Regent Shanghai Pudong, Greater China
Investor presentation
Post 2020 Q3 results
© 2020 All Rights Reserved | Proprietary and confidential - further reproduction or distribution is prohibited |
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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Strong portfolio of preferred brands, geographically diverse and asset light
Strong portfolio
of brands
Asset light and geographically diverse
High quality fee
stream
Mainstream | Upscale | Luxury | ||
Owned, Leased | Luxury | ||||||
& Managed | 140k | 10% | Mainstream | ||||
Managed | Leases | 96k | |||||
16% | |||||||
68% | |||||||
30% | 1% | 34% | 109k | ||||
Total | Total | Upscale | Total | Pipeline | 38% | |||||
rooms: | rooms: | rooms: | rooms: | |||||||
16% | ||||||||||
890k | 222k | 890k | 890k | 286k | ||||||
25% | ||||||||||
Franchised | 527k | 80k | ||||||||
69% | 59% | 28% | Americas | |||||||
~95% of profits from fee business | ||||||||||
EMEAA | ||||||||||
~80% of fee revenue linked to hotel revenues | ||||||||||
~10% of fee revenue linked to hotel profits | Greater China | |||||||||
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Why owners choose to partner with IHG
Trust and track record
Global Sales organisation
• Developed a leading global sales enterprise to drive higher quality, lower cost revenue to our hotels
- Drives ~25% of Group gross revenue
Technology Leadership
• Roll out of cloud-based IHG Concerto including Guest Reservation System
- Revenue management for hire tools
- IHG Connect and IHG Studio enhance guest experience
Investment in hotel lifecycle management and operations
- Accelerating hotel signings into openings and maximising owner ROI
- Faster ramp up of new hotel openings
- Extensive infrastructure for franchise
support
1 Loyalty contribution on a room revenue basis for 2019
Strength of brands
- Breadth and depth of brand portfolio
- Includes Holiday Inn Brand Family, the largest global hotel brand and InterContinental, the largest luxury hotel brand
- Deliver RevPAR premiums
- Strong owner ROI
Strong loyalty and enterprise contribution
- ~45% loyalty contribution1
- >100m IHG Rewards Club members
- Significant portion of room revenue booked through IHG's direct channels
Procurement
- Programs for hotel operating goods and services
- IHG Marketplace - hotel procurement buying programme / platform
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IHG is well placed to capitalise on the long-term industry fundamentals
Industry |
IHG
Growing | • | Industry total revenue ↑ 5% CAGR1 |
industry demand • | Attractive long-term structural growth drivers |
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 in 2019
- Owners generating high ROI albeit against some 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 to 2019 |
• 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 |
1 Source: STR; 2016-19;2 Source: STR census data; based on room share
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Strong competitive position in an industry where branded players are gaining market share
IHG has over 4% share of global
room supply
Share of global room supply (%)
Marriott
7.2% Hilton
5.1% IHG
4.4%
4.2% Wyndham
3.8% Accor
75.3%
With a larger share of the active | In an industry where branded | |
pipeline | players have gained share | |
IHG share of global rooms and | Global share of top 5 branded | |
active pipeline (%) | players | |
10.9% | ||
24.9% | ||
19.8% | ||
4.4% |
Other | 2015 | 2019 | |||||||||||
Share of global room supply Share of global active pipeline | |||||||||||||
IHG is largely asset-light and weighted | ~40% of IHG pipeline under construction | Strong conversion opportunity | |||||||||||
towards mainstream select service | potential to drive further share gains | ||||||||||||
Source: STR | |||||||||||||
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IHG's ~$1.4 bn1 System Fund supports our brand marketing and our revenue delivery system
Brands | Sources of Income |
Marketing & Reservations
Assessment
~3.0% of gross rooms revenue
IHG Rewards Club Point Sales ~4.75% IHG Rewards Club bill
Other fees for value add services
e.g. pay for performance programmes
Sources of Spend
IHG Rewards Club
Advertising & Marketing
Distribution
(Reservation & Channels)
Systems & Technology
1For year ending December 2019
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IHG's business model provides a level of resilience relative to the wider industry
