Holiday Inn 2003 Annual Report Download - page 6

through IHG’s websites, call centres and travel agent relationships,
and to provide supporting technology to deliver this.
Delivery through IHG’s reservations channels showed
impressive growth during the year, across all IHG’s brands
and regions. The percentage of total room nights booked
through IHG’s reservation channels rose 2.6 percentage points,
while net revenue booked rose 16.0%, in the 12 months ended
31 December 2003.
IHG’s global e-commerce team continued to pursue an
aggressive strategy. In the last 12 months, IHG launched sites
for the French, German, Spanish, New Zealand, Australian and
Chinese markets and additional sites are planned.
The Priority Club Rewards programme continues to grow in
importance to IHG, with membership increasing by 3.6 million
to over 19 million members by December 2003.
SCALE
There was a net increase in system size during the year of 187
hotels, comprising 21,445 rooms, with over 60% of these being
new build properties. Included in this were the 109 hotels and
12,569 rooms of the Candlewood Suites brand, purchased on
31 December 2003. Key growth areas have been the continued
expansion of Express in the limited service sector, which looks
set to exceed 1,500 hotels in 2004, and Staybridge Suites,
which finished the year with 71 hotels operating and more
than 40 in the pipeline.
IHG’s pipeline of hotels signed and waiting to enter the system
grew to 544 hotels and 71,226 rooms by 31 December 2003,
up from 490 hotels and 65,975 rooms as at 31 December 2002.
FIGURE 1
Hotels Rooms
TOTAL SYSTEM SIZE Change Change
AT 31 DECEMBER 2003 2003 over 2002 2003 over 2002
Analysed by brand:
InterContinental 135 –45,046 833
Crowne Plaza 202 858,482 1,627
Holiday Inn 1,529 -26 287,769 -3,746
Holiday Inn Express* 1,455 85 120,298 9,129
Staybridge Suites 71 21 8,221 2,619
Candlewood Suites 109 109 12,569 12,569
Other brands 19 -10 3,933 -1,586
Total 3,520 187 536,318 21,445
Analysed by ownership type:
Owned and leased 171 -18 39,459 -2,126
Managed 423 113 103,440 17,090
Franchised 2,926 92 393,419 6,481
Total 3,520 187 536,318 21,445
* Operates as Express by Holiday Inn in EMEA and Asia Pacific regions.
ASSET REVIEW AND INVESTMENT
Following the Separation, IHG undertook a detailed review
of its owned and leased portfolio to identify opportunities
to lower capital intensity. Assets will only be owned if they
have strategic value or generate superior returns. IHG have
now developed plans for each owned asset taking into account
a wide range of different criteria, including where relevant the
state of the local market and readiness of the asset to be sold.
It is currently estimated that the disposal programme will
involve the further sale of assets with a net book value of
between £800m and £1 billion. The scale and complexity
of the programme means it will take some considerable time
to complete and is subject to no significant adverse changes
in market conditions.
In the 12 months to 31 December 2003 IHG completed sales
of fixed assets with proceeds of £254m with an overall gain on
sale of £4m. IHG is in active negotiations on further sales and
has a pipeline of disposals.
In July 2003, IHG completed the sale of a 16 property
Staybridge Suites portfolio to Hospitality Properties Trust
(‘HPT’), one of the largest hotel real estate investment trusts,
for $185m. Investment had been made into the Staybridge
Suites portfolio by IHG to enable rapid entry to the important
US extended stay market. The disposal to HPT achieved a
reduction in capital employed within the business while
retaining management and branding of the hotels.
IHG's strategic relationship with HPT expanded further with
the conversion in September 2003 of 14 further HPT owned
hotels to the Staybridge Suites brand.
The sale of the InterContinental London May Fair for £115m
was completed in September 2003. With an alternative in
London, and with this property in need of refurbishment, the
opportunity was taken to reduce capital intensity in the
business at a favourable price in excess of £400,000 per room.
In October 2003, IHG announced the acquisition of the
Candlewood Suites brand in the US for $15m from Candlewood
Hotel Corporation. This brand’s positioning in the midscale
extended stay segment will complement Staybridge's upscale
positioning. Candlewood Suites is an established brand of
purpose built hotels with 109 properties on average less than
five years old. The major owner of Candlewood Suites
properties is HPT, which owned 64 at the time of
announcement and which, in a related transaction, purchased
an additional 12 properties. IHG will manage all 76 of HPT’s
properties under 20-year agreements, with options to extend.
The transaction concluded on 31 December 2003.
RESERVATION SYSTEMS AND PRIORITY CLUB REWARDS
The newly formed Global Brand Services continued to
strengthen brand loyalty, to make it as easy as possible to book
OPERATING AND FINANCIAL REVIEW
4InterContinental Hotels Group 2003