INTERCONTINENTAL HOTELS GROUP PLC InterContinental Maldives Maamunagau Resort
Investor Presentation
Most pure play, asset light global hotel company - highest quality of earnings
High quality revenue stream
- ~95% of profits from fee business following disposal of InterContinental Hong Kong
- ~80% of IHG's fee revenues linked to hotel revenues
- ~10% of IHG's fee revenues linked to hotels profits
Q1 2020 Open Rooms | Q1 2020 Pipeline Rooms |
30%
41%
Franchise | ||
59% | Managed | |
70% | Owned & Leased | |
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Global business with a presence in over 100 countries; concentrated in the US and China
Closing room count (k) | Closing pipeline rooms (k) |
March 2020 | March 2020 |
(Global: 882k rooms) | (Global: 288k rooms) |
137k | |
16% | |
88k | |
31% | |
118k | |
41% | |
221k | 524k |
25% | 59% |
Americas
EMEAA
Greater China
82k
28%
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IHG's business model provides a level of resilience relative to the wider industry
As of the end of April, ~85% of
our hotels remained open
Hotels closed by region1(%)
Weighted to domestic rather
than international travel
~70% of our open rooms are in
the Mainstream2segment
Open rooms by brand category (%)
10%
2%
~95%
of our US business is
domestic driven
~70%
50%
~85%
90%
98%
of our US estate is in non-urban markets
~20%
50%
Americas | EMEAA | Greater China |
Closed Open
1As at 30 April 2020; 2Mainstream includes Midscale and Upper Midscale brands
Lowdegree of reliance
on large groups and
events
~10%
Mainstream Upscale Luxury
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The Upper Midscale segment, which accounts for ~65% of our rooms in the US, has historically recovered faster than other segments
US RevPAR Performance 2008 - 2015 (12m rolling) | US Industry Chain Scale RevPAR Change (12m rolling) |
15.%
10.%
5.%
0.%
-5.%
-10.%
-15.%
-20.%
-25.%
-30.%
1988 | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Luxury Chains | Upper Upscale Chains | Upper Midscale Chains | |||||||||||||||||||||||||||||
Midscale Chains | Economy Chains | ||||||||||||||||||||||||||||||
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In response to Covid-19, we have taken a number of measures to reduce costs and preserve liquidity
Cost Actions | Liquidity Profile1 |
Fee Business cost savings to be achieved in
~$150m 2020
~$100mGross capex reduction YoY
~$150m | Cash savings from withdrawing FY19 final |
dividend recommendation | |
Scaling down discretionary and marketing spend across our System Fund
Introduced cost saving measures across our Owned, Leased and Managed Lease estate
~$2bn
Dec
2021
Sep
2023
£600m
>18
months
Available liquidity: ~$1.2bn of cash on deposit and undrawn facilities of $850m
Secured covenant waivers over $1.35bn syndicated and bilateral RCF
Extended maturity of syndicated RCF by 18 months until September 2023
Commercial paper issued under UK Government's CCFF
Headroom under theoretical 'zero occupancy'
environment; significantly longer under current occupancy conditions2
1As at 30 April 2020; 2Headroom assessment assumes cash outflows for the Fee Business, our Owned, Leased and Managed Leased hotels and the System Fund, as well as outflows for financing and tax
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Our response is on every front, taking decisive action to the benefit of all our stakeholders
Our response to Covid-19 is focused on remaining true to our purpose and values. Actions across our wider stakeholder group have included:
- Cross-industrycollaboration to help impacted colleaguesfind alternative employment whilst hotels are temporarily closed
- Supportinglong-standing charitable partners, including the British Red Crossthrough its Disaster Relief Alliance membership, CARE International, and the China Red Cross
- Working with governments and organisations around the world to provide accommodation tofrontline workers, military personneland vulnerable members of society
- Extension of ourTrue Hospitality for Good programme to help supportfoodbanks and food provision charities in more than70 countries
- Waiving of cancellation feesforguests on stays through to the end of June andreduction of the criteria for Elite membership across our loyalty programme, IHG Rewards Club
- Ensuring our hotels remainclean and safeenvironments for our guests and our colleagues
- Helping ourownerskeep their hotels open through tailored fee reliefand increased payment flexibility
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IHG is well placed to capitalise on the long-term industry fundamentals
Industry |
IHG
Growing | • | Industry total revenue ↑ 5%1 |
industry demand • | Brands consistently grown share vs independents |
Reallocated
resources
• | Embedded more effective regional structure |
• | Operating closer to market |
Shift to scale
brands
Attractive
asset class
Consumer
trends shifting
Technology
Sustainability
- Branded share2: 54% Open Rooms / 81% Pipeline
- Top 3 share2: 17% Open Rooms / 44% Pipeline
- Near record absolute RevPAR
- Owners continue to generate high ROI albeit against rising cost pressures
- Increasing demand for distinctive brands
- Integral to the entire guest journey
- Scale needed to support investment
- Increasingly informing guest preferences
- Scale helps owners seeking support
Growing
market share
Strengthening existing brands
Launched
new brands
Cloud-based
capabilities
Responsible
Business focus
• Accelerated net rooms growth from ~3% to 5.6% |
in three years |
• Continual innovation driving guest preference |
• Cost effective build and operational prototypes |
• Five new brands launched or acquired |
• Targeting under-served segments |
• Rolled out IHG Concerto across estate |
