Holiday Inn Resort, Bali Interim Results Presentation 30 July 2015 1
First half highlights and market perspective Continued strategic progress Strong underlying financial performance Growth momentum behind our preferred brands best first half for signings since 2008 Kimpton integration progressing well Innovation in loyalty and digital technology High quality earnings business model Finalised major asset disposal programme 95% of operating profit from fee business pro forma for recent asset sales 85% of fee income from hotel revenues Compelling industry tailwinds Globalisation of travel Emerging market middle class / outbound travellers Branded hotels increasing market share Favourable US supply / demand dynamics 2
Crowne Plaza, Berlin Financial Review Paul Edgecliffe-Johnson CFO 3
Strong underlying financial performance Reported Underlying 1 H1 2015 H1 2014 % change % change Revenue $915m $908m 1% 8% Fee revenue 2 $626m $600m 4% 9% Fee-based margin 46.8% 45.0% 1.8%pts Operating profit $337m $310m 9% 10% Interest $(43)m $(39)m 10% Tax rate 3 30% 33% (3)%pts Adjusted EPS 4 87.2 70.7 23% 25% Weighted basic average shares 235m 256m (8)% ¹Underlying calculated at constant exchange rates (CER) and excludes Kimpton, individually significant liquidated damages, results from managed lease hotels, and results from owned asset disposals. 2 Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages. 3 Before exceptional items. 4 Before exceptional items, underlying growth based on reported interest and tax rate. 4
Resilient fee-based business model RevPAR X Rooms X Royalty Rate H1 2015 fee revenue 1 $652m up 9% H1 2015 Group RevPAR growth H1 2015 system growth 2 (%) 7.4% 3.3% 1.8%pts 5.1% 5.8% 4.5% 2.8% ADR Occupancy RevPAR Gross Net H1 2015: 4.2% total RevPAR growth H1 2015: 28k rooms opened, 14k rooms removed 1 Fee revenue excludes Kimpton, revenue from owned and leased hotels, managed lease hotels, and significant liquidated damages receipts; growth is stated at CER. 2 Dark orange bar reflects growth excluding the Kimpton acquisition. 5
Business model drives revenue growth in all regions RevPAR X Rooms X Royalty Rate H1 2015 fee revenue¹ growth (excluding Kimpton) 9.1% 9.5% 8.7% 10.9% 5.1% $22m $6m H1 2015 fee $652m $359m $92m $83m $51m revenue 1 Group 2 Americas Europe AMEA Greater China $1m $3m ¹ Fee revenue excludes revenue from owned and leased hotels, managed lease hotels, and significant liquidated damages; growth is stated at CER. ² Group fee revenue includes $67m of central revenue. 6
The Americas rate driven RevPAR growth and highest signings in 7 years Comparable RevPAR up 5.4%; rate up 4.2% Americas portfolio at all-time occupancy high of 67.8% US RevPAR 5.6%; record US demand for 52 consecutive months H1 Growth in fee revenue drivers 1 9.1% 5.4% 4.6% YoY net rooms growth 4.6% (2.1% ex. Kimpton) 2.1% YoY gross rooms growth 7.4% (4.9% ex. Kimpton) RevPAR Net rooms Fee revenue Fee revenue 1 up 9.1% (ex. Kimpton) Total underlying revenue 2 up 10% Underlying profit 2 up 8% Overheads impacted by $3m increase in healthcare claims H1 Net rooms growth (k) 3 11 460 (7) 10 474 Pipeline: 95k high quality rooms 21k rooms signed; highest in 7 years FY 2014 Exits Openings H1 2015 1 At CER. Dark grey bar reflects net rooms excluding the Kimpton acquisition. 2 Underlying growth calculated at CER and excludes individually significant liquidated damages, results from managed lease hotels, and results from owned asset disposals. 3 Dark green bar reflects openings excluding the Kimpton acquisition. 7
Europe strong performance in UK and Germany Comparable RevPAR up 5.1% UK 6.1%; UK provinces 8.0% Germany 5.0% H1 Growth in fee revenue drivers 1 5.1% 9.5% YoY net rooms growth 1.2% YoY gross rooms growth 4.4% 1.2% Fee revenue 1 up 9.5% RevPAR Net rooms Fee revenue Total underlying revenue 2 up 10% H1 Net rooms growth (k) Underlying profit 2 up 22% Reflecting transition of UK business to franchised from managed Pipeline: 19k high quality rooms 104 (2) 2 104 3k rooms signed FY 2014 Exits Openings H1 2015 1 At CER. 2 Underlying growth calculated at CER and excludes individually significant liquidated damages, results from managed lease hotels, and results from owned asset disposals. 8
