Holiday Inn 2011 Annual Report Download - page 26

A WINNING STRATEGY
We have made explicit choices regarding
the segments of the market in which we
wish to operate, ‘where we compete’,
and our basis of differentiation and
competition, ‘how we win’. These
decisions are underpinned by a rigorous
strategy setting process that is informed
by regular external research into
consumer preferences, developments
in the hotel and leisure sectors, and
economic and demographic trends.
The key elements of our strategy and
progress in its implementation are
reviewed annually by the Board.
We are focused on operating hotels in
those geographies and market segments
that offer the greatest growth potential
and attractive long-term returns.
Our preferred business model favours
franchising our brands and managing
hotels rather than owning properties
which reduces capital intensity, allows
us to grow faster and provides a more
resilient business model.
We operate a portfolio of well-known
and distinctive brands that aim over
time to increase their appeal amongst
guests in our chosen market segments.
Our brands and their related
propositions continue to benefit from
sustained investment by the Group and
owners in the physical hotel environment
and customer service training. Based
on our insights into changing guest
preferences and emerging segments,
we will create and launch new brands
to allow us to win greater market share.
Our hotel operations are supported by
best-in-class demand delivery systems
and operational expertise that provide
scale benefits resulting in margin
improvement and better returns
for owners.
INVESTING BEHIND GROWTH
During the year, we invested $93 million
in growth capital expenditure. This
included a $12 million equity stake in
Summit Hotel Properties, Inc. in the US
with whom we have a hotel sourcing
agreement; $11 million in the joint venture
which will take Holiday Inn Express into
India; and $25 million in the joint venture
to develop a Hotel Indigo on the Lower
East side of Manhattan. We also spent
$101 million maintenance capital
expenditure in owned hotels and our
systems infrastructure to maintain our
leading position in the industry and drive
further growth. Investments in technology
included the further development of our
branded websites, applications for mobile
devices, new software tools to improve
pricing and hotel operations, new
distribution platforms and our central
sales and reservations capability.
GROWTH IN SYSTEM SIZE
During the year, we opened 241 hotels
and 44,265 rooms in our system and
signed a total of 356 hotels and 55,424
rooms into our pipeline reflecting the
strong preference amongst owners
for our brands. The tougher financing
climate in The Americas and Europe
increased the proportion of new signings
represented by conversions of existing
properties, whereas China, the Middle
East and Asia remained predominantly
new-build markets. We achieved modest
growth in system size of two per cent and
24 IHG Annual Review and Summary Financial Statement 2011
“A net gain in hotel rooms
coupled with industry-leading
RevPAR boosted our market
share. Fee-based margins
rose 4.9 percentage points to
40.6 per cent, creating capacity
for more investment in brand
quality and guest delivery.”
Tom Singer
Chief Financial Officer
FINANCE
We continue to pursue an asset-light business model focused on franchising our brands and
managing hotels rather than owning properties. Since 2003, we have sold nearly 200 hotels,
returned almost $6 billion to shareholders and built a fee-based income stream with proven
resilience – even during global recession. Our strategy is to create high-quality growth by
developing our brands and relationships to increase market share and improve our margins
and returns to owners. We invest our free cash flow to accelerate our growth in existing and
new emerging markets which offer attractive long-term prospects.