• Enhanced Wi-Fi platform with IHG Connect |
• Continuous focus on sustainable solutions |
• Sustainability credentials facilitate owner needs |
1Source: STR; 2016 - 19 CAGR; 2Source: STR census data; based on room share
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We have made strong progress against our aim to deliver industry leading net system size growth
Accelerating net system size growth from established brands
Net system size (rooms) | +5.6% | |||||
New brands | 884k | |||||
Existing brands | +4.8% | |||||
+4.0%837k
+3.1%798k
767k
744k
2015 | 2016 | 20171 | 2018 | 20192 |
12017 includes 5.0k room deal in Makkah; 22019 includes 5.2k rooms from Sands partnership in Macau SAR
Launched five new brands in two years
Strong gross openings pace, remain focused on quality
Gross openings and removals (rooms)
Gross openings | 4.8% | 5.6% | |||
Removals | 4.0% | ||||
3.1% | |||||
6.3% | 7.1% | 7.8% | |||
5.4% | |||||
-2.3% | -2.2% | -2.2% | -2.2% | ||
2016 | 2017 | 2018 | 2019 | ||
Continued momentum in new brand signings | |||||
Signings (rooms) | 99k | 98k | |||
83k | |||||
76k |
2016 | 2017 | 2018 | 2019 |
Other new brands avid Existing brands
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Latest trading performance: Q1 and April 2020 RevPAR
Q1 2020 RevPAR movement summary
Jan | Feb | Mar | Q1 | Apr | |
Americas | 0.2% | (0.9)% | (49.0)% | (19.3)% | ~(80)% |
EMEAA | 2.1% | (11.3)% | (62.7)% | (25.7)% | ~(90)% |
Greater China | (24.6)% | (89.3)% | (81.4)% | (65.3)% | ~(75)% |
Group | (1.5)% | (10.8)% | (55.1)% | (24.9)% | ~(80)% |
Q1 2020 system and pipeline summary (rooms)
System | Pipeline | ||||||||
Openings | Removals | Net | Total | YoY | Signings | Total | |||
Americas | 2,522 | (3,519) | (997) | 523,650 | 2.4% | 6,108 | 118,490 | ||
EMEAA | 1,521 | (3,599) | (2,078) | 221,292 | 3.5% | 2,476 | 82,098 | ||
Greater China | 2,002 | (928) | 1,074 | 136,620 | 16.2% | 5,618 | 87,733 | ||
Group | 6,045 | (8,046) | (2,001) | 881,562 | 4.6% | 14,202 | 288,321 | ||
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FY 2019 results: executing against our strategic initiatives and accelerating growth
Rooms & RevPAR | Results |
- +5.6% net rooms growth, strongest in over a decade
- (0.3)% Global RevPAR
- Record signings in EMEAA and Greater China
- 6% underlying operating profit growth
- 3% adjusted EPS growth
- Highly cash generative business model with $509m of free cash flow
- +10% Total Dividend
Accelerating growth
- $125m efficiency programme mostly complete and savings fully reinvested
- Accelerated net system size growth from ~3% to 5.6% over the past 3 years
- Pipeline ~1/3 of our system size; 40% under construction
- Underpinned by our commitment to operate a responsible business
Progress with brands
- New room and public space designs delivering uplifts in owner returns and guest satisfaction for established brands
- Launched Atwell Suites with 10 signings in 2019
- 10 avid hotels open, >200 signed since launch
- 12 voco hotels open, with 33 deals signed since launch
- 10 Six Senses properties signed since acquisition
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FY 2019 results: continued progression in fee margin
Total annual savings of $125m by 2020
- Total annual savings of $125m by 2020
- Savings fullyre-invested on an annual basis
Progression in fee margin1
+0.8%pts
54.1%
53.3%
FY 2018 Reported | FY 2019 Reported |
- 2018 fee margin included $9mone-off P&L marketing assessment revenue and equivalent cost (as previously disclosed)
- 2019 fee margin held back by an operating loss from Six Senses Hotels Resorts Spas
- Excluding these items, fee margin increased 160bps
1Reported Fee margin stated at AER
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Our strategy for uses of cash remains unchanged
Invest in the | Maintain sustainable | Return surplus | ||
business to | growth in ordinary | funds to | ||
drive growth | dividend | shareholders | ||
Commitment to Investment Grade Credit Rating
2.5x - 3.0x Net Debt : EBITDA1
1Range represents best proxy for investment grade credit rating under accounting standard IFRS 16 - equivalent to 2.0 - 2.5x net debt: EBITDA under the previous standard
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Conclusions
- Taken decisive action to reduce costs and preserve liquidity in response toCovid-19; priority remains supporting our guests, colleagues and hotel owners
- Resilient business model relative to the industry, with weighting towards Upper Midscale hotels innon-urban locations with a low degree of reliance on international travel; compelling long term market opportunity unchanged
- Strategic initiatives set out two years ago have strengthened our business, accelerating net rooms growth and driving financial results
- Continued commitment to operate a responsible business with new Science Based Target
- Strong industry fundamentals andcash-generative, resilient fee-based model, provides confidence to continue to invest for the long-term
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Sources & uses of cash
Cash flow from operations well above capex needs
981 | Free cash flow FY 2019 ($m) | |||||||
33 | ||||||||
(55) | ||||||||
(55) | ||||||||
(248)
656
- 509
(113)
(292)
(8)(73)
(723)
(700) | ||||||||||
EBITDA1 | System | Working | Exceptional | Interest & tax Free cash | Maintenance Free cash flow | Recyclable | Acquisitions Contingent | FX, lease | Dividends | (Increase)/ |
Fund inflow/ | capital & other | Items 3 | flow before | capex & key | & system | purchase | repayments | decrease | ||
(outflow)2 | movements | maintenance | money | fund capex | consideration and other non- | in net debt | ||||
capex and | cash iterms | |||||||||
key money |