As of the end of
September, ~97% of our
hotels are open
Hotels by region (%)
2%9%
98% 91% 100%
Americas EMEAA Greater
China
Closed Open
Q3 occupancy | Occupancy1 has been re- | |
building fastest in our largest | ||
running at 44% | ||
segment of mainstream | ||
Q3 occupancy by region | US weekly occupancy1 (%) |
60% | ||||||
57% | Mainstream | |||||
50% | ||||||
46% | 40% | |||||
Upscale | ||||||
31% | 30% | |||||
Luxury | ||||||
20% | ||||||
10% | ||||||
Americas | EMEAA | Greater | 0% | |||
China | Apr'20 | May'20 Jun'20 Jul'20 Aug'20 | Sep'20 | 30 Sep '20 | ||
1 - Comparable open hotels |
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Our mix places us well to benefit from the expected shape of demand recovery
Mainstream, our largest segment, is outpacing overall industry RevPAR
US rooms distribution
84%
10%
6%
Mainstream Upscale Luxury
Domestic travel is
leading the recovery
US demand mix
International
Domestic
Non-urban1 areas
strongly
outperforming urban
US rooms distribution
Urban
Non Urban
Groups is toughest
area of demand; IHG's
lowest exposure
2019 US guest stays
Business transient
Leisure
Groups
1Non-urban regions includes hotels located in small metro towns, suburban districts, interstate, airport and resort locations
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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 | ||||||||||||||||||||||||||||||
Source: STR
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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:
- $2.75bn Bonds1
- $1.4bn RCF2
- $2.9bn available liquidity
Ordinary dividend progression 2014-2019 (¢ per share)
Final | Interim | |||||||||||||||
+10% CAGR | 114 | |||||||||||||||
104 | ||||||||||||||||
77 | 85 | 94 | 78 | |||||||||||||
71 | ||||||||||||||||
64 | ||||||||||||||||
58 | ||||||||||||||||
52 | ||||||||||||||||
40 | ||||||||||||||||
40 | ||||||||||||||||
36 | ||||||||||||||||
33 | ||||||||||||||||
30 | ||||||||||||||||
28 | ||||||||||||||||
25 | ||||||||||||||||
2014 | 2015 | 2016 | 2017 | 2018 | 20194 |
Strong free cash flow generation ($m)3
611 | Shareholder returns 2003-19 ($bn) | 13.6 | ||||||||
551 | ||||||||||
466 | 516 | 509 | ||||||||
5.8 | ||||||||||
7.9 | ||||||||||
321 | ||||||||||
Asset disposals | Operational cash flows | Total | ||||||||
2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
1 Next bond maturity in November 2022 (£173m); 2 Maturity of the $1.35bn RCF extended by 18 months to September 2023; 3 2017 and 2018 Free Cash Flow Restated for the adoption of IFRS 16; 4 2019 final dividend recommendation withdrawn in response to Covid-19
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Our commitment to operate a responsible business
Supporting our communities through the crisis and beyond
Ensuring long-term environmental | Taking action to build a more | |
resilience | diverse & inclusive culture | |
- Accommodation for the most vulnerable in society
- Donation to food banks across 70+ countries
- Developing a new strategic Communities approach
ESG
rankings
- 2030 Science Based Target
- Task Force for Climate-related Financial Disclosures
- Engaging in forums with other business leaders and governments
Responsible
business
credentials
- Launch of new Americas D&I commitments
- Creation of new ethnic diversity network in Europe
- Developing a long term D&I ambition for the Group
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Q3 2020 and Covid-19 response
Navigating the Covid-19 crisis effectively and responsibly
Q3 2020 Rooms & RevPAR
- 890k rooms (5,977 hotels), +2.9% net growth YoY
- Global RevPAR decline (53)% in Q3; (52)% YTD
- 97% of estate open as of 30th September
- Q3 occupancy ~44%, up from April trough ~20%
- RevPAR outperformance in key markets
H1 2020 Results
- (83)% underlying H1 operating profit decline
- (90)% H1 adjusted EPS decline
- $(66)m H1 Free Cash Flow; broadly neutral FCF in Q2 (positive FCF in Q3)
- $2.1bn available liquidity at end September - rising to $2.9bn on a PF basis for bonds repaid and issued
Protecting the business
- Decisive cost action; robust liquidity and cash flow
- Providing support to owners to help keep hotels open, lower their costs and manage cash
- New operating procedures to protect colleagues and deliver guest safety
- Ensuring guests have confidence to stay with flexibility and rapid implementation of the IHG Clean Promise