AMEA solid growth led by Japan and South East Asia H1 Growth in fee revenue drivers 1 Comparable RevPAR up 5.4% Japan 12.8%; South East Asia 7.8% 5.4% 3.1% 5.1% $22m Total RevPAR up 4.4% YoY net rooms growth 3.1% YoY gross rooms growth 6.9% Fee revenue 1 up 5.1% Underlying revenue 2 up 4% Underlying profit 2 up 17% Increased focus on efficiency RevPAR Net rooms Fee revenue H1 Net rooms growth (k) 68 2 68 (2) Pipeline: 41k rooms 9k rooms signed FY 2014 Exits Openings H1 2015 1 At CER. 2 Underlying growth calculated at CER and excludes individually significant liquidated damages, results from managed lease hotels, and results from owned asset disposals. 9
Greater China continued industry outperformance Comparable RevPAR up 1.5% Mainland China 4.8%; Hong Kong (9.2)%; Macau (12.1)% 4.8%pts ahead of the industry Total RevPAR down 2.4% Mix impact from tier 2 and 3 cities YoY net rooms growth 9.5% YoY gross rooms growth 12.1% Fee revenue 1 up 10.9% Total underlying revenue 2 up 5% Underlying profit 2 down 6% Reflecting investment into regional operational capabilities H1 Growth in fee revenue drivers 1 9.5% 10.9% $22m 1.5% RevPAR Net rooms Fee revenue H1 Net rooms growth (k) 78 2 78 (2) Pipeline: 59k rooms 9k rooms signed FY 2014 Exits Openings H1 2015 1 At CER. 2 Underlying growth calculated at CER and excludes individually significant liquidated damages, results from managed lease hotels, and results from owned asset disposals. 10
Capital allocation disciplined approach maintains flexibility and maximises returns Efficient balance sheet with an investment grade credit rating 2.0 to 2.5x net debt / EBITDA Towards top end in favourable economic conditions 2.2x at 30 June, 2015 Disposal of major owned assets now finalised InterContinental Paris Le Grand disposal completed InterContinental Hong Kong disposal to complete in H2 2015 Nearly 200 assets divested for c.$8bn since demerger in 2003 Capital allocation Approach to capital allocation unchanged Decision on return of funds to shareholders from asset sales completed in 2015 will be announced at preliminary results in February 2016 11
Capital expenditure increased system funded capital following Amadeus announcement Maintenance capex & key money H1 2015 Maintenance capex $27m Key money $19m Total $46m Hotel maintenance capex reducing in line with asset intensity Key money deployment weighted towards H2 in line with openings Recyclable investments H1 2015 Gross out $49m Gross in $6m Net total $43m Continue to support new brands and priority market growth H1 2015 includes ongoing investment behind launch of EVEN Hotels Broadly neutral over time System fund capital investments 1 H1 2015 Gross out $30m Gross in $10m Net total $20m System funded capital investments are expected to increase to c.$100m in 2015, reflecting investment in evolving our own market-leading technology Medium-term per annum capital expenditure guidance unchanged Gross: up to $350m; Net ~$150m 1 IHG finances capital expenditure. Depreciation charged to system fund not IHG. Resulting system fund cash surplus flows back to IHG. Broadly neutral over time. 12
Highly cash generative business Net capital expenditure of $109m covered ~2x by underlying cash from operations Cash flow generated by operations, disposals, and efficient balance sheet Proposed interim dividend of 27.5, 10% growth $m 800 Cash inflows Cash outflows 600 616 457 192 400 389 200 213 369 438 44 0 EBITDA Other operating items Interest and tax Cash from operations (preexceptionals) Maintenance capex and key money Recyclable / system fund capex Disposal proceeds Cashflow before exceptionals and financing Exceptional Increase in Cash items borrowings available for shareholders/ corporate activity Ordinary dividend Acquisition of Kimpton FX / other Change in cash 13
Hotel Indigo, Bangkok Wireless Road Operating Review Richard Solomons CEO 14
Our winning strategy will drive future growth Value creation: superior shareholder returns Value creation: Superior shareholder returns Winning Model Targeted Portfolio Attractive markets Highest opportunity segments Managed & franchised model Disciplined execution Scale and efficiency of operations Investment in developing great talent and technology platforms Commitment to responsible business practices 15
Our commercial strategy supports the winning model to deliver a leading guest experience Create & Deliver a Consistent & Differentiated In-Hotel Experience Make Direct the Preferred Way to Book GRS Grow & Deepen Relationships with High-Value Guests 16
