InterContinental Hotels Group PLC · LSE:IHG
InterContinental Hotels — Investor Presentation (June 2010)
50 slides from InterContinental Hotels's investor presentation, June 2010
Slide 1: InterContinental Hotels Group June 2010
InterContinental Hotels Group June 2010 InterContinental Shanghai Puxi, China 1
Slide 2: IHG is positioned to win
IHG is positioned to win • World’s largest hotel company with leadership positions in both developed and developing markets Global Scale • Industry-leading I d t l di pipeline i li – robust b t and d driving d i i market k t share h gains i • Company re-organised over last 5 years to allow delivery
Slide 3: IHG: The world's largest hotel company
IHG: The world world’s s largest hotel company 650 Americas 448,641 rooms Global o. of rooms 550 EMEA 121,246 rooms Scale 450 Asia Pacific 81,943 rooms No 350 Globally 651,830 rooms 250 IHG Wyndham Marriott Hilton Accor 166 Hotels Seven 1,313 Hotels 55,874 Rooms 184 Hotels 239,559 Rooms 20,329 Rooms
Slide 4: IHG has commanding scale
IHG has commanding scale 4 476 hotels, 4,476 hotels 335,000 people 100 countries 651,830 rooms Top 3 position in Top 3 position in 1,344 pipeline hotels 5 of 6 top markets* 15 of 20 top markets* 16% global share 133m room nights $17bn +$1bn booked in 2009 gross revenues system funds * As defined by
Slide 5: IHG's growth strategy to create sustainable value
IHG’s IHG s growth strategy to create sustainable value Making best use of our scale to build and grow preferred hotel brands for guests and owners in high value markets “Where we play” “How we win” Markets Powerful and distinct brands Segments Best demand delivery systems Model Aligned and engaged
Slide 6: Where we play
“Where Where we play” play Add in established markets where we already have scale Markets Build leadership positions in high growth developing markets Gain footholds via upscale in gateway cities Participate where branding can add real value Segments Participate where our scale is a compet
Slide 7: Asset light, fee based model
Asset light light, fee based model 68% Managed and 87% franchised EBIT* 32% Owned 13% EBIT* 2003 2009 * EBIT pre overheads, central costs and exceptionals Data as at 31 December 2009 7
Slide 8: Resilient business model
Resilient business model Source: IHG. Actual currency. Adjusted for owned & leased hotels, individually significant LDs and HPT guarantee payments 8
Slide 9: High performance business model
High performance business model Preferred BRANDS Reinvestment RevPAR out-performance Low capital intensity Scaleable cost base Ri i margins Rising i Operating Owner efficiencies ROI More deals/ more scale 9
Slide 10: How we Win - our journey to Great Hotels Guests Love
“How How we Win Win” - our journey to Great Hotels Guests Love • Market segmentation and penetrating customer insight • Thoughtful, innovative Brand evolution Powerful and • Consistent branded hotel experience p distinct brands • Widely available, quality managed and up to the mark y into the strate
Slide 11: IHG transformation drives alignment and performance
IHG transformation drives alignment and performance 2003 TODAY • Division of a brewing business • Focused hotel company • Collection of hotel chains • Portfolio brand management • Three independent regions • Four fully aligned regions • No global functions • Global functions led from centre • Indist
Slide 12: Higher engagement drives RevPAR outperformance
Higher engagement drives RevPAR outperformance 120 RGI* Performance in US & UK managed hotels** Above and below average engagement 116 112 108 104 2007 2009 Below average Above average *RGI is relative RevPAR index as compared to a locally defined competitive set. **213 US & UK owned and managed hot
