How our business works
We operate hotels in three different ways – as a franchisor, a manager and on an owned and leased basis.
We focus on the mainstream, upscale and luxury segments of the hotel industry and have a targeted portfolio of brands individually tailored to meet guests’ needs and occasions.
An asset light global operating model
Whether we franchise to, or manage hotels on behalf of third-party hotel owners depends largely on market maturity, owner preference and, in certain cases, the particular brand. Mature markets, such as the Americas and Europe, predominantly follow a franchise model, while a managed model is typically used in emerging markets, such as Greater China.
Open rooms by region as at 31 December 2024
| Region | Open rooms by region as at 31 December 2024 |
|---|---|
| Americas: 527,994 | 55 |
| EMEAA: 266,474 | 26 |
| Greater China: 192,657 | 19 |
2024 Revenue from reportable segments: $2,312m
| Region | 2023 Revenue from reportable segments: $2,164m |
|---|---|
| Americas: $1,141m | 51 |
| EMEAA: $748m | 31 |
| Greater China: $161m | 8 |
| Central: $262m | 10 |
2024 Operating profit from reportable segments $1,124m
2024 Operating profit from reportable segments, analysed as:
The key differences between our three main models are summarised below
| Business model | Hotel ownership | IHG capital intensity | Employees | Brand ownership marketing and distribution |
|---|---|---|---|---|
| Franchised | Third party | Low | Third party | IHG |
| Managed | Third party | Low | IHG and third party | |
| Owned and leased | IHG | High | IHG |
Our business model
Franchised model
Franchised model
Franchisees want to be in business for themselves but not by themselves. Our franchisees can brand their hotel with one of our well-known and popular brands, and benefit from a powerful loyalty programme and strong reservation system. We also provide a comprehensive set of tools such as revenue management and marketing programmes to drive business and new demand.
Our franchise fee growth is driven by three levers – room growth, revenue per available room (RevPAR) and royalty fees. The franchise agreement is generally a standard contract, with some variation across the world. A sample contract would normally have a royalty fee of 5-6 per cent of rooms' revenue. However this can vary by brand and country.
Visit our Global Development website to learn more about the IHG opportunity, or get in touch with our team.
Managed model
Managed model
Some third-party owners want their hotel managed for them, and expect a high standard of service which we provide across the world.
We manage the hotel but ownership of the physical building remains with a third-party owner. Typically, the senior management like the General Manager and the Financial Controller are IHG employees, who have oversight to build a successful team.
Management contracts can be bespoke but usually include two separate fees: base and incentive. The base fee is typically 1-3 per cent of a hotel’s total revenue. However, the percentage does vary by country and brand. The incentive fee is a share of profits, which is in place to align our interests with those of the property owner and to reward us for running the hotel profitably.
Visit our Global Development website to learn more about the IHG opportunity, or get in touch with our team.
Owned model
Owned model
Since 2003 we have completed the sale of almost 200 hotels as part of our move to an asset-light business model. In a few instances, we do still own hotels through recyclable investments in order to drive the growth of our brands and expand our presence in key markets.
The IHG System Fund
We manage a System Fund for the benefit of all hotels in the IHG System with the objective of driving revenue.
Total assessments and contributions paid by hotels into The Fund are spent on marketing, the IHG® One Rewards loyalty programme and the guest 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 for this cash: Invest in the business to drive growth; maintain sustainable growth in the ordinary dividend; return surplus funds to shareholders by way of special dividends, capital returns and share repurchase programmes.
Developing with us
