, some of which may be outside the
Groups control, including commoditization (whereby price
and/or
quality becomes relatively more important than brand
identifications due, in part, to the increased prevalence of
third-party intermediaries), consumer preference and perception,
failure by the Group or its franchisees to ensure compliance
with the significant regulations applicable to hotel operations
(including fire and life safety requirements), or other factors
affecting consumers willingness to purchase goods and
services, including any factor which adversely affects the
reputation of those brands.
In particular, where the Group is unable to enforce adherence to
its operating and quality standards, or the significant
regulations applicable to hotel operations, pursuant to its
franchise and management contracts, there may be further adverse
impact upon brand reputation or customer perception and
therefore the value of the hotel brands.
Given the importance of brand recognition to the Groups
business, the Group has invested considerable resources in
protecting its intellectual property, including registration of
trademarks and domain names. However, the controls and laws are
variable and subject to change. Any widespread infringement,
misappropriation or weakening of the control environment could
materially harm the value of the Groups brands and its
ability to develop the business.
The
Group is exposed to a variety of risks related to identifying,
securing and retaining franchise and management
agreements
The Groups growth strategy depends on its success in
identifying, securing and retaining franchise and management
agreements. This is an inherent risk for the hotel industry and
franchise business model. Competition with other hotel companies
may generally reduce the number of suitable franchise,
management and investment opportunities offered to the Group and
increase the bargaining position of property owners seeking to
become a franchisee, or engage a manager. The terms of new
franchise or management agreements may not be as favorable as
current arrangements and the Group may not be able to renew
existing arrangements on similarly favorable terms or at all.
There can also be no assurance that the Group will be able to
identify, retain or add franchisees to the Group system or to
secure management contracts. For example, the availability of
suitable sites, planning and other local regulations or the
availability and affordability of finance may all restrict the
supply of suitable hotel development opportunities under
franchise or management agreements. In connection with entering
into franchise or management agreements, the Group may be
required to make investments in, or guarantee the obligations
of, third parties or guarantee minimum income to third parties.
There are also risks that significant franchisees or groups of
franchisees may have interests that conflict, or are not
aligned, with those of the Group including, for example, the
unwillingness of franchisees to support brand improvement
initiatives.
Changes in legislation or regulatory changes may be implemented
that have the effect of favoring franchisees relative to brand
owners.
10
The
Group is exposed to the risks of political and economic
developments
The Group is exposed to the inherent risks of global and
regional adverse political, economic and financial market
developments, including recession, inflation, availability of
affordable credit and currency fluctuations that could lower
revenues and reduce income. A recession reduces leisure and
business travel to and from affected countries and adversely
affects room rates
and/or
occupancy levels and other income-generating activities. This
may result in deterioration of results of operations and
potentially reduce the value of properties in affected
economies. The owners or potential owners of hotels franchised
or managed by the Group face similar risks which could adversely
impact the Groups ability to retain and secure franchise
or management agreements. More specifically, the Group is highly
exposed to the US market and, accordingly, is particularly
susceptible to adverse changes in the US economy.
Further political or economic factors or regulatory action could
effectively prevent the Group from receiving profits from, or
selling its investments in, certain countries, or otherwise
adversely affect operations. For example, changes to tax rates
or legislation in the jurisdictions in which the Group operates
could decrease the proportion of profits the Group is entitled
to retain, or the Groups interpretation of various tax
laws and regulations may prove to be incorrect, resulting in
higher than expected tax charges.
The
Group requires the right people, skills and capability to manage
growth and change
In order to remain competitive, the Group must employ the right
people. This includes hiring and retaining highly skilled
employees with particular expertise or leadership capability.
The implementation of the Groups strategic business plans
could be undermined by failure to build resilient corporate
culture, recruit or retain key personnel, unexpected loss of key
senior employees, failures in the Groups succession
planning and incentive plans, or a failure to invest in the
development of key skills.
Some of the markets in which the Group operates are experiencing
economic growth and the Group must compete against other
companies inside and outside the hospitality industry for
suitably qualified or experienced employees. Failure to attract
and retain these employees may threaten the success of the
Groups operations in these markets. Additionally, unless
skills are supported by a sufficient infrastructure to enable
knowledge and skills to be passed on, the Group risks losing
accumulated knowledge if key employees leave the Group.
The
Group is exposed to the risk of events that adversely impact
domestic or international travel
The room rates and occupancy levels of the Group could be
adversely impacted by events that reduce domestic or
international travel, such as actual or threatened acts of
terrorism or war, epidemics, travel-related accidents,
travel-related industrial action, increased transportation and
fuel costs and natural disasters, resulting in reduced worldwide
travel or other local factors impacting individual hotels. A
decrease in the demand for hotel rooms as a result of such
events may have an adverse impact on the Groups operations
and financial results. In addition, inadequate preparedness,
contingency planning or recovery capability in relation to a
major incident or crisis may prevent operational continuity and
consequently impact the value of the brand or the reputation of
the Group.
The
Group is reliant upon its proprietary reservations system and is
exposed to the risk of failures in the system and increased
competition in reservations infrastructure
The value of the brands of the Group is partly derived from the
ability to drive reservations through its proprietary
HolidexPlus reservations system, a central repository of all
hotel room inventories linked electronically to multiple sales
channels including the Groups own websites, call centers
and hotels, third-party intermediaries and travel agents.
Lack of resilience in operational availability could lead to
prolonged service disruption and may result in significant
business interruption and subsequent impact on revenues. Lack of
investment in these systems may also result in reduced ability
to compete. Additionally, failure to maintain an appropriate
e-commerce
strategy and select the right partners could erode the
Groups market share.
11
The
Group is exposed to inherent risks in relation to technology and
systems
The Group is reliant upon certain technologies and systems
(including IT systems) for the running of its business,
particularly those which are highly integrated with business
operational processes. Disruption to those technologies or
systems could adversely affect the efficiency of the business,
notwithstanding business continuity or disaster recovery
processes. The Group may have to make substantial additional
investments in new technologies or systems to remain
competitive. Failing to keep pace with developments in
technologies or systems may put the Group at a competitive
disadvantage. The technologies or systems that the Group chooses
may not be commercially successful or the technology or system
strategy employed may not be sufficiently aligned with the needs
of the business or responsive to changes in business strategy.
As a result, the Group could lose customers, fail to attract new
customers or incur substantial costs or face other losses.
The
Group is exposed to the risks of the hotel industry supply and
demand cycle
The future operating results of the Group could be adversely
affected by industry overcapacity (by number of rooms) and weak
demand due, in part, to the cyclical nature of the hotel
industry, or other differences between planning assumptions and
actual operating conditions. Reductions in room rates and
occupancy levels would adversely impact the results of Group
operations.
The
Group may experience a lack of selected development
opportunities
While the Group is operating in 100 countries and territories,
if the availability of suitable development sites becomes
limited for the Group and its prospective hotel owners, for
example, due to saturation or changing geo-political
circumstances, this could adversely affect the Groups
future growth pipeline.
The
Group is exposed to risks related to corporate
responsibility
The reputation of the Group and the value of its brands are
influenced by a wide variety of factors, including the
perception of key stakeholders and the communities in which the
Group operates. The social and environmental impacts of business
are under increasing scrutiny, and the Group is exposed to the
risk of damage to its reputation if it fails to demonstrate
sufficiently responsible practices, ethical behavior or fails to
comply with regulatory requirements in a number of areas such as
fraud, bribery and corruption, safety and security,
sustainability and responsible tourism, environmental
management, equality, diversity and human rights, and support
for local communities.
The
Group is exposed to the risk of litigation
The Group could be at risk of litigation from many parties,
including guests, customers, joint venture partners, suppliers,
employees, regulatory authorities, franchisees
and/or the
owners of hotels managed by it. Claims filed in the US may
include requests for punitive damages as well as compensatory
damages. Exposure to litigation or fines imposed by regulatory
authorities may also affect the reputation of the Group.
The
Group may face difficulties insuring its business
Historically, the Group has maintained insurance at levels
determined to be appropriate in light of the cost of cover and
the risk profiles of the business in which it operates. However,
forces beyond the Groups control including market forces,
may limit the scope of coverage the Group can obtain and the
Groups ability to obtain coverage at reasonable rates.
Other forces beyond the Groups control, such as terrorist
attacks or natural disasters may be uninsurable or simply too
expensive to insure. Inadequate or insufficient insurance could
expose the Group to large claims or could result in the loss of
capital invested in properties, as well as the anticipated
future revenue from properties, and could leave the Group
responsible for guarantees, debt or other financial obligations
related to such properties.
12
The
Group is exposed to a variety of risks associated with its
financial stability, ability to borrow and satisfy debt
covenants
While the strategy of the Group is to extend the hotel network
through activities that do not involve significant amounts of
its own capital, the Group does require capital to fund some
development opportunities, and to maintain and improve owned
hotels. The Group is reliant on having financial strength and
access to borrowing facilities to meet these expected capital
requirements. The majority of the Groups borrowing
facilities are only available if the financial covenant in the
facilities are complied with. Non-compliance with covenants
could result in the lenders demanding repayment of the funds
advanced. If the Groups financial performance does not
meet market expectations, it may not be able to refinance
existing facilities on terms considered favorable.
The
Group is required to comply with data privacy
regulations
Existing and emerging data privacy regulations limit the extent
to which the Group can use personal identifiable information.
Compliance with these regulations in each jurisdiction in which
the Group operates may require changes in the way data is
collected, monitored, shared and used, which could increase
operating costs or limit the advantages from processing such
data. In addition, non-compliance with data privacy regulations
may result in fines, damage to reputation or restrictions on the
use or transfer of information.
The
Group is exposed to the risks related to information
security
The Group is increasingly dependent upon the availability,
integrity and confidentiality of information including, but not
limited to, guest and employee credit card, financial and
personal data, business performance and financial reporting.
The reputation and performance of the Group may be adversely
affected if it fails to maintain appropriate confidentiality of
information and ensure relevant controls are in place to enable
the release of information only through the appropriate channels
in a timely and accurate manner.
The
Group is exposed to funding risks in relation to the defined
benefits under its pension plans
The Group is required by law to maintain a minimum funding level
in relation to its ongoing obligation to provide current and
future pensions for members of its UK pension plans who are
entitled to defined benefits. In addition, if certain plans of
the Group are
wound-up,
the Group could become statutorily liable to make an immediate
payment to the trustees to bring the funding of defined benefits
to a level which is higher than the minimum legal requirements.
The contributions payable by the Group must be set with a view
to making prudent provision for the benefits accruing under the
plans of the Group.
In particular, the trustees of the Groups UK defined
benefit plan may demand increases to the contribution rates
relating to the funding of this plan, which would oblige
relevant employers of the Group to contribute extra amounts. The
trustees must consult the plans actuary and principal
employer before exercising this power. In practice, contribution
rates are agreed between the Group and the trustees on actuarial
advice, and are set for
three-year
terms. The funding implications of the last actuarial review are
disclosed in the notes to the Groups Consolidated
Financial Statements on page F-30.
|
|
ITEM 4.
|
INFORMATION
ON THE COMPANY
|
SUMMARY
Group
overview
The Group is an international hotel business which owns a
portfolio of established and diverse hotel brands, including
InterContinental Hotels & Resorts
(InterContinental), Crowne Plaza Hotels &
Resorts (Crowne Plaza), Holiday Inn
Hotels & Resorts (including Holiday Inn Club
Vacations) (Holiday Inn), Holiday Inn Express,
Staybridge Suites, Candlewood Suites and Hotel Indigo. At
December 31, 2010, the Group had 4,437 franchised, managed,
owned and leased hotels and 647,161 guest rooms in 100 countries
and territories around the world. The Group also manages the
hotel loyalty program, Priority Club Rewards.
13
The Groups revenue and earnings are derived from hotel
operations, which include franchise and other fees paid under
franchise agreements, management and other fees paid under
management contracts, where the Group operates
third-parties hotels, and operation of the Groups
owned and leased hotels.
At March 25, 2011, InterContinental Hotels Group PLC had a
market capitalization of approximately £3.7 billion,
and was included in the list of FTSE 100 companies, a list
of the 100 largest companies by market capitalization on the
London Stock Exchange.
InterContinental Hotels Group PLC is the holding company for the
Group. Six Continents Limited (formerly Six Continents PLC),
which was formed in 1967, is the principal subsidiary company.
The Companys corporate headquarters are in the United
Kingdom, and the registered address is:
InterContinental Hotels Group PLC
Broadwater Park
Denham
Buckinghamshire UB9 5HR
Tel: +44 (0) 1895 512000
Internet address: www.ihgplc.com
InterContinental Hotels Group PLC was incorporated in Great
Britain on May 21, 2004 and registered in, and operates
under, the laws of England and Wales. Operations undertaken in
countries other than England and Wales are subject to the laws
of those countries in which they reside.
Group
history and recent developments
The Group, formerly known as Bass and, more recently, Six
Continents, was historically a conglomerate operating as, among
other things, a brewer, soft drinks manufacturer, hotelier,
leisure operator, and restaurant, pub and bar owner. In the last
several years, the Group has undergone a major transformation in
its operations and organization, as a result of the Separation
(as discussed below) and a number of significant disposals
during this period, which has narrowed the scope of its business.
On April 15, 2003, following shareholder and regulatory
approval, Six Continents PLC (as it then was) separated into two
new listed groups, InterContinental Hotels Group PLC (as it then
was) comprising the Hotels and Soft Drinks businesses and
Mitchells & Butlers plc comprising the Retail and
Standard Commercial Property Developments businesses (the
Separation).
The Group disposed of its interests in the soft drinks business
by way of an initial public offering (IPO) of
Britvic, a manufacturer and distributor of soft drinks in the
United Kingdom, in December 2005.
Acquisitions
and dispositions
From Separation to December 31, 2010, 185 hotels with a net
book value of $5.3 billion have been sold, generating
aggregate proceeds of $5.6 billion. Of these 185 hotels,
166 hotels have remained in the Groups global system (the
number of hotels and rooms franchised, managed, owned and leased
by the Group) through either franchise or management agreements.
At December 31, 2010, the Group owned 15 hotels.
The following provides details relating to the hotels disposed
and retained pursuant to the asset disposal program.
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset disposal program detail
|
|
Number of hotels
|
|
Proceeds
|
|
Net book value
|
|
|
($ billion)
|
|
Disposed since April 2003
|
|
|
185
|
|
|
|
5.6
|
|
|
|
5.3
|
|
Remaining owned and leased hotels as of December 31, 2010
|
|
|
15
|
|
|
|
|
|
|
|
1.5
|
|
During 2010, the Group disposed of the Holiday Inn Lexington for
$5 million and the InterContinental Buckhead, Atlanta for
$105 million. During 2009, the Group disposed of the
InterContinental Sao Paulo for $22 million. During 2008,
the Group disposed of the Holiday Inn Jamaica for
$30 million.
14
The Group also divested a number of equity interests for total
proceeds of $17 million, $15 million and
$61 million in 2010, 2009 and 2008, respectively. The most
significant interests sold were a 31.25% interest in the Crowne
Plaza Christchurch and a 17% interest in the Crowne Plaza
Amsterdam in 2008. In 2010, a loan repayment of $11 million was
also received.
The asset disposal program which commenced in 2003 has
significantly reduced the capital requirements of the Group
whilst largely retaining the hotels in the Groups system
through management and franchise agreements.
Capital expenditure in 2010 totaled $95 million compared
with $148 million in 2009 and $108 million in 2008.
2009 included the $65 million purchase of the Hotel Indigo San
Diego.
At December 31, 2010 capital committed, being contracts
placed for expenditure on property, plant and equipment and
intangible assets not provided for in the Consolidated Financial
Statements, totaled $14 million.
On October 24, 2007 the Group announced a worldwide
relaunch of its Holiday Inn brand family which is now
substantially complete. In support of this relaunch, the Group
has made a non-recurring revenue investment of $63 million
which has been charged to the Consolidated income statement as
an exceptional item since the 2007 relaunch. During 2010,
$9 million (2009 $19 million, 2008 $35 million)
was charged.
Return
of funds
Since March 2004, the Group has returned over
£3.5 billion of funds to shareholders by way of
special dividends, share repurchase programs and capital returns
(see table below).
A £150 million share repurchase program was announced
on February 20, 2007. During 2010 no shares were
repurchased. By March 25, 2011, a total of
14.4 million shares had been repurchased under the
£150 million repurchase program at an average price
per share of 831 pence per share (approximately
£120 million). Purchases are made under the existing
authority from shareholders which will be renewed at the
Companys Annual General Meeting. Any shares repurchased
under these programs will be canceled.
Information relating to the purchases of equity securities can
be found in Item 16E.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of funds program
|
|
Timing
|
|
Total return
|
|
Returned to
date(i)
|
|
Still to be returned
|
|
£501 million special dividend
|
|
|
Paid in December 2004
|
|
|
|
£501m
|
|
|
|
£501m
|
|
|
|
Nil
|
|
First £250 million share buyback
|
|
|
Completed in 2004
|
|
|
|
£250m
|
|
|
|
£250m
|
|
|
|
Nil
|
|
£996 million capital return
|
|
|
Paid in July 2005
|
|
|
|
£996m
|
|
|
|
£996m
|
|
|
|
Nil
|
|
Second £250 million share buyback
|
|
|
Completed in 2006
|
|
|
|
£250m
|
|
|
|
£250m
|
|
|
|
Nil
|
|
£497 million special dividend
|
|
|
Paid in June 2006
|
|
|
|
£497m
|
|
|
|
£497m
|
|
|
|
Nil
|
|
Third £250 million share buyback
|
|
|
Completed in 2007
|
|
|
|
£250m
|
|
|
|
£250m
|
|
|
|
Nil
|
|
£709 million special dividend
|
|
|
Paid in June 2007
|
|
|
|
£709m
|
|
|
|
£709m
|
|
|
|
Nil
|
|
£150 million share buyback
|
|
|
Deferred
|
|
|
|
£150m
|
|
|
|
£120m
|
|
|
|
£30m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
£3,603m
|
|
|
|
£3,573
|
|
|
|
£30m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
|
As of March 25, 2011.
|
Hotels
The Group is an international hotel business which owns a
portfolio of established and diverse hotel brands, including
InterContinental Hotels & Resorts, Crowne Plaza
Hotels & Resorts, Holiday Inn Hotels &
Resorts (including Holiday Inn Club Vacations), Holiday Inn
Express, Staybridge Suites, Candlewood Suites and Hotel Indigo.
At December 31, 2010, the Group had 4,437 franchised,
managed, owned and leased hotels and 647,161 guest rooms in 100
countries and territories around the world. The Group also
manages the hotel loyalty program, Priority Club Rewards.
15
SEGMENTAL
INFORMATION
Geographic
segmentation
The following table show the Groups revenue and operating
profit before exceptional operating items and the percentage by
geographical area, for the years ended December 31, 2010,
2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
($ million)
|
|
Revenue(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
807
|
|
|
|
772
|
|
|
|
963
|
|
EMEA
|
|
|
414
|
|
|
|
397
|
|
|
|
518
|
|
Asia Pacific
|
|
|
303
|
|
|
|
245
|
|
|
|
290
|
|
Central(2)
|
|
|
104
|
|
|
|
124
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,628
|
|
|
|
1,538
|
|
|
|
1,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional operating
items(1)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
369
|
|
|
|
288
|
|
|
|
465
|
|
EMEA
|
|
|
125
|
|
|
|
127
|
|
|
|
171
|
|
Asia Pacific
|
|
|
89
|
|
|
|
52
|
|
|
|
68
|
|
Central
|
|
|
(139
|
)
|
|
|
(104
|
)
|
|
|
(155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
444
|
|
|
|
363
|
|
|
|
549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
(%)
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
49.6
|
|
|
|
50.2
|
|
|
|
50.8
|
|
EMEA
|
|
|
25.4
|
|
|
|
25.8
|
|
|
|
27.3
|
|
Asia Pacific
|
|
|
18.6
|
|
|
|
15.9
|
|
|
|
15.3
|
|
Central
|
|
|
6.4
|
|
|
|
8.1
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional operating items
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
83.1
|
|
|
|
79.3
|
|
|
|
84.7
|
|
EMEA
|
|
|
28.2
|
|
|
|
35.0
|
|
|
|
31.1
|
|
Asia Pacific
|
|
|
20.0
|
|
|
|
14.3
|
|
|
|
12.4
|
|
Central
|
|
|
(31.3
|
)
|
|
|
(28.6
|
)
|
|
|
(28.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The results of operations have been
translated into US dollars at the average rates of exchange for
the year. In the case of sterling, the translation rate is $1 =
£0.65 (2009 $1 = £0.64, 2008 $1 = £0.55). In the
case of the euro, the translation rate is $1 = 0.76 (2009
$1 = 0.72, 2008 $1 = 0.68).
|
|
(2)
|
|
Central revenue primarily relates
to Holidex (the Groups proprietary reservation system) fee
income. Central operating profit includes central revenue less
costs related to global functions.
|
|
(3)
|
|
Operating profit before exceptional
operating items does not include exceptional operating items for
all periods presented. Exceptional operating items (charge
unless otherwise noted) by region were the Americas
$8 million (2009 $301 million, 2008 $99 million);
EMEA credit of $3 million (2009 $22 million, 2008
$21 million); Asia Pacific $2 million (2009
$7 million, 2008 $2 million); and Central $nil (2009
$43 million, 2008 $10 million).
|
16
BUSINESS
OVERVIEW
The Group is an international hotel business which owns a
portfolio of established and diverse hotel brands, including
InterContinental Hotels & Resorts, Crowne Plaza
Hotels & Resorts, Holiday Inn Hotels &
Resorts (including Holiday Inn Club Vacations), Holiday Inn
Express, Staybridge Suites Candlewood Suites and Hotel Indigo.
