Intercontinental Hotels Group Plc · LSE:IHG

Intercontinental Hotels — FY2015 Earnings Presentation

53 slides from Intercontinental Hotels's earnings presentation, Feb 23, 2016

  1. Slide 1: Full Year Results Presentation

    InterContinental London – The O2, UK Full Year Results Presentation 23 February 2016 IHG© 1

  2. Slide 2: 2015 highlights

    2015 highlights - high quality fee growth driven by focused execution Fee growth momentum Underlying fee revenues1 8% Leveraging scale and cost discipline Fee-based margin 1.6%pts Strong cash generation Underlying free cash flow2 17% Ordinary dividend 10% Driving shareholder value Special dividend3

  3. Slide 3: Financial Review

    InterContinental Bordeaux – Le Grand, France Financial Review Paul Edgecliffe-Johnson CFO IHG© 3

  4. Slide 4: Strong underlying financial performance

    Strong underlying financial performance Underlying1 Reported $ million 2015 2014 % Change 2015 Revenue $1,522m $1,409m 8% $1,803m Fee revenue2 $1,352m $1,255m 8% $1,349m Fee-based margin 46.0% 44.7% 1.3%pts 46.3% Operating profit $650m $583m 11% $680m Reported interest $(87)m $(80)m 9% $(87)m Report

  5. Slide 5: Global demand growth for IHG branded hotels

    Global demand growth for IHG branded hotels RevPAR X Rooms X Royalty Rate 2015 Group RevPAR growth 2015 system growth2 (%) 7.8% Inc. Kimpton Exc. Kimpton 4.8% 4.4% 3.1% 6.3% 0.8%pts 3.2% ADR Occupancy RevPAR Gross Net 2015: 3.8% total1 RevPAR growth 2015: 44k rooms opened (56k incl. Kimpton acquisit

  6. Slide 6: Strong fee revenue growth across all regions

    Strong fee revenue growth across all regions RevPAR X Rooms X Royalty Rate 2015 fee revenue1 $1,293m, up 7.7% 18 16 14 12 10 8 6 4 7.7% 8.4% 7.5% 7.8% 6.2% 2 0 2015 fee $1,293m $730m $160m $159m $109m revenue1 Group2 Americas Europe AMEA Greater China ¹ Fee revenue excludes revenue from owned and le

  7. Slide 7: Strong fee revenue growth across all regions

    Strong fee revenue growth across all regions RevPAR X Rooms X Royalty Rate 2015 fee revenue1 $1,349m, up 12.2% 2015 (inc. Kimpton) 2015 (exc. Kimpton) 18 16.6% 16 14 12.2% 12 10 8 6 4 7.7% 8.4% $22m $6m 7.5% $3m 7.8% 6.2% 2 $1m 0 2015 fee $1,349m $786m $160m $159m $109m revenue1 Group2 Americas Euro

  8. Slide 8: Strong fee revenue growth across all regions

    Strong fee revenue growth across all regions RevPAR X Rooms X Royalty Rate 2-year fee revenue¹ growth 2015 (inc. Kimpton) 2014 18 16.6% 16 14 12.2% 12 10 9.5% 8 7.2% 7.8% 7.5% 6.8% 7.8% 6.2% 6 5.0% 4 $22m $6m $3m 2 $1m 0 2-year fee 19.4% 24.4% 14.3% 11.2% 17.3% growth1 Group2 Americas Europe AMEA Gr

  9. Slide 9: The Americas – double digit profit growth driven by rate and openings

    The Americas – double digit profit growth driven by rate and openings momentum 2015 Growth in fee revenue drivers1 Comparable FY RevPAR up 4.6%; US up 4.7% 16.6% • Growth led by rate up 3.8% • Q4 US and Americas RevPAR up 2.9% $22m 4.6% 4.3% 8.4% Net rooms growth 4.3% (1.8% ex. Kimpton) 1.8% • Gross

  10. Slide 10: Europe – robust trading in key markets and accelerating signings pace

    Europe – robust trading in key markets and accelerating signings pace 2015 Growth in fee revenue drivers1 Comparable RevPAR up 5.4% (Q4 up 3.6%) 7.5% • UK 5.1%: Provinces 6.4%; London 2.9% • Germany 4.4% 5.4% $22m 2.4% Net rooms growth 2.4%, highest since 2008 • Gross rooms growth 5.3% RevPAR Net ro

