Source - LSE Regulatory
RNS Number : 6860D
InterContinental Hotels Group PLC
20 February 2024
 

A close-up of a logo Description automatically generatedInterContinental Hotels Group PLC

Full Year Results to 31 December 2023

20 February 2024

 

2023

20221

% change

 

Underlying2
% change

REPORTABLE SEGMENTS2:






   Revenue2

$2,164m

$1,843m

+17%


+19%

   Revenue from fee business2

$1,672m

$1,434m

+17%


+17%

   Operating profit2

$1,019m

$828m

+23%


+25%

   Fee margin2

59.3%

55.9%

+3.4%pts



   Adjusted EPS2

375.7¢

282.3¢

+33%



GROUP RESULTS:

 

 

 

 

 

   Total revenue

$4,624m

$3,892m

+19%



   Operating profit

$1,066m

$628m

+70%



   Basic EPS

443.8¢

207.2¢

+114%



   Total dividend per share

152.3¢

138.4¢

+10%



   Net debt2

$2,272m

$1,851m

+23%



1.  Re-presented for the adoption of IFRS 17 'Insurance Contracts' (see note 1 to the Financial Statements).

2.  Definitions for non-GAAP measures can be found in the 'Use of key performance measures and non-GAAP measures' section, along with reconciliations of these measures to the most directly comparable line items within the Financial Statements.

 

Trading and revenue

·      Strong trading: global RevPAR2 up +16.1% YoY (Q4 +7.6%); global RevPAR up +10.9% vs 2019 (Q4 +12.7%)

·      Americas FY RevPAR up +7.0% YoY (Q4 +1.5%), EMEAA +23.7% (Q4 +7.0%) and Greater China +71.7% (Q4 +72.0%), reflecting the differing levels of travel restrictions that were still in place in 2022

·      Average daily rate up +5% vs 2022, +13% vs 2019; occupancy up +6%pts vs 2022, just (1)%pt lower vs 2019

·      Total gross revenue2 of $31.6bn, +23% vs 2022, +13% vs 2019

System size and pipeline

·      Gross system growth +5.3%; net system size growth of +3.8%

·      Opened 47.9k rooms (275 hotels), +16% YoY (ex. Iberostar); global estate 946k rooms (6,363 hotels)

·      Signed 79.2k rooms (556 hotels), +26% YoY (ex. Iberostar); global pipeline 297k rooms (2,016 hotels), +5.5% YoY

·      Q4 opened 19.2k rooms (117 hotels) and signed 28.3k rooms (194 hotels), one of the highest quarters on record

Margin and profit

·      Fee margin2 of 59.3%, up +3.4%pts driven by trading recovery in EMEAA and Greater China

·      Operating profit from reportable segments2 of $1,019m, up +23%; this included $13m adverse currency impact

·      Reported operating profit of $1,066m, including a profit of $19m from System Fund and reimbursables (2022: loss of $105m) and a $28m exceptional profit (2022: $95m net exceptional charges)

Cash flow and net debt

·      Net cash from operating activities of $893m (2022: $646m), with adjusted free cash flow2 of $819m (2022: $565m), the latter representing 129% conversion of adjusted earnings2 (2022: 111%)

·      Net debt increase of $421m reflects the strong adjusted free cash flow, $1.0bn of shareholder returns and a $105m net foreign exchange adverse impact

·      Adjusted EBITDA2 of $1,086m, +21% vs 2022; net debt:adjusted EBITDA ratio of 2.1x

Shareholder returns

·      Completion of 2023's $750m share buyback programme, and payment of $245m in ordinary dividends

·      Final dividend of 104.0¢ proposed, +10% vs 2022, resulting in a total dividend for the year of 152.3¢

·      New $800m buyback programme launched, which together with ordinary dividends is expected to return over $1bn to shareholders in 2024

Clear framework to drive future value creation over the medium to long term

·      High single digit percentage growth in fee revenue, though combination of RevPAR and system size growth, together with 100‑150bps fee margin expansion, annually on average over the medium to long term

·      100% conversion of adjusted earnings into adjusted free cash flow, supporting investment in the business to optimise growth, sustainably growing the ordinary dividend and returning surplus capital

·      12-15% adjusted EPS compound annual growth rate, including the assumption of ongoing share buybacks

 

Elie Maalouf, Chief Executive Officer, IHG Hotels & Resorts, said:

 

"I was honoured to take over as IHG's group CEO in July and would like to thank our teams for delivering an excellent set of results. Travel demand was strong across all markets, with RevPAR up 16% on last year and 11% ahead of the 2019 pre-pandemic peak. Combined with the power of our enterprise and efficient operating model, profit from reportable segments grew 23% and exceeded one billion dollars for the first time, and adjusted EPS grew 33%. Today we are announcing a further $800m share buyback programme, which together with ordinary dividends is expected to return over $1bn to shareholders in 2024.

 

Alongside strong trading and financial performances, we continued to grow our portfolio and the global footprint of our brands. We opened 275 hotels in 2023 and signed more than double that amount - 556 hotels - into our pipeline. Adjusting for the effect of the Iberostar hotels joining IHG's system, openings for the fourth quarter grew by 27% year‑on‑year and signings were up by 50%, representing one of our biggest ever quarters for development activity.

 

As we look ahead, our evolved strategic priorities and clear plans will further reinforce IHG Hotels & Resorts as the hotel company of choice for guests and owners. The travel industry has attractive, long-term drivers of demand, and the strength of our brand portfolio and enterprise platform will continue to boost our RevPAR and system size growth. Combined with our scale and cost base efficiencies, this will further expand fee margin. IHG's strong cash generation supports investment in growth initiatives, sustainably increasing our ordinary dividend and the regular return of surplus capital such as through buybacks. We look forward to an important next chapter of growth for IHG that creates long-term sustainable value for our shareholders and benefits our employees, hotel owners and communities."

 

 

For further information, please contact:

Investor Relations:         Stuart Ford (+44 (0)7823 828 739); Aleksandar Milenkovic (+44 (0)7469 905 720);
Joe Simpson (+44 (0)7976 862 072)

Media Relations:           Neil Maidment (+44 (0)7970 668 250); Mike Ward (+44 (0)7795 257 407)

 

Presentations for analysts and institutional shareholders:

Covering IHG's 2023 results, a pre-recorded webcast presented by Elie Maalouf, Chief Executive Officer, and Michael Glover, Chief Financial Officer, will be available from 7:00am (London time) today, 20 February 2024, and can be accessed at www.ihgplc.com/en/investors/results-and-presentations.

 

Covering IHG's update on strategic priorities, a live webcast, together with a Q&A session, will be hosted later today at 1:30pm (London time). Elie Maalouf and Michael Glover will present along with other senior management colleagues, and the event can be accessed directly on https://limecrane.com/reg/ihg/ir/ or via www.ihgplc.com/en/investors/results-and-presentations. The content of this full year results announcement contains all material background information to IHG's update on strategic priorities, with no further announcement to be released.

 

Analysts and institutional investors wishing to ask questions should use the following dial-in details for a Q&A facility:

 

UK toll-free: 0800 048 7798. US toll-free: 800 579 2543. Other international: (+1) 785 424 1789. Conference ID: IHG.

 

An archived replay of the update on strategic priorities is expected to be available within 24 hours and will remain available, accessed at www.ihgplc.com/en/investors/results-and-presentations.

 

Website:

The full release and supplementary data will be available on our website from 7:00am (London time) on 20 February 2024. The web address is www.ihgplc.com/en/investors/results-and-presentations.

 

About IHG Hotels & Resorts:

IHG Hotels & Resorts [LON:IHG, NYSE:IHG (ADRs)] is a global hospitality company, with a purpose to provide True Hospitality for Good.

 

With a family of 19 hotel brands and IHG One Rewards, one of the world's largest hotel loyalty programmes, IHG has over 6,300 open hotels in more than 100 countries, and a development pipeline of over 2,000 properties.

 

-     Luxury & Lifestyle: Six Senses Hotels Resorts Spas, Regent Hotels & Resorts, InterContinental Hotels & Resorts, Vignette Collection, Kimpton Hotels & Restaurants, Hotel Indigo

-     Premium: voco hotels, HUALUXE Hotels & Resorts, Crowne Plaza Hotels & Resorts, EVEN Hotels

-     Essentials: Holiday Inn Express, Holiday Inn Hotels & Resorts, Garner hotels, avid hotels

-     Suites: Atwell Suites, Staybridge Suites, Holiday Inn Club Vacations, Candlewood Suites

-     Exclusive Partners: Iberostar Beachfront Resorts

 

InterContinental Hotels Group PLC is the Group's holding company and is incorporated and registered in England and Wales. Approximately 345,000 people work across IHG's hotels and corporate offices globally.

 

Visit us online for more about our hotels and reservations and IHG One Rewards. To download the IHG One Rewards app, visit the Apple App or Google Play stores.

 

For our latest news, visit our Newsroom and follow us on LinkedIn.

 

Cautionary note regarding forward-looking statements:

This announcement contains certain forward-looking statements as defined under United States law (Section 21E of the Securities Exchange Act of 1934) and otherwise. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe' or other words of similar meaning. These statements are based on assumptions and assessments made by InterContinental Hotels Group PLC's management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed in or implied by, such forward-looking statements. The main factors that could affect the business and the financial results are described in the 'Risk Factors' section in the current InterContinental Hotels Group PLC's Annual report and Form 20-F filed with the United States Securities and Exchange Commission.

 

 

Summary of system size and pipeline progress in 2023

 

Openings and signings progress in 2023 reflects IHG's strong portfolio of brands and the overall enterprise platform that we provide to hotel owners, together with the long-term attractiveness of the markets we operate in:

 

·     Global system of 946k rooms (6,363 hotels) at 31 December 2023, weighted 66% across midscale segments and 34% across upscale and luxury

·     Gross growth +5.3%, with 47.9k rooms (275 hotels) opened which represents an increase of +16% on the prior year when adjusting to exclude Iberostar hotels added to IHG's system; on the same basis, Q4 was a +27% increase on the prior year with 19.2k rooms (117 hotels) opened

·     Removal of 13.3k rooms (76 hotels), a removal rate of -1.5%, in line with the historical underlying average rate

·     Net system size growth +3.8%, or +3.2% excluding Iberostar openings in 2023

·     Signed 79.2k rooms (556 hotels), +26% more than prior year when excluding Iberostar; on the same basis, Q4 was a +50% increase on the prior year with 28.3k rooms (194 hotels) signed

·     Signings mix drives pipeline to be weighted 52% across midscale segments and 48% across upscale and luxury, which over the coming years will drive a more balanced system mix and fee stream

·     Conversions growing strongly, representing 39% of openings and 36% of signings (excluding Iberostar for both); conversion signings rose to 191 hotels in 2023 (2022: 96) and new-build signings rose to 359 (2022: 323)

·     Global pipeline of 297k rooms (2,016 hotels), representing 31% of current system size and growth of +5.5%

·     More than 40% of the global pipeline is under construction, broadly in line with prior years

 

System and pipeline summary of movements in 2023 and total closing position (rooms):

 


System

Pipeline

Openings

Removals

Net

Total

YoY%

Signings

Total

Group

47,919

(13,343)

34,576

946,203

+3.8%

79,220

296,954

Americas

10,405

(6,307)

4,098

519,594

+0.8%

28,297

109,164

EMEAA

21,174

(3,571)

17,603

247,267

+7.7%

24,787

82,226

Greater China

16,340

(3,465)

12,875

179,342

+7.7%

26,136

105,564

 

 

The regional performance reviews provide further detail of the system and pipeline by region, and further analysis by brand and by ownership type.

 

 

 

Update on strategic priorities

 

To further strengthen our ability to drive future growth, in 2023 we evolved key elements of our strategy, including our ambition, strategic pillars and growth behaviours.

 

These changes build on the investments we have made in recent years, where we have expanded our portfolio from 11 to 19 brands and significantly strengthened our enterprise. This includes the relaunched IHG One Rewards loyalty programme, refreshed masterbrand, new partnerships and an enhanced web and mobile offer, as well as embarking on our Journey to Tomorrow to invest in our people, deliver more sustainable hotels and bring positive change in our communities.

 

Our purpose of True Hospitality for Good remains at the heart of our brands and culture and is therefore unchanged, but our ambition as an organisation has been simplified to focus on what is central to accelerating growth: being the hotel company of choice for guests and owners. We have evolved the four pillars to execute against our strategy:

·      Relentless Focus on Growth, instils a targeted approach to expanding our brands in high-value and growth markets;

·      Brands Guests and Owners Love, shows our explicit intention to deliver for both groups, every time;

·      Leading Commercial Engine, recognises the importance of investing in the technology and tools that drive commercial success and make the biggest difference to guests, owners and hotel teams; and

·      Care for our People, Communities and Planet, which remains in step with our 2030 Journey to Tomorrow targets.

 

Together, our strategic pillars have been designed to push the limits of what we've built, driving us further and faster towards realising our potential in a sustainable and responsible way. Over the long term, with disciplined execution, our strategy creates value for all our stakeholders and delivers growth in cash flows and profits, which can be reinvested in our business and returned to shareholders, and reflects how IHG delivers on our growth algorithm and investment case.



 

 

Strategic and operational highlights for 2023

 

Relentless focus on growth

 

·     New midscale conversion brand launched. Our new Garner brand became franchise-ready in the US in September 2023, and rapidly achieved its first seven signings and two openings by the end of the year. We have also quickly expanded the brand to other markets, where it is ready for development in Mexico from February 2024 and with initial agreements already reached for conversions expected this year in Japan. IHG expects the growth potential of Garner to reach more than 500 hotels over the next 10 years and 1,000 hotels over the next 20 years.

·     Other newer brands progressing well. The seven other brands launched or acquired over more recent years (Regent, Six Senses, Kimpton, Vignette Collection, voco, avid and Atwell Suites) are now 5% of the system size but 16% of the pipeline. There were 141 hotels signed across these seven brands in 2023, compared to 78 in the prior year. We continue to evaluate where through the introduction of our existing brands to new markets and the addition of new brands to our portfolio we could accelerate IHG's growth.

·     Our established brands continue to grow. Each of InterContinental, Hotel Indigo, Hualuxe, Crowne Plaza, EVEN, Holiday Inn, Holiday Inn Express, Staybridge Suites and Candlewood Suites have pipelines representing at least 20% of current system size. Our commitment to continuous investment to keep all our brands modern and relevant was reflected in the year with initiatives such as the launch of our global brand evolution for InterContinental Hotels & Resorts, new marketing campaigns and innovative format developments. For example, these include changes to the build types for EVEN that significantly lower the cost per key, and more flexible formats for our suites brands.

·     Conversions reaching record levels. Hotel signings in 2023 included nearly 200 in total that were conversions to IHG brands, double the number in 2022, and there were more than 100 conversion properties opened in the year. Together, conversions therefore represented 37% of combined signings and openings activity in 2023.

·     Luxury & Lifestyle growing particularly fast. The six IHG brands in this higher fee per key segment have grown to represent 14% of IHG's system size (509 properties, 129k rooms) and 22% of our pipeline (357 properties, 65k rooms) which is around twice the size from five years earlier. Luxury & Lifestyle accounted for 23% of signings in the year, and signings grew by 33% year-on-year. One in two Luxury & Lifestyle development deals now include a branded residences component, which will further accelerate system growth and fee income.

