Annual report and summary financial statements 2006 

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Operating and financial review

The Americas

Americas results 12 months ended 31 December
2006
$m
2005
$m
% change
* Discontinued operations are all owned and leased.
Revenue:      
Owned and leased   211 195 8.2
Managed   143 118 21.2
Franchised   443 389 13.9
Continuing operations   797 702 13.5
Discontinued operations*   55 111 (50.5)
Total $m 852 813 4.8
         
Sterling equivalent m 463 445 4.0
         
Operating profit before other operating income and expenses:
Owned and leased   26 25 4.0
Managed   50 36 38.9
Franchised   382 340 12.4
    458 401 14.2
Regional overheads   (59) (62) (4.8)
Continuing operations   399 339 17.7
Discontinued operations*   8 23 (65.2)
Total $m 407 362 12.4
         
Sterling equivalent m 221 198 11.6

Revenue and operating profit from continuing operations increased by 13.5% to $797m and 17.7% to $399m respectively during 2006. Underlying trading performance across all ownership types was strong, although the pace of RevPAR growth achieved in the first half of the year was not maintained throughout the second half of the year.

Discontinued operations include the results of hotels sold during 2005 and 2006, together with four hotels currently on the market for disposal. Including discontinued operations, revenue grew 4.8% whilst operating profit increased by 12.4%.

Continuing owned and leased revenue increased by 8.2% to $211m. Owned and leased InterContinental branded hotels achieved RevPAR growth in excess of 12% over 2005, driven by gains in both daily rates and occupancy levels (see figure 8). The owned and leased results were impacted, as expected, by a $6m loss at the recently opened InterContinental Boston. Excluding this loss, the combined impact of RevPAR growth and operating efficiencies led to a 28% increase in operating profit from continuing owned and leased hotels.

Figure 8

Americas RevPAR movement
on previous year
12 months ended
31 December 2006
Owned and leased (comparable):  
InterContinental 12.2%
Managed (comparable):  
InterContinental 10.1%
Crowne Plaza 14.1%
Holiday Inn 4.7%
Staybridge Suites 8.8%
Candlewood Suites 9.9%
Franchise (all hotels):  
Crowne Plaza 10.3%
Holiday Inn 7.6%
Holiday Inn Express 10.7%

Managed revenues increased by 21.2% to $143m during the year as a result of strong underlying trading, restructured management agreements, an increased number of hotels under management contracts and the full year benefit of contracts negotiated during 2005 as part of the hotel disposal programme. RevPAR growth in the managed hotels was strong across most brands (see figure 8). Holiday Inn growth levels were impacted during the fourth quarter by hotel refurbishments (nine of 28 hotels). Managed revenues include $80m (2005 $70m) from properties that are structured, for legal reasons, as operating leases but with the same characteristics as management contracts.

Managed operating profit increased by 38.9% to $50m including $9m (2005 $9m) from the managed properties held as operating leases and $3m from the receipt of business interruption proceeds following hurricane damage in 2005. As a consequence of the 2005 hurricane season, ongoing insurance costs increased significantly, reducing managed operating profit in 2006 by an incremental $3m.

Franchised revenue and operating profit increased by 13.9% to $443m and 12.4% to $382m respectively, driven by RevPAR growth of 9.2%, net room count growth of 4% and fees associated with record levels of signings. The RevPAR gains were achieved across all brands despite high prior year comparables (see figure 8). Holiday Inn Express and Crowne Plaza both reported double digit RevPAR growth, driven by higher daily rates.

The Americas regional overheads were favourably impacted during the year by lower claims in the Group-funded employee healthcare programme.

Figure 9

Americas hotel
and room count
at 31 December
Hotels Rooms
2006 Change
over 2005
2006 Change
over 2005
Analysed by brand:        
InterContinental 49 4 16,525 1,197
Crowne Plaza 155 22 42,604 5,530
Holiday Inn 987 (40) 186,067 (8,937)
Holiday Inn Express 1,506 81 123,718 7,908
Staybridge Suites 97 10 10,953 1,038
Candlewood Suites 130 18 14,149 1,466
Hotel Indigo 6 3 893 396
Other (2) (295)
Total 2,930 96 394,909 8,303
Analysed by ownership type:        
Owned and leased 13 1 4,679 428
Managed 189 (19) 39,257 (6,063)
Franchised 2,728 114 350,973 13,938
Total 2,930 96 394,909 8,303

The Americas net hotel and room count grew by 96 hotels (8,303 rooms) to 2,930 hotels (394,909 rooms) (see figure 9). The net growth includes openings of 222 hotels (26,613 rooms) led by demand for Holiday Inn Express 128 hotels (11,155 rooms).

Although the regions’ net growth was predominantly achieved in the US markets, Mexico represented over 10% of the expansion. The net growth also included removals of 126 hotels (18,310 rooms), of which Holiday Inn hotels represented 56% (74% of rooms).

Figure 10

Americas pipeline
at 31 December
Hotels Rooms
2006 Change
over 2005
2006 Change
over 2005
Analysed by brand:        
InterContinental 6 (1) 2,935 (770)
Crowne Plaza 24 1 5,839 1,227
Holiday Inn 212 59 26,566 7,525
Holiday Inn Express 503 114 43,550 10,587
Staybridge Suites 115 36 12,027 3,832
Candlewood Suites 128 45 11,723 4,256
Hotel Indigo 24 16 3,045 2,163
         
Total 1,012 270 105,685 28,820
Analysed by ownership type:        
Owned and leased (2) (574)
Managed 14 1 3,710 (231)
Franchised 998 271 101,975 29,625
Total 1,012 270 105,685 28,820

The Americas pipeline continued to achieve record growth levels and totalled 1,012 hotels (105,685 rooms) at 31 December 2006. Signing levels outpaced prior year as demand for the new Holiday Inn prototype and Holiday Inn Express continued to accelerate throughout 2006. During the year 61,673 room signings were completed, compared with 49,765 room signings in 2005. This level of growth demonstrates strong demand for IHG brands and represents a key driver of future profitability.

 

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