Activities

InterContinental is the world’s largest hotel operator by bedroom numbers and it operates in the upscale, mid-market, budget and extended stay sectors. The group owns, leases, manages or franchises around 3,600 hotels with 537,500 bedrooms in nearly 100 countries.

It is the UK’s second largest hotel group after Whitbread and its Express by Holiday Inn is the third largest budget brand in the country.

Since its demerger from Six Continents (formerly Bass Plc) in 2003, IHG has been busy transforming itself from a hotel owner into a hotel management and franchise company.

The group operates under seven hotel brands:

• InterContinental Hotels and Resorts (upscale)
• Crowne Plaza Hotels and Resorts (upscale)
• Holiday Inn Express/Express by Holiday Inn (midscale to budget)
• Holiday Inn Hotels and Resorts (midscale)
• Hotel Indigo (upscale brand at affordable prices)
• Staybridge Suites (extended stay)
• Candlewood Suites (US mid-market extended stay)

Timeline

• 1777: William Bass opens a brewery in Burton-on-Trent. The company acquires a number of regional companies, including Mitchells & Butlers in 1961. It becomes Bass Plc after merging with Charrington in 1967.
• 1987: The group buys a small group of hotels.
• 1988: Bass buys Holiday Inns International, the world’s leading midscale hotel brand that was founded in Tennessee in 1952. It adds the remaining North American business of Holiday Inn in 1990.
• 1991: The Holiday Inn Express brand is launched as a limited-service chain.The first European Express by Holiday Inn opens in Strathclyde, Scotland, in 1996.
• 1994: The group launches the upscale Crowne Plaza.
• 1997: Bass sells its midscale hotel assets in the US, maintaining the brand through franchising. It also moves into the US upscale extended stay sector with the introduction of Staybridge Suites by Holiday Innn.
• March 1998: Bass Hotels and Resorts buys the upscale InterContinental brand for £1.8b. The brand was founded by Pan American World Airlines in 1946.
• January 2000: Bass Hotels buys the 59-strong Southern Pacific Hotels Corporation in Australia, followed by US-based hotel management group Bristol Hotels & Resorts, which has 112 hotels.
• June 2000: Bass sells its brewing interest and the Bass name to Interbrew of Belgium for £2.3b. As a result, it is renamed Six Continents.
• April 2001: The company buys the 79-strong Posthouse chain from Compass for £810m, converting most into Holiday Inns. In May it buys the InterContinental Hong Kong for £241m.
• April 2003: Six Continents demerges its two businesses. The hotel and soft drink business becomes InterContinental Hotels Group (IHG) while the pubs and restaurants business becomes Mitchells & Butlers. IHG announces a £61m cost-cutting exercise and, in May, says it will cut 800 senior management roles (30% of the total).
• August 2003: Radisson Edwardian buys the May Fair InterContinetal for £115m.
• July 2003: IHG sells 16 Staybridge Suites in the USA to Hospitality Properties Trust (HPT) on a 20-year management contract. In September it converts 14 former Summerfield Suites hotels to the Staybridge brand in another deal with HPT.
• December 2003: IHG buys the midscale extended stay Candlewood Suites brand for $15m with an agreement to manage the properties for HPT.
• March 2004: IHG confirms plans to sell off most of its its 188 hotels while seeking to retain the management contracts on the majority. It has sold 20 in the past year for £250m.
• September 2004: Chief executive Richard North is ousted months after announcing a 55% boost to interim profits. The group believes the marketing skills of his replacement, Andrew Cosslett, will speed its transformation into a managed and franchised hotel operator. IHG puts 73 UK hotels on the market.
• October 2004: IHG opens its first Hotel Indigo (an upscale brand at affordable prices) in Atlanta, USA. A second opens in Chicago in June 2005.
• November 2004: IHG opens the first new-generation Holiday Inn in Georgia, USA.
• December 20004: IHG sells 13 hotels in the USA to HPT for $460m, followed by another 12 in February 2005.
• March 2005: IHG announces the sale of 73 UK to LRG Acquisition, a consortium headed by Lehman Brothers. The group makes £1b from the sale before transaction costs, £22m below the hotels’ net book value. It will manage 63 hotels under 20-year contracts, and the remaining 10 until 2007. The deal leaves it with just three owned properties in the UK.
• April 2005: IHG announces plans to bring Staybridge Suites to the UK. Two properties will open in London in late 2006.
• July 2005: Stardon (a joint venture between Starwood Hotels and Resorts and Edinburgh-based Chardon Management) announces plans to convert five Hilton hotels it bought in March into Holiday Inns.
• August 2005: Queen’s Moat Houses plans to convert 11 hotels to the Holiday Inn brand and two to the Crowne Plaza brand by the end of the year. IHG sells the Holiday Inn Nottingham to Britannia Hotels for £6.75m.
• September 2005: The group clinches a £170m sale-and-manageback deal of 10 hotels in Australia, New Zealand and Fiji.
  November 2005: IHG sells the Paris InterContinental hotel out of the system for €371m. It also offloads the Crowne Plaza Birmingham (for £24.4m) to retain the InterContinental London on Hyde Park corner as its only owned property in the UK. 
• December 2005: IHG nets £371m from the flotation of soft drinks company Britvic, in which it held a majority stake of 47.5%.
• January 2006: IHG puts seven InterContinental-branded hotels in Europe on the market, and announces plans to dispose of its mid-scale European properties. 
• March 2006: IHG sells 24 European Crowne Plaza, Holiday Inn and Express by Holiday Inn hotels to one of its largest franchisees, Westmont Hospitality. It secures 15-year franchise contracts expected to generate £2.7m of franchise fees per annum.
  