- Free cash flow down $102myear-on-year, due to higher cash tax and interest
- Gross capital expenditure of $265m covered 2.5x by free cash flow before maintenance capex and key money
1Before exceptional items and System Fund result; 2System Fund inflow/(outflow) includes $54m of depreciation and amortisation and excludes exceptional costs of $28m in relation to efficiency programme; 3Includes $46m relating to group wide efficiency programme ($28m in relation to the System Fund)
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Targeted capital expenditure to drive growth
Medium term guidance:
Maintenance capex,
key money and selective
investments
Recyclable investments
System Fund capital
investments
Total capital investments
$m | FY 2019 | FY 20181 | ||
Maintenance capex | 86 | 60 | ||
Key money2 | 61 | 54 | ||
Total | 147 | 114 | ||
$m | FY 2019 | FY 20181 | ||
Gross out | 19 | 38 | ||
Gross in | (4) | (40) | ||
Net total | 15 | (2) | ||
$m | FY 2019 | FY 20181 | ||
Gross out | 98 | 99 | ||
Gross in | (49) | (45) | ||
Net total | 49 | 54 | ||
Gross total3 | 265 | 253 | ||
Net total | 211 | 166 | ||
- ~$150m per annum
- Key money: ~$75m per annum
- Maintenance capex: ~$75m per annum
- ~$100m per annum but expected to be broadly neutral over time
- ~$100m per annum
- Repaid when depreciation charged to System Fund
- Depreciation of GRS commenced in H2 2018
- Gross: up to $350m per annum
- Net: ~$150m
1The 2018 comparatives have been restated to reflect the adoption of IFRS 16 'Leases' from 1 January 2019; 2Key money presented net of repayments; 3Includes gross key money payments of 2019: $62m and 2018: $56m
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Highly cash generative business driving strong shareholder returns
- Strong cash flows driving consistent shareholder returns
- Total returns of ~$13.6bn since 2003, ~40% from operations
- $2.4bn ordinary dividend
- $11.2bn additional returns
- Strong financial position:
- $2.0bn Bonds1
- $1.4bn RCF2
Ordinary dividend progression 2014-2019 (¢ per share)
Final | Interim | |||||||||||||||
+10% | 104 | 114 | ||||||||||||||
77 | 85 | 94 | 78 | |||||||||||||
71 | ||||||||||||||||
64 | ||||||||||||||||
58 | ||||||||||||||||
52 | ||||||||||||||||
40 | ||||||||||||||||
40 | ||||||||||||||||
36 | ||||||||||||||||
33 | ||||||||||||||||
30 | ||||||||||||||||
28 | ||||||||||||||||
25 | ||||||||||||||||
2014 | 2015 | 2016 | 2017 | 2018 | 20194 |
Strong free cash flow generation ($m)3 | ||||
551 | 611 | Shareholder returns 2003-19 ($bn) | 13.6 | |
516 | ||||
509 | ||||
466 | ||||
5.8 | ||||
7.9 | ||||
321 | ||||
Asset disposals | Operational cash flows | Total |
2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
1First Bond (£400m) matures in November 2022; 2Maturity of the $1.275bn syndicated RCF extended by 18 months to September 2023; 32017 and 2018 Free Cash Flow Restated for the adoption of IFRS 16; 42019 final dividend recommendation withdrawn in response to Covid-19
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Strategic initiatives to drive industry leading rooms growth over the medium term
We have a clearly defined strategy which will continue to drive superior shareholder returns
Value creation: delivering industry-leading medium term net rooms growth
Model
5.Optimise our | 1.Build & | |
preferred portfolio of | ||
leverage scale | ||
brands for owners & | ||
guests | ||
IHG's | ||
Strategic | ||
4.Evolve owner | Model | 2. Strengthen loyalty |
programme | ||
proposition | ||
Targeted portfolio
- Attractive markets
- Highest opportunity segments
- Managed & franchised model
3.Enhance revenue delivery | |
Disciplined | •New organisational design will redeploy resources to leverage scale and accelerate growth |
•Initiatives funded by company-wide efficiency programme | |
execution | |
•Capital discipline & balance sheet philosophy remain unchanged | |
Whilst doing business responsibly | |
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But in order to deliver industry-leading net rooms growth over
the medium term, we need to make our strategic model work harder
1. | Build & leverage scale | ||||
Design a new organisational structure which redeploys | |||||
resources to leverage scale and accelerate growth | |||||
5 | 1 | 2. | Strengthen loyalty programme | ||
Continue to innovate IHG Rewards Club to create a more | |||||
differentiated offering and leverage & expand loyalty partnerships | |||||
IHG's | 3. | Enhance revenue delivery | |||
Strategic | Prioritise digital & technological innovation to drive | ||||
4 | Model | increased direct revenues e.g. Guest Reservation System | |||
2 | |||||
4. | Evolve owner proposition | ||||
Upweight owner support to accelerate growth & expand our | |||||
industry leading franchise offer into new areas | |||||
3 | 5. | Optimise our preferred portfolio of brands for owners and guests |
- Strengthen & grow existing brands
- Augment portfolio with new brands to match identified valuable opportunities
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Optimise our preferred portfolio of brands for owners & guests
Optimising our brand portfolio
- Breadth and depth of brand portfolio driving the growth of our business
Mainstream | Upscale | Luxury | ||
Brands
Established
New Brands | |||||||||||
Industry Supply YoY1 | 4.1% | 3.0% | 3.3% | ||||||||
IHG Share of Industry | 16% / 1st | 4% / 5th | 14% / 2nd | ||||||||
System / Rank | 1 | ||||||||||
IHG Share of Industry | 24% / 1st | 5% / 5th | 13% / 2nd | ||||||||
Pipeline / Rank | 1 | ||||||||||
May 2020 | 1As per STR | © 2020 All Rights Reserved | Proprietary and confidential - further reproduction or distribution is prohibited | 23 |
Optimising our brand portfolio
-
