Intercontinental Development

7/27/2019 Intercontinental Development

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Andrew CosslettChief Executive



3

IHG's journey

Faster growth by

making IHG’s brandsthe first-choice for

guests and hotel owners

Goal

By end 2008:Net, organic growth of 50,000 - 60,000 rooms

Target

Build the industry’s

strongest operating systemfocused on the biggestmarkets and segments

where scale really counts

• Brand performance

• Excellent hotel returns

• Market scale/knowledge

• Aligned organisation

Strategy Priorities



Today’s agenda

Peter GowersChief Marketing Officer

The importance of brands

Jenifer Zeigler InterContinental Brand Director

How we applyconsumer insight Roland Fasel

General Manager InterContinental London Park Lane

How we drivehotel returns

Richard SolomonsFinance Director



Today’s agenda










Driving growth

By end 2008:Net, organic growth of 50,000 - 60,000 rooms

Target

Faster growth by

making IHG’s brandsthe first-choice for

guests and hotel owners

Goal

Royalty rateRoomsX XRevPAR



Importance of brands continues to grow

• Customers want brands

– Growth in branded consumer products

– Growing use of internet to book - brands offer reassurance

• Lenders want brands

– Last two cycles showed trading resilience of branded hotels

– Branded hotels easier to resell

• Owners want brands

– Brands deliver guests and aid financing

– Brands drive higher revPAR; higher ROI



Strong global growth in branded rooms

1995 2001 2004‘000 ‘000 ‘000

Worldwide Rooms 14,100 16,900 18,350

Worldwide Branded Rooms 2,900 4,400 6,713

Worldwide % Branded Rooms 21% 26% 37%

Source: Mintel/TTI/IHG analysis

3% CAGR growth in worldwide rooms over last decade

10% CAGR growth in worldwide branded rooms in last decade

Branding accelerates during downturn



Still significant growth to come

BrandedRooms

'000

%BrandedRooms

TotalRooms

'000

2004

North America 5,650 65% 3,673

South America 850 20% 170Americas 6,500 59% 3,843

Europe 6,550 25% 1,638Middle East 355 25% 89

Africa 485 15% 73EMEA 7,390 24% 1,799

East Asia 3,500 25% 875South Asia 200 10% 20 Australia 200 60% 120Other AsiaPac 560 10% 56Asia Pacific 4,460 24% 1,071

Worldwide 18,350 37% 6,713

Source: Mintel/TTI/IHG analysis



Strong branded revenue growth

-7%

-5%

-3%

-1%

1%

3%

5%

7%

9%

11%

13%

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Unbranded Branded

dd

5.9% 16 year CAGR

3.0% 16 year CAGR

% g

r o w t h p e r a n n u m

US Industry revenue growth

Source: STR



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The importance of having a brand portfolio

• Meets customer needs

– Customers have different stay needs but like to stay withinthe same loyalty programme

• Meets owner needs

– Owners like to work with a small number of brand ownersbut have different development opportunities

• Common brand platform allows increased systems investment

– Funds from all brands contribute to reservation channels,loyalty club etc - allows extra investment and innovation



12

IHG's 7 step process to build differentiated brands

1.DNA 2.Insight

3. Point of Difference

4.

Innovation

5.

Look & Feel

6.

Consistency

7.

Character



13

What IHG does differently

Hotel Industry IHG

Intuition

Generic brands

Focused on product

Insight

Distinctive brands

Product and People



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Getting branding right - Holiday Inn Express

DNA Insight

Point of Difference “SMART”

Innovation:

Shower

Look & Feel:

Advertising

Consistency:

Breakfast

Character:

Training

Revenues growth +2.3ppt vs segment (2002-05)Segment pipeline share +4.6ppt (2002-05)

Royalty rate +1ppt (2005)



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Significant opportunity in the luxury segment

Global room revenueby segment

Forecast global room revenuegrowth by segment, 2005-10

0

5

10

15

20

25

30

35

40

Luxury Upscale Midscale Budget

0

20

40

60

80

100

120

140

Luxury Upscale Midscale Budget

2 0 0 5 R e v

e n u e s

( $ B i l l i o

n s )

R e v e n u e g r o w t h

( $ b i l l i o n )

Source: IHG estimates

Note: growth across top 20 global markets



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Luxury hotel brands currently undifferentiated

Bedding warsFine dining

Flat screen TVs….all expensive for owners



17

Differentiating InterContinental

Customer preference

Owner ROI

Owner Focused

Brand Manager Research

Projects

Point of Difference

“IN THE KNOW”Owner input



18

Today’s agenda




How we applyconsumer insight Roland FaselGeneral Manager

InterContinental London Park Lane





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Current InterContinental positioning

• Most global Five Star hotel brand

– 142 Hotels; 63 countries

• Strong representation in fast growing economies: – China : 6 open; 9 pipeline

– Rest of Asia Pacific: 23 open; 9 pipeline

– Middle East : 30 open; 4 pipeline

– United States & Mexico: 24 open; 6 pipeline

• 19% of IHG's total gross revenues – $2.1bn total gross revenues to 30 September 2006