·     Further international expansion. We are already present in over 100 countries and capitalising on that in 2023 there were 31 hotel openings that represented a debut in a new country for a particular IHG brand. We are also expanding our presence in some of the most rapidly growing markets such as India with 46 open and 49 pipeline hotels, Saudi Arabia with 43 open and 39 pipeline hotels, and Greater China which recently celebrated the achievement of exceeding 700 open hotels and with 500 more in the pipeline. In the Americas region, having strengthened our development capacity that serves Canada, Mexico, Latin America and the Caribbean, there were 51 hotel signings across these markets which represented 20% of the overall signings for the Americas region and which was more than double the 21 signings in these markets in the prior year (excluding Iberostar).

·     Capturing demand across stay occasions. Reflecting the different stages of recovery post-pandemic, by the fourth quarter of 2023 our global revenue performance was ahead of 2019 levels for all three types of stay occasions. For the full year of 2023, Leisure revenue was ahead of 2019 by +33% (+13% room nights, +17% rate); Business was ahead by +3% (-2% room nights, +5% rate) and although Groups was still -5% lower (-7% room nights, +3% rate) it turned positive for the final quarter and Groups revenue on-the-books was +17% higher year-on-year. Supporting the outlook for further RevPAR progress, total global revenue on‑the-books at 1 January 2024 was +16% higher than at the same point a year earlier.

 

Brands guests and owners love

 

·     Driving overall guest satisfaction. Global 'Guest Love' scores trended up further in 2023, and Guest Satisfaction Index (GSI), which measures our outperformance against peers, continued to maintain a four-year high. Our support to strengthen the quality and consistency of every stage and element of the guest experience is paramount to succeeding in preferred customer choice and strong owner returns.

·     Brand resonance campaigns. Our masterbrand strategy is putting IHG Hotels & Resorts in more places more often, which is lifting awareness and brand favourability measures. The 'Guest How You Guest' global marketing campaign extended its reach across markets, channels and events to increase IHG's appeal with key demographics. We supported this with targeted regional promotions and individual brand marketing campaigns, including new global campaigns for Holiday Inn Express, InterContinental and our largest ever for Hotel Indigo.

·     Further updates to brands. These included rolling out programmes for a vibrant new service culture for InterContinental to drive its performance and growth, an upgraded breakfast service for Holiday Inn in the US and Canada with streamlined labour costs, and also an improved breakfast offering and fresh design for Holiday Inn Express in Greater China to further accelerate its growth in the region.



 

·     Constant pursuit of owner cost savings across design & build, operate and renovate. Latest format evolutions in 2023 such as avid/Candlewood Suites dual branding have reduced cost per key by a further 7‑9%. In-room design standardisation for Holiday Inn and Holiday Inn Express in Greater China is achieving savings of 13-18%. Our F&B purchasing programmes cover over 4,000 hotels with a further 323 joining in 2023, and have driven savings of up to 15%. Our Group Purchasing Organization agreements now cover over 100,000 items, and broader Hotel Purchasing Services are in place in 6 markets. These provide end-to-end support to speed up openings and renovations, and achieve savings of up to 30% across various goods and services categories and continue to expand into new areas such as freight and logistics.

Leading commercial engine

 

·     Growing the enterprise contribution delivered for owners. The percentage of room revenue booked through IHG-managed channels and sources has reached almost 80%, up from 72% three years earlier. It is a key indicator of value-add, the success of our commercial engine across technology platforms, and of our sales and distribution channels. Providing our hotel owners higher-value revenue at a lower cost of acquisition is of paramount importance to the attractiveness and proven success of our enterprise system.

·     Loyalty participation going from strength to strength. IHG One Rewards has grown to over 130 million members. Following its transformation midway through the prior year, 2023 was a record year for enrolments, up 50% YoY and up 24% on 2019 levels. Reward Nights were also up by around 20% YoY and 40% on 2019 levels, demonstrating strong member engagement and driving increased returns for owners particularly through Reward Night dynamic pricing which helps increase demand in lower occupancy periods. Loyalty penetration has increased with members now responsible for over 55% of room nights globally in 2023. Loyalty members spend approximately 20% more in hotels than non-members, and are around ten times more likely to book direct. IHG One Rewards received seven Freddie Awards in 2023, the most prestigious member-generated awards in the travel loyalty industry, reflecting an exceptional year of further progress.

·     Co-brand credit cards driving further loyalty contribution and revenue. Following the update of US card products alongside the relaunch of the loyalty programme, new account activations have continued to increase very strongly and in 2023 were up 60%+ year-on-year and 80%+ on 2019 levels. We have also achieved continued double-digit percentage growth in average card spend, both on a year-on-year basis and versus 2019.

·     Digital channels leading the way. By the end of 2023, we had redesigned and relaunched brand websites covering 92% of open hotels. The IHG mobile app and other mobile channels now account for 58% of all digital bookings, and the rapid growth across IHG's direct digital booking channels means these are now generating 25% of total room revenue across the whole enterprise system. The app saw the number of downloads increase 60% YoY and revenue increase 38%. In Greater China, updates to the IHG WeChat channel contributed to an 8% increase in conversion rates year-on-year and the channel generated nearly twice as much revenue.

·     IHG's Guest Reservation System (GRS) maximising choice and value. The up-sell of unique room attributes such as room size and views was made available in over 6,000 hotels during the year. Guests that select an up-sell in our digital booking channels drive an average nightly room revenue increase of $18 across our Essentials and Suites brands and $40 for Luxury & Lifestyle. Our GRS capabilities also enable more effective cross-sell of guest‑stay extras such as F&B credits, lounge access, additional in-room welcome amenities and parking, as part of the redesigned booking flow. For hotels that have this live, conversion rates are around 2% of eligible guests, with incremental revenue per booking averaging $31 for Essentials and Suites brands and $90 for Luxury & Lifestyle.

·     New Revenue Management System (RMS) to drive further improvements in owner returns. Continuing our focus on providing best-in-class platforms, IHG's RMS employs a new cloud-based platform that incorporates leading data science and forecasting tools to deliver advanced insights and recommendations to owners as part of our enhanced revenue management services. Already in pilot, the rollout is targeting approximately 4,000 hotels in 2024 and the balance of hotels in 2025. In a further important platform development, work will also begin this year on our next‑generation Property Management System (PMS) to create even greater value for owners, where a single cloud‑based view across properties will enable the deployment of fast, efficient enhancements.

·     Further technology enhancements leveraging IHG's scale and skills for both guests and owners. Artificial intelligence (AI) is providing a more intuitive guest experience for our Digital Concierge 'chatbot' service. With the growth in AI capabilities and IHG's scale investment, we have already increased end-to-end AI‑led customer self‑service by 53% in 2023 compared to a year earlier, with the potential for this to continue growing which will drive additional cost efficiency and effectiveness for our owners, as well as further increases in guest satisfaction.

·     Leveraging our commercial engine through partnerships. As we continue to integrate the Iberostar Beachfront Resorts brand and properties into our systems, this is strengthening our all-inclusive resort offer, as well as leveraging the scale of the loyalty programme and IHG's leading technology platforms and distribution channel management. In 2023, we achieved the important milestones of Iberostar properties becoming fully bookable on IHG direct channels, and IHG One Rewards loyalty points being both earned and redeemable at these properties. The integration progress and its benefits are also laying the foundations for future exclusive partnerships demonstrating the value of IHG's commercial engine.

 

Care for our people, communities and planet

 

We champion a diverse culture where everyone can thrive. In 2023 we launched IHG University, a new gateway to build skills, advance career development and champion best practice, and which has already received multiple digital learning awards. Globally, 35% of our leaders working at VP level and above are female, and we were delighted that Forbes recognised IHG as one of the world's top companies for women and are proud to be officially certified in the US as a Great Place to Work for parents, as well as featuring in the 100 Best Places to Work for Women. 22% of our leaders are racially/ethnically diverse and represent 16 nationalities, and IHG has been rated 2nd out of 850 companies on the Financial Times Europe's Diversity Leaders 2024. Our employee resource groups (ERGs) have grown significantly and now have more than 4,000 members and allies across 29 chapters that promote different workplace diversities. Reflecting our continued progress, overall employee engagement in our 2023 survey stood at 87%, a +1% improvement on the prior year, which once again saw IHG accredited as a Kincentric Global Best Employer, and from the Inclusion Index measures, nine out of 10 employees consider IHG to have an inclusive culture.

 

·     Improving the lives of 30 million people in our communities around the world. This goal is part of our 10-year responsible business plan, and we focus on making a positive impact through three areas: skills training, disaster relief and tackling food poverty. In 2023, through IHG Academy, more than 30,000 participants all around the world gained valuable employment and life skills, as the programme rapidly grows to give young people the benefit of work experience, internships, apprenticeships and free online learning. IHG supported 15 relief efforts in 2023, working with a range of humanitarian aid partners around the world to assist in their critical relief and recovery efforts. We expanded our work with more local foodshare partnerships, our support of The Global FoodBanking Network covered nearly 50 countries in 2023, and more than 39,000 colleagues volunteered over 121,000 hours to support their local communities.

·     Reducing our energy use and carbon emissions. Our 2030 science-based target is a 46% absolute reduction from the 2019 baseline year in our Scope 1 and 2 Greenhouse Gas (GHG) emissions and material Scope 3 emission sources from our franchised hotels energy consumption and Fuel and Energy Related Activities (FERA). Whilst there was an increase year-on-year in 2023 due to the recovery in occupancy and growth in the size of the estate, we continued to drive energy efficiency with a 3.8% reduction in carbon emissions per occupied room from 2019 and a 1.9% absolute reduction against the baseline. Updates to our brand standards are integrating more Energy Conservation Measures (ECMs) into hotel requirements, such as new lighting controls, occupancy-sensing thermostats and heat pumps. We continued to expand the availability of a renewable energy solution for hotels in a number of states in the US. Throughout the year we also continued to develop a low carbon hotel programme, focused primarily on operational carbon of new build hotels, to support delivery of our carbon and energy goals. We expect to launch this programme in 2024.

 

 

Outlook: attractive long-term growth drivers

 

Hotel industry demand characteristics exhibit both structural growth and resiliency

 

·     Industry revenue has outpaced global economic growth in 19 out of 24 years between 2000 and 2023, with a CAGR of +4.4% (versus +2.9% CAGR for GDP). Prior to the pandemic, there were 10 consecutive years of industry revenue growth outperforming global economic growth.

·     The industry has previously demonstrated relative resilience during economic downturns, particularly in essential business travel and in chainscales such as upper midscale, which is where IHG has substantial presence. Through the pandemic, a sustained level of essential travel was also shown, followed by a rapid recovery.

·     Whilst geopolitical risks and the economic outlook in some geographies show challenges and uncertainties, current conditions, including employment, consumer savings and business activity levels, remain supportive of industry growth.

·     Research and consumer surveys indicate relative resilience and prioritisation of travel from discretionary spending and the ongoing strength of real disposal income and household savings metrics. Business surveys indicate expectations for increasing corporate travel budgets and a continued return to pre-pandemic levels of travel activity, as well as the potential for greater hotel use to support hybrid and flexible working arrangements.

·     Reflecting the strength of current demand recovery, global hotel room nights consumed are estimated by Oxford Economics to have already returned back above 2019 levels in 2023. They forecast long-term growth at a CAGR of +4.0% through to 2033. The US market alone is expected to increase by a 2.7% CAGR from 2.3 billion to 3.0 billion room nights over this time period, and China to be faster at a +4.2% CAGR.

·     Near-term growth is also expected to capture a number of tailwinds, including: the last stages of a full post-pandemic recovery in a number of countries; further recovery in occupancy levels for business travel and for groups, meetings and events; the full restoration of international flight capacity; and further potential for room rate increases driven by the increase in demand, constrained net new supply in the short term, and any ongoing inflation.

 

The need for additional hotel supply remains an enduring industry characteristic

 

·     Global hotel room net new supply growth has been at a CAGR of 2.4% over the 10 years from 2013 to 2023, and was 1.1% in the US, according to STR. STR's recent forecasts for US industry net supply growth are for this to improve from 0.3% in 2023 to 0.8% in 2024, followed by growth of between 1.4% and 1.9% a year through to 2027.

·     In the most recent years, Covid restrictions challenged the ability to complete and open new build hotels. Development activity for the industry also saw an impact from the costs and availability of construction crews and materials, followed by the macro-economic outlook and interest rate increases affecting the availability and cost of real estate financing.

·     Longer-term, and in addition to the industry's RevPAR growth, following the normalisation of financing and construction costs, further new hotel supply will still be needed to satisfy the demands of growing populations and rising middle classes, to drive business and commerce, and to satisfy the inherent desire to travel to physically interact and for new experiences.

·     Global leading hotel brands are expected to continue their long-term trend of taking market share. In periods when developers are adding less new supply, RevPAR growth from existing room inventory is expected to be stronger and leading branded players can also accelerate conversion opportunities to progress their unit growth performance.



Outlook: IHG strongly positioned to drive growth and shareholder value

 

IHG sees a continuation of its strong track record of driving growth and shareholder value through our:

 

·     Asset light, fee-based, predominantly franchised model, which has high barriers to entry in an industry that provides long-term structural growth characteristics in both demand (RevPAR) and new supply (system growth). Reflecting IHG's success in capturing growth, ahead of the temporary disruption caused by Covid, in the decade to 2019 IHG delivered:

+3.9% average annual growth in RevPAR, and

+3.2% average annual growth in net system size.

·     Chainscale and geographic diversification, with exposure to a mix of large, resilient and high growth market segments.

·     Well-invested portfolio that includes market leading brands, and an enterprise platform through which our hotel owners leverage IHG's scale, distribution channels, leading technology and loyalty programme.

·     Existing system of over 6,300 hotels that will grow fee income through long term, sustainable RevPAR expansion.

·     Growing pipeline of over 2,000 further hotels that will deliver multi-year growth in system size.

·     Efficient cost base, with a proven track record of leveraging this to increase margins whilst investing appropriately to support future growth, and benefiting from a model where fee income is largely linked to hotel revenues. Reflecting this, over the decade to 2019 IHG delivered:

~130bps average annual improvement in fee margin, and

+11.4% CAGR in Adjusted EPS.

·     Strong cash generation, from which to further invest in our brands and enterprise platform to optimise growth, fund a sustainably growing dividend and return surplus funds to shareholders. Reflecting this, IHG has delivered:

>100% conversion of adjusted earnings into adjusted free cash flow,

+11.0% CAGR in ordinary dividends through to 2019, and, after resuming dividend payments at the end of 2021, a +10% CAGR thereafter, and

5-6% of shares bought back in each of the last two years through surplus capital being returned to shareholders via share buyback programmes.

 

Building on this track record, in 2023 IHG achieved:

·     RevPAR back ahead of 2019 levels and substantially ahead of 2022, which was a lower base from the residual Covid impact on trading in that year;

·     Net system size growth of +3.8%, which is above the historical long-run average;

·     Underlying fee revenue1 growth of +17.5% and underlying fee operating profit1 of +24.6%;

·     Fee business cost base increased by +8.5%, reflecting around 5% underlying inflation, together with a step-up in cost investment supporting growth initiatives, including Iberostar integration costs and the launch of Garner;

·     Fee margin1 expansion of +340bps year-on-year to 59.3% (for 2019 we reported 54.1% prior to adoption of IFRS17);

·     Operating profit from reportable segments1 growth of +23% and adjusted EPS1 of +33% year-on-year, which at $1,019m and 375.7¢ are up +18% and +24% ahead of 2019, respectively;

·     129% conversion of adjusted earnings into adjusted free cash flow; and

·     The return of $1.0bn to shareholders during the year through ordinary dividend payments and the share buyback programme, equivalent to 10% of IHG's $10.0bn (£8.3bn) market capitalisation at the start of 2023.

