Share price

2606.00

-17.00p / -0.65% / View details

Overview of IHG

Our commanding scale

  • 724,018 hotel rooms, 4,942 hotels, as at 30 June 2015
  • 1,293 pipeline hotels, as at 30 June 2015
  • 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
  • More than 88 million IHG Rewards Club members, as at 30 June 2015

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
 

 

             
Franchised  4,167 84.3% Third party* Low Third party  
             
Managed 767 15.5% Third party* Low IHG and third party                    IHG
             
Owned and leased  8 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).

In support of our asset-light strategy, during 2014 we:

Disposals

• completed the disposal of 80 per cent of our interest in InterContinental New York Barclay for $274 million;

• sold InterContinental Mark Hopkins San Francisco for $120 million; and

• announced a binding offer in respect of InterContinental Paris – Le Grand for €330 million ($406 million).

Acquisitions

• announced the acquisition of Kimpton Hotels & Restaurants for $430 million – a fully asset-light business. This acquisition completed in January 2015.

Last updated 8 May 2015

Find out more about our brands

IHG logo

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