Holiday Inn Brand Family Brand re-fresh has driven market out-performance Largest ever global brand re-fresh $1bn global brand re-fresh announced in 2007 Re-launched 3,300 hotels, opened 1,500, and removed 1,100 since programme started Reduced average hotel age to less than both Hampton Inn and Courtyard Increased guest satisfaction Overall guest satisfaction at record highs JD Power highest guest satisfaction in mid-scale full service four years in a row Brand preference driving RevPAR premium IHG s engine for accelerated growth Platform for innovation and expansion 10%+ annual growth in signings since 2011 514 hotels opened in last 3 years; 70% of total additions 17
Holiday Inn Brand Family Only global mainstream brand Top two largest global brands across all segments Holiday Inn >100k rooms outside the US, more than 4x nearest competitor Holiday Inn Express doubled non-us presence since 2007 Holiday Inn brand family global room supply vs. competitors (k) 1 Non-US Holiday Inn brand family room count vs. competitors (k) 1 232 219 204 102 113 148 66 89 31 4 15 14 26 3 13 Holiday Inn Express Holiday Inn Hampton Inn Courtyard Hilton Garden Inn 1 Competitor data from Smith Travel Research Census report, 2015 data represents position at end of June 07 15 Holiday Inn 07 15 Holiday Inn Express 07 15 Hampton Inn 07 15 07 Courtyard 15 Hilton Garden Inn 18
Holiday Inn Brand Family Guest experience innovations and brand extensions Holiday Inn open lobby Next generation public area which offers unmatched solution for guest s business and leisure needs Nearly 30 already open in Americas 17 launched across six markets in Europe; delivering 8pts increase in guest satisfaction Holiday Inn Express next generation room New smart design developed in conjunction with insight from guests and owners; tailored to each region 42 US hotels already adopted new room elements and 150+ properties ready to execute the new model First test room also live in Europe Holiday Inn Club Vacations Asset light time share business launched in 2008 Grown to 4,000+ villas across 12 different resorts in US Builds high value loyal guests, benefiting wider system 19
Holiday Inn Brand Family Global growth and design innovation Holiday Inn Makkah, Saudi Arabia Holiday Inn Express Formula Blue Room, Salt Lake City Holiday Inn Open Lobby, Frankfurt, Germany Holiday Inn Club Vacations, Las Vegas 20
Boutique portfolio Developing on our leading position Market leading position Kimpton integration progressing well Continue to expand distribution Leading boutique footprint with 128 hotels open and 79 in the pipeline Existing strength in the US with significant overseas growth potential Non-US position expected to double in 3 to 5 years Transitioning Kimpton operations ensuring uniqueness of the brand is maintained Retained key Kimpton talent and San Francisco HQ Integrated websites to utilise cross sell and developed sales structure to drive corporate stays Implemented IHG framework for finance, legal, HR 8 hotels opened; two new markets for Hotel Indigo and 5 new openings for Kimpton 12 hotels signed, including the landmark Hotel Indigo Los Angeles and 2 Kimpton hotels in Washington D.C. 7 Kimpton hotel exits in San Francisco due to specific issue; will not impact broader growth plans 21
Boutique portfolio Landmark signings and openings in H1 Hotel Monaco, a Kimpton Hotel, Pittsburgh Palladian, a Kimpton Hotel, Seattle Hotel Indigo, Helsinki Hotel Indigo, Bali 22
Crowne Plaza Growing scale and making business travel work Growing scale 9% annual room growth outside of US Doubled non-us presence over last 10 years; added more rooms than any other brand in the upscale segment Driving re-brand opportunities; 30% of total signings in last 3 years Largest IHG brand in Greater China 40k open and pipeline rooms Making business travel work New enhancements to drive business productivity Complimentary Wi-Fi in the Americas and Europe New energy essentials food offering WorkLife room design to pilot this year Over 55% of US estate renovated or new since 2010 7k rooms removed since start of programme 23
Crowne Plaza Market leading global growth Panama Airport Guangzhou Zengcheng, China Potsdamer Platz, Berlin Battersea, London 24
Enhancing IHG Rewards Club to develop deeper lifetime relationships Dream Plan Book Stay Share Innovating to drive personalisation Completed first phase roll out of new CRM capability allowing hotels teams to offer a more individual service Next phase of CRM capability to include more personalised member communications and stay preference management Award winning Recognised again at the 2015 Freddie Awards - Best Customer Service Middle East and Asia / Oceania Best redemption ability Europe and Africa 16 awards since relaunch in 2013 Driving member enrolments 4m new members enrolled in six months; up 26% YOY Member base above 88m delivering 40% of hotel bookings 25