we have taken a strategic approach to identify opportunities
Categories
Mainstream1 | Upscale | Luxury | ||||||||||||
IHG's New | ||||||||||||||
Offering | ||||||||||||||
• | New build only | • | New build led | • | Existing hotel owners | • | New build and | • | New build and | |||||
• | Select service model | • | Focused service model | conversions | conversions | |||||||||
Owner | • | Access to IHG systems | ||||||||||||
• | Attractive returns enabled | • | Attractive returns enabled | • | High-end specification | • | Premium asset locations | |||||||
Opportunity | and revenue delivery | |||||||||||||
Criteria | by an efficient operating | by an efficient operating | • | Sizeable returns per | • | Sizeable returns per | ||||||||
• | Ideal for conversions | |||||||||||||
model | model | asset | asset | |||||||||||
• | The basics done | • | Stylish experiences and | • | Top tier luxury, leisure | |||||||||
exceptionally well at a | • | Hotels connected by their | focused offering | |||||||||||
functional benefits at | • | Top tier luxury offering | ||||||||||||
Guest | price point ~$10-15 less | individual characters, | • | World renowned, resort | ||||||||||
mainstream price | catering to our most | |||||||||||||
Opportunity | than Holiday Inn Express | making memorable travel | locations | |||||||||||
• | Options and flexibility for | sophisticated guests | ||||||||||||
• | Streamlined and efficient | dependable | • | Reputation for wellness | ||||||||||
longer stay guests | ||||||||||||||
design | and sustainability | |||||||||||||
Industry leading revenue | ||||||||||||||
IHG's | Industry leading midscale | Track record of delivery with | management & reservation | Operator of largest global | Operator of largest global | |||||||||
Competitive Offer | brand expertise | longer stay brands | tools, strong B2B offer and | Luxury brand2 | Luxury brand2 | |||||||||
loyalty programme | ||||||||||||||
1.Mainstream classified as Midscale and Upper-Midscale;2.As per STR data
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Mainstream
- Holiday Inn Brand Family innovation driving performance
- UpdatedFormula Blueguestroom and public space designs in the US & Canada; >1,600 hotels open or committed
Holiday Inn Brand Family
Global gross openings (rooms)
38k
o | Delivering 5pt premium in guest satisfaction |
and strong owner ROI | |
• >150 hotels with new room designs across Europe | |
o | Delivering 5pt premium in guest satisfaction |
25k25k
29k
27k
•New build prototypelaunched in US; >180 hotels |
open or committed across the Americas |
- Integrating new public space and guest room designs
- Smaller site requirements and cost effective construction methods
-
'Open Lobby' new public space open or committed in
>90% hotels across Europe - Driving uplifts in guest satisfaction and food & beverage revenue
2015 | 2016 | 2017 | 2018 | 2019 |
Share of US openings1(rooms)
3%pts
23%
20%
20162019
May 2020 | 1Source: STR; US upper midscale segment | © 2020 All Rights Reserved | Proprietary and confidential - further reproduction or distribution is prohibited | 25 |
Mainstream
- Good momentum following launch of avid and Atwell Suites
- 10 hotels open; with strong guest satisfaction
- >200 signings (20k rooms) since launch, including 16 hotels in Q4
- ~70% of signings from existing franchise owners
- >80 hotels under construction or with plans approved for construction
- All-Suitesmarket represents 152m room nights and $18bn in revenue annually
- Fastest growing segment in the industry, with ~70% system size growth over the past four years
- Strong owner interest with 10 signings in 2019; further 11 applications approved
- First hotels are expected to break ground in 2020 and open in 2021
May 2020 | © 2020 All Rights Reserved | Proprietary and confidential - further reproduction or distribution is prohibited | 26 |
Mainstream
- New design prototypes across extended stay brands
- Launched new build brand prototype
- Refresh of the hotel design
- Drive owner returns through more efficient and flexible base plans
- New brand logo to showcase an elevated experience for guests
- Launched new build brand prototype
- Based on over 18 months of guest research
- Drive owner returns through efficiencies
- Flexible designs which can work on smaller sites and in more markets
- New breakfast offer implemented across estate
May 2020 | © 2020 All Rights Reserved | Proprietary and confidential - further reproduction or distribution is prohibited | 27 |
Upscale
- Crowne Plaza renovations delivering improved guest experience
• Continued global growth with highest signings in a decade | |||
• Six flagship properties open including Atlanta, Paris & Hamburg | |||
• | Renovations driving uplifts in both RevPAR and guest satisfaction | ||
• | 28 Plaza Workspaces installed, with 16 more committed | ||
28 | |||
Crowne Plaza Atlanta Perimeter, US | |||
Upscale
- Increased pace of Hotel Indigo openings and signings
• ~120 properties open and a further ~100 in the pipeline | |||
• Record number of signings in 2019 | |||
• | Now have a presence secured in the pipeline in 16 new countries | ||
• | Set to double the size of the portfolio over the next five years | ||
29 | |||
Hotel Indigo Milan - Corso Monforte, Italy | |||
Upscale
- Plan to accelerate global expansion beyond EMEAA
- Plan to accelerate brand's global expansion beyond EMEAA in 2020
- Signed 33 hotels since launch in June 2018
- 12 voco hotels open across EMEAA; seeinghigh-single digit uplift in guest satisfaction across hotels after conversion
• On track to grow brand to >200 hotels in 10 years | voco Dubai, United Arab Emirates | 30 |
Enhancing our luxury offering to owners and guests
Global luxury footprint - Open and pipeline hotels