Financial snapshot

Full year

Turnover: £1.9b (2004: £2.2b)
Pre-tax profit: £284m (2004: £264m)

Half year

Turnover: £1.1b (2004: £1.06b)
Pre-tax profit: £166m (2004: £154m)

Financial year end: December 31 2005
Half-year end: 30 June 2005

These results cover both the hotel division and the soft drinks business of IHG.

Operating data

In the year to 31 December, 2005, the hotels division reported turnover of  £1.239b (2004: £1.498b). Operating profit was unchanged at £269m. 

In the half-year to 30 June, 2005, hotels reported turnover of £690m (2004: £735m). Operating profit was £153m (2004: £115m).

Full year results by region:

Americas: Turnover £445m, operating profit: £198m
EMEA: Turnover: £611m, operating profit £104m
Asia Pacific: Turnover: £141m, operating profit: £32m

By December 2005, IHG had 3,606 hotels of which 55 were owned or leased, 504 were managed and 3,047 were franchised.

Number of hotels by brand:

InterContinental: 137
Crowne Plaza: 235
Holiday Inn: 1,435
Holiday Inn Express: 1,590
Staybridge Suites by Holiday Inn: 87 (Americas)
Candlewood Suites:112 (Americas)
Hotel Indigo: 3 (Americas)

Number of hotels by region:

Americas: 2,834 hotels
Europe, Middle East and Africa: 610 hotels
Asia Pacific: 162 hotels

Number of UK hotels: 237 (of which only the InterContinental London is company-owned)

Number of employees: about 30,000 worldwide
Number of UK employees: 9,000 employed by IHG
Number of UK employees in IHG-branded hotels: 13,000 (including the staff of franchisees)

Strategy

“This is a strong set of results with a solid performance across all three of our regions. 2005 was a year of significant change for IHG and a number of key strategic milestones were met. We executed on our asset disposal programme and successfully floated Britvic, to become a pure play, high growth hotel company, managing and franchising hotels using our attractive stable of brands.

The record number of hotels we currently have under development gives us confidence we can grow this business and achieve
our rooms target as we look to the years ahead."

Source: preliminary results statement, 2 March 2006

Chief executive

Andrew Cosslett

Key directors

Chairman: David Webster
Chief marketing officer: Peter Gowers
Finance director: Richard Solomons
President, Americas: Stevan Porter
Managing director, EMEA: Richard Hartman
Managing director, Asia Pacific: Patrick Imbardelli
Executive vice-president corporate services, company secretary and general counsel: Richard Winter
Executive vice-president, human resources: Tracy Robbins

Contact

67 Alma Road
Windsor
Berkshire
SL4 3HD

Tel: 01753 410 100
Fax: 01753 410 101

E-mail:
Website: http://www.ihgplc.com

Commentary

By the close of 2005, IHG had nearly completed its plan to sell 175 owned hotels (and return £2.75b to shareholders) in order to focus on branding, management and franchising.

It had offloaded 145 properties for £2.3b (of which 126 remained in the IHG system) and had another 30 hotels on the market with a combined value of £600m. This left the group with 22 owned hotels worth £900m in total.

It intends to retain ownership of trophy hotels in strategic locations such as London, Paris, New York and Hong Kong.

New hotels in the pipeline include 54 Crowne Plazas, 27 InterContinentals, eight Hotel Indigos, 204 Holiday Inns, 429 Holiday Inn Express hotels, 79 Staybridge Suites and 83 Candlewood Suites.