– 11% total gross revenue growth to 30 September 2006



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Performance already strong

Global InterContinental RevPAR Growth

0

5

10

15

Q3'04 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06

R e v P A R G r o w t h ( % )

• RevPAR growth outperformance vs global luxury sector – 2005: 2.2ppt outperformance

– H1 2006: 3.4ppt outperformance



21

High growth opportunities

Leverages IHG's global footprint and

owners' development opportunities

Luxury segment growingaround the world

High revenue per hotel

means fits most locations- other brands need market scale

Creates its own scale

High value per management contract

$300k- $3m fees; average $800k



22

InterContinental repositioning

Phase I:Portfolio repositioning

Phase II:Brand research

1998:InterContinental brandacquired - 117 hotels

2006:142 hotels; 33 pipeline

1998 - 2006: portfolio optimised35 Lower quality hotel exits

35 Hotel renovations

60 High quality hotel additions

1998:Older demographic targeted

Conservative positioning

2006:Brand repositioning launched

2004-2006: Consumer research Younger demographic identified

Advertising focus changed

"In the Know" positioning



23

Getting branding right - InterContinental

DNA Insight

Point of Difference “IN THE KNOW”

Look & Feel:

Updatedbrand image

Consistency:

Localexperience

Character:

ColleagueEngagement

Innovation:

Concierge



Nanjing

Dubai

ArizonaDavos



38

Today’s agenda










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Bringing "In The Know" to life

DNA Insight


Innovation:

Theo RandallSpa

Club Lounge

Look & Feel:Guest RoomsPublic Areas

Consistency:ArrivalService

Character:People



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DNA Insight


Innovation:

Theo RandallSpa

Club Lounge



Character:People



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Theo Randall at the InterContinental



42

Club InterContinental



43


DNA Insight




Innovation:

Theo RandallSpa

Club Lounge

Character:People

S



44

Suite

L bb



45

Lobby

B i i "I Th K " t lif



46


DNA Insight



Innovation:

Theo RandallSpa

Club Lounge


Character:People

S i



47

Service




48


DNA Insight


Character:People

Innovation:

Theo RandallSpa

Club Lounge



People



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People

Competitive Map 04 07



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Competitive Map 04 - 07

‘In the know’authentic

Modern

Contemporary

Classic

Traditional

Four Seasons

Ritz

Dorchester MandarinOriental

Connaught

ClaridgesLanesborough

SandersonGreat EasternChurchill Hyatt

RegencyThe LanghamThe

Metropolitan

GenericConsumer promise

Market position 2004-2007



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Market position 2004-2007

Club IntercontinentalSuites

Signature SuitesStandard Rooms Superior Rooms

60 Suites112 Rooms 275 Rooms

2007£200-250+£150+ £400-500+

2004 £150+£130+ £210+

Business mix 2004-2007



52

Business mix 2004-2007

Wholesaleleisure

Corporaterates

Largemeetings

Individualcustomers

2007 20% 44%11%25%

Reduce IncreaseReduceReduce

200436% 21%16%27%

Today’s agenda



53

Today s agenda








IHG's journey



54

IHG s journey

Faster growth bymaking IHG’s brands

the first-choice for guests and hotel owners

Goal

By end 2008:

Net, organic growth of 50,000 - 60,000 rooms

Target





• Excellent hotel returns• Market scale/knowledge


Strategy Priorities

InterContinental London Park Lane refurbishment



55

InterContinental London Park Lane refurbishment

Hotel Built 1973

1998: InterContinentalbrand acquisition

Property in need of refurbishment

Capex 1998-2005 Low capex spend - await refurbishment

£70m Renewal capex£5m Enhancement capex

£1m New brand standards

2005/06:Refurbishment

Ongoing capex 5-7% of revenues

Major owned and leased asset refurbishment profile



56

Major owned and leased asset refurbishment profile

Refurbishment New Build

New York

Atlanta

Hong Kong

Boston

London Park Lane

Paris Le Grand

2000/2001

2002/2003

2004 Goal to meetWACC

across the cycle2004-2006

2006

2005-2006

InterContinental London Park Lane earnings profile



57

g p

2000 Revenue £43m; EBITDA £20m; EBIT £18m





2005 Revenue £18m; EBITDA £(1m); EBIT £(3)m

2006 Revenue £3m; EBITDA £(4m); EBIT £(8)m

Revenue £45-50m; EBITDA £20-25m; EBIT £15 - 20mNet book value: £200m

ROCE 7.5% - 10%2009



Andrew CosslettChief Executive

IHG's journey



59

j y

Faster growth bymaking IHG’s brands

the first-choice for guests and hotel owners

Goal

By end 2008:

Net, organic growth of 50,000 - 60,000 rooms

Target





• Excellent hotel returns• Market scale/knowledge


Strategy Priorities

Intercontinental Development

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