Focusing on growth
- 263 signings YTD (82 in Q3), 173 openings (82 in Q3)
- 27% signings from conversions, up from 20% last year
- ~40% of pipeline under construction; 43 ground breaks in Q3
- Leveraging investment in technology and loyalty
- Planning business recovery in a responsible way
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Americas - US
Our weighting to mainstream has helped drive market outperformance
Q3 2020 US RevPAR change - IHG vs industry (%)
-38%
-42%
-47%-49%-47% -50%US Industry | IHG Weighted Segments Holiday Inn Express |
IHG1 Industry2
September 2020 US Occupancy distribution by brand segment (% of estate)
13% | ||||
60% | 63% | 26% | ||
41% | ||||
35% |
30% | 29% | 46% | |||||||||
39% | |||||||||||
10% | |||||||||||
8% | |||||||||||
Total | Mainstream | Premium | Luxury | ||||||||
Occ: >50% | Occ: 30% - 50% | Occ: <30% | |||||||||
1 Includes the adverse impact of hotels temporarily closed as a result of Covid-19.2 Industry data per STR, which excludes hotels that have been closed for >1 month
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IHG's response to the Covid-19 pandemic
Colleagues
- New operating procedures for frontline colleagues
- Support services to those affected by job losses
- Aiding flexible and remote working
Communities
- Accommodation to frontline workers
- Partnership with aid organisations to fund disaster relief
- Enable IHG Rewards Club members to donate points
Guests
- Flexible cancellation policy
- Protecting membership status of IHG Rewards Club members
- Global IHG Clean Promise
Cost reduction
- Up to $150m cost reduction in Fee Business
- ~50% sustainable into 2021
- System Fund cost base reduced
Liquidity and cash flow
- $2.9bn available liquidity
- Cash preservation and disciplined working capital management
Owners
- Temporary fee relief
- Relaxation of brand standards
- Operational support
- Government advocacy
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Owners: the value of our rapid response, system scale and ongoing operating and technology developments
Immediate support
Leveraging our scale
Maximising
demand
Brand
standards
Operational
advice
Fee relief
Cash
Flow
Government
advocacy
- Enhanced demand driver mapping
- Coordinated Covid-related demand
- Temporary relaxation of brand standards
- Help owners protect cash flow
- Support with closing and re-opening hotels
- Flexing operations and reducing costs
- Temporary discount on fees including technology and System Fund assessments
- Allow owners to manage cash flow through utilisation of maintenance reserves
- Secure broader government support
- Help owners access government schemes
Payment flexibility
Safety
standards
IHG
Concerto
Technology development
Procurement
Responsible
business focus
•
•
•
•
•
•
•
•
•
•
•
Case-by-case consideration of payment plans
Enhancement of IHG Way of Clean Introduction of new operating procedures
Automating front desk operations such as Contactless Check-in
New Owner Engagement Portal
Enhancement to revenue management services
Loyalty and mobile developments
Supporting supplier negotiations
Scale leverage to secure improved terms
Reducing carbon footprint in line with our Science Based Target
Strengthened Diversity & Inclusion focus
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Guests: the value of our branded flexibility and "stay safe" peace of mind
Immediate support
Leveraging our scale
Cancellation
fees
Cleanliness &
Safety
Loyalty
Promotional
activity
Meet with
Confidence
- Waived from the onset of the crisis
- IHG Clean Promise
- Face coverings in Americas
- Protected membership status
- Paused point expiry until end of year
- Reduced Elite status qualification requirements
- IHG's Heroes room rate for key workers
- Key worker leisure rate introduced
- Providing corporate bookers with greater flexibility
- Enhanced approach to health and safety
Booking | • Extension of Book Now, Pay Later policies | |
flexibility | ||
Cleanliness & | • | IHG Clean Promise |
Safety | • | Mobile check-in and check-out |
- Targeted campaigns for individual guests
Personalisation • Engagement and click through rate
doubled
Global | • WebEx for 1,500 Corporate Travel |
Managers to update on Covid-19 | |
Sales | |
response | |
Guest | • IHG's Guest Satisfaction Index1 has been |
net positive every month | |
satisfaction | • Each month showing sequential |
