Investors

The hotel industry demonstrated its resilience in the challenging 12 months ended 31 December 2011 by continuing the recovery started during 2010. Global room demand surpassed its previous peak and is now at a new high, most notably in the United States (US), the largest lodging market in the world.

IHG closely monitors markets across the globe and follows key industry and business metrics, such as RevPAR, average daily rate, demand and gross domestic product (GDP), to ensure its strategy continues to be sustainable in the changing business environment and suitable for the Group's capabilities, and as such the business remains resilient.

The global hotel market is estimated to be close to 20 million rooms and leading research (Smith Travel Research) calculates there are seven million branded hotel rooms globally, with the remainder a combination of independent hotels, guesthouses and other types of lodging. For four years, IHG has held the largest share of branded rooms, currently at approximately nine per cent of supply, distributed across nearly 100 countries and territories.

IHG continues to grow rooms supply and revenues, aided by wider trends:

• Increase in affluence and freedom to travel in emerging markets – countries such as China are increasingly significant as domestic and international travel markets. They already have a sizeable hotel industry, and the importance of hotel brands is growing;
• The growth of the branded hotel sector has exceeded that of the unbranded sector over the past 10 years, and although currently less than half of all hotel rooms are branded, the benefits of a brand, such as the greater security and performance of a global reservation system, loyalty schemes and international networks, are clear to many owners. IHG is therefore well-positioned to win the business of owners seeking to grow with a hotel brand. Additionally, IHG and other large hotel companies have the competitive advantage of a global portfolio of brands that suit the different real estate or market opportunities an owner may have
• Global economic trends – we expect 2011's modest economic growth to continue into 2012. Countries in or highly connected to the Eurozone face an uncertain short-term outlook and are likely to see stagnant or negative GDP growth, depending on the outcome of the sovereign debt crisis. Many other developed and major emerging markets are expected to experience modest growth. GDP is a leading indicator for key industry metrics and our expertise combined with consensus opinion for long-term GDP trends allow us to prepare better the business for fluctuations in demand; and
• Change in demographics – as developed market populations age, increased leisure time suggests positive implications for travel and hotel demand. Conversely, younger generations are looking to balance work and lifestyles better, indicating an increasing need for quality hotel options. In advanced developing markets, an emerging middle class presents consumer and branded organisations with an opportunity to develop further global networks.

With a positive industry outlook, the prospects for IHG look particularly good. Branded hotels are becoming more popular as customers seek out consistent experiences, while investors appreciate the reliable returns that brands can generate.

Our business has been through a lot of change over the last few years. IHG is in good shape and is ready to build on its strong foundations and enter its next phase of development – high quality growth.

Richard Solomons
CEO – InterContinental Hotels Group

For information about industry trends, news and information, please select from the following links:

• MKG Worldwide hotel rankings
• World Tourism Organisation
• World Travel and Tourism Council