At December 31, 2010, the Group had 4,437 franchised,
managed, owned and leased hotels and 647,161 guest rooms in 100
countries and territories around the world. The Group also
manages the hotel loyalty program, Priority Club Rewards.
Industry
and market trends
2010 was a turnaround year for the global economy, with
clear signs that the global recession was easing during the
second half and business and consumer confidence returning. This
assisted the hotel industrys recovery from a challenging
economic period. The lodging industry is cyclical, tending to
reflect the state of the general economic cycle. Historically,
in previous cycles the industry has experienced periods of five
to eight years of growth in revenue per available room (RevPAR)
followed by up to two years of decline. Demand has rarely fallen
for sustained periods and it is the interplay between hotel
supply and demand that drives longer-term fluctuations in RevPAR.
The expected recovery in demand took place in 2010. The more
modest increases in industry pricing, or average daily rate,
which along with occupancy make up RevPAR, was caused by the
increase in supply of hotel rooms globally, a legacy of the
growth in hotel construction which began prior to the downturn.
The sustained success of the economic recovery is likely to be
determined by both the challenging choices policy makers are
faced with regarding austerity measures and the issues
surrounding sovereign debt, along with the response of
corporations and the financial sector. Corporations will need to
play an important role in the recovery through sustained
investment and job creation, and the Group, with an ambitious
program to open new hotels, anticipates the need to recruit
approximately 160,000 people over the next few years.
The Group monitors key industry drivers and business
fundamentals, such as RevPAR, to ensure its strategy remains
well suited to the environment and the Groups capabilities.
Different regions, countries and types of demand vary in the
speed they recover and it is our understanding of local demand
drivers, combined with a global outlook, that help us anticipate
the needs of different types of guest demand and so continue to
develop the business to meet these needs. As an example, the
Groups recent launch of new tools to support meetings and
events in our hotels was well-timed with the earlier than
anticipated recovery in this type of demand. Many commentators
thought meetings and events business would remain subdued into
2011.
There are a number of external drivers from which IHG expects to
benefit:
|
|
|
|
|
global economic recovery the global economy grew by
3.8% during 2010 (Oxford Economics), and US historic market data
show that following recessions, hotel industry revenues broadly
increase ahead of Gross Domestic Product (GDP) (Smith Travel
Research). We expect the current recovery to be similar, and are
investing in the business to capture demand as it continues to
strengthen;
|
|
|
|
increase in affluence and freedom to travel in emerging
markets countries such as China are increasingly
significant as domestic and international travel markets. They
already have a sizeable hotel industry, and the importance of
hotel brands in such emerging markets is growing;
|
|
|
|
rising global travel volumes airline capacity
continues to grow, with affordability of travel improving
globally. Business travel is expected to recover in most markets
in 2011 and leisure travellers who have been
resilient in the downturn will continue to travel
both internationally and within domestic markets;
|
|
|
|
change in demographics as the population ages and
becomes wealthier in developed markets, increased leisure time
and incomes encourage more travel and hotel stays; conversely,
younger generations are increasingly seeking a better work/life
balance, with higher expectations from those providing their
accommodation. This has positive implications for increased
leisure travel; and
|
|
|
|
demand for branded hotels is growing faster than that for
independent hotels.
|
17
Our
strategy
With a portfolio of well-established brands, in the best
developed and emerging markets, the Group is using its size,
scale, people and expertise to realize its Vision of becoming
one of the worlds great companies. The Group will be a
great company when guests love to stay with us, people love to
work for us, owners love our brands and investors love our
performance. This strategy is measured by a series of key
performance indicators around Where we
compete and How we win
(pages 22 and 23).
The Groups strategy has ensured that it remains the
largest hotel company in the world, by number of rooms. By
grounding its operations and growth in its core purpose of
creating Great Hotels Guests Love, the Company uses elements of
its strategy, such as the business model of third-party
ownership, to grow faster than its global competitors.
Delivering
the elements of the Groups strategy
Competing
with an appropriate business model
The Groups business model has a clear focus on franchising
and managing hotels, rather than owning them outright, enabling
the Group to grow at an accelerated pace, with limited capital
investment. Furthermore, the Group benefits from the reduced
volatility of fee-based income streams, as compared with the
ownership of assets.
A key characteristic of the franchised and managed business is
that it generates more cash than is required for investment in
the business, with a high return on capital employed. At
December 31, 2010 87% of operating profit before regional
and central overheads, exceptional items, interest and tax is
derived from franchised and managed operations.
Where necessary, the Group actively supports its brands by
employing its own capital to showcase
best-in-class
operations through flagship assets.
The Groups business model creates opportunities to build
relationships with independent hotel owners and generate
revenues by offering access to our global demand delivery
systems, where guests can book their hotels through the
Groups booking channels, including branded websites and
call centers. The latest example is our strategic relationship
with Summit Hotel Properties Inc. (Summit), a US
hotel investment company focused on branded hotels. On any
unbranded hotel bought by Summit, the Group now has first rights
to give the hotel a Groups brand and earn fee revenues
through generating demand for that hotel.
The key features of the Groups business model are
represented in the following table and charts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing and
|
|
|
|
|
|
The Groups
|
|
The Groups
|
|
|
Brand
|
|
distribution
|
|
Staff
|
|
Ownership
|
|
capital
|
|
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
This is the largest part of our business: 3,783 hotels operate
under franchise agreements
|
|
The Groups
brands
|
|
The Group
|
|
Third party
|
|
Third party
|
|
None
|
|
Fee % of
rooms
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed
The Group manages 639 hotels worldwide
|
|
The Groups
brands
|
|
The Group
|
|
The Group
usually
supplies
general
manager as
a minimum
|
|
Third party
|
|
Low/none
|
|
Fee % of
total
revenue
plus % of
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
The Group owns 15 hotels worldwide (less than 1% of our
portfolio)
|
|
The Groups
brands
|
|
The Group
|
|
The Group
|
|
The Group
|
|
High
|
|
All
revenues
and profits
|
18
The following table shows the number of hotels and rooms
franchised, managed, owned and leased by the Group as at
December 31, 2010, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed
|
|
|
|
|
|
|
|
|
contracts and joint
|
|
|
|
|
|
|
Franchised
|
|
ventures
|
|
Owned and leased
|
|
Total
|
|
|
No. of
|
|
No. of
|
|
No. of
|
|
No. of
|
|
No. of
|
|
No. of
|
|
No. of
|
|
No. of
|
|
|
hotels
|
|
rooms
|
|
hotels
|
|
rooms
|
|
hotels
|
|
rooms
|
|
hotels
|
|
rooms
|
|
2010
|
|
|
3,783
|
|
|
|
479,320
|
|
|
|
639
|
|
|
|
162,711
|
|
|
|
15
|
|
|
|
5,130
|
|
|
|
4,437
|
|
|
|
647,161
|
|
2009
|
|
|
3,799
|
|
|
|
483,541
|
|
|
|
622
|
|
|
|
157,287
|
|
|
|
17
|
|
|
|
5,851
|
|
|
|
4,438
|
|
|
|
646,679
|
|
2008
|
|
|
3,585
|
|
|
|
465,967
|
|
|
|
585
|
|
|
|
148,240
|
|
|
|
16
|
|
|
|
5,644
|
|
|
|
4,186
|
|
|
|
619,851
|
|
The Groups continuing operating profit* by ownership
type for the year ended December 31, 2010:
The Groups global room count by ownership type at
December 31, 2010:
|
|
|
*
|
|
Before regional and central
overheads, exceptional items, interest and tax
|
Competing
in developed and emerging markets
When considering open hotel rooms and those in development, the
Group has leadership positions in 15 of the top 20 markets
globally. These markets alone account for over 80% of global
lodging spend. These include large developed markets such as the
United States (US), United Kingdom (UK),
and Germany, as well as emerging markets like China.
The US is the largest market for branded rooms, with
3.4 million. The segment in the US with the greatest share
is midscale, with 1.3 million branded hotels rooms, and the
Groups Holiday Inn brand family is the largest operator in
this segment.
The Group is also focused on growing in large markets such as
the UK and Germany where it ranks second and third, respectively
in terms of number of available rooms. The benefits of a large
hotel presence across these high-value self-supporting markets
for the Group include the ability to build relationships with
the largest possible number of guests.
The Group is the largest hotel company in China, the emerging
market with the greatest scale, having 0.5 million branded
rooms. The Group, which was the first international chain to
open hotels in the country, remains the largest, with close to
50,000 rooms. The rapid pace of openings for the Group and the
wider lodging industry shows that China, and other emerging
markets are behaving as the Group has seen in developed markets
over the past 50 years. The strong demand drivers for
hotels suggest these will remain key growth markets.
Outside the largest markets, the Group focuses on achieving
presence for its biggest brands in key gateway cities which show
the potential for high demand from business and leisure guests,
and where its brands can generate revenue premiums.
In the hotel industry, the future supply of hotels and hotel
rooms is visible through the pipeline, and the Groups
pipeline reflects the sustainability of its leadership position.
In 2010, the Groups portfolio opened 35,744 rooms in 29
countries, and signed a further 55,598 into the pipeline, across
38 countries. The Group currently has 204,859 rooms in 1,275
hotels under development in 64 countries.
19
The Groups pipeline ensures sustainable development in new
and emerging markets that best suit the Companys strengths
and anticipate the future needs of customers. The Group has
committed development teams ensuring a sizeable pipeline in
developing markets: during 2010 the Group opened 7,253 rooms in
Greater China, representing 20% of all new rooms opened by it
across the globe during 2010.
The Groups pipeline is the largest branded hotel pipeline
in the world, representing 18% of all hotels under development,
including those that are independent or unaffiliated.
Winning
with our scale and expertise
The major benefit the Group brings to guests who stay in the
Groups portfolio of hotels, and owners who invest with us,
is our system to help guests book and stay with us, and then
maintain the relationship with them after they leave. This
includes having hotels in key locations, great brands with
consumer appeal, efficient reservations systems, global web
presence, our loyalty rewards schemes, along with other
elements. Together, these form the largest such
system in the industry and are the engine of our
business, delivering, on average, 68% of total rooms revenue in
2010.
With continued focus on the success of this global system, we
have developed
best-in-class
marketing and technology to support our hotels and drive
incremental revenues.
Our focus on key geographical markets where we operate a large
number of hotels, such as the US, UK, China, Middle East and
Germany, means we can run hotels and our operating system with
greater efficiencies, delivering more to the consumer at a lower
cost.
The size of the global hotel market is estimated by the Group to
be close to 20 million rooms. Competitors in the market
include other branded hotel companies, both large and small,
international and domestic, and independently owned hotels.
IHG remains the largest branded hotel company, with our share
currently at approximately 10% of the branded rooms (Smith
Travel Research), and a presence in 100 countries and
territories. Leading research (Smith Travel Research) calculates
that there are 6.6 million branded hotel rooms, with the
remainder a combination of independent hotels, guesthouses and
other types of lodging.
Although currently less than half of all hotel rooms are
branded, the benefits of being part of a brand are recognized by
many owners and the growth of branded rooms has exceeded the
growth of unbranded rooms over the past 10 years. Raising
finance is still an issue globally, and branded hotels are
perceived as offering greater security through global
reservations systems, loyalty schemes, and international
networks. Branded hotel companies, such as the Group, are
attractive to independent hotel owners and are therefore gaining
market share at the expense of the unbranded portion of the
industry. The Group is well positioned to benefit from this
trend.
Hotel owners are increasingly recognising the benefits of
franchising or managing with the Group, which can offer a
portfolio of brands to suit the different real estate
opportunities an owner may have, together with effective revenue
delivery through global reservations channels. Furthermore,
hotel ownership is increasingly being separated from hotel
operations, encouraging hotel owners to use third parties, such
as the Group, to manage their hotels.
Winning
with our people and values
Our Vision can only be realized if we have collaborative and
engaged employees, delivering the right experience to our guests
through shared values and living our brands. We have extensive
on-boarding, communication, development and recognition
programs, aligned under our employment brand, Room to be
yourself, providing the right environment for our people
to be successful.
20
Our people dictate our culture, and the Group is aligned around
great values which are consistently brought to life through a
set of five behaviors, the Winning Ways:
|
|
|
|
|
Do the right thing;
|
|
|
|
Show we care;
|
|
|
|
Aim Higher;
|
|
|
|
Celebrate difference; and
|
|
|
|
Work better together.
|
Business
relationships with others
The Group maintains effective relationships across all aspects
of its operations. The Groups operations are not dependent
upon any single customer, supplier or hotel owner due to the
extent of its brands, market segments and geographical coverage.
For example, the Groups largest third-party hotel owner
controls just 3% of the Groups total room count.
The Group continued to enhance and streamline its procurement
processes during 2010, and with the implementation of
initiatives to combat waste and enhance relationships with
suppliers, the Group is striving to ensure best-practice is
employed throughout the Group. With a focus on ensuring
high-quality goods and services are sourced at competitive
prices, the Group strives to ensure enhanced value for the
Group, our hotel owners and shareholders.
IHG is proud of its strong and important relationship with the
IAHI, the Owners Association for owners of hotels in the
Groups seven brands across the world. IHG meets with the
IAHI, in large and small groups, on a regular basis and works
together to support and facilitate the continued development of
the Groups brands and systems. During 2010, the combined
work of the Group and IAHI implemented several enhancements to
the Groups system.
Examples of such enhancements include:
Holiday Inn relaunch the near completion of
the $1 billion global relaunch of the Holiday Inn brand
family;
InnSupply improving purchasing efficiencies
and streamlining the procurement processes across both
organizations;
Way of Sales developing
best-in-class
practices for the sales operations of both organizations, having
identified critical roles for generating revenues;
Celebrate Service week giving recognition and
thanks to the many thousands of front-line employees, and
emphasizing engagement through the Groups brands; and
People Tools enhancing the recruitment,
hiring, training and retention practices across both
organizations, with specific focus on reflecting the individual
qualities of each brand. These tools are supplied to all hotels:
managed, franchised and owned and leased.
Many jurisdictions and countries regulate the offering of
franchise agreements and recent trends indicate an increase in
the number of countries adopting franchise legislation. As a
significant percentage of the Groups revenue is derived
from franchise fees, the Groups continued compliance with
franchise legislation is important to the successful deployment
of the Groups strategy.
21
Measuring
our success
We measure our success in terms of shareholder value, as well as
through a set of strategic priorities. These form our key
performance indicators (KPIs) to ensure a consistent approach to
running the business. These KPIs consist of Where we
compete, including the appropriate business model, key
target markets and consumer segments; and How we
win, including financial returns, our people, the guest
experience and responsible business.
Where we compete
|
|
|
|
|
|
|
|
|
Key performance
|
|
Current status and
|
|
|
Strategic priorities
|
|
indicators (KPIs)
|
|
2010 developments
|
|
2011 priorities
|
|
To accelerate profitable growth of our core business in the
largest markets where presence and scale really count and also
in key global gateway cities. Seek opportunities to leverage our
scale in new business areas.
|
|
Sustained system size growth; and
deal signings focused in scale markets
and key gateway cities.
|
|
System size maintained at 647,161
rooms;
over 90% of deals signed in scale
markets and key gateway cities;
re-entry into Hawaii with a Holiday Inn
Resort;
opening our second Hotel Indigo in
London, and our first in Asia Pacific, on the Bund in
Shanghai;
17 signings of Hotel Indigo and
Staybridge Suites outside of North America; and
259 hotels opened globally.
|
|
Continue international roll-out of
Staybridge Suites and Hotel Indigo;
accelerate growth strategies in quality
locations in agreed scale markets; and
continue to leverage scale and build
upon improved strategic position during the economic downturn.
|
22
How we win
|
|
|
|
|
|
|
Strategic priorities
Financial returns
To generate higher returns for owners and the Group through
increased revenue share, improved operating efficiency and
growing margins.
Our people
Creating hotels that are well run, with brands brought to
life by people who are proud of the work they do.
Guest experience
To operate a portfolio of brands attractive to both owners
and guests that have clear market positions and differentiation
in the eyes of the guest.
Responsible business
To take a proactive stance and seek creative solutions
through innovation and collaboration on environment and
community issues, and to drive increased value for the Group,
owners, guests and the communities where we operate.
|
|
|
|
Current status and 2010 developments
Further procurement efficiencies made;
enhanced Customer Relationship Management with new
technology and campaign management tools to involve non-Priority
Club Rewards (PCR) members; and
enhanced communications with PCR loyalty program
members with refreshed loyalty systems.
Launched and cascaded our Vision to become one of
the worlds great companies;
developed management tools to deliver a branded
guest experience;
further emphasis on our culture of learning and
development with industry recognition;
Celebrate Service week a
global event to recognize our people, in partnership with the
IAHI ownership community; and
managing employee engagement.
Global pilots to identify opportunities to create
branded hallmarks with guest appeal;
near completion of the Holiday Inn
relaunch; and
grew our industry-leading loyalty program PCR, to
56 million members, contributing $6.5 billion of
global system rooms revenue.
Green Engage developed (patent pending);
rolled out to over 1,000 hotels by December 31, 2010;
collaborated with the University of Oxfords
Department of Plant Sciences to understand better how hotel
design and development impacts the environment; and
Corporate Responsibility approach defined and agreed.
|
|
2011 priorities
Capitalize on recovery of group and meetings
business;
strengthen global sales force effectiveness;
optimize revenues from third party and Group
websites;
ensure the Groups industry leading system of
delivering demand and revenue to hotels retains competitive
advantage; and
strengthen loyalty program, with enhanced member
offer.
Cascade of branded management tools to whole hotel
estate, including our franchised hotels;
ongoing partnership with IAHI ownership community
for people events;
continued focus on developing skills to deliver our
Vision and branding capability; and
opportunities for employees and communities to be
involved with Olympics partnership.
Leverage strong position of Holiday Inn relaunch
with roll-out of global marketing initiatives;
ensure growth plans of each brand aligns fully with
corporate Vision;
focus on strength of Priority Club Rewards and
visibly enhance offering to its members in hotels and across
global reservations channels; and
increase the Groups business from Priority
Club Rewards members.
