Holiday Inn 2015 Annual Report Download - page 41

Europe results
12 months ended 31 December
2015
$m
2014
$m
2015 vs
2014 %
change
2013
$m
2014 vs
2013 %
change
Revenue
Franchised 104 104 –104 –
Managed 131 159 (17.6) 156 1.9
Owned and leased 30 111 (73.0) 140 (20.7)
Total 265 374 (29.1) 400 (6.5)
Percentage of Group
revenue
14.7 20.1 (5.4) 21.0 (0.9)
Operating profit before
exceptional items
Franchised 77 78 (1.3) 79 (1.3)
Managed 28 30 (6.7) 30 –
Owned and leased 114 (92.9) 30 (53.3)
106 122 (13.1) 139 (12.2)
Regional overheads (28) (33) 15.2 (34) 2.9
Total 78 89 (12.4) 105 (15.2)
Percentage of Group
operating profit before
central overheads and
exceptional items
9.4 11.0 (1.6) 12.8 (1.8)
Highlights for the year ended 31 December 2015
Comprising 660 hotels (106,711 rooms) at the end of 2015, Europe
represented 14% of the Group’s room count and 9% of the Group’s
operating profit before central overheads and exceptional operating
items for the year ended 31 December 2015. Revenues are primarily
generated from hotels in the UK and continental European gateway
cities. The largest proportion of rooms in Europe are operated under
the franchise business model primarily in the upper midscale segment
(Holiday Inn and Holiday Inn Express). Similarly, in the upscale segment,
Crowne Plaza is predominantly franchised, whereas, in the luxury
segment, the majority of InterContinental-branded hotels are operated
under management agreements.
Revenue and operating profit before exceptional items decreased
by $109m (29.1%) to $265m and by $11m (12.4%) to $78m respectively.
This was primarily due to InterContinental Paris – Le Grand becoming
a managed property and the negative impact of significant foreign
exchange translation movement. On an underlyinga basis, revenue
and operating profit increased by $13m (7.5%) and $17m (23.3%)
respectively, with the transition of 61 UK managed hotels to franchise
contracts driving an increase in underlying franchise fees, and cost
efficiencies reducing regional overheads. Overall, comparable
RevPAR in Europe increased by 5.4%, with the UK increasing by 5.1%,
led by rate growth in both London and the provinces, and Germany
growing by 4.4%.
Franchised revenue remained flat at $104m, whilst operating profit
decreased by $1m (1.3%) to $77m. On a constant currency basis,
revenue and operating profit increased by $15m (14.4%) and $11m
(14.1%) respectively, following the transition of UK managed hotels
to franchise contracts.
Managed revenue decreased by $28m (17.6%) and operating profit
decreased by $2m (6.7%). Revenue and operating profit included $75m
(2014: $90m) and $1m (2014: $2m) respectively from managed leases.
Excluding properties operated under this arrangement, and on a
constant currency basis, revenue decreased by $2m (2.9%) and
operating profit increased by $3m (10.7%), impacted by the transition
of UK managed hotels to franchise contracts.
The one remaining hotel in the owned and leased estate,
InterContinental Paris – Le Grand, was sold on 20 May 2015 for gross
proceeds of €330m. Owned and leased revenue decreased by $81m
(73.0%) to $30m and operating profit decreased by $13m (92.9%) to $1m.
Highlights for the year ended 31 December 2014
Revenue and operating profit before exceptional items decreased
by $26m (6.5%) to $374m and by $16m (15.2%) to $89m respectively.
On an underlyinga basis, revenue and operating profit increased by
$4m (1.4%) and $3m (3.5%) respectively. Overall, comparable RevPAR
in Europe increased by 5.1%. The UK achieved a particularly strong
comparable RevPAR growth of 8.9%, with double-digit growth in
the first and third quarters. Comparable RevPAR in Germany was
also strong, increasing by 4.1%, driven by continued growth in
domestic output and a rise in employment, whilst IHG hotels in the
Commonwealth of Independent States (CIS) collectively experienced
a comparable RevPAR decline of 4.0%, reflecting a challenging
economic climate in the region during 2014.
Franchised revenue remained flat at $104m, whilst operating profit
decreased by $1m (1.3%) to $78m. Excluding the benefit of a $9m
liquidated damages receipt in 2013, revenue and operating profit
increased by $8m (8.4%) and $8m (11.4%) respectively at constant
currency. This underlying growth was mainly driven by an increase
in royalties of 8.0%, reflecting comparable RevPAR growth of 5.3%,
together with 5.7% rooms growth.
Managed revenue increased by $3m (1.9%) to $159m, whilst operating
profit was flat with 2013 at $30m. Revenue and operating profit
included $90m (2013: $89m) and $2m (2013: $2m) respectively
from managed leases. Excluding properties operated under this
arrangement and on a constant currency basis, revenue increased
by $3m (4.5%), whilst operating profit was flat. At the end of 2014,
IHG commenced a process to restructure the majority of its UK
managed hotels to new franchised contracts.
In the owned and leased estate, revenue decreased by $29m (20.7%)
to $111m and operating profit decreased by $16m (53.3%) to $14m.
At constant currency and excluding the impact of the disposal of
InterContinental London Park Lane (which contributed revenue and
operating profit of $22m and $8m respectively in 2013), owned and
leased revenue and operating profit both decreased by $7m. These
declines were driven by InterContinental Paris – Le Grand due to the
refurbishment of the Salon Opera ballroom in the first half of 2014.
The hotel delivered revenue and operating profit of $111m and $15m
respectively, a decrease of 5.9% and 34.8% compared to 2013, whilst
RevPAR decreased by 4.7%.
a Underlying excludes the impact of owned-asset disposals, significant liquidated damages,
Kimpton, and the results from managed-lease hotels, translated at constant currency by
applying prior-year exchange rates.
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IHG Annual Report and Form 20-F 2015
STRATEGIC REPORT GOVERNANCE GROUP FINANCIAL STATEMENTS ADDITIONAL INFORMATIONPARENT COMPANY FINANCIAL STATEMENTS