InterContinental Hotels Group PLC · LSE:IHG

InterContinental Hotels — Investor Presentation (August 2014)

70 slides from InterContinental Hotels's investor presentation, August 2014

  1. Slide 1: Investor Presentation

    Crowne Plaza, Kunming, China Investor Presentation August 2014 IHG©

  2. Slide 2: Table of contents

    Table of contents 1. IHG’s strategy p5 2. Preferred brands p13 3. Best-in-class delivery p21 4. Targeted portfolio p27 5. Financial performance p39 Appendices I. H1 2014 – further financial information p55 II. System size and pipeline p67 IHG© 2

  3. Slide 3: H1 2014 - continued growth momentum delivers strong first half performance

    H1 2014 - continued growth momentum delivers strong first half performance Strong trading performance Global RevPAR 5.8% Good growth in fees Fee revenues¹ 6% Efficiency and scale benefits Fee-based margin¹ 1%pt² Reduced asset intensity Net asset disposal proceeds $346m Sustainable shareholder value

  4. Slide 4: Well positioned for high quality growth

    Well positioned for high quality growth • Globalisation of travel Positive long-term industry dynamics • Growing global middle class • Long-term outperformance of branded hotels vs. unbranded • Resilient fee based model Targeted portfolio • Key market focus – aligned with expected industry growth •

  5. Slide 5: IHG's strategy

    Crowne Plaza Beijing Lido IHG’s strategy IHG© 5

  6. Slide 6: Long-term macro trends continue to be supportive

    Long-term macro trends continue to be supportive GDP growth Favourable demographics Globalisation of travel Real GDP growth (%) Av. Disposable income per household ($k) Global outbound trips (M trips) 10 US 107 Business 1,163 8 China Leisure Emerging 236 economies1 942 6 98 190 World 4 93 627 16 2 G

  7. Slide 7: IHG's strategy for high quality growth

    IHG’s strategy for high quality growth Value creation: superior shareholder returns Value creation: Superior shareholder returns Winning Model Targeted Portfolio Attractive markets Highest opportunity segments Managed & franchised model - Scale and efficiency of operations Disciplined - Investment i

  8. Slide 8: Understanding consumers' evolving needs and lifestyle are at the heart of our strategy

    Understanding consumers’ evolving needs and lifestyle are at the heart of our strategy Social media Connectivity Personalisation & advocacy New consumer digital lifestyle DREAM PLAN BOOK TRAVEL SHARE RESEARCH READ REVIEWS MAKE JOURNEY POST PHOTO CHECK OPTIONS RESERVATIONS STAY WRITE REVIEW Continuou

  9. Slide 9: IHG is focused on delivering a winning experience across the guest journey

    IHG is focused on delivering a winning experience across the guest journey TARGET GUESTS IHG© 9

  10. Slide 10: IHG has a strong history of innovation and firsts

    IHG has a strong history of innovation and firsts 1st 1st 1st Hotel brand franchise: Computerised hotel Hotel loyalty programme Holiday Inn reservation system International hotel brand Hotel group to offer Hotel group to introduce in China: free internet online booking Holiday Inn Hotel group to con

  11. Slide 11: IHG's unparalleled global scale - significant barriers to entry

    IHG’s unparalleled global scale - significant barriers to entry 693k open rooms Largest hotel loyalty Large standalone 187k room pipeline scheme membership eCommerce business Largest global More reviews on IHG’s Apps & websites in hotel brand by >2x websites for IHG hotels 14 languages - Holiday Inn

  12. Slide 12: Capital allocation strategy – long-term disciplined approach

    Capital allocation strategy – long-term disciplined approach An efficient balance sheet with an investment grade credit rating • 2.0 to 2.5x net debt / EBITDA • Towards top end in favourable economic conditions Reduce asset intensity of the business Invest in the business to drive growth Maintain su

  13. Slide 13: Preferred Brands

    Crowne Plaza Beijing Lido Preferred Brands IHG© 13

  14. Slide 14: IHG©

    IHG© 14

  15. Slide 15: Preferred Brands - a leading and strongly differentiated portfolio

    Preferred Brands - a leading and strongly differentiated portfolio Leading brands • InterContinental: 2x bigger than any luxury hotel brand • Holiday Inn Brand family: largest global hotel brand with largest global pipeline Continued focus on strengthening established brands • Holiday Inn relaunch,

