This
announcement contains inside information
3 May
2024
InterContinental Hotels Group
PLC
Changes to System Fund
arrangements
InterContinental Hotels Group PLC
('IHG' or 'the Company') today announces changes to its System Fund
('the Fund') arrangements. Given the highly successful growth and
development of the IHG One Rewards loyalty programme, IHG has now
established new terms that govern assessment fees that owners pay
into the Fund and the sharing arrangements for ancillary fee
streams such as those related to the sale of loyalty
points.
IHG manages the Fund for the benefit
of hotels within the IHG system. Owners pay
contributions into the Fund, which include a marketing and
reservation assessment and a loyalty assessment. Certain other
ancillary revenues are also included in the Fund. System Fund
revenues in 2023 totalled $1,564m, up by $331m or 27% from five
years earlier. IHG uses the Fund to make substantial investments
including but not limited to: marketing the individual hotel brands
and masterbrand; delivering a leading loyalty programme, IHG One
Rewards; and developing and implementing powerful technology, such
as the Global Reservation System, the IHG mobile app and digital
channels, and the new Revenue Management System. These substantial
System Fund investments thereby strengthen the whole IHG
enterprise.
The Fund is not managed to a profit
or loss for IHG over the longer term, but for the benefit of hotels
in the IHG system.
The growth in the System Fund
reflects the increase in IHG's system size, expansion of the IHG
One Rewards programme, and the success of IHG's overall enterprise
in driving more revenues to hotels in the system.
Following a review of IHG's owner
charges, IHG is lowering its standard loyalty assessment fee that
owners pay into the Fund. IHG is also today announcing to owners
other marketing and loyalty programme benefits, including
increasing certain Reward Night reimbursements that owners receive
back out of the Fund when points are redeemed for stays, which will
additionally improve IHG's overall owner offer and owner
economics.
The Fund has received a growing
stream of ancillary revenues such as those from the sale of IHG One
Rewards loyalty points. Historically, IHG
has allowed the full revenue generated on the sale of loyalty
points to be included in the System Fund. A portion of the revenue
from the sale of certain loyalty points, together with certain
other ancillary revenues, will now be recognised by IHG within its
results from reportable segments. Initially 50% of this will be
recognised by IHG in 2024, which is estimated to deliver
approximately $25m incrementally to revenue and operating profit
from reportable segments. This will annualise in 2025 when 100%
will be recognised by IHG. There is also expected to be further
growth in future years as the number of points sold continues to
grow, and due to the ramp-up effect of the IFRS 15 accounting
standard which defers revenue recognition until redemption of the
points previously sold.
As previously set out
within the Company's update on strategic
priorities in February 2024, IHG is actively developing
opportunities to grow ancillary fee streams such as points sales.
These also enhance fee margin, and are in addition to the
100-150bps annual improvement in fee margin on average over the
medium to long term that IHG expects to be achieved through
operational leverage.
IHG's hotel owners benefit from the
substantial scale and efficiency of the System Fund and will
continue to do so as it further grows and as the overall enterprise
achieves new levels of strength. Across all the changes being made
to the System Fund arrangements, IHG and the IHG Owners
Association have worked together to ensure that the overall
capacity and effectiveness of the Fund to invest and spend on
behalf of all IHG system hotels remains strong, and that the
operation of the Fund continues to be on a net nil surplus/deficit
basis over the longer term.
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)
For the purposes of the Market Abuse
Regulation, the person responsible for arranging the release of
this announcement is Nicolette Henfrey, EVP, General Counsel &
Company Secretary.
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 more than 6,300 open hotels in
over 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 new 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.