Continue to roll out Green Engage to our
owned and managed hotels, and expand into the franchised estate
in all regions;
work with stakeholders, such as Harvard University,
to educate decision-makers on the Groups economic
impacts; and
continue to embed our community strategy, including
establishing the IHG Academy program and activating
our strategic partner in providing disaster recovery.
|
23
Segmental
Results by Activity
The following table shows the Groups continuing revenue
and operating profit before exceptional operating items by
activity and the percentage contribution of each activity, for
the years ended December 31, 2010, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
($ million)
|
|
Revenue(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
465
|
|
|
|
437
|
|
|
|
495
|
|
Managed
|
|
|
119
|
|
|
|
110
|
|
|
|
168
|
|
Owned and leased
|
|
|
223
|
|
|
|
225
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
807
|
|
|
|
772
|
|
|
|
963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
81
|
|
|
|
83
|
|
|
|
110
|
|
Managed
|
|
|
130
|
|
|
|
119
|
|
|
|
168
|
|
Owned and leased
|
|
|
203
|
|
|
|
195
|
|
|
|
240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
414
|
|
|
|
397
|
|
|
|
518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
12
|
|
|
|
11
|
|
|
|
18
|
|
Managed
|
|
|
155
|
|
|
|
105
|
|
|
|
113
|
|
Owned and leased
|
|
|
136
|
|
|
|
129
|
|
|
|
159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
303
|
|
|
|
245
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central(2)
|
|
|
104
|
|
|
|
124
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,628
|
|
|
|
1,538
|
|
|
|
1,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional operating
items(1)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
392
|
|
|
|
364
|
|
|
|
426
|
|
Managed
|
|
|
21
|
|
|
|
(40
|
)
|
|
|
51
|
|
Owned and leased
|
|
|
13
|
|
|
|
11
|
|
|
|
55
|
|
Regional overheads
|
|
|
(57
|
)
|
|
|
(47
|
)
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
369
|
|
|
|
288
|
|
|
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
59
|
|
|
|
60
|
|
|
|
75
|
|
Managed
|
|
|
62
|
|
|
|
65
|
|
|
|
95
|
|
Owned and leased
|
|
|
40
|
|
|
|
33
|
|
|
|
45
|
|
Regional overheads
|
|
|
(36
|
)
|
|
|
(31
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125
|
|
|
|
127
|
|
|
|
171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
7
|
|
|
|
5
|
|
|
|
8
|
|
Managed
|
|
|
73
|
|
|
|
44
|
|
|
|
55
|
|
Owned and leased
|
|
|
35
|
|
|
|
30
|
|
|
|
43
|
|
Regional overheads
|
|
|
(26
|
)
|
|
|
(27
|
)
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
|
|
|
|
52
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central(2)
|
|
|
(139
|
)
|
|
|
(104
|
)
|
|
|
(155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
444
|
|
|
|
363
|
|
|
|
549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes on page 25.
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
(%)
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
28.6
|
|
|
|
28.4
|
|
|
|
26.1
|
|
Managed
|
|
|
7.3
|
|
|
|
7.2
|
|
|
|
8.9
|
|
Owned and leased
|
|
|
13.7
|
|
|
|
14.6
|
|
|
|
15.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49.6
|
|
|
|
50.2
|
|
|
|
50.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
5.0
|
|
|
|
5.4
|
|
|
|
5.8
|
|
Managed
|
|
|
8.0
|
|
|
|
7.7
|
|
|
|
8.9
|
|
Owned and leased
|
|
|
12.4
|
|
|
|
12.7
|
|
|
|
12.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.4
|
|
|
|
25.8
|
|
|
|
27.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
0.7
|
|
|
|
0.7
|
|
|
|
0.9
|
|
Managed
|
|
|
9.5
|
|
|
|
6.8
|
|
|
|
6.0
|
|
Owned and leased
|
|
|
8.4
|
|
|
|
8.4
|
|
|
|
8.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.6
|
|
|
|
15.9
|
|
|
|
15.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central
|
|
|
6.4
|
|
|
|
8.1
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional operating items
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
88.3
|
|
|
|
100.2
|
|
|
|
77.6
|
|
Managed
|
|
|
4.7
|
|
|
|
(11.0
|
)
|
|
|
9.3
|
|
Owned and leased
|
|
|
2.9
|
|
|
|
3.0
|
|
|
|
10.0
|
|
Regional overheads
|
|
|
(12.8
|
)
|
|
|
(12.9
|
)
|
|
|
(12.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83.1
|
|
|
|
79.3
|
|
|
|
84.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
13.3
|
|
|
|
16.5
|
|
|
|
13.6
|
|
Managed
|
|
|
14.0
|
|
|
|
17.9
|
|
|
|
17.3
|
|
Owned and leased
|
|
|
9.0
|
|
|
|
9.1
|
|
|
|
8.2
|
|
Regional overheads
|
|
|
(8.1
|
)
|
|
|
(8.5
|
)
|
|
|
(8.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28.2
|
|
|
|
35.0
|
|
|
|
31.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
1.6
|
|
|
|
1.4
|
|
|
|
1.5
|
|
Managed
|
|
|
16.4
|
|
|
|
12.1
|
|
|
|
10.0
|
|
Owned and leased
|
|
|
7.9
|
|
|
|
8.2
|
|
|
|
7.8
|
|
Regional overheads
|
|
|
(5.9
|
)
|
|
|
(7.4
|
)
|
|
|
(6.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.0
|
|
|
|
14.3
|
|
|
|
12.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central
|
|
|
(31.3
|
)
|
|
|
(28.6
|
)
|
|
|
(28.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The results of operations have been
translated into US dollars at the average rates of exchange for
the year. In the case of sterling, the translation rate $1 =
£0.65 (2009 $1 = £0.64, 2008 $1 = £0.55). In the
case of the euro, the translation rate is $1 = 0.76 (2009
$1 = 0.72, 2008 $1 = 0.68).
|
|
(2)
|
|
Central revenue primarily relates
to Holidex (the Groups proprietary reservation system) fee
income. Central operating profit includes central revenue less
costs related to global functions.
|
|
(3)
|
|
Operating profit before exceptional
operating items does not include exceptional operating items for
all periods presented. Exceptional operating items (charge
unless otherwise noted) by region were the Americas
$8 million (2009 $301 million, 2008 $99 million);
EMEA credit of $3 million (2009 $22 million, 2008
$21 million); Asia Pacific $2 million (2009
$7 million, 2008 $2 million); and Central $nil (2009
$43 million, 2008 $10 million).
|
25
Global
System
In addition to management or franchise fees, hotels within the
Groups system pay cash assessments and contributions which
are collected by the Group for specific use within the System
Fund (the Fund). The Fund also receives proceeds
from the sale of Priority Club Rewards points. The Fund is
managed for the benefit of hotels in the system with the
objective of driving revenues for the hotels. The Fund is used
to pay for marketing, the Priority Club Rewards loyalty program
and the global reservations system.
Priority Club Rewards: The Groups
worldwide loyalty scheme, Priority Club Rewards, is the largest
of its kind in the hotel industry. Members enjoy a variety of
privileges and rewards as they stay at the Groups hotels
around the world. The global system room revenue generated from
Priority Club Rewards members during 2010 was $6.6 billion.
Priority Club Rewards membership reached 56 million
customers as at December 31, 2010, compared to
48 million as at December 31, 2009.
Central Reservations System Technology: The
Group operates the HolidexPlus reservations system. The
HolidexPlus system receives reservations requests entered on
terminals located at most of the Groups reservations
centers, as well as from global distribution systems operated by
a number of major corporations and travel agents. Where local
hotel systems allow, the HolidexPlus system immediately confirms
reservations or indicates alternative accommodation available
within the Groups network. Confirmations are transmitted
electronically to the hotel for which the reservation is made.
Reservations Call Centers: The Group operates
10 reservations call centers around the world which enable it to
sell in local languages in many countries and offer a high
quality service to customers.
Internet: The Group introduced electronic
hotel reservations in 1995. The Internet is an important
communications, branding and distribution channel for hotel
sales. During 2010, 24% (24% in 2009) of global system room
revenue booked via the Internet through various branded
websites, such as www.intercontinental.com and
www.holidayinn.com, as well as certified third parties.
The Group has established standards for working with third-party
intermediaries online travel
distributors who sell or re-sell the Groups
branded hotel rooms via their Internet sites. Under the
standards, certified distributors are required to respect the
Groups trademarks, ensure reservations are guaranteed
through an automated and common confirmation process, and
clearly present fees to customers.
During 2010, global system room revenue booked through the
Groups global systems (which includes Priority Club
Rewards members, central reservations and call centers, global
distribution systems and the Internet) was 68% (68% in 2009).
Sales
and Marketing
The Group targets its sales and marketing expenditure in each
region on driving revenue and brand awareness or, in the case of
sales investments, targeting segments such as corporate
accounts, travel agencies and meeting organizers. The majority
of the Groups sales and marketing expenditure is funded by
contractual fees paid by most hotels in the system.
26
Global
Brands
Brands
Overview
The Group offers hotel brands that appeal to guests with
different needs and tastes. This requires a portfolio of large
global brands, growing alongside innovative new brands to meet
the unique experiences our guests desire.
The hotel industry is usually split into segments based upon
price point and consumer expectations. The Group is focused on
the three segments that together generate over 90% of branded
hotel revenues: midscale (broadly 3 star hotels), upscale
(mostly 4 star), and luxury (5 star).
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010
|
Brands
|
|
Room numbers
|
|
Hotels
|
|
InterContinental Hotels & Resorts
|
|
|
58,429
|
|
|
|
171
|
|
Crowne Plaza Hotels & Resorts
|
|
|
106,155
|
|
|
|
388
|
|
Holiday Inn Hotels &
Resorts(1)
|
|
|
230,117
|
|
|
|
1,247
|
|
Holiday Inn Express
|
|
|
191,228
|
|
|
|
2,075
|
|
Staybridge Suites
|
|
|
20,762
|
|
|
|
188
|
|
Candlewood Suites
|
|
|
28,253
|
|
|
|
288
|
|
Hotel Indigo
|
|
|
4,548
|
|
|
|
38
|
|
Other
|
|
|
7,669
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
647,161
|
|
|
|
4,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes Holiday Inn Club Vacations
(2,892 rooms, 6 hotels)
|
InterContinental
Hotels & Resorts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
Asia Pacific
|
|
Average room rate
$(1)
|
|
|
158.54
|
|
|
|
232.90
|
|
|
|
174.76
|
|
Room
numbers(2)
|
|
|
19,120
|
|
|
|
20,111
|
|
|
|
19,198
|
|
|
|
|
(1)
|
|
For the year ended
December 31, 2010; quoted at constant US$ exchange rate.
Average room rate is for comparable InterContinental hotels.
|
|
(2)
|
|
At December 31, 2010.
|
InterContinental Hotels & Resorts
(InterContinental) is the Groups 5-star brand
located in major cities in over 60 countries worldwide. With
over 60 years experience, the brands
understanding of high quality, understated service and
outstanding facilities, coupled with a genuine interest in our
guests differentiate it in a competitive segment. The philosophy
of the brand is to enable every guest to maximize the enjoyment
of their stay specializing in engaging guests with
the destination by sharing local knowledge to create authentic
experiences that enrich our guests lives and help them
broaden their outlook.
InterContinental hotels are principally managed by the Group. At
December 31, 2010, there were 171 InterContinental
hotels which represented 9% of the Groups total hotel
rooms. During 2010, nine InterContinental hotels were added to
the portfolio, while four hotels were removed.
27
Crowne
Plaza Hotels & Resorts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
Asia Pacific
|
|
Average room rate
$(1)
|
|
|
101.94
|
|
|
|
140.39
|
|
|
|
105.16
|
|
Room
numbers(2)
|
|
|
57,073
|
|
|
|
22,941
|
|
|
|
26,141
|
|
|
|
|
(1)
|
|
For the year ended
December 31, 2010; quoted at constant US$ exchange rate.
Average room rate is for comparable Crowne Plaza hotels.
|
|
(2)
|
|
At December 31, 2010.
|
Crowne Plaza Hotels & Resorts (Crowne Plaza),
in the upscale, 4 star segment, specializes in offering
state-of-the-art
business and meeting facilities that provide productive,
successful and energizing experiences to guests who believe
travel is fun and rewarding.
The majority of Crowne Plaza hotels are operated under franchise
agreements in the US and Europe, and managed in other markets by
the Group. At December 31, 2010, there were 388 Crowne
Plaza hotels which represented 16% of the Groups total
hotel rooms. During 2010, 29 Crowne Plaza hotels were added to
the portfolio, while seven hotels were removed.
The
Holiday Inn Family of Brands
The Holiday Inn family of brands is the worlds largest
midscale hotel brand family by number of rooms, and the
Groups most significant operation. Focused around a
relaxed atmosphere, the brands are designed to support both
business travellers and families. During 2010, the brand family
neared completion of a $1 billion refresh, updating their
image by upgrading facilities, service and amenities, ensuring
the brands continue to remain competitive within their midscale
markets. The Holiday Inn family was the first international
hotel chain to open in China in 1984 and the first hotel chain
to launch a direct bookings website in 1995.
Holiday
Inn Hotels & Resorts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
Asia Pacific
|
|
Average room rate
$(1)
|
|
|
95.12
|
|
|
|
115.51
|
|
|
|
88.57
|
|
Room
numbers(2)(3)
|
|
|
147,575
|
|
|
|
52,945
|
|
|
|
29,597
|
|
|
|
|
(1)
|
|
For the year ended
December 31, 2010; quoted at constant US$ exchange rate.
Average room rate is for comparable Holiday Inn hotels.
|
|
(2)
|
|
At December 31, 2010.
|
|
(3)
|
|
The Americas total includes Holiday
Inn Club Vacations (2,892 rooms).
|
Holiday Inn Hotels & Resorts (including Holiday Inn Club
Vacations) (Holiday Inn) are predominantly operated
under franchise agreements. At December 31, 2010, there
were 1,247 Holiday Inn hotels which represented 36% of the
Groups total hotel rooms, of which 64% were located in the
Americas. During 2010, 53 Holiday Inn hotels were added to the
portfolio, while 131 hotels were removed.
Holiday
Inn Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
Asia Pacific
|
|
Average room rate
$(1)
|
|
|
95.55
|
|
|
|
95.18
|
|
|
|
45.70
|
|
Room
numbers(2)
|
|
|
159,867
|
|
|
|
23,706
|
|
|
|
7,655
|
|
|
|
|
(1)
|
|
For the year ended
December 31, 2010; quoted at constant US$ exchange rate.
Average room rate is for comparable Holiday Inn Express hotels.
|
|
(2)
|
|
At December 31, 2010.
|
Holiday Inn Express hotels are almost entirely operated under
franchise agreements. At December 31, 2010, there were
2,075 Holiday Inn Express hotels worldwide which represented 30%
of the Groups total hotel rooms, of which 84% were located
in the Americas. During 2010, 122 new Holiday Inn Express hotels
were added to the portfolio, while 116 hotels were removed.
28
Staybridge
Suites
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
Average room rate
$(1)
|
|
|
94.16
|
|
|
|
112.18
|
|
Room
numbers(2)
|
|
|
20,014
|
|
|
|
748
|
|
|
|
|
(1)
|
|
For the year ended
December 31, 2010; quoted at constant US$ exchange rate.
Average room rate is for comparable Staybridge Suites hotels.
|
|
(2)
|
|
At December 31, 2010.
|
Staybridge Suites is the Groups upscale extended stay
brand, offering a sociable, family-like atmosphere. It was the
fastest upper-tier extended stay brand to reach the 50-hotel and
100-hotel milestones, and was ranked highest in the prestigious
J.D. Power and Associates 2009 North America Hotel Guest
Satisfaction Index Study for extended stay hotels. In 2008
Staybridge Suites opened its first EMEA hotel in Liverpool and
has since opened properties in Cairo, Abu Dhabi and Newcastle.
The Staybridge Suites brand is principally operated under
management contracts and franchise agreements. At
December 31, 2010 there were 188 Staybridge Suites hotels,
which represented 3% of the Groups total hotel rooms, of
which 96% (183 hotels) were located in the Americas. During
2010, seven hotels were added to the portfolio, and one hotel
was removed.
Candlewood
Suites
|
|
|
|
|
|
|
Americas
|
|
Average room rate
$(1)
|
|
|
62.30
|
|
Room
numbers(2)
|
|
|
28,253
|
|
|
|
|
(1)
|
|
For the year ended
December 31, 2010; quoted at constant US$ exchange rate.
Average room rate is for comparable Candlewood Suites hotels.
|
|
(2)
|
|
At December 31, 2010.
|
Candlewood Suites is the Groups midscale extended stay
brand that gives its guests all the essentials they need for a
home-like stay at great value. Shortly after being acquired by
IHG in 2003, Candlewood Suites won J.D. Powers award for
highest extended stay guest satisfaction in North America in
2004 whilst also ranking first in the Market Metrix Hospitality
Index survey for customer satisfaction. Candlewood Suites
continues to lead the way in midscale extended stay lodging,
with the most properties under development.
The Candlewood Suites brand is operated under management
contracts and franchise agreements. At December 31, 2010,
there were 288 Candlewood Suites hotels, which represented 4% of
the Groups total rooms, all of which were located in the
Americas. During 2010, 35 hotels were added to the portfolio,
and one hotel was removed.
Hotel
Indigo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
Asia Pacific
|
|
Average room rate
$(1)
|
|
|
104.36
|
|
|
|
204.65
|
|
|
|
|
|
Room
numbers(2)
|
|
|
4,254
|
|
|
|
110
|
|
|
|
184
|
|
|
|
|
(1)
|
|
For the year ended
December 31, 2010; quoted at constant US$ exchange rate.
Average room rate is for comparable Hotel Indigo hotels.
|
|
(2)
|
|
At December 31, 2010.
|
Hotel Indigo is the Groups boutique and youngest brand,
launched in 2004, and focuses on a guest that appreciates art
and design and that is seeking affordable luxury. Hotel Indigo
provides guests with the refreshing design and intimate service
synonymous with a boutique along with the consistency,
reliability, and accessibility of a branded hotel. Each hotel is
unique and reflects its local neighborhood with local murals and
images, a vibrant color palette and locally sourced and seasonal
menu items.
The Hotel Indigo brand is principally operated under franchise
agreements. At December 31, 2010, there were 38 Hotel
Indigo hotels, 35 located in the Americas. During 2010, five
hotels were added to the portfolio, and no hotels were removed.
29
Geographical
Analysis
Although it has worldwide hotel operations, the Group is most
dependent on the Americas for operating profit, reflecting the
structure of the branded global hotel market. The Americas
region generated 63% of the Groups operating profit before
central overheads and exceptional operating items during 2010.
The geographical analysis, split by number of rooms and
operating profit, is set out in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
Asia Pacific
|
|
|
(% of total)
|
|
Room
numbers(1)
|
|
|
68
|
|
|
|
19
|
|
|
|
13
|
|
Regional operating profit (before central overheads and
exceptional operating
items)(2)
|
|
|
63
|
|
|
|
22
|
|
|
|
15
|
|
|
|
|
(1)
|
|
At December 31, 2010.
|
|
(2)
|
|
For the year ended
December 31, 2010.
|
Americas
In the Americas, the largest proportion of rooms is operated
under the franchise business model (89% of rooms in the Americas
operate under this model) primarily in the midscale segment
(Holiday Inn and Holiday Inn Express). Similarly, in the upscale
segment, Crowne Plaza is predominantly franchised, whereas the
majority of the InterContinental branded hotels are operated
under franchise and management agreements. With 3,458 hotels
(439,375 rooms), the Americas represented 68% of the
Groups room count and 63% of the Groups operating
profit before central overheads and exceptional operating items
during the year ended December 31, 2010. The key profit
producing region is the United States, although the Group is
also represented in each of Latin America, Canada, Mexico
and the Caribbean.
EMEA
In EMEA, the largest proportion of rooms is operated under the
franchise business model primarily in the midscale segment
(Holiday Inn and Holiday Inn Express). Similarly, in the upscale
segment, Crowne Plaza is predominantly franchised whereas the
majority of the InterContinental branded hotels are operated
under management agreements. Comprising 694 hotels (120,852
rooms) at the end of 2010, EMEA represented 22% of the
Groups operating profit before central overheads and
exceptional operating items during the year ended
December 31, 2010. Profits are primarily generated from
hotels in the United Kingdom, Continental European gateway
cities and the Middle East portfolio.
Asia
Pacific
In Asia Pacific, the largest proportion of rooms are operated
under the managed business model. The majority of hotels are in
the midscale and upscale segments. Comprising 285 hotels (86,934
rooms) at December 31, 2010, Asia Pacific represents 15% of
the Groups operating profit before central overheads and
exceptional operating items during the year ended
December 31, 2010. The Chinese tourism market continues to
grow, with the country forecast to become one of the
worlds biggest tourist destinations within 10 years.
At December 31, 2010 the Group had 145 hotels in
Greater China and a further 147 hotels in development.
