InterContinental Hotels Group PLC · LSE:IHG
InterContinental Hotels — Investor Presentation (July 2007)
65 slides from InterContinental Hotels's investor presentation, Jul 10, 2007
Slide 1: Leading in China – the world's highest opportunity hotel market
Leading in China – the world’s highest opportunity hotel market 10 July 2007
Slide 2: Agenda
Agenda z Introduction Andrew Cosslett, Chief Executive z The China Opportunity Joon Aun Ooi, VP Hotel Openings z Optimising Growth Jerry Huang, VP Development z Building the Right Team Winnie Ng, VP Human Resources z Financial Overview Richard Solomons, Finance Director z Conclusions & Q&A Andrew Co
Slide 3: IHG's growth strategy
IHG's growth strategy Goal Target Faster growth by By end 2008: making IHG’s brands Net organic growth of the first choice for 50,000 - 60,000 rooms guests and hotel owners Strategy Priorities Build the industry’s strongest • Brand performance operating system focused on • Excellent hotel returns th
Slide 4: Focus on highest opportunity segments and markets
Focus on highest opportunity segments and markets z 1 million additional rooms required around the world by 2012 z Two thirds midscale, majority branded Midscale Upscale • Major cities e.g. Moscow, • US - biggest opportunity Los Angeles, Tokyo, Saigon, • China and Japan Beijing • UK • Strengthen exi
Slide 5: Creation of a scale business in China
Creation of a scale business in China z China is IHG's third largest market with 22,665 rooms z Including the rooms pipeline, China is IHG’s second largest market – 29,771 room pipeline, over 50% of which are InterContinental or Crowne Plaza – IHG signed 40% of all new international branded rooms in
Slide 6: Unmatched market potential
Unmatched market potential China US Europe Population 1,300m 296m 728m GDP US$2.5 trillion $13.2 trillion $15.7 trillion 2001-2006 GDP CAGR 12.4% 5.5% 3.9% 2006-2010 forecast GDP CAGR 11.6% 5.1% 4.5% Cities over 1 million people 177 49 36 Sources: CIA, EIU, City Mayor Statistics, IMF, internal estim
Slide 7: Strong tailwinds for growth
Strong tailwinds for growth Cars Sold (million) Internet Penetration 21 70%+ 137m users, 2nd only to 7m US 7 11% 2 6% 2000 2006 2020 2003 2006 2020 Highway Kilometers (‘000) Airport Construction Budget $17.4bn 85 41,000km, $14.8bn 2nd only to the USA 41 16 2000 2006 2020 US China Sources: Mintel, Va
Slide 8: Expectations of exponential travel growth
Expectations of exponential travel growth Domestic trips, million Inbound tourist arrivals, million 3bn 1,400 1,200 2006 – >50m 1,000 2020 - 3bn 800 2020 – 150-180m 600 400 200 0 '00 '01 '02 '03 '04 '05 '06 ’20 Source: National Bureau of Statistics of China Source: World Travel & Tourism Council Out
Slide 9: IHG's plan for growth
IHG's plan for growth Mainstream - deepen presence Secure appropriate Premium - focus human capital on major cities Standalone business, Build owner not a satellite office Leverage relationships with consumer insight asset light model Strengthen Develop franchising market leading over time operating
Slide 10: Agenda
Agenda z Introduction Andrew Cosslett, Chief Executive z The China Opportunity Joon Aun Ooi, VP Hotel Openings z Optimising Growth Jerry Huang, VP Development z Building the Right Team Winnie Ng, VP Human Resources z Financial Overview Richard Solomons, Finance Director z Conclusions Andrew Cosslett
Slide 11: China is the world's highest opportunity hotel market
China is the world's highest opportunity hotel market 2005-2010 Rooms CAGR 6% 4% 2% 0% China France US UK Germany Japan Total Rooms by 2010 1.4m 0.7m 4.9m 0.5m 1.0m 1.8m New Rooms by 2010 0.36m 0.1m 0.42m 0.05m 0.08m 0.15m Source: IHG internal data 11
Slide 12: The mainstream segment is expected to grow fastest
