Annual report and summary financial statements 2006 

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Operating and financial review

Europe, Middle East and Africa (EMEA)

EMEA results 12 months ended 31 December
2006
£m
2005
£m
% change
* Discontinued operations are all owned and leased.
Revenue:        
Owned and leased   100 110 (9.1)
Managed   71 55 29.1
Franchised   35 35
Continuing operations   206 200 3.0
Discontinued operations*   125 411 (69.6)
Total m 331 611 (45.8)
         
Dollar equivalent $m 608 1,115 (45.5)
         
Operating profit before other operating income and expenses:
Owned and leased   (5) (5)
Managed   37 31 19.4
Franchised   24 26 (7.7)
    56 52 7.7
Regional overheads   (20) (21) (4.8)
Continuing operations   36 31 16.1
Discontinued operations*   26 73 (64.4)
Total m 62 104 (40.4)
         
Dollar equivalent $m 114 189 (39.7)

Revenue from continuing operations of £206m was 3.0% ahead of 2005 whilst continuing operating profit before other income and expenses increased by 16.1% to £36m. Including discontinued operations, revenue and operating profit decreased by 45.8% and 40.4% respectively, reflecting the impact of hotels sold and converted to management and franchise contracts over the past two years.

In the owned and leased estate, continuing revenues declined by £10m to £100m as a result of the major refurbishment at the InterContinental London Park Lane. The hotel reopened in November 2006 following a 13 month closure and is expected to be fully operational by Spring 2007. Excluding the impact of the InterContinental London Park Lane in 2005 and 2006, the continuing owned and leased operating profit increased by £5m, driven by enhanced trading performance at the InterContinental Paris Le Grand where RevPAR growth was more than 25% over 2005.

Figure 11

EMEA RevPAR movement
on previous year
12 months ended
31 December 2006
* Includes comparable owned, leased and managed hotels and all franchised hotels.
Owned and leased (comparable):  
InterContinental 21.8%
All ownership types*:  
UK 6.0%
Continental Europe 9.0%
Middle East 19.0%

Figure 12

EMEA hotel
and room count
at 31 December
Hotels Rooms
2006 Change
over 2005
2006 Change
over 2005
Analysed by brand:        
InterContinental 66 1 21,423 (50)
Crowne Plaza 68 4 16,440 409
Holiday Inn 317 (3) 50,628 (316)
Holiday Inn Express 172 11 18,109 1,138
Total 623 13 106,600 1,181
Analysed by ownership type:        
Owned and leased 10 (31) 3,088 (7,453)
Managed 174 (2) 40,675 978
Franchised 439 46 62,837 7,656
Total 623 13 106,600 1,181

Figure 13

EMEA pipeline
at 31 December
Hotels Rooms
2006 Change
over 2005
2006 Change
over 2005
Analysed by brand:        
InterContinental 10 1 2,549 170
Crowne Plaza 15 3 3,667 790
Holiday Inn 54 26 7,818 2,952
Holiday Inn Express 59 22 7,445 3,289
Staybridge Suites 5 5 578 578
Total 143 57 22,057 7,779
Analysed by ownership type:        
Managed 39 10 7,689 1,194
Franchised 104 47 14,368 6,585
Total 143 57 22,057 7,779

Managed revenues and operating profit increased by 29.1% to £71m and 19.4% to £37m respectively. The growth was driven by the impact of management contracts negotiated in 2005 and 2006 as part of the hotel disposal programme in the UK and Europe, together with strong RevPAR growth in key regions including Continental Europe and the Middle East (see figure 11).

Franchised revenue of £35m was in line with 2005 revenues, whilst operating profit decreased by £2m to £24m. The prior year included £7m in liquidated damages for the termination of franchise contracts in South Africa. Excluding the impact of this, franchised operating profit increased by 26.3% as a result of strong RevPAR growth across the UK and Continental Europe and increased room count. The increased room count was driven by the negotiation of franchise contracts in Continental Europe as part of the hotel disposal programme and further expansion in the region.

During 2006, EMEA hotel and room count grew by 13 hotels (1,181 rooms). The net growth included the opening of 31 hotels (4,823 rooms) and the removal of 18 hotels (3,642 rooms), including exits on a limited number of managed hotels, as agreed at the time of the UK portfolio disposal in May 2005.

The pipeline in EMEA increased by 57 hotels (7,779 rooms) to 143 hotels (22,057 rooms) (see figure 13). The growth includes a record level of 13,321 room signings, driven by demand for Holiday Inn and Holiday Inn Express in the UK, Continental Europe and South Africa, and for all brands in the Middle East and Russia.

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