The hotel industry performed well last year despite challenging economic conditions. The economic outlook deteriorated over the course of 2012 with increased concerns over the Eurozone and weaker performance in the US and China. Global Domestic Product (GDP) increased by 2.3 per cent in 2012, compared with 2.9 per cent in 2011 and the year ended with a continued uncertain outlook across the globe.
However, the hotel industry demonstrated its resilience against this challenging economic background. Globally, industry revenue per available room (RevPAR), a key industry indicator, increased by 4.5 per cent, compared to a 5.9 per cent increase in 2011. IHG performed well against these market conditions, with global RevPAR growth in 2012 of 5.2 per cent.
The global hotel market is estimated to be close to 21.5 million rooms. Smith Travel Research calculates that there are 7.3 million branded hotel rooms, with the remainder a combination of independent hotels, guesthouses and other types of lodging. IHG holds the largest share of branded rooms, currently approximately nine per cent of branded supply, distributed across nearly 100 countries and territories around the world. In 2012 we opened 33,922 new rooms worldwide (226 new hotels). This has taken the number of open IHG hotel rooms to 675, 982 (4,602 hotels) at 31 December 2012, up 2.7 per cent from 2011, taking into account the removal of hotels which left the IHG System.
The benefits of a brand, such as the greater security and performance of a global reservation system, loyalty programmes and international network, are clear to many owners and IHG is well-positioned to win the business of owners seeking to grow with a hotel brand. Additionally, IHG and other large hotel companies have the competitive advantage of a global portfolio of brands that suit the different real estate or market opportunities an owner may have.
To ensure our strategy continues to be sustainable in the changing business environment and sustainable for the Group's capabilities, IHG closely monitors markets across the global and follows key industry and business metrics such as RevPAR, average daily rate, demand, GDP and guest satisfaction.
IHG continues to drive high quality growth aided by wider trends:
- Increase in affluence and freedom to travel in emerging markets – countries such as China are increasingly significant as domestic and international travel markets. They already have a sizeable hotel industry, and the importance of hotel brands is growing;
- The growth of the branded hotel sector has exceeded that of the unbranded sector over the past 10 years, and although currently less than half of all hotel rooms are branded, the benefits of a brand, such as the greater security and performance of a global reservation system, loyalty schemes and international networks, are clear to many owners. IHG is therefore well-positioned to win the business of owners seeking to grow with a hotel brand. Additionally, IHG and other large hotel companies have the competitive advantage of a global portfolio of brands that suit the different real estate or market opportunities an owner may have
- Global economic trends – GDP is a leading indicator for key industry metrics and our expertise combined with consensus opinion for long-term GDP trends allow us to prepare better the business for fluctuations in demand; and
- Change in demographics – as developed market populations age, increased leisure time suggests positive implications for travel and hotel demand. Conversely, younger generations are looking to balance work and lifestyles better, indicating an increasing need for quality hotel options. In advanced developing markets, an emerging middle class presents consumer and branded organisations with an opportunity to develop further global networks.
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