The mainstream segment is expected to grow fastest 1,600 Basic Mainstream Premium +77,000 rooms 1,200 Rooms, '000 800 +218,000 rooms 400 +64,000 rooms 0 2005 2010 z High proportion of domestic travellers, looking for a mainstream rate z Expected highest return on investment for hotel owners – Mainst
Slide 13: International brands deliver highest returns to owners
International brands deliver highest returns to owners 2006 RevPAR premium of branded hotels to unbranded 25 20 RevPAR Premium US$ 15 = 42% premium 10 5 = 1% = 51% premium premium = 11% premium 0 5* International Brand 5* Domestic Brand 4* International Brand 4* Domestic Brand Source: Horwath Asia P
Slide 14: Significant growth opportunity for international brands
Significant growth opportunity for international brands z c.15% of rooms in China are currently branded – c.10% are international brands, c.5% domestic brands z Brand conscious society seeking out international brands – 12% of worldwide luxury goods sales in China, up from 1% five years ago – By 201
Slide 15: Reducing state ownership gives conversion opportunities
Reducing state ownership gives conversion opportunities z Government objective to reduce state ownership of non-core assets z IHG benefits from growth of professional real-estate class Ownership Total hotels Total rooms Total revenue 12,930 1.46m US$13.3bn State-owned 58% 59% 59% 37% 31% 17% Private
Slide 16: IHG leads the international set
IHG leads the international set Current system rooms Pipeline rooms IHG Starwood Starwood Additional 1,063 Accor Wyndham rooms open and 5,071 pipeline Wyndham Accor rooms added in Q2 2007 Shangri-La Shangri-La Marriott Marriott Hyatt Hyatt Hilton Hilton 0 10000 20000 30000 40000 50000 60000 Source:
Slide 17: Strong representation across all major market segments
Strong representation across all major market segments IHG System Size and Pipeline by Brand, rooms (‘000) 50 40 Pipeline 30 20 10 0 2002 2003 2004 2005 2006 H1 2007 2002 2003 2004 2005 2006 H1 2007 Source: IHG Internal Data 17
Slide 18: Brand positioning based on insight into consumer needs
Brand positioning based on insight into consumer needs z Extensive consumer research completed in China. Interviews in 2006 with: – Over 2,000 people across Mainland China – Over 600 people in South Korea, Japan, Taiwan and Hong Kong z We now have insight into consumer attitudes and what drives bran
Slide 19: Express by Holiday Inn system and pipeline
System rooms (hotels)* 2,787 (8) Express system and pipeline (rooms) Pipeline rooms (hotels)* 5,385 (19) 8,000 6,000 Average number of rooms 280 4,000 2,000 Business vs Leisure 85% business 0 RevPAR premium to all 3* 2004 2005 2006 H1 2007 10% hotels in 2006** Express RevPAR($)*** 30 20 10 * As at 3
Slide 20: Express by Holiday Inn Shangdi Beijing
Express by Holiday Inn Shangdi Beijing 20
Slide 21: Express by Holiday Inn Putuo Shanghai / Tianjin
Express by Holiday Inn Putuo Shanghai Express by Holiday Inn Tianjin 21
Slide 22: Holiday Inn system and pipeline
System rooms (hotels)* 11,267 (36) Holiday Inn system and pipeline (rooms) 18,000 Pipeline rooms (hotels)* 7,584 (24) 16,000 14,000 12,000 Average number of 320 10,000 rooms/hotel 8,000 6,000 4,000 Business vs Leisure 55% business 2,000 0 International vs 2004 2005 2006 H1 2007 70% domestic Domestic
Slide 23: Holiday Inn Vista Shanghai
Holiday Inn Vista Shanghai 23
Slide 24: Holiday Inn Century City Chengdu
Holiday Inn Century City Chengdu 24
Slide 25: Crowne Plaza system and pipeline
System rooms (hotels)* 5,623 (16) Crowne Plaza system and pipeline (rooms) 16,000 Pipeline rooms (hotels)* 11,323 (29) 14,000 12,000 Average number of 10,000 370 rooms/hotel 8,000 6,000 4,000 Business vs Leisure 75% business 2,000 0 International vs 2004 2005 2006 H1 2007 55% international Domestic
Slide 26: Crowne Plaza Shenzhen
SS CROWNE PLAZA HOTELS & RESORTS Crowne Plaza Shenzhen CROWNE PLAZA HOTEL
Slide 27: Crowne Plaza Beijing