 

Looking ahead, IHG's growth ambitions and drivers for future shareholder value creation include:

·     High-single digit percentage growth in fee revenue annually on average over the medium to long term, driven by the combination of RevPAR growth and net system size growth;

·     100-150bps annual improvement in fee margin on average over the medium to long term from operational leverage;

·     ~100% conversion of adjusted earnings into adjusted free cash flow;

·     Sustainably growing the ordinary dividend;

·     Returning additional capital to shareholders, such as through regular share buyback programmes, further enhancing EPS growth; and

·     The opportunity for compound growth in adjusted EPS of +12-15% annually on average over the medium to long term, driven by the combination of the above and including the assumption of ongoing share buybacks.

 

IHG's total fee revenue growth is driven by the combination of growth in RevPAR and growth in our net system size. Total fee revenue growth is expected to grow faster than the typical rate of increase in our fee business cost base, and this positive operational leverage drives the potential for 100-150bps annual improvement in fee margin on average over the medium to long term. Additional drivers of this include structural shifts over time such as a growing proportion of franchising and increasing scale efficiencies in markets such as Greater China.

 

In addition to fee margin progress from operational leverage, IHG is actively developing further opportunities to drive fee margin over the longer term. These will include ongoing cost base efficiency and effectiveness initiatives, and the expansion of ancillary fee streams including driving additional growth from our co-brand credit card offerings.

 

1.  Definitions for non-GAAP measures can be found in the 'Use of key performance measures and non-GAAP measures' section, along with reconciliations of these measures to the most directly comparable line items within the Financial Statements.

 

Capital allocation: growing the ordinary dividend and returning surplus capital through buybacks

 

IHG's asset-light business model is highly cash-generative through the cycle and enables us to invest in our brands and strengthen our enterprise platform. We have a disciplined approach to capital allocation which ensures that the business is appropriately invested in, whilst looking to maintain an efficient and conservative balance sheet.

 

IHG's perspectives on the uses of cash generated by the business remain unchanged: ensuring we invest in the business to optimise growth that will drive long-term shareholder value creation, funding a sustainably growing dividend, and then returning surplus capital to shareholders, whilst targeting our leverage ratio within a range of 2.5-3.0x net debt:adjusted EBITDA to maintain an investment grade credit rating.

 

IHG typically pays dividends weighted approximately one-third to the interim and two-thirds to the final payment. The total dividend for 2022 was 138.4¢. The interim dividend for 2023 was increased by 10% to 48.3¢. With a proposed final dividend increase of 10% to 104.0¢, the total dividend for 2023 of 152.3¢ will have increased by 10%. The ex-dividend date is Thursday 4 April 2024 and the record date is Friday 5 April 2024. Subject to shareholder approval at the AGM on Friday 3 May 2024, the dividend will be paid on Tuesday 14 May 2024.

 

In 2022, a $500m share buyback programme reduced the total number of voting rights in the Company by 5.0%. In 2023, a $750m programme returned further surplus capital, repurchasing 10.6 million shares at an average price of £55.88 per share, and reduced the voting rights by a further 6.1%. This programme, together with ordinary dividend payments, returned $1.0bn to shareholders in 2023, equivalent to 10% of IHG's $10.0bn (£8.3bn) market capitalisation at the start of 2023 and 6.1% of IHG's most recent $16.4bn (£13.1bn) market capitalisation at 19 February 2024.

 

A new share buyback programme will commence immediately, targeted to return $800m over the course of 2024. With the further improvement in profitability and strong cash generation achieved in 2023, IHG's net debt:adjusted EBITDA ratio reduced to 2.1x at 31 December 2023. With adjusted EBITDA1 of $1,086m in 2023, this new buyback programme to return a further $800m of surplus capital to shareholders would increase pro forma leverage by 0.7x to 2.8x. On a prospective basis, given analyst consensus expectations for growth in EBITDA and cash generation in 2024, leverage would be expected at the end of the year to be around the lower end of our target range of 2.5-3.0x.

 

The Board expects IHG's business model to continue its strong track record of generating substantial capacity to support our investment plans that drive growth, to fund a sustainably growing ordinary dividend, and to routinely return surplus capital to our shareholders.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.  Definitions for non-GAAP measures can be found in the 'Use of key performance measures and non-GAAP measures' section, along with reconciliations of these measures to the most directly comparable line items within the Financial Statements.

Summary of financial performance

INCOME STATEMENT SUMMARY


            12 months ended 31 December

 

2023

2022

%

 

$m

 Re-presenteda $m

change

Revenue

 



Americas

1,105

1,005

10.0

EMEAA

677

552

22.6

Greater China

161

87

85.1

Central

221

199

11.1


____

____

____

Revenue from reportable segmentsb

2,164

1,843

17.4


 



System Fund and reimbursable revenues

2,460

2,049

20.1


_____

_____

_____

Total revenue

4,624

3,892

18.8


 



Operating profit

 



Americas

815

761

7.1

EMEAA

215

152

41.4

Greater China

96

23

317.4

Central

(107)

(108)

(0.9)


_____

_____

_____

Operating profit from reportable segmentsb

1,019

828

23.1

Analysed as:

 

 

 

            Fee business

992

805

23.2

            Owned, leased and managed lease

29

19

52.6

            Insurance activities

(2)

4

NMc


 



System Fund and reimbursable result

19

(105)

NMc


____

____

____

Operating profit before exceptional items

1,038

723

43.6

Operating exceptional items

28

(95)

NMc


____

____

____

Operating profit

1,066

628

69.7


 



Net financial expenses

(52)

(96)

(45.8)

Analysed as:

 

 

 

            Adjusted interest expenseb

(131)

(122)

7.4

            System Fund interest

44

16

175.0

            Foreign exchange gains

35

10

250.0

 

 

 

 

Fair value (losses)/gains on contingent purchase consideration

(4)

8

NMc


____

____

____

Profit before tax

1,010

540

87.0


 



Tax

(260)

(164)

58.5

Analysed as;

 



Adjusted taxb

(253)

(194)

30.4

Tax attributable to System Fund

(3)

-

NMc

Tax on foreign exchange gains

3

4

(25.0)

            Tax on exceptional items

(7)

26

NMc


____

____

____

Profit for the year

750

376

99.5


 



Adjusted earningsd

635

511

24.3


 



Basic weighted average number of ordinary shares (millions)

169

181

(6.6)


____

____

____

Earnings per ordinary share

 



 

Basic

443.8¢

207.2¢

114.2

 

Adjustedb

375.7¢

282.3¢

33.1



 



Dividend per share

152.3¢

138.4¢

10.0



 



Average US dollar to sterling exchange rate

$1: £0.80

$1: £0.81

(1.2)

 

 

a.     Re-presented for the adoption of IFRS 17 'Insurance Contracts' and to combine System Fund and reimbursables (see 'New accounting standards and other presentational changes').

b.     Definitions for non-GAAP measures can be found in the 'Key performance measures and non-GAAP measures' section along with reconciliations of these measures to the most directly comparable line items within the Financial Statements.

c.    Percentage change considered not meaningful, such as where a positive balance in the latest period is comparable to a negative or zero balance in the prior period.

d.    Adjusted earnings as used within adjusted earnings per share, a non-GAAP measure.

                                                                                                                                         

Revenue

Trading improved significantly in the first quarter of 2023, as travel in the comparative period of 2022 was impacted by the Omicron variant of Covid-19. From April, the comparatives became subsequently tougher as government-mandated travel restrictions eased in the prior year. Leisure demand in the Americas and EMEAA saw continued strength, supported by improving corporate and group bookings. Greater China rebounded significantly, with RevPARa exceeding pre-pandemic levels in the third quarter, which the Americas and Europe achieved in 2022. By the fourth quarter, average daily rate was 15% above pre-pandemic highs and occupancy had recovered to within 1%pt of 2019 levels.

 

Group comparable RevPAR improved year-on-year by 33.0% in the first quarter, 17.1% in the second quarter, 10.5% in the third quarter, 7.6% in the fourth quarter and 16.1% for the full year. When compared to the pre-pandemic levels of 2019, Group comparable RevPAR increased 6.8% in the first quarter and 9.9% in the second quarter, 12.8% in the third quarter and 12.7% in the fourth quarter, with the full year 10.9% ahead of 2019.

 

Our other key driver of revenue, net system size, increased by 3.8% year-on-year to 946,203 rooms.

 

Total revenue increased by $732m (18.8%) to $4,624m, including a $411m increase in System Fund and reimbursable revenues. Revenue from reportable segmentsa increased by $321m (17.4%) to $2,164m, driven by the improved trading conditions. Underlying revenuea increased by $347m to $2,164m, with underlying fee revenuea increasing by $249m. Owned, leased and managed lease revenue increased by $77m.

 

Operating profit and margin

Operating profit improved by $438m from $628m to $1,066m, including a $123m increase in operating exceptional items, from a $95m charge in 2022 to a $28m income in 2023, and a $124m increase in the reported System Fund and reimbursable result, from a $105m loss in 2022 to a $19m profit in 2023.

 

Operating profit from reportable segmentsa increased by $191m (23.1%) to $1,019m, with fee business operating profit increasing by $187m (23.2%) to $992m, due to the improvement in trading which drove a $65m increase in incentive management fees to $168m. Owned, leased and managed lease operating profit improved from $19m to $29m. Underlying operating profita increased by $201m (24.6%) to $1,019m.

 

Fee margina increased by 3.4%pts over the prior year to 59.3% benefitting from the improvement in trading.

 

The impact of the movement in average USD exchange rates for 2022 compared to 2023 netted to a $2m impact on operating profit from reportable segmentsa when calculated as restating 2022 figures at 2023 exchange rates, but negatively impacted operating profit from reportable segmentsa by $13m when applying 2022 rates to 2023 figures.

 

If the average exchange rate during January 2024 had existed throughout 2023, the 2023 operating profit from reportable segmentsa would have been $4m lower.

 

System Fund and reimbursable result

The Group operates a System Fund to collect and administer cash assessments from hotel owners for specified purposes of use including marketing, reservations and the Group's loyalty programme, IHG One Rewards. The System Fund also benefits from proceeds from the sale of loyalty points under third-party co-branding arrangements. The Fund is not managed to generate a surplus or deficit for IHG over the longer term, but is managed for the benefit of hotels in the IHG system with the objective of driving revenues for the hotels in the system.

 

The growth in the IHG One Rewards programme means that, although assessments are received from hotels up front when a member earns points, more revenue is deferred each year than is recognised in the System Fund. This can lead to accounting losses in the System Fund each year as the deferred revenue balance grows which do not necessarily reflect the Fund's cash position and the Group's capacity to invest.

 

Reimbursable revenues represent reimbursements of expenses incurred on behalf of managed and franchised properties and relate, predominantly, to payroll costs at managed properties where IHG is the employer. As IHG record reimbursable expenses based upon costs incurred with no added mark up, this revenue and related expenses have no impact on either operating profit or net profit for the year.

 

In the year to 31 December 2023, System Fund and reimbursable revenues increased $411m (20.1%) to $2,460m, driven by the continued strength in travel demand, the strong performance of the IHG One Rewards programme since the relaunch in the first half of last year.

 

The reported System Fund and reimbursable result improved to a $19m profit from a $105m loss, primarily due to the continued strength in travel demand on revenues, partially offset by increased investments in media as well as revenue-driving channels and activities.

 



 

a.     Definitions for non-GAAP measures can be found in the 'Key performance measures and non-GAAP measures' section along with reconciliations of these measures to the most directly comparable line items within the Financial Statements.


Operating exceptional items

Operating exceptional items of $28m comprise the Group's $18m share of profits from the InterContinental New York Barclay associate due to an increase in the fair value of the hotel which resulted in the reversal of an $18m liability recognised in 2022 and $10m other operating income relating to amounts receivable from the Group's insurer under its business interruption policy for certain owned, leased and managed lease hotels due to Covid-19. Further information on exceptional items can be found in note 5 to the Group Financial Statements.

 

Net financial expenses

Net financial expenses decreased to $52m from $96m, including $35m in foreign exchange gains. Adjusted interesta, which excludes exceptional finance expenses and foreign exchange gains/losses and adds back interest attributable to the System Fund, increased by $9m to an expense of $131m. The increase in adjusted interesta was primarily driven by an increase in interest attributable to the System Fund of $28m due to increased base rates, offset by an increase in financial income of $17m.  

 

Financial expenses include $78m (2022: $82m) of total interest costs on public bonds, which are fixed rate debt. Interest expense on lease liabilities was $29m (2022: $29m).

 

Fair value gains and losses on contingent purchase consideration

Contingent purchase consideration arose on the acquisition of Regent. The net loss of $4m (2022: $8m gain) is principally due to an unfavourable movement in observable US corporate bond rates. The total contingent purchase consideration liability at 31 December 2023 is $69m (31 December 2022: $65m).

 

Taxation

The adjusted taxa rate for 2023 was 28% (2022: 27%). Taxation within exceptional items totalled a charge of $7m (2022: credit of $26m) and relates to the tax impacts of the operating exceptional items.  Tax paid in 2023 totalled $243m (2022: $211m).  Further information on tax can be found in note 6 to the Group Financial Statements.

 

Earnings per share

The Group's basic earnings per ordinary share is 443.8¢ (2022: 207.2¢). Adjusted earnings per ordinary sharea increased by 93.4¢ to 375.7¢.

 

Dividends and shareholder returns

The Board is proposing a final dividend of 104.0¢ in respect of 2023, which is growth of 10% on 2022. With the interim dividend of 48.3¢ paid in October 2023, the total dividend for the year would therefore be 152.3¢, representing an increase of 10%. The ex-dividend date is Thursday 4 April 2024 and the record date is Friday 5 April 2024. The corresponding dividend amount in Pence Sterling per ordinary share will be announced on Thursday 25 April 2024, calculated based on the average of the market exchange rates for the three working days commencing 22 April 2024. Subject to shareholder approval at the AGM on Friday 3 May 2024, the dividend will be paid on Tuesday 14 May 2024. A Dividend Reinvestment Plan ("DRIP") is provided by Equiniti Financial Services Limited. The DRIP enables the Company's shareholders to elect to have their cash dividend payments used to purchase the Company's shares. More information can be found at www.shareview.co.uk/info/drip.

 

Dividend payments in 2023 have returned close to $250m to IHG's shareholders. Additional surplus capital was returned to shareholders through a $750m share buyback programme that concluded on 29 December 2023. This repurchased 10,643,334 shares at an average price of £55.88 per share and reduced the total number of voting rights in the Company by 6.1%.

 

The Board has announced a further share buyback programme to return an additional $800m to shareholders in 2024.

 

 

a.     Definitions for non-GAAP measures can be found in the 'Key performance measures and non-GAAP measures' section along with reconciliations of these measures to the most directly comparable line items within the Financial Statements.