  16. Slide 16: Preferred brands - the insights informing our brand development

    Preferred brands - the insights informing our brand development Segment name Summary of Needs Wellbeing Family Time Romantic Getaway Short Break Experience Rest & Go Mixing Business with Pleasure Business Productivity Building Business Interactions Social Identity IHG© 16

  17. Slide 17: Preferred brands - strong momentum

    Preferred brands - strong momentum US RevPAR Global IHG Global segment positioning3 premium growth review score 2010-Current1 (x/5)2 System Pipeline +2% 4.4 #1 #2 +1% 4.3 #1 #1 +3%4 4.2 #2 #4 +26% 4.4 #4 #2 +1% 4.4 #3 / #2 #4 / #2 1 Source: IHG, STR, US only. Note: InterContinental vs. luxury segmen

  18. Slide 18: EVEN Hotels - addressing an unmet consumer need

    EVEN Hotels – addressing an unmet consumer need Cork & Kale Restaurant Athletic Studio Bedroom Eat Well Social Area Well-come Island IHG© 18

  19. Slide 19: EVEN Hotels - first two hotels opened in Norwalk and Rockville

    EVEN Hotels – first two hotels opened in Norwalk and Rockville Both hotels opened in June Locations chosen to demonstrate strong comparable performance to owners Excellent initial guest feedback on both IHG and third party review sites1 • Norwalk: 4.7 out of 5 (IHG); #1 out of 14 (3rd party) • Rockv

  20. Slide 20: IHG©

    IHG© 20

  21. Slide 21: Best in class delivery

    InterContinental Nha Trang, Vietnam Best in class delivery IHG© 21

  22. Slide 22: IHG's $1.3bn System Fund powers our revenue delivery system

    IHG’s $1.3bn(1) System Fund powers our revenue delivery system Brands Sources of Income Sources of Spend Marketing & Reservations Advertising & Marketing Assessment ~30% ~3.0% of rooms revenue IHG Rewards Club Point Sales Distribution ~40% $1.3bn ~4.75% IHG Rewards Club bill (Reservation & Channels)

  23. Slide 23: Building lifetime relationships - Leveraging IHG Rewards Club

    Building lifetime relationships - Leveraging IHG Rewards Club Industry’s first and largest loyalty scheme: 80m+ members IHG Rewards Club members • Deliver ~40% of rooms revenues • Provide ~20% more revenue per stay than non-members • Are 3.5x more likely to use low-cost booking channels Successful r

  24. Slide 24: Driving bookings through direct channels

    Driving bookings through direct channels IHG rooms revenue by channel 2005 vs. 2013 $12.0bn $18.3bn 12% 19% IHG Websites 17% IHG websites driven IHG Rewards Club Hotel Direct 16% significant growth 14% 11% IHG Rewards Club remains Central Reservation Office (CRO) strong 11% 12% Global Distribution S

  25. Slide 25: Industry leading web and mobile platforms

    Industry leading web and mobile platforms Fast growing digital business with significant scale • Web: $3.7bn1 revenues; 9% H1 growth2 • Mobile: $740m1 gross bookings; ~50% H1 growth2 Award winning apps • No.1 hotel and travel app on the Apple app store • Ranked 1st place for iOS apps in the Apptenti

  26. Slide 26: IHG©

    IHG© 26

  27. Slide 27: Targeted portfolio

    Hotel Indigo, St Petersburg Targeted portfolio IHG© 27

  28. Slide 28: Highly cash generative, resilient, fee based model

    Highly cash generative, resilient, fee based model Highest quality revenue stream • c.85% of IHG’s fee revenues are derived from hotel revenues • c.15% are derived from hotel profits IHG benefits from industry upside, but is more sheltered in a downturn Franchised Managed Owned & Leased 7% <1% <1% 2