improvement |
1 Guest Satisfaction Index (GSI) is an IHG metric that uses third party aggregated social media review data to benchmark IHG guest satisfaction performance against that of our competitors
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Cleaning standards developed with industry-leading experts to enhance guest safety and reassurance
Strengthening IHG Way of Clean
- New global standard of hotel cleanliness and hygiene
- Science-ledprotocols developed with the Cleveland Clinic, Ecolab and Diversey
- Provide assurance throughout the guest experience e.g. sanitiser stations, social distance floor markers, grab-and-go breakfast options
- Working with scientific advisors to determine appropriate new technologies to pilot
- Innovating food and beverage to incorporate new operating procedures, social distancing, contactless room service
- Protecting hotel colleagues with standards on PPE, installing shields at front desk, training and certification
- Supported by a new verification procedure
Over 30% uplift in percentage of positive third-party
social review comments on cleanliness from guests following
launch of the IHG Clean Promise
InterContinental Mark Hopkins, San Francisco, United States
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Leveraging our investments in loyalty and technology to drive competitive advantage
Enhancing value
of loyalty
programme
Dynamic pricing
for Reward Nights
IHG Concerto
Revenue
management
- Loyalty members driving increasing share of occupancy as hotels begin to reopen
- Points promotion to encourage more frequent stays
- Our most loyal guests have been returning first
- Dynamic pricing for Reward Nights rolled out globally
- Over 80% of hotels have reduced their points pricing to deliver ~25% more value for guests outside of peak times
- Investment in cloud-based Concerto platform allows rapid deployment of mobile Check-in/out
- Owner Engagement Portal providing real-time scorecard metrics, allowing owners to rapidly respond
- Use of machine learning to enhance revenue management algorithms ensuring pricing and owner returns are maximised during periods of volatile demand
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Measures to reduce costs, preserve cash and maintain liquidity
Cost actions and cash preservation
- On track to achieve ~$150m of fee business cost savings in 2020, driven by salaries and wages reductions and challenges to discretionary spend
- Targeting for ~50% of cost savings to be sustainable beyond 2020, alongside continued investment in growth initiatives
- Scaling down marketing spend across the System Fund, reflecting lower levels of assessment income
- Taken cost containment action across our owned, leased and managed lease hotels, with ~$130m overall reduction to the cost base in H1
- Targeting a FY2020 reduction in gross capex of ~$100m over FY2019
Liquidity profile
- ~$2.9bn of available liquidity at end September on PF basis following bonds subsequently issued and repaid
- Secured covenant waivers over $1.35bn syndicated and bilateral RCF until December 2021
-
Extended maturity of our $1.35bn RCF by 18 months until
September 2023 - Issued £600m of commercial paper under UK
Government's CCFF - Have a staggered bond maturity profile, with next bond maturity in November 2022 (£173m)
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Conclusions
- Decisive action taken to manage through Covid-19 crisis effectively and responsibly to protect our stakeholders
- Domestic mainstream demand returning first, with group and international travel taking more time
- Near-termoutlook remains uncertain and the time period for market recovery is unknown
- Well placed with our industry-leading mainstream presence, and predominantly domestically-focused business
- Leveraging the benefit of our scale and strength of brands for owners and guests
- We have continued to sign and open new hotels, underscoring the confidence owners have in our system and brands
- The industry continues to have attractive structural growth drivers and IHG's cash-generative, resilient fee-based model, gives us confidence to emerge strongly when markets recover
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Optimise our preferred portfolio of brands for owners & guests
Our brand portfolio
- Breadth and depth of brand portfolio will drive future growth