  11. Slide 11: AMEA – solid performance led by Japan and accelerating rooms growth

    AMEA – solid performance led by Japan and accelerating rooms growth in focus markets 2015 Growth in fee revenue drivers1 Comparable RevPAR up 4.5% (Q4 up 0.2%) 6.9% • Japan 14.6%; Middle East 0.2% 6.2% • Australia 4.5%; SE Asia 5.7% 4.5% $22m Net rooms growth 6.9% • Gross rooms growth 9.7% RevPAR Ne

  12. Slide 12: Greater China – continued market outperformance and rooms growth

    Greater China – continued market outperformance and rooms growth driving fee revenue 2015 Growth in fee revenue drivers1 Comparable RevPAR up 0.3% (Q4 down 0.9%) • Outperforming the industry 9.4% 7.8% Total RevPAR down 2.3% $22m • Increasing mix from tier 2 and 3 cities Net rooms rooms growth growth

  13. Slide 13: Greater China – regional RevPAR performance

    Greater China – regional RevPAR performance driven by market specific dynamics • Tier 1 city demand remains strong, with supply growth now moderated • In Tier 2/3/4 strong demand matched by fast supply growth from a low base • Hong Kong impacted by inbound tourism declines; Macau from austerity meas

  14. Slide 14: Disciplined focus on costs – investing for future growth

    Disciplined focus on costs – investing for future growth whilst driving scale efficiencies Fee margin1 up 1.6%pts to 46.3% in 2015 (CER up 1.3%pts) • Americas: leveraged scale benefits by driving RevPAR growth • Europe: optimised business model to drive efficiencies • AMEA: driven steady margin grow

  15. Slide 15: Capital allocation approach supported by strong cash flow generation

    Capital allocation approach supported by continuing strong cash flow generation 2015 Cash Flow ($m) 1,500 1,442 1,250 438 1,004 1,000 1,275 750 581 500 115 466 149 250 188 38 0 Net cash from ops Maintenance Free Cash Flow Recyclable & System Ordinary dividend Other Major asset Net cash pre- Kimpton

  16. Slide 16: Optimising capital allocation – targeted investment to drive growth

    Optimising capital allocation remains a priority – targeted investment to drive growth $m 2015 2014 Maintenance • Hotel maintenance capex Maintenance capex 56 101 nearly halved in 2015 with capex & key money Key money 59 53 completion of major asset disposal programme Total 115 154 $m 2015 2014 • Re

  17. Slide 17: Continued focus on returning value to shareholders

    Optimising capital allocation remains a priority – continued focus on returning value to shareholders Maintain sustainable ordinary dividend • Final dividend of 57.5¢, growth of 11% • Total dividend of 85.0¢, growth of 10% • 11% CAGR since 2004 Return surplus funds to shareholders • Proposed $1.5bn

  18. Slide 18: Highly cash generative business driven by fee based operating model

    Highly cash generative business driven by fee based operating model Pre-exceptional Free Cash Flow1 $m Consistently strong cash flows 600 independent of asset sales: • Total FCF over $2.5bn since 500 2010, averaging $425m/year • Continually strong FCF, 400 underpinning sustainable ordinary dividend

  19. Slide 19: Operating Review

    Holiday Inn Resort, Bali Operating Review Richard Solomons IHG© CEO 19

  20. Slide 20: Clearly defined and consistently executed strategy has driven out-performance

    Clearly defined and consistently executed strategy has driven market out-performance Rooms growth % (’04 – ’15 CAGR) Room revenue growth % (’04 – ’15 CAGR) 3.1 5.4 4.1 1.8 Industry2 IHG Industry2 IHG Fee revenues1 ($bn) Return on Capital Employed3 (%) +8% CAGR 57 1.3 0.6 9 2004 2015 2004 2015 1Group

  21. Slide 21: Winning strategy positions us well to continue outperforming

    Winning strategy positions us well to continue outperforming in the future 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 o

  22. Slide 22: Travel and tourism - one of the five largest industries

    Travel and tourism - one of the five largest industries in the world Travel and tourism is a • Direct GDP contribution $2.4 trillion1 major global • 5th largest global industry2 industry • 4%+ CAGR in direct GDP contribution since 20101 • Growing GDP share: 10 year forecast CAGR = 3.7%3 Strong histo

  23. Slide 23: Branded hotel segment is the fastest growing

    In a diverse accommodation landscape the branded hotel segment is the fastest growing Accommodation market rooms revenue share and growth Market ’02 – ’14 Hotel accommodation share (%)1 CAGR (%)1 Branded hotels 32 5.1 Unbranded hotels 34 2.9 66% Market ’02 – ’14 Non-hotel accommodation share (%)2 CA