30
The following table shows information concerning the
geographical locations and ownership of the Groups hotels
as at December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
Managed
|
|
Owned and leased
|
|
Total
|
|
|
Hotels
|
|
Rooms
|
|
Hotels
|
|
Rooms
|
|
Hotels
|
|
Rooms
|
|
Hotels
|
|
Rooms
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
27
|
|
|
|
7,616
|
|
|
|
26
|
|
|
|
10,015
|
|
|
|
3
|
|
|
|
1,489
|
|
|
|
56
|
|
|
|
19,120
|
|
Crowne Plaza
|
|
|
191
|
|
|
|
50,761
|
|
|
|
18
|
|
|
|
6,312
|
|
|
|
|
|
|
|
|
|
|
|
209
|
|
|
|
57,073
|
|
Holiday
Inn(1)
|
|
|
787
|
|
|
|
137,691
|
|
|
|
28
|
|
|
|
8,825
|
|
|
|
3
|
|
|
|
1,059
|
|
|
|
818
|
|
|
|
147,575
|
|
Holiday Inn Express
|
|
|
1,846
|
|
|
|
159,615
|
|
|
|
1
|
|
|
|
252
|
|
|
|
|
|
|
|
|
|
|
|
1,847
|
|
|
|
159,867
|
|
Staybridge Suites
|
|
|
137
|
|
|
|
14,280
|
|
|
|
44
|
|
|
|
5,501
|
|
|
|
2
|
|
|
|
233
|
|
|
|
183
|
|
|
|
20,014
|
|
Candlewood Suites
|
|
|
211
|
|
|
|
18,934
|
|
|
|
77
|
|
|
|
9,319
|
|
|
|
|
|
|
|
|
|
|
|
288
|
|
|
|
28,253
|
|
Hotel Indigo
|
|
|
31
|
|
|
|
3,639
|
|
|
|
3
|
|
|
|
405
|
|
|
|
1
|
|
|
|
210
|
|
|
|
35
|
|
|
|
4,254
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
3,219
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
3,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,230
|
|
|
|
392,536
|
|
|
|
219
|
|
|
|
43,848
|
|
|
|
9
|
|
|
|
2,991
|
|
|
|
3,458
|
|
|
|
439,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
10
|
|
|
|
2,278
|
|
|
|
51
|
|
|
|
16,540
|
|
|
|
3
|
|
|
|
1,293
|
|
|
|
64
|
|
|
|
20,111
|
|
Crowne Plaza
|
|
|
71
|
|
|
|
15,888
|
|
|
|
27
|
|
|
|
7,053
|
|
|
|
|
|
|
|
|
|
|
|
98
|
|
|
|
22,941
|
|
Holiday Inn
|
|
|
245
|
|
|
|
38,250
|
|
|
|
80
|
|
|
|
14,695
|
|
|
|
|
|
|
|
|
|
|
|
325
|
|
|
|
52,945
|
|
Holiday Inn Express
|
|
|
194
|
|
|
|
23,241
|
|
|
|
3
|
|
|
|
312
|
|
|
|
1
|
|
|
|
153
|
|
|
|
198
|
|
|
|
23,706
|
|
Staybridge Suites
|
|
|
1
|
|
|
|
183
|
|
|
|
4
|
|
|
|
565
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
748
|
|
Hotel Indigo
|
|
|
2
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
110
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
291
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
523
|
|
|
|
79,950
|
|
|
|
167
|
|
|
|
39,456
|
|
|
|
4
|
|
|
|
1,446
|
|
|
|
694
|
|
|
|
120,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
6
|
|
|
|
1,814
|
|
|
|
44
|
|
|
|
16,889
|
|
|
|
1
|
|
|
|
495
|
|
|
|
51
|
|
|
|
19,198
|
|
Crowne Plaza
|
|
|
3
|
|
|
|
482
|
|
|
|
78
|
|
|
|
25,659
|
|
|
|
|
|
|
|
|
|
|
|
81
|
|
|
|
26,141
|
|
Holiday Inn
|
|
|
9
|
|
|
|
1,826
|
|
|
|
94
|
|
|
|
27,573
|
|
|
|
1
|
|
|
|
198
|
|
|
|
104
|
|
|
|
29,597
|
|
Holiday Inn Express
|
|
|
1
|
|
|
|
138
|
|
|
|
29
|
|
|
|
7,517
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
7,655
|
|
Hotel Indigo
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
184
|
|
Other
|
|
|
11
|
|
|
|
2,574
|
|
|
|
7
|
|
|
|
1,585
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
4,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
30
|
|
|
|
6,834
|
|
|
|
253
|
|
|
|
79,407
|
|
|
|
2
|
|
|
|
693
|
|
|
|
285
|
|
|
|
86,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
43
|
|
|
|
11,708
|
|
|
|
121
|
|
|
|
43,444
|
|
|
|
7
|
|
|
|
3,277
|
|
|
|
171
|
|
|
|
58,429
|
|
Crowne Plaza
|
|
|
265
|
|
|
|
67,131
|
|
|
|
123
|
|
|
|
39,024
|
|
|
|
|
|
|
|
|
|
|
|
388
|
|
|
|
106,155
|
|
Holiday
Inn(1)
|
|
|
1,041
|
|
|
|
177,767
|
|
|
|
202
|
|
|
|
51,093
|
|
|
|
4
|
|
|
|
1,257
|
|
|
|
1,247
|
|
|
|
230,117
|
|
Holiday Inn Express
|
|
|
2,041
|
|
|
|
182,994
|
|
|
|
33
|
|
|
|
8,081
|
|
|
|
1
|
|
|
|
153
|
|
|
|
2,075
|
|
|
|
191,228
|
|
Staybridge Suites
|
|
|
138
|
|
|
|
14,463
|
|
|
|
48
|
|
|
|
6,066
|
|
|
|
2
|
|
|
|
233
|
|
|
|
188
|
|
|
|
20,762
|
|
Candlewood Suites
|
|
|
211
|
|
|
|
18,934
|
|
|
|
77
|
|
|
|
9,319
|
|
|
|
|
|
|
|
|
|
|
|
288
|
|
|
|
28,253
|
|
Hotel Indigo
|
|
|
33
|
|
|
|
3,749
|
|
|
|
4
|
|
|
|
589
|
|
|
|
1
|
|
|
|
210
|
|
|
|
38
|
|
|
|
4,548
|
|
Other
|
|
|
11
|
|
|
|
2,574
|
|
|
|
31
|
|
|
|
5,095
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
7,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,783
|
|
|
|
479,320
|
|
|
|
639
|
|
|
|
162,711
|
|
|
|
15
|
|
|
|
5,130
|
|
|
|
4,437
|
|
|
|
647,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes Holiday Inn Club Vacations
(6 hotels, 2,892 rooms) within franchised.
|
Room
Count and Pipeline
During 2010, the Groups global system (the number of
hotels and rooms which are franchised, managed, owned or leased
by the Group) remained in line with 2009 at 4,437 hotels
(647,161 rooms). Openings of 259 hotels (35,744 rooms) were
driven, in particular, by continued expansion in the US and
China and offset the removal of 260 hotels (35,262 rooms).
In Asia Pacific, demand for upscale brands (InterContinental,
Crowne Plaza and Hotel Indigo) contributed 65% of total room
openings in the region.
31
The Holiday Inn brand family relaunch is substantially complete
with 2,956 hotels (89% of the total Holiday Inn brand family)
open under the updated signage and brand standards at
December 31, 2010. During 2010, the removal of
non-brand-conforming hotels contributed to the total removal of
247 Holiday Inn and Holiday Inn Express hotels (30,892 rooms).
At the end of 2010, the pipeline totaled 1,275 hotels (204,859
rooms). The Groups pipeline represents hotels and rooms
where a contract has been signed and the appropriate fees paid.
Signings of 319 hotels (55,598 rooms) represent an increase in
rooms signed from 2009 levels. Demonstrating the continued
demand for the Groups brands globally, 50% of the rooms
pipeline is now outside the Americas region. There were 25 hotel
signings (3,025 rooms) for Hotel Indigo as it gains real
momentum in Europe and Asia Pacific where, together, 12 hotels
(1,456 rooms) were signed. The Group also entered into an
InterContinental Alliance relationship with the Las Vegas Sands
Corp. to bring the 6,874 all-suite Venetian and Palazzo
Resorts into the Groups system in 2011.
During 2010, the opening of 35,744 rooms contributed to a net
pipeline decline of 5,504 rooms. Terminations from the pipeline
in 2010 totaled 25,358 rooms, a decrease of 21% compared with
2009. Terminations occur for a number of reasons such as the
withdrawal of financing and changes in local market conditions.
There are no assurances that all of the hotels in the pipeline
will open. The construction, conversion and development of
hotels is dependent upon a number of factors, including meeting
brand standards, obtaining the necessary permits relating to
construction and operation, the cost of constructing, converting
and equipping such hotels and the ability to obtain suitable
financing at acceptable interest rates. The supply of capital
for hotel development in the United States and major economies
may not continue at previous levels and consequently the
pipeline could decrease.
Americas
The Americas hotel and room count in 2010 decreased by 21 hotels
(5,979 rooms) to 3,458 hotels (439,375 rooms). Openings of 194
hotels (20,980 rooms) included key openings of the
InterContinental New York Times Square and the first Staybridge
Suites in New York, taking IHGs room count in New York
city to 6,570. The Holiday Inn brand family generated openings
of 137 hotels (13,446 rooms) and the Groups extended stay
brands, Staybridge Suites and Candlewood Suites, achieved
openings of 41 hotels (3,862 rooms). Removals of 215 hotels
(26,959 rooms) were mainly from Holiday Inn and Holiday Inn
Express hotels.
The Americas pipeline totaled 890 hotels (102,509 rooms) at
December 31, 2010. Overall signings of 30,223 rooms were
flat on 2009 as slow real estate and construction activity
continued into 2010. Notable signings included the
InterContinental Alliance established with the Las Vegas Sands
Corp., and the re-entry to the Hawaii market with the Holiday
Inn Beachcomber Resort in Waikiki Beach.
EMEA
During 2010, EMEA hotel and room count decreased by one hotel (a
net increase of 556 rooms) to 694 hotels (120,852 rooms).
Activity included openings of 33 hotels (5,767 rooms) and
removals of 34 hotels (5,211 rooms). The net decrease of seven
Holiday Inn and Holiday Inn Express hotels comprised 25 openings
and 32 removals.
The pipeline in EMEA increased by one hotel (a net decrease of
26 rooms) to 153 hotels (31,435 rooms). There were 9,303 room
signings in 2010, with continued demand for the Groups
brands in the UK and Germany. Demand was particularly strong in
the midscale segment which represented 61% of room signings.
There were eight signings for the Groups lifestyle brand,
Hotel Indigo, including four in the UK and entry into new
markets in Lisbon, Madrid and Berlin. There were also six Crowne
Plaza signings including the strategic markets of Istanbul, St
Petersburg and Amsterdam.
Asia
Pacific
Asia Pacific hotel and room count increased by 21 hotels (5,905
rooms) to 285 hotels (86,934 rooms). Openings of 32 hotels
(8,997 rooms) were partially offset by the removal of 11
hotels (3,092 rooms). The growth
32
was driven by 24 hotel openings in 17 cities across Greater
China (7,253 rooms), seven hotels (1,477 rooms) more than in
2009. This included key hotel openings in Shanghai of the
InterContinental at the Expo site and the Hotel Indigo on the
Bund, the first opening for this brand in Asia Pacific. Across
the region 65% of rooms opened were in upscale brands
(InterContinental, Crowne Plaza and Hotel Indigo).
The pipeline in Asia Pacific increased by 19 hotels (5,741
rooms) to 232 hotels (70,915 rooms). Pipeline growth was evenly
balanced between the Greater China market (nine hotels, 3,128
rooms) and Asia Australasia (10 hotels, 2,613 rooms) including
six hotel signings in India taking its total pipeline to 10,073
rooms.
Across the region there were 18 Holiday Inn Express signings,
more than double the number for this brand in 2009, indicating
the potential for midscale growth in the region. In Vietnam two
new Holiday Inn resorts were signed in the prime beachfront
locations of Cam Ranh Bay and Phu Quoc. There were also 12
Crowne Plaza signings, including the Crowne Plaza Lumpini Park
in Bangkok.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
Rooms
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
Global hotel and room count at December 31,
|
|
2010
|
|
2009
|
|
over 2009
|
|
2010
|
|
2009
|
|
over 2009
|
|
Analyzed by brand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
171
|
|
|
|
166
|
|
|
|
5
|
|
|
|
58,429
|
|
|
|
56,121
|
|
|
|
2,308
|
|
Crowne Plaza
|
|
|
388
|
|
|
|
366
|
|
|
|
22
|
|
|
|
106,155
|
|
|
|
100,994
|
|
|
|
5,161
|
|
Holiday
Inn(1)
|
|
|
1,247
|
|
|
|
1,325
|
|
|
|
(78
|
)
|
|
|
230,117
|
|
|
|
243,460
|
|
|
|
(13,343
|
)
|
Holiday Inn Express
|
|
|
2,075
|
|
|
|
2,069
|
|
|
|
6
|
|
|
|
191,228
|
|
|
|
188,007
|
|
|
|
3,221
|
|
Staybridge Suites
|
|
|
188
|
|
|
|
182
|
|
|
|
6
|
|
|
|
20,762
|
|
|
|
19,885
|
|
|
|
877
|
|
Candlewood Suites
|
|
|
288
|
|
|
|
254
|
|
|
|
34
|
|
|
|
28,253
|
|
|
|
25,283
|
|
|
|
2,970
|
|
Hotel Indigo
|
|
|
38
|
|
|
|
33
|
|
|
|
5
|
|
|
|
4,548
|
|
|
|
4,030
|
|
|
|
518
|
|
Other
|
|
|
42
|
|
|
|
43
|
|
|
|
(1
|
)
|
|
|
7,669
|
|
|
|
8,899
|
|
|
|
(1,230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,437
|
|
|
|
4,438
|
|
|
|
(1
|
)
|
|
|
647,161
|
|
|
|
646,679
|
|
|
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analyzed by ownership type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised(1)
|
|
|
3,783
|
|
|
|
3,799
|
|
|
|
(16
|
)
|
|
|
479,320
|
|
|
|
483,541
|
|
|
|
(4,221
|
)
|
Managed
|
|
|
639
|
|
|
|
622
|
|
|
|
17
|
|
|
|
162,711
|
|
|
|
157,287
|
|
|
|
5,424
|
|
Owned and leased
|
|
|
15
|
|
|
|
17
|
|
|
|
(2
|
)
|
|
|
5,130
|
|
|
|
5,851
|
|
|
|
(721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,437
|
|
|
|
4,438
|
|
|
|
(1
|
)
|
|
|
647,161
|
|
|
|
646,679
|
|
|
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes Holiday Inn Club Vacations
(6 hotels, 2,892 rooms in both 2010 and 2009).
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
Rooms
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
Global pipeline at December 31,
|
|
2010
|
|
2009
|
|
over 2009
|
|
2010
|
|
2009
|
|
over 2009
|
|
Analyzed by brand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
60
|
|
|
|
63
|
|
|
|
(3
|
)
|
|
|
19,374
|
|
|
|
20,173
|
|
|
|
(799
|
)
|
Crowne Plaza
|
|
|
123
|
|
|
|
129
|
|
|
|
(6
|
)
|
|
|
38,994
|
|
|
|
38,555
|
|
|
|
439
|
|
Holiday Inn
|
|
|
313
|
|
|
|
338
|
|
|
|
(25
|
)
|
|
|
57,505
|
|
|
|
59,008
|
|
|
|
(1,503
|
)
|
Holiday Inn Express
|
|
|
494
|
|
|
|
563
|
|
|
|
(69
|
)
|
|
|
53,219
|
|
|
|
57,756
|
|
|
|
(4,537
|
)
|
Staybridge Suites
|
|
|
101
|
|
|
|
123
|
|
|
|
(22
|
)
|
|
|
10,760
|
|
|
|
13,360
|
|
|
|
(2,600
|
)
|
Candlewood Suites
|
|
|
120
|
|
|
|
169
|
|
|
|
(49
|
)
|
|
|
10,506
|
|
|
|
14,851
|
|
|
|
(4,345
|
)
|
Hotel Indigo
|
|
|
62
|
|
|
|
53
|
|
|
|
9
|
|
|
|
7,627
|
|
|
|
6,660
|
|
|
|
967
|
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
6,874
|
|
|
|
|
|
|
|
6,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,275
|
|
|
|
1,438
|
|
|
|
(163
|
)
|
|
|
204,859
|
|
|
|
210,363
|
|
|
|
(5,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analyzed by ownership type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
970
|
|
|
|
1,158
|
|
|
|
(188
|
)
|
|
|
113,940
|
|
|
|
126,386
|
|
|
|
(12,446
|
)
|
Managed
|
|
|
305
|
|
|
|
280
|
|
|
|
25
|
|
|
|
90,919
|
|
|
|
83,977
|
|
|
|
6,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,275
|
|
|
|
1,438
|
|
|
|
(163
|
)
|
|
|
204,859
|
|
|
|
210,363
|
|
|
|
(5,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seasonality
Although the performance of individual hotels and geographic
markets might be highly seasonal due to a variety of factors
such as the tourist trade and local economic conditions, the
geographical spread of the Groups hotels in 100 countries
and territories and the relative stability of the income stream
from franchising and management activities, diminishes, to some
extent, the effect of seasonality on the results of the Group.
Competition
The Groups hotels compete with a wide range of facilities
offering various types of lodging options and related services
to the public. The competition includes several large and
moderate sized hotel chains offering upper, mid and lower priced
accommodation and also includes independent hotels in each of
these market segments, particularly outside of North America
where the lodging industry is much more fragmented. Major hotel
chains which compete with the Group include Marriott
International, Inc., Starwood Hotels & Resorts
Worldwide, Inc., Choice Hotels International, Inc., Best Western
International, Inc., Hilton Hotels Corporation, Wyndham
Worldwide Corporation, Four Seasons Hotels Inc. and Accor S.A.
The Group also competes with non-hotel options, such as
timeshare offerings and cruises.
RevPAR
The following tables present RevPAR statistics for the year
ended December 31, 2010 and a comparison to 2009. RevPAR is
a meaningful indicator of performance because it measures
period-over-period
change in rooms revenue for comparable hotels. RevPAR is
calculated by dividing rooms revenue for comparable hotels by
room nights available to guests for the period.
Franchised, managed, owned and leased statistics are for
comparable hotels, and include only those hotels in the
Groups system at December 31, 2010 and franchised,
managed, owned or leased by the Group since January 1, 2009.