Mainstream | Upscale | Luxury | ||
Brands
Established
New Brands | ||||
Q3 hotel openings/signings | 62/57 | 14/17 | 6/8 | |
% of Q3 signings that are | 25% | 28% | 11% | |
conversions | ||||
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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
- Continued momentum for avid and Atwell Suites
- 14 hotels open; strong guest satisfaction
- 7 hotels opened in H1
- First avid hotel opened in Mexico
- >200 signings (20k rooms) since launch, including 15 hotels in H1
- ~90 hotels under construction or with plans approved for construction
- Continued franchise applications from current and potential IHG owners
- Applications approved in diverse markets such as Miami (Florida), Denver (Colorado) and Charlotte (North Carolina)
- 19 franchise agreements executed or approved since launch
- First hotels are expected to break ground in 2020 and open in 2021
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Upscale
- Global expansion of voco to Americas and Greater China
voco Paris Montparnasse, France (due to open Q3 2020) | voco Hangzhou Minghao Bingjiang, Greater China (due to open Q3 2020) |
• Signed 40 hotels since launch in June 2018
• Attractive option for the conversion of high-quality individual and locally-branded hotels; numerous new-build opportunities
• Simplified hotel conversion process
• Following success of 36 open and pipeline hotels in EMEAA, expansion of brand to Americas and Greater China
• First signings in Greater China in June
• Strong owner interest in the Americas with key signings in landmark locations such as New York and Florida
voco Melbourne Central, Australia (due to open Q1 2021)
Continued signings across our luxury brands
InterContinental Grand Pacific Hotel, Fiji (due to open in 2022) | Kimpton Shanghai New Bund, Greater China (due to open in 2023) |
Regent Shanghai Pudong, Greater China (signed and opened in H1) | Six Senses Antognolla, Italy (due to open in 2023) |
Strengthen Loyalty Programme & Enhance Revenue Delivery
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 digital in-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
- Accounted for ~$5.6bn of revenue, up 7% in 2019
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IHG Concerto™
- initial phase of rollout now complete
- IHG Concerto is our proprietary cloud based, hotel technology platform
- Initial functionality is now live across all our 5,900+ hotels
- Includes our new Guest Reservations System, developed in partnership with Amadeus
- Comprises industry-leading, plug and play architecture
- Gives IHG the flexibility to 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 piloting attribute pricing
- At present, guests are typically offered a choice of room type when making a booking
- Attribute pricing will instead allow guests to choose rooms based on specific attribute type
- This will give guests a much greater opportunity to customise their stay
- It will also give owners the ability to unlock value through 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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Appendices
Financial performance
Results from reportable segments1 | Reported | Underlying2 | ||
$ million | H1 2020 | H1 2019 | % Change | H1 2020 |
Revenue3 | $488m | $1,012m | (52)% | (51)% |
Operating profit | $74m | $410m | (82)% | (83)% |
Revenue from fee business | $375m | $730m | (49)% | (48)% |
Operating profit from fee business | $97m | $394m | (75)% | (75)% |
Fee margin4 | 26.1% | 54.1% | (28.0)%pts | |
Adjusted Interest5 | $62m | $66m | (6)% | |
Reported tax rate | (127)% | 21% | (148)%pts | |
Adjusted EPS6 | 14.3¢ | 148.6¢ | (90)% | |
Interim Dividend | - | 39.9¢ | (100)% | |
1 Reportable segments excludes System Fund results, hotel cost reimbursements and exceptional items. 2 Reportable segment results excluding significant liquidated damages, current year disposals and stated at constant H1 2020 exchange rates (CER). 3
Comprises the Group's fee business and owned, leased and managed lease hotels. 4 Excludes owned, leased and managed lease hotels, significant liquidated damages and the results of the Group's captive insurance company. 5 Adjusted interest adds back $4m of interest charges in relation to the System Fund. 6 Calculated using results from Reportable Segments and Adjusted Interest, and excluding changes in fair value to contingent consideration.