66Open 33Pipeline | 212Open 65Pipeline | 6Open 5Pipeline | 18Open 25Pipeline |
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Luxury
- Global expansion drives Kimpton growth
- Luxury boutique hotels withmulti-award winning restaurant and bars
- Best signings performance in the US since acquisition
- Signed 11 hotels including landmark properties in Hong Kong and Beijing
- Opened five properties in 2019; three outside of the US
• #5 on Fortune's 100 Best Companies to Work For in 2019 | Kimpton Charlotte Square, Edinburgh | 32 |
Luxury
- Strengthening InterContinental's position as world's largest luxury brand
- World's largest luxury hotel brand with distinctive style and ambience
- 9 openings and 13 signings in 2019
- Total pipeline and system size for the brand now ~280 properties
- Opened first InterContinental Residences property in Greater China
- Significant owner investment with a number of properties currently
under or soon to enter refurbishment | InterContinental Edinburgh The George, Edinburgh | 33 |
Luxury
- Moved to reposition Regent Hotels & Resorts
• World-renowned heritage with an elegant and timeless design
• Three new signings since acquisition | |||
• | Developed new brand hallmarks to position in the top tier of luxury | ||
• | On track to grow the portfolio to >40 hotels over the long term | 34 | |
Regent Porto Montenegro | |||
Luxury
- Strong momentum since acquisition of Six Senses
• World-renowned for wellness and sustainability at the top end of luxury
• Ten hotels signed since acquisition, including London, the Galápagos
Islands and the Loire Valley | |||
• | Potential to grow to >60 properties over the long term | ||
• | Voted Travel + Leisure #1 hotel brand for third consecutive year in 2019 | ||
35 | |||
Six Senses Krabey Island, Cambodia | |||
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Strengthen Loyalty Programme & Enhance Revenue Delivery
Strengthen loyalty
- Enhancing value of programme through partnerships and innovation
Loyalty
contribution
Unique
partnerships
Maximising
value of points
- Loyalty room night contribution1~46%
- Offering money can't buy experiences for our members atUS Open Tennis Championships
- Giving guests the opportunity to earn and redeem points in highly desirable destinations withMr & Mrs Smithand Sands Chinain Macau SAR
- Further enriching value proposition through trials of dynamic reward night pricing and option to pay with points during stay for services and amenities
1Based on both qualified and redeemed stays
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Enhance revenue delivery
- Investment in technology and global sales driving low cost revenue for our owners
Enhancements to GRS
- Piloting attribute pricing functionality for Guest Reservation System
- Trials commencing through H1 2020
Global sales organisation
- Centralised corporate negotiations
- Driving higher quality, lower cost revenue to our hotels
IHG Connect
- Implemented or being installed in >4,500 hotels
- Driving Guest Love uplifts of >14%pts
Revenue Management for Hire
- Adopted in >3,500 hotels
- Driving RGI uplift
OTAs
- Renegotiated more favourable terms on behalf of our owners
IHG's revenue
delivery
enterprise
IHG Studio
- New digitalin-room entertainment solution
- Implemented or being installed in >100 hotels
IHG Mobile
- App downloads up 11%, with $1.5bn app revenue, up 18% YoY
- JD Power Best App award in 2019
Digital check out
- Now accounts for ~$5.6bn of revenue, up 7%
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The IHG revenue delivery enterprise supports 5,900+ hotels across ~100 countries and delivers some 79% of rooms revenues
B2B Sales Systems | CRM Systems |
Channel Distribution | Revenue Management |
Systems | & GRS Tools |
IHG's | |
revenue | |
delivery | |
enterprise | |
Digital Marketing | IHG Rewards Club |
Operational Expertise | Innovative Technology |
May 2020 | © 2020 All Rights Reserved | Proprietary and confidential - further reproduction or distribution is prohibited | 40 |
IHG Concerto™
- initial phase of rollout now complete
- IHG Concerto is our proprietarycloud based, hotel technology platform
- Initial functionality is nowliveacross all our 5,900+ hotels
- Includes our newGuest Reservations System, developed in partnership with Amadeus
- Comprisesindustry-leading, plug and play architecture
- Gives IHG theflexibilityto adapt to market demands
Today
Employee | Efficiencies | Guest Love |
Satisfaction | ||
Competitive
advantage
Scalability Performance Industry
Leadership
Future
Reservations, | Yielding & | Dashboard & | Arrival, Departure, | Service Delivery | ||||||||||
Rate & Inventory | Price | Guest Folio | Owner Portal | and more | ||||||||||
Insights | & Optimisation | |||||||||||||
Management | Optimisation | Management | ||||||||||||
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Guest Reservation System
- Piloting enhanced functionality, including attribute pricing
- The next phase for our GRS will involve developing and pilotingattribute pricing
- At present, guests are typically offered a choice ofroom typewhen making a booking
- Attribute pricing will instead allow guests to choose rooms based on specificattribute type
- This will give guests a much greater opportunity tocustomisetheir stay
- It will also give owners the ability tounlock valuethrough optimising pricing for desirable attributes
- Functionality will only be available to guests who book direct through IHG channels
From: Hidden value
Room rate: $150
King
Illustrative only
To:
Highlighted value
Room rate: $150+
King
+$
High floor
+$$
Ocean View
+$$$
Quiet Zone
+$
Illustrative only
Executive
$$$
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IHG's ~$1.4 bn1System Fund supports our brand marketing and our revenue delivery system