  29. Slide 29: IHG's geographic distribution

    IHG’s geographic distribution H1 2014 Operating Profit* H1 2014 Open Rooms H1 2014 Pipeline Rooms 9% 10% 10% 10% 30% 44% 10% 15% 65% 67% 17% 9% Americas Europe AMEA Greater China (US, Canada, (UK & Ireland, (Asia, (China, Hong Kong, Latin America Continental Middle East Macau, Taiwan) Caribbean) Eur

  30. Slide 30: Optimal geographic positioning - growth plans focused in the right markets

    Optimal geographic positioning - growth plans focused in the right markets IHG’s ten priority markets’ room revenue - current and expected growth to 2020 ($bn) These ten markets combined: 32 - Comprise >85% of IHG’s system and pipeline2 - Represent >75% of industry growth to 2020 - Will grow at 4.6%

  31. Slide 31: IHG's priority markets - Illustrative scenarios to 2020

    IHG’s 10 priority markets - Illustrative scenarios to 2020 IHG 10 Priority Markets 2012 $bn 2020 illustrative scenarios ($bn) Maintain room Add 1pts room Add 2pts room revenue share revenue share revenue share at 6.6% to 7.6% to 8.6% IHG top 10: gross rooms revenues (6.6% share of industry room reve

  32. Slide 32: IHG's scale Americas operation

    IHG’s scale Americas operation Canada: System: 168 hotels System Pipeline Pipeline: 36 hotels 24 2 149 12 692 121 1,944 353 187 74 315 85 35 27 2 3 US: System: 3,256 hotels Pipeline: 654 hotels Other 88 13 Denotes a high revenue hotel market As at H1 2014 IHG© 32

  33. Slide 33: IHG's scale Americas operation

    IHG’s scale Americas operation System Pipeline Mexico: System: 126hotels 27 4 Pipeline: 32 hotels 30 4 81 19 67 26 4 5 2 1 Americas (ex US, Canada, Mexico): System: 86 hotels Other 1 - Pipeline: 27 hotels As at H1 2014 IHG© 33

  34. Slide 34: IHG has long and rich history in Greater China

    IHG has long and rich history in Greater China - 30 years of operation Bespoke China website Standalone InterContinental Region 1st International Hong Kong created branded hotel acquired 1st opening 1984 1991 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1st opening New brand

  35. Slide 35: IHG has built a leading position in Greater China

    IHG has built a leading position in Greater China Greater China system & pipeline 120 55k 80 No of rooms ‘000 Pipeline System 40 71k 0 IHG Wyndham* Starwood Hilton Marriott Accor Shangri La Hyatt *Operate a predominantly franchised model Source: IHG 31 June 2014; All other data is STR Global to 30 J

  36. Slide 36: Strong brand portfolio: Portfolio today is mainly in Tier 1 and 2 cities

    Strong brand portfolio Portfolio today is mainly in Tier 1 and 2 cities City tier of open hotels As of June 2014 Total # of hotels, % of total * Current Open Hotels HARBIN SUIFENHE Greater China System System Total System Rooms Hotels MUDANJIANG Libya CHANGBAISHAN SHENYANG 12,482 31 PANJIN TANGSHAN

  37. Slide 37: Pipeline well positioned to take advantage of tier 3 and 4 city growth

    Pipeline well positioned to take advantage of tier 3 and 4 city growth City tier of pipeline hotels As of June 2014 DAQING HARBIN Total # of hotels, % of total * Current Pipeline JILIN Greater China CHANGCHU Pipeline Pipeline Total Pipeline Rooms Hotels N CHANGBAISHAN Libya TIELING 11% Tier 1 ANSHAN

  38. Slide 38: IHG©

    IHG© 38

  39. Slide 39: Financial performance

    InterContinental Nha Trang, Vietnam Financial performance IHG© 39

  40. Slide 40: Strong underlying growth

    Strong underlying growth Reported Underlying1 $ million H1 2014 H1 2013 % Change H1 2014 H1 2013 % Change Revenue $908m $936m (3)% $788m $757m 4% Fee Revenue2 $600m $562m 7% $597m $562m 6% Operating profit $310m $338m (8)% $301m $284m 6% Interest $(39)m $(36)m 8% Tax rate3 33% 31% 2%pts Adjusted EPS