 

Summary of cash flow, working capital, net debt and liquidity

 

Adjusted EBITDAa reconciliation

 

12 months ended 31 December

 


2023      

2022      


   $m

 

   $m

 

 


Cash flow from operations

 1,219

  961

Cash flows relating to exceptional items

29

    43

Impairment reversal/(loss) on financial assets

1

    (5)

Other non-cash adjustments to operating profit

(60)

  (61)

System Fund and reimbursable result

(19)

105

System Fund depreciation and amortisation

(83)

  (86)

Other non-cash adjustments to System Fund result

(23)

  (24)

Working capital and other adjustments

(79)

  (101)

Capital expenditure: contract acquisition costs (key money),

net of repayments

101

   64


  ________   

  _____   

Adjusted EBITDAa

   1,086

   896

 

____

___





 

 

 

CASH FLOW SUMMARY

12 months ended 31 December

 

 

2023

2022

$m

 

$m

$m

change

 

 



Adjusted EBITDAa

1,086

896

190


 



Working capital and other adjustments

79

101


Impairment (reversal)/loss on financial assets

(1)

5


Other non-cash adjustments to operating profit

60

61


System Fund and reimbursable result

19

(105)


Non-cash adjustments to System Fund result

106

110


Capital expenditure: contract acquisition costs (key money),

net of repayments

(101)

(64)


Capital expenditure: maintenance

(38)

(44)


Cash flows relating to exceptional items

(29)

(43)


Net interest paid

(83)

(104)


Tax paid

(243)

(211)


Principal element of lease payments

(28)

(36)


Purchase of own shares by employee share trusts

(8)

(1)



____

____

____

Adjusted free cash flowa

819

565

254


 



Capital expenditure: gross recyclable investments

(61)

(15)


Capital expenditure: gross System Fund capital investments

(46)

(35)


Disposals and repayments, including other financial assets

8

16


Repurchase of shares, including transaction costs

(790)

(482)


Dividends paid to shareholders

(245)

(233)


Dividends paid to non-controlling interest

(3)

-



____

____

____

Net cash flow before other net debta movements

(318)

(184)

(134)


 



Add back principal element of lease repayments

28

36


Exchange and other non-cash adjustments

(131)

178



____

____

____

(Increase)/decrease in net debta

(421)

30

(451)

Net debta at beginning of the year

(1,851)

(1,881)


Net debta at end of the year

(2,272)

(1,851)

(421)

 

 

______

______

____

a.     Definitions for non-GAAP measures can be found in the 'Key performance measures and non-GAAP measures' section.

 



 

Cash flow from operations

For the year ended 31 December 2023, cash flow from operations was $1,219m, an increase of $258m on the previous year, primarily reflecting the increase in operating profit.

 

Cash flow from operations is the principal source of cash used to fund interest and tax payments, capital expenditure, ordinary dividend payments and additional returns of capital of the Group.

 

Adjusted free cash flowa

Adjusted free cash flowa was an inflow of $819m, an increase of $254m on the prior year. Adjusted EBITDAa increased by $190m and the System Fund and reimbursable result improved by $124m due to stronger trading. Net interest paid decreased by $21m primarily due to an increase in interest received of $14m. These were partly offset by a $22m lower working capital and other adjustments cash inflow, an increase in contract acquisition (key money) costs net of repayments of $37m, and $32m higher tax payments. Working capital and other adjustments includes $123m of cash inflow related to deferred revenue, driven primarily by the loyalty programme. Exceptional cash costs in the year of $29m includes payments relating to commercial litigation and disputes; in the prior year, the cost of ceasing operations in Russia was also included.

 

Net and gross capital expenditure

Net capital expenditurea was $157m (2022: $59m) and gross capital expenditurea was $253m (2022: $161m). Gross capital expenditurea comprised: $146m maintenance capex and key money; $61m gross recyclable investments; and $46m System Fund capital investments. Net capital expenditurea includes the offset from $8m proceeds from other financial assets, $7m key money repayments and $81m System Fund depreciation and amortisation.

 

Net debta

Net debta increased by $421m from $1,851m at 31 December 2022 to $2,272m at 31 December 2023. There were $1,035m of payments related to ordinary dividends and the share buyback programmes during the year. The change in net debta includes adverse net foreign exchange impacts of $105m driven by translation of the Group's sterling bond debt and $26m of other non-cash adjustments.

 

Balance Sheet


2023

2022

 


$m

$m

 

Goodwill and other intangible assets

1,099

1,144

 

Other non-current assets

1,585

1,394

 

Cash and cash equivalents

1,322

976

 

Other current assets

807

702

 


_______

______

Total assets

4,813

4,216

 

 

 


Loans and other borrowings

(3,166)

(2,396)

 

Other current liabilities

(1,591)

(1,489)

 

Other non-current liabilities

(2,002)

(1,939)

 

 

________

_________

Total liabilities

(6,759)

(5,824)

 

 

________

________

Net liabilities

(1,946)

(1,608)

 

 

Net liabilities

The Group had net liabilities of $1,946m at December 2023 ($1,608m at 31 December 2022). In accordance with accounting standards, the Group's internally developed brands are not recorded on the Group's balance sheet, and its asset-light business model means that most properties from which income is derived are not owned. This does not have an impact on the ability of the Group to raise external funding or the dividend capacity of the Group.

 

Goodwill and other intangible assets

Goodwill and other intangible assets total $1,099m. This was a decrease of $45m compared to the prior year driven by amortisation of software assets. Goodwill and brands have a total net book value of $775m as at 31 December 2023 ($774m as at 31 December 2022). Brands relate to the acquisitions of Kimpton, Regent and Six Senses. They are each considered to have an indefinite life given their strong brand awareness and reputation, and management's commitment to continued investment in their growth. Goodwill and brands are allocated to cash generating units (CGUs) and they are tested annually for impairment, with no impairment recognised in 2023 given the recoverable amounts of the CGUs exceeded their carrying value. The movement in the year is due to exchange rates.

 

The remaining balance of intangible assets primarily relates to software ($297m).

 

a.                    Definitions for non-GAAP measures can be found in the 'Key performance measures and non-GAAP measures' section along with reconciliations of these measures to the most directly comparable line items within the Financial Statements.

 

Working capital

Trade receivables increased by $87m, from $493m at 31 December 2022 to $580m, primarily due to improved trading in the last quarter of 2023 compared to the last quarter of 2022. Current trade and other payables increased by $14m, primarily due to $13m deferred consideration moving from non-current payables in 2023. Deferred revenue increased by $124m, driven by an increase in the future redeemable points balance related to the loyalty programme.

 

Sources of liquidity

As at 31 December 2023, the Group had total liquidity of $2,572m (31 December 2022: $2,224m), comprising $1,350m of undrawn bank facilities and $1,222m of cash and cash equivalents (net of overdrafts and restricted cash).  The change in total liquidity from December 2022 of $348m is primarily due to a new bond issuance of $657m, offset by other net cash outflows of $318m.

 

In November 2023, the Group issued a €600m 4.375% bond repayable in November 2029. Currency swaps were transacted at the same time as the bond was issued in order to swap the proceeds and interest flows to US Dollars. The currency swaps fix the bond debt at $657m, with interest payable semi-annually at 5.97%.

 

The Group currently has $3,122m of sterling and euro bonds outstanding. The bonds mature in October 2024 (€500m), August 2025 (£300m), August 2026 (£350m), May 2027 (€500m), October 2028 (£400m) and November 2029 (€600m). There are currency swaps in place on the euro bonds, fixing the October 2024 bond at £454m, the May 2027 bond at £436m and the November 2029 bond at $657m.  The Group currently has senior unsecured long-term credit ratings of BBB from S&P and Baa2 from Moody's.

 

The Group is further financed by a $1.35bn syndicated bank revolving credit facility (RCF).  A one-year extension option was exercised during the year and the facility now matures in 2028. There is a one-year extension option remaining at the lender's discretion. There are two financial covenants: interest cover and leverage ratio. Covenants are tested at half year and full year on a trailing 12-month basis. The interest cover covenant requires a ratio of Covenant EBITDA to Covenant interest payable above 3.5:1 and the leverage ratio requires Covenant net debt to Covenant EBITDA below 4.0:1. At 31 December 2023, the leverage ratio was 2.14 and the interest cover ratio was 12.34. See note 10 to the Group Financial Statements for further information. The RCF was undrawn at 31 December 2023.

 

The Group is in compliance with all of the applicable financial covenants in its loan documents, none of which are expected to present a material restriction on funding in the near future.

 

It is management's opinion that the available facilities are sufficient for the Group's present liquidity requirements.

 



 

Additional revenue, global system size and pipeline analysis

 

 

Disaggregation of total gross revenue in IHG's System

Total gross revenuea provides a measure of the overall strength of the Group's brands. It comprises total rooms revenue from franchised hotels and total hotel revenue from managed hotels and from owned, leased and managed lease hotels and excludes revenue from the System Fund and reimbursement of costs. Other than owned, leased and managed lease hotels, total gross revenue is not revenue attributable to IHG as it is derived from hotels owned by third parties.

 


12 months ended 31 December

 





2023

2022

%

 

$bn

$bn

Changeb

Analysed by brand




InterContinental

5.1

4.0

26.6

Kimpton

1.3

1.2

10.0

Hotel Indigo

0.9

0.7

28.2

Crowne Plaza

3.7

3.0

23.9

Holiday Inn Express

9.2

8.3

11.5

Holiday Inn

6.0

5.1

16.9

Staybridge Suites

1.2

1.2

6.4

Candlewood Suites

0.9

0.8

3.7

Otherc

3.3

1.5

121.5


____

____

____

Total

31.6

25.8

22.6


____

____

____


 



Analysed by ownership type

 



Franchisedd (revenue not attributable to IHG)

20.0

16.7

19.6

Managed (revenue not attributable to IHG)

11.1

8.7

28.4

Owned, leased and managed lease

(revenue recognised in Group income statement)

 

0.5

0.4

18.8


____

____

____

Total

31.6

25.8

22.6


____

____

____






 

  Total gross revenue in IHG's system increased by 22.6% (23.4% increase at constant currency) to $31.6bn, driven by improved trading conditions and growth in the number of hotels in our system.

 

 

a.                    Definitions for the key performance measures can be found in the 'Key performance measures and non-GAAP measures' section along with reconciliations of these measures to the most directly comparable line items within the Group Financial Statements.

b.                    Year-on-year percentage movement calculated from source figures.

c.                    Includes Holiday Inn Club Vacations.

d.                    Includes exclusive partner hotels.

 



 


RevPARa movement summary at constant exchange rates (CER)

 


Full Year 2023 vs 2022

Full Year 2023 vs 2019


RevPAR

ADR

Occupancy

RevPAR

ADR

Occupancy

Group

16.1%

5.1%

6.4%pts

10.9%

12.7%

(1.1)%pts

Americas

7.0%

4.6%

1.5%pts

13.0%

12.8%

0.1%pts

EMEAA

23.7%

9.8%

7.9%pts

15.4%

21.0%

(3.4)%pts

G. China

71.7%

18.0%

19.1%pts

0.7%

0.6%

0.1%pts

 


Q4 2023 vs 2022

Q4 2023 vs 2019


RevPAR

ADR

Occupancy

RevPAR

ADR

Occupancy

Group

7.6%

2.4%

3.2%pts

12.7%

14.7%

(1.2)%pts

Americas

1.5%

3.1%

(1.0)%pts

14.0%

14.1%

(0.1)%pts

EMEAA

7.0%

3.7%

2.2%pts

18.5%

22.4%

(2.4)%pts

G. China

72.0%

21.1%

17.6%pts

(0.6)%

3.3%

(2.4)%pts

 

 

RevPARa movement at CER vs actual exchange rates (AER)

 


Full Year 2023 vs 2022

Full Year 2023 vs 2019


CER (as above)

AER

Difference

CER (as above)

AER

Difference

Group

16.1%

15.7%

(0.4)%pts

10.9%

8.1%

(2.8)%pts

Americas

7.0%

7.1%

0.1%pts

13.0%

12.5%

(0.5)%pts

EMEAA

23.7%

23.7%

0.0%pts

15.4%

7.6%

(7.8)%pts

G. China

71.7%

63.9%

(7.8)%pts

0.7%

(1.5)%

(2.2)%pts

 


Q4 2023 vs 2022

Q4 2023 vs 2019


CER (as above)

AER

Difference

CER (as above)

AER

Difference

Group

7.6%

8.0%

0.4%pts

12.7%

9.1%

(3.6)%pts

Americas

1.5%

1.5%

0.0%pts

14.0%

13.3%

(0.7)%pts

EMEAA

7.0%

8.8%

1.8%pts

18.5%

9.3%

(9.2)%pts

G. China

72.0%

69.7%

(2.3)%pts

(0.6)%

(2.9)%

(2.3)%pts

 

 

Monthly RevPARa (CER)

 

2023 vs 2022

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Group

40.8%

33.5%

27.2%

21.7%

17.0%

13.3%

9.5%

10.4%

11.6%

8.7%

7.2%

6.6%

Americas

24.5%

18.3%

13.8%

5.9%

6.9%

4.7%

2.8%

3.9%

5.7%

1.8%

2.4%

0.0%

EMEAA

84.0%

71.9%

44.5%

36.7%

24.2%

22.7%

16.1%

16.1%

15.7%

10.1%

5.9%

5.0%

G. China

53.3%

54.2%

125.2%

171.4%

106.9%

68.4%

40.5%

38.5%

54.2%

80.8%

59.9%

75.7%

 

2023 vs 2019

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Group

4.2%

6.7%

9.2%

9.5%

9.3%

10.9%

12.8%

11.1%

14.5%

11.0%

11.0%

16.6%

Americas

8.8%

11.0%

13.1%

11.5%

11.8%

13.0%

12.5%

10.9%

18.2%

13.1%

13.1%

16.1%

EMEAA

8.2%

7.7%

13.0%

12.6%

15.6%

16.7%

19.0%

17.0%

16.6%

16.8%

15.5%

23.7%

G. China

(16.6)%

(3.8)%

(6.6)%

5.0%

(6.4)%

(0.1)%

14.0%

9.3%

3.3%

(4.5)%

(3.3)%

6.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

a.     RevPAR (revenue per available room), ADR (average daily rate) and occupancy are on a comparable basis, based on comparability as at 31 December 2023 and include hotels that have traded in all months in both the current and the prior year. This same group of hotels is also used to compare RevPAR performance for 2023 vs 2019. The principle exclusions in deriving these measures are new openings, properties under major refurbishments and removals. See 'Key performance measures and non-GAAP measures' section for further information on the definition of RevPAR.