Crowne Crowne Plaza Plaza Beijing Beijing Crowne Plaza Changshu 27
Slide 28: InterContinental system and pipeline
System rooms (hotels)* 2,988 (7) InterContinental system and pipeline (rooms) 8,000 Pipeline rooms (hotels)* 5,479 (12) 6,000 Average number of 400 rooms/hotel 4,000 2,000 Business vs Leisure 80% business 0 International vs 2004 2005 2006 H1 2007 70% international Domestic InterContinental RevPAR($)
Slide 29: InterContinental Shenzhen
InterContinental Shenzhen 29
Slide 30: InterContinental Nanjing
InterContinental Nanjing 30
Slide 31: IHG's competitive advantages
IHG’s competitive advantages Largest Distribution Strong Brands Strong Relationships Current: 22,665 rooms, Outperforming the market: Government bodies 67 hotels Holiday Inn + 34% Owners Pipeline: 29,771 rooms, Crowne Plaza + 75% Industry experts 84 hotels Strategic Plans Organisation Structure Stro
Slide 32: The China Opportunity - Summary
The China Opportunity - Summary z Three significant areas of growth: – New rooms - concentrated in mainstream segment – Conversion of unbranded rooms – Conversion of Government-owned hotels z IHG well positioned to exploit competitive advantage – Largest hotel distribution network – Established rela
Slide 33: Agenda
Agenda z Introduction Andrew Cosslett, Chief Executive z The China Opportunity Joon Aun Ooi, VP Hotel Openings z Optimising Growth Jerry Huang, VP Development z Building the Right Team Winnie Ng, VP Human Resources z Financial Overview Richard Solomons, Finance Director z Conclusions Andrew Cosslett
Slide 34: Scale position already within reach
Scale position already within reach Confirmed Opened Confirmed Projects Hotels Projects HARBIN 7 12 SUIFENHE SHENYANG 16 29 QINGHUANGDAO ULAANBAATAR BEIJING DANDONG 36 24 DALIAN TIANJIN HOHHOT TAIYUAN QINGDAO JINAN 8 19 ERDOS CHANGSHU YANTAI Total 67 84 ZHENGZHOU CHANGZHOU JIANGYIN SUZHOU XI’AN NANJ
Slide 35: Significant medium term opportunity
Significant medium term opportunity June 2007 End 2008 Significant medium term opportunity 7 10 - 15 z China hotel market forecast to add over 300,000 new rooms by 2010 16 30 - 40 z IHG share of international branded rooms pipeline 25% 36 50 - 60 z Conversions to branded 8 20 - 25 z Huge medium term
Slide 36: Strategic approach to development
Strategic approach to development Population GDP/Growth Transport Infrastructure Current/Projected Market Performance… Strategic Development Plan Allocation of resources focused by priority markets Prioritised matrix of cities Understanding of most appropriate brand by location Source: IHG Internal
Slide 37: Planned infrastructure investment underway
Planned infrastructure investment underway Manzhouli Hailaer Qiqiharer Qiqiharer Daqing Harbin Harbin JilinMudanjiang Aertai Changchun Changchun Yanji Chifeng Shenyang Shenyang Fushun Anshan Dandong Dalian Dalian Tangshan Yining Hohhot Hohhot Urumqi Beijingi Tianjin Datong Beijingi TianjinYantai Bao
Slide 38: A Chinese "tier 2" city
A Chinese "tier 2" city Wenzhou Population: 1.3m- urban, rank 75th Area: 11,784 km2 GDP 2006: US$23.5bn, rank 27th Major industries: Shoes, textiles, pens etc. Airport: Yes (domestic/Hong Kong/Macau) Port: Yes (up to 50K-tonne vessels) Strategic development plan Hotels Targeted InterContinental 1 Cr
Slide 39: We have built a strong reputation with owners
We have built a strong reputation with owners z IHG has c.25% of the international branded rooms pipeline z IHG won c.40% of all new international branded rooms in 2006 z Success based on – Most experienced development team and long term China presence – Focus on building lasting relationships with
Slide 40: And the nature of our owner-base is developing
And the nature of our owner-base is developing z Strategy to develop owners with multiple property portfolios – ‘Repeat’ owners represented 48% of all deals signed in 2006, vs 13% in 2003 – Expect increasing momentum in 2007 z Majority of owners are domestic – 40% owners are state owned companies –