  41. Slide 41: H1 2014 - driving fee revenue growth

    H1 2014 - driving fee revenue growth RevPAR X Rooms X Royalty Rate H1 2014 fee revenue1 $600m, up 6% H1 2014 Group RevPAR growth H1 2014 system growth (%) 5.8% 5.6% 2.3% 2.3%pts 2.2% 2 ADR Occupancy RevPAR Gross Net H1 2014: 17k rooms opened, 11k rooms removed 1 Fee revenue excludes revenue from own

  42. Slide 42: H1 2014 - driving fee revenue growth

    H1 2014 - driving fee revenue growth RevPAR X Rooms X Royalty Rate H1 2014 fee revenue¹ growth 8.1% 7.2% 7.0% 6.2% $35m $22m $6m 1.3% $3m $1m H1 2014 fee $600m $329m $84m $79m $46m revenue1 Group2 Americas Europe AMEA Greater China ¹ Fee revenue excludes revenue from owned and leased hotels, managed

  43. Slide 43: The Americas – Strong RevPAR and profit growth

    The Americas – Strong RevPAR and profit growth H1 Growth in fee revenue drivers 1 Comparable RevPAR up 6.7% • US 6.6% 6.7% 7.2% Net rooms growth 0.2% $22m • Gross rooms growth 4.1%2 0.2% RevPAR Net rooms Fee Revenue Fee revenue up 7.2%1 H1 Net rooms growth 460k 451k 9k 453k Underlying revenue up 9%,

  44. Slide 44: Europe – Strong trading performance in key markets

    Europe – Strong trading performance in key markets H1 Growth in fee revenue drivers1 Comparable RevPAR up 4.9% • UK 8.7% 8.1% • Germany 3.1 % $6m 4.9% Net rooms growth 1.9% 1.9% • Gross rooms growth 4.7%2 RevPAR Net rooms Fee Revenue Fee revenue up 8.1%1 H1 Net rooms growth Underlying revenue down 2

  45. Slide 45: AMEA – Rate driven growth

    AMEA – Rate driven growth Growth in fee revenue drivers1 Comparable RevPAR up 3.7% 6.3% • ex Thailand and Egypt up 5.4% 3.7% Total RevPAR up 1.7% 1.3% • Increasing mix from developing markets $1m Net rooms growth 6.3% RevPAR Net rooms Fee Revenue • Gross rooms growth 7.3%2 Fee revenue up 1.3%1 Net r

  46. Slide 46: Greater China – Continued industry outperformance

    Greater China – Continued industry outperformance Growth in fee revenue drivers 1 Comparable RevPAR up 4.3% 13.2% • Significant industry outperformance 3.1% Total RevPAR down 1.4% 7.0% • Increasing mix from tier 2 and 3 cities 4.3% $3m Net rooms growth 13.2% • Gross rooms growth 15.9%2 RevPAR Net ro

  47. Slide 47: Driving sustainable fee margin progression

    Driving sustainable fee margin progression Fee margin up 1%pt in H1 2014 to 45.0% • Productivity improvement and scale benefits balanced with investment for growth • Helped by favourable phasing of costs • Sustainable fee margin progression over the medium term Fee margin growth drivers: fee revenue

  48. Slide 48: Capital allocation strategy – long-term disciplined approach

    Capital allocation strategy – long-term disciplined approach An efficient balance sheet with an investment grade credit rating • 2.0 to 2.5x net debt / EBITDA • Towards top end in favourable economic conditions Reduce asset intensity of the business Invest in the business to drive growth Maintain su

  49. Slide 49: Capital expenditure categories

    Capital expenditure categories Gross medium-term capital expenditure: up to $350m per annum1 Maintenance capex Recyclable System funded & key money investments capital $100m-$150m p.a. investments O&L Hotel maintenance Investment Invest to drive Recycle System Corporate IHG infrastructure growth Fun

