Holiday Inn 2007 Annual Report Download - page 59

GROUP FINANCIAL STATEMENTS
Corporate information and accounting policies and Notes to the Group financial statements 57
GROUP FINANCIAL STATEMENTS
Notes to the Group financial statements
1 EXCHANGE RATES
The results of foreign operations have been translated into
sterling at the weighted average rates of exchange for the
period. In the case of the US dollar, the translation rate is
£1=$2.01 (2006 £1=$1.84). In the case of the euro, the translation
rate is £1=€1.46 (2006 £1=€1.47).
Foreign currency denominated assets and liabilities have been
translated into sterling at the rates of exchange on the balance
sheet date. In the case of the US dollar, the translation rate is
£1=$2.01 (2006 £1=$1.96). In the case of the euro, the translation
rate is £1=€1.36 (2006 £1=€1.49).
2 SEGMENTAL INFORMATION
The primary segmental reporting format is determined to be
three main geographical regions:
Americas;
Europe, Middle East and Africa (EMEA); and
Asia Pacific.
These, together with Central functions, form the principal
format by which management is organised and makes
operational decisions.
The Group further breaks each geographical region into three
distinct business models which offer different growth, return,
risk and reward opportunities:
Franchised
Where Group companies neither own nor manage the hotel,
but license the use of a Group brand and provide access to
reservation systems, loyalty schemes and know-how. The Group
derives revenues from a brand royalty or licensing fee, based
on a percentage of room revenue.
Managed
Where, in addition to licensing the use of a Group brand, a Group
company manages the hotel for third party owners. The Group
derives revenues from base and incentive management fees and
provides the system infrastructure necessary for the hotel to
operate. Management contract fees are generally a percentage
of hotel revenue and may have an additional incentive fee linked
to profitability or cash flow. The terms of these agreements vary,
but are often long term (for example, 10 years or more). The
Group’s responsibilities under the management agreement
typically include hiring, training and supervising the managers
and employees that operate the hotels under the relevant
brand standards. In order to gain access to central reservation
systems, global and regional brand marketing and brand
standards and procedures, owners are typically required
to make a further contribution.
Owned and leased
Where a Group company both owns (or leases) and operates the
hotel and, in the case of ownership, takes all the benefits and
risks associated with ownership.
Segmental results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated
on a reasonable basis.