Brands | Sources of Income | Sources of Spend | |||||
Marketing & Reservations | |||||||
Assessment | Advertising & Marketing | ||||||
~3.0% of rooms revenue | |||||||
IHG Rewards Club Point Sales | Distribution | |
~4.75% IHG Rewards Club bill | (Reservation & Channels) | |
Other fees for value add services | IHG Rewards Club | |
e.g. pay for performance programmes | ||
1As at 31 December 2019
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Underpinned by our commitment to operate a responsible business
- Providing True Hospitality for everyone
Waste reduction | Environmental sustainability | Workplace culture | ||||
- First global hotel company to mandatebulk-size bathroom amenities across entire estate
- Innovative food waste management
• 2030 Science Based Target1 | • Launched colleague share plan | ||
• | Task Force for Climate-related | • | 'CEO Action' pledge for diversity |
Financial Disclosures | and inclusion | ||
• | CEO Water Mandate | • | The Valuable 500 |
1IHG commits to reduce absolute scope 1, 2 and 3 (Fuel and Energy related activities) GHG emissions from its owned, leased and managed hotels, 15% by 2030 from a 2018 base year. IHG also commits to reduce scope 3 GHG emissions from its franchised hotels 46% per square meter by 2030 from a 2018 base year
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Appendices
Financial performance
Results from reportable segments1 | Reported | Underlying2 | ||
$ million | 2019 | 2018 | % Change | 2019 |
Restated3 | ||||
Revenue4 | $2,083m | $1,933m | 8% | 6% |
Operating profit | $865m | $832m | 4% | 6% |
Revenue from fee business | $1,510m | $1,486m | 2% | 2% |
Operating profit from fee business | $813m | $793m | 3% | 5% |
Fee margin5 | 54.1% | 53.3% | 0.8%pts | |
Adjusted Interest6 | $133m | $115m | 16% | |
Reported tax rate | 24% | 22% | 2%pts | |
Adjusted EPS7 | 303.3¢ | 293.2¢ | 3% | |
Total Dividend | 125.8¢ | 114.4¢ | 10% | |
1Reportable segments excludes System Fund results, hotel cost reimbursements and exceptional items; 2Reportable segment results excluding significant liquidated damages, current year acquisitions and stated at constant FY 2019 exchange rates (CER);
3Restated following the adoption of IFRS 16 'Leases' from 1 January 2019 and the amended definitions for fee margin and adjusted EPS. 4Comprises the Group's fee business and owned, leased, and managed lease hotels; 5Excludes owned, leased and managed lease hotels, significant liquidated damages and the results of the Group's captive insurance company. 6Adjusted interest includes $18m of interest charges in relation to the System Fund 7Calculated using results from Reportable Segments and Adjusted Interest, and excluding changes in fair value to contingent consideration
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Resilient fee-based business model driving solid fee revenue growth
FY 2019 fee revenue: $1,510m up 2%1and 2% underlying2
RevPAR
FY 2019 Group comparable RevPAR
FY 2019 system growth (%YoY)
X
Rooms
X
Royalty Rate
+0.1%pts | growth | |
-0.4% | ||
-0.3% | ||
Occupancy | ADR | RevPAR |
7.8% | |
5.6% | |
Gross | Net |
- 65k rooms opened: +16%
- 18k rooms removed
-2.2%Total RevPARgrowth3 | +4.6% Growth in availablerooms3 |
¹ Growth stated at AER. ² Underlying fee revenue excludes owned leased and managed lease hotels, significant liquidated damages, current year acquisitions and stated at constant FY 2019 exchange rates (CER) 3Growth stated for underlying fee business
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Strong penetration into developing markets continues to dilute short term RevPAR but provides a long runway for future revenue growth
RevPAR Growth % | Net rooms growth % | Underlying Fee | ||||
Comments | ||||||
FY 2019 | Comparable | Total2 | YoY | Available2 | Revenue1Growth % | |
Hotels that have | All hotels | Aggregate | ||||
that were open | number of | |||||
traded in all | ||||||
in FY 2019 and | 31stDecember | rooms available | ||||
months being | ||||||
FY 2018 (incl | 2019 vs 2018 | for sale in | ||||
compared (i.e. | ||||||
hotels that are | FY 2019 vs | |||||
steady state) | ||||||
ramping up) | FY 2018 | |||||
•Underlying fee revenue growth impacted by $9m of one-off | ||||||
Americas | -0.1% | -1.5% | 2.8% | 2.6% | 0.2% | P&L marketing assessments in the prior year as previously |
disclosed | ||||||
EMEAA | 0.3% | -1.2% | 5.8% | 5.9% | 2.3% | •Total RevPAR impacted by openings in less developed cities |
•Total RevPAR impacted by number of properties in ramp up | ||||||
Greater | -4.5% | -7.0% | 17.5% | 11.6% | 2.3% | and openings in less developed cities. |
China | •17.5% YoY rooms growth includes InterContinental Alliance | |||||
Resorts in Macau, opened in June 19 | ||||||
Total | -0.3% | -2.2% | 5.6% | 4.6% | 2.0% | |
- Underlying fee revenue and excludes owned, leased and managed lease hotels, significant liquidated damages, current year acquisitions, System Fund results and hotel cost reimbursements at constant FY 2019 exchange rates (CER)
- Underlying fee business Total RevPAR and Available rooms
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Americas FY 2019 US RevPAR performance in line with the segments in which we compete
FY 2019 Growth in fee revenue drivers1
- Comparable RevPAR down 0.1%; US down 0.2%
- Q4 US RevPAR down 1.7%
- Ongoing softness in small groups business
- Supply growth in Upper Midscale
2.8% | 2.6% |
0.2% | |
-0.1% |
- YoY net rooms growth 2.8% (Gross: up 5.1%)
- Strongest growth rate in 3 years
- Highest number of openings in 8 years
- Underlying fee revenue1flat, underlying fee operating profit2up 4%:
- Underlying fee revenue growth held back by $9mone-off P&L marketing assessment revenue in 2018
