Annual Report
and Form 20-F
2023
True
Hospitality
for Good
Our purpose
is to provide
True Hospitality
for Good.
It brings our brands to life,
shapes our culture and
represents a commitment
to make a difference to
our people, guests and
communities, and to protect
the world around us.
With strong stakeholder
engagement, together
we work towards common
goals that help create shared
value for all.
Holiday Inn Resort, Phuket, Surin Beach, Thailand
Welcome
Strategic Report
2
2023 in review
4
Chair’s statement
6
Chief Executive Officer’s review
8
Industry overview
10
Our business model
14
Trends shaping our industry
16
A brand for everyone
18
Our strategy
36
Our stakeholders
38
Our culture – how we operate responsibly
42
Our risk management
50
Viability statement
52
Delivering on the recommendations
of TCFD
60
Key performance indicators (KPIs)
64
Chief Financial Officer’s review
65
Performance
65
Group
73
Americas
77
Europe, Middle East, Asia & Africa (EMEAA)
80
Greater China
83
Central
84
Key performance measures
and non-GAAP measures
Governance
90
Chair’s overview
92
Our Board of Directors
96
Changes to the Board, and its Committees,
and Executive Committee
96
Board and Committee membership
and attendance in 2023
97
Our Executive Committee
100 Governance structure
101
Board activities
101
Key areas of focus during the year
102
Key matters discussed in 2023
and Section 172 statement
104
Our shareholders and investors
104
Director appointments and induction
105 Board effectiveness evaluation
107
Audit Committee Report
112
Responsible Business Committee Report
114
Nomination Committee Report
116
Directors’ Remuneration Report
141
Statement of compliance
Group Financial Statements
144
Statement of Directors’ Responsibilities
145
Independent Auditor’s UK Report
151
Independent Auditor’s US Report
154
Group Financial Statements
161
Accounting policies
173
Notes to the Group Financial Statements
Parent Company Financial Statements
218
Parent Company Financial Statements
220
Notes to the Parent Company
Financial Statements
Additional Information
226 Other financial in
formation
235 Directors’ Report
242 Group information
255 Shareholder information
262 Exhibits
263 Forward-looking statements
264 Form 20-F cross
-reference guide
267 Glossary
269 Useful information
What’s inside
Our presence
brands, one of the industry’s largest loyalty programmes, over 6,300
open hotels in more than 100 countries, and a further 2,000 hotels
See pages 16 to 21.
Our ambition
To be the hotel company of choice for guests and owners.
See page 18.
Our strategy
To use our scale and expertise to create the exceptional guest
experiences and owner returns needed to grow our brands in the
industry’s most valuable markets and segments. Delivered through
a culture that retains and attracts the best people and embraces
opportunities to positively impact the world around us.
See pages 18 to 35.
Our business model
By franchising our brands and managing hotels on behalf of third
parties, we can focus on increasing fee revenues and fee margins,
with limited capital requirements. We grow our business by ensuring
our brands meet consumer demand and generate strong returns for
hotel owners.
See pages 10 to 13.
The Strategic Report on pages 2 to 88 was
approved by the Board on 19 February 2024.
Nicolette Henfrey
Company Secretary
1
IHG
| Annual Report and Form 20-F 2023
Contents
2023 in review
Demand continued to grow during 2023 as people’s
appetite for travel shone through. Signi
ficant investments
in our enterprise platform, including our brands, loyalty,
digital offer and sustainability initiatives, saw us enrich
the guest experience, grow our estate and drive returns.
Financial performance
Global RevPAR
+
16.1
%
2022: +36.6%
Net system size growth
3.8
%
2022: 4.3%
Signings (rooms)
79,220
2022: 80,338
Total gross revenue in IHG’s System
a
$
31.6
bn
2022: $25.8bn
Total revenue
$
4,624
m
2022: $3,892m
Revenue from reportable segments
b
$
2,164
m
2022: $1,843m
Operating profit
c
$
1,066
m
2022: $628m
Operating profit
from reportable segments
b
$
1,019
m
2022: $828m
Basic EPS
443.8
�
2022: 207.2�
Adjusted EPS
b
375.7
�
2022: 282.3�
Dividend
152.3
�
2022: 138.4�
Share buyback completed
d
$
750
m
2022: $500m
Regional growth (number of rooms)
Americas
EMEAA
Greater China
Openings
10,405
2022: 20,568
Openings
21,174
2022: 16,211
Openings
16,340
2022: 12,664
Signings
28,297
2022: 32,464
Signings
24,787
2022: 25,847
Signings
26,136
2022: 22,027
See page 73.
See page 77.
See page 80.
a
Definitions
for key performance measures can be found in the use of key performance measures and non-GAAP measures section, which can be found on pages 84 to 88.
b
Use of Non-GAAP measures: In addition to performance measures directly observable in the Group Financial Statements (IFRS measures), additional
financial measures
(described as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not de
fined under
IFRS or are adjusted IFRS figures. Further explanation in relation to these measures can be
found on pages 84 to 88, and reconciliations to IFRS
figures, where they have been
adjusted, are on pages 226 to 231.
c
2023 operating profit shown a
fter $19m System Fund and reimbursable reported pro
fit and $28m net exceptional gain. See page 154
for details.
d
2022 share buyback completed in January 2023.
Strategic Report
2
IHG
| Annual Report and Form 20-F 2023
SHAREHOLDERS
AND INVESTORS
Our focus on building a stronger business
for guests and owners, coupled with
increasing demand, led to strong trading
and shareholder returns delivered via our
cash-generative business model.
