Our focus is on driving high-quality growth. We will achieve this by further strengthening our existing brands, launching new brands and ensuring our hotels are known for industry-leading guest experiences delivered by talented people and best-in-class delivery systems. The global economy remained uncertain throughout 2011, but the strength of IHG’s preferred brands, underpinned by our global systems and scale, drove good growth in revenue and operating profits.
One of my immediate priorities on being appointed Chief Executive was to ensure that IHG was optimally structured to derive maximum benefit from our scale and expertise in each geographic region. As a result we have reorganised the business into four regions: The Americas; Europe; Asia, Middle East and Africa; and Greater China.
Driving high-quality growth
The next phase of IHG’s journey will be characterised by high-quality growth, measured by gains in both market share and margins. Where appropriate, and as opportunities arise, we will invest our free cash flow in the business to accelerate this growth and raise the awareness of our brands.
We will continue to drive market share in two ways. We will use our powerful revenue systems and innovations to drive growing revenues into IHG branded hotels. We will also add new and rebranded hotels to our system. In 2011 we delivered 6.2 per cent global RevPAR growth, beating the industry in key markets, such as the US and Greater China. We grew our system size by two per cent in the year and our industry-leading 13 per cent of the active new-build global pipeline demonstrates our ability to continue to increase our share of room supply.
We will achieve progressive and sustainable margin growth and higher returns for owners by capitalising on benefits of scale and efficiency. Our fee-based margin was up nearly five percentage points in 2011, and we expect to continue to drive up our margins over time whilst continuing to reinvest in the business.
There are three clear priorities we have set to achieve our growth strategy and deliver Great Hotels Guests Love:
1. Preferred brands
In a competitive world, preferred brands are a prerequisite to deliver market share growth. Our brands are already some of the best recognised in the industry, but in order to drive meaningful increases in share, we have to make them work harder.
The Holiday Inn relaunch continues to drive results for both IHG and our owners. In 2011, the brand once again grew its industry segment premium and for the first time ever was awarded ‘Highest in Guest Satisfaction among Mid-Scale Full Service Hotel Chains’ in the coveted J.D. Power and Associates 2011 North American Hotel Guest Satisfaction Index StudySM. We will keep improving the experience for guests and building brand awareness. In 2012 Holiday Inn is the official hotel provider to the London 2012 Olympic and Paralympic Games, which will also coincide with the brand’s 60th birthday, so we have plenty of opportunity to talk about the brand to existing and future guests.
We are now applying the same approach we used with Holiday Inn to deliver the Crowne Plaza repositioning programme. Crowne Plaza has been a great success story for IHG and is already the world’s fourth largest full-service upscale hotel brand, generating $3.9 billion in total gross revenues per annum. It does suffer from some inconsistencies, however, especially in North America, and a three-phase, multi-year programme will address this, raising all Crowne Plaza hotels to the same standard around the world.
We also see the opportunity to leverage the value of the IHG family of brands through select partnerships. The first InterContinental Alliance Resort opened during 2011, we continue to expand Holiday Inn Club Vacations and we entered into a joint venture to launch the Holiday Inn Express brand in India.
In 2012 we will launch two new brands to exploit untapped profitable market segments, in the midscale segment in the US and in the upper upscale segment in China. We have had a significant amount of interest from our owners in relation to these new brands and are very excited about the opportunities they will bring.
2. Talented people
Our brands represent a promise to our guests. It is our people who deliver that promise and bring each brand to life. So aligning all 345,000 people working in our hotels and corporate offices around the world as brand ambassadors is critical to our success.
We need our people to deliver consistent brand experiences to our guests which requires significant effort and innovation and the engagement of our third-party hotel owners. This is a big task but we have made great progress over the past few years with an innovative and effective approach. We have launched our suite of ‘People Tools’ which help our owners and managers to hire, train, involve and recognise the best employees for their brands, and more recently piloted a unique approach to revitalise the ‘back of house’ space in our hotels.
Our efforts in this area have been rewarded and for the first time IHG has been placed in Fortune’s ‘100 Best Companies to Work For’ in the US as well as winning a host of other awards.
3. Best-in-class delivery
We continue to leverage our global scale and the power of our systems to drive a greater share of industry demand into our hotels. We do this by ensuring our distribution channels are aligned with the needs of our guests, whilst driving the most profitable revenues for our owners. In 2011, 69 per cent of total rooms revenue was booked through IHG’s channels or direct to hotels by our 63 million Priority Club Rewards members.
Our innovations continue to lead the industry. During the year we introduced our Best Price Guarantee, designed to drive more guests to book through our direct websites. We are also a founding member of roomkey.com, the first industry-owned online hotels search engine, launched in January 2012, and our mobile apps now generate close to $150 million annually from a standing start two years ago.
Looking ahead, whilst there is considerable uncertainty in some markets of the world, the hotel industry is well-positioned to benefit from long-term trends with continuing demand in emerging markets and China in particular. We remain confident in IHG’s ability to deliver high-quality growth through gains in both market share and margins, due to our preferred brands, outstanding people, geographic diversity, robust balance sheet and resilient business model.