  50. Slide 50: Maintenance capital expenditure & key money

    Maintenance capital expenditure & key money Medium term spend of $100m-$150m p.a. Key money: • Deployed on a tactical basis to access strategic opportunities • Only used when returns are financially and strategically attractive 2011-13 Medium 2014 average p.a. term p.a. Owned & leased hotel maintena

  51. Slide 51: Recyclable investments

    Recyclable investments Establishes long-term fee revenue streams Support new brands and priority market growth Broadly neutral over time Target investment returns ≥ WACC 2011-13 Medium average 2014 term p.a. p.a Gross: • Real estate, JVs, equity stakes $50m- $50m- ~$65m $100m2 $150m • ~$450m current

  52. Slide 52: Recyclable investments: Case study

    Recyclable investments: Case study “Fastest growing extended stay brand” Brand 50 100 200 launch hotels hotels hotels1 Total Gross Revenue : >$600m 1998 2002 2003 2007 2012 2014 287 hotels open or in pipeline $228m Investment Capital recycled behind 19 hotels 1 200th hotel opened in July 2014 IHG© 5

  53. Slide 53: System funded capital investments

    System funded capital investments Cash fees collected, primarily from hotels, for use within the System Fund (2013: $1.3bn) • Spent on behalf of our hotels on marketing, reservations, and IHG Rewards Club • Consistent with the industry IHG’s financial statements do not include income and expenses of

  54. Slide 54: IHG©

    IHG© 54

  55. Slide 55: Appendix I: H1 2014 further financial information

    Crowne Plaza Beijing Lido Appendix I: H1 2014 further financial information IHG© 55

  56. Slide 56: Revenue & Operating Profit

    Revenue & Operating Profit Total Revenue Total Operating Profit * Half Year Full Year Half Year Full Year 2014 2013 2012 2013 2012 2014 2013 2012 2013 2012 Franchised 305 278 260 576 541 263 245 224 499 466 Managed 52 79 47 128 97 25 52 24 74 48 Owned & Leased 78 100 93 212 199 8 11 7 30 24 435 457

  57. Slide 57: Underlying operating profit adjustments (CER)

    Underlying operating profit adjustments (CER) H1 2014 H1 2013 FY 2013 Liquidated damages Americas $7m (franchise) $31m (managed) $31m (managed) Europe - $9m (managed) $9m (managed) AMEA - - $6m (managed) Sub-total $7m $40m $46m Disposals Americas $(1)m $6m $20m Europe - $8m $8m Sub-total $(1)m $14m

  58. Slide 58: Hotel franchising

    Hotel franchising Total gross revenue $bn¹ (rooms only) Group royalty drivers H1 2014 YoY Average H1 2014 6.5 rooms (0.1)% H1 2013 6.1 RevPAR 6.2% Royalty H1 2012 5.8 fees 6.4% Franchise Fees $m Franchise EBIT $m (margin %) H1 2014 357 H1 2014 300 (84%) H1 2013 332 H1 2013 285 (86%) H1 2012 313 H1 2

  59. Slide 59: Hotel management

    Hotel management Total gross revenue $bn1(total hotel) Management Fees² $m H1 2014 4.4 H1 2014 181 H1 2013 4.1 H1 2013 171 H1 2012 4.2 H1 2012 176 Managed EBIT² $m (margin %) Reported managed lease revenue and EBIT $m $m H1 2014 H1 2013 H1 2014 104 (57%) Americas revenue 21 19 Americas EBIT 1 1 H1 2

  60. Slide 60: Owned & Leased

    Owned & Leased O&L revenue $m O&L EBIT $m (margin %) H1 2014 192 H1 2014 31 (16%) H1 2013 195 H1 2013 37 (19%) H1 2012 184 H1 2012 32 (17%) Reported O&L revenue O&L EBITDA $m and EBIT from disposals ($m) H1 2014 46 $m H1 ‘14 H1 ‘13 Europe revenue - 22 H1 2013 51 Europe EBIT - 8 Americas revenue 23 5