•
Total dividend of 152.3c proposed and
$750m share buyback completed. New
$800m programme approved for 2024
•
Americas RevPAR +7.0% vs 2022; EMEAA
+23.7%; Greater China +71.7%
•
Surpassed 6,300 open hotels; +3.8% net
system size growth
•
Signings +26% YOY*; grew conversions
– represented 37% of openings and
signings combined
•
Fee margin
b
59.3%, 3.4%pts ahead of 2022
•
$1,019m operating profit
from reportable
segments
b
, up 23% vs 2022
•
Net cash from operating activities of
$893m (2022: $646m), adjusted free
cash flow
b
of $819m (2022: $565m)
•
Adjusted EPS
b
grew 33% to 375.7¢
•
Elie Maalouf appointed Group CEO
•
Michael Glover appointed Group CFO
•
Refreshed corporate strategy to drive
growth and long-term shareholder value
See information about our shareholders and
investors on page 36 and 104 and our KPIs on
pages 60 to 62.
*
Excluding Iberostar Beachfront Resorts
HOTEL
OWNERS
Owners choose to work with IHG based
on trust in our brands, our ability to drive
returns and the strength of our enterprise
– underpinned by a focus on the cost to
build, open and operate our hotels.
•
Enterprise contribution of ~80% of total
room revenue (vs 72% three years ago),
boosted by technology and channels
enhancements
•
Launched new midscale conversion
brand Garner
•
Guest How You Guest masterbrand
campaign lifted awareness and brand
favourability measures
•
Enhanced design, service and F&B
•
Launched new procurement programmes
to reduce costs across hotel lifecycle
•
Guest Reservation System now enabling
attribute upsell to drive revenue across
estate; pilots launched for new revenue
management system
•
IHG LIFT launched in US and Canada to
support historically under-represented
groups and further diversify owner base
See information about our hotel owners on
pages 22 to 25 and 37, and our net rooms
supply, signings, gross revenue and enterprise
contribution KPIs on pages 60 and 61.
OUR
GUESTS
We focus on ensuring the services,
technology and experiences we provide
meet evolving expectations, increase
consumer preference and loyalty, and
drive bookings.
•
Guest Satisfaction Index continued
to maintain a four-year high
•
Grew loyalty members to over 130m,
with record enrolments and ~20%
increase in Reward Nights vs 2022
•
New partnerships providing access
to music festivals and sporting events
•
Revenue driven by mobile app up 38%
and downloads up 60% YOY
•
Websites covering 92% of open hotels
redesigned and relaunched
•
Updated guest room and public space
designs, F&B and service
•
Strengthened artificial intelligence
capabilities to improve self-service
guest offer
•
Over 60% increase in new co-brand
credit card accounts YOY
See information about our guests on pages
22 to 25 and page 36, and our Guest Love KPI
on page 62.
OUR
PEOPLE
We champion an engaging, diverse and
high-performance culture and focus
on providing the tools, technology and
working environment we need to succeed
as individuals and as a business.
•
Employee engagement 87% (+1%pt on
2022). A Kincentric Global Best Employer
•
Rated 2nd on Financial Times Europe’s
Diversity Leaders 2024 list; recognised
as a top company for women by Forbes
•
Employee Resource Groups expanded
to foster diverse and inclusive culture
•
Strengthened partnerships with US
Historically Black Colleges to enhance
early careers pipeline
•
IHG University launched to support
development and drive performance
•
Extended conscious inclusion training
to hotel colleagues
•
Launched Leading for Growth Executive
Development Programme
See information about our people on pages
28 to 31 and 37, our employee engagement
KPI on page 63.
OUR COMMUNITIES
AND SUPPLIERS
We aim to improve millions of lives within
our communities by supporting disaster
relief, tackling food poverty and providing
skills training to help drive social and
economic change.
•
More than 39,000 colleagues
volunteered over 121,000 hours to
support their local communities
•
Supported charities providing aid
following 15 natural disasters
•
Expanded supplier diversity programme
to build inclusion through supply chain
•
More than 30,000 participants received
free access to skills and training through
our IHG Academy offerings
•
Launched IHG Community Tracker to
measure Journey to Tomorrow progress
•
Supported Global FoodBanking Network,
which operates in nearly 50 countries
See information about our communities and
suppliers on pages 32 and 33, 36, and 37 and
our IHG® Academy KPI on page 62.
PLANET
We are committed to reducing carbon,
waste and water usage so we can operate
and grow with our owners in ways that
minimise our impact on the planet.
•
3.8% reduction in carbon emissions per
occupied room since 2019; 1.9% absolute
reduction against baseline
•
Introduced new energy conservation
measures as brand standards
•
Expanded Community Solar to give more
US hotels access to renewable energy
•
Launched collaborations with
certification programmes so hotels can
showcase their sustainability credentials
to guests and corporate clients
•
Over 1,600 hotels accessed food waste
training, with over 37,000 courses
completed by managed and
franchised colleagues
•
Launched Meeting for Good to provide
more sustainable events
See pages 33 to 35, 52 to 59, and 238 to 240
for our planet, TCFD and Greenhouse Gas
(GHG) emissions disclosures, and our carbon
footprint KPI on page 63.
Strategic Report
3
IHG
| Annual Report and Form 20-F 2023
2023 in review
Chair’s statement
Deanna Oppenheimer
Non-Executive Chair
Significant investment
in recent years across
every aspect of IHG’s
enterprise platform
has strengthened
our competitive
edge and offer for
guests and owners.”
T
his has been another important year
of progress for IHG Hotels & Resorts,
characterised not only by excellent
financial per
formance underpinned by
strong guest demand and further growth
with our owners, but also a smooth evolution
of leadership and strategy that positions
the business for an exciting next chapter.