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Fee-based business model shows relative resilience in spite of RevPAR downturn
H1 2020 fee revenue: $375m, down 49%1 and 48% underlying2
RevPAR
X
Rooms
X
Royalty Rate
H1 2020 Group comparable RevPAR
growth | ||
-12.1% | ||
-30.6%pts | ||
-51.7% | ||
ADR | Occupancy | RevPAR |
H1 2020 system growth (%YoY)
5.5% | • 12k rooms opened in H1 |
• 12k3 rooms removed in H1 | |
3.2% | |
Gross | Net |
-53.0% Total RevPARgrowth4 | +4.5% Growth in availablerooms4 |
- Growth stated at AER. ² Underlying fee revenue excludes owned, leased and managed lease hotels, significant liquidated damages, current year disposals and stated at constant H1 2020 exchange rates (CER). 3 Removals include 2.1k rooms relating to a previously flagged hotel portfolio in Germany. 4 Growth stated for underlying fee business.
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Growth rate analysis
RevPAR growth % | Net rooms growth % | Underlying Fee | ||||
Comments | ||||||
H1 2020 | Comparable | Total2 | YoY | Available2 | Revenue1 Growth % | |
Hotels that have | All hotels | Aggregate | ||||
that were open | number of | |||||
traded in all | ||||||
in H1 2020 and | 30 June 2020 | rooms available | ||||
months being | ||||||
H1 2019 (incl | vs 2019 | for sale in | ||||
compared (i.e. | ||||||
hotels that are | H1 2020 vs | |||||
steady state) | ||||||
ramping up) | H1 2019 | |||||
Americas | (47.6)% | (47.6)% | 1.7% | 2.7% | (45.7)% | |
EMEAA | (58.9)% | (59.0)% | 2.9% | 3.8% | (62.9)% | |
• Total RevPAR impacted by number of properties in ramp up | ||||||
Greater | (61.7)% | (65.1)% | 9.9% | 13.5% | (71.9)% | and openings in less developed cities |
China | • Fee revenue growth impacted by lower levels of incentive | |||||
management fee income | ||||||
Total | (51.7)% | (52.6)% | 3.2% | 4.5% | (47.9)% | |
- Underlying fee revenue and excludes owned, leased and managed lease hotels, significant liquidated damages, current year disposals, System Fund results and hotel cost reimbursements at constant H1 2020 exchange rates (CER).
- Underlying fee business Total RevPAR and Available rooms.
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Americas
Q2 US RevPAR outperformance in the weighted segments in which we compete
- H1 Comparable RevPAR down 47.6%; US down 46.8%
- Q2 US RevPAR down 69.3%
- Franchised estate down 66% and Managed estate down 86%
- Upper Midscale and Extended Stay proving most resilient segments
- July RevPAR expected to be down ~54%; occupancy in comparable open hotels ~45%
- 97% of the estate open as of the end of the month
- YoY net rooms growth 1.7% (gross: up 3.9%)
- Development continuing with >30 ground breaks in Q2
H1 2020 Growth in fee revenue drivers1
1.7% | ||
-47.6% | -45.9% | |
Comp. RevPAR | Net rooms | Fee revenue |
- Underlying fee revenue1 down 46%, underlying fee operating profit2 down 49%:
- Impact from higher levels of temporary hotel closures in US managed estate partially offset by fee business cost savings, a $4m payroll tax credit benefit and a $4m litigation settlement benefit
- Owned, leased and managed lease profit down $31m to a loss of $10m, impacted by the temporary closure of a number of hotels; results include a $4m benefit from business interruption insurance
- Pipeline: 116k rooms; 9k signed
- Signings include 15 avid and 7 Atwell Suites hotels
H1 2020 Net rooms growth ('000s)
525 | |||
523 | |||
(6) | 5 | ||
FY 2019 | Exits | Openings | H1 2020 |
1 Underlying fee revenue excludes owned, leased and managed lease hotels, significant liquidated damages, current year disposals and stated at constant H1 2020 exchange rates (CER). 2 Underlying fee operating profit excludes owned, leased and managed lease hotels, significant liquidated damages and current year disposals at constant H1 2020 exchange rates (CER). 3 Growth stated at CER.