34
The comparison with 2009 is at constant US$ exchange rates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
Managed
|
|
Owned and leased
|
|
|
|
|
Change vs
|
|
|
|
Change vs
|
|
|
|
Change vs
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
58.5
|
%
|
|
|
3.3
|
%pts
|
|
|
68.7
|
%
|
|
|
4.7
|
%pts
|
|
|
79.4
|
%
|
|
|
0.4
|
%pts
|
Average daily rate
|
|
$
|
124.05
|
|
|
|
(0.3
|
)%
|
|
$
|
170.14
|
|
|
|
2.7
|
%
|
|
$
|
223.15
|
|
|
|
8.1
|
%
|
RevPAR
|
|
$
|
72.54
|
|
|
|
5.7
|
%
|
|
$
|
116.93
|
|
|
|
10.2
|
%
|
|
$
|
177.22
|
|
|
|
8.7
|
%
|
Crowne Plaza
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
58.3
|
%
|
|
|
3.3
|
%pts
|
|
|
70.7
|
%
|
|
|
3.4
|
%pts
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
$
|
97.79
|
|
|
|
(1.5
|
)%
|
|
$
|
125.36
|
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
RevPAR
|
|
$
|
57.04
|
|
|
|
4.5
|
%
|
|
$
|
88.63
|
|
|
|
6.2
|
%
|
|
|
|
|
|
|
|
|
Holiday Inn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
58.1
|
%
|
|
|
2.8
|
%pts
|
|
|
68.9
|
%
|
|
|
4.0
|
%pts
|
|
|
72.5
|
%
|
|
|
1.5
|
%pts
|
Average daily rate
|
|
$
|
94.10
|
|
|
|
(0.9
|
)%
|
|
$
|
106.74
|
|
|
|
0.9
|
%
|
|
$
|
106.24
|
|
|
|
(2.1
|
)%
|
RevPAR
|
|
$
|
54.64
|
|
|
|
4.1
|
%
|
|
$
|
73.56
|
|
|
|
7.1
|
%
|
|
$
|
76.98
|
|
|
|
(0.1
|
)%
|
Holiday Inn Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
61.8
|
%
|
|
|
3.0
|
%pts
|
|
|
80.3
|
%
|
|
|
5.2
|
%pts
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
$
|
95.45
|
|
|
|
(0.7
|
)%
|
|
$
|
133.96
|
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
RevPAR
|
|
$
|
58.95
|
|
|
|
4.4
|
%
|
|
$
|
107.59
|
|
|
|
9.5
|
%
|
|
|
|
|
|
|
|
|
Staybridge Suites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
70.4
|
%
|
|
|
6.7
|
%pts
|
|
|
75.3
|
%
|
|
|
6.9
|
%pts
|
|
|
76.7
|
%
|
|
|
8.5
|
%pts
|
Average daily rate
|
|
$
|
92.17
|
|
|
|
(2.8
|
)%
|
|
$
|
98.16
|
|
|
|
(3.5
|
)%
|
|
$
|
89.10
|
|
|
|
(5.9
|
)%
|
RevPAR
|
|
$
|
64.91
|
|
|
|
7.4
|
%
|
|
$
|
73.96
|
|
|
|
6.3
|
%
|
|
$
|
68.38
|
|
|
|
5.9
|
%
|
Candlewood Suites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
67.1
|
%
|
|
|
5.2
|
%pts
|
|
|
71.9
|
%
|
|
|
8.7
|
%pts
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
$
|
66.92
|
|
|
|
(5.0
|
)%
|
|
$
|
57.13
|
|
|
|
(8.8
|
)%
|
|
|
|
|
|
|
|
|
RevPAR
|
|
$
|
44.88
|
|
|
|
3.0
|
%
|
|
$
|
41.10
|
|
|
|
3.7
|
%
|
|
|
|
|
|
|
|
|
Hotel Indigo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
59.0
|
%
|
|
|
6.7
|
%pts
|
|
|
62.7
|
%
|
|
|
3.3
|
%pts
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
$
|
102.99
|
|
|
|
(0.7
|
)%
|
|
$
|
111.17
|
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
RevPAR
|
|
$
|
60.76
|
|
|
|
12.0
|
%
|
|
$
|
69.65
|
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
Managed
|
|
Owned and leased
|
|
|
|
|
Change vs
|
|
|
|
Change vs
|
|
|
|
Change vs
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
57.3
|
%
|
|
|
1.0
|
%pts
|
|
|
65.8
|
%
|
|
|
4.3
|
%pts
|
|
|
76.5
|
%
|
|
|
2.9
|
%pts
|
Average daily rate
|
|
$
|
283.71
|
|
|
|
0.5
|
%
|
|
$
|
210.41
|
|
|
|
(1.9
|
)%
|
|
$
|
359.89
|
|
|
|
7.1
|
%
|
RevPAR
|
|
$
|
162.68
|
|
|
|
2.3
|
%
|
|
$
|
138.55
|
|
|
|
4.9
|
%
|
|
$
|
275.43
|
|
|
|
11.4
|
%
|
Crowne Plaza
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
66.9
|
%
|
|
|
4.7
|
%pts
|
|
|
75.6
|
%
|
|
|
2.7
|
%pts
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
$
|
135.32
|
|
|
|
(0.8
|
)%
|
|
$
|
156.14
|
|
|
|
(4.7
|
)%
|
|
|
|
|
|
|
|
|
RevPAR
|
|
$
|
90.48
|
|
|
|
6.7
|
%
|
|
$
|
118.03
|
|
|
|
(1.2
|
)%
|
|
|
|
|
|
|
|
|
Holiday Inn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
64.7
|
%
|
|
|
4.4
|
%pts
|
|
|
71.6
|
%
|
|
|
1.3
|
%pts
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
$
|
117.37
|
|
|
|
2.2
|
%
|
|
$
|
111.30
|
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
RevPAR
|
|
$
|
75.99
|
|
|
|
9.6
|
%
|
|
$
|
79.73
|
|
|
|
2.7
|
%
|
|
|
|
|
|
|
|
|
Holiday Inn Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
69.8
|
%
|
|
|
3.0
|
%pts
|
|
|
50.8
|
%
|
|
|
4.1
|
%pts
|
|
|
70.2
|
%
|
|
|
9.7
|
%pts
|
Average daily rate
|
|
$
|
95.23
|
|
|
|
1.3
|
%
|
|
$
|
75.33
|
|
|
|
(9.8
|
)%
|
|
$
|
110.30
|
|
|
|
11.7
|
%
|
RevPAR
|
|
$
|
66.43
|
|
|
|
5.9
|
%
|
|
$
|
38.26
|
|
|
|
(2.0
|
)%
|
|
$
|
77.49
|
|
|
|
29.5
|
%
|
Staybridge Suites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
|
|
|
|
|
|
|
|
74.3
|
%
|
|
|
7.7
|
%pts
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
|
|
|
|
|
|
|
|
$
|
112.18
|
|
|
|
(3.1
|
)%
|
|
|
|
|
|
|
|
|
RevPAR
|
|
|
|
|
|
|
|
|
|
$
|
83.39
|
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
|
Hotel Indigo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
93.4
|
%
|
|
|
7.4
|
%pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
$
|
204.65
|
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR
|
|
$
|
191.16
|
|
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
Managed
|
|
Owned and leased
|
|
|
|
|
Change vs
|
|
|
|
Change vs
|
|
|
|
Change vs
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
69.7
|
%
|
|
|
1.2
|
%pts
|
|
|
66.9
|
%
|
|
|
6.1
|
%pts
|
|
|
71.1
|
%
|
|
|
5.9
|
%pts
|
Average daily rate
|
|
$
|
181.67
|
|
|
|
9.6
|
%
|
|
$
|
165.41
|
|
|
|
1.9
|
%
|
|
$
|
358.55
|
|
|
|
5.7
|
%
|
RevPAR
|
|
$
|
126.65
|
|
|
|
11.5
|
%
|
|
$
|
110.59
|
|
|
|
12.2
|
%
|
|
$
|
254.97
|
|
|
|
15.3
|
%
|
Crowne Plaza
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
59.0
|
%
|
|
|
2.5
|
%pts
|
|
|
67.7
|
%
|
|
|
6.8
|
%pts
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
$
|
125.74
|
|
|
|
(0.5
|
)%
|
|
$
|
104.93
|
|
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
RevPAR
|
|
$
|
74.21
|
|
|
|
4.0
|
%
|
|
$
|
71.05
|
|
|
|
12.9
|
%
|
|
|
|
|
|
|
|
|
Holiday Inn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
74.7
|
%
|
|
|
2.6
|
%pts
|
|
|
67.3
|
%
|
|
|
5.5
|
%pts
|
|
|
90.1
|
%
|
|
|
5.4
|
%pts
|
Average daily rate
|
|
$
|
84.20
|
|
|
|
(1.3
|
)%
|
|
$
|
88.51
|
|
|
|
5.2
|
%
|
|
$
|
129.34
|
|
|
|
(0.5
|
)%
|
RevPAR
|
|
$
|
62.86
|
|
|
|
2.2
|
%
|
|
$
|
59.57
|
|
|
|
14.5
|
%
|
|
$
|
116.52
|
|
|
|
5.8
|
%
|
Holiday Inn Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
61.3
|
%
|
|
|
(2.4
|
)%pts
|
|
|
66.2
|
%
|
|
|
9.5
|
%pts
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
$
|
47.79
|
|
|
|
(6.4
|
)%
|
|
$
|
45.61
|
|
|
|
13.7
|
%
|
|
|
|
|
|
|
|
|
RevPAR
|
|
$
|
29.27
|
|
|
|
(9.9
|
)%
|
|
$
|
30.20
|
|
|
|
32.6
|
%
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
70.3
|
%
|
|
|
4.7
|
%pts
|
|
|
77.0
|
%
|
|
|
2.4
|
%pts
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
$
|
108.52
|
|
|
|
(6.2
|
)%
|
|
$
|
92.30
|
|
|
|
(6.5
|
)%
|
|
|
|
|
|
|
|
|
RevPAR
|
|
$
|
76.31
|
|
|
|
0.5
|
%
|
|
$
|
71.03
|
|
|
|
(3.5
|
)%
|
|
|
|
|
|
|
|
|
36
Regulation
Both in the United Kingdom and internationally, the Groups
hotel operations are subject to regulation, including health and
safety, zoning and similar land use laws as well as regulations
that influence or determine wages, prices, interest rates,
construction procedures and costs.
TRADEMARKS
Group companies own a substantial number of service brands upon
which it is dependent and the Group believes that its
significant trademarks are protected in all material respects in
the markets in which its brands currently operate.
ORGANIZATIONAL
STRUCTURE
Principal
operating subsidiary undertakings
InterContinental Hotels Group PLC was the beneficial owner of
all of the equity share capital, either itself or through
subsidiary undertakings, of the following companies during the
year. The companies listed below include those which principally
affect the amount of profit and assets of the Group.
Six Continents
Limited(a)
Hotel Inter-Continental London
Limited(a)
IHG Hotels
Limited(a)
Six Continents Hotels,
Inc.(b)
Inter-Continental Hotels
Corporation(b)
111 East
48th
Street Holdings,
LLC(b)
InterContinental Hotels Group Resources,
Inc.(b)
InterContinental Hong Kong
Limited(c)
Société Nouvelle du Grand Hotel
SA(d)
|
|
|
(a)
|
|
Incorporated in Great Britain and
registered in England and Wales.
|
|
(b)
|
|
Incorporated in the United States.
|
|
(c)
|
|
Incorporated in Hong Kong.
|
|
(d)
|
|
Incorporated in France.
|
37
PROPERTY,
PLANT AND EQUIPMENT
Group companies own and lease properties throughout the world,
principally hotels but also offices. The table below analyzes
the net book value of the Groups property, plant and
equipment at December 31, 2010. Approximately 45% of hotel
properties by value were directly owned, with 50% held under
leases having a term of 50 years or longer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at December 31, 2010
|
|
Americas
|
|
EMEA
|
|
Asia Pacific
|
|
Total
|
|
|
($ million)
|
|
Land and buildings
|
|
|
495
|
|
|
|
523
|
|
|
|
317
|
|
|
|
1,335
|
|
Fixtures, fittings and equipment
|
|
|
119
|
|
|
|
146
|
|
|
|
90
|
|
|
|
355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
614
|
|
|
|
669
|
|
|
|
407
|
|
|
|
1,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximately 85% of the net book value relates to the top five
owned and leased hotels (in terms of value) of a total of 15
hotels, including $183 million relating to assets held
under finance leases.
There were no assets classified as held for sale at
December 31, 2010. Subsequent to December 31, 2010,
four hotels, including the InterContinental Barclay in New York,
met the held for sale criteria of IFRS 5
Non-current Assets Held for Sale and Discontinued
Operations. Three of the properties are located in North
America and one in Australia, and all are expected to be sold
within the next 12 months. The fair value less estimated
costs to sell for each property exceeds its net book value.
Contracts placed for expenditure on property, plant and
equipment not included in the Consolidated Financial Statements
at December 31, 2010 amounted to $10 million.
Charges over one hotel totaling $85 million exist as
security provided to the Groups pension plans.
ENVIRONMENT
With over 4,400 hotels globally and almost 1,300 in the
pipeline, the Group has an opportunity to make a positive
difference in the communities in which it operates.
As such the Group is committed to:
|
|
|
|
|
Implementing sound environmental practices in the design,
development and operation of its hotels;
|
|
|
|
Encouraging the development and integration of sustainable
technologies;
|
|
|
|
Endeavoring to reduce its use of energy, water and re-use and
recycle the resources consumed by its business wherever
practical;
|
|
|
|
Engaging its customers, colleagues, hotel owners, suppliers and
contractors in its efforts to protect the environment;
|
|
|
|
Providing the training and resources required to meet its
objectives;
|
|
|
|
Monitoring, recording and benchmarking its environmental
performance on a regular basis;
|
|
|
|
Making business decisions taking into account these
commitments; and
|
|
|
|
Communicating its policies, practices and programs to all its
stakeholders.
|
Corporate responsibility (CR) is central to the way
the Group does business. Acting responsibly creates value for
its brands while helping its hotels to manage costs, drive
revenue and be prepared for the future. It also keeps the Group
in tune with the thinking of its stakeholders, and supports its
mission to champion and protect the Groups trusted
reputation, which in turn reinforces trust in the Groups
brands, builds competitive advantage and strengthens its
corporate reputation.
The Group is focused on developing better ways to design, build
and run its hotels. The Groups strategy is based on
innovation and collaboration.
38
|
|
|
|
|
Innovation the Group develops innovative
concepts and technologies, and works closely with its partners
to find creative solutions to the challenges it faces.
|
|
|
|
Collaboration the Groups stakeholders
play a key role in helping it identify and tackle its
priorities. Stakeholders include guests and corporate clients,
hotel owners and franchise holders, local communities,
employees, shareholders, suppliers, academic institutions,
non-government organizations, governments and industry-specific
institutions.
|
The Groups innovation and collaboration activities are
focused on the areas that make most sense to its business, and
where it believes it can make most difference, in its
communities. The Groups CR strategy focuses on two main
pillars:
|
|
|
|
|
Environment reduce energy use in the
Groups owned and managed estate by between 6% and 10% over
three years
(2010-2012)
via the use of Green Engage; and
|
|
|
|
Communities generate local economic
opportunities, particularly through the IHG
Academy, and provide support through disaster relief.
|
The Group chooses not simply to mitigate its greenhouse gas
emissions through the purchase of voluntary carbon offsets. The
Group believes that as a global organization with operations in
many markets, its biggest contribution towards cutting
greenhouse gas emissions will come from delivering real emission
cuts through innovating new and better ways to
design, build and run its hotels not through
offsetting.
The Groups key programs include;
|
|
|
|
|
Green Engage Green Engage is the Groups
innovative online sustainability management system, which
launched in 2009 and, which defines the Groups vision of a
sustainable hotel. Green Engage is designed to help hotels
reduce energy costs, with hotels achieving energy savings of up
to 25%. The system, which has recently received a LEED
(Leadership in Energy and Environmental Design) endorsement,
allows hotels to track, measure and report on their energy,
water and waste, and recommends actions that will cut energy
bills without compromising the guest experience. The Group is
the worlds first hotel company to be awarded LEED
endorsement for an existing hotel program, further cementing its
place as an industry leader in sustainability.
|
|
|
|
IHG Academy The
IHG Academy is a public/private
partnership with education providers and community organizations
that helps the Group create local economic opportunities.
|
|
|
|
The Innovation Hotel The Groups online
innovation hotel takes visitors on a
tour of the model hotel of the future, pointing out practical
solutions and technology that can make its hotels greener and
more efficient.
|
Over 1,000 of the Groups hotels are registered to use
Green Engage and 2,000 individuals are registered as users. The
Groups aim is to have its entire global system using it
over time. In 2011 the Group will launch version 2.0 of Green
Engage based on feedback from existing users. The new version
retains all the features and benefits of the original but is
easier to use with better benchmarking.
|
|
ITEM 4A.
|
UNRESOLVED
STAFF COMMENTS
|
None.
|
|
ITEM 5.
|
OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
|
INTRODUCTION
Business
and Overview
The Group is an international hotel business which owns a
portfolio of established and diverse hotel brands, including
InterContinental Hotels & Resorts, Crowne Plaza
Hotels & Resorts, Holiday Inn Hotels &
Resorts (including Holiday Inn Club Vacations), Holiday Inn
Express, Staybridge Suites, Candlewood Suites and Hotel Indigo.
At December 31, 2010, the Group had 4,437 franchised,
managed, owned and leased hotels and 647,161
39
guest rooms in 100 countries and territories around the world.
The Group also manages the hotel loyalty program, Priority Club
Rewards.
The Groups revenue and earnings are derived from hotel
operations, which include franchise and other fees paid under
franchise agreements, management and other fees paid under
management contracts, where the Group operates
third-parties hotels, and operation of the Groups
owned hotels.
Operational
Performance
Revenue increased by 5.9% to $1,628 million and operating
profit before exceptional items increased by 22.3% to
$444 million during the year ended December 31, 2010.
The 2010 results reflect a return to RevPAR growth in a
recovering global market, with an overall RevPAR increase of
6.2% led by occupancy. 2010 fourth quarter comparable RevPAR
increased 8.0% compared to the same quarter in 2009, including a
2.4% increase in average daily rate. During 2010, average daily
rate for the InterContinental and Holiday Inn brands increased
by 1.3% and 0.5% respectively.
The $1 billion roll-out of the Holiday Inn brand family
relaunch is substantially complete. By December 31, 2010,
2,956 hotels were converted globally under the relaunch program,
representing 89% of all Holiday Inn hotels. The required
improvement in quality standards contributed to the removal of a
total of 35,262 rooms from the Groups global system during
2010. In spite of this necessary reduction, the closing global
room count was 647,161 rooms, in line with 2009 levels.
The performance of the Group is evaluated primarily on a
regional basis. The regional operations are split by business
model: franchise agreement, management contract, and owned and
leased operations. All three income types are affected by
occupancy and room rates achieved by hotels, the ability to
manage costs and the change in the number of available rooms
through acquisition, development and disposition. Results are
also impacted by economic conditions and capacity. The
Groups segmental results are shown before exceptional
operating items, interest expense, interest income and income
taxes.
CRITICAL
ACCOUNTING POLICIES
The preparation of the financial statements requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and costs and expense
during the reporting period. On an ongoing basis, management
evaluates its estimates and judgments, including those relating
to revenue recognition, bad debts, investments, property, plant
and equipment, goodwill and intangible assets, income taxes,
guest program liability, self insurance claims payable,
restructuring costs, retirement benefits and contingencies and
litigation.
Management bases its estimates and judgments on historical
experience and on other factors that are believed to be
reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying value of
assets and liabilities that are not readily available from other
sources. Actual results may differ from these estimates under
different assumptions and conditions.
The Groups critical accounting policies are set out below.
Revenue
recognition
Revenue is the gross inflow of economic benefits received and
receivable by the Group on its own account where those inflows
result in increases in equity.
Revenue is derived from the following sources: franchise fees;
management fees; owned and leased properties and other revenues
which are ancillary to the Groups operations, including
technology fee income.
Generally, revenue represents sales (excluding VAT and similar
taxes) of goods and services, net of discounts, provided in the
normal course of business and recognized when services have been
rendered. The following is a description of the composition of
revenues of the Group.
40
Franchise fees received in connection with the
license of the Groups brand names, usually under long-term
contracts with the hotel owner. The Group charges franchise
royalty fees as a percentage of room revenue. Revenue is
recognized when earned and realized or realizable under the
terms of the agreement.
Management fees earned from hotels managed by the
Group, usually under long-term contracts with the hotel owner.
Management fees include a base fee, which is generally a
percentage of hotel revenue, and an incentive fee, which is
generally based on the hotels profitability or cash flows.
Revenue is recognized when earned and realized or realizable
under the terms of the contract.
Owned and leased primarily derived from hotel
operations, including the rental of rooms and food and beverage
sales from owned and leased hotels operated under the
Groups brand names. Revenue is recognized when rooms are
occupied and food and beverages are sold.
In addition to management or franchise fees, hotels within the
IHG system pay cash assessments and contributions which are
collected for specific use within the System Fund
(the Fund). The Fund also receives proceeds
from the sale of Priority Club Rewards points. The Group exerts
significant influence over the operation of the Fund, however,
the Fund is managed for the benefit of hotels in the system with
the objective of driving revenues for the hotels. The Fund is
used to pay for marketing, the Priority Club Rewards loyalty
program and the global reservations system. The Fund is planned
to operate at breakeven with any short-term timing surplus or
deficit carried in the Consolidated statement of financial
position within working capital. As all Fund income is
designated for specific purposes and does not result in a profit
or loss for the Group, the revenue recognition criteria as
outlined in the accounting policy above are not met and
therefore the income and expenses of the Fund are not included
in the Consolidated income statement. Financial information
relating to the Fund is included in Note 31 of Notes to the
Consolidated Financial Statements.
Goodwill,
intangible assets, and property, plant and
equipment
Goodwill arising on acquisitions prior to October 1, 1998
was eliminated against equity. From October 1, 1998 to
December 31, 2003, acquired goodwill was capitalized and
amortized over a period not exceeding 20 years. Since
January 1, 2004, goodwill continued to be capitalized but
amortization ceased as at that date, replaced by an impairment
review on an annual basis or more frequently if there are
indicators of impairment. The annual review is performed in the
fourth quarter. Goodwill is allocated to cash-generating units
for impairment testing purposes.
Intangible assets and property, plant and equipment are
capitalized and amortized over their expected useful lives, and
reviewed for impairment when events or circumstances indicate
that the carrying value may not be recoverable. Assets that do
not generate independent cash flows are combined into
cash-generating units.