The backdrop to these achievements was
one of travel demand ahead of 2019 in many
markets and strong recovery in others, while
the attractiveness of our brand portfolio saw
the continued expansion of our footprint in
high-value markets and segments. This has
been achieved thanks to significant
investment in recent years across every
aspect of IHG’s enterprise platform to
strengthen our competitive edge and offer
for guests and owners.
In what was my first
full year as Chair, I have
been impressed in my conversations with
senior leadership, wider colleagues and
on market visits with how the business works
together to make this happen, with guests
and owners central to every plan. I have also
valued time spent meeting many owners
who clearly appreciate this commitment to
continuous improvement and delivering
strong returns.
Final dividend
104.0
¢
Final dividend proposed for 2023
(2022: 94.5�)
Total dividend
152.3
¢
Total dividend proposed for 2023
(2022: 138.4�)
Return of funds
$
750
m
Through share buyback
programme (completed
in December 2023)
$
800
m
Share buyback programme
approved for 2024
Strategic Report
4
IHG
| Annual Report and Form 20-F 2023
Leadership changes
Elie Maalouf became Group CEO on 1 July
2023, succeeding Keith Barr, who stepped
down following more than 30 years with the
business, including six as CEO. I would like to
thank Keith for his outstanding contribution
and leadership, which included growing
IHG’s brand portfolio, strengthening its
enterprise, embarking on a 10-year
responsible business plan and helping the
business navigate the Covid-19 pandemic
with such agility, clarity and care.
We place great value on succession
planning and talent development, and Elie
brings significant industry experience and
an excellent track record within the business.
Having successfully led IHG’s Americas
operations for eight years, where he oversaw
record profits, growth o
f the region’s estate
and the launch of new brands and formats,
the Board was unanimous in its assessment
that Elie was the best candidate for the job.
This was one of several leadership changes
in 2023 that underlines the depth of talent
at IHG, with Michael Glover replacing
Paul Edgecliffe-Johnson as Chief Financial
Officer, Jolyon Bulley becoming Americas
CEO and Heather Balsley replacing Claire
Bennett as Global Chief Customer Officer.
Each individual brings industry expertise,
a track record of excellent results and a deep
understanding of IHG and its business, and
I have great confidence in the leadership
team delivering success on the next stage
of IHG’s growth journey.
Importance of strategy
Elie is already instilling great passion and
energy for using the strong enterprise
platform established in recent years to realise
the full growth potential of the Company.
Central to this progress is having a clear
ambition and effective strategy, and Elie
has introduced refreshed versions of both
to the business in 2023 to sharpen our
focus on growth, succeed in a competitive
marketplace and prioritise long-term value
for all stakeholders.
The hotel industry brings joy like no
other – connecting people and helping
communities thrive. IHG and our hotels have
a central role to play, united by a purpose of
providing True Hospitality for Good for the
benefit o
f all stakeholders. This purpose is
embedded within our brands and culture
and is therefore unchanged within our
refreshed strategy. It also underpins our
Journey to Tomorrow programme, which
ensures our commitment to operate and
grow responsibly across the environmental,
social and governance (ESG) agenda is
woven into the fabric of the business.
The Board fully supports the evolution
of our strategy. It stays informed of how
colleagues are engaging with business
priorities and IHG’s wider culture through
feedback forums, including the work of
our designated Voice of the Employee
Non-Executive Director and IHG’s Colleague
HeartBeat survey.
Our purpose, ambition, strategy and
behaviours are all being applied to an
asset-light, fee-based, largely franchised
business model. This remains a great
strength of IHG, with a regional approach
enabling flexibility by market, and high cash
generation supporting enterprise investments
across brands, loyalty and technology that
enhance performance and drive growth,
and also create surplus funds to return
to shareholders.
During the year, important strategic
progress was made on several fronts.
Enhancements to IHG® One Rewards
strengthened loyalty, we introduced new
capabilities to our mobile app to enhance
the guest experience and drive owner
returns, and the launch of Garner™ added
a 19th brand to our portfolio in a midscale
segment with significant growth potential.
A cornerstone of how we work with owners
is helping them run an efficient business and
new procurement programmes and brand
prototypes were among key updates to
strengthen operational and commercial
support alongside close collaboration with
the IHG Owners Association. Further steps
were also taken towards our Journey to
Tomorrow commitments across our people,
communities and planet agenda.
The role of the Board
Amid a shifting global macro-economic
landscape, the role of the Board has been
to support and constructively challenge the
Executive Committee (EC) around how we
prioritise, manage risk, grow and generate
future value. Focus areas spanned our
approach to cybersecurity risk management
– including emerging risks, such as the rise
of arti
ficial intelligence – how we optimise
owner returns, and growth plans in the
context of a competitive landscape.
To support IHG’s operations and growth
aspirations, I place great importance on
ensuring our Board represents a rich blend
of backgrounds, expertise and experience
that reflects the
focus of the business and
the evolving corporate landscape.
As part of clear succession plans, several
Board changes took place during the year.
Jo Harlow retired following nine years of
excellent service, and we welcomed two
new Independent Non-Executive Directors.
Angie Risley joined in September, bringing
a wealth of board and senior management
experience from a career in HR spanning
executive roles across sectors including
hospitality, retail and banking.
Angie has succeeded Jo as Chair of
the Remuneration Committee and joins
the Responsible Business and Nomination
Committees. Sir Ron Kalifa joined in January
2024, bringing many years of technology
industry experience across strategy, sales,
marketing and operations, and joins the
Audit and Remuneration Committees.
