Holiday Inn 2008 Annual Report Download - page 16

14 IHG Annual Report and Financial Statements 2008
Business review continued
Europe, Middle East and Africa
EMEA results
12 months ended 31 December
2008 2007 %
$m $m change
Revenue
Owned and leased 240 244 (1.6)
Managed 168 167 0.6
Franchised 110 81 35.8
Continuing operations 518 492 5.3
Discontinued operations* –17 –
Total 518 509 1.8
Operating profit before exceptional items
Owned and leased 45 33 36.4
Managed 95 87 9.2
Franchised 75 58 29.3
215 178 20.8
Regional overheads (44) (44) –
Continuing operations 171 134 27.6
Discontinued operations* –1–
Total 171 135 26.7
* Discontinued operations are all owned and leased.
EMEA comparable RevPAR movement on previous year
12 months ended
31 December 2008
Owned and leased
InterContinental (7.8)%
All ownership types
UK 1.2%
Continental Europe 1.6%
Middle East 20.2%
Revenue and operating profit before exceptional items from
continuing operations increased by 5.3% to $518m and 27.6% to
$171m respectively. Including discontinued operations, revenue
increased by 1.8% whilst operating profit before exceptional items
increased by 26.7%. Included in these results were liquidated
damages of $9m relating to one management contract and $7m
for a portfolio of franchised hotels settled during the year.
During the year, the region achieved RevPAR growth of 3.6%
driven by gains across all brands operated under managed and
franchise contracts. From a regional perspective, RevPAR growth
in the Middle East was extremely strong at 20.2%, whilst smaller
growth was experienced in Continental Europe. The region’s
continuing operating profit margin increased by 5.8 percentage
points to 33.0%. Excluding the two liquidated damages
settlements, the margin on continuing operations grew
3.7 percentage points reflecting economies of scale in the
managed business and strong revenue conversion at the
InterContinental London Park Lane.
In the owned and leased estate, continuing revenue decreased
by 1.6% to $240m as a result of the expiry of a hotel lease in
Continental Europe. The InterContinental London Park Lane,
which had its first full year of trading since re-opening after
refurbishment in 2007, grew strongly in revenues to a market
leading position (source: STR). The InterContinental Le Grand
Paris experienced tougher trading conditions leading to a
RevPAR decline at the hotel. Strong revenue conversion at the
InterContinental London Park Lane contributed to the continuing
owned and leased operating profit increase of $12m to $45m.
EMEA managed revenue increased by 0.6% to $168m and
operating profit increased by 9.2% to $95m, driven by the receipt
of $9m in liquidated damages relating to the renegotiation of a
management contract, which remains in the system. Excluding
these liquidated damages, revenue and operating profit declined
4.8% and 1.1% respectively in 2008, as a result of mixed trading
conditions in the region. Growth in the Middle East continued
through the addition of new rooms and strong RevPAR growth of
20.2%. Offsetting this was a reduced contribution from a portfolio
of managed hotels in the UK. A reduction in the fees associated
with signing hotels to the pipeline further impacted the operating
profit in the region.
Franchised revenue and operating profit increased by 35.8% to
$110m and 29.3% to $75m respectively. The growth was principally
driven by room count expansion and RevPAR growth in Continental
Europe, with Germany and Russia showing RevPAR growth of 3.9%
and 8.6% respectively. The region further benefited from the receipt
of $7m of liquidated damages relating to the removal of a portfolio
of Holiday Inn Express hotels in the UK.
Regional overheads were in line with 2007, with a $2m increase in
costs associated with the new head office offset through further
efficiencies in sales and marketing activities.