 


            Hotels

 

          Rooms

 

Global hotel and room count

 

Change over


 

Change over

 

2023

2022


2023

2022

 

31 December

31 December


31 December

31 December

Analysed by brand







Six Senses

             25

6


1,761

395

Regent

10

1


3,087

59


InterContinental

222

15


73,500

3,694


Vignette Collection

11

8


2,283

1,704


Kimpton

78

2


13,721

413


Hotel Indigo

153

10


20,218

1,764


voco

62

17


15,507

5,083


HUALUXE

20

(1)


5,529

(454)


Crowne Plaza

408

5


112,232

1,813


EVEN Hotels

26

4


3,931

751


Holiday Inn Express

3,171

80


336,317

9,415


Holiday Inn

1,202

4


215,910

351

Garner

2

2


158

158

avid hotels

67

8


6,027

674


Atwell Suites

2

-


186

-


Staybridge Suites

325

11


35,320

1,359


Holiday Inn Club Vacations

30

2


9,526

704


Candlewood Suites

376

8


33,497

744


Iberostar Beachfront Resorts

49

16


17,600

5,198


Othera

124

1


39,893

751



 _____

 _____


 _______

 _______

Total

6,363

199


946,203

34,576



 _____

 _____


 _______

 _______

Analysed by ownership type







Franchisedb

5,356

154


680,601

24,170


Managed

990

44


261,371

10,394


Owned, leased and managed lease

17

1


4,231

12



 _____

 _____


 _______

 ______

Total

6,363

199


946,203

34,576



 _____

 ____


 _______

 ______



 



 


 

a.                    Includes eight open hotels that will be re-branded to voco and five open hotels that will be re-branded to Vignette Collection.

b.                    Includes exclusive partner hotels.  

 


 


         Hotels

 

           Rooms

 

Global Pipeline

 

Change over


 

Change over

 

2023

2022


2023

2022

 

31 December

31 December


31 December

31 December

Analysed by brand







Six Senses

42

4


3,057

426

Regent

11

1


2,442

132


InterContinental

100

10


25,271

2,690


Vignette Collection

18

11


2,056

1,456


Kimpton

54

13


10,761

2,318


Hotel Indigo

132

13


20,939

1,088


voco

74

35


12,741

2,512


HUALUXE

25

4


6,343

993


Crowne Plaza

126

15


32,442

3,492


EVEN Hotels

33

2


5,383

104


Holiday Inn Express

632

15


78,019

1,284


Holiday Inn

246

17


45,901

1,811

Garner

5

5


332

332

avid hotels

141

(4)


11,577

(808)


Atwell Suites

41

11


4,124

1,123


Staybridge Suites

164

2


18,185

190


Holiday Inn Club Vacations

2

1


832

680


Candlewood Suites

151

27


11,957

1,689


Iberostar Beachfront Resorts

5

(10)


2,240

(3,825)


Other

14

(15)


2,352

(2,201)



 _____

 _____


 _______

 ______

Total

2,016

157


296,954

15,486



 _____

 _____


 _______

 ______

Analysed by ownership type







Franchiseda

1,426

113


174,084

10,773


Managed

589

44


122,715

4,713

Owned, leased and managed lease

1

-


155

-



 _____

 _____


 _______

 ______

Total

2,016

157


296,954

15,486



 _____

 _____


 _______

 ______

 

a.     Includes exclusive partner hotels.

 

Net system size increased by 3.8% year-on year to 946.2k rooms. During the year, 47.9k rooms (275 hotels) opened, compared to 49.4k rooms (269 hotels) in the prior year which included 12.4k rooms (33 hotels) under the Iberostar Beachfront Resorts brand. In 2023, 13.3k rooms (76 hotels) left the IHG system, compared to 18.1k rooms (96 hotels) in 2022 which included 6.5k rooms (28 hotels) as part of ceasing operations in Russia. The removals rate of 1.5% was in line with our historical underlying average.

 

At the end of 2023, the global pipeline totalled 297.0k rooms (2,016 hotels), an increase of 15.5k rooms (157 hotels), as signings outpaced openings and terminations. The IHG pipeline represents hotels where a contract has been signed and the appropriate fees paid.

 

During the year, 79.2k rooms (556 hotels) were signed, compared to 80.3k rooms (467 hotels) in the prior year which included 18.5k rooms (48 hotels) under the Iberostar Beachfront Resorts brand. Signings in 2023 included 30.1k rooms (220 hotels) for the Holiday Inn Brand Family, 0.8k rooms (13 hotels) under the Six Senses brand and 0.5k rooms (seven hotels) as part of our newly launched brand, Garner. Conversions (excluding Iberostar) represented 36% of signings in 2023.

 

Regional performance reviews, system size and pipeline analysis

 

 

AMERICAS

 

            
            12 months ended 31 December

 

Americas results

 



 

 

2023

2022

%

 

 

$m

$m

change

 

Revenue from the reportable segmenta




 


Fee business

957

879

8.9

 


Owned, leased and managed lease

148

126

17.5

 


____

____

____

 



1,105

1,005

10.0

 


____

____

____

 

Operating profit from the reportable segmenta




 


Fee business

787

741

6.2

 


Owned, leased and managed lease

28

20

40.0

 


____

____

____

 



815

761

7.1

 

Operating exceptional items


27

(46)

NMb

 


____

____

____

 

Operating profit

842

715

17.8

 


____

____

____

 

 

 

Americas Comparable RevPARa movement on previous year

 

12 months ended

31 December 2023

Fee business

 


InterContinental

12.0%


Kimpton

8.9%


Hotel Indigo

4.9%


Crowne Plaza

11.2%


EVEN Hotels

8.5%


Holiday Inn Express

6.4%


Holiday Inn

7.2%


avid hotels

8.6%


Staybridge Suites

6.1%


Candlewood Suites

2.4%


All brands

7.0%

 

Owned, leased and managed lease

 


All brands

16.8%










 

Comparable RevPARa was up +7.0% vs 2022 (up +13.0% vs 2019) with occupancy of 68.2% up +1.5%pts and rate +4.6% higher. Trading in the first quarter of 2022 saw travel volumes impacted as a result of the Omicron variant of Covid-19, with comparatives becoming subsequently tougher from April onwards. Q4 RevPARa was up +1.5% vs 2022 (up +14.0% vs 2019), with occupancy of 63.9% down -1.0%pts but rate +3.1% higher. US Q4 RevPARa was up +0.1% and for the full year was up +5.4% (up +11.2% and +11.1%, respectively, vs 2019). Leisure demand had another strong year, and there was further return of groups activity and more business travel, the latter achieving revenues ahead of pre-Covid levels. This also led to urban locations being back above 2019 levels by the end of the year.

 

Revenue from the reportable segmenta increased by $100m (+10%) to $1,105m. Operating profit increased by $127m to $842m, driven by the increase in revenue, together with a $73m favourable change in exceptional income (further information on exceptional items can be found in note 5 to the Group Financial Statements). Operating profit from the reportable segmenta increased by $54m (+7%) to $815m (an increase of $115m or +16% vs 2019).

 

Fee business revenuea increased by $78m (+9%) to $957m, with comparable RevPARa up +7.0%. Fee business operating profita increased by $46m (+6%) to $787m, driven by the improvement in trading. Fee margina was 82.2%, compared to 84.3% in 2022 and 77.7% in 2019; the year-on-year reduction predominantly reflects cost investment in growth initiatives, including the launch of Garner. There were $21m of incentive management fees earned (2022: $18m; 2019: $13m).

 

Owned, leased and managed lease revenue increased by $22m to $148m, with comparable RevPARa up +16.8%, leading to an owned, leased and managed leased operating profit of $28m compared to $20m in the prior year.

 

 

a.     Definitions for non-GAAP measures can be found in the 'Key performance measures and non-GAAP measures' section along with reconciliations of these measures to the most directly comparable line items within the Group Financial Statements.



 

b.     Percentage change considered not meaningful, such as where a positive balance in the latest period is comparable to a negative or zero balance in the prior period.

 

 

           Hotels

 

          Rooms

 

Americas hotel and room count

 

Change over


 

Change over

 

2023

2022


2023

2022

 

31 December

31 December


31 December

31 December

Analysed by brand







Six Senses

1

1


10

10


InterContinental

43

1


15,674

133


Vignette Collection

1

1


355

355


Kimpton

63

1


10,895

291


Hotel Indigo

72

(1)


9,578

(169)


voco

12

4


1,299

376


Crowne Plaza

106

(4)


27,142

(1,192)


EVEN Hotels

19

-


2,744

1


Holiday Inn Express

2,509

37


228,753

3,669


Holiday Inn

688

(8)


111,754

(1,613)

Garner

2

2


158

158

avid hotels

67

8


6,027

674


Atwell Suites

2

-


186

-


Staybridge Suites

303

7


31,675

646


Holiday Inn Club Vacations

30

2


9,526

704


Candlewood Suites

376

8


33,497

744


Iberostar Beachfront Resorts

23

-


9,027

-


Othera

97

(1)


21,294

(689)



 _____

 ____


 _______

 _____

Total

4,414

58


519,594

4,098



 _____

 ____


 _______

 _____

Analysed by ownership type







Franchisedb

4,242

57


482,948

4,500


Managed

168

-


35,309

(412)

Owned, leased and managed lease

4

1


1,337

10



 _____

 ____


 _______

 ______

Total

4,414

58


519,594

4,098



 _____

 ____


 _______

 ______

 

 

a.     Includes four open hotels that will be re-branded to voco.

b.     Includes exclusive partner hotels.

 

 


 

 

 

 

 


            Hotels

 

             Rooms

 

 

 

Americas Pipeline

 

Change over


 

Change over

 

 

2023

2022


2023

2022

 

 

31 December

31 December


31 December

31 December

 

Analysed by brand






 


Six Senses

8

2


474

151

 


Regent

1

1


167

167

 


InterContinental

12

2


2,708

305

 


Vignette Collection

3

1


261

86

 


Kimpton

28

4


5,518

935

 


Hotel Indigo

31

5


4,337

690

 


voco

12

8


1,383

636

 


Crowne Plaza

9

2


2,210

892

 


EVEN Hotels

11

1


1,239

68

 


Holiday Inn Express

349

9


33,463

571

 


Holiday Inn

72

7


8,639

669

 


Garner

5

5


332

332

 


avid hotels

141

(4)


11,577

(808)

 


Atwell Suites

41

11


4,124

1,123

 


Staybridge Suites

145

3


15,351

428

 


Holiday Inn Club Vacations

2

1


832

680

 


Candlewood Suites

151

27


11,957

1,689

 


Iberostar Beachfront Resorts

5

-


2,240

(151)

 


Other

14

1


2,352

382

 



 _____

 ____


 ______

 _____

 

Total

1,040

86


109,164

8,845

 



 ______

_____


 _______

 ______

 

Analysed by ownership type






 


Franchiseda

994

78


101,989

7,731

 


Managed

46

8


7,175

1,114

 



 _____

 ____


 ______

 ______

 

Total

1,040

86


109,164

8,845

 



 _____

 ____


 ______

 ______












a.     Includes exclusive partner hotels.

Gross system size growth was +2.0% year-on-year with the opening of 10.4k rooms (101 hotels) in the Americas region, of which 4.2k rooms (40 hotels) opened in Q4. Openings for the year included 57 hotels across the Holiday Inn Brand Family and a further 20 properties across the Staybridge Suites and Candlewood Suites brands. The first two Garner conversions were achieved by the end of the year, having become franchise-ready in the US in September 2023. The pace of openings for avid hotels also accelerated with eight added, and there are a further 18 currently under construction. The voco brand is rolling out further in the region, with four openings, to now have a portfolio of 12 properties, while new openings for Crowne Plaza included Saint John Harbour View, one of nine openings in Canada in 2023 as presence across our brands builds in that market. There were eight openings across our Luxury & Lifestyle brands including the first Vignette Collection property for the region, InterContinental Dominica Cabrits Resort & Spa, and three Kimpton properties (The Forum in Charlottesville, Grand Roatan Resort & Spa in the Bay Islands, Honduras, and Kimpton Hotel Theta in New York). There were 6.3k rooms (43 hotels) removed in the year, taking the removal rate to 1.2% and closer to the historical underlying average of 1.5%.

Net system size grew +0.8% year-on-year. There was no impact from Iberostar Beachfront Resorts on net system growth in 2023, as all 23 properties in the region had already joined the IHG system by the end of 2022.

There were 28.3k rooms (271 hotels) signed during the year, including 9.9k rooms (90 hotels) during Q4. During the year there were 100 signings across Holiday Inn and Holiday Inn Express, and a conversion portfolio including three beachfront resorts in Mexico added by Holiday Inn Club Vacations which marked the first for the brand outside of the US. There were 88 signings across our other Suites brands, including 16 for Atwell Suites as this brand accelerates development pace. 23 signings for avid hotels included further examples of dual-branded properties with Candlewood Suites. Across our Luxury & Lifestyle brands, 29 properties were signed, which was 58% more rooms than the prior year. These included Six Senses Napa and Six Senses Xala in Mexico, the first destination in the Americas for the Regent brand at Santa Monica Beach, three for InterContinental (in Ecuador, Mexico and the Turks & Caicos Islands) and a very strong year for Kimpton with eight properties added to its pipeline (five in the US and three resort locations in the wider region). 51, or nearly 20% of signings for the region, were outside of the US, as we strengthen our development activity in Canada, Mexico, Latin America and the Caribbean.

 

The pipeline stands at 109.2k rooms (1,040 hotels), which represents 21% of the current system size in the region.

EMEAA


12 months ended 31 December

EMEAA results

 



 

2023

2022

%

 

$m

$m

change

Revenue from the reportable segmenta





Fee business

354

284

24.6


Owned, leased and managed lease

323

268

20.5


____

____

____



677

552

22.6


____

____

____

Operating profit/(loss) from the reportable segmenta

 




Fee business

214

153

39.9


Owned, leased and managed lease

1

(1)

NMb


____

____

____



215

152

41.4

Operating exceptional items


1

(49)

NMb



____

____

____

Operating profit

216

103

109.7


____

____

____







 

 

EMEAA comparable RevPARa movement on previous year

12 months ended

31 December 2023

Fee business



Six Senses

17.7%


InterContinental

26.0%


Kimpton

47.1%


Hotel Indigo

24.5%


voco

10.5%


Crowne Plaza

23.7%


Holiday Inn Express

21.9%


Holiday Inn

23.4%


Staybridge Suites

12.5%


All brands

23.5%




Owned, leased and managed lease



All brands

31.8%

 

Comparable RevPARa was up +23.7% vs 2022 (up +15.4% vs 2019) with occupancy of 70.4% up +7.9%pts and rate +9.8% higher. Leisure had another very strong year and business travel along with groups activity picked up pace as the post Covid-19 recovery continued. Q4 RevPARa was up +7.0% vs 2022 (up +18.5% vs 2019), with occupancy of 71.5% up +2.2%pts and rate +3.7% higher. The UK, which saw one of the earlier easings of restrictions, saw RevPARa up +14% for the year (up +17% vs 2019) and up +5% in Q4 (up +20% vs 2019). Elsewhere, the variances in performance largely reflected timing of recovery following the easing of travel restrictions, with RevPARa for Q4 in Continental Europe up +8% (up +19% vs 2019), Australia up +7% (up +16% vs 2019), South East Asia & Korea up +8% (+13% vs 2019) and Japan up +20% (+2% vs 2019). RevPARa in the Middle East was down -1% in Q4 (up +24% vs 2019) as the prior comparable period benefitted from the FIFA World Cup held in Qatar, but there was strong growth elsewhere particularly Saudi Arabia and the UAE.

 

Revenue from the reportable segmenta increased by $125m (+23%) to $677m. Operating profit increased by $113m to $216m, driven by the improved trading, together with the non-recurrence of the $49m of operating exceptional charges in the prior year (further information on exceptional items can be found in note 5 to the Group Financial Statements). Operating profit from the reportable segmenta increased by $63m (+41%) to $215m (a decrease of $2m vs 2019).