Shareholder returns
Following a strong financial per
formance
this year, I am pleased to announce the
Board is recommending a final dividend
of 104 cents per ordinary share, an increase
of 10% on the
final dividend
for 2022.
An interim dividend of 48.3 cents was paid
in October 2023, taking the total dividend
for the year to 152.3 cents, representing
an increase of 10% on 2022. An additional
$750m was also returned to shareholders
through a share buyback programme
(completed in December 2023), taking the
total returns for the year to $1bn, and the
Board has approved a further share buyback
of $800m for 2024. The Board expects
IHG’s business model to continue its strong
long-term track record of generating
substantial capacity to enable investment
plans that drive growth, fund a sustainably
growing ordinary dividend, and allow
surplus capital to be returned to our
shareholders.
Looking ahead, as a global business, we
must remain alive to potential challenges
created by political instability and conflict
in parts of the world, but the industry has
proven its resilience over many years and its
future is a bright one. An expanding middle
class in emerging markets, rising GDP, and
consumer appetite to travel and stay in
branded hotels all remain fundamental
drivers of industry demand and future supply
growth. With strong leadership, talented
teams and a refreshed strategy focused on
capitalising on the powerful enterprise we
have created in recent years, I am confident
in IHG’s ability to drive performance, growth
and shareholder value.
There is real momentum in the business for
the year ahead, and I’d like to thank all our
colleagues for their hard work and dedication,
and our owners for their continued
confidence in IHG.
Deanna Oppenheimer
Non-Executive Chair
Strategic Report
5
IHG
| Annual Report and Form 20-F 2023
Chair’s statement
Elie Maalouf
Chief Executive Officer
Chief Executive Of
ficer’s review
Q
What have been the highlights since
becoming Group CEO in July 2023?
A
It is an honour to lead this iconic company
and one of many highlights so far has
been getting even closer to our markets.
I’ve really valued time spent meeting
colleagues, owners and shareholders
on visits across the world, seeing the
relationships we have built, hearing
first-hand what we are doing well, where we
need to go further and how we can best
work together to achieve shared success.
IHG has enormous growth potential and I’m
inspired by the passion of our teams and
the power of their collaboration to drive
performance and returns using the strong
enterprise platform we have built in
recent years. My predecessor, Keith Barr,
played a major role in laying the foundation
for an exciting chapter ahead, and I would
like to take the opportunity to thank him
on behalf of everyone at IHG.
Q
How did the Company perform in 2023?
A
Testament to the strength and scale of
our brands and wider enterprise platform,
I am proud to say we delivered an excellent
financial per
formance alongside strong
system size and pipeline growth. Very
healthy average daily rate and occupancy
pushed global RevPAR ahead of both
2022 and 2019 levels, with leisure leading
We talk to Elie Maalouf,
Chief Executive Officer,
about the Company’s
performance and outlook
Q&A
Key highlights in 2023
275
Hotels opened
(269 in 2022)
556
Hotels signed
(467 in 2022)
38
%
Of total openings and
signings were for our
Holiday Inn® Brand Family
22
%
Of our pipeline
now represented by
Luxury & Lifestyle brands
>$
1
bn
Record operating profit
becomes IHG’s
19
th
brand
Strategic Report
6
IHG
| Annual Report and Form 20-F 2023
the way, and business travel and group
activity improving steadily. The Americas
continued its upward trajectory with
RevPAR up 7.0% year-on-year, EMEAA
was up by +23.7% following a strong
performance in Continental Europe and
the reopening of Japan, and Greater
China increased by 71.7%, reflecting
a strong rebound in demand following
the lifting of pandemic restrictions.
That performance, coupled with fee
margin growth and disciplined cost
management, helped drive operating
profit to more than $1bn
for the
first time.
We returned $1bn to shareholders through
ordinary dividend payments and a $750m
share buyback programme, and a new
$800m share buyback programme for
2024 has been approved.
Our brands continued to grow around
the world, too. We opened 275 hotels,
contributing to net system size growth of
3.8%, and signed another 556 properties
into our global pipeline, which now stands
at 2,016 hotels – or 32% of today’s system
size. Notably, our openings and signings
performance in Q4 was one of our
biggest ever for development activity.
We can be proud of this performance
alongside all we have done to strengthen
our business further on multiple fronts
for guests and owners. On behalf of the
Executive Committee, I would like to
thank all our hotel and corporate teams
for delivering this excellent performance,
and our owners for their continued
commitment to IHG.
Q
How has IHG’s strategy changed since
you became Group CEO?
A
Our strategy needs to constantly evolve in
this dynamic industry. Having added eight
brands to our portfolio in the past six years
and made big investments in the enterprise
platform that supports them, it was
important to reassess how IHG capitalises
on what we have built to unlock and drive
growth in a competitive landscape.
Our purpose of True Hospitality for Good
remains unchanged and is something that
resonates strongly across the organisation,
in our communities and with those we
work with. However, our strategy has
evolved, starting with a simpler ambition
that sharpens our focus on what is central
to accelerating growth: being the hotel
company of choice for guests and owners.
We have also refreshed our strategic pillars
and looked carefully at the behaviours
we need to deliver them successfully.
Relentless Focus on Growth establishes a
targeted approach to expanding our brands
in high-value markets; Brands Guests and
Owners Love shows our explicit intention
to deliver for both; 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 remains
unchanged and in step with our Journey
to Tomorrow plan. These elements
combined are designed to drive us further
and faster towards realising IHG’s full
growth potential.
Q
What strategic progress was made
in 2023?