- Owned, leased and managed lease profit3up $2m
- Pipeline: 117k rooms; 33k signed
- Increase in share of industry signings4
-1.6% | ||
Comp. | Net rooms Fee revenue Total RevPAR* | Available |
RevPAR | rooms** | |
* Underlying Fee | ** Underlying Fee | |
business: -1.5% | business: +2.6% |
FY 2019 Net rooms growth ('000s)
525 | |||
510 | 26 | ||
(12) | |||
FY 2018 | Exits | Openings | FY 2019 |
1Underlying fee revenue excludes owned, leased and managed lease hotels, significant liquidated damages, current year acquisitions and stated at constant FY 2019 exchange rates (CER) 2Underlying fee operating profit excludes owned, leased and managed lease hotels, significant liquidated damages and current year acquisitions at constant FY 2019 exchange rates (CER); 3Growth stated at CER; 4Source; STR
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Americas - US
Performance of groups business and supply growth in Upper-Midscale
RevPAR growth for groups business across | Market weakness in certain corporate segments | |
Upscale and Upper-Midscale is challenged | ||
FY 2019 groups RevPAR growth (%) | FY 2019 Revenue (YoY %) | 9% |
1.0 | US market1 | ||||
0.5 | |||||
0.0 | |||||
-0.5 | Crowne | Holiday | Luxury | Upper | All others |
-1.0 | |||||
Plaza | Inn | Upscale | |||
-1.5 | |||||
-2.0 | |||||
-2.5 | |||||
-3.0 |
-7%-7%
-1%
-6%
0%
-3.5 |
Supply growth is higher for Upper Midscale vs Industry
FY 2019 industry supply and demand growth1
3.4%
2.9%
2.0%2.0%
Upper Midscale | Total US | |||
1Source: STR | Supply | Demand |
Automotive/ | Energy/ | Airline | Technology Manufacturing Professional |
Transportation | Utilities | Services |
Long-term fundamentals remain strong
1,300 | (Rooms sold, m)1 | ||||||||||||||||||||||||||||||
1,200 | |||||||||||||||||||||||||||||||
1,100 | |||||||||||||||||||||||||||||||
1,000 | |||||||||||||||||||||||||||||||
900 | |||||||||||||||||||||||||||||||
800 | |||||||||||||||||||||||||||||||
0 | |||||||||||||||||||||||||||||||
1988 | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
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Europe, Middle East, Asia and Africa
Strong signings and openings pace; voco momentum continues
FY 2019 Growth in fee revenue drivers1
- Comparable RevPAR up 0.3% (Q4 up 0.2%)
- UK up 1%; London up 3%; Provinces down 1%
- Middle East down 3% due to continued increased supply and political unrest
- YoY net rooms growth 5.8% (Gross: up 7.3%)
- Underlying fee revenue1up 2% and underlying fee operating profit2up 5%
- Owned, leased and managed lease profit3up $11m, benefiting from a partial usage of the IFRS 16 lease liability
- Challenging trading conditions resulted in a small operating loss for UK leased hotels after charging $17m of rental guarantee lease payments against the IFRS 16 lease liability
- Pipeline: 81k rooms; 29k signed
- 33 voco hotels signed across 16 countries over the past 18 months
7.1% | |
5.8% | |
2.3% | |
0.3% | 0.2% |
Comp. | Net rooms Fee revenue1Total RevPAR* | Available |
RevPAR | rooms** | |
* Underlying Fee | ** Underlying Fee | |
business: -1.2% | business: +5.9% |
FY 2019 Net rooms growth ('000s)
223 | |||
15 | |||
211 | |||
(3) | |||
FY 2018 | Exits | Openings | FY 2019 |
1Underlying fee revenue excludes owned, leased and managed lease hotels, significant liquidated damages, current year acquisitions and stated at constant FY 2019 exchange rates (CER) 2Underlying fee operating profit excludes owned, leased and managed lease hotels, significant liquidated damages and current year acquisitions at constant FY 2019 exchange rates (CER) 3Growth stated at CER
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Greater China
Record rooms growth and signings; continued industry outperformance
- Comparable RevPAR down 4.5% impacted by the ongoing unrest in Hong Kong SAR
- Mainland China down 1% (Q4 up 1%)
- Hong Kong SAR down 27% (Q4 down 63%)
- Total RevPAR down 5.9% due to mix effect of openings in lower RevPAR cities
- YoY net rooms growth 17.5% (Gross: up 20.6%)
- Underlying fee revenue1up 2% and operating profit2up 16% driven by rooms growth and disciplined cost control
- Fee revenue growth impacted by $5m fee income loss from the ongoing unrest in Hong Kong SAR
- Pipeline: 85k rooms
- 36k rooms signed, strongest ever signings performance
FY 2019 Growth in fee revenue drivers1
17.5% |
12.2% |
2.3% |
-4.5% | -5.9% | |
Comp. | Net rooms Fee revenue1Total RevPAR* | Available |
RevPAR | rooms** | |
* Underlying Fee | ** Underlying Fee | |
business: -7.0% | business: +11.6% |
FY 2019 Net rooms growth ('000s)
136 | |||
24 | |||
115 | |||
(4) | |||
FY 2018 | Exits | Openings | FY 2019 |
- Underlying fee revenue excludes owned, leased and managed lease hotels, significant liquidated damages, current year acquisitions and stated at constant FY 2019 exchange rates (CER)
- Underlying fee operating profit excludes owned, leased and managed lease hotels, significant liquidated damages and current year acquisitions at constant FY 2019 exchange rates (CER)
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Fee margin1by region
Americas
FY 2019 | 77.7% |
FY 2018 | 74.8%* |
Restated2 | |
- Excluding $9mone-off impact in revenue and costs related to P&L marketing assessments, fee margin would have been 75.8%
Greater China
FY 2019 | 54.1% |
FY 2018 | 46.7% |
Restated2 | |
Europe, Middle East, Asia and Africa
FY 2019 | 58.6%* |
FY 2018 | 62.3% |
Restated2 | |
* Includes an operating loss from Six Senses Hotels Resorts Spa
Total IHG
FY 2019 | 54.1% |
FY 2018 | 53.3% |
Restated2 | |
- Fee margin excludes owned, leased and managed lease hotels, significant liquidated damages and the results of the Group's captive insurance company; is stated at AER.
