Annual Report
- Back to topBack to top
- Overview of 2018Overview of 2018
- From the Chair & CEOFrom the Chair & CEO
- Financial highlightsFinancial highlights
- Our brandsOur brands
- Where we operateWhere we operate
- Trends shaping our industryTrends shaping our industry
- Our business modelOur business model
- Our strategy for high-quality growthOur strategy for high-quality growth
- Our culture, key stakeholders and doing business responsiblyOur culture, key stakeholders and doing business responsibly
- DownloadsDownloads
Annual Report
and Form 20-F 2018
Summary of our Annual
Report and Form 20-F 2018
An overview of 2018
Our business and achievements for the year.
From the Chair
Our focus in 2018 has been strengthening the execution of our strategy, and laying the foundation for faster growth."
Patrick Cescau
Chair
From the CEO
Supported by our people, strategic initiatives and positive industry trends, we are confident in our prospects."
Keith Barr
Chief Executive Officer
Total revenue
$4,337m
2017: $4,075ma (+6.4%)
Revenue from reportable segmentsb
$1,933m
2017: $1,730ma (+11.7%)
Operating profit
$566m
2017: $728ma (-22.3%)
Operating profit from reportable segmentsb
$816m
2017: $758ma (+7.7%)
Total gross revenue in IHG's Systemb
$27.4bn
2017: $25.7bn (+6.6%)
Underlying fee revenue growthb
+6.5%
2017: +4.7%a
Total underlying operating profit growthb
$47m
2017: $56ma +6.2%
Revenue per available room (RevPAR growth)
+2.5%
2017: +2.7%
a restated to reflect the adoption of IFRS 15 (see pages 109 to 113) in the Financial Statements.
b Use of Non-GAAP measures:
In addition to performance measures directly observable in the Group Financial Statements (IFRS measures), additional financial measures (described as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not defined under IFRS or are adjusted IFRS figures. Further explanation in relation to these measures can be found on page 36, and reconciliations to IFRS figures, where they have been adjusted, are on pages 172 to 175. Total underlying operating profit growth and underlying fee revenue growth are stated at constant currency.
In 2018, we evolved our marketing function to adopt a comprehensive global approach to marketing and brand development activities. This included organising our brands into mainstream, upscale and luxury segments, in order to maximise efficiencies, better focus resources and drive performance.
Where we operate
We operate in more than 100 countries globally.
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Group revenue from
reportable segmentsb$1,933m
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Group operating profit from reportable segmentsb
$816m
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Number of rooms
836,541
Revenue 2018
$1,234m
Operating Profit
$123m
Number of rooms
123,456
In addition to performance measures directly observable in the Group Financial Statements (IFRS measures), additional financial measures (described as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not defined under IFRS or are adjusted IFRS figures. Further explanation in relation to these measures can be found on page 36, and reconciliations to IFRS figures, where they have been adjusted, are on pages 172 to 175. Total underlying operating profit growth and underlying fee revenue growth are stated at constant currency.
Trends shaping our industry
Demand for branded experiences
Growing consumer demand for branded experiences requires hotel companies to continue to find new ways to work with owners and partners to meet expectations.
Owners recognise the strength of a branded offer, and in addition to traditional opportunities, are looking for ways to affiliate with a brand through light-touch conversions or low-cost construction techniques, combined with features that reduce operating costs. The recent addition of multiple new brands by big-branded players illustrates the level of capacity in the market and industry appetite.
Over the last decade, IHG has added our wellness focus brand, EVEN Hotels, a brand tailored to the Chinese consumer, HUALUXE, and following acquisition, expanded Kimpton in the global boutique luxury space.
20+ a
New brands launched in the last decade by the top five hotel groups
a Source: STR, Inc
We have also launched avid™ hotels in the mainstream segment, upscale brand voco, which is principally focused on conversions, and acquired Regent in the upper luxury space. This reflects a continued strategic focus on offering more tailored experiences to a diverse guest base in the highest opportunity sements and markets in the world.
Diverse consumer needs
The consumer landscape continues to evolve– from millennials seeking increasingly unique and authentic experiences, to baby boomers with money and time to travel, both of whom increasingly expect technology to aid, inform and enrich their stays.
46% b
Of predicted US business trip spending will be by millennials, by 2020
b Source: Boston Consulting Group
From intuitive booking apps, chatbots, and mobile check-in/check-out, to smart artificial intelligence assistants and seamless wifi, today’s guests expect technology to be integrated into many areas of the travel experience. To meet this trend, the ability of hotel companies to work in partnership with the right technology providers has become increasingly important.
IHG has made good progress in this area, from bespoke online payment solutions to Artifical Intelligence Smart Rooms in some of our InterContinental hotels and the development of IHG Studio with our avid brand, which allows seamless direct casting of entertainment from guest smart devices to in-room TVs.
Power of the cloud
Data generation, storage and use has never been as prevalent and important as it is today. Cloud storage has further changed the game, giving accommodation providers easy access to real-time diverse data, that enables a more personalised and efficient service. Operationally it allows providers to use data to tailor guest experiences faster, and drive a more personalised relationship with them.
With this trend comes a growing responsibility to handle data responsibly, respecting consumer preferences and rights. IHG is a pioneer in data-centric technology innovation, from loyalty to reservations and hotel solutions.
90% c
Data in the world was generated in last two years
c Source: Forbes Media LLC
Our business model
Through our business model, we predominantly franchise our brands and manage hotels on behalf of third-party hotel owners. As an asset-light business, we focus on growing our fee revenues and fee margins, with limited requirements for capital.
4,615
Franchised hotels
(576,979 rooms)
965
Managed hotels
(253,566 rooms)
23
Owned and leased hotels
(5,996 rooms)
Our strategy for high-quality growth
We have a clearly defined strategy designed to drive superior shareholder returns. Our focus is on delivering high-quality growth, which means consistent, sustained growth in cash flows and profits over the long-term. The execution of our strategy is underpinned by a strong culture, talented people and a commitment to the environment and our stakeholders.
Our culture, key stakeholders and doing business responsibly
Our focus on doing business responsibly and the way we interact with our stakeholders, helps create a diverse, healthy and inclusive culture. IHG’s purpose and strategy go beyond a simple hotel stay and shareholder returns; it also includes the impact we have on the environment and the communities we work in.
