19 February 2013
IHG Announces Double Digit Operating Profit Growth in 2012
Another year of industry-leading performance in key markets as IHG prepares to celebrate its 10th anniversary
226 new hotels and the launch of two new brands are just some of the milestones achieved by IHG last year. The strong Preliminary Results announced by the company today demonstrate how IHG is increasing its global footprint, tailoring its brands to today’s guests, harnessing the power of the online world, supporting hotel owners and ultimately creating returns for shareholders.
2012 Financial Results
IHG grew RevPAR (revenue per available room) by over 5% in 2012, generating revenue of $1.8 billion. This, coupled with a 2.7% increase in system size (the number of rooms operating under the company’s brands) saw fee revenue increase by 6.8%. Through a continued focus on reducing costs, and making the most of IHG’s industry leading scale, this was converted into a 10% increase in operating profit. Regional highlights included:
- The Americas, home to 77% of IHG’s hotels, performed particularly well, increasing system size by 2% and outperforming the industry in RevPAR growth in the US, despite uncertainty created by the presidential election and ‘fiscal’ cliff’,
- In Europe, RevPAR increased 1.7% overall, with Revenues up 8%. The UK outperformed the industry with a 2.5% growth in RevPAR. Germany also performed well, with RevPAR up 5.4%, on the back of a strong trade fair schedule.
- Greater China produced a 21% increase in operating profit – the result of new hotels opening and RevPAR growth of 5.4% (significantly outperforming the industry).
- Across Asia, Middle East and Africa RevPAR grew 4.9%. South East Asia, Saudi Arabia and the UAE were the strongest performing markets, with RevPAR up 8.3%, 8% and 5.5% respectively.
Richard Solomons, Chief Executive, commented “2012 was another year of significant progress for IHG with our preferred brands driving RevPAR up 5.2%. Along with a 2.7% increase in our room count, increasingly fuelled by expansion in developing markets, we’ve been able to deliver a significant rise in fee revenue - the key measure of success in our core business of franchising and managing hotels.
Our continued growth is based upon our unique close relationship with our hotel owners, who choose our brands and work with us to deliver great guest experiences. Our increasing scale and focus on reducing costs has allowed us to both reinvest in the business and achieve solid margin progression, resulting in double-digit profit and dividend growth.”
Growth through Preferred Brands
These results also signify a good year for hotel openings and signings across IHG’s nine brands. IHG opened a hotel every 39 hours on average, including the highest number of openings seen in Europe for four years. In total 226 new hotels (34,000 rooms), opened their doors to guests, taking IHG’s global hotel count to 4,602 (676,000 rooms).
IHG’s future growth prospects also remain strong with the company signing nearly one hotel a day (356 hotels, 54,000 rooms) into their development pipeline – a notable achievement given the financing environment remains challenging in many markets. IHG’s global development pipeline now stands at 1,053 hotels (169,000 rooms), giving the company a 12% share of all active hotel projects worldwide. IHG currently has a 5% share of global hotel rooms, highlighting the increase in market share the company can expect over the coming years. 50% of these hotels are in developing markets, compared to just 19% of rooms currently open, highlighting the shift in business mix towards developing markets where demand is growing at its fastest.
IHG’s strong financial performance and the steady pace of signings and openings in 2012 reflect the company’s focus on maintaining its industry-leading portfolio of ‘preferred’ brands. 2012 saw a number of important achievements on this front including the launch of two innovative new concepts never previously seen in the hotel industry:
- HUALUXE Hotels & Resorts is the first ever international hotel brand designed specifically for the Chinese consumer. The reaction from hotel owners has been very positive with 15 hotels signed to date and the company’s long terms aspirations set on HUALUXE being present in 100 cities across China.
- EVEN Hotels is the first mainstream hotel brand to focus specifically on health and wellness - targeting a potential 17 million travellers in the US alone. A flagship property will open in a prime location in New York with active discussions on further projects continuing at pace.
As well as unveiling these exciting new concepts, helping IHG satisfy unmet consumer demand in key markets, the company remains focused on constantly improving the quality of their established brands:
Holiday Inn Brand Family
- Holiday Inn, which celebrated its 60th anniversary during the year, goes from strength to strength following the rebrand. For the second year running the brand was ranked by J.D. Power and Associates as “Highest in Guest Satisfaction among Mid-scale Full Service Hotel Chains”. This accolade comes on the back of Holiday Inn’s hugely successful role as official hotel provider to the London 2012 Olympic and Paralympic Games and a number of significant openings including the world’s largest Holiday Inn in Macau with 1,224 rooms.
- Holiday Inn Express, which debuted in India, Bahrain and Thailand this year, continues to be IHG’s biggest growth engine with 452 hotels [52,000 rooms] slated to open across the globe in the next three to five years. India will be home to 15 of these hotels, with 12 planned for Indonesia.
- The Holiday Inn Brand Family is the fastest growing brand in its segment globally, and made up 70% of all openings and signings in the Americas last year. Significantly it now accounts for almost two-thirds of IHG’s total future growth and one third of all hotels the company plans to open across the Asia, Middle East and Africa region.
- InterContinental Hotels & Resorts opened second locations in both Mexico City and London and 10 new hotel deals were signed, including two new resorts in Australia and Thailand and the UAE’s sixth InterContinental hotel.
