Annual report and summary financial statements 2006 

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Operating and financial review

Group performance

Summary results 12 months ended 31 December
2006
m
2005
m
% change
Revenue:      
Americas 433 384 12.8
EMEA 206 200 3.0
Asia Pacific 111 87 27.6
Central 55 42 31.0
Continuing operations 805 713 12.9
Discontinued operations 155 1,197 (87.1)
  960 1,910 (49.7)
Operating profit:      
Americas 217 186 16.7
EMEA 36 31 16.1
Asia Pacific 29 21 38.1
Central (81) (65) 24.6
Continuing operations 201 173 16.2
Discontinued operations 30 166 (81.9)
Operating profit before other operating income and expenses 231 339 (31.9)
Other operating income and expenses 27 (22)
Operating profit 258 317 (18.6)
Interest (11) (33) (66.7)
Profit before tax 247 284 (13.0)
Analysed as:      
Continuing operations 217 127 70.9
Discontinued operations 30 157 (80.9)
Earnings per ordinary share:      
Basic 104.1p 95.2p 9.3
Adjusted 42.9p 38.2p 12.3
Adjusted – continuing operations 37.5p 22.5p 66.7

Key performance indicators (KPIs)

In addition to the traditional profit measures, the management team at IHG monitor the Group and regional performance of the business through a range of financial and non-financial KPIs, the most significant of which include:

  • total gross revenue – measure of the scale and reach of IHG’s brands;
  • revenue per available room (RevPAR) – measure of underlying hotel revenue with year-on-year performance being measured by the RevPAR movement against the prior year;
  • hotel and room count – measure of the size of IHG’s portfolio; and
  • pipeline of hotels and rooms – measure of demand and growth potential for IHG’s brands.

Data for the calculation of KPIs is provided from IHG and underlying hotel records.

The following section assesses IHG’s KPIs in conjunction with the Group and regional trading performance. KPI definitions are included in the Glossary.

Group results

Revenue from continuing operations increased by 12.9% to £805m and continuing operating profit increased by 16.2% to £201m during the 12 months ended 31 December 2006. The growth was driven by a combination of strong industry fundamentals in all three of IHG’s regions, RevPAR premiums to market for most of IHG’s brands and continuing expansion in hotel and room count.

Including discontinued operations, total operating profit before other operating income and expenses decreased by 31.9% to £231m during 2006 as a result of asset disposals. Discontinued operations represent the results from operations that have been sold or are held for sale and where there is a co-ordinated plan to dispose of the operations under IHG’s asset disposal programme. In this OFR, discontinued operations include owned and leased hotels in the US, UK, Continental Europe and Asia Pacific that have been sold or placed on the market from 1 January 2005, and the Britvic Group, disposed of by way of an initial public offering in December 2005.

With the weighted average US dollar exchange rate to sterling being similar to the rate in 2005 (2006 $1.84: £1, 2005 $1.83: £1), growth rates for results expressed in US dollars were similar to those in sterling. Continuing operating profit before other operating income and expenses was $369m, ahead of 2005 by 16.8%. Including discontinued operations, operating profit before other income and expenses was $424m, 31.5% lower than 2005.

Figure 5

Global hotel
and room count
at 31 December
Hotels Rooms
2006 Change
over 2005
2006 Change
over 2005
Analysed by brand:        
InterContinental 148 11 49,599 3,337
Crowne Plaza 275 40 75,632 10,228
Holiday Inn 1,395 (40) 260,470 (7,346)
Holiday Inn Express 1,686 96 143,582 10,028
Staybridge Suites 97 10 10,953 1,038
Candlewood Suites 130 18 14,149 1,466
Hotel Indigo 6 3 893 396
Other 4 (3) 968 (434)
Total 3,741 135 556,246 18,713
Analysed by ownership type:        
Owned and leased 25 (30) 8,460 (7,025)
Managed 512 8 125,214 3,965
Franchised 3,204 157 422,572 21,773
Total 3,741 135 556,246 18,713

Global room count and pipeline

During 2006, the IHG global system (the number of hotels and rooms which are owned, leased, managed or franchised by the Group) increased by 135 hotels (18,713 rooms). The growth was driven by continued expansion in the US and Greater China (which includes the People’s Republic of China, Hong Kong, Macau and Taiwan), together with the addition of IHG ANA (13 hotels, 4,937 rooms). Holiday Inn Express represented 71% of the net hotel growth, demonstrating strong market demand in the midscale, limited service sector. The net decline in the number of Holiday Inn hotels mainly reflects Holiday Inn brand through the removal of lower quality, non-brand conforming hotels in the US.

At the end of 2006, the IHG pipeline (contracts signed for hotels and rooms yet to enter the IHG global system) totalled 1,241 hotels (157,991 rooms). In the year, the hotel and room pipeline increased by over 40% as a result of record levels of signings across all regions.

Total gross revenues

One measure of overall IHG hotel system performance is the growth in total gross revenue, with total gross revenue defined as total room revenue from franchised hotels and total hotel revenue from managed, owned and leased hotels. Total gross revenue is not revenue attributable to IHG, as it is derived mainly from hotels owned by third parties. Total gross revenue increased by 9.4% from $13.9bn in 2005 to $15.2bn in 2006, with strong growth levels achieved across all major brands (see figure 7).

Figure 6

Global pipeline
at 31 December
Hotels Rooms
2006 Change
over 2005
2006 Change
over 2005
Analysed by brand:        
InterContinental 36 9 13,211 3,858
Crowne Plaza 60 6 17,113 3,599
Holiday Inn 299 95 44,774 13,739
Holiday Inn Express 574 145 55,520 17,454
Staybridge Suites 120 41 12,605 4,410
Candlewood Suites 128 45 11,723 4,256
Hotel Indigo 24 16 3,045 2,163
         
Total 1,241 357 157,991 49,479
Analysed by ownership type:        
Owned and leased (2) (574)
Managed 139 41 41,648 13,843
Franchised 1,102 318 116,343 36,210
Total 1,241 357 157,991 49,479

Figure 7

Total gross revenues 12 months ended 31 December
2006
$bn
2005
$bn
%
change
InterContinental 3.0 2.7 11.1
Crowne Plaza 2.3 2.0 15.0
Holiday Inn 6.3 6.0 5.0
Holiday Inn Express 3.0 2.6 15.4
Other brands 0.6 0.6
Total 15.2 13.9 9.4

Reservation systems and loyalty programme

IHG supports revenue delivery into its hotels through its global reservation channels and loyalty programme, Priority Club Rewards. In 2006, global system room revenue booked through IHG’s proportion of IHG global system room revenue booked via reservation channels increased from 41% to 44%.

The IHG internet channel continued to show strong growth, with global system room revenue booked via the internet increasing by 18% to $2.0bn, accounting for 16% of IHG global system room revenue (up from 14% in 2005).

Room revenue generated from Priority Club Rewards members (across all IHG channels) increased by 16% to $4.4bn and represented 34% of IHG global system room revenue (up from 32% in 2005).

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