Media

There are over 3,700 hotels operating under IHG brands which are franchised.

Franchisees want to be in business for themselves but not by themselves. Ownership of a franchise can bring considerable benefits – franchisees can brand their hotel with one of our well-known and popular brands, while the franchise contract provides a powerful set of tools to drive new business.

• Connection to the IHG reservations system which is supported by web, call centres and GDS (travel agent booking system). By mid-2009, $4.4bn of rooms revenue or 66% of total rooms revenue, was booked through IHG's channels or by Priority Club Rewards members direct to hotel, up 4 percentage points on the first half of 2008.
• Participation in Priority Club Rewards, which has 47 million members worldwide.
• A proprietary operating manual setting out required and suggested operating specifications, standards and procedures.
• Property Improvement Plan (PIP) detailing actions a franchisee needs to take to bring their hotel up to mandatory brand standards.
• Franchisee-funded brand marketing programme.

Other services available to franchisees include training programmes, a consultation and advice service and optional marketing programmes.

This following is a diagram of the Franchise Revenue Business Model

Rooms

RevPAR

Royalty Fees

Drivers
Net System Growth
Market Share

Drivers
Relative Brand Premia

Drivers
Price/Return
Relationship with owner

IHG franchise revenue has three levers to drive future growth. Some of the factors that influence these levers are under our direct control, like rooms' growth, and others are influenced by market forces, such as the performance of our brands relative to competitors' brands.

The franchise contract is generally a standard contract, with some variation across the world. A sample contract would have a royalty fee of 5% of rooms' revenue. However this also varies across brands and countries.

IAHI, the Owners’ Association of IHG

The IAHI is the first association of owners in the hotel industry and comprises IHG franchisees throughout the world. The IAHI represents the interests of nearly 3,000 owners and operators of IHG hotel brands. The Association works collaboratively with IHG to maintain the highest professional hospitality standards for the brands.

The IAHI is focused on the following objectives to help promote members' long-term interests:

• Review and support IHG hotel brand standards and hallmarks to include compliance, planning and implementation.
• Optimise use of marketing and advertising funds to deliver each brand’s consumer message in an effective manner with growth of brand and market share performance as the key measure of success.
• Assist in creating long-term brand and hotel asset value through excellent brands, quality operations, superior marketing and team member development.
• Effectively represent members’ interests, as a part of the broader hotel industry, on legislative and economic issues that impact their businesses.
• Assist IHG in gaining the top position in the hospitality Industry for franchise desirability and performance.

Hotel operating profits that meet or exceed industry averages and fair returns on investment will be the result of these collective efforts.

The IAHI also represents members' interests to the broader hotel industry on legislative issues, along with vendors and other resources, helping to achieve the objectives outlined above.

For more information, visit www.iahi.org.