A
We advanced on multiple fronts,
strengthening our ability to capture guest
demand, deepening loyalty, and driving
returns and new growth opportunities
with our owners.
Our Holiday Inn Brand Family’s enduring
appeal saw it generate 38% of openings
and signings in the year. We continued
to diversify our exposure to different
segments, with our Luxury & Lifestyle
brands now representing 14% of our system
size and 22% of our pipeline – around
twice the size it was five years ago. Almost
a quarter of signings globally were in this
high-fee segment, and
flagship openings
included the Regent® Hotels Carlton
Cannes and Shanghai on The Bund.
We also continued to expand our offer in
other areas where we see strong demand
and growth opportunities. We launched
our conversion brand Garner in the
midscale segment – worth $14bn today in
the US alone. Our first two hotel openings
and seven signings were achieved within
months of launch in the US, and the brand
is already now heading for Japan and
Mexico. All our newer brands are gaining
traction, with the seven launched or
acquired in recent years – not including
Garner or our commercial agreement
with Iberostar – now accounting for 16%
of our pipeline. Conversions also remain
an important focus for us across all
segments, reaching record levels of 37%
of openings and signings combined.
Looking across the enterprise more
broadly, IHG One Rewards members
booked more than 55% of our room
nights globally in 2023, and in what
was a record year for enrolments, the
programme has now grown to more than
130 million members. Our mobile app
generated 38% more revenue in 2023 on
the back of fresh updates to personalise
the guest experience and grew downloads
by 60% year-on-year. Collectively, the
impact of these investments and more
are creating increasing value for our
owners, with enterprise contribution
rising from 72% to almost 80% in the past
three years. At the same time, we have
kept guest satisfaction at a four-year
high and we remain focused on working
closely with our owners to reduce the
cost to build, open and operate our hotels.
As we strengthen the business, it is
important we do so responsibly for
our people and the world around us.
Maintaining an inclusive, engaging
culture is vital to our success, so seeing
IHG once again named a Kincentric
Global Best Employer was a special
moment. We continued to support our
communities by responding to natural
disasters, creating opportunities for
people to learn new skills in our industry,
and making a positive difference to
thousands of people during Giving for
Good month. We also took further steps
to reduce our environmental impact in
several areas, including incorporating
more energy conservation measures into
brand standards, educating colleagues
on food waste and delivering more
sustainable events for corporate clients.
Q
How do you see the future of the
hotel industry?
A
The long-term prospects for our industry
are very attractive when you consider
global population growth, rising middle
classes and prosperity in emerging
markets, and people’s inherent desire to
travel. Oxford Economics is forecasting
the number of global hotel room nights
consumed to grow annually at an average
rate of +4.0% from 2023 through to 2033.
In the Americas, the world’s biggest
tourism market, where IHG has almost
4,500 hotels, industry forecasts expect
room nights to increase from 2.3 billion
to 3.0 billion by 2033. In Greater China,
where we strengthened our position as
the leading international hotel company
this year with the opening of our 700th
hotel, an extra 660 million room nights
are forecast over the same period.
Meanwhile, across EMEAA, there is growing
travel demand across key markets, from
Asia and the Middle East to Europe. This
landscape underpins global net new supply
growth for our industry. Over the past
decade, supply has grown annually at an
average rate of 2.4% and it is expected to
continue at a similar rate into the future.
These fundamentals and the outlook
have remained strong through varying
economic cycles, and so while as a global
business we must always remain agile in
an evolving macro-economic landscape,
we look forward to an important next
chapter of growth for IHG and value
creation for our owners and shareholders.
Elie Maalouf
Chief Executive Officer
Strategic Report
7
IHG
| Annual Report and Form 20-F 2023
Chief Executive Officer’s review
The hotel industry has
attractive tailwinds…
US disposable personal income
grew on average by
1.6
%
per annum between 2000 and 2023
Source: Federal Reserve Economic Data (FRED)
Globally, middle income
consumers spent
$
44
tn
in 2020, with this expected
to increase to
$
62
tn
by 2030
Source: The Brookings Institution
Global hotel room net new
supply grew
2.4
%
per annum between 2013 and 2023
Source: STR
T
he global hotel industry continued
to strengthen in 2023, benefitting
from further consumer appetite
for leisure stays and a robust return of
business demand, which together drove
record RevPAR levels.
The $700 billion hotel industry has
compelling structural growth drivers,
underpinned by factors including the
inherent needs and desires to travel for
business and leisure purposes, population
growth, and an expanding middle class in
emerging markets with increasing disposable
incomes. Spend on travel continues to be
among the most resilient of discretionary
areas for consumers, while demand for
business travel remains robust, with hotels
adapting to support flexible working trends
in the post-Covid-19 environment. Although
there are uncertainties within the wider
economic outlook, we anticipate a number
of tailwinds persisting through 2024,
including further progress in returning to
pre-Covid-19 levels of demand for group
travel to meetings and events, as well as the
ongoing recovery of travel demand to and
from Greater China as international
flight
capacity continues to increase.
In what is a relatively fragmented sector,
with 56% of rooms affiliated with a global
or regional chain, competitor pressures in
the branded space remain intense as all
major players pursue growth strategies
through a combination of organic growth,
partnership arrangements and acquisitions.
Branded hotel penetration has steadily
increased as a long-term trend, with this
expected to continue to grow as consumers
look to trusted brands to meet their evolving
expectations, particularly when it comes to
state-of-the-art technology and the skills,
scale and resources required to provide
guests with enjoyable, effective and
sustainable stays.