 

Fee business revenuea increased by $70m (+25%) to $354m, with comparable RevPARa up +23.5%. Fee business operating profita increased by $61m (+40%) to $214m, driven by the improvement in trading. Fee margina was 60.5%, compared to 52.7% in 2022 and 58.6% in 2019. There were $101m of incentive management fees earned (2022: $69m; 2019: $90m).

 

Owned, leased and managed lease revenue increased by $55m to $323m, with comparable RevPAR up +31.8%. As the trading challenges on this largely urban-centred portfolio have eased, a return to a $1m operating profit was achieved compared to the $1m loss in 2022 (or a $3m loss in the comparable period when excluding the results of three UK portfolio hotels and one InterContinental hotel which were disposed of during 2022).

a.                    Definitions for non-GAAP measures can be found in the 'Key performance measures and non-GAAP measures' section along with reconciliations of these measures to the most directly comparable line items within the Financial Statements.



 

b.                    Percentage change considered not meaningful, such as where a positive balance in the latest period is comparable to a negative or zero balance in the prior period.


Hotels

 

   Rooms

 

EMEAA hotel and room count

 

Change over


 

Change over

 

2023

2022


2023

2022

 

31 December

31 December


31 December

31 December

Analysed by brand







Six Senses

23

5


1,621

385

Regent

4

-


1,036

(77)


InterContinental

119

8


34,443

1,582


Vignette Collection

7

4


1,206

627


Kimpton

12

-


2,376

(21)


Hotel Indigo

58

7


7,029

1,296


voco

38

9


11,791

3,865


Crowne Plaza

178

(4)


43,285

(657)


Holiday Inn Express

349

8


51,488

1,613


Holiday Inn

382

8


69,330

1,463


Staybridge Suites

22

4


3,645

713


Iberostar Beachfront Resorts

26

16


8,573

5,198


Othera

19

3


11,444

1,616



 _____

 ____


 _______

 ______

Total

1,237

68


247,267

17,603



 _____

 ____


 _______

 ______

Analysed by ownership type







Franchisedb

839

37


140,830

8,914


Managed

385

31


103,543

8,687

Owned, leased and managed lease

13

-


2,894

2



 _____

 ____


 _______

 ______

Total

1,237

68


247,267

17,603



 _____

 ____


 _______

 ______

 

a.     Includes three open hotels that will be re-branded to voco and five open hotels that will be re-branded to Vignette Collection.



 

b.     Includes exclusive partner hotels.

 




 

Hotels

 

Rooms

 

EMEAA Pipeline

 

Change over


 

Change over

 

2023

2022


2023

2022

 

31 December

31 December


31 December

31 December

Analysed by brand







Six Senses

30

2


2,350

275


Regent

7

1


1,468

100


InterContinental

56

5


13,510

1,714


Vignette Collection

14

9


1,523

1,098


Kimpton

15

7


2,365

831


Hotel Indigo

53

7


8,309

265


voco

51

19


8,907

80


Crowne Plaza

49

9


11,529

1,152


Holiday Inn Express

89

1


13,309

110


Holiday Inn

86

2


16,122

(314)


Staybridge Suites

19

(1)


2,834

(238)


Iberostar Beachfront Resorts

-

(10)


-

(3,674)


Other

-

(16)


-

(2,583)



 ____

 ____


 ______

 ______

Total

469

35


82,226

(1,184)



 ____

 ____


 ______

 ______

Analysed by ownership type







Franchiseda

174

10


24,516

(2,172)


Managed

294

25


57,555

988


Owned, leased and managed lease

1

-


155

-



 ____

 ____


 ______

 ______

Total

469

35


82,226

(1,184)



 ____

 ____


 ______

 ______

 

a.     Includes exclusive partner hotels.

 

Gross system size growth was +9.2% year-on-year with the opening of 21.2k rooms (87 hotels) in the EMEAA region, of which 6.8k rooms (36 hotels) opened in Q4. Openings for the year included 16 further Iberostar Beachfront Resorts that were added as part of the long-term commercial agreement established in November 2022, and 26 openings across the Holiday Inn Brand Family. There were nine voco properties added, and in a particularly strong period of openings for the InterContinental brand there were eight opened that included Jaipur, Bucharest, Durrat Al Riyadh and the InterContinental Rome Ambasciatori Palace in Rome. Six Senses Rome also opened in the year, as did further properties for the brand in the Maldives, Saudi Arabia and Switzerland. The Vignette Collection brand launched in new countries with four openings, and there were five Crowne Plaza and seven Hotel Indigo properties added (with notable openings including Crowne Plaza Kuala Lumpur City Centre and Hotel Indigo Kuala Lumpur on the Park, marking the 150th globally for that brand, and Hotel Indigo Bordeaux Centre Chartrons), while the opening of Staybridge Suites Cannes marked its debut in France. There were 3.6k rooms (19 hotels) removed in the year, resulting in a removal rate of 1.6%.

 

Net system size grew +7.7% year-on-year. Excluding the further 16 Iberostar Beachfront Resorts properties that were added to the system in 2023 (after the first 10 that were added in 2022), net growth would have been +5.4%.

 

There were 24.8k rooms (151 hotels) signed during the year, including 10.0k rooms (63 hotels) during Q4. During the year there were 42 signings across the Holiday Inn Brand Family. As we continue to rapidly expand in Saudi Arabia, there were 14 signings in the country including Regent Riyadh King Abdullah Financial District and Regent Jeddah Corniche which will be an important first for the brand in the Middle East region and follows the flagship 2023 opening for the brand with the Regent Carlton Cannes, France. Across our Luxury & Lifestyle brands, there were 55 properties signed or 9.5k rooms, representing 38% of all signings for the year in the region. Within this there were 12 for Vignette Collection, and in a further reflection of the strength of the brand and our ability to attract conversion properties, there were 27 signings for voco.

 

The pipeline stands at 82.2k rooms (469 hotels), which represents 33% of the current system size in the region.

GREATER CHINA


 

       12 months ended 31 December


 



Greater China results

2023

2022

%

 

$m

$m

change

 




Revenue from the reportable segmenta





Fee business

161

87

85.1



____

____

____



161

87

85.1


____

____

____

Operating profit from the reportable segmenta

 




Fee business

96

23

317.4



____

____

____

Operating profit

96

23

317.4


____

____

____







 

 

Greater China comparable RevPARa movement on previous year

12 months ended

31 December 2023

 

 

Fee business



Regent

110.8%


InterContinental

82.4%


Hotel Indigo

70.3%


HUALUXE

75.6%


Crowne Plaza

69.7%


Holiday Inn Express

60.3%


Holiday Inn

63.8%


All brands

71.7%

 

Comparable RevPARa was up +71.7% vs 2022 (up +0.7% vs 2019) with occupancy of 61.1% up +19.1%pts and rate +18.0% higher. This reflected the excellent rebound in demand since the lifting of travel restrictions in December 2022. Q3 RevPARa, which was particularly strongly driven by domestic leisure trips, was up +43.2% vs 2022 (up +9.3% vs 2019). Q4 RevPARa was up +72.0% vs 2022 due to a comparable period in which the industry was substantially impacted by localised travel restrictions in late 2022; when compared with 2019, Q4 RevPARa slipped back down to ‑0.6%, as in comparison to Q3 the final quarter of the year is more weighted to business demand and this is still experiencing a lag from the more gradual return of international inbound travel. Q4 occupancy was 59.5%, up +17.6%pts on 2022 but down ‑2.4%pts on 2019 levels, whilst rate was +21.1% higher than the prior year and +3.3% higher than 2019. For the year, Tier 1 cities which are more weighted to international travel saw RevPARa still down -11% vs 2019, whilst Tier 2‑4 cities which are more weighted to domestic and leisure demand were up +7%.

 

Revenue from the reportable segmenta increased by $74m (+85%) to $161m. Driven by the improvement in trading, operating profit increased by $73m (+317%) to $96m (an increase of $23m or +32% vs 2019). Fee margina was 59.6%, compared to 26.4% in 2022 and 54.1% in 2019. There were $46m of incentive management fees earned (2022: $16m; 2019: $48m).

 

a.     Definitions for non-GAAP measures can be found in the 'Key performance measures and non-GAAP measures' section along with reconciliations of these measures to the most directly comparable line items within the Financial Statements.

 

 

 



 

 


Hotels

 

Rooms

 

Greater China hotel and room count

 

Change over


 

Change over

 

2023

2022


2023

2022

 

31 December

31 December


31 December

31 December

Analysed by brand







Six Senses

1

-


130

-


Regent

6

1


2,051

136


InterContinental

60

6


23,383

1,979


Vignette Collection

3

3


722

722


Kimpton

3

1


450

143


Hotel Indigo

23

4


3,611

637


voco

12

4


2,417

842


HUALUXE

20

(1)


5,529

(454)


Crowne Plaza

124

13


41,805

3,662


EVEN Hotels

7

4


1,187

750


Holiday Inn Express

313

35


56,076

4,133


Holiday Inn

132

4


34,826

501


Othera

8

(1)


7,155

(176)



 ____

 ____


 ______

 ______

Total

712

73


179,342

12,875



 ____

 ____


 ______

 ______

Analysed by ownership type







Franchised

275

60


56,823

10,756


Managed

437

13


122,519

2,119



 ____

 ____


_______

 ______

Total

712

73


179,342

12,875



 ____

 ____


 _______

 ______

 

a.     Includes one open hotel that will be re-branded to voco.

 


Hotels

 

Rooms

 

Greater China Pipeline

 

Change over


 

Change over

 

2023

2022


2023

2022

 

31 December

31 December


31 December

31 December

Analysed by brand







Six Senses

4

-


233

-


Regent

3

(1)


807

(135)


InterContinental

32

3


9,053

671


Vignette Collection

1

1


272

272


Kimpton

11

2


2,878

552


Hotel Indigo

48

1


8,293

133


voco

11

8


2,451

1,796


HUALUXE

25

4


6,343

993


Crowne Plaza

68

4


18,703

1,448


EVEN Hotels

22

1


4,144

36


Holiday Inn Express

194

5


31,247

603


Holiday Inn

88

8


21,140

1,456



 ____

 ____


 ______

 ____

Total

507

36


105,564

7,825



 ____

 ____


 ______

 ____

Analysed by ownership type







Franchised

258

25


47,579

5,214


Managed

249

11


57,985

2,611



 ____

 ____


 _______

 ______

Total

507

36


105,564

7,825



 ____

 ____


 _______

 ______

 

 

 

Gross system size growth was +9.8% year-on-year with the opening of 16.3k rooms (87 hotels) in the Greater China region, of which 8.2k (41 hotels) opened in a particularly busy final quarter of the year which also saw the milestone of over 700 open hotels reached. Openings over the course of 2023 included 51 for the Holiday Inn Brand Family, including Holiday Inn Chengdu East and Holiday Inn Express Shanghai NECC, and 14 Crowne Plaza properties, including Chengdu Tianfu New Area which took the Crowne Plaza brand's category leading position in the region to 124 hotels. There were four openings for voco and the first three for Vignette Collection (Hangzhou Huaxia Center Hotel, WM Hotel Hong Kong and The Xanadu Guangzhou, each opened within two months of signing) as these brands expand in the region, and which contributed to conversions accounting for 32% of all openings in the year. Across Luxury & Lifestyle brands there were 15 openings, including a further flagship for Regent with Shanghai On The Bund, and six openings for InterContinental including Shenzhen World Exhibition & Convention Center, Changzhou and Wuxi Taihu New City. Other notable openings included EVEN Hotel Zhongshan City Center, which is a new flagship for this brand that now has 7 open in the region and a pipeline for a further 22. There were 3.5k rooms (14 hotels) removed in the year, representing a removal rate of 2.1%. Net system size growth was +7.7% year-on-year.

 

There were 26.1k rooms (134 hotels) signed during the year, including 8.4k rooms (41 hotels) during Q4. During the year there were 59 signings for Holiday Inn Express and 16 for Holiday Inn, growing their pipelines to 194 and 88, respectively. Crowne Plaza had 17 signings, whilst voco achieved a further 12. There were 20 signings across our Luxury & Lifestyle brands; of these, there were seven for InterContinental, including Hangzhou Wulin, Zhengzhou Zhengdong and Haikou West Coast. Our six Luxury & Lifestyle brands grew to represent 20% of both the existing system size and the pipeline in the region.

 

The pipeline stands at 105.6k rooms (507 hotels), which represents 59% of the current system size in the region.

 

 

 

 

Central


12 months ended 31 December


 




2023

2022

%

Central results

$m

$m

change

 




Revenue

221

199

11.1

Gross costs

(328)

(307)

6.8


____

____

____

Operating loss

(107)

(108)

(0.9)


____

____

____

 

 

Central revenue, which is mainly comprised of technology fee income and revenue from insurance activities, increased by $22m (+11.1%) to $221m in 2023, primarily driven by the growth of IHG system size and insurance programme.

 

Gross costs increased by $21m (+6.8%) year-on-year, driven by $12m increase in the insurance programme which was matched by associated revenues and by investment spend to support growth initiatives, including the integration of Iberostar Beachfront Resorts.

 

The resulting $107m operating loss was a decrease of $1m (-0.9%) year-on-year.

 

 



 

 

Key performance measures and non-GAAP measures

 

In addition to performance measures directly observable in the Financial Statements (IFRS measures), certain financial measures are presented when discussing the Group's performance which are not measures of financial performance or liquidity under International Financial Reporting Standards (IFRS). In management's view, these measures provide investors and other stakeholders with an enhanced understanding of IHG's operating performance, profitability, financial strength and funding requirements. These measures do not have standardised meanings under IFRS, and companies do not necessarily calculate these in the same way as each other. As these measures exclude certain items (for example impairment and the costs of individually significant legal cases or commercial disputes) they may be materially different to the measures prescribed by IFRS and may result in a more favourable view of performance. Accordingly, they should be viewed as complementary to, and not as a substitute for, the measures prescribed by IFRS and as included in the Financial Statements.

 

Global revenue per available room (RevPAR) growth

RevPAR is the primary metric used by management to track hotel performance across regions and brands. RevPAR is also a commonly used performance measure in the hotel industry.

 

RevPAR comprises IHG's System rooms revenue divided by the number of room nights available and can be derived from occupancy rate multiplied by average daily rate (ADR). ADR is rooms revenue divided by the number of room nights sold.

 

References to RevPAR, occupancy and ADR are presented on a comparable basis, comprising groupings of hotels that have traded in all months in both the current and comparable year. The principal exclusions in deriving this measure are new hotels (including those acquired), hotels closed for major refurbishment and hotels sold in either of the comparable years.

 

RevPAR and ADR are quoted at a constant US$ exchange rate, in order to allow a better understanding of the comparable year-on-year trading performance excluding distortions created by fluctuations in currency movements.

 

Total gross revenue from hotels in IHG's System

Total gross revenue is revenue not wholly attributable to IHG, however, management believes this measure is meaningful to investors and other stakeholders as it provides a measure of System performance, giving an indication of the strength of IHG's brands and the combined impact of IHG's growth strategy and RevPAR performance.

 

Total gross revenue refers to revenue which IHG has a role in driving and from which IHG derives an income stream.

 

Total gross revenue comprises:

Total rooms revenue from franchised hotels;

Total hotel revenue from managed and exclusive partner hotels including food and beverage, meetings and other revenues, reflecting the value driven by IHG and the base upon which fees are typically earned; and

Total hotel revenue from owned, leased and managed lease hotels.

