Holiday Inn 2013 Annual Report Download - page 167

The Group is exposed to the risk of events that adversely impact domestic or international travel
The room rates and occupancy levels of the Group could be adversely impacted by events that reduce domestic or international
travel, such as actual or threatened acts of terrorism or war, political or civil unrest, epidemics, travel-related accidents,
travel-related industrial action, increased transportation and fuel costs and natural disasters, resulting in reduced worldwide
travel or other local factors impacting individual hotels. A decrease in the demand for hotel rooms as a result of such events may
have an adverse impact on the Group’s operations and financial results. In addition, inadequate preparation, contingency planning
or recovery capability in relation to a major incident or crisis may impact life safety, prevent operational continuity and consequently
impact the value of our brands and/or the reputation of the Group.
The Group is exposed to the risks of the hotel industry supply and demand cycle
The future operating results of the Group could be adversely affected by industry overcapacity (by number of rooms) and weak
demand due, in part, to the cyclical nature of the hotel industry, or other differences between planning assumptions and actual
operating conditions. Reductions in room rates and occupancy levels would adversely impact the results of Group operations.
The Group is subject to a competitive and changing industry
The Group operates in a competitive industry and must compete effectively against traditional competitors such as other global
hotel chains, local hotel companies and independent hotels to win the loyalty of guests, employees and owners. The competitive
landscape also includes other types of businesses, such as web-based booking channels (which include online travel agents and
intermediaries), and alternative sources of accommodation such as private property. Failure to compete effectively in traditional
and emerging areas of the business could impact the Group’s market share, system size, profitability and relationships with
owners and guests.
The Group is dependent upon a wide range of external stakeholders and business partners
The Group is dependent upon the performance, behaviours and reputation of a wide range of business partners and external
stakeholders including, but not limited to, owners, contractors, lenders, suppliers, vendors, joint venture partners, agents, third-party
intermediaries and other business partners. Further, the number and complexity of interdependencies with stakeholders is evolving.
Breakdown in relationships, poor vendor performance, insolvency, stakeholder behaviours or adverse reputations could impact on the
Group’s performance and competitiveness, delivery of projects, guest experiences or the reputation of the Group or its brands.
Tactical risks
The Group is exposed to a variety of risks related to identifying, securing and retaining franchise and management agreements
The Group’s growth strategy depends on its success in identifying, securing and retaining franchise and management agreements.
This is an inherent risk for the hotel industry and franchise business model. Competition with other hotel companies may generally
reduce the number of suitable franchise, management and investment opportunities offered to the Group and increase the bargaining
position of property owners seeking to become a franchisee or engage a manager. The terms of new franchise or management
agreements may not be as favourable as current arrangements; the Group may not be able to renew existing arrangements on
similarly favourable terms or at all.
There can also be no assurance that the Group will be able to identify, retain or add franchisees to the IHG System or to secure
management contracts. For example, the availability of suitable sites, market saturation, planning and other local regulations or
the availability and affordability of finance may all restrict the supply of suitable hotel development opportunities under franchise
or management agreements. In connection with entering into franchise or management agreements, the Group may be required
to make investments in, or guarantee the obligations of, third parties or guarantee minimum income to third parties. There are also
risks that significant franchisees or groups of franchisees may have interests that conflict, or are not aligned, with those of the Group
including, for example, the unwillingness of franchisees to support brand improvement initiatives. This could result in franchisees
prematurely terminating contracts which would adversely impact the overall IHG System size and the Group’s financial performance.
The Group is exposed to inherent risks in relation to changing technology and systems
The Group is reliant upon certain technologies, systems and platforms for the running of its business, particularly those which are
highly integrated with business operational processes. Some of these are dependent upon the products and services of third-party
technology providers. The failure of any such third-party provider to provide products and/or perform services could materially
adversely impact the Group’s business. The Group may also have to make substantial additional investments in new technologies
or systems to remain competitive. Failing to keep pace with developments in technologies or systems may put the Group at a
competitive disadvantage. The technologies or systems that the Group chooses may not be commercially successful or the
technology or system strategy employed may not be sufficiently aligned with the needs of the business or responsive to changes in
business strategy. As a result, the Group could adversely affect guest experiences, lose customers, fail to attract new customers,
incur substantial costs or face other losses.
Operational risks
The Group is reliant on the reputation of its brands and the protection of its intellectual property rights
Any event that materially damages the reputation of one or more of the Group’s existing or new brands and/or fails to sustain the
appeal of the Group’s existing or new brands to its customers and owners may have an adverse impact on the value of that brand
and subsequent revenues from that brand or business. In particular, where the Group is unable to enforce adherence to its safety
or operating and quality standards, or the significant regulations applicable to hotel operations, pursuant to its franchise and
management contracts, there may be further adverse impact upon brand reputation or customer perception and therefore the
value of the Group’s brands.
Additional Information 165
OVERVIEW STRATEGIC REPORT GOVERNANCE
GROUP FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS ADDITIONAL INFORMATION