Our hotels typically operate under one of three different business models; owned, leased managed or franchised:
|Brand ownership||Marketing and distribution||Employees||Hotel Ownership||IHG Capital intensity||IHG income|
*IHG often employs the General Manager only.
|Franchised We operate 3,977 hotels under franchise agreements (84.67%)||IHG||IHG||Third party||Third party||Low||Fee % of rooms revenue|
|Managed We manage 711 hotels (15.14%)||IHG||IHG||IHG & Third-party*||Third party||Low||Fee % of total revenue plus % of profit|
|Owned and leased We own and lease 9 hotels (less than 1%)||IHG||IHG||IHG||IHG||High||All revenues and profits|
IHG's business model is focused on franchising and managing hotels, rather than owning them, enabling us to grow at an accelerated pace with limited capital investment.
A key characteristic of the franchised and managed business model is that it is highly cash generative, with a high return on capital employed. The asset-light approach means IHG benefits from the reduced volatility of fee-based income streams, as compared with the ownership of assets, resulting in a high-quality income stream. It enables us to focus on growing our fee revenues (Group revenue excluding owned and leased hotels, managed leases and significant liquidated damages) and fee margins (operating profit as a percentage of revenue, excluding revenue and operating profit from owned and leased hotels, managed leases and significant liquidated damages).
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 income for the System Fund in 2013 was $1.35 billion (2012: $1.25 billion) and these funds are used to pay for 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.
Last updated 3 April 2014