 

Other than total hotel revenue from owned, leased and managed lease hotels, total gross revenue is not revenue attributable to IHG as these managed, franchised and exclusive partner hotels are owned by third parties.

 

Total gross revenue is used to describe this measure as it aligns with terms used in the Group's management, franchise and exclusive partner agreements and therefore is well understood by owners and other stakeholders.

 

Revenue and operating profit measures

Revenue and operating profit from (1) fee business, (2) owned, leased and managed lease hotels, and (3) insurance activities are described as 'revenue from reportable segments' and 'operating profit from reportable segments', respectively, within note 3 to the Group Financial Statements. These measures are presented insofar as they relate to each of the Group's regions and its Central functions. Management believes revenue and operating profit from reportable segments are meaningful to investors and other stakeholders as they exclude the following elements and reflect how management monitors the business:

System Fund and reimbursables - the System Fund is not managed to generate a surplus or deficit for IHG over the longer term; it is managed for the benefit of the hotels within the IHG System. The System Fund is operated to collect and administer cash assessments from hotel owners for specific purposes of use including marketing, the Guest Reservation System and loyalty programme. There is a cost equal to reimbursable revenues so there is no profit impact. Cost reimbursements are not applicable to all hotels, and growth in these revenues is not reflective of growth in the performance of the Group. As such, management does not include these revenues in their analysis of results.

Exceptional items - these are identified by virtue of their size, nature or incidence with consideration given to consistency of treatment with prior years and between gains and losses. Exceptional items include, but are not restricted to, gains and losses on the disposal of assets, impairment charges and reversals, the costs of individually significant legal cases or commercial disputes, and reorganisation costs. As each item is different in nature and scope, there will be little continuity in the detailed composition and size of the reported amounts which affect performance in successive periods. Separate disclosure of these amounts

 

facilitates the understanding of performance including and excluding such items. Further detail of amounts presented as exceptional is included in note 5 to the Group Financial Statements.


In further discussing the Group's performance in respect of revenue and operating profit, additional non-IFRS measures are used and explained further below:

Underlying revenue;

Underlying operating profit;

Underlying fee revenue; and

Fee margin.

Operating profit measures are, by their nature, before interest and tax. The Group's reported operating profit additionally excludes fair value changes in contingent purchase consideration, which relates to financing of acquisitions. Management believes such measures are useful for investors and other stakeholders when comparing performance across different companies as interest and tax can vary widely across different industries or among companies within the same industry. For example, interest expense can be highly dependent on a company's capital structure, debt levels and credit ratings. In addition, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate.

 

Although management believes these measures are useful to investors and other stakeholders in assessing the Group's ongoing financial performance and provide improved comparability between periods, there are limitations in their use as compared to measures of financial performance under IFRS. As such, they should not be considered in isolation or viewed as a substitute for IFRS measures. In addition, these measures may not necessarily be comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation.

 

Underlying revenue and underlying operating profit

These measures adjust revenue from reportable segments and operating profit from reportable segments, respectively, to exclude revenue and operating profit generated by owned, leased and managed lease hotels which have been disposed, and significant liquidated damages, which are not comparable year-on-year and are not indicative of the Group's ongoing profitability. The revenue and operating profit of current year acquisitions are also excluded as these obscure underlying business results and trends when comparing to the prior year. In addition, in order to remove the impact of fluctuations in foreign exchange, which would distort the comparability of the Group's operating performance, prior year measures are restated at constant currency using current year exchange rates.

 

Management believes these are meaningful to investors and other stakeholders to better understand comparable year-on-year trading and enable assessment of the underlying trends in the Group's financial performance.

 

Underlying fee revenue growth

Underlying fee revenue is used to calculate underlying fee revenue growth. Underlying fee revenue is calculated on the same basis as underlying revenue as described above but for the fee business only and to exclude revenue and operating profit from insurance activities, which are not a core part of the Group's trading operations.

 

Management believes underlying fee revenue is meaningful to investors and other stakeholders as an indicator of IHG's ability to grow the core fee-based business, aligned to IHG's asset-light strategy.

 

Fee margin

Fee margin is presented at actual exchange rates and is a measure of the profit arising from fee revenue. Fee margin is calculated by dividing 'fee operating profit' by 'fee revenue'. Fee revenue and fee operating profit are calculated from revenue from reportable segments and operating profit from reportable segments, as defined above, adjusted to exclude revenue and operating profit from the Group's owned, leased and managed lease hotels as well as from insurance activities and significant liquidated damages.

 

Management believes fee margin is meaningful to investors and other stakeholders as an indicator of the sustainable long-term growth in the profitability of IHG's core fee-based business, as the scale of IHG's operations increases with growth in IHG's system size.

 

Adjusted interest

Adjusted interest is presented before exceptional items and excludes foreign exchange gains/losses primarily related to the Group's internal funding structure and the following items of interest which are recorded within the System Fund:

Interest income is recorded in the System Fund on the outstanding cash balance relating to the IHG loyalty programme. These interest payments are recognised as interest expense for IHG.

Other components of System Fund interest income and expense, including capitalised interest, lease interest expense and interest income on overdue receivables.


Given results related to the System Fund are excluded from adjusted measures used by management, these are excluded from adjusted interest and adjusted earnings per ordinary share (see below).

The exclusion of foreign exchange gains/losses provides greater comparability with covenant interest as calculated under the terms of the Group's revolving credit facility.

 

Management believes adjusted interest is a meaningful measure for investors and other stakeholders as it provides an indication of the comparable year-on-year expense associated with financing the business including the interest on any balance held on behalf of the System Fund.

 

Adjusted tax

Adjusted tax excludes the impact of foreign exchange gains/losses, exceptional items, System Fund and fair value gains/losses on contingent consideration.

 

Foreign exchange gains/losses vary year-on-year depending on the movement in exchange rates, and fair value gains/losses on contingent consideration and exceptional items also vary year-on-year. These can impact the current year's tax charge. The System Fund (including interest and tax) is not managed to a surplus or deficit for IHG over the longer term and is, in general, not subject to tax. Management believes removing these from both profit and tax provides a better view of the Group's underlying tax rate on ordinary operations and aids comparability year-on-year, thus providing a more meaningful understanding of the Group's ongoing tax charge. .

 

The adjusted tax definition has been amended from 2023 to align to the adjustments made to adjusted earnings per share and ensure consistency between measures. The measure has been re-presented for prior years to show consistent presentation.

 

Adjusted earnings per ordinary share

Adjusted earnings per ordinary share adjusts the profit available for equity holders used in the calculation of basic earnings per share to remove the System Fund and reimbursable result, interest attributable to the System Fund and foreign exchange gains/losses as excluded in adjusted interest (above), change in fair value of contingent purchase consideration, exceptional items, and the related tax impacts of such adjustments and exceptional tax.

 

Management believes that adjusted earnings per share is a meaningful measure for investors and other stakeholders as it provides a more comparable earnings per share measure aligned with how management monitors the business.

 

Net debt

Net debt is used in the monitoring of the Group's liquidity and capital structure and is used by management in the calculation of the key ratios attached to the Group's bank covenants and with the objective of maintaining an investment grade credit rating. Net debt is used by investors and other stakeholders to evaluate the financial strength of the business.

 

Net debt comprises loans and other borrowings, lease liabilities, the principal amounts payable and receivable on maturity of derivatives swapping debt values, less cash and cash equivalents. A summary of the composition of net debt is included in note 10 to the Group Financial Statements.

 

Adjusted EBITDA

One of the key measures used by the Group in monitoring its debt and capital structure is the net debt: adjusted EBITDA ratio, which is managed with the objective of maintaining an investment grade credit rating. The Group has a stated aim of targeting this ratio at 2.5-3.0x. Adjusted EBITDA is defined as cash flow from operations, excluding cash flows relating to exceptional items, cash flows arising from the System Fund and reimbursable result, other non-cash adjustments to operating profit or loss, working capital and other adjustments, and contract acquisition costs (key money).

 

Adjusted EBITDA is useful to investors as an approximation of operational cash flow generation and is also relevant to the Group's banking covenants, which use Covenant EBITDA in calculating the leverage ratio. Details of covenant levels and performance against these are provided in note  to the Group Financial Statements.

 

Gross capital expenditure, net capital expenditure, adjusted free cash flow

These measures have limitations as they omit certain components of the overall cash flow statement. They are not intended to represent IHG's residual cash flow available for discretionary expenditures, nor do they reflect the Group's future capital commitments. These measures are used by many companies, but there can be differences in how each company defines the terms, limiting their usefulness as a comparative measure. Therefore, it is important to view these measures only as a complement to the Group statement of cash flows.

 

Gross capital expenditure

Gross capital expenditure represents the consolidated capital expenditure of IHG inclusive of System Fund capital investments. Gross capital expenditure is defined as net cash from investing activities, adjusted to include contract acquisition costs (key money). In order to demonstrate the capital outflow of the Group, cash flows arising from any disposals or distributions from associates and joint ventures are excluded. The measure also excludes any material investments made in acquiring businesses, including any subsequent payments of deferred or contingent purchase consideration included within investing activities, which represent ongoing payments for acquisitions.
Gross capital expenditure is reported as either maintenance, recyclable or System Fund. This disaggregation provides useful information as it enables users to distinguish between:

System Fund capital investments which are strategic investments to drive growth at hotel level;

Recyclable investments (such as investments in associates and joint ventures and loans to facilitate third-party ownership of hotel assets), which are intended to be recoverable in the medium term and are to drive the growth of the Group's brands and expansion in priority markets; and

Maintenance capital expenditure (including contract acquisition costs), which represents a permanent cash outflow.

 

Management believes gross capital expenditure is a useful measure as it illustrates how the Group continues to invest in the business to drive growth. It also allows for comparison year-on-year.

 

Net capital expenditure

Net capital expenditure provides an indicator of the capital intensity of IHG's business model. Net capital expenditure is derived from net cash from investing activities, adjusted to include contract acquisition costs (net of repayments) and to exclude any material investments made in acquiring businesses, including any subsequent payments of deferred or contingent purchase consideration included within investing activities which are typically non-recurring in nature. Net capital expenditure includes the inflows arising from any disposal and loan repayment receipts, or distributions from associates and joint ventures.

 

In addition, System Fund depreciation and amortisation relating to property, plant and equipment and intangible assets, respectively, is added back, reducing the overall cash outflow. This reflects the way in which System Funded capital investments are recovered from the System Fund, over the life of the asset.

 

Management believes net capital expenditure is a useful measure as it illustrates the net capital investment by IHG, after taking into account capital recycling through asset disposal and the funding of strategic investments by the System Fund. It provides investors and other stakeholders with visibility of the cash flows which are allocated to long-term investments to drive the Group's strategy.

 

Adjusted free cash flow

Adjusted free cash flow is net cash from operating activities adjusted for: (1) the inclusion of the cash outflow arising from the purchase of shares by employee share trusts reflecting the requirement to satisfy incentive schemes which are linked to operating performance; (2) the inclusion of maintenance capital expenditure (excluding contract acquisition costs); (3) the inclusion of the principal element of lease payments; and (4) the exclusion of payments of deferred or contingent purchase consideration included within net cash from operating activities.

 

Management believes adjusted free cash flow is a useful measure for investors and other stakeholders as it represents the cash available to invest back into the business to drive future growth and pay the ordinary dividend, with any surplus being available for additional returns to shareholders.

 

Changes in definitions to the 2022 Annual Report and Accounts

The following definitions have been amended:

 

The definition and calculation of Total Gross Revenue has been amended to include revenue from exclusive partner hotels, as this revenue reflects the value that IHG generates for its exclusive partner hotels. The value of Total Gross Revenue is unchanged in comparative years.

Underlying fee revenue and operating profit measures have been amended to separate revenue and related costs from insurance activities from fee business revenue and costs. This change is due to the adoption of IFRS 17 'Insurance Contracts', which requires insurance related revenue and costs to be disclosed separately from fee revenues. Underlying fee revenue and operating profit measures have also been amended. Comparative periods have been restated for this change.

The definition and reconciliation of fee margin has been amended to remove the exclusion of insurance revenues and costs, as insurance related revenues and costs are no longer included as part of fee business (see above). Where information is available, comparative periods have been restated for this change.

The adjusted tax definition has been amended to align to the adjustments made to adjusted earnings per share to ensure consistency between measures. Fair value gains/losses on contingent consideration and System Fund interest are therefore now excluded from the calculation of adjusted tax. The measure has been re-presented for prior years to show consistent presentation. 



 

 



 


Revenue and operating profit non-GAAP reconciliations         

Highlights for the 12 months ended 31 December

 

Reportable segments

Revenue

 

Operating profit










2023

2022

Re-presenteda

%


2023

2022

Re-presenteda

%


$m

$m

change


$m

$m

change









Per Group income statement

4,624

3,892

18.8


1,066

628

69.7

System Fund and reimbursables

(2,460)

(2,049)

20.1


(19)

105

NMb

Operating exceptional items

-

-

-


(28)

95

NMb


_____

_____

_____


_____

_____

_____

Reportable segments

2,164

1,843

17.4


1,019

828

23.1


 




 



Reportable segments analysed as:








Fee business

1,672

1,434

16.6


992

805

23.2

Owned, leased and managed lease

471

394

19.5


29

19

52.6

Insurance activities

21

15

40.0


(2)

4

NMb


_____

_____

_____


_____

_____

_____

Reportable segments

2,164

1,843

17.4


1,019

828

23.1

 

a.     Re-presented for the adoption of IFRS 17 'Insurance Contracts' and to combine System Fund and reimbursables (see 'New accounting standards and other presentational changes' in the Group Financial Statements).

b.     Percentage change considered not meaningful, such as where a positive balance in the latest period is comparable to a negative or zero balance in the prior period.

 

 

Underlying revenue and underlying operating profit


Revenue

 

Operating profit


 

 

 


2023

2022

%


2023

2022

%


$m

$m

change


$m

$m

Change





  




Reportable segments (see above)

2,164

1,843

17.4

  

1,019

828

23.1

Significant liquidated damagesb

-

(7)

NMa  

  

-

(7)

NMa

Owned and leased asset disposalsc

-

(19)

NMa

  

-

(2)

NMa

Currency impact

-

-

-

  

-

(1)

NMa


____

____

_____

  

_____

_____

_____

Underlying revenue and underlying operating profit

2,164

1,817

19.1


1,019

818

24.6

 

a.     Percentage change considered not meaningful, such as where a positive balance in the latest period is comparable to a negative or zero balance in the prior period.

b.     $7m recognised in 2022 reflects the significant liquidated damages related to one hotel in EMEAA.

c.     The results of three UK portfolio hotels and one InterContinental Hotel have been removed in 2022 (being the year of disposal) to determine underlying growth.

 

 



 

Underlying fee revenue and underlying fee operating profit


Revenue

Operating profit


 

 


2023

2022

Re-presentedb

%


2023

2022

Re-presentedb

%


$m

$m

change


$m

$m

change









Reportable segments fee business (see above)

1,672

1,434

16.6


992

805

23.2

Significant liquidated damagesc

-

(7)

NMa


-

(7)

NMa

Currency impact

-

(4)

NMa


-

(2)

NMa


_____

_____

_____


_____

_____

_____

Underlying fee revenue and underlying fee operating profit

1,672

1,423

17.5


992

796

24.6

 

a.     Percentage change considered not meaningful, such as where a positive balance in the latest period is comparable to a negative or zero balance in the prior period.

b.     Re-presented for the adoption of IFRS 17 'Insurance Contracts'.

c.     $7m recognised in 2022 reflects the significant liquidated damages related to one hotel in EMEAA.