While there have been short-term challenges
impacting the completion and opening of
new-build hotels, primarily driven by the cost
and availability of
financing, there remains
a long-term need for new hotel supply to
satisfy the demand drivers previously
mentioned. Global hotel room net new
supply increased at a CAGR of 2.4% over the
10 years from 2013 to 2023, with industry
forecasts showing a similar rate across the
next five years.
Cost remains a significant barrier to building
a scale position in the global hotel industry,
whether that’s due to investment to build
and maintain the properties, establish
strong loyalty programmes and technology
platforms, or to develop and market leading
brands. Hotel owners affiliated with a major
global brand and enterprise system also
tend to generate higher returns.
The hotel industry is cyclical: long-term
fluctuations in RevPAR tend to reflect the
interplay between industry demand, supply
and the macro-economic environment.
At a local level, political and economic
factors, as well as those such as terrorism,
oil market conditions and significant
weather events, can also impact demand
and supply.
While the potential for macro-economic
challenges from factors such as persistent
inflation, higher borrowing costs and
geopolitical flashpoints create some
ongoing uncertainty in 2024, the attractive
industry fundamentals that led to the sector
outpacing global economic growth in 19 out
of 24 years between 2000 and 2023 remain
very firmly in place
for the long term.
As a global business, with a footprint in
over 100 countries, operating in the midst
of change and uncertainty is something
IHG is very used to and it continues to be
one of our greatest strengths. Our strategy
of developing a strong brand portfolio and
an industry-leading loyalty programme,
together with our fee-based income streams
and prevalent midscale positioning, means
we remain resilient through varying
economic cycles.
Industry overview
We operate in an industry with high growth potential,
underpinned by strong long-term fundamentals.
Strategic Report
8
IHG
| Annual Report and Form 20-F 2023
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
GDP
Revenue
0%
50%
100%
150%
200%
250%
300%
350%
Branded share
of global
room supply
Branded share
of global
active pipeline
78%
56%
1.4x
Branded hotel business models
There are two principal business models:
• A fee-based, asset-light model:
–
Franchised: owned and operated by
parties distinct from the brand, who
pay fees to the hotel company for use
of its brand.
–
Managed: operated by a party distinct
from the hotel owner. The owner pays
management fees and, if the hotel
uses a third-party brand name, fees
to that third-party, too.
• An owner-operated, asset-heavy model:
–
Owned: operated and branded by
the owner who benefits
from all
the income.
–
Leased: similar to owned, except
the owner-operator does not have
outright ownership of the hotel but
leases it from the ultimate owner.
Asset-heavy models generate returns on the real estate and centralise control over
operations. Asset-light models typically enable faster growth and generate higher
returns. This model tends to present lower risk to fluctuations in the economy.
and a track record of growth
Global hotel revenues have outpaced GDP growth, and are now ahead
of pre-Covid-19 levels
Global industry revenue vs global GDP, indexed to 1999
Global industry RevPAR
($)
RevPAR movements are illustrative of
lodging demand
2020
79.7
2019
2021
33.7
2022
50.7
2023
92.9
73.9
Source: STR
Global rooms supply
(m rooms)
Supply growth reflects the
attractiveness of the hotel industry
2020
19.5
2019
2021
19.7
2022
20.1
2023
21.4
20.6
Source: STR
with significant barriers
to entry…
The top five hotel groups
a
have
increased their market share
Share of top
five branded hotel groups
as % of global rooms supply
2020
23.9%
2019
2021
23.9%
2022
24.3%
2023
24.4%
24.4%
Consumers value loyalty
membership, which requires a
large-scale enterprise to deliver
76
%
Of consumers are more likely
to recommend brands with good
loyalty programmes
Source: Bond, in partnership with Visa
81
%
Of consumers are more likely
to use a brand if they are members
of its loyalty programme
Source: Bond, in partnership with Visa
With share expected to further expand
Branded share of global industry
supply and share of global industry
active pipeline
a
Includes IHG, Marriott International, Inc.,
Hilton Worldwide Holdings Inc.,
Wyndham Hotels & Resorts Inc., Accor S.A.
Source: STR
Source: STR
Source: STR
Strategic Report
9
IHG
| Annual Report and Form 20-F 2023
Industry overview
Franchised
a
72%
28%
<1%
<1%
2%
1%
Managed
Owned, leased
and managed lease
59%
41%
55%
26%
19%
Americas
EMEAA
Greater China
37%
35%
28%
14%
15%
61%
8%
Luxury & Lifestyle
Premium
Essentials
Suites
Exclusive Partners
22%
19%
46%
12%
T
he growth of our business relies
on two fundamental drivers:
increasing revenue per available
room (RevPAR) and expanding the number
of rooms in our system. RevPAR indicates
the value guests ascribe to a given hotel,
brand or market, and grows when they stay
more often or pay higher rates. Room supply
also reflects capturing structural growth
drivers of increasing demand to travel and
experience, as well as how attractive the
hotel industry is as an investment from an
owner’s perspective.
To drive growth, we have a portfolio of
19 brands across more than 100 countries in
the Luxury & Lifestyle, Premium, Essentials,
Suites and Exclusive Partners categories.
Supported by a leading loyalty programme
and powerful technology, our brands meet
clear guest needs and generate strong returns
for our owners, which in turn attracts further
hotel investment and grows our system size.
IHG is an asset-light business, and our focus
is on growing fee revenues and fee margins,
which we can do with limited capital
requirements. This enables us to grow and
invest in our business while generating high
returns on invested capital and strong
cash flow.
We generally franchise or manage hotels,
with the decision largely driven by market
maturity, owner preference and, in certain
cases, the particular brand. Hotels in the
Essentials category tend to be franchised,
while Luxury & Lifestyle hotels are
predominantly managed.