Slide 13: The best demand delivery system
The best demand delivery system Hotel Indigo Scottsdale, USA 13
Slide 14: How we win: The IHG system
How we win: The IHG system Scale Brand Portfolio Loyalty Program Seven hotel brands Priority Club Rewards Over 4,400 hotels, c130 covering all major the largest in industry; over million stays per annum segments 51 million members System Funds IHG’s system Web Presence delivers 68% of Annual System
Slide 15: Funding the system
Funding the system All hotels contribute c.3.0% of rooms revenue c.4.75% total Other fees for + + (service contribution fee) PCR bill value add services Advertising & Marketing Distribution Priority Club Rewards (c.25%) (Reservations and Channels) (c.40%) (c.35%) c.$1bn total system funds in 2009 Di
Slide 16: Booking channels
Booking channels $10.9bn $13.7bn 2% 5% 10% 11% 13% 14% 14% 20% Online Travel Agency 10% Global G oba Distribution st but o System Syste 18% Call centres PCR Hotel Direct 51% IHG Websites W b it 32% Hotel Direct 2004 2009 Note: 2009 constant USD rates 16
Slide 17: Online direct marketing
Online direct marketing • Top 20 Google advertiser globally • Purchasing over 3m keywords in 16 languages • Serving over 12bn online ad impressions annually • Reaching customers during online shopping: – Search Engines (Google, BING) – Community Guides (T i d i (Tripadvisor, Cit S CitySearch) h) – M
Slide 18: Targeted marketing
Targeted marketing • $28m investment over 3 years in modernising of infrastructure and processes • Enable the identification and marketing to an additional c.34m customers • Improve time to market and accuracy of campaigns • >$150m incremental revenue from these types of campaigns in 2009 18
Slide 19: Reaching corporate accounts - Sales
Reaching corporate accounts - Sales Our sales structure aligns with our accounts’ buying behavior… Global IHG Global Accounts Strategic Accounts Director …and touches a significant amount of our Key system revenue: Accounts Director Global, Regional and • $3.5bn room revenue Sub-regional Accounts Ke
Slide 20: Priority Club Rewards (PCR)
Priority Club Rewards (PCR) • Priority Club contribution +4% pts vs. 2008 • Over 51m PCR members worldwide – Largest programme in hotel industry – Record hotel enrolments in 2009 (+28% YOY) • Increase value proposition of Priority Club points – “Points & Cash” - combine points with cash to redeem fr
Slide 21: The most valuable customers
The most valuable customers • They PAY more – 10% premium on ADR versus other guests – Less price sensitive - choosing our brands for reasons other than strictly price • They STAY more – Studies show that PCR members stay >30% more with IHG post enrollment – PCR members 10 times more likely to stay
Slide 22: Powerful and distinct brands
Powerful and distinct brands Holiday Inn Pataya, Thailand 22
Slide 23: Relaunching Holiday Inn – Three key issues to address
Relaunching Holiday Inn – Three key issues to address Emotional Consistency Differentiation Connection 23
Slide 24: Required guest satisfaction thresholds not being met
Required guest satisfaction thresholds not being met 2006 Global Satisfaction Scores HOLIDAY INN HOLIDAY INN EXPRESS Consistency Failing/Action Required Failing/Action Required Acceptable/Commendable Acceptable/Commendable Excellent Excellent Source: IHG data 24
Slide 25: We have removed the properties that were damaging brand equity
We have removed the properties that were damaging brand equity Global Holiday Inn brand family rooms removed 2004-2010e 2004 2010e ed ms remove Room Source: IHG c 180 000 rooms exited 2004 c.180,000 2004-2010 2010 (>1 (>1,250 250 hotels) 25