Enhancing IHG Rewards Club to develop deeper lifetime relationships Dream Plan Book Stay Share New top tier launched Our most loyal members are personal advocates for our brands and desire extra level of status recognition Spire Elite meets this need for recognition and builds a special rewards relationship with guests Benefits include: Richest points incentives in the hotel industry Option upon membership of one-time 25,000 points award or companion upgrade to platinum elite 26
Our approach to technology Dream Plan Book Stay Share Insight into guest needs across the entire Guest Journey Know the market and leverage current trends to enhance the guest experience Understanding needs of different demographics, e.g. Boomers vs. Millennials Own the stay experience Focus on adding value in dream, plan, book, and share Build on IHG s track record of innovation and leadership Invest smartly control IP and data; partner where appropriate 27
Amadeus strategic relationship will deliver industry defining guest reservation system Dream Plan Book Stay Share Revolutionising the industry s technology foundations Cloud based community model a first for the sector Next generation and fully integrated solution to deliver more personalisation and a superior guest experience Phased launch planned for 2017 Amadeus will own GRS Amadeus will fund, build and maintain the system Leverages proven expertise in technology Amadeus has already developed a similar model for the airlines which has 100+ users IHG has launch partner benefits Input on design and functionality to meet IHG needs Ability to develop IHG bespoke systems in parallel with GRS to innovate ahead of the market First mover advantage to utilise GRS benefits once live 28
Stay.com collaboration marks another industry first to enhance the guest journey Dream Plan Book Stay Share Compelling digital content through collaboration Collaboration with digital travel service stay.com to enhance guest journey from dream to stay Users can explore destinations and create personalised travel guides for 50+ locations with IHG hotels Guides available offline on the mobile app for easy access 29
Leading digital innovation driving growth in our direct channel revenue Dream Plan Book Stay Share Driving direct channel growth Continue to grow digital revenue, our lowest cost channel Tracking at over $4bn per annum H1 up $220m YOY, more than any other channel Enhancing own digital channels Launched content rich websites for Crowne Plaza, Hotel Indigo and extended stay brands Engaging design delivers uniqueness of each brand Display automatically adjusts across different devices Lowest price promise initiated in the UK for all IHG Rewards Club members Offers loyalty members booking direct a better price than available through any other channels Gives clear incentive for guests to become part of IHG Rewards Club and book through IHG channels 30
Lowest price promise gives guest clear incentive to book direct 31
Continue to innovate mobile solutions to enhance guest experience and drive delivery Dream Plan Book Stay Share Market leading mobile services IHG translator app made available on Apple Watch TM Real time bill viewing added to Mobile check-in and check-out IHG guest request launched, allowing guests to make in-hotel requests directly through our mobile app Accelerating growth in mobile delivery Innovative guests services and #1 app rating delivering growth App downloads up 52% YOY in the first half; over 4m in total Mobile revenue tracking at $1bn per annum; up 48% YOY 32
Conclusion Compelling long-term industry tailwinds Strategic progress and growth of our portfolio of preferred brands Innovating across digital technology and loyalty programme Completion of asset-light transition delivers highest quality of earnings Well positioned to drive profitable future growth through winning strategy 33
Staybridge Suites, Midvale, Utah Q&A 34
EPIC Hotel, a Kimpton Hotel, Miami Appendices 35
