Holiday Inn 2010 Annual Report Download - page 37

Business review 35
OVERVIEW BUSINESS REVIEW
THE BOARD,
SENIOR MANAGEMENT AND
THEIR RESPONSIBILITIES
GROUP FINANCIAL
STATEMENTS
PARENT COMPANY
FINANCIAL STATEMENTS USEFUL INFORMATION
The Group requires the right
people, skills and capability
to manage growth and
change
In order to remain competitive, the Group must employ the right people. This includes hiring and
retaining highly skilled employees with particular expertise or leadership capability. The implementation
of the Group’s strategic business plans could be undermined by failure to build resilient corporate
culture, recruit or retain key personnel, unexpected loss of key senior employees, failures in the Group’s
succession planning and incentive plans, or a failure to invest in the development of key skills.
Some of the markets in which the Group operates are experiencing economic growth and the Group
must compete against other companies inside and outside the hospitality industry for suitably qualified
or experienced employees. Failure to attract and retain these employees may threaten the success
of the Group’s operations in these markets. Additionally, unless skills are supported by a sufficient
infrastructure to enable knowledge and skills to be passed on, the Group risks losing accumulated
knowledge if key employees leave the Group.
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, 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 preparedness,
contingency planning or recovery capability in relation to a major incident or crisis may prevent
operational continuity and consequently impact the value of the brand or the reputation of the Group.
The Group is reliant upon its
proprietary reservations
system and is exposed to the
risk of failures in the system
and increased competition in
reservations infrastructure
The value of the brands of the Group is partly derived from the ability to drive reservations through
its proprietary HolidexPlus reservations system, a central repository of all hotel room inventories
linked electronically to multiple sales channels including IHG’s own websites, call centres and hotels,
third-party intermediaries and travel agents.
Lack of resilience in operational availability could lead to prolonged service disruption and may result
in significant business interruption and subsequent impact on revenues. Lack of investment in these
systems may also result in reduced ability to compete. Additionally, failure to maintain an appropriate
e-commerce strategy and select the right partners could erode the Group’s market share.
The Group is exposed to
inherent risks in relation to
technology and systems
The Group is reliant upon certain technologies and systems (including IT systems) for the running
of its business, particularly those which are highly integrated with business operational processes.
Disruption to those technologies or systems could adversely affect the efficiency of the business,
notwithstanding business continuity or disaster recovery processes. The Group may 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
lose customers, fail to attract new customers or incur substantial costs or face other losses.
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 may experience a
lack of selected development
opportunities
While the Group is operating in 100 countries and territories, if the availability of suitable development
sites becomes limited for IHG and its prospective hotel owners, for example due to saturation or
changing geo-political circumstances, this could adversely affect the Group’s future growth pipeline.
The Group is exposed to
risks related to corporate
responsibility
The reputation of the Group and the value of its brands are influenced by a wide variety of factors,
including the perception of key stakeholders and the communities in which the Group operates.
The social and environmental impacts of business are under increasing scrutiny, and the Group is
exposed to the risk of damage to its reputation if it fails to demonstrate sufficiently responsible
practices, ethical behaviour, or fails to comply with regulatory requirements in a number of areas
such as fraud, bribery and corruption, safety and security, sustainability and responsible tourism,
environmental management, equality, diversity and human rights, and support for local communities.