Slide 41: Franchise development in China in early stages
Franchise development in China in early stages z Focus on key economic development areas in China – Beijing, Shanghai, Guangzhou, Chengdu z Target owners for multi-property commitments z Investing behind Express by Holiday Inn brand positioning z Considerable risk mitigation in place z Roll-out will
Slide 42: Optimising growth - summary
Optimising growth - summary z 151 hotels open or in pipeline for development z Significant medium term opportunity for future development z Development potential in ‘secondary’ cities relatively untapped z Strategic development plan focuses resources z IHG approach built on strong owner relationship
Slide 43: Agenda
Agenda z Introduction Andrew Cosslett, Chief Executive z The China Opportunity Joon Aun Ooi, VP Hotel Openings z Optimising Growth Jerry Huang, VP Development z Building the Right Team Winnie Ng, VP Human Resources z Financial Overview Richard Solomons, Finance Director z Conclusions Andrew Cosslett
Slide 44: Demand for employees is high across all industries
Demand for employees is high across all industries We estimate these 5 corporations Current: c.16,900 alone will need to Current: c.30,000 more than double their employees in next five years Current: c.22,700 Current: c.100,000 Current: c.8,000 44
Slide 45: The biggest challenge to growth in China is people
The biggest challenge to growth in China is people Demand Supply z 470+ Fortune 500 companies in China z Total no of graduates in 2005 - 3m z Annual demand for 150,000 graduates z Only 2.5% suitable for multinationals z 70% of companies indicate shortage z Estimated 4,000 new leaders per year of lea
Slide 46: Attracting highest quality talent will be key to our success
Attracting highest quality talent will be key to our success In the next 5 years IHG will need: z At least 100,000 more employees z Many high quality General Managers – 84 pipeline hotels – 55 hotels signed in last 12 months z Over 3,500 hotel executive committee / F&B Sales Front Desk Other functio
Slide 47: Strategy relies on attraction, development and retention
Strategy relies on attraction, development and retention Talent Talent Attraction Development Talent Retention 47
Slide 48: Gaining preference from candidates
Gaining preference from candidates Impact and successes z Voted China’s top employer in Shanghai z Developed talent bank for General Manager and senior leadership positions Actions z Employer branding z eCareers z Media Campaign z Fast Track programme 48
Slide 49: Development of new and existing employees
Development of new and existing employees z Succession planning and High Potential employee development z Management trainee programme z IHG Academy 49
Slide 50: Industry first – IHG Academy in China
Industry first – IHG Academy in China z Shanghai launched 2006 – industry first z Chongqing launched 2007 z Accredited Hospitality Management programme z 190 current students z Future placements in IHG hotels z 2 further planned this year (Xian, Shunde – Guangdong province) 50
Slide 51: Our People are highly engaged
Our People are highly engaged 91% are proud to work for us 89% intend to stay with the 93% would company for the recommend us as a next 2 years 76% of our GMs say place to work “Yes” to all these 6 questions in the employee survey 91% feel happy to come to work at IHG 93% feel the job 83% are willin
Slide 52: Building the Right Team - summary
Building the Right Team - summary z Major talent challenge in Greater China z Plans in place to – meet our target of 125 hotels in China by 2008 and – fuel our robust growth in the next 5-10 years z Comprehensive approach to strengthening our position z Responsive people agenda in place z High engag