Foreign exchange translation exposure $8m impact from currency translation in H1 For 1%pt difference in full year group RevPAR growth between constant and actual exchange rates, we expect a $4m impact on reported fee business operating profit 1 RevPAR movement summary at constant exchange rates (CER) vs. actual exchange rates (AER) H1 2015 Q2 2015 Region CER AER Difference CER AER Difference Group 5.1% 0.5% (4.6)pts 4.4% (0.4)% (4.8)pts Americas 5.4% 3.9% (1.5)pts 4.7% 3.2% (1.5)pts Europe 5.1% (10.3)% (15.4)pts 4.4% (11.2)% (15.6)pts AMEA 5.4% (1.6)% (7.0)pts 4.5% (3.6)% (8.1)pts G. China 1.5% 0.9% (0.6)pts 0.6% 0.9% 0.3pts 1 Based on exchange rates at time of release. 36
Underlying operating profit adjustments (CER) H1 2015 H2 2015 FY 2015 FY 2014 1 Adjustments following Kimpton acquisition $3m $(6)m $(3)m Refurbishment of InterContinental New York Barclay $(2)m $(4)m $(6)m US healthcare claims $(4)m $(2)m $(6)m Total Americas $(3)m $(12)m $(15)m $(6)m InterContinental Paris Le Grand owned income $(1)m $(12)m $(13)m InterContinental Paris Le Grand management fees $1m $3m $4m Total Europe - $(9)m $(9)m - AMEA managed investment & refurbishment - $(3)m $(3)m Total AMEA - $(3)m $(3)m $(2)m Investment into operations capability $(2)m $(3)m $(5)m Total Greater China $(2)m $(3)m $(5)m $5m Total Group $(5)m $(27)m $(32)m $8m 1 Includes $7m significant liquidated damages receipt in Americas franchise; $(5)m impact in Americas managed from the InterContinental New York Barclay renovation; $(3)m impact in Americas managed from devaluation of the Venezuelan Bolivar; $(5)m impact in Americas overheads from unusually high US healthcare claims; $(2)m impact from investment in AMEA managed; $5m Greater China managed profit impact from small one-offs and cost management. 37
Kimpton accounting considerations Acquisition fully consolidated from 16 January 2015 Fair value of assets and liabilities acquired of $441 million: $193 million brand value $71 million management contracts to be amortised over 30 years; c.$2.4m p.a. $167 million goodwill $10 million other 2015 operating profit adjustments Liquidated damages of $3 million in H1 2015 Anticipated costs associated with Kimpton transition of $3 million in H2 2015 System removals in July representing $6 million of annual fee revenue 38
Hotel franchising Total gross revenue $bn¹ (rooms only) Group royalty drivers H1 2015 YoY H1 2015 6.8 Average rooms 4.0% H1 2014 6.5 RevPAR 5.1% H1 2013 6.1 Royalty fees 9.4% Franchise Fees² $m Franchise EBIT $m (margin %) H1 2015 383 H1 2015 324 (85%) H1 2014 357 H1 2014 300 (84%) H1 2013 332 H1 2013 285 (86%) Based on actual USD with the exception of group royalty drivers which are calculated at constant exchange rates ¹Total gross revenue is defined as total room revenue from franchise hotels, it is not revenue attributable to IHG ²Franchise fees and EBIT exclude individually significant liquidated damages of $7m in Americas in 2014 39
Hotel management Total gross revenue $bn 1 (total hotel) Management Fees² $m H1 2015 4.2 4.7 H1 2015 177 210 H1 2014 4.4 H1 2014 181 H1 2013 4.1 H1 2013 171 Managed EBIT² $m (margin %) Reported managed lease revenue and EBIT $m H1 2015 100 114 (54%) $m H1 2015 H1 2014 Americas revenue 22 21 Americas EBIT 2 1 H1 2014 105 (58%) Europe revenue 36 46 Europe EBIT (1) - H1 2013 101 (59%) AMEA revenue 21 19 AMEA EBIT 1 2 Based on actual USD ¹Total gross revenue is defined as total hotel revenue from managed hotels, it is not revenue attributable to IHG. Dark red bar reflects numbers excluding Kimpton. ²Hotel management fees and EBIT exclude the results of leased properties, individually significant liquidated damages of $31m in H1 2013. Dark red bar reflects numbers excluding Kimpton. 40
Hotel owned & leased O&L revenue $m O&L EBIT $m (margin %) H1 2015 147 H1 2015 31 (21%) H1 2014 140 H1 2014 29 (21%) H1 2013 136 H1 2013 28 (21%) H1 2015 H1 2014 O&L EBITDA $m 39 41 Reported O&L revenue and EBIT from disposals ($m) $m 2015 2014 InterContinental Paris Revenue 30 52 InterContinental Paris EBIT (1) 3 InterContinental Barclay Revenue 14 H1 2013 43 InterContinental Barclay EBIT (1) InterContinental Mark Hopkins Revenue 9 InterContinental Mark Hopkins EBIT - *All charts exclude results from disposed assets: InterContinental London Park Lane (sold 2013), InterContinental New York Barclay (sold 2014), InterContinental Mark Hopkins San Francisco (sold 2014) and InterContinental Le Grand (sold 2015). Revenue from these hotels was: 2015 $30m, 2014: $75m 2013: $134m, Operating profit: 2015: $1m, 2014: $1m, 2013: $23m. Based on actual USD 41