  24. Slide 24: IHG is focused on markets where 80% of room revenue growth is forecast

    IHG is focused on the hotel markets where 80% of room revenue growth is forecast IHG’s priority markets: forecast share of hotel industry rooms revenue growth to 20251 UK 3% Russia / CIS 2% Canada 4% 4% Germany+2 United Greater States Middle East 7% China 25% 24% India 5% 3% Mexico 3% Indonesia = >$

  25. Slide 25: Focused approach has driven acceleration in room openings and signings

    IHG’s focused approach has driven an acceleration in room openings and signings • Material step up in openings and signings in the last two years • Accelerating growth with a focus on quality (nearly 150k rooms removed in 6 years) • 15% share of industry pipeline; 3x current supply share IHG annual

  26. Slide 26: Broad but targeted brand portfolio

    Constantly evolving guest needs - IHG has a broad but targeted brand portfolio Needs based segments IHG brands • Romantic getaway • Short break experience • Rest and go • Well-being • Family time • Mixing business with pleasure • Business productivity • Business interactions • Social identity IHG© 2

  27. Slide 27: Accelerating boutique portfolio

    Accelerating boutique portfolio - delivering unique guest experiences • Kimpton® hotel content live on ihg.com Kimpton integration • Utilising sales tools to drive corporate bookings progressing well • Global principles designed to drive non-US growth • 14 boutique openings and 27 signings − Kimpton

  28. Slide 28: Hotel Van Zandt, a Kimpton Hotel, Austin, Texas

    Hotel Van Zandt, a Kimpton Hotel, Austin, Texas

  29. Slide 29: Hotel Indigo Bangkok Wireless Road, Thailand

    Hotel Indigo Bangkok Wireless Road, Thailand

  30. Slide 30: Hotel Indigo Lower East Side, New York

    Hotel Indigo Lower East Side, New York

  31. Slide 31: Holiday Inn Express – flexible leisure/work space

    Holiday Inn Express® – meeting guest need for a flexible leisure/work space Accelerating • 5% CAGR in net system growth over last three years global growth • Global annual room signings nearly doubled in five years • United States - ‘Formula Blue’ design − More flexibility; smart and distinctive sty

  32. Slide 32: Holiday Inn Express Formula Blue public area

    IHG© Holiday Inn Express Formula Blue public area, Minneapolis, Minnesota

  33. Slide 33: Holiday Inn Express Next Generation room, London

    IHG© Holiday Inn Express Next Generation room, London - Ealing, UK

  34. Slide 34: Holiday Inn Club Vacations – fast growth

    Holiday Inn Club Vacations® – fast growth to meet family leisure demand • Asset light timeshare business • Accesses vacation ownership opportunity with fee model Meeting • Increases IHG capability to meet leisure demand demand for family time − Penetrates high barrier entry markets − Enhances IHG Re

  35. Slide 35: Holiday Inn Club Vacations, Cape Canaveral, Florida

    IHG© Holiday Inn Club Vacations, Cape Canaveral, Florida

  36. Slide 36: Innovative technology and enhancing the guest journey

    Innovative technology and enhancing the guest journey is critical to delivering our winning model Dream Plan Book Stay Share Superior owner Preferred guest experiences proposition 5 delivered through people 1 Winning Effective channel 4 Model management 2 Build & leverage scale 3 Strong brand portfo

  37. Slide 37: Strategic relationship with Amadeus for next generation GRS

    Strategic relationship with Amadeus to develop a next generation Guest Reservation System Dream Plan Book Stay Share • Amadeus will build the system; leverages proven expertise in technology • Fully integrated solution on target for 2017 phased launch IHG ecosystem Amadeus cloud based community mode

  38. Slide 38: New GRS will deliver more innovation

    New GRS will deliver more innovation and develop the guest experience further Dream Plan Book Stay Share • Richer booking experience with more personalisation options Guest • Unique guest offerings on direct channels • Introduction of attribute pricing to optimise revenue for owners Owner – e.g mix

  39. Slide 39: Shift from OTAs to IHG direct channels

    Dynamic marketing and clear guest benefits driving shift from OTAs to IHG direct channels Dream Plan Book Stay Share • UK Holiday Inn Express® Lowest Price Promise – ~20% channel shift from OTA to IHG direct – Online IHG Rewards Club enrolments more than doubled – Utilised programmatic marketing to