Our broad geographic spread and weighting
towards essential business and domestic
leisure has driven comparative resilience
during times of economic downturn. Although
this continues to be a core component of
our business, we have made excellent
progress in expanding our presence in the
Luxury & Lifestyle segment, which generally
generates higher fees per room. This category
is currently 14% of IHG’s system size, though
comprises 22% of the future growth pipeline.
Our asset-light business model means we
do not employ colleagues in franchise
hotels, nor do we control their day-to-day
operations, policies or procedures. That
being said, IHG and our franchise hotels
are committed to delivering a consistent
brand experience, conducting business
responsibly and sustainably so that we
deliver our purpose of providing True
Hospitality for Good.
Total development pipeline
296,954
rooms
Total system size
946,203
rooms
Composition of rooms
Composition of rooms
Our business model
We predominantly franchise our brands
and manage hotels on behalf of third-party
hotel owners. While we will continue to have
a weighting towards Essentials, our pipeline
shows an increasing proportion of growth
in the Premium and Luxury & Lifestyle
segments, as well as a more even
geographical spread.
a
Includes Iberostar Beachfront Resorts, which joined IHG’s system
and pipeline as part of a long-term commercial agreement.
Strategic Report
10
IHG
| Annual Report and Form 20-F 2023
How we generate revenue
Franchised hotels
We receive a fixed percentage o
f rooms
revenue when a guest stays at one of
our hotels. This is our fee revenue.
RevPAR X Rooms X Royalty rate
Managed hotels
We generate revenue through base
management fees and incentive
management fees.
Fixed % of total hotel revenue as a
management fee and typically a share
of hotel gross operating pro
fit a
fter
deduction of management fees
Exclusive partners
We receive marketing, distribution,
technology and other fees for providing
access to our enterprise platform.
Fee streams similar to our
asset-light model
Revenue attributable to IHG comprises:
•
Fee business revenue from
reportable segments:
–
Franchise fees
–
Management fees
–
Commercial agreement fees
–
Central revenue (principally
technology fee income)
•
All revenue from owned, leased and
managed lease hotels.
See page 85 for more information.
System Fund
IHG manages a System Fund for the
benefit o
f hotels within the IHG system
and their third-party owners, who pay
contributions into it. This includes a
marketing and reservation assessment
and a loyalty assessment.
The System Fund also benefits
from
proceeds from the sale of IHG One
Rewards points under third-party
co-branding arrangements.
Given the significant scale o
f the
System Fund, IHG can make substantial
investments in marketing brands,
creating a leading loyalty programme
and powerful technology, including
revenue management systems, thereby
strengthening the IHG enterprise.
The System Fund is not managed to
a profit or loss
for IHG over the longer
term, but for the bene
fit o
f hotels in the
IHG system, and comprises:
•
Assessments and contributions paid
by hotels.
•
Revenue recognised on consumption
of IHG One Rewards loyalty points.
Reimbursable revenues
In a managed property, the Group
typically acts as employer of the
general manager and, in some cases,
other employees at the hotel, and is
entitled to reimbursement of these
costs. The performance obligation is
satisfied over time as the employees
perform their duties, consistent with
when reimbursement is received.
See page 66 for more information.
For the small number of hotels
(representing <1% of our system size)
that we own or lease, we record the
entire revenue and profit o
f the hotel
in our financial statements.
Third-party owners pay
Owned, leased and
managed lease hotels
2023:
$
2,164
m
2023:
$
2,460
m
Fees
to IHG in relation to the licensing
of our brands and, if applicable, hotel
management services.
Assessments and contributions
that are collected for speci
fic use
within the System Fund, as well as
reimbursable revenues.
IHG fee revenue
System Fund and
reimbursable revenues
Strategic Report
11
IHG
| Annual Report and Form 20-F 2023
Our business model
Consistent uses of generated cash
Our priorities for the uses of cash are
consistent with previous years and
comprise three pillars:
1
Invest in the business
to drive growth
We look to strategically
drive growth, while
maintaining strict control
on investments and our
day-to-day capital
expenditures.
2
Target sustainable growth
in the ordinary dividend
IHG has a dividend policy
where we would look to
grow the ordinary dividend
each year, while balancing
all our stakeholder interests
and ensuring our
long-term success.
3
Return surplus capital
to shareholders
The Board expects our
asset-light model to
provide the opportunity
to routinely return
additional capital to
shareholders such as
through share buybacks.
Shareholder returns (2003-23)
($bn)
Source of returns
7.8
15.4
7.6
Asset
disposals
Operational
cash flows
Total
Our business model
continued
Capital allocation and dividend policy
Fee margin
a
by region
Americas
FY 2021
FY 2022
82.2%
FY 2023
82.2%
84.3%
EMEAA
FY 2021
FY 2022
FY 2023
21.5%
60.5%
52.7%
Greater China
FY 2021
FY 2022
47.3%
FY 2023
59.6%
26.4%
Total IHG
FY 2021
FY 2022
49.5%
FY 2023
59.3%
55.9%
a
Use of Non-GAAP measures: In addition to performance measures directly observable in the Group Financial Statements (IFRS measures), additional
financial measures
(described as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not de
fined under
IFRS or are adjusted IFRS figures. Further explanation in relation to these measures can be
found on page 84 to 88 and reconciliations to IFRS
figures, where they have been
adjusted, are on pages 226 to 231.
Our owned, leased and managed lease hotels tend to have significantly lower margins than our
fee business. This is because we not
only record the entire revenue of the hotel, but also the entire cost base, which includes staff and maintenance of the hotel.
