InterContinental Hotels Group PLC · LSE:IHG
InterContinental Hotels — FY2012 Earnings Presentation
44 slides from InterContinental Hotels's earnings presentation, Feb 19, 2013
Slide 1: Full Year Results Presentation
Full Year Results Presentation 19 February 2013
Slide 2: Patrick Cescau, Chairman
Patrick Cescau, Chairman Crowne Plaza Zhenjiang 2
Slide 3: Strong results in 2012 - delivering high quality growth
Strong results in 2012 - delivering high quality growth • Preferred brands drive outperformance – Group RevPAR up 5.2% – Net system size up 2.7% – Fee revenue up 6.8%¹ • Substantial growth opportunities globally – Strengthening existing brands – Two new brands launched • Leveraging scale benefits •
Slide 4: Financial Results - Tom Singer, CFO
Financial Results - Tom Singer, CFO Hotel Indigo Berlin – Ku’damm 4
Slide 5: Financial results
Financial results CER² Change 12 months 12 months $ million Change % % Excluding to 31 Dec 12 to 31 Dec 11 LDs³ Revenue 1,835 1,768 4% 6% Operating Profit¹ 614 559 10% 13% Interest (54) (62) (13)% Profit before tax¹ 560 497 13% Tax rate¹ 27% 24% 3%pts Profit after tax¹ 407 377 8% Adjusted Basic EPS¹
Slide 6: 2012: Strong fee revenue growth
2012: Strong fee revenue growth Royalty RevPAR X Rooms X Rate 2012 fee revenue¹ growth 16% 8% 6.8% 4% 4% 2012 fee $1,135m² $601m $158m $170m $92m revenue1 Group Americas Europe AMEA Greater China ¹ Fee revenue excludes revenue from owned and leased hotels, managed lease hotels & significant liquidat
Slide 7: Good RevPAR growth across all regions
RevPAR Good RevPAR growth across all regions Comparable YoY RevPAR growth by rate and occupancy Occupancy (%) Rate (%) 6.1% 5.4% 5.2% 4.9% 1.2% 4.1% 3.1% 3.2% 1.7% 3.7% 2.0% 2.0% 1.2% 2.3% 0.5% Group Americas Europe AMEA Greater China 7
Slide 8: IHG brands continue to outperform
RevPAR IHG brands continue to outperform IHG RevPAR performance vs. industry - US Comparable IHG RevPAR Total IHG RevPAR Industry (segment) RevPAR: STR 16 14 YoY RevPAR growth (%) 12 10 8 6 4 2 0 US - total InterContinental Crowne Plaza Hotel Indigo Holiday Inn Holiday Inn Express Source: IHG; Smith
Slide 9: Driving fee revenue - relaunch driving strong results
RevPAR Driving fee revenue - relaunch driving strong results • Continued growth in RevPAR premium • Strong increase in signings • Significant reduction in room exits following relaunch completion US Holiday Inn brand family 12 Global Holiday Inn brand month RevPAR index to upper family hotel signing
Slide 10: High quality growth driving market share
Rooms High quality growth driving market share • 2.7% net system growth • High quality pipeline - 34k rooms added, 16k removed - 54k rooms signed - 8th consecutive year of growth - 40% under construction - Leading 5% industry supply share - 12% share of active* industry hotel pipeline - >50% of pipe
Slide 11: Strong fee revenue growth - increasing proportion from developing markets
Strong fee revenue growth - increasing proportion from developing markets Split of rooms, openings & pipeline Global fee revenue, net room & by developing & mature markets RevPAR growth indexed to 2009 Developing Mature Fee 50% revenue1 71% Comparable 81% RevPAR2 50% Net system 29% size2 19% System
Slide 12: Performance by business model
Performance by business model Operating Operating model Revenue¹ % Growth² profit¹ % Growth² % Margin % pt growth ($m) ($m) Franchised 653 8% 547 8% 83.8% (0.1) %pt Managed 368 7% 216 15% 58.7% 4.0 %pt³ Owned & Leased 583 5% 125 20% 21.4% 2.7 %pt • Franchised margin remains at high absolute level •
Slide 13: High quality growth - progressive growth in fee-based margins
High quality growth - progressive growth in fee-based margins • Fee-based operating margin¹ up 2%pts in 2012 – Better than anticipated result – Includes c. 0.5%pt benefit from small one off items • Investment for growth supported by cost discipline and efficiencies – Brand development – Global infra
Slide 14: Strong free cash flow generation
Strong free cash flow generation 12 months 12 months $ million to 31 Dec 12 to 31 Dec 11 EBITDA 708 658 Free cash flow 463 422 Growth capital expenditure (20) (93) Disposal receipts 8 157 Ordinary dividends (174) (148) Special dividends (505) - Share buyback (107) - Retirement benefit contributions*
Slide 15: Harnessing the power of free cash flow
Harnessing the power of free cash flow Free cash flow Asset disposals Investment grade credit rating Growth capital Sustainable ordinary investment Capital returns dividend 15
Slide 16: Growth capital investment - driving future share gains