The impairment testing of individual assets or cash-generating
units requires an assessment of the recoverable amount of the
asset or cash-generating unit. If the carrying value of the
asset or cash-generating unit exceeds its estimated recoverable
amount, the asset or cash-generating unit is written down to its
recoverable amount. Recoverable amount is the greater of fair
value less cost to sell and value in use. Value in use is
assessed based on estimated future cash flows discounted to
their present value using a pre-tax discount rate that is based
on the Groups weighted average cost of capital adjusted to
reflect the risks specific to the business model and territory
of the cash-generating unit or asset being tested. The outcome
of such an assessment is subjective, and the result sensitive to
the assumed future cashflows to be generated by the
cash-generating units or assets and discount rates applied in
calculating the value in use. Any impairment arising is charged
to the income statement.
Following the full impairment of Americas managed goodwill in
2009, the remaining balance of goodwill of $92 million at
December 31, 2010, relates to Asia Australasia franchised
and managed operations. Given the substantial valuation headroom
relating to this goodwill, management believe that the carrying
value of the cash-generating unit would only exceed its
recoverable amount in the event of highly unlikely changes in
the key assumptions.
During 2010, the Group recognized total impairment charges of
$7 million across two asset categories as follows:
|
|
|
|
|
Property, plant and equipment $6 million in
respect of one hotel in the Americas; and
|
|
|
|
Other financial assets $1 million in respect of
two equity investments in North America.
|
41
The hotel impairment charge was measured by reference to value
in use calculations using a pre-tax discount rate of 11.8%.
Following the impairment charge, the hotel had a net book value
of $4 million at December 31, 2010.
The equity investments were impaired following significant and
prolonged declines in their fair value below cost. Following the
impairment charges, the combined investments had a net book
value of $5 million.
Income
taxes
The Group provides for deferred tax in accordance with IAS 12
Income Taxes in respect of temporary differences
between the tax base and carrying value of assets and
liabilities including accelerated capital allowances, unrelieved
tax losses, unremitted profits from overseas where the Group
does not control remittance, gains rolled over into replacement
assets, gains on previously revalued properties and other
short-term temporary differences. Deferred tax assets are
recognized to the extent that it is regarded as probable that
the deductible temporary differences can be realized. The Group
estimates deferred tax assets and liabilities based on current
tax laws and rates, and in certain cases, business plans,
including managements expectations regarding the manner
and timing of recovery of the related assets. Changes in these
estimates may affect the amount of deferred tax liabilities or
the valuation of deferred tax assets.
Provisions for tax contingencies require judgments on the
expected outcome of tax exposures which may be subject to
significant uncertainty, and therefore the actual results may
vary from expectations resulting in adjustments to contingencies
and cash tax settlements. During 2010, exceptional provision
releases of $7 million were made in relation to tax matters
which have been settled or in respect of which the relevant
statutory limitation period has expired.
Loyalty
program
The hotel loyalty program, Priority Club Rewards enables members
to earn points, funded through hotel assessments, during each
qualifying stay and redeem the points at a later date for free
accommodation or other benefits. The future redemption liability
is included in trade and other payables and is estimated using
eventual redemption rates determined by actuarial methods and
points values. Actuarial gains and losses on the future
redemption liability are borne by the System Fund and any
resulting changes in the liability would correspondingly adjust
the amount of short-term timing differences held in the Group
statement of financial position. The future redemption liability
amounted to $531 million at December 31, 2010.
Pensions
and other post-employment benefit plans
Accounting for pensions and other post-employment benefit plans
requires the Group to make assumptions including, but not
limited to, future asset returns, discount rates, rates of
inflation, life expectancies and health care costs. The use of
different assumptions could have a material effect on the
accounting values of the relevant assets and liabilities which
could result in a material change to the cost of such
liabilities as recognized in the income statement over time.
These assumptions are subject to periodic review. A sensitivity
analysis to changes in various assumptions is included in
Note 3 of Notes to the Consolidated Financial Statements.
OPERATING
RESULTS
Accounting
Principles
The following discussion and analysis is based on the
Consolidated Financial Statements of the Group, which are
prepared in accordance with IFRS.
For the year ended December 31, 2010 the results include
exceptional items totaling a net charge of $4 million (2009
$80 million, 2008 $85 million). For comparability of
the periods presented, some performance indicators in this
Operating and financial review and prospects discussion have
been calculated after eliminating these exceptional items. Such
indicators are prefixed with adjusted. An analysis
of exceptional items is included in Note 5 of Notes to the
Consolidated Financial Statements.
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
($ million)
|
|
Total revenue
|
|
|
1,628
|
|
|
|
1,538
|
|
|
|
1,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional operating items
|
|
|
444
|
|
|
|
363
|
|
|
|
549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exceptional operating items
|
|
|
(7
|
)
|
|
|
(373
|
)
|
|
|
(132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss)
|
|
|
437
|
|
|
|
(10
|
)
|
|
|
417
|
|
Net financial expenses
|
|
|
(62
|
)
|
|
|
(54
|
)
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax
|
|
|
375
|
|
|
|
(64
|
)
|
|
|
316
|
|
Tax
|
|
|
(97
|
)
|
|
|
272
|
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after tax
|
|
|
278
|
|
|
|
208
|
|
|
|
257
|
|
Gain on disposal of assets, net of tax
|
|
|
2
|
|
|
|
6
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
280
|
|
|
|
214
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
97.2¢
|
|
|
|
74.7¢
|
|
|
|
91.3¢
|
|
Adjusted
|
|
|
98.6¢
|
|
|
|
102.8¢
|
|
|
|
120.9¢
|
|
Year
ended December 2010 compared with year ended December
2009
Revenue increased by 5.9% to $1,628 million and operating
profit before exceptional items increased by 22.3% to
$444 million during the year ended December 31, 2010.
In 2010, the InterContinental Buckhead, Atlanta and the Holiday
Inn Lexington were sold for $105 million and
$5 million, respectively, with proceeds used to reduce net
debt. These disposals resulted in a reduction in owned and
leased revenue and operating profit of $19 million and
$4 million, respectively, compared to 2009.
The average US dollar exchange rate to sterling strengthened
during 2010 (2010 $1=£0.65, 2009 $1=£0.64). Translated
at constant currency, applying 2009 exchange rates, revenue
increased by 6.0% and operating profit increased by 22.3%.
Exceptional
operating items
Exceptional operating items of $7 million consisted of a
litigation provision of $22 million, an impairment charge
of $7 million, severance costs of $4 million and costs
of $9 million to complete the Holiday Inn brand family
relaunch offset by gains of $35 million from the disposal
of assets, including a $27 million profit on the sale of
the InterContinental Buckhead, Atlanta.
Compared with the previous year, exceptional operating items in
2010 were significantly lower as 2009 was impacted by difficult
trading which resulted in exceptional operating costs of
$373 million, primarily due to the recognition of
impairment charges, an onerous contract provision and the cost
of office closures.
Exceptional operating items are treated as exceptional by reason
of their size or nature and are excluded from the calculation of
adjusted earnings per ordinary share in order to provide a more
meaningful comparison of performance.
Net
financial expenses
Net financial expenses increased from $54 million in 2009
to $62 million in 2010, as the effect of the
£250 million 6% bond offset lower net debt levels and
low interest rates. Average net debt levels in 2010 were lower
than 2009 primarily as a result of improved trading, the
disposal of the InterContinental Buckhead, Atlanta and a
continuing focus on cash management.
43
Financing costs included $2 million (2009 $2 million)
of interest costs associated with Priority Club Rewards where
interest is charged on the accumulated balance of cash received
in advance of the redemption points awarded. Financing costs in
2010 also included $18 million (2009 $18 million) in
respect of the InterContinental Boston finance lease.
Taxation
The effective rate of tax on the combined profit from continuing
and discontinued operations, excluding the impact of exceptional
items, was 26% (2009 5%). The rate was particularly low in 2009
due to the impact of prior year items relative to a lower level
of profit than in 2010. By excluding the impact of prior year
items, which are included wholly within continuing operations,
the equivalent tax rate would be 35% (2009 42%). This rate is
higher than the UK statutory rate of 28% due mainly to certain
overseas profits (particularly in the US) being subject to
statutory rates higher than the UK statutory rate, unrelieved
foreign taxes and disallowable expenses.
Taxation within exceptional items totaled a credit of
$1 million (2009 $287 million) in respect of
continuing operations. This represented the release of
exceptional provisions relating to tax matters which were
settled during 2010, or in respect of which the statutory
limitation period had expired, together with tax relief on
exceptional costs, tax arising on disposals and also tax
relating to an internal reorganization in 2010.
Net tax paid in 2010 totaled $68 million (2009
$2 million) including $4 million paid (2009
$1 million) in respect of disposals. Tax paid is lower than
the current period income tax charge, primarily due to the
receipt of refunds in respect of prior years, together with
provisions for tax for which no payment of tax was made.
Earnings
per ordinary share
Basic earnings per ordinary share in 2010 was 97.2 cents,
compared with 74.7 cents in 2009. Adjusted earnings per ordinary
share was 98.6 cents, against 102.8 cents in 2009.
Highlights
for the year ended December 31, 2010
The following is a discussion of the year ended
December 31, 2010 compared with the year ended
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2010
|
|
2009
|
|
Change
|
|
|
($ million)
|
|
%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
807
|
|
|
|
772
|
|
|
|
4.5
|
|
EMEA
|
|
|
414
|
|
|
|
397
|
|
|
|
4.3
|
|
Asia Pacific
|
|
|
303
|
|
|
|
245
|
|
|
|
23.7
|
|
Central
|
|
|
104
|
|
|
|
124
|
|
|
|
(16.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,628
|
|
|
|
1,538
|
|
|
|
5.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional operating
items(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
369
|
|
|
|
288
|
|
|
|
28.1
|
|
EMEA
|
|
|
125
|
|
|
|
127
|
|
|
|
(1.6
|
)
|
Asia Pacific
|
|
|
89
|
|
|
|
52
|
|
|
|
71.2
|
|
Central
|
|
|
(139
|
)
|
|
|
(104
|
)
|
|
|
(33.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
444
|
|
|
|
363
|
|
|
|
22.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Operating profit before exceptional
operating items does not include exceptional operating items for
all periods presented. Exceptional operating items (charge
unless otherwise noted) by region were Americas $8 million
(2009 $301 million); EMEA credit of $3 million (2009
$22 million); Asia Pacific $2 million (2009
$7 million); and Central $nil (2009 $43 million).
|
44
Revenue increased by 5.9% to $1,628 million and operating
profit before exceptional items increased by 22.3% to
$444 million during the year ended December 31, 2010.
The 2010 results reflect a return to RevPAR growth in a
recovering global market, with an overall RevPAR increase of
6.2% led by occupancy. 2010 fourth quarter comparable RevPAR
increased 8.0% compared to the same quarter in 2009, including a
2.4% increase in average daily rate. During 2010, average daily
rate for the InterContinental and Holiday Inn brands increased
by 1.3% and 0.5% respectively.
The $1 billion roll-out of the Holiday Inn brand family relaunch
is substantially complete. By December 31, 2010, 2,956
hotels were converted globally under the relaunch program,
representing 89% of all Holiday Inn hotels. The required
improvement in quality standards contributed to the removal of a
total of 35,262 rooms from the Groups global system during
2010. In spite of this necessary reduction, the Groups
closing global room count was 647,161 rooms, in line with 2009
levels.
The ongoing focus on efficiency across the Group largely
sustained underlying cost reductions achieved in 2009. Regional
and central overheads increased by $49 million, from $209
million in 2009 to $258 million in 2010, driven by incremental
performance based incentive costs of $47 million and charges of
$4 million relating to a self-insured healthcare benefit plan.
Primarily as a result of these actions taken across the Group to
improve efficiencies, operating profit margin was 35.7%, up
1.1 percentage points on 2009, after adjusting for owned
and leased hotels, Americas managed leases, significant
liquidated damages received in 2009, an onerous contract
provision established in 2009 and non-payment of performance
based incentive costs in 2009.
In 2010 the InterContinental Buckhead, Atlanta and the Holiday
Inn Lexington were sold for $105 million and
$5 million respectively, with proceeds used to reduce net
debt. These disposals resulted in a reduction in owned and
leased revenue and operating profit of $19 million and
$4 million, respectively, compared to 2009.
Americas
Americas
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2010
|
|
2009
|
|
Change
|
|
|
($ million)
|
|
%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
465
|
|
|
|
437
|
|
|
|
6.4
|
|
Managed
|
|
|
119
|
|
|
|
110
|
|
|
|
8.2
|
|
Owned and leased
|
|
|
223
|
|
|
|
225
|
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
807
|
|
|
|
772
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional operating items
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
392
|
|
|
|
364
|
|
|
|
7.7
|
|
Managed
|
|
|
21
|
|
|
|
(40
|
)
|
|
|
152.5
|
|
Owned and leased
|
|
|
13
|
|
|
|
11
|
|
|
|
18.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
426
|
|
|
|
335
|
|
|
|
27.2
|
|
Regional overheads
|
|
|
(57
|
)
|
|
|
(47
|
)
|
|
|
(21.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
369
|
|
|
|
288
|
|
|
|
28.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue and operating profit before exceptional items increased
by $35 million to $807 million (4.5%) and
$81 million to $369 million (28.1%) respectively.
Franchised revenue increased by $28 million to
$465 million (6.4%) and operating profit by
$28 million to $392 million (7.7%) compared to 2009.
Royalties growth was driven by RevPAR gains across all brands
and by a 4.5% RevPAR increase in total. While franchised hotel
and room count at December 31, 2010 was lower than at
45
December 31, 2009, the weighting of removals towards the
end of 2010 meant that daily rooms available actually increased
in 2010 from 2009 levels, further boosting royalty growth. Non
royalty revenues and profits remained flat on 2009, as real
estate financing for new activity remained constrained.
Managed revenue increased by $9 million to
$119 million (8.2%) in line with the RevPAR growth of 7.5%.
Operating profit increased by $61 million to
$21 million from a $40 million loss in 2009. The loss
in 2009 included a charge for priority guarantee shortfalls
relating to a portfolio of hotels. A provision for onerous
contracts was established on December 31, 2009 and further
payments made during 2010 were charged against this provision.
Excluding the effect of the provision, managed operating profit
increased by $3 million, driven by RevPAR growth of 23.3%
in Latin America.
Results from managed operations included revenues of
$71 million (2009 $71 million) and operating profit of
$1 million (2009 nil) from properties that are
structured, for legal reasons, as operating leases but with the
same characteristics as management contracts.
Owned and leased revenue declined by $2 million to
$223 million (0.9%) and operating profit increased by
$2 million to $13 million (18.2%). Improving trading
conditions led to a RevPAR increase of 6.4%, including an 8.1%
increase at the InterContinental New York Barclay. The
disposal of the InterContinental Buckhead, Atlanta in July 2010
and its subsequent conversion to a management contract resulted
in reductions of $15 million in revenue and $4 million
in operating profit when compared to 2009. The Holiday Inn
Lexington was also sold in March 2010, which led to a
$4 million reduction in revenue and no reduction in
operating profit compared to 2009. Excluding the impact of these
two disposals, owned and leased revenue increased by
$17 million (9.0%) and operating profit by $6 million
(150.0%) compared to 2009.
Regional overheads increased by $10 million (21.3%) from
$47 million in 2009 to $57 million in 2010. The
increase was attributable primarily to performance based
incentives and $4 million from increased claims in a
self-insured healthcare benefit plan.
EMEA
EMEA
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2010
|
|
2009
|
|
Change
|
|
|
($ million)
|
|
%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
81
|
|
|
|
83
|
|
|
|
(2.4
|
)
|
Managed
|
|
|
130
|
|
|
|
119
|
|
|
|
9.2
|
|
Owned and leased
|
|
|
203
|
|
|
|
195
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
414
|
|
|
|
397
|
|
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional operating items
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
59
|
|
|
|
60
|
|
|
|
(1.7
|
)
|
Managed
|
|
|
62
|
|
|
|
65
|
|
|
|
(4.6
|
)
|
Owned and leased
|
|
|
40
|
|
|
|
33
|
|
|
|
21.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
161
|
|
|
|
158
|
|
|
|
1.9
|
|
Regional overheads
|
|
|
(36
|
)
|
|
|
(31
|
)
|
|
|
(16.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
125
|
|
|
|
127
|
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue increased by $17 million to $414 million
(4.3%) and operating profit before exceptional items decreased
by $2 million to $125 million (1.6%) compared to 2009. At
constant currency, revenue increased by $30 million (7.6%)
and operating profit before exceptional items increased by
$3 million (2.4%). Excluding $3 million of liquidated
damages received in 2009, revenue at constant currency increased
by 8.4% and operating profit by 4.8%.
46
Franchised revenue and operating profit decreased by
$2 million to $81 million (2.4%) and $1 million
to $59 million (1.7%) respectively compared to 2009. At
constant currency, revenue increased by 1.2% and operating
profit increased by 1.7% respectively. Excluding the impact of
$3m in liquidated damages received in 2009, revenue and
operating profit at constant currency increased by 5.0% and 7.0%
respectively. The underlying increase was driven by a RevPAR
increase of 7.6%. Revenues associated with new signings,
relicensing and terminations decreased compared to 2009 as real
estate activity remained slow.
EMEA managed revenue increased by $11 million to
$130 million (9.2%) and operating profit decreased by
$3 million to $62 million (4.6%) compared to 2009. At
constant currency, revenue increased by 10.9% while operating
profit declined by 3.1%. Positive RevPAR growth in key European
cities and markets, including growth of 14.8% in the
Groups managed properties in Germany, was offset by
unfavorable trading across much of the Middle East where RevPAR
declined overall by 0.7%. At the year end, a provision of
$3 million was made for future estimated cash outflows
relating to guarantee obligations for one hotel.
In the owned and leased estate, revenue increased by
$8 million to $203 million (4.1%) and operating profit
increased by $7 million to $40 million (21.2%), or at
constant currency, revenue and operating profit increased by
8.2% and 27.3% respectively. RevPAR increase of 11.9% benefited
from average daily rate growth of 6.5% across the year. The
InterContinental London Park Lane and InterContinental Paris Le
Grand delivered strong
year-on-year
RevPAR growth of 15.0% and 11.5% respectively. Margins improved
in both these hotels as the focus remained on cost control.
Regional overheads increased by $5 million to
$36 million (16.1%) compared to 2009, mainly attributable
to performance based incentive costs.
Asia
Pacific
Asia
Pacific Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2010
|
|
2009
|
|
Change
|
|
|
($ million)
|
|
%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
12
|
|
|
|
11
|
|
|
|
9.1
|
|
Managed
|
|
|
155
|
|
|
|
105
|
|
|
|
47.6
|
|
Owned and leased
|
|
|
136
|
|
|
|
129
|
|
|
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
303
|
|
|
|
245
|
|
|
|
23.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional operating items
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
|
|
|
7
|
|
|
|
5
|
|
|
|
40.0
|
|
Managed
|
|
|
73
|
|
|
|
44
|
|
|
|
65.9
|
|
Owned and leased
|
|
|
35
|
|
|
|
30
|
|
|
|
16.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
|
|
|
|
79
|
|
|
|
45.6
|
|
Regional overheads
|
|
|
(26
|
)
|
|
|
(27
|
)
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
89
|
|
|
|
52
|
|
|
|
71.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific revenue and operating profit before exceptional
items increased by $58 million to $303 million (23.7%)
and by $37 million to $89 million (71.2%) respectively
compared to 2009.
Continued strong economic growth in the region was given a
further boost by the World Expo held in Shanghai from May to
October 2010. Resulting RevPAR growth in key Chinese cities was
exceptional, with increases of 55.9% and 29.9% in Shanghai and
Beijing respectively.
Franchised revenue increased by $1 million to
$12 million (9.1%) and operating profit increased by
$2 million to $7 million (40.0%).
47
Managed revenue increased by $50 million to
$155 million (47.6%) and operating profit increased by
$29 million to $73 million (65.9%) compared to 2009.
In addition to strong comparable RevPAR performance, there was a
positive contribution from recently opened hotels, with a 9%
room increase in the size of the Asia Pacific managed estate
during 2010 following a 10% increase in 2009, and a
$4 million operating profit increase due to the collection
of old or previously provided for debts.