- FY 2018 fee margin updated for IFRS 16 'Leases' effective 1 January 2019 and excludes the results of the Group's captive insurance company
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2019 impairment charge
Americas
Impairment charge
- $50m impairment charge on acquired Kimpton Hotels & Restaurant management agreements
- Non-cashand excluded from adjusted results
Rationale
- Relates to reduced trading expectations in the US and impact of higher than expected number of exits in 2019 on overall assumptions
- Impairment test does not account for ~40 Kimpton signings since acquisition including 27 signings in the Americas and taking the brand to 14 new markets internationally
Europe, Middle East, Asia and Africa
Impairment charge
- $81m impairment charge on UK leased hotel portfolio
- $49m in goodwill
- $32m in IFRS 16right-of-use asset
- $38m fair value gain recorded from a related reduction in the value of contingent consideration liability
- Net P&L impact of $43m
- Both itemsnon-cash and excluded from adjusted results
Rationale
- Impairment charge driven by:
- Higher cost inflation, particularly wages/food
- Delays and disruption from a refurbishment and rebranding programme across 12 hotels
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~100% of efficiency programme costs now recognised; remainder of the $200m cash cost expected in 2020
$m | FY 2017 | FY 2018 | FY 2019 | Total | |
to date | |||||
IHG (exceptional) | 22 | 59 | 18 | 99 | |
Cash costs | System Fund (exceptional) | 9 | 47 | 28 | 84 |
Total | 31 | 106 | 46 | 183 | |
IHG (exceptional) | 36 | 56 | 20 | 112 | |
Book costs | System Fund1 | 9 | 47 | 28 | 84 |
Total | 45 | 103 | 48 | 196 | |
1Note that System Fund efficiency programme costs do notqualify as exceptional items on the income statement
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Revenue & Operating Profit 2018-2019
Total Revenue | * | ||||||
Total Operating Profit | |||||||
Full Year | Full Year | ||||||
2019 | 2019 | 2018** | |||||
2018 | |||||||
Fee Business | 853 | 853 | 663 | 638 | |||
Owned, Leased & Managed Leases | 187 | 198 | 37 | 35 | |||
Total Americas | 1,040 | 1,051 | 700 | 673 | |||
Fee Business | 337 | 320 | 202 | 202 | |||
Owned, Leased & Managed Leases | 386 | 249 | 15 | 4 | |||
Total EMEAA | 723 | 569 | 217 | 206 | |||
Fee Business | 135 | 143 | 73 | 70 | |||
Total Greater China | 135 | 143 | 73 | 70 | |||
Central Results | 185 | 170 | (125) | (117) | |||
Total Reportable Segments | 1,933 | 832 | |||||
2,083 | 865 | ||||||
Reimbursement of Costs | 1,171 | 1,171 | - | - | |||
System Fund | 1,373 | 1,233 | (49) | (146) | |||
Total IHG | 4,627 | 4,337 | 816 | 686 |
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Free Cash Flow Generation
$m | 12 months to 31 Dec 2019 | Restated for IFRS 16 Leases | ||
12 months to 31 Dec 2018 | ||||
Operating profit from reportable segments1 | 865 | 832 | ||
System Fund result2 | (21) | (99) | ||
Depreciation & amortisation3 | 170 | 164 | ||
Working capital & other movements | (82) | 4 | ||
Loyalty programme deferred revenue net movement | 52 | 124 | ||
Equity-settledshare-based cost | 42 | 38 | ||
Retirement benefit contributions, net of cost | (3) | (12) | ||
Purchase of shares by employee share trusts | (5) | (3) | ||
Cash flows relating to exceptional items4 | (55) | (137) | ||
Net interest paid & similar charges | (107) | (85) | ||
Tax paid5 | (141) | (66) | ||
Principal element of lease payments | (59) | (35) | ||
Capital expenditure: key money (net of repayments) | (61) | (54) | ||
Capital expenditure: maintenance | (86) | (60) | ||
Free cash flow | 509 | 611 | ||
1. | Before System Fund result and exceptional items. | |||
2. | System Fund result stated before exceptional cost of $28m (12 months to 31 December 2018 | $47m) in relation to efficiency programme. | ||
3. | Includes System Fund depreciation & amortisation of $54m (12 months to 31 December 2018 | $49m). | ||
4. | Includes $46m (12 months to 31 December 2018 $106m) relating to the efficiency programme ($28m in relation to the System Fund). | |||
5. | Excludes tax paid on disposals. | |||
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Uses of Free Cash Flow
$m | 12 months to 31 Dec 2019 | Restated for IFRS 16 Leases | ||
12 months to 31 Dec 2018 | ||||
Free cash flow | 509 | 611 | ||
Capital expenditure: Recyclable investments | (19) | (38) | ||
Capital expenditure: System Fund investment | (98) | (99) | ||
Acquisitions | (292) | (34) | ||
Payment of contingent purchase consideration | (8) | (4) | ||
Distributions from associates and joint ventures | - | 32 | ||
Disposal receipts: Other | 4 | 8 | ||
Tax paid - disposals | - | (2) | ||
Ordinary dividend | (211) | (199) | ||
Special dividend | (510) | - | ||
Dividends paid to non-controlling interests | (1) | (1) | ||
Currency swap proceeds | - | 3 | ||
Transaction costs relating to shareholder returns | (1) | - | ||
Net cash inflow/(outflow) | (627) | 277 | ||
Exchange, lease repayments & other non-cash items | (73) | 11 | ||
Opening net debt | (1,965) | (2,253) | ||
Closing net debt | (2,665) | (1,965) | ||
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Q1 2020 Current Trading
Comparable RevPAR, ADR & Occupancy Growth
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Comparable RevPAR - 3 Months to 31 March 2020
Fee Business and Owned, Leased & Managed Leases
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Comparable RevPAR - 3 Months to 31 March 2020 Total
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Hotel & Room Count as at 31 December 2019
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Pipeline as at 31 December 2019
*Does not include three open and one pipeline hotel that will be re-branded to voco.
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Cautionary note regarding forward-looking statements
This presentation may contain projections and forward looking statements. The words "believe", "expect", "anticipate", "intend" and "plan" and similar expressions identify forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the Company's financial position, potential business strategy, potential plans and potential objectives, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future
business strategies and the environment in which the Company will operate in the future. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate. The forward-looking statements in this document speak only as at the date of this presentation and the Company assumes no obligation to update or provide any additional information in relation to such forward-looking statements.
The merits or suitability of investing in any securities previously issued or issued in future by the Company for any investor's particular situation should be independently determined by such investor. Any such determination should involve, inter alia, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of the transaction in question.
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Investor Relations team contact details:
Stuart Ford | Matthew Kay | Rakesh Patel | Kavita Tatla | Karolina Nadolinska |
stuart.ford@ihg.com | matthew.kay@ihg.com | rakesh.patel2@ihg.com | kavita.tatla@ihg.com | karolina.nadolinska@ihg.com |
+44 (0)1895 512176 | +44 (0)1895 512176 | +44 (0)1895 512176 | +44 (0)1895 512176 | +44 (0)1895 512176 |
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IHG - Intercontinental Hotels Group plc published this content on 18 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 May 2020 12:34:02 UTC