Growth capital investment - driving future share gains • Medium term growth capital expenditure $100m - $200m per annum – Up to $150m for EVEN Hotels 2013 / 2014 – c.$30m to enhance and retain halo Crowne Plaza assets in 2013 – c.$30m for JV and Equity investments in 2013 • Funded by recycling • Med
Slide 17: Capital returns - strong track record
Capital returns - strong track record • Sustainable ordinary dividend growth of 16% to 64¢ – Dividend maintained through the downturn – >$1bn paid in ordinary dividends since 2003 • $1bn of returns, comprising – $0.5bn special dividend with share consolidation – paid in Q4 – $0.5bn share buyback – $
Slide 18: Change to quarterly reporting
Change to quarterly reporting • Interim Management Statement approach from Q1 2013 • No financial statements at Q1 and Q3 • Full supplementary rooms & RevPAR data • Conference call with Q&A • Focus attention on longer term performance of the business 18
Slide 19: Outlook and current trading
Outlook and current trading • Industry outlook – Continued global demand growth – 2013 US Industry 3rd party RevPAR forecasts* c.6% • IHG Outlook – Forward indicators encouraging – Well positioned to outperform • January RevPAR up 6.6%, rate up 2.1% – Americas 7.0% with US up 7.4% – Europe (0.1)% –
Slide 20: Operating Review - Richard Solomons, CEO
Operating Review - Richard Solomons, CEO Holiday Inn Resort Krabi Ao Nang Beach, Thailand 20
Slide 21: IHG's consistent 10 year track record
IHG’s consistent 10 year track record High quality growth – 425k rooms added, 263k rooms removed – 5% share of global industry supply, 12% share of global hotel pipeline – Strengthening existing brands, developing new ones – Unique partnership through IHG Owners Association Driving an asset light bu
Slide 22: Our model for high quality growth
Our model for high quality growth Superior owner Preferred guest proposition experiences delivered 5 1 through people Effective channel 4 2 management Build & leverage scale 3 Strong brand portfolio & loyalty programme Low capital intensity model drives growing cash flow and ROI 22
Slide 23: Priorities for high quality growth
Priorities for high quality growth “Great Hotels Guests Love” Priorities for high quality growth BEST IN PREFERRED TALENTED CLASS BRANDS PEOPLE DELIVERY RESPONSIBLE BUSINESS PRACTICE INVEST IN GROWTH GROW MARKET SHARE SUSTAINABLE MARGIN GROWTH 23
Slide 24: Building preferred brands - bigger, better, stronger
Building preferred brands - bigger, better, stronger • Bigger – Economies of scale – Enables areas of specialism e.g. Bangkok resorts team • Better – Continuous operational improvement – Our brands are regularly recognised by industry awards • Stronger – First choice amongst guest, owners and employ
Slide 25: Building preferred brands - market segmentation insights
Building preferred brands - market segmentation insights From: Industry definition To: what guests look for Driven by price point: Driven by a COMBINATION of factors: • Luxury • WHO is travelling • Upper Upscale • Upscale • The OCCASION they are travelling for • Upper Midscale • Midscale • Economy •
Slide 26: Strengthen established brands - Crowne Plaza repositioning
Strengthen established brands - Crowne Plaza repositioning • Globally significant brand – $4.0bn* brand (19% of IHG’s gross revenues) – 392 hotels open, 98 in pipeline – Performance gap Americas vs. Rest of World • Significant opportunity to reposition brand Phase 2012 2013 2014 2015 1. Quality impr
Slide 27: New hallmarks - leveraging market segmentation work
New hallmarks - leveraging market segmentation work Primary guest need = business productivity - Efficiency - Working productively - Staying connected to the outside world Hallmarks designed to enhance 4 key experience areas 1. Arrival • Mobile check-in/out • Executive ‘go to’ 2. Food & Beverage • Q
Slide 28: Strengthen established brands - significant value created
Strengthen established brands - significant value created New Brand Family architecture – Leverages position as largest hotel brand in the world – Driven by sophisticated segmentation work Driving awareness J.D. Power: ranked highest in Guest Satisfaction among 2011/12: mid-scale full service hotel
Slide 29: Develop new brands - proven success
Develop new brands - proven success Proven success with Hotel Indigo Strong growth in system & pipeline • Americas launch 2004, global roll-out 2008 Open hotels • 50 hotels open, 47 in pipeline Pipeline 47 – 2012: 13 openings, 18 signings 56 • Fastest growing branded boutique in 2012¹ 50 – Largest g