- Hotel Indigo, the company’s boutique hotel brand is expanding fast. 13 hotels opened during the year and Hotel Indigo doubled its footprint in Europe, with a total of eight hotels now across the UK alone. The brand passed the symbolic 50th hotel milestone during the year and will grow to nearly 100 hotels over the next three to five years. More than half of these hotels will open outside of the Americas.
- Both Staybridge Suites and Candlewood signed 19 new deals each in the year.
- The Crowne Plaza repositioning programme is on track with a suite of new hallmarks, developed following extensive new research, including mobile check-in/check-out, improved in-room connectivity and enhanced fitness and well-being options to be introduced by the end of 2015. 14 of the 21 Crowne Plaza hotels opened in 2012 were in Asia, highlighting the brand’s fast pace of growth across Asia Pacific.
Online Growth Driving Guest Bookings
Ensuring guests have fast, easy access to IHG’s growing collection of hotels around the world is a key focus. In 2012 69% of rooms revenue was delivered through IHG’s own booking channels including Priority Club Rewards (PCR), the industry’s oldest and largest loyalty programme. PCR membership grew 13% last year and now totals 71 million. The loyalty of these members is a powerful revenue stream, with PCR members staying more often, spending more when they do and using more cost effective booking channels.
As guests increasingly live their lives “on the move” there has been explosive growth in online bookings, with 80% of consumers going online before booking a room. IHG’s websites generated over a quarter of a billion visits last year, resulting in $3.4 billion of revenue – up 10% on the previous year. During the year IHG spent $65 million on search engines and now manages over eight million key words in 16 languages. With a suite of mobile apps launched by the company, mobile bookings also generated industry leading revenues of over $330 million - up from just [$3] million in 2009. In the social media space IHG’s brands generated 1 billion impressions last year and received an average of 6.4 mentions per minute. In addition IHG is a founding partner of the first industry led search engine roomkey.com.
Creating 90,000 New Jobs Around the World
As well as providing a place for guests to relax on holiday or conduct business, IHG hotels are a place of employment for more than 350,000 people around the world. Hotels make a significant contribution to society, helping to build sustainable communities and providing attractive employment opportunities for people who might not have entered the industry otherwise.
IHG’s rapid growth means that there are another 90,000 positions to fill in the next few years. To meet this significant employment challenge, IHG is partnering with community organisations and education providers around the world, to offer skills development and improve employment prospects in local markets. The IHG Academy Programme has grown rapidly since its inception in 2006 with more than 10,000 people worldwide having benefited from the programme. There are now 172 IHG Academies operating in 37 countries with another 117 Academies undergoing accreditation.
Celebrating 10 Years of Superior Shareholder returns
IHG’s strong performance in 2012 means for the third consecutive year, the company’s shareholders will receive a double digit increase in their total dividend. This comes on top of more than $1 billion in ordinary dividends and $8 billion of additional capital returns since the company listed in 2003.
Reflecting on the success of 2012 and the opportunities ahead, Solomons concluded “2013 is an even more important year than usual for IHG, because we’ll be celebrating our 10th anniversary as an independent company. It’s been a hugely successful journey so far – during the last ten years we’ve grown by over 30% to become a truly global hotel company with over 4,600 hotels and 670,000 rooms worldwide, welcoming millions of guests each year.
“During the same period, we’ve helped make our hotel owners successful and delivered consistently high returns to our shareholders, well above the industry and FTSE 100 average. Whilst the global economy continues to present challenges in the immediate future, IHG has an exceptionally strong platform for sustained high quality growth in the future. Thanks to our preferred brands, strong delivery systems and hard-working colleagues around the world, I’ve got every confidence that IHG’s next ten years will be just as successful as our first decade.”
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The full release and supplementary data is available on our website from 7.00 am (London time) on 19 February: www.ihgplc.com/prelims13
Imagery: High resolution images to accompany this announcement are available for the media to download free of charge from www.vismedia.co.uk. This includes profile shots of key executives.
Video: To watch a video of our CFO, Tom Singer, reviewing our results visit our YouTube channel at www.youtube.com/ihgplc
Notes to Editors
About IHG: IHG (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with nine hotel brands including InterContinental® Hotels & Resorts, Hotel Indigo®, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites®, Candlewood Suites®, EVEN™ Hotels and HUALUXE™ Hotels & Resorts. IHG also manages Priority Club® Rewards, the world’s first and largest hotel loyalty programme with over 71 million members worldwide.
IHG franchises, leases, manages or owns over 4,600 hotels and more than 675,000 guest rooms in nearly 100 countries and territories. With more than 1,000 hotels in its development pipeline, IHG expects to recruit around 90,000 people into additional roles across its estate over the next few years.
InterContinental Hotels Group PLC is the Group’s holding company and is incorporated in Great Britain and registered in England and Wales.
Visit www.ihg.com for hotel information and reservations and www.priorityclub.com for more on Priority Club Rewards. For our latest news, visit www.ihg.com/media, www.twitter.com/ihg, www.facebook.com/ihg or www.youtube.com/ihgplc.
About IHG Owners Association: The IHG Owners Association represents the interests of owners and operators of more than 3,100 InterContinental Hotels Group (IHG) hotels worldwide in the United States, Europe, the Middle East, Africa, Canada, Mexico and Latin America. The IHG family of brands includes InterContinental® Hotels & Resorts, Crowne Plaza® Hotels and Resorts, Hotel Indigo™, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites® and Candlewood Suites®. For additional information, visit www.owners.org or contact +1 770-604-5555.