Annual report and summary financial statements 2006 

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Chief executive's review

2006 was a year of excellent growth for IHG. The hotel industry as a whole grew strongly, benefiting from trends that will drive demand for hotel rooms for many years. IHG, through its strong brand family, powerful operating systems that drive demand to our hotels and unmatched global position, outperformed the industry.

Strong trading Continuing operating profit* was up 16 per cent, from £173 million to £201 million. Adjusted continuing earnings per share rose 67 per cent, from 22.5p to 37.5p. Global revenue per available room (RevPAR) – the industry’s main performance measure – rose by 9.8 per cent, mainly driven by rate increases. Our RevPAR growth outperformed the market in each of our seven key profit generating business areas around the world.

Increased rooms growth We made good progress against the three year target we set in 2005 of adding 50,000 to 60,000 net rooms, reaching 125 hotels in China, and adding 15 to 25 InterContinentals by the end of 2008. We expected to add in the region of 10,000 net rooms in 2006, and in fact added 18,713. This included 4,937 rooms from IHG’s joint venture in Japan with All Nippon Airlines. This deal makes us the largest international hotel operator in Japan, the world’s second largest hotel market, and we will be building on this position over the coming years. We further strengthened our market leading position in China. InterContinental expanded rapidly with 15 hotels opened in the year.

Overall, during 2006 we signed deals for nearly 103,000 hotel rooms, a 47 per cent increase on 2005. Our pipeline of rooms, already the largest in the industry, increased 46 per cent in the year and now stands at almost 158,000 rooms.

Given this strong level of openings and signings, we now expect to exceed our net rooms growth target by the end of 2008.

Strengthening our business We have been developing plans to help us be better at what we do. During the year we undertook what we believe to be the biggest market research project involving hotels. We have looked inside and outside the industry for examples of best practice in franchising so that we can take what is already one of IHG’s existing strengths to a new level. We now have a deeper insight into how our hotel brands can be improved so that they address our guests’ needs more effectively. The excellent brand performance in 2006 is very encouraging and suggests that we are on the right track.

These insights and learnings are proving effective in helping us to achieve IHG’s business objectives and position us well for stronger performance in the years to come.

In the pages that follow we review the performance of our different regions and Group functions and demonstrate how we are gearing up for growth.

Growth is our goal and we are increasingly well placed to achieve it. We have a clear strategy, strong position and great people. Not surprisingly, our outlook remains positive.

Andrew Cosslett's signatureAndrew Cosslett Chief Executive

* Operating profit before other operating income and expenses.

Andrew Cosslett, Chief Executive

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