Slide 53: Agenda
Agenda z Introduction Andrew Cosslett, Chief Executive z The China Opportunity Joon Aun Ooi, VP Hotel Openings z Optimising Growth Jerry Huang, VP Development z Building the Right Team Winnie Ng, VP Human Resources z Financial Overview Richard Solomons, Finance Director z Conclusions Andrew Cosslett
Slide 54: China is already profitable for IHG
China is already profitable for IHG Continuing Revenues $m Continuing EBIT $m 1600 400 1400 350 1200 300 1000 250 800 200 600 150 400 100 200 50 0 0 2004 2005 2006 2004 2005 2006 Continuing as at 31 December 2006 China Asia* Group Asia Pacific EBIT stated before regional overheads Exchange rate USD:
Slide 55: Growth in China has required low capital investment
Growth in China has required low capital investment z Since 2003, our business in China has grown by 27 hotels z Excluding InterContinental Hong Kong, capital investment in only one hotel – $5m invested, current 10% return z Group scale leveraged for economies in system capex – Total Asia Pacific no
Slide 56: Substantial revenue investment to generate future growth
Substantial revenue investment to generate future growth China financial results $m (Managed and Franchised only) 2004 2005 2006 2007 (forecast) Revenue 17 19 24 31 Costs (6) (8) (14) (19) EBIT 11 11 10 12 z Invested in scaleable cost base to drive and support future growth – Growth in staff numbers
Slide 57: Managed system and pipeline – strong future profitability
Managed system and pipeline – strong future profitability z Average of 4 years for a new management contract to stabilise Managed system Managed pipeline Total Managed Fee 65 hotels 84 hotels 149 hotels Revenue $m 2007 forecast ‘Steady state’ ‘Steady state’ Revenues 29 30-35 59-64 Costs (18) (6-8) (
Slide 58: Agenda
Agenda z Introduction Andrew Cosslett, Chief Executive z The China Opportunity Joon Aun Ooi, VP Hotel Openings z Optimising Growth Jerry Huang, VP Development z Building the Right Team Winnie Ng, VP Human Resources z Financial Overview Richard Solomons, Finance Director z Conclusions & Q&A Andrew Co
Slide 59: IHG is already leading in China
IHG is already leading in China z We have over 22,600 rooms in China z We have the biggest pipeline with over 29,700 rooms z We have built a scaleable infrastructure z We have invested in research to inform development z We have built strong relationships with owners z We are winning a 40% share of
Slide 60: Potential for further growth is considerable
Potential for further growth is considerable z Market is evolving quickly – China will soon mirror the US market z As market evolves, consumers will seek out more differentiated hotel brands – Opportunity for Staybridge Suites, Candlewood Suites and Hotel Indigo z Development of franchising model at
Slide 61: Leading in China – the world's highest opportunity hotel market
Leading in China – the world’s highest opportunity hotel market 10 July 2007
Slide 62: Appendices
Appendices 62
Slide 63: Biographies
Biographies z Edmond joined IHG in 1997 as Managing Director Holiday Inn brands Asia Pacific. From 1999-2001 he was Senior Vice President, Development & Technical Services, before taking on his current role as Chief Operating Officer, Greater China. Edmond Ip His career in hospitality spans 34 years
Slide 64: Biographies
Biographies z Winnie Ng joined IHG in 2005 as VP Human Resources for China. Winnie has over 18 years of management, consulting and human resources experience covering a broad spectrum of industries, including Starbucks Coffee, Lucent Winnie Ng Technologies, Texas Instruments and Cathay Pacific. VP H
Slide 65: Leading in China – the world's highest opportunity hotel market
Leading in China – the world’s highest opportunity hotel market 10 July 2007
InterContinental Hotels Group — Investor Presentation (July 2007) on 6ix