Slide 26: We have replaced them with better hotels including many new builds
We have replaced them with better hotels including many new builds Global Holiday y Inn family y rooms added 2004-2010e oms added Roo d Source: IHG c 190 000 rooms added 2004-2010 c.190,000 2004 2010 (>1,600 (>1 600 hotels) 26
Slide 27: Each hotel goes through a three stage relaunch process
Each hotel goes through a three stage relaunch process 1 2 3 1st Stages 2nd Stage Final Stage Pass Complete Install brand Install relaunch service culture hallmarks signage audit training Meet guest satisfaction threshold 27
Slide 28: Efforts driving relative RevPAR outperformance and increasing premium
These efforts are driving relative RevPAR outperformance and increasing our premium As of March 2010, 239 US hotels that had been trading as relaunched hotels for over 1 year were showing a RevPAR outperformance of 6%pts* compared to those that had not yet relaunched. US Holiday Inn brand family Rev
Slide 29: Since 2007, we have replaced 21% of the estate and grown our premium
Since 2007, we have replaced 21% of the estate and grown our premium Global Holiday Inn family rooms 2008 - 2010 500 s(‘000s) 16 400 ( 89 ) 75 er of rooms 300 200 413 415 325 Numbe 100 0 Closing system Exits Existing hotels ‘New New build Conversion Con ersion Est. closing Est size Dec 2007 relaunch
Slide 30: We are experiencing improvements in guest satisfaction
We are experiencing improvements in guest satisfaction Global Holiday Inn family guest metric improvements 21 2.1 2.2 1.8 1.4 1.2 11 1.1 Guest Intent to return Intent to satisfaction recommend Not Relaunched Relaunched Source: IHG %pt global change Q1 ’07 to Q1 ‘10 30
Slide 31: Q1 2010 financial results & outlook
Q1 2010 financial results & outlook Crowne Plaza Lijiang Ancient Town, China 31
Slide 32: Continued strength in absolute demand
Continued strength in absolute demand Source: IHG 32
Slide 33: Q1 2010 – RevPAR growth for the first time in 18 months
Q1 2010 – RevPAR growth for the first time in 18 months • Global constant currency RevPAR up 0.2%*, including 4.1%* in March – Asia Pacific growth of 10.0%*, including a 22.2%* increase in China • System size of 651,830 rooms (4,476 hotels) – 9,872 rooms added in the quarter, 4,721 rooms removed • P
Slide 34: Near term outlook
Near term outlook • April trading – Global RevPAR growth of 5.2%* – Americas +3.7%*; EMEA +5.0%*; APAC +13.0%* • Encouraging signs of early recovery, but caution due to: – Rates ates st still be being guunder de pressure p essu e in many a y markets a ets – Booking windows remaining short and visibi
Slide 35: Growing global supply share
Growing global supply share Supply of March 2010 active global hotel new build pipeline 20 e (%) 15 Hotel pipeline share 10 5 0 IHG Hilton Marriott Starwood Source: STR Global 35
Slide 36: Our competitive advantages
Our competitive advantages • Scale, in multiple areas • Branded and channel delivery expertise, detailed consumer insight • Powerful, distinct brands with high consumer and owner preference • $1bn system funds g • The largest loyalty y yp programme g (Priority ( y Club Rewards)) • A strong, supporti
Slide 37: Update on Asia Pacific and Greater China
Update on Asia Pacific and Greater China InterContinental Shanghai Puxi, China 37
Slide 38: Asia Pacific – IHG's industry leading system and pipeline share
Asia Pacific – IHG’s industry leading system and pipeline share 20% Share of industry branded open rooms 15% c rooms’ sharre Share Sh off industry i d t pipeline i li rooms 10% Asia Pacific 5% 0% IHG Wyndham Accor Starwood Marriott Shangri - La Hyatt Hilton Source: STR Global May ’10. Pipeline data
Slide 39: Greater China – IHG's leading position is becoming even stronger