  61. Slide 61: 2014 Current Trading Comparable RevPAR Growth

    2014 Current Trading Comparable RevPAR Growth Constant US$ Qtr 1 Apr May Jun Qtr 2 Jun Ytd United States: InterContinental 5.7% 1.3% 6.2% (3.1%) 1.4% 3.3% Crowne Plaza 7.9% 4.9% 8.8% 6.6% 6.8% 7.3% Holiday Inn 6.7% 5.7% 10.2% 5.9% 7.2% 7.0% Holiday Inn Express 5.5% 5.5% 7.9% 6.3% 6.6% 6.1% Staybridg

  62. Slide 62: 2014 Current Trading Comparable ADR Growth

    2014 Current Trading Comparable ADR Growth Constant US$ Qtr 1 Apr May Jun Qtr 2 Jun Ytd United States: InterContinental 2.1% 0.1% 3.2% (0.7%) 0.9% 1.4% Crowne Plaza 2.3% 1.6% 3.4% 3.4% 2.8% 2.6% Holiday Inn 2.0% 2.7% 4.3% 3.6% 3.5% 2.9% Holiday Inn Express 2.3% 3.0% 3.6% 4.1% 3.6% 3.0% Staybridge Su

  63. Slide 63: 2014 Current Trading Comparable Occupancy Growth

    2014 Current Trading Comparable Occupancy Growth (%age pts) Qtr 1 Apr May Jun Qtr 2 Jun YTD United States: InterContinental 2.5% 1.0% 2.4% (2.1%) 0.5% 1.5% Crowne Plaza 3.4% 2.3% 3.6% 2.3% 2.7% 3.1% Holiday Inn 2.6% 2.0% 3.7% 1.6% 2.4% 2.5% Holiday Inn Express 1.9% 1.7% 2.8% 1.6% 2.0% 2.0% Staybridg

  64. Slide 64: Comparable RevPAR – 6 Months to 30 June 2014 Franchised and Managed

    Comparable RevPAR – 6 Months to 30 June 2014 Franchised and Managed Constant US$ Franchised Comparable Managed Comparable Hotels Occ % ADR RevPAR Hotels Occ % ADR RevPAR 2014 Pts 2014 Growth 2014 Growth 2014 Pts 2014 Growth 2014 Growth InterContinental 27 66.1% 0.5% 138.11 5.8% 91.34 6.6% 20 79.8% 1

  65. Slide 65: Comparable RevPAR – 6 Months to 30 June 2014 Owned & Leased and Total

    Comparable RevPAR – 6 Months to 30 June 2014 Owned & Leased and Total Constant US$ Owned & Leased Comparable Total Comparable Hotels Occ % ADR RevPAR Occ % ADR RevPAR 2014 Pts 2014 Growth 2014 Growth 2014 Pts 2014 Growth 2014 Growth InterContinental 1 74.9% (3.9%) 284.40 12.2% 213.09 6.7% 73.2% 0.8%

  66. Slide 66: IHG©

    IHG© 66

  67. Slide 67: Appendix II: System size and pipeline

    Crowne Plaza Beijing Lido Appendix II: System size and pipeline IHG© 67

  68. Slide 68: Hotel & Room Count at 30 June 2014

    Hotel & Room Count at 30 June 2014 Franchised Managed Owned & Leased Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms InterContinental 28 8,104 22 8,920 1 424 51 17,448 Crowne Plaza 168 44,435 11 3,491 0 0 179 47,926 Holiday Inn 753 130,284 18 5,539 2 910 773 136,733 Holiday Inn Express 2,0

  69. Slide 69: Pipeline at 30 June 2014

    Pipeline at 30 June 2014 Franchised Managed Owned & Leased Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms InterContinental 2 447 4 990 0 0 6 1,437 Crowne Plaza 14 2,888 2 268 0 0 16 3,156 Holiday Inn 136 18,440 4 1,399 0 0 140 19,839 Holiday Inn Express 377 35,787 2 521 0 0 379 36,308 Sta

  70. Slide 70: Investor Relations team contact details

    Investor Presentation August 2014 Investor Relations team contact details: David Kellett Isabel Green Debbie Holmes david.kellett@ihg.com isabel.green@ihg.com debbie.holmes@ihg.com +44 (0)1895 512326 +44 (0) 1895 512829 +44 (0) 1895 512176 IHG© 70

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