Our business model is focussed on franchising and managing hotels, rather than owning them, enabling us to grow at an accelerated pace with limited capital investment. This allows IHG to focus on building strong, preferred Brands based on relevant consumer needs, leaving asset management and real estate to our local third party owners with the necessary expertise. With this asset-light approach, IHG also benefits from the reduced volatility of fee based income streams, as compared with the ownership of assets. It allows IHG to focus on building strong Delivery systems such as our branded hotel websites and call centres, creating greater returns for owners.
A key characteristic of the franchised and managed business model is that it is highly cash generative, with a high return on capital employed. It enables us to focus on growing our fee revenue (Group revenue excluding owned and leased hotels, managed leases and significant liquidated damages) and fee based margins (operating profit as a percentage of revenue, excluding revenue and operating profit from owned and leased hotels, managed leases and significant liquidated damages).
Currently 86 per cent of our Group operating profit [before regional and central overheads and exceptional items] is derived from franchised and managed operations. In some situations, IHG supports its brands by using its capital to build or support the funding of flagship assets in high-demand locations in order to drive growth. We plan to recycle capital by selling these assets when the time is right and to reinvest elsewhere in the business and across our portfolio.
We continue to invest for growth, strengthening both our existing brands and launching new ones.
The key features of our business model are represented in the following table and charts.
|Brand||Marketing and distribution||Staff||Ownership||Capital||IHG income|
|Owned||IHG||IHG||IHG||IHG||High||All revenues and profits|
|Managed||IHG||IHG||IHG usually supplies general manager as premium||Third party||Low / none||Fee % of total revenue plus % of profit|
|Franchised||IHG||IHG||Third party||Third party||None||Fee % of rooms revenue|
|IHG global hotel count by ownership type at 31 December 2013|
|IHG continuing operating profit* by ownership
type for the year ended 31 December 2012
*Before regional and central overheads and exceptional items.
The largest part of our business: 3,977 hotels operate under franchise agreements (as at Preliminary Results to 31 December 2013)
We manage 711 hotels worldwide (as at Preliminary Results to 31 December 2013)
We own 9* hotels worldwide (as at Preliminary Results to 31 December 2013)
Figures as at 31 December 2013. * The disposal of InterContinental Park Lane completed on 1 May 2013, and is therefore disclosed as owned and leased.
Last updated 18 February 2014