In the owned and leased estate, revenue increased by
$7 million to $136 million (5.4%) and operating profit
by $5 million to $35 million (16.7%). These results
were driven by the InterContinental Hong Kong, where RevPAR
increased 15.3% during 2010.
Regional overheads decreased by $1 million to
$26 million (3.7%), with an increase in performance-based
incentive costs offset by the effect of the 2009 restructuring.
Central
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2010
|
|
2009
|
|
Change
|
|
|
($ million)
|
|
%
|
|
Revenue
|
|
|
104
|
|
|
|
124
|
|
|
|
(16.1
|
)
|
Gross central costs
|
|
|
(243
|
)
|
|
|
(228
|
)
|
|
|
(6.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net central costs
|
|
|
(139
|
)
|
|
|
(104
|
)
|
|
|
(33.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2010, net central costs increased by $35 million
from $104 million to $139 million (33.7%). The increase was
primarily driven by an increase in performance based incentive
costs where no payments were made on some plans in 2009. At
constant currency, net central costs increased by
$36 million (34.6%) compared to 2009.
System
Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2010
|
|
2009
|
|
Change
|
|
|
($ million)
|
|
%
|
|
Assessment fees and contributions received from hotels
|
|
|
944
|
|
|
|
875
|
|
|
|
7.9
|
|
Proceeds from sale of Priority Club Rewards points
|
|
|
106
|
|
|
|
133
|
|
|
|
(20.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,050
|
|
|
|
1,008
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the year ended December 31, 2010, System Fund income
increased by 4.2% to $1.1 billion primarily as a result of
growth in hotel room revenues and marketing programs. Sale of
Priority Club Rewards points declined by 20.3% due to the impact
of a special promotional program in 2009.
In addition to management or franchise fees, hotels within the
Groups system pay cash assessments and contributions which
are collected by the Group for specific use within the Fund. The
Fund also receives proceeds from the sale of Priority Club
Rewards points. The Fund is managed for the benefit of hotels in
the system with the objective of driving revenues for the
hotels. The Fund is used to pay for marketing, the Priority Club
Rewards loyalty program and the global reservation system. The
operation of the Fund does not result in a profit or loss for
the Group and consequently the revenues and expenses of the Fund
are not included in the Group Income Statement.
Highlights
for the year ended December 31, 2009
The following is a discussion of the year ended
December 31, 2009 compared with the year ended
December 31, 2008.
Group
results
Revenue decreased by 18.9% to $1,538 million and operating
profit before exceptional items decreased by 33.9% to
$363 million during the year ended December 31, 2009.
The results reflect the challenging global
48
economic environment faced by the Group throughout 2009. Group
RevPAR fell 14.7% during the year, with declines in both
occupancy and rate. However, stabilizing occupancy levels in the
fourth quarter indicated a slight rebound in trading conditions
which resulted in a RevPAR decline of 10.9% compared to the
fourth quarter in 2008. Furthermore, the Group continued to
achieve organic growth during the year, increasing its net room
count by 4.3% or 26,828 rooms. The Group also made significant
progress in the roll-out of the Holiday Inn brand family
relaunch, with 1,697 hotels converted globally at
December 31, 2009.
In the year, the Group took a number of actions to improve
efficiency and reduce costs which led to a reduction in regional
and central overheads of $95 million, from
$304 million in 2008 to $209 million in 2009,
including a $23 million favorable movement in foreign
exchange.
Americas
Revenue and operating profit before exceptional items decreased
by 19.8% to $772 million and 38.1% to $288 million
respectively compared to 2008. Excluding the receipt of
significant liquidated damages of $13 million in 2008,
revenue and operating profit declined by 18.7% and 36.3%
respectively.
The region experienced challenging trading conditions throughout
the year leading to RevPAR, revenue and profit declines across
all ownership types. Despite RevPAR declines, the regions
US comparable hotels demonstrated outperformance relative to the
US market.
Franchised revenue and operating profit decreased by 11.7% to
$437 million and 14.6% to $364 million respectively,
compared to 2008. This decrease was predominantly driven by a
fall in royalty revenues as a consequence of a RevPAR decline of
14.3%. Revenues also included the impact of a decline in real
estate activity leading to lower fees associated with activities
such as the signing of new hotels and conversions. An increase
in overall room supply partially offset the decline in revenue
and profit.
Managed revenues decreased by 34.5% to $110 million during
the year or, by 29.0% excluding the impact of $13 million
in liquidated damages received in 2008. All brands were impacted
by the economic downturn which resulted in RevPAR declines of
17.8%. Operating profit declined by $91 million
($78 million excluding liquidated damages) resulting in a
loss of $40 million. The loss was due to the RevPAR driven
revenue declines, the Group funding owners priority return
shortfalls on a number of hotels managed by one owner and
certain guarantee payments. At 2009 year end, an exceptional
charge of $91 million was recognized comprising the write
off of a deposit related to the priority return contracts and
the total estimated net cash outflows to this owner under the
guarantee. Therefore, future payments to this owner will be
charged against the provision and will not impact operating
results. The managed results also included the impact of
provisions recognized following the devaluation of the
Venezuelan currency and the potential impact of asset
nationalization.
Results from managed operations include revenues of
$71 million (2008 $88 million) and operating profit of
$nil (2008 $6 million) from properties that are structured,
for legal reasons, as operating leases but with the same
characteristics as management contracts.
Owned and leased revenue declined by 25.0% to $225 million
and operating profit decreased by 80.0% to $11 million.
Underlying trading was driven by RevPAR declines, including the
InterContinental brand with a decline of 28.2%. Trading at the
InterContinental New York Barclay, in particular, was severely
impacted by the collapse of the financial markets. Results also
included the impact of the sale of the Holiday Inn Jamaica, sold
in August 2008, which led to a reduction in revenue and
operating profit of $16 million and $2 million
respectively when compared to 2008.
As a result of the declining real estate market the
InterContinental Buckhead, Atlanta and Staybridge Suites Denver
Cherry Creek no longer met the criteria for designation as held
for sale assets and consequently the results of these hotels are
no longer categorized as discontinued operations and comparative
figures have been re-presented accordingly.
Regional overheads declined 29.9% during the year, from
$67 million to $47 million. The favorable movement was
driven by increased efficiencies and the impact of an
organizational restructuring undertaken to further align the
regional structure with the requirements of the Groups
owners and hotels.
49
EMEA
Revenue and operating profit before exceptional items decreased
by 23.4% to $397 million and 25.7% to $127 million,
respectively. At constant currency, revenue and operating profit
before exceptional items decreased by 16.8% and 22.8%,
respectively. The region received significant liquidated damages
totaling $16 million in 2008 and $3 million in 2009.
Excluding these receipts, revenue declined by 21.5% and
operating profit before exceptional items declined by 20.0%, and
at constant currency by 14.7% and 16.8%, respectively.
During the year, RevPAR declines were experienced across the
region, with declines in key markets ranging from 9.8% in the UK
to 17.8% in Continental Europe.
Franchised revenue and operating profit decreased by 24.5% to
$83 million and 20.0% to $60 million, respectively, or
at constant currency by 18.2% and 13.3%, respectively. Excluding
the impact of $3 million in liquidated damages received in
2009 and $7 million received in 2008, revenue and operating
profit declined by 22.3% and 16.2% respectively, or at constant
currency by 15.5% and 8.8% respectively. The decline was
principally driven by RevPAR declines across Continental Europe
and the UK, partly offset by a 6% increase in room count.
EMEA managed revenue and operating profit decreased by 29.2% to
$119 million and by 31.6% to $65 million,
respectively, or at constant currency by 25.0% and 29.5%,
respectively. Excluding the impact of $9 million in
liquidated damages received in 2008, revenue and operating
profit declined by 25.2% and 24.4%, respectively, or at constant
currency by 20.8% and 22.1%, respectively. The results were
driven by managed RevPAR declines of 14.9%.
Owned and leased revenue decreased by 18.8% to $195 million
and operating profit decreased by 26.7% to $33 million, or
at constant currency by 10.4% and 17.8% respectively. The
InterContinental Paris Le Grand, in particular, was adversely
impacted by the economic downturn as both business and leisure
travel declined in Paris. However, trading at the
InterContinental London Park Lane was more resilient, with
RevPAR down just 1.7% during the year.
Regional overheads decreased by 29.5% to $31 million due to
improved efficiencies and cost savings, as well as a favorable
movement in foreign exchange of $6 million.
Asia
Pacific
Asia Pacific revenue and operating profit before exceptional
items decreased by 15.5% to $245 million and 23.5% to
$52 million, respectively. Excluding the receipt of
$4 million in significant liquidated damages in 2008,
revenue and operating profit declined by 14.3% and 18.8%
respectively. Despite RevPAR declines of 13.5%, the
regions brands demonstrated outperformance relative to the
market.
Franchised revenues and operating profit decreased by 38.9% to
$11 million and by 37.5% to $5 million, respectively.
Excluding the impact of $4 million liquidated damages
received in 2008, revenue decreased by 21.4% and profit
increased by $1 million or 25.0%. The decline in revenue
was driven by lower RevPARs and the loss of royalties following
the removal of six hotels (1,067 rooms) which did not meet
IHGs brand and quality standards.
Managed revenue decreased by 7.1% to $105 million and
operating profit decreased by 20.0% to $44 million. RevPAR
across the Greater China managed estate declined 15.6%,
primarily due to room oversupply in key Chinese cities, such as
Beijing and trading upside in 2008 from the Olympic Games.
Owned and leased revenue decreased by 18.9% to $129 million
and operating profit decreased by 30.2% to $30 million.
These results were driven by the InterContinental Hong Kong,
where RevPAR declined 22.2% during the year.
Regional overheads decreased by 28.9% to $27 million, due
to the impact of regional restructuring and lower marketing
costs associated with the ANA joint venture in Japan.
Central
During 2009, net central costs decreased by 32.9% from
$155 million to $104 million. The significant
reduction was driven by management actions to increase
efficiencies and implement cost-saving measures across
50
the Group. Relative to 2008, the 2009 net central costs
also benefited from a $16 million favorable movement in
foreign exchange whilst the 2008 results included the receipt of
a favorable $3 million insurance settlement.
System
Fund
In the year ended December 31, 2009, System Fund income
increased by 1.8% to $1.01 billion primarily as a result of
the growth in system size and marketing programs.
LIQUIDITY
AND CAPITAL RESOURCES
Sources
of Liquidity
The Group is primarily financed by a $1.6 billion
syndicated bank facility which expires in May 2013 (the
Syndicated Facility) and £250 million of
public bonds which are repayable on December 9, 2016.
Short-term borrowing requirements are met from drawings under
bilateral bank facilities. Additional funding is provided by the
99-year
finance lease on the InterContinental Boston.
The £250 million public bonds were issued on
December 9, 2009 at a coupon of 6% and were initially
priced at 99.465% of face value and are unsecured. Interest is
payable annually on December 9, in each year commencing
December 9, 2010 to the maturity date. Currency swaps were
transacted at the same time the bonds were issued in order to
swap its proceeds and interest flows into US dollars. The
reasons for issuing the bonds were to diversify the Groups
funding sources and extend the duration of a portion of its
borrowings.
At December 31, 2010, total borrowings were
$794 million, including the finance lease creditor of
$206 million. The currency denomination of the borrowings
was $303 million of US dollar denominated borrowings,
$385 million of sterling denominated borrowings,
$100 million of euro denominated borrowings and
$6 million of borrowings denominated in other currencies,
mainly Hong Kong dollars. The impact of currency swaps traded in
December 2009 is to convert the sterling denominated borrowings
above into US dollar denominated borrowings.
At December 31, 2010, total committed bank facilities
amounted to $1,605 million of which $1,400 million
were unutilized. Uncommitted facilities totaled
$53 million. In the Groups opinion, the available
facilities are sufficient for the Groups present
requirements.
The Group held cash and short-term deposits at December 31,
2010 amounting to $78 million. Credit risk is minimized by
operating a policy that generally restricts the investment of
surplus cash to counterparties with an A credit rating or better
or those providing adequate security. Limits are also set on the
amounts invested with individual counterparties. Notwithstanding
that counterparties must have an A credit rating or better,
during periods of significant financial market turmoil,
counterparty exposure limits are significantly reduced and
counterparty credit exposure reviews are broadened to include
the relative placing of credit default swap pricings. Most of
the Groups surplus funds are held in the United Kingdom or
United States and there are no material funds where repatriation
is restricted as a result of foreign exchange regulations.
The Syndicated Facility contains two financial covenants:
interest cover and net debt divided by earnings before interest,
tax, depreciation and amortization (EBITDA). Net
debt is calculated as total borrowings less cash and cash
equivalents. The Group is in compliance with all of the
financial covenants in its loan documents, none of which is
expected to present a material restriction on funding in the
near future.
Further details of exchange and interest rate risk and financial
instruments are disclosed in Item 11. Quantitative
and qualitative disclosures about market risk.
Cash
From Operating Activities
Net cash from operating activities totaled $462 million for
the year ended December 31, 2010 (2009 $432 million).
Cash flow from operating activities is the principal source of
cash used to fund the ongoing operating expenses, interest
payments, maintenance capital expenditure and dividend payments
of the Group. The Group believes that
51
the requirements of its existing business and future investment
can be met from cash generated internally, disposition of assets
and external finance expected to be available to it.
Cash
From Investing Activities
Net cash inflows from investing activities totaled
$36 million (2009 $114 million outflow) comprising
proceeds (net of tax paid) from the disposal of hotels and
investments of $131 million (2009 $34 million) and
capital expenditure of $95 million (2009
$148 million). Proceeds in 2010 included $105 million
from the sale of the InterContinental Buckhead, Atlanta. Capital
expenditure in 2009 included $65 million for the
acquisition of the Hotel Indigo San Diego.
Cash
Used in Financing Activities
Net cash used in financing activities totaled $447 million
(2009 $362 million), including a reduction in gross
borrowings of $292 million (2009 $249 million).
Returns to shareholders, comprising dividend payments, totaled
$121 million (2009 $118 million). The share repurchase
program was suspended in 2008.
Overall net debt decreased during the year by $349 million
to $743 million at December 31, 2010.
The Group had committed contractual capital expenditure of
$14 million at December 31, 2010 (2009
$9 million).
Off-Balance
Sheet Arrangements
At December 31, 2010, the Group had no off-balance sheet
arrangements that have or are reasonably likely to have a
current or future effect on the Groups financial
condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or
capital resources that is material to investors.
Contractual
Obligations
The Group had the following contractual obligations outstanding
as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts
|
|
Less than
|
|
|
|
|
|
After
|
|
|
committed
|
|
1 year
|
|
1-3 Years
|
|
3-5 years
|
|
5 years
|
|
|
($ million)
|
|
Long-term
debt(i)(ii)
|
|
|
621
|
|
|
|
1
|
|
|
|
205
|
|
|
|
|
|
|
|
415
|
|
Interest
payable(ii)
|
|
|
166
|
|
|
|
32
|
|
|
|
56
|
|
|
|
52
|
|
|
|
26
|
|
Finance lease
obligations(iii)
|
|
|
3,428
|
|
|
|
16
|
|
|
|
32
|
|
|
|
32
|
|
|
|
3,348
|
|
Operating lease obligations
|
|
|
505
|
|
|
|
50
|
|
|
|
76
|
|
|
|
56
|
|
|
|
323
|
|
Agreed pension scheme
contributions(iv)
|
|
|
152
|
|
|
|
41
|
|
|
|
17
|
|
|
|
|
|
|
|
94
|
|
Capital contracts placed
|
|
|
14
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,886
|
|
|
|
154
|
|
|
|
386
|
|
|
|
140
|
|
|
|
4,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
|
Repayment period classified
according to the related facility maturity date.
|
|
(ii)
|
|
Including the impact of derivatives.
|
|
(iii)
|
|
Represents the minimum lease
payments related to the
99-year
lease on the InterContinental Boston. Payments under the lease
step up at regular intervals over the lease term.
|
|
(iv)
|
|
Primarily relates to the recovery
plan agreed with trustees of the InterContinental Hotels UK
Pension Plan (see below).
|
In limited cases, the Group may provide performance guarantees
to third-party hotel owners to secure management contracts.
Forecast payments of $32 million have been provided for in
the financial statements and the maximum unprovided exposure
under such guarantees was $90 million at December 31,
2010.
As of December 31, 2010, the Group had outstanding letters
of credit of $54 million mainly relating to self insurance
programs.
52
The Group may guarantee loans made to facilitate third-party
ownership of hotels in which the Group has an equity interest
and also a management contract. As of December 31, 2010,
there were no such guarantees in place.
The Group has given warranties in respect of the disposal of
certain of its former subsidiaries and hotels. It is the view of
the Directors that, other than to the extent that liabilities
have been provided for in the Consolidated Financial Statements,
such warranties are not expected to result in material financial
loss to the Group.
Pension
Plan Commitments
The Group operates the following material defined benefits
plans: the InterContinental Hotels UK Pension Plan and, in the
United States, the InterContinental Hotels Pension Plan and the
InterContinental Hotels non-qualified plans.
On an IAS 19 Employee Benefits basis, the
InterContinental Hotels UK Pension Plan had a deficit of
$34 million at December 31, 2010, including the tax
that would be deducted at source in respect of a refund of
surplus taking into account amounts payable under funding
commitments. The defined benefits section of this Plan is closed
to new members. In addition, there are unfunded UK pension
arrangements for certain members affected by the lifetime
allowance; at December 31, 2010, these arrangements had an
IAS 19 deficit of $55 million. In 2011, the Group expects
to make regular contributions to the UK pension plan of
£5 million.
The most recent actuarial valuation of the InterContinental
Hotels UK Pension Plan was carried out as of March 31, 2009
and showed a deficit of £129 million on a funding
basis. Under the recovery plan agreed with the trustees, the
Group aims to eliminate this deficit by March 2017 through
additional Company contributions of up to £100 million
and projected investment returns. The agreed additional
contributions comprise three annual payments of
£10 million; £10 million was paid in August
2010 and two further payments of £10 million are due
on or before July 31, 2011 and 2012, together with further
payments related to the disposal of hotels (7.5% of net sales
proceeds) and growth in the Groups EBITDA above specified
targets. If required in 2017, a top-up payment will be made to
bring the total additional contributions up to
£100 million. The InterContinental Hotels UK Pension
Plan is formally valued every three years and future valuations
could lead to changes in the amounts payable beyond March 2012.
In 2011, the Group expects to make additional contributions of
£14 million under these arrangements with further
amounts payable if there are any hotel disposals.
The US-based plans are closed to new members and pensionable
service no longer accrues for current employee members. On an
IAS 19 basis, at December 31, 2010 the plans had a combined
deficit of $82 million. In 2011, the Group expects to make
contributions to these plans of $10 million.
The Group is exposed to the funding risks in relation to the
defined benefit sections of the InterContinental Hotels UK
Pension Plan and the US-based InterContinental Hotels Pension
Plan, as explained in Item 3. Key
information Risk factors.
|
|
ITEM 6.
|
DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
|
DIRECTORS
AND SENIOR MANAGEMENT
Overall strategic direction of the Group is provided by the
Board of directors, comprising executive and non-executive
directors, and by members of the executive committee.
