Share price

2671.00

+33.00p / +1.25% / View details

Overview of IHG

Our commanding scale

  • 741,807 hotel rooms, 5,028 hotels, as at 31 March 2016
  • 1,378 pipeline hotels, as at 31 March 2016
  • Less than 1% of hotels are owned or leased
  • Operating in nearly 100 countries around the world
  • Listed on the London and New York stock exchanges
  • Nearly 94 million IHG Rewards Club members, as at 31 March 2016

Our business model

We predominantly franchise our brands to, and manage hotels on behalf of, third-party owners. Our asset-light strategy enables us to grow our business whilst generating high returns on invested capital.

We franchise and/or manage hotels depending largely on market maturity, owner preference and, in certain cases, on the particular brand. For example, in the US, a mature market, we operate a largely franchised business, working together with our owners to deliver preferred brands. By contrast, in Greater China, an emerging market, we operate a predominantly managed business where we are responsible for operating the hotel on behalf of our owners. We adapt this business model by market as necessary, for example, we also have managed leases (properties structured for legal reasons as operating leases but with the same characteristics as management contracts), partnerships and joint ventures.

Our hotels typically operate under one of three different business models; owned, leased managed or franchised:

  Number of hotels % of our portfolio Hotel ownership IHG capital intensity Employees' Brand ownership, marketing and distribution
 

As at 31 March 2016

             
Franchised  4,211 83.7% Third party* Low Third party  
             
Managed 810 16.1% Third party* Low IHG and third party                    IHG
             
Owned and leased  7 Less than 1% IHG High  IHG  

In 2014, over 90 per cent of our operating profit was generated from our asset-light management and franchise contracts. In addition, approximately 85 per cent of our fee-based income was derived from hotel revenues, and 15 per cent was principally from management fees linked to hotel profits. The asset-light approach, and franchised and managed business model:

• is highly cash-generative, with a high return on capital employed; and

• means IHG benefits from the reduced volatility of fee-based income streams and allows us to focus on growing our fee revenues and fee margins with limited requirements for IHG’s capital. 

The System Fund

The System Fund is managed by IHG for the benefit of hotels in the IHG System with the objective of driving revenues for the hotels. Total assessments and contributions paid by hotels to the System Fund in 2014 were $1.5 billion (2012: $1.3 billion) and these assessments are used to fund marketing, the IHG Rewards Club loyalty programme and the global reservation system. The System Fund is planned to operate at break even and does not result in a profit or loss for IHG.

Capital allocation

Our focus on an asset-light business model is supported by a disciplined, long-term approach to allocating capital and reducing the asset intensity of the business. We seek to maintain an efficient balance sheet with an investment grade credit rating. Our business is highly cash-generative, and we have three primary uses of the cash we generate:

• Invest in the business to drive growth: This includes acquisitions of businesses and our day-to-day capital expenditures.

• Maintain sustainable growth in the ordinary dividend: Our 2014 full-year dividend will be 77 cents (48.6 pence) per share (subject to shareholder approval of the 2014 final dividend) – up 10 per cent on 2013 (see page 50).

• Return surplus funds to shareholders: During 2014, we announced a $750 million return to shareholders via special dividend with share consolidation, and completed our $500 million share buyback (see page 50).

Last updated 6 May 2016

Find out more about our brands

IHG logo

  • InterContinental Hotel & Resort logo
  • Kimpton logo
  • Hualuxe Hotels and Resorts logo
  • Holiday Inn logo
  • Holiday Inn Express logo
  • Staybridge Suites logo
  • Hotel Indigo logo
  • Even Hotels logo
  • Crowne Plaza logo
  • Holiday Inn Club Vacations logo
  • Holiday Inn Resort logo
  • Candlewood Suites logo

*IHG® Rewards Club not applicable to Kimpton® Hotels & Restaurants; to be included at a future date.