Holiday Inn 2012 Annual Report Download - page 14

12 IHG Annual Report and Financial Statements 2012
operating profit from owned and leased hotels, managed leases and
significant liquidated damages).
Currently 86 per cent of our Group operating profit (before regional and
central overheads and exceptional items) is derived from franchised
and managed operations. In some situations, IHG supports its brands
by using its capital to build or support the funding of flagship assets in
high-demand locations in order to drive growth. We plan to recycle
capital by selling these assets when the time is right and to reinvest
elsewhere in the business and across our portfolio.
On 6 November 2012, we announced that the InterContinental London
Park Lane would be the next hotel considered for sale and that
discussions regarding the disposal of the InterContinental New York
Barclay were progressing and would be opened to a wider group of
prospective buyers.
We continue to invest for growth, strengthening both our existing
brands and launching new ones.
Winning with a portfolio of preferred Brands
We aim to build a portfolio of brands that are bigger, better, and stronger:
• Bigger means we have prioritised our growth strategy to
build brand scale and leverage this scale through greater
operational efficiency.
• Better means a focus on continuous improvement in how we
develop and deliver our brands to ensure guest needs are met
with a consistent, high-quality experience.
• Stronger means a focus on driving brand preference among
guests, owners, investors and employees.
As part of our commitment to deliver against our brand strategy,
in 2012, IHG launched two unique new brands to the market, which
complement our overall portfolio of brands.
As of 31 December 2012, IHG’s portfolio comprised the following brands:
Our new brands
EVEN Hotels was launched in February 2012 following extensive
customer research in order to create a brand that meets travellers’
holistic wellness needs. EVEN Hotels is aimed at business and leisure
travellers who are looking for a wellness experience in a hotel stay
at a mainstream price point. IHG is investing up to $150 million in
establishing the brand, owning and managing the first hotels to ensure
the brand achieves its potential and market share growth in the US.
During 2012, IHG signed the first EVEN hotel located in the heart of
midtown Manhattan, New York.
How we win
Competing with an appropriate business model
COPY TO COME
Managed
We manage 658 hotels
worldwide
Owned and leased
We own 10 hotels worldwide
(less than one per cent of
our portfolio)
IHG
IHG
IHG
IHG
IHG usually
supplies
General
Manager as
a minimum
IHG
Third-party
IHG
Low/none
High
Franchised
This is the largest part of our
business: 3,934 hotels operate
under franchise agreements
IHG IHG Third-party Third-party None Fee % of
rooms
revenue
Brand
ownership Marketing and distribution
Staff Hotel
ownership IHG capital IHG income
Fee % of total
revenue plus
% of profit
All revenues
and profits
IHG global hotel count by ownership type
at 31 December 2012
■ Franchised
■ Managed
■ Owned and leased
3,934 hotels
658 hotels
10 hotels
As can be seen in the diagrams above and below, our business model
is focussed on franchising and managing hotels, rather than owning
them, enabling us to grow at an accelerated pace with limited capital
investment. This allows IHG to focus on building strong, preferred
Brands based on relevant consumer needs, leaving asset management
and real estate to our local third party owners with the necessary
expertise. With this asset-light approach, IHG also benefits from
the reduced volatility of fee based income streams, as compared with
the ownership of assets. It allows IHG to focus on building strong
Delivery systems such as our branded hotel websites and call
centres, creating greater returns for owners.
A key characteristic of the franchised and managed business
model is that it is highly cash generative, with a high return on
capital employed. It enables us to focus on growing our fee revenue
(Group revenue excluding owned and leased hotels, managed
leases and significant liquidated damages) and fee based margins
(operating profit as a percentage of revenue, excluding revenue and
■ Franchised 61%
■ Managed 25%
■ Owned and leased 14%
IHG continuing operating profit* by ownership type
for the year ended 31 December 2012
*Before regional and central overheads and exceptional items
Business Review: Our strategy continued