Greater China – IHG’s IHG s leading position is becoming even stronger 30% 25% 20% are na rooms’ sha 15% 10% Greater Chin 5% G 0% IHG Wyndham Accor Starwood Marriott Shangri - La Hyatt Hilton Share of industry branded Share of industry pipeline open rooms: rooms: Midscale/ economy Midscale// economy
Slide 40: IHG is growing rapidly in Greater China
IHG is growing rapidly in Greater China 100 90 80 70 60 Roomss (‘000s) 50 40 30 20 10 138 0 2005 2006 2007 2008 2009 May '10 Mid Midscale l system t Mid Midscale l pipeline i li Upscale/ up. upscale/ luxury system Upscale/ up. upscale/ luxury pipeline Source: IHG 40
Slide 41: IHG has strong brand distribution throughout Greater China
IHG has strong brand distribution throughout Greater China System Pipeline DAQING Rooms Hotels Rooms Hotels HARBIN SUIFENHE MUDANJIANG 7,828 17 9,026 22 ANSHAN QINGHUANGDAO ULAANBAATAR BEIJING DANDONG 13,736 36 19,890 55 TANGSHAN DALIAN SHIJIAZHUANGTIANJIN 16,110 50 12,164 41 HOHHOT DATONG BAOTOU QI
Slide 42: Appendices
Appendices Holiday Inn, Maldives 42
Slide 43: Free Cash Flow Generation
F Free Cash C h Flow Fl Generation G ti 12 months 12 months $m to 31 December to 31 December 2009 2008 Operating Profit* 363 549 Depreciation Hotel Depreciation 74 74 Non Hotel Depreciation* 35 36 Working Capital & Other Movements 60 123 Net Equity Settled Share – Based Costs 14 31 Cash flows arisin
Slide 44: Uses of Free Cash Flow
U Uses off F Free Cash C h Flow Fl 12 months 12 months $m to 31 December to 31 December 2009 2008 Free Cash Flow 377 566 Investment Capital - Expenditure (91) (9) p Investment Capital - Receipts p 35 86 Tax paid on disposals (1) (3) Share Repurchases - (139) Ordinary Dividend (118) (118) Pension Con
Slide 45: Book Value of Remaining Owned & Leased Hotels and Other Associates and Investments
Book Value of Remaining Owned & Leased Hotels and Other Associates and Investments (as at 31 Mar 2010) Hotels NBV (US$m) • Big 4 InterContinental hotels 4 1,186 • Other owned & leased hotels 12 421 Total 16 1,607 Other associates and investments 120 Total 1,727 45
Slide 46: Managed & Franchised business models - the detail
Managed & Franchised business models - the detail Franchising Managing • One of largest franchisers • One of largest managers • 488,298 franchised rooms • 157,983 managed rooms • Typically owner operators • Typically T i ll institutional i tit ti l owners • Standard contract • Tailored contracts • 1
Slide 47: 2010 Current Trading – Comparable RevPAR Growth
2010 Current Trading – Comparable RevPAR Growth Constant US$ Jan Feb Mar Qtr 1 US - InterContinental (11.7%) 4.1% 4.8% (0.9%) US - Crowne Plaza (7.1%) (0.8%) 5.1% (0.6%) US - Holiday Inn (9.8%) (5.0%) 2.7% (3.5%) US - Express (8.0%) (5.2%) 2.1% (3.4%) US - Staybridge 0.8% 1.1% 7.7% 3.4% US - Candlew
Slide 48: Hotel & Room Count at 31 March 2010
Hotel & Room Count at 31 March 2010 Owned & Leased Managed Franchised Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms InterContinental 4 1,911 , 25 9,145 , 26 7,455 , 55 18,511 , Crowne Plaza - - 19 6,560 187 50,059 206 56,619 Holiday Inn 3 1,056 29 9,077 846 146,984 878 157,117 Express by
Slide 49: Pipeline at 31 March 2010
Pipeline at 31 March 2010 Managed Franchised Total Hotels Rooms Hotels Rooms Hotels Rooms InterContinental 5 1,822 1 218 6 2,040 Crowne Plaza 1 200 32 6,674 33 6,874 Holiday Inn - - 197 25,401 197 25,401 Express by Holiday Inn - - 441 39,724 441 39,724 Staybridge Suites 1 200 107 11,239 108 11,439 C
Slide 50: InterContinental Hotels Group June 2010
InterContinental Hotels Group June 2010 InterContinental Shanghai Puxi, China 50
InterContinental Hotels Group — Investor Presentation (June 2010) on 6ix