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Europe, Middle East, Asia and Africa
Challenging trading conditions with mandated closures and travel restrictions
- Comparable RevPAR down 58.9% (Q2 down 87.6%)
- UK down 59%; London down 63%; Provinces down 57%
- H1 trough in April, with small but sequential improvements through May and June
- July RevPAR expected to be down ~74%; occupancy in comparable open hotels >30%
- 84% of the estate open as of the end of the month
- YoY net rooms growth 2.9% (gross: up 5.6%)
- Removals include 2.1k rooms relating to a previously flagged hotel portfolio in Germany
H1 2020 Growth in fee revenue drivers1
2.9% | |
-58.9% | -63.9% |
Comp. RevPAR | Net rooms | Fee revenue1 |
- Underlying fee revenue1 down 63% ($95m) and underlying fee operating profit2 down $91m to a loss of $4m, impacted by lower incentive management fee income
- Owned, leased and managed lease loss3 increased $8m; hotel closures partially offset by: significant cost reduction measures; rent reductions; $3m of disposal gains
- Rental payments relating to UK and German leased hotels now fully variable through the income statement; no lease liability or right-of-use asset on the balance sheet
- Pipeline: 80k rooms; 4k signed
- Signings include 4 Hotel Indigo, 4 InterContinental and 2 Six Senses properties
H1 2020 Net rooms growth ('000s)
223 | |||
(5) | 221 | ||
3 | |||
FY 2019 | Exits | Openings | H1 2020 |
1 Underlying fee revenue excludes owned, leased and managed lease hotels, significant liquidated damages, current year disposals and stated at constant H1 2020 exchange rates (CER). 2 Underlying fee operating profit excludes owned, leased and managed lease hotels, significant liquidated damages and current year disposals at constant H1 2020 exchange rates. (CER) 3 Growth stated at CER.
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Greater China
Occupancy levels recovered to >50% through July
- Comparable RevPAR down 61.7% (Q2 down 59.2%)
- Mainland China down 59% (Q2 down 56%)
- Tier 1 RevPAR down 66% in Q2, with Tier 2-4 RevPAR down 50%
- ~80% of our demand in Greater China is domestic driven
- Hong Kong SAR down 86% (Q2 down 90%)
H1 2020 Growth in fee revenue drivers1
9.9% |
-61.7% |
-72.7% |
• | July RevPAR expected to be down ~36%; occupancy in comparable open hotels >50% | Comp. RevPAR | Net rooms | Fee revenue1 |
• | >99% of the estate open as of the end of the month | |||
- YoY net rooms growth 9.9% (gross: up 12.2%)
- Underlying fee revenue1 down 72% ($46m) and operating profit2 down $40m to a loss of $5m driven by lower incentive management fee income
- Pipeline: 92k rooms, with construction resumed on >95% of 2020 projects
• 13k rooms signed, including first voco properties in the region
H1 2020 Net rooms growth ('000s)
139 | |||
136 | 4 | ||
(1) | |||
FY 2019 | Exits | Openings | H1 2020 |
1 Underlying fee revenue excludes owned, leased and managed lease hotels, significant liquidated damages, current year disposals and stated at constant H1 2020 exchange rates (CER). 2 Underlying fee operating profit excludes owned, leased and managed lease hotels, significant liquidated damages and current year disposals at constant H1 2020 exchange rates (CER).
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Fee margin1 by region
Americas | Europe, Middle East, Asia and Africa |
H1 2020 | 72.1% | H1 2020 -7.1% |
H1 20192 | 77.3% | H1 20192 | 57.8% |
Greater China | Total IHG |
H1 2020 -27.8% | H1 2020 | 26.1% |
H1 20192 | 54.5% | H1 20192 | 54.1% |
1 Fee margin excludes owned, leased and managed lease hotels, significant liquidated damages and the results of the Group's captive insurance company; is stated at AER. 2 H1 2019 fee margin updated to exclude the results of the Group's captive insurance company.