  40. Slide 40: Shift from OTAs to IHG direct channels

    Dynamic marketing and clear guest benefits driving shift from OTAs to IHG direct channels IHG© 40

  41. Slide 41: Accelerating digital revenue growth

    Accelerating digital revenue growth – our lowest cost distribution channel Dream Plan Book Stay Share IHG annual digital revenue ($bn)1 • Direct digital1 is the largest IHG channel; 20% of rooms revenue +11% CAGR – Revenue up $430m YOY; more than any other channel 4.2 – Supported by fast mobile grow

  42. Slide 42: Guest Request tool enhancing the stay experience

    Guest Request tool enhancing the stay experience Dream Plan Book Stay Share • New tool enhances in-hotel request process and utilises mobile app – Piloted in the US with further roll out in Americas during 2016 – Drove satisfaction levels up 5pts IHG© 42

  43. Slide 43: IHGConnect enhancing the stay experience

    IHGConnect enhancing the stay experience and building IHG® Rewards Club loyalty Dream Plan Book Stay Share • IHGConnect delivering seamless wi-fi experience for guests – Roll out in progress; 1,500+ hotels expected to go live in 2016 – Developing personalised and dynamic landing page for loyalty mem

  44. Slide 44: Maintaining connections with guests post stay

    Maintaining our connections with guests post stay ― creating “meaningful membership” Dream Plan Book Stay Share • Guests want to belong but with a sense of individuality • Need to involve consumers with brands within a community • Brands build credibility through trustworthy dialogues • Membership e

  45. Slide 45: Building membership communities through social media and IHG Rewards Club

    Building membership communities through social media, trusted reviews and IHG® Rewards Club Dream Plan Book Stay Share • Presence in 200 countries; ~5m followers, up 16% Developing guest • ‘Journey to Extraordinary’ campaign; 14% awareness communities increase for Holiday Inn® through social media •

  46. Slide 46: Conclusion

    Conclusion • Economic and political uncertainty in some markets • Attractive industry with significant growth opportunities • Clear strategy supported by focused investment drives outperformance • Brand developments meeting evolving owner and guest needs • Utilising technology to deliver direct reve

  47. Slide 47: Q&A

    Crowne Plaza, Fuzhou Riverside, China Q&A IHG© 47

  48. Slide 48: Appendices

    Hotel Indigo, York, UK Appendices IHG© 48

  49. Slide 49: Foreign exchange translation exposure

    Foreign exchange translation exposure $(25)m impact from currency translation in 2015 • Recent trends indicate further impact in 2016 Reported EBIT ($m) Foreign exchange impact ($m)3 Region 2015 2015 vs. 2014 rates1 20162 vs. 2015 rates Americas 597 (12) (4) Europe 78 (14) (1) AMEA 86 (7) (1) Greate

  50. Slide 50: 2015/2016 significant flags

    2015/ 2016 significant flags • $3m Kimpton significant liquidated damages receipt (Americas managed) • $(2)m Kimpton integration costs (Americas managed) 2015 • $(3)m impact from Kimpton exits in July2013 2015 (Americas managed) • $(4)m InterContinental New York Barclay renovation costs (Americas ma

  51. Slide 51: Hotel franchising

    Hotel franchising Total gross revenue $bn¹ Group royalty drivers 2015 YoY Average 2015 14.1 rooms 3.7% RevPAR 4.5% 2014 13.4 Royalty fees 8.4% 2013 12.5 Franchise Fees $m Franchise EBIT $m (margin %) 2015 785 2015 669 (85%) 2014 747 2014 632 (85%) 2013 690 2013 586 (85%) Based on actual USD with the

  52. Slide 52: Hotel management

    Hotel management Total gross revenue $bn1 (total hotel) Management Fees² $m 2015 8.6 9.6 2015 373 429 2014 9.0 2014 379 2013 8.5 2013 365 Managed EBIT² $m (margin %) Reported managed lease revenue and EBIT $m $m 2015 2014 2015 217 15 (54%) Americas revenue 38 38 Americas EBIT 0 0 2014 222 (59%) Euro

  53. Slide 53: Owned & Leased

    Owned & Leased O&L revenue $m O&L EBIT $m (margin %) 2015 164 2015 27 (16%) 2014 404 2014 79 (20%) 2013 398 2013 86 (22%) O&L Revenue and EBIT from disposals ($m) O&L EBITDA $m $m 2015 2014 2015 36 InterContinental Barclay Revenue - 14 InterContinental Barclay EBIT - (1) InterContinental Mark Hopkin

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