Slide 30: Develop new brands - HUALUXE and EVEN
Develop new brands - HUALUXE and EVEN • Strong owner interest - 15 signings in 2012 • 1st 5-star international hotel designed for Chinese travellers • Potential to be in over 100 cities in China long term • IHG capital not required • Mainstream wellness brand with a 17m target guest • IHG will inves
Slide 31: Talented people - delivering guest experiences through people
Talented people - delivering guest experiences through people • Strengthening our brands through our frontline – 3%pt improvement in engagement – Franchisee roll-out • Our winning culture - employer brand external recognition – Sunday Times “Best Big 25 Companies to Work for” – CRF Institute Top Emp
Slide 32: Best in class delivery - using scale to drive profitable revenue
Best in class delivery - using scale to drive profitable revenue 1. 2. 3. 4. 69%¹ Creating Converting Yielding Retaining Revenue Demand Demand Demand Demand Delivery ¹69% of rooms revenue booked through IHG’s Channels and by Priority Club Rewards members direct to hotel 32
Slide 33: Attracting guests to our brands
1. 1 Creating Demand Attracting guests to our brands Mass marketing – Greater China InterContinental & Crowne Plaza brand campaigns – Doubled brand awareness & preference Online marketing – Generated $1.4bn of revenues – Paid: >8m keywords managed – Non-paid: powerful search engine optimisation stra
Slide 34: Turning browsers into buyers
2. Converting Demand Turning browsers into buyers IHG direct websites – >227m visits in 2012 generating $3.4bn in revenue, up 10% – Guest Ratings & Review Mobile – 1st major hotel chain to have apps across all platforms – Booked $330m revenues in 2012 (up from $3m in 2009) Global call centres – 10 c
Slide 35: The right room at the right price
3. Yielding Demand The right room at the right price Price optimisation tool – Industry first, recognised by several awards – Used in >3,000 hotels globally – Average 4.3% RevPAR uplift Revenue management hotel training programmes – >3,800 online training modules in progress – >900 hotels completed
Slide 36: Leveraging Priority Club Rewards
4. Retaining Demand Leveraging Priority Club Rewards Largest hotel loyalty programme – 71m members (up 13%) Priority Club revenue contribution = 41% Our most valuable guests: – Pay more – Stay more – Cost less External recognition - 2012 awards: – “Best Hotel Loyalty Program” from Premier Traveler –
Slide 37: Responsible Business Practices - IHG's industry leading CR programmes
Responsible Business Practices - IHG’s industry leading CR programmes • Industry leading online • Partnership between IHG and sustainability management local education provider programme • >150 IHG Academy • Measures & manages energy, Programmes water, waste and carbon • > 10,000 participants to dat
Slide 38: Well positioned for continued high quality growth
Well positioned for continued high quality growth • Strong platform built over 10 year period • Clear strategy for future high quality growth – Preferred Brands – Talented People – Best in class Delivery • Investing to drive long term growth • Confident outlook in uncertain macro environment • Marke
Slide 39: Questions & Answers
Questions & Answers InterContinental, London Westminster 39 39
Slide 40: Appendices
Appendices Holiday Inn Express, Phuket 40
Slide 41: Hotel franchising + 7.6% growth in profits
Hotel franchising + 7.6% growth in profits Total gross revenue $bn¹ (rooms only) Group Royalty drivers 2012 vs. 2011 2012 12.0 Average rooms 1.0% 2011 11.3 RevPAR 5.2% 2010 10.5 Royalty fees 8.4% Franchise Fees $m Franchise EBIT $m (margin %) 2012 653 2012 547 (84%) 2011 609 2011 511 (84%) 2010 558
Slide 42: Hotel management - good margin expansion
Hotel management - good margin expansion Total gross revenue $bn1(total hotel) Management Fees² $m 2012 8.6 2012 368 2011 8.3 2011 349 2010 7.7 2010 333 Managed EBIT² $m (margin³ %) Managed lease revenue and EBIT $m $m 2012 2011 2012 216 (59%) Americas Revenue 34 59 2011 191 (55%) Americas EBIT 0 1
Slide 43: Owned & Leased - rate drives good margin growth
Owned & Leased - rate drives good margin growth O&L revenue $m O&L EBIT $m (margin %) 2012 583 2012 125 (21%) 2011 565 2011 106 (19%) 2010 523 2010 84 (16%) O&L EBITDA $m 2012 164 2011 148 2010 131 Based on actual USD *All charts exclude results from disposed assets: InterContinental Buckhead, Atlan
Slide 44: Full Year Results Presentation
Full Year Results Presentation 19 February 2013
InterContinental Hotels Group — FY2012 Earnings Presentation on 6ix