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Exceptional Items
Category | Detail | Rationale | Charge ($m) | ||
Property, plant and equipment | • Carrying book value of owned, leased and managed leased assets in the Americas and | (85) | |||
EMEAA | |||||
Intangible assets | • Acquired open and pipeline management agreements | (47) | |||
Trade deposits and loans | • Discounted value of deposits and loans held by owners in connection to managed hotels | (41) | |||
Impairment | Contract assets | • Remaining undiscounted amount of trade deposits and loans | (37) | ||
Investment in associates | • Stakes in associates held by IHG; shown net of a $13m fair value gain on a put option over | (21) | |||
part of IHG's investment in the New York Barclay associate | |||||
Trade and other receivables | • Impaired as a result of estimated expected credit losses arising from Covid-19 | (22) | |||
Right-of-use assets | • Relates to the fixed element of an individual hotel lease agreement | (5) | |||
Derecognition of right of-use-assets | • Resulting from leases now being recognised as fully variable | (49) | |||
Derecognition of lease liabilities | 71 | ||||
Cost of sales & | Onerous expenditure provision | • In respect of future contractual expenditure | (10) | ||
admin expenses | Reorganisation, acquisition and | • Relates to UK leased portfolio and Six Senses acquisition | (7) | ||
integration costs | |||||
Provision for guarantees on 3rd | • Commercially similar in nature to key money or trade deposits | (2) | |||
party debt | |||||
Total operating exceptional items | (255) | ||||
Non-operating expenses: Fair value gains on contingent purchase consideration | 21 | ||||
Total exceptional items before tax | (234) | ||||
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Exceptional Items: UK leased portfolio
Our total exceptional items before tax of $(234)m includes the below items in respect of the UK leased portfolio:
- Leases now considered to be fully variable and so the associated lease liabilities and right of use assets have been derecognised from the balance sheet
- FY 2019 reported results benefited from charging $17m of rental guarantee lease payments against the IFRS 16 liability held on the balance sheet
- All remaining property, plant and equipment has been fully impaired to nil
- Provision recognised against the estimated value of future contractual expenditure
- Fair value adjustment to contingent purchase consideration resulting in a reduction to the value of the liability to nil
H1 2020 Exceptional Items | $m |
Derecognition of right-of-use assets | (22) |
Derecognition of lease liabilities | 40 |
Impairment of property, plant and equipment | (50) |
Provision for onerous contractual expenditure | (10) |
Reorganisation costs | (4) |
Fair value gains on contingent purchase | 21 |
consideration | |
Total | (25) |
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2020 notable items
Significant items | H1 2020 | FY 2020 | ||
Payroll tax credits | AMER | $4m | $11m | |
Litigation settlement in relation to a single hotel | AMER | $4m | $4m | |
Individually significant Liquidated Damages1 | EMEAA | $1m | $1m | |
Gain on disposal of Holiday Inn Melbourne Airport | EMEAA | $3m | $3m | |
1 In February 2018, IHG received liquidated damages totalling $15m relating to the termination of a portfolio of 13 open hotels (2k rooms) and 6 pipeline hotels (1k rooms) in Germany, which exited IHG's system in Q1 2020. Under IFRS15, the $15m was recognised over the period from receipt until exit (H1 2018: $2.8m, FY 2018: $6.7m, FY 2019: $7.7m, H1 2020: $1.0m).
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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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2020 current trading
Comparable RevPAR, ADR & occupancy growth
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Comparable RevPAR - 3 months to 30 September 2020 Fee business and owned, leased & managed leases
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Comparable RevPAR - 3 months to 30 September 2020 total
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Hotel & room count as at 30 September 2020
*Does not include one open hotel that will be re-branded to voco. | © 2020 All Rights Reserved | Proprietary and confidential - further reproduction or distribution is prohibited |
November 2020 |
Pipeline as at 30 September 2020
*Does not include one pipeline hotel that will be re-branded to voco.** Includes one voco Pipeline hotel | Proprietary and confidential - further reproduction or distribution is prohibited |
November 2020 | © 2020 All Rights Reserved |
Investor Relations team contact details:
Stuart Ford | Rakesh Patel | Kavita Tatla | Karolina Nadolinska |
stuart.ford@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 |
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IHG - Intercontinental Hotels Group plc published this content on 11 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 November 2020 09:54:09 UTC