53
The directors and officers of InterContinental Hotels Group PLC
at March 25, 2011 were:
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initially
|
|
Date of next
|
|
|
|
|
appointed to
|
|
reappointment
|
Name
|
|
Title
|
|
the Board
|
|
by
shareholders(1)
|
|
James Abrahamson
|
|
Director
|
|
|
2010
|
|
|
|
2011
|
|
Graham
Allan(2)
|
|
Director
|
|
|
2010
|
|
|
|
2011
|
|
Andrew Cosslett
|
|
Director and Chief Executive
|
|
|
2005
|
|
|
|
2011
|
|
David
Kappler(2)
|
|
Director and Senior Independent Director
|
|
|
2004
|
|
|
|
2011
|
|
Kirk Kinsell
|
|
Director
|
|
|
2010
|
|
|
|
2011
|
|
Ralph
Kugler(2)
|
|
Director
|
|
|
2003
|
|
|
|
2011
|
|
Jennifer
Laing(2)
|
|
Director
|
|
|
2005
|
|
|
|
2011
|
|
Jonathan
Linen(2)
|
|
Director
|
|
|
2005
|
|
|
|
2011
|
|
Richard Solomons
|
|
Director and Chief Financial Officer
|
|
|
2003
|
|
|
|
2011
|
|
David Webster
|
|
Director and Chairman
|
|
|
2003
|
|
|
|
2011
|
|
Ying
Yeh(2)
|
|
Director
|
|
|
2007
|
|
|
|
2011
|
|
|
|
|
(1)
|
|
The new UK Corporate Governance
Code recommends that all Directors of FTSE 350 companies
submit themselves for election or re-election (as appropriate)
by shareholders every year. Although IHG is not obliged to
follow this recommendation until its Annual General Meeting in
2012, the Board has decided to submit the appointment of all its
Directors for shareholder approval in 2011. Therefore, all
Directors will retire and offer themselves for election or
re-election at the next Annual General Meeting.
|
|
(2)
|
|
Non-executive independent director.
|
Officers
|
|
|
|
|
|
|
|
|
|
|
Initially appointed
|
Name
|
|
Title
|
|
to position
|
|
Tom Conophy
|
|
Executive Vice President and Chief Information Officer
|
|
|
2006
|
|
Tracy Robbins
|
|
Executive Vice President, Human Resources & Group
Operations Support
|
|
|
2005
|
|
Tom Seddon
|
|
Executive Vice President and Chief Marketing Officer
|
|
|
2007
|
|
George Turner
|
|
Executive Vice President, General Counsel and Company Secretary
|
|
|
2009
|
|
On March 16, 2011 the Company announced that Andrew
Cosslett will step down as Chief Executive on June 30,
2011, and will be succeeded by Richard Solomons. A Director
since 2003 and currently Chief Financial Officer and Head of
Commercial Development, Richard Solomons will start in his new
position as Chief Executive on July 1, 2011.
Directors
and Officers
David
Webster, Non-Executive Chairman
Appointed Deputy Chairman and Senior Independent Director of
InterContinental Hotels Group PLC on the separation of Six
Continents PLC in April 2003. Appointed Non-Executive Chairman
on January 1, 2004. Also Non-Executive Chairman of Makinson
Cowell Limited, a capital markets advisory firm, a Non-Executive
Director of Amadeus IT Holding SA, a transaction processing and
technology solutions company for the travel and tourism
industry, a member of the Appeals Committee of the Panel on
Takeovers and Mergers and a Director of Temple Bar Investment
Trust PLC. Formerly Chairman of Safeway plc and a
Non-Executive Director of Reed Elsevier PLC. Chairman of the
Nomination Committee. Age 66.
54
Andrew
Cosslett, Chief Executive
Appointed Chief Executive in February 2005, joining the Group
from Cadbury Schweppes plc where he was most recently President,
Europe, Middle East & Africa. During his career at
Cadbury Schweppes he held a variety of senior regional
management and marketing roles in the UK and Asia Pacific. Also
has over 11 years experience in brand marketing with
Unilever. A member of the Executive Committee of the World
Travel & Tourism Council and a member of the
Presidents Committee of the CBI. Andrew Cosslett will step
down as Chief Executive on June 30, 2011. Age 55.
James
Abrahamson, President, The Americas
Appointed a Director in August 2010. Has over
32 years experience in hotel operations, branding,
development and franchise relations. Joined the Group as an
Executive Committee member with responsibility for the Americas
region in January 2009 from Global Hyatt Corporation, where he
served as Head of Development, The Americas. Previously Senior
Vice President, Hilton Hotels Corporation for 12 years.
Responsible for the business development and performance of all
the hotel brands and properties in the Americas region.
Age 55.
Kirk
Kinsell, President, EMEA
Appointed a Director in August 2010, retaining his
responsibility for the EMEA region, which he had held as an
Executive Committee member since September 2007. Has over
28 years experience in the hospitality industry,
including senior franchise positions with Holiday Inn
Corporation and ITT Sheraton, prior to joining the Group in 2002
as Senior Vice President, Chief Development Officer for the
Americas region. Responsible for the business development and
performance of all the hotel brands and properties in the EMEA
region. Age 56.
Richard
Solomons, Chief Financial Officer and Head of Commercial
Development
Qualified as a chartered accountant in 1985, followed by seven
years in investment banking, based in London and New York.
Joined the Group in 1992 and held a variety of senior finance
and operational roles. Appointed Finance Director of the Hotels
business in October 2002 in anticipation of the separation of
Six Continents PLC in April 2003. Responsible for corporate and
regional finance, Group financial control, strategy, investor
relations, tax, treasury, commercial development and
procurement. Richard Solomons will be appointed Chief Executive
on July 1, 2011. Age 49.
Graham
Allan, Non-Executive Director
Appointed a Director in January 2010. Became Chief Executive
Officer of Yum! Restaurants International, a subsidiary of Yum!
Brands, Inc., in 2010 after serving as President since 2003.
Previously Executive Vice President and Chief Operating Officer
of Yum! Restaurants International in Europe. Has over
19 years experience in brand management, marketing,
franchising and retail development. Age 55.
David
Kappler, Senior Independent Non-Executive Director
Appointed a Director and Senior Independent Director in June
2004. A Non-Executive Director of Shire plc. A qualified
accountant and formerly Chief Financial Officer of Cadbury
Schweppes plc and Non-Executive Chairman of Premier Foods plc.
Also served as a Non-Executive Director of Camelot Group plc and
HMV Group plc. A member of the Trilantic Europe Advisory
Council. Chairman of the Audit Committee. Age 64.
Ralph
Kugler, Non-Executive Director
Appointed a Director in April 2003. Also Chairman of
Byotrol plc, a hygiene technology company, a Non-Executive
Director of Discovery Group Holdings Ltd, a PR services company,
Board Adviser at Mars, Incorporated, the global consumer
business, a Non-Executive Director of Spotless Holding SAS, a
consumer products business, and Senior Advisor to 3i plc.
Previously Director on the boards of Unilever PLC and Unilever
N.V. until May 2008 with his last role as Global President,
Unilever Home and Personal Care. Chairman of the Remuneration
Committee. Age 55.
55
Jennifer
Laing, Non-Executive Director
Appointed a Director in August 2005. Was Associate Dean,
External Relations at London Business School, until 2007. A
Fellow of the Marketing Society and of the Institute of
Practitioners in Advertising, has over 30 years
experience in advertising including 16 years with
Saatchi & Saatchi. Also a Non-Executive Director of
Hudson Highland Group Inc., a US human resources company.
Chairman of the Corporate Responsibility Committee. Age 64.
Jonathan
Linen, Non-Executive Director
Appointed a Director in December 2005. Was formerly Vice
Chairman of the American Express Company, having held a range of
senior positions throughout his career of over 35 years
with American Express. A Non-Executive Director of Yum! Brands,
Inc. and of Modern Bank N.A., a US private banking company. Also
serves on a number of US Councils and advisory boards.
Age 67.
Ying Yeh,
Non-Executive Director
Appointed a Director in December 2007. Vice President and
Chairman, Greater China Region, Nalco Company, a water
treatment and process improvement company. Previously Chairman
and President, North Asia Region, President, Business
Development, Asia Pacific Region and Vice President, Eastman
Kodak Company. Also a Non-Executive Director of AB Volvo. Was,
for 15 years, a diplomat with the US Foreign Service in
Hong Kong and Beijing until 1997. Age 62.
Other
members of the Executive Committee
Tom
Conophy, Executive Vice President and Chief Information
Officer
Has over 30 years experience in the IT industry,
including management and development of new technology solutions
within the travel and hospitality business. Joined the Group in
February 2006 from Starwood Hotels & Resorts
International where he held the position of Executive Vice
President & Chief Technology Officer. Responsible for
global technology, including IT systems and information
management throughout the Group. Age 50.
Tracy
Robbins, Executive Vice President, Human Resources &
Group Operations Support
Has over 25 years experience in line and HR roles in
service industries. Joined the Group in December 2005 from
Compass Group PLC, a world leading food service company, where
she was Group Human Resources Leadership & Development
Director. Previously Group HR Director for Forte Hotels Group.
Has global responsibility for talent management, leadership
development, reward strategy, organizational capability and
operations support. Age 47.
Tom
Seddon, Executive Vice President and Chief Marketing
Officer
Has over 18 years experience in sales and marketing
in the hospitality industry, including with IHGs
predecessor parent companies from 1994 to 2004. Rejoined the
Group in November 2007, from restaurant business
SUBWAY®
where he was responsible for worldwide sales and marketing
activities. Has responsibility for worldwide brand management,
reservations,
e-commerce,
global sales, relationship and distribution marketing and
loyalty programs. Age 42.
George
Turner, Executive Vice President, General Counsel and Company
Secretary
Solicitor, qualified to private practice in 1995. After
12 years with Imperial Chemical Industries PLC, where he
was most recently Deputy Company Secretary, he joined the Group
in September 2008. Appointed Executive Vice President, General
Counsel and Company Secretary in January 2009. Responsible for
corporate governance, risk management, insurance, data privacy,
internal audit, company secretariat, legal and corporate
responsibility & public affairs. Age 40.
56
There are no family relationships between any of the persons
named above.
There are no arrangements or understandings with major
shareholders, customers, suppliers or others, pursuant to which
any person named above was selected as a director or member of
senior management.
COMPENSATION
In fiscal 2010, the aggregate compensation (including pension
contributions, bonus and awards under the long term incentive
plans) of the directors and officers of the Company was
$23.6 million. The aggregate amount set aside or accrued by
the Company in fiscal 2010 to provide pension retirement or
similar benefits for those individuals was $0.6 million. An
amount of $9.4 million was charged in fiscal 2010 in
respect of bonuses payable to them under performance related
cash bonus schemes and long term incentive plans.
Note 3 of Notes to the Financial Statements sets out the
individual compensation of the directors. The following are
details of the Companys principal share schemes, in which
the directors of the Company participated during the period.
Annual
Bonus Plan
The IHG Annual Bonus Plan (ABP), enables eligible employees,
including Executive Directors, to receive all or part of their
bonus in the form of shares together with, in certain cases, a
matching award of free shares up to half the deferred amount.
The bonus and any matching shares awarded are released on the
third anniversary of the award date. The bonuses in 2007 were
eligible for matching shares, all of which were released on the
third anniversary of the award date. In 2007, participants could
defer up to 100% of the total annual bonus, with the deferred
amount being accounted for as a share-based payment. Under the
terms of the 2008, 2009 and 2010 plans a fixed percentage of the
bonus is awarded in the form of shares with no voluntary
deferral and no matching shares.
The awards in all of the plans are conditional on the
participants remaining in the employment of a participating
company or leaving for a qualifying reason as set out in the
plan rules. Participation in the ABP is at the discretion of the
Remuneration Committee. The number of shares is calculated by
dividing a specific percentage of the participants annual
performance-related bonus by the middle market quoted prices on
the three consecutive dealing days immediately preceding the
date of grant. A number of executives participated in the plan
during the year, however, no conditional rights over shares were
awarded to participants.
Long Term
Incentive Plan
The Long Term Incentive Plan (LTIP) allows Executive Directors
and eligible employees to receive share awards, subject to the
satisfaction of performance conditions, set by the Remuneration
Committee, which are normally measured over a three year period.
Awards are normally made annually and, except in exceptional
circumstances, will not exceed three times salary for Executive
Directors and four times salary in the case of other eligible
employees. During 2010, conditional rights over
2,602,773 shares were awarded to employees under the plan.
The plan provides for the grant of nil cost options
to participants as an alternative to conditional share awards.
Executive
Share Option Plan
For options granted, the option price is not less than the
market value of an ordinary share, or the nominal value if
higher. The market value is the quoted price on the business day
preceding the date of grant, or the average of the middle market
quoted prices on the three consecutive dealing days immediately
preceding the date of grant. A performance condition has to be
met before options can be exercised. The performance condition
is set by the Remuneration Committee. The plan was not operated
during 2010 and no options were granted in the year under the
plan. The latest date that any options may be exercised is
April 4, 2015.
Options
and Ordinary Shares held by Directors
Details of the directors interests in the Companys
shares are set out on page 62 and pages F-46 to F-48.
57
BOARD
PRACTICES
Contracts
of Service
The Remuneration Committees policy is for Executive
Directors to have rolling contracts with a notice period of
12 months. All new appointments are intended to have
12-month
notice periods. However, on occasion, to complete an external
recruitment successfully, a longer initial notice period
reducing to 12 months may be used.
Andrew Cosslett, James Abrahamson, Kirk Kinsell and Richard
Solomons have service agreements with a notice period of
12 months.
David Websters appointment as Non-executive Chairman,
effective from January 1, 2004, is subject to six
months notice.
Non-executive director, Ralph Kugler signed a letter of
appointment effective from the listing of IHG in April 2003.
This was renewed, effective from completion of the capital
reorganization of the Company and the listing of new IHG shares
on June 27, 2005. David Kappler signed a letter of
appointment effective from his date of original appointment to
the Board on June 21, 2004. This was also renewed,
effective from June 27, 2005. Jennifer Laing and Jonathan
Linen signed letters of appointment effective from their
appointment dates, respectively August 25, 2005 and
December 1, 2005. Ying Yeh signed a letter of appointment
effective from her appointment date of December 1, 2007.
Graham Allan signed a letter of appointment effective from his
appointment date of January 1, 2010.
Directors
Contracts
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Contract
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effective
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Unexpired term/
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Directors
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date
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notice period
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Andrew Cosslett
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February 3, 2005
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3 months
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James Abrahamson
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August 1, 2010
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12 months
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Kirk Kinsell
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August 1, 2010
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12 months
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Richard Solomons
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April 15, 2003
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12 months
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Each of Andrew Cosslett and Richard Solomons signed a letter of
appointment, effective from completion of the capital
reorganization of the Company and the listing of new IHG shares
on June 27, 2005. The terms of each appointment were as set
out in each executive directors original service agreement.
On March 16, 2011 the Company announced that Andrew
Cosslett will step down as Chief Executive on June 30,
2011, and will be succeeded by Richard Solomons.
Richard Solomons signed a contract on March 16, 2011
relating to his employment as Chief Executive, effective from
July 1, 2011.
See Note 3 of the Notes to the Consolidated Financial
Statements for details of directors service contracts.
Payments
on Termination
No provisions for compensation for termination following change
of control, or for liquidated damages of any kind, are included
in the current directors contracts. In the event of any
early termination of an executive directors contract the
policy is to seek to minimize any liability.
Upon retirement, and under certain other specified circumstances
on termination of his employment, a director will become
eligible to receive benefit from his participation in a Company
pension plan. See Note 3 of Notes to the Consolidated
Financial Statements for details of directors pension
entitlements at December 31, 2010.
Committees
Each Committee of the Board has written terms of reference which
are approved by the Board and which are subject to review each
year.
58
Executive
Committee
The Executive Committee is chaired by the Chief Executive. It
consists of the executive directors and the most senior
executives from the Group and usually meets monthly. Its role is
to consider and manage a range of important strategic and
business issues facing the Group. It is responsible for
monitoring the performance of the business. It is authorized to
approve capital and revenue investment within levels agreed by
the Board. It reviews and recommends to the Board the most
significant investment proposals.
Audit
Committee
The Audit Committee is chaired by David Kappler who has
significant recent and relevant financial experience and is the
Committees financial expert. During 2010, the other
Committee members were Graham Allan, Ralph Kugler and
Jennifer Laing. All Audit Committee members are independent.
The Audit Committees principal responsibilities are to:
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review the Groups public statements on internal control,
risk management and corporate governance compliance prior to
their consideration by the Board;
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review the Groups processes for detecting and addressing
fraud, misconduct and control weaknesses and to consider the
response to any such occurrence, including overseeing the
process enabling the anonymous submission of concerns;
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review reports from management, internal audit and external
audit concerning the effectiveness of internal control,
financial reporting and risk management processes;
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review with management and the external auditor any financial
statements required under UK or US legislation before
submission to the Board;
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establish, review and maintain the role and effectiveness of the
internal audit function, including overseeing the appointment of
the Head of Global Internal Audit;
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assume responsibility for the appointment, compensation,
resignation, dismissal and the overseeing of the external
auditor, including review of the external audit, its cost and
effectiveness;
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pre-approve non-audit work to be carried out by the external
auditor and the fees to be paid for that work, along with the
monitoring of the external auditors independence; and
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oversee the Groups Code of Ethics and Business Conduct and
associated procedures for monitoring adherence.
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The Audit Committee discharges its responsibilities through a
series of Committee meetings during the year at which detailed
reports are presented for review. The Audit Committee
commissions reports, either from external advisers, the Head of
Global Internal Audit, or Group management, after consideration
of the major risks to the Group or in response to developing
issues. The Chief Financial Officer attends its meetings as do
the external auditor and the Head of Global Internal Audit, both
of whom have the opportunity to meet privately with the Audit
Committee, in the absence of Group management, at the conclusion
of each meeting.
All proposals for the provision of non-audit services by the
external auditor are pre-approved by the Audit Committee or its
delegated member, the overriding consideration being to ensure
that the provision of non-audit services does not impact the
external auditors independence and objectivity.
Remuneration
Committee
The Remuneration Committee, chaired by Ralph Kugler, also
comprises the following Non-Executive, directors: David Kappler,
Jonathan Linen and Ying Yeh. The Remuneration Committee agrees,
on behalf of the Board, all aspects of the remuneration of the
Executive Directors and the Executive Committee members, and
agrees the strategy, direction and policy for the remuneration
of senior executives who have a significant influence over the
Companys ability to meet its strategic objectives.
Nomination
Committee
The Nomination Committee comprises the Chairman of the Board and
all the Non-Executive Directors. It is chaired by the Chairman
of the Board except when matters relating to this position are
to be discussed, in which case
59
it is chaired by an independent Non-Executive Director. The
Committee leads the process for Board appointments and nominates
candidates for approval by the Board. The balance of skills,
experience, independence and knowledge of Board members is
evaluated in order to define the requirements for a particular
appointment. The Committee generally engages external
consultants to advise on candidates for Board appointments and
appointments are made on merit, against objective criteria,
including ability to commit time, and with due regard for the
benefits of diversity, including gender. The Committee also has
responsibility for succession planning and assists in
identifying and developing the role of the Senior Independent
Director.
During 2010 the Committee discussed succession planning for both
the Executive Committee and the Board of Directors, considered
and recommended new Executive Director appointments, which have
now been implemented, and considered the appointment of an
additional Non-Executive Director.
Corporate
Responsibility Committee
The Corporate Responsibility Committee, chaired by Jennifer
Laing, was established in February 2009. The other Committee
member during 2010 was Ralph Kugler. Graham Allan joined the
Committee in January 2011. Meetings are regularly attended by
other members of the Board and Executive Committee. The
Corporate Responsibility Committee ensures that the Company has
in place the right policies, management and measurement systems
to enable it to deliver against its strategy.
Disclosure
Committee
The Disclosure Committee, chaired by the Groups Financial
Controller, and comprising the Company Secretary and other
senior executives, reports to the Chief Executive, the Chief
Financial Officer and to the Audit Committee. Its duties include
ensuring that information required to be disclosed in reports
pursuant to UK and US accounting, statutory or listing
requirements, fairly represents the Groups position in all
material respects.
General
Purposes Committee
The General Purposes Committee comprises any one Executive
Committee member together with a senior officer from an agreed
and restricted list of senior executives. It is always chaired
by an Executive Committee member. It attends to business of a
routine nature and to the administration of matters, the
principles of which have been agreed previously by the Board or
an appropriate Committee.
A description of the significant ways in which the
Companys actual corporate governance practices differ from
the New York Stock Exchange corporate governance requirements
followed by US companies can be found on page 82.
60
EMPLOYEES
The Group directly employed an average of 7,858 people worldwide
in the year ended December 31, 2010. Of these, 96% were
employed on a full-time basis and 4% were employed on a
part-time basis.
The table below analyzes the distribution of the average number
of employees for the last three fiscal periods by division and
by geographic region.
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Americas
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EMEA
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Asia Pacific
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Central
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Total
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2010
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3,309
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|
|
|
1,795
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|
|
|
1,517
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|
|
1,237
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7,858
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|
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2009
|
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3,229
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|
|
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1,712
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1,410
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1,205
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|
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7,556
|
|
|
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|
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|
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2008
|
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3,384
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1,824
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1,470
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1,271
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7,949
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The costs of the above employees are borne by the Group. In
addition, the Group employs 4,489 (2009 4,561, 2008 4,353)
people who work in managed hotels or directly on behalf of the
System Fund and whose costs of $282 million (2009
$267 million, 2008 $272 million) are borne by those
hotels or by the Fund.
Under EU law, many employees of Group companies are now covered
by the Working Time Regulations which came into force in the
United Kingdom on