Americas


Revenue

 

Operating profita

 









2023

2022

%


2023

2022

%


$m

$m

change


$m

$m

change









Per financial statements

1,105

1,005

10.0


815

761

7.1









Reportable segments analysed as:








Fee business

957

879

8.9


787

741

6.2

Owned, leased and managed lease

148

126

17.5


28

20

40.0


_____

_____

_____


_____

_____

_____


1,105

1,005

10.0


815

761

7.1









Reportable segments (see above)

1,105

1,005

10.0


815

761

7.1

Currency Impact

-

2

NMb


-

-

-


_____

_____

_____


_____

_____

_____

Underlying revenue and underlying operating profit

1,105

1,007

9.7


815

761

7.1









Owned, leased and managed lease included in the above

(148)

(126)

17.5


(28)

(20)

40.0


_____

_____

_____


_____

_____

_____

Underlying fee business

957

881

8.6


787

741

6.2

 

 

a.                     Before exceptional items.

b.                    Percentage change considered not meaningful, such as where a positive balance in the latest period is comparable to a negative or zero balance in the prior period.

 



 

EMEAA


Revenue

 

Operating profita

 









2023

2022

%


2023

2022

%


$m

$m

change


$m

$m

change





  




Per financial statements

677

552

22.6

  

215

152

41.4









Reportable segments analysed as:








Fee business

354

284

24.6


214

153

39.9

Owned, leased and managed lease

323

268

20.5


1

(1)

NMb


_____

_____

_____


_____

_____

_____


677

552

22.6


215

152

41.4









Reportable segments (see above)

677

552

22.6


215

152

41.4

Significant liquidated damagesc

-

(7)

NMb


-

(7)

NMb

Owned and leased asset disposalsd

-

(19)

NMb


-

(2)

NMb

Currency impact

-

3

NMb


-

1

NMb


_____

_____

_____

  

_____

_____

_____

Underlying revenue and underlying operating profit

677

529

28.0


215

144

49.3





  




Owned, leased and managed lease included in the above

(323)

(253)

27.7


(1)

2

(150.0)


_____

_____

_____


_____

_____

_____

Underlying fee business

354

276

28.3


214

146

46.6

 

 

 

 

a.     Before exceptional items.

b.     Percentage change considered not meaningful, such as where a positive balance in the latest period is comparable to a negative or zero balance in the prior period.

c.     $7m recognised in 2022 reflects the significant liquidated damages related to one hotel in EMEAA.

d.     The results of three UK portfolio hotels and one InterContinental Hotel have been removed in 2022 (being the year of disposal) to determine underlying growth.



Greater China


Revenue

 

Operating profita

 









2023

2022

%

  

2023

2022

%


$m

$m

change

   

$m

$m

change

Per financial statements




  




Reportable segments analysed as:

161

87

85.1

   

96

23

317.4


____

_____

_____

  

_____

_____

_____

Fee business

161

87

85.1

  

96

23

317.4









Reportable segments (see above)

161

87

85.1

  

96

23

317.4

Currency impact

-

(5)

NMb


-

(1)

NMb


_____

_____

____

  

_____

_____

_____

Underlying revenue and underlying operating profit

161

82

96.3


96

22

336.4

 

a.                    Before exceptional items.

b.                    Percentage change considered not meaningful, such as where a positive balance in the latest period is comparable to a negative or zero balance in the prior period.

 

 



 

Fee margin reconciliation

 


12 months ended 31 December 2023

 


 

Americas

EMEAA

Greater China

Central

Total

Revenue $m

 





Reportable segments analysed as fee business (see above)

957

354

161

200

1,672

 

_____

_____

_____

_____

_____

 

957

354

161

200

1,672

 






Operating profit $m

 





Reportable segments analysed as fee business (see above)

787

214

96

(105)

992

 

_____

_____

_____

_____

_____

 

787

214

96

(105)

992

 






Fee margin %

82.2%

60.5%

59.6%

(52.5)%

59.3%

 

 

 


12 months ended 31 December 2022 (Re-presenteda)

 





 

 

Americas

EMEAA

Greater China

Central

Total

Revenue $m

 





Reportable segments analysed as fee business (see above)

879

284

87

184

1,434

Significant liquidated damages

-

(7)

-

-

(7)

 

_____

_____

_____

_____

_____

 

879

277

87

184

1,427

 





 

Operating profit $m

 




 

Reportable segments analysed as fee business (see above)

741

153

23

(112)

805

Significant liquidated damages

-

(7)

-

-

(7)

 

_____

_____

_____

_____

_____

 

741

146

23

(112)

798

 






Fee margin %

84.3%

52.7%

26.4%

(60.9)%

55.9%

 

a.     Re-presented to reflect the adoption of IFRS 17 'Insurance Contracts'.

 



 




12 months ended 31 December 2021 (Re-presenteda)

 





 

 

Americas

EMEAA

Greater China

Central

Total

Revenue $m

 





Reportable segments analysed as fee business (see above)

691

149

116

188

1,144

Significant liquidated damages

-

-

(6)

-

(6)

 

_____

_____

_____

_____

_____

 

691

149

110

188

1,138

 





 

Operating profit $m

 




 

Reportable segments analysed as fee business (see above)

568

32

58

(89)

569

Significant liquidated damages

-

-

(6)

-

(6)

 

_____

_____

_____

_____

_____

 

568

32

52

(89)

563

 






Fee margin %

82.2%

21.5%

47.3%

(47.3)%

49.5%

 

a.      Re-presented to reflect the adoption of IFRS 17 'Insurance Contracts'.

 

 

Net capital expenditure reconciliation


    12 months ended

     31 December

 




2023

2022


$m

$m




Net cash from investing activities

(137)

(78)

Adjusted for:



    Contract acquisition costs, net of repayments

(101)

(64)

    System Fund depreciation and amortisationa

81

83


_____

_____

Net capital expenditure

(157)

(59)


_____

_____

Analysed as:



Capital expenditure: maintenance (including contract acquisition costs, net of repayments, of $101m (2022: $64m))

(139)

(108)

Capital expenditure: recyclable investments

(53)

1

Capital expenditure: System Fund capital investments

35

48


_____

_____

Net capital expenditure

(157)

(59)


_____

_____

 

a.     Excludes depreciation of right-of-use assets.

 

 



 

Gross capital expenditure reconciliation


12 months ended

31 December

 




2023

2022


$m

$m




Net capital expenditure

(157)

(59)

Add back:



    Disposal receipts

(8)

 

(16)

    Repayments of contract acquisition costs

(7)

(3)

    System Fund depreciation and amortisationa

(81)

(83)


_____

_____

Gross capital expenditure

(253)

(161)


_____

_____

Analysed as:



Capital expenditure: maintenance (including contract

acquisition costs of $108m (2022: $67m))

(146)

(111)

Capital expenditure: recyclable investments

(61)

(15)

Capital expenditure: System Fund capital investments

(46)

(35)


_____

_____

Gross capital expenditure

(253)

(161)


_____

_____

 

a.     Excludes depreciation of right-of-use assets.

 

 

Adjusted free cash flow reconciliation

 

    12 months ended

    31 December

 

 


2023

2022


$m

$m




Net cash from operating activities

893

646

Adjusted for:



Principal element of lease payments

(28)

(36)

Purchase of shares by employee share trusts

(8)

(1)

Capital expenditure: maintenance (excluding contract acquisition costs)

(38)

(44)


_____

_____

Adjusted free cash flow

819

565


_____

_____

 

 



 

Adjusted interest reconciliation


    12 months ended

    31 December

 



2023

2022


$m

$m

Net financial expenses

 


Financial income

39

22

Financial expenses

(91)

(118)


_____

_____


(52)

(96)

Adjusted for:



Interest attributable to the System Fund

(44)

 

(16)

Foreign exchange gains

(35)

(10)


_____

_____


(79)

(26)


_____

_____

Adjusted interest

(131)

(122)


_____

_____





 

 

 

Adjusted tax and tax rate reconciliation

 

 

 

2023

2022 (Re-presenteda)

 

 

Profit before tax

$m

 

Tax

$m

Tax
rate

Profit before tax

$m

 

Tax

$m

Tax
rate

 

 

 

 

 

 

 

 

 

 

 

Group income statement

 

1,010

 

(260)

 

25.7%

 

540

 

(164)

 

30.4%

 


Adjust for:







 


Exceptional items

(28)

7


95

(26)


 


Foreign exchange gains

(35)

(3)


(10)

(4)


 


System Fund

(19)

3


105

-


 


System Fund interest

(44)

-


(16)

-


 


Fair value losses/(gains) on contingent purchase consideration

 

4

 

-


 

(8)

 

-


 



_____

_____

 

_____

_____


 


Adjusted tax and tax rate

888

(253)

28.5%

706

(194)

27.5%

 



 

 


 

 


 











 

a.     The definition of Adjusted tax measures has been amended in 2023, see the 'Use of key performance measures and non-GAAP measures' section. Prior year measures have been re-represented accordingly.

 

 

 



 

Adjusted earnings per ordinary share reconciliation


      12 months ended

      31 December


 



2023

2022


$m

$m

Profit available for equity holders

750

375

Adjusting items:



   System Fund and reimbursable result

(19)

105

   Interest attributable to the System Fund

(44)

(16)

   Operating exceptional items

(28)

95

   Fair value losses/(gains) on contingent purchase consideration

4

(8)

   Foreign exchange gains

(35)

(10)

   Tax attributable to the System Fund

3

-

   Tax on foreign exchange gains

(3)

(4)

   Tax on exceptional items

7

(26)


_____

_____

Adjusted earnings

635

511


 


Basic weighted average number of ordinary shares (millions)

169

181

Adjusted earnings per ordinary share (cents)

375.7

282.3


 


 

 

 

Highlights for the 12 months ended 31 December 2023 vs 31 December 2019

 

Reportable segments

Revenue

 

Operating profit










2023

2019

Re-presentedb

%


2023

2019

Re-presentedb

%


$m

$m

change


$m

$m

change









Per Group income statement

4,624

4,627

(0.1)


1,066

630

69.2

System Fund and reimbursables

(2,460)

(2,544)

(3.3)


(19)

49

NMa

Operating exceptional items

-

-

-


(28)

186

NMa


_____

_____

_____


_____

_____

_____

Reportable segments

2,164

2,083

3.9


1,019

865

17.8

 

 

 

b.     Percentage change considered not meaningful, such as where a positive balance in the latest period is comparable to a negative or zero balance in the prior period.

c.     Re-presented for the adoption of IFRS 17 'Insurance Contracts' and to combine System Fund and reimbursables (see 'New accounting standards and other presentational changes' in the Group Financial Statements).

 

 



 

Americas


Revenue

 

Operating profita

 








2023

2019

%


2023

2019


$m

$m

change


$m

$m








Per financial statements

1,105

1,040

6.3


815

700








Reportable segments analysed as:







Fee business

957

853

12.2


787

663

Owned, leased and managed lease

148

187

(20.9)


28

37


_____

_____

_____


_____

_____


1,105

1,040

6.3


815

700

















 

a.     Before exceptional items.

 

 

EMEAA


Revenue

 

Operating profita

 









2023

2019

%


2023

2019

%


$m

$m

change


$m

$m

change





  




Per financial statements

677

723

(6.4)

  

215

217

(0.9)









Reportable segments analysed as:








Fee business

354

337

5.0


214

202

5.9

Owned, leased and managed lease

323

386

(16.3)


1

15

(93.3)


_____

_____

_____


_____

_____

_____


677

723

(6.4)


215

217

(0.9)


















 

 

 

 

a.     Before exceptional items.

 

 

Greater China


Revenue

 

Operating profita

 









2023

2019

%

  

2023

2019

%


$m

$m

change

   

$m

$m

change





  




Per financial statements

161

135

19.3

   

96

73

31.5


 



  

 



Reportable segments analysed as:

 




 



Fee business

161

135

19.3

  

96

73

31.5

 

a.     Before exceptional items.

 

 

 



 

Fee margin reconciliation

 

 

 

12 months ended 31 December 2019

 

 

Americas

EMEAA

Greater China

Revenue $m

 



Reportable segments analysed as fee business (see above)

853

337

135

Significant liquidated damages

-

(11)

-

 

_____

_____

_____

 

853

326

135

 




Operating profit $m

 



Reportable segments analysed as fee business (see above)

663

202

73

Significant liquidated damages

-

(11)

-

 

_____

_____

_____

 

663

191

73

 




Fee margin %

77.7%

58.6%

54.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

InterContinental Hotels Group PLC

GROUP INCOME STATEMENT

For the year ended 31 December 2023

 

 

2023

Year ended

31 December

 

$m

2022

Year ended
31 December

Re-presented*
$m




Revenue from fee business

1,672

1,434

Revenue from owned, leased and managed lease hotels

471

394

Revenue from insurance activities

21

15

System Fund and reimbursable revenues

2,460

2,049

 

_____

_____

Total revenue (notes 3 and 4)

4,624

3,892




Cost of sales

(742)

(648)

System Fund and reimbursable expenses

(2,441)

(2,154)

Administrative expenses

(338)

(353)

Insurance expenses

(23)

(11)

Share of profits/(losses) of associates and joint ventures

31

(59)

Other operating income

21

29

Depreciation and amortisation

(67)

(68)

Impairment reversal/(loss) on financial assets

1

(5)

Other net impairment reversals (note 5)

-

5


_____

_____

Operating profit (note 3)

1,066

628

 

 

 

Operating profit analysed as:

 

 

  Operating profit before System Fund, reimbursables and exceptional items

1,019

828

  System Fund and reimbursable result

19

(105)

  Operating exceptional items (note 5)

28

(95)

 

_____

_____

 

1,066

628

 

 

 

Financial income

39

22

Financial expenses

(91)

(118)

Fair value (losses)/gains on contingent purchase consideration

(4)

8


_____

_____

Profit before tax

1,010

540




Tax (note 6)

(260)

(164)


_____

_____

Profit for the year from continuing operations

750

376


_____

_____

 

 

 

Attributable to:



    Equity holders of the parent

750

375

    Non-controlling interest

-

1


_____

_____


750

376


_____

_____


 

 

Earnings per ordinary share (note 8)

 

 

    Basic

443.8¢

207.2¢

    Diluted

441.2¢

206.0¢

 

* Re-presented for the adoption of IFRS 17 'Insurance Contracts' and to combine System Fund and reimbursables (see note 1).

 

 

 

 

 

 

 

 

 

InterContinental Hotels Group PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2023

 

 

2023

Year ended

31 December

 

$m

2022

Year ended

31 December

Re-presented*

$m




Profit for the year

750

376




Other comprehensive (loss)/income






Items that may be subsequently reclassified to profit or loss:

 

 

    (Losses)/gains on cash flow hedges, including related tax  
    of $nil (2022: $2m credit)

 

(30)

 

35

    Gains/(losses) on net investment hedges

15

(6)

    Costs of hedging

-

3

    Hedging losses/(gains) reclassified to financial expenses

28

(43)

    Exchange (losses)/gains on retranslation of foreign operations,
    including related tax charge of $4m (2022: $5m credit)

 

(137)

 

187


_____

_____


(124)

 

176