Holiday Inn 2008 Annual Report Download - page 5

OVERVIEW
Chairman’s statement and Chief Executive’s review 3
Chief Executive’s review
“During 2008
we witnessed
unprecedented
events in the world
economy. In spite of
this, it was a good
year for IHG. We
benefited from our
strategy to focus
on franchising and
managing hotels
and beat our three
year net rooms
growth target by
over 35 per cent.”
BUSINESS SUMMARY
In the year, we continued to grow sales, profits* and revenue per available room
(RevPAR) – the industry’s main performance measure – which rose again, up
0.9 per cent globally. Throughout the year, we saw RevPAR outperformance in all
our key markets, but in line with the industry we experienced a sharp downturn
in the fourth quarter when our RevPAR declined 6.5 per cent. We have taken
a number of actions to prepare the business for the tougher environment ahead.
Sadly this has involved some redundancies across the Group.
ACCELERATED ROOMS GROWTH
We opened a record 430 hotels during 2008, including 115 hotels in the fourth
quarter, when the economic conditions had worsened significantly.
We were pleased to beat our target to add 50,000-60,000 net rooms within three
years and in the end we added more than 82,000 rooms to the system – a great
achievement. We signed 693 hotels, 98,886 rooms, into our forward development
pipeline during the year. More than 25,000 of these rooms were signed in the
fourth quarter, demonstrating the continuing appetite that owners and guests
have for our brands all around the world. At the same time, we continued to
focus on improving quality and we removed 193 hotels from our system. Overall,
we grew the number of rooms in our system by 6 per cent on a net basis.
BRAND PERFORMANCE
The $1 billion relaunch of the Holiday Inn family of brands is progressing well.
Almost 300 hotels had been relaunched by the end of 2008 and feedback from
guests and owners has been encouraging. The improvements will deliver
a higher quality guest experience and stronger returns for hotel owners.
In September 2008, we entered the timeshare market through an exclusive
licensing and marketing agreement, launching our Holiday Inn Club Vacations
brand. We successfully continued the expansion of our brands around the world
with the launch of Staybridge Suites and Hotel Indigo outside our Americas region.
ADVANTAGES OF SCALE
With almost 620,000 rooms worldwide, we can deploy our significant scale to
benefit both ourselves and our hotel owners. Our reservations channels now
bring in $7.6 billion of room revenues and our Priority Club Rewards members
contribute $5.9 billion. We now directly generate around 60 per cent of room
nights at our hotels through our system.
This year we started several projects to make more of our scale, to maximise
efficiencies and drive cost savings. These include establishing a Group procurement
team and consolidating several accounting processes to overseas locations. The
savings will continue in 2009 and we have committed to keeping our costs below
2008 levels.
The trading environment became significantly tougher throughout 2008 and
there is no doubt 2009 will be very challenging, but ours is a resilient business
and our strategy remains the right one. Over the last few years, we have built
confidence and momentum in the business and forged an even stronger
bond with our community of outstanding owners with whom we operate
our hotel system. Together we are all focused on a common goal, to
create Great Hotels Guests Love and despite the poor short-term outlook,
we remain confident we can deliver our ambition.
Andrew Cosslett
Chief Executive
* Before exceptional items.