Holiday Inn 2010 Annual Report Download - page 11

Business review 9
OVERVIEW BUSINESS REVIEW
THE BOARD,
SENIOR MANAGEMENT AND
THEIR RESPONSIBILITIES
GROUP FINANCIAL
STATEMENTS
PARENT COMPANY
FINANCIAL STATEMENTS USEFUL INFORMATION
With a portfolio of great brands, in the best developed and emerging
markets, we are using our size, scale, people and expertise to
realise our Vision of becoming one of the world’s great companies.
This strategy is measured by a series of key performance indicators
around ‘Where we compete’ and ‘How we win’.
Delivering the elements of our strategy
Competing with an appropriate business model
Our business model has a clear focus on franchising and managing hotels, rather than owning them outright, enabling us to grow at an
accelerated pace with limited capital investment. Furthermore, IHG 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. Currently 87% of operating profit* is derived from franchised and managed operations.
Where necessary we actively support our brands by employing our own capital to showcase best-in-class operations through flagship assets.
Our 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 IHG booking channels, including branded websites and
call centres. The latest example is our strategic relationship with Summit Hotel Properties Inc., a US hotel investment company focused on
branded hotels. On any unbranded hotel bought by Summit, we now have first rights to give the hotel an IHG brand and earn fee revenues
through generating demand for that hotel.
The key features of our business model are represented in the following table and charts.
* Before regional and central overheads, exceptional items, interest and tax.
IHG’s strategy has ensured that we remain the largest hotel
company in the world, by number of rooms. By grounding our
operations and growth in Great Hotels Guests Love, we use
elements of our strategy, such as the business model of third-
party ownership, to grow faster than our global competitors.
Our strategy
With a portfolio of great brands, in the best developed and emerging markets, we are winning with our size, scale, people and expertise
to create a clear strategy to realise our Vision to become one of the great companies of the world…
‘Where we compete’
Appropriate business model
Relevant consumer segments
Best developed and emerging markets
‘How we win’
Portfolio of great brands
Our scale and expertise
Our people and our relationships
…achieved through strategic priorities
Growing our core business in the largest
markets where scale really counts, and also in
key global gateway cities and resort destinations
Seek opportunities to leverage our scale
in new business areas
Financial returns
Our people
Guest experience
Responsible business
Brand Marketing and
distribution Staff Ownership IHG capital IHG income
Franchised
This is the largest part of our
business: 3,783 hotels operate
under franchise agreements
IHG IHG Third party Third party None Fee % of
rooms revenue
Managed
We manage 639 hotels worldwide
IHG IHG IHG usually
supplies general
manager as a
minimum
Third party Low/none Fee % of total
revenue plus
% of prot
Owned and leased
We own 15 hotels worldwide
(less than 1% of our portfolio)
IHG IHG IHG IHG High All revenues
and prots