Our asset-light business model requires
a limited increase in IHG’s own operating
expenditure to support our revenue
growth, which delivers operating profit
and fee margin growth.
The benefit o
f operational efficiencies,
along with brands and markets becoming
more mature, supported fee margin
expansion of around 130bps a year
between 2009 and 2019 in total for IHG.
For franchised hotels, the
flow through o
f
revenue to operating profit is higher than it
is at managed hotels, given the fee model
and our well-invested scale platform where
limited resources are required to support the
addition of an incremental hotel. This is most
evident in our Americas region, where fee
margins are the highest, reflecting our scale
and over 90% of our hotels operating under
our franchised model.
Across our managed hotels, the flow
through of revenue to pro
fit can be lower,
given higher operating expenditure on
operations teams supporting the hotel
network.
How we drive operating profit
Strategic Report
12
IHG
| Annual Report and Form 20-F 2023
Capital expenditure
Spend incurred by IHG can be summarised as follows:
Type
What is it?
Recent examples
Maintenance capital expenditure
and key money
Maintenance capital expenditure is devoted
to the maintenance of our systems and
corporate offices, along with our owned,
leased and managed lease hotels.
Key money is expenditure used to access
strategic opportunities, particularly in
high-quality and sought-after locations,
when returns are financially and/or
strategically attractive.
Examples of maintenance spend include
investment in corporate technology and
software, as well as office refurbishment
and maintenance. Across our owned,
leased, and managed lease hotels we
invest in refurbishment of public spaces
and guest rooms.
Examples of key money include
investments to secure representation for
our brands in prime locations.
Recyclable investments to drive
the growth of our brands and our
expansion in priority markets
Recyclable investments are capital used to
acquire real estate or investment through
joint ventures, equity capital, or loans to
facilitate third-party ownership of hotel
assets. This expenditure is strategic to help
build brand presence.
We would look to divest these investments
at an appropriate time and reinvest the
proceeds across the business.
Examples of recyclable investments in
prior years include our EVEN Hotels
brand, where we used our capital to
develop three hotel properties in the US
to showcase the concept. These hotels
were subsequently sold and now
operate under a franchise agreement.
More recently, recyclable investments
have included the initial purchasing of
sites for the Six Senses brand to be
developed in key markets in the US.
System Fund capital investments
for strategic investment to drive
growth at hotel level
The development of tools and systems that
hotels use to drive performance. This is
charged back to the System Fund over the
life of the asset.
We continue to invest in a range of
upgraded technology solutions,
including the ongoing development of
IHG’s mobile app and IHG One Rewards
loyalty evolution.
Dividend policy and shareholder returns
The Board consistently reviews the
Group’s approach to capital allocation
and seeks to maintain an efficient balance
sheet and investment-grade credit rating.
IHG has an excellent track record of
returning funds to shareholders through
ordinary and special dividends, and share
buybacks. The ordinary dividend paid to
shareholders increased at an 11% CAGR
between 2004 and 2019, and at a 10%
CAGR after resuming dividend payments
at the end of 2021.
Our asset-light business model is highly
cash generative through the cycle and
enables us to invest in our brands and
strengthen our enterprise. When
reviewing dividend recommendations,
the Board looks to ensure that any
recommendation does not harm the
sustainable success of the Company
and that there are sufficient distributable
reserves to pay any recommended
dividend. The Board assesses the Group’s
ability to pay a dividend bearing in mind its
responsibilities to its stakeholders and its
objective of maintaining an investment-
grade credit rating. One of the measures
we use to monitor this is net debt:adjusted
EBITDA and we aim for a ratio of 2.5-3.0x.
$500m of surplus capital was returned
via a buyback programme announced in
August 2022 and then a further $750m via
a subsequent programme over the course
of 2023. The highly cash-generative nature
of our business model means we expect to
have substantial ongoing capacity to return
further surplus capital to shareholders, such
as through share buybacks, as we look to
move leverage into our target range
over time.
The Board intends to continue sustainably
growing the ordinary dividend and to typically
pay dividends weighted approximately
one-third to the interim and two-thirds to the
final payment.
In February 2023, IHG’s Board proposed
a final dividend o
f 94.5¢ in respect of
2022, representing growth of 10% on that
for 2021. The proposal was subsequently
approved at the AGM and paid to
shareholders on 16 May 2023.
In August 2023, IHG’s Board declared
an interim dividend of 48.3¢ per share,
representing growth of 10% on 2022’s
interim dividend. This was paid to
shareholders on 5 October 2023.
The Board is proposing a final dividend o
f
104.0¢ in respect of 2023, representing
growth of 10% on that for 2022. The
proposed total dividend for the year is
therefore 152.3¢. Further, the Board have
approved a share buyback programme
to return an additional $800m of surplus
capital in 2024. Given expectations for
growth and EBITDA in 2024, leverage is
expected to be around the lower end of
our target range of 2.5-3.0x.
Strategic Report
13
IHG
| Annual Report and Form 20-F 2023
Our business model
The rebound in business travel has reignited another trend –
blended travel, where business and leisure are combined into one
stay, by either taking the time to explore the local destination during
a business or work trip, or by adding a holiday onto the beginning
or end of a business trip or conference.
A shift to remote working in recent years is contributing to the rise
in popularity of blended travel. According to a 2023 survey by the
Global Business Travel Association (GBTA), business travellers are
blending business and personal travel more frequently than they did
in 2019. Additionally, guests are increasingly extending their trips,
with 42% of travellers adding leisure stays to their business trips
in 2023 and 79% staying at the same accommodation for business
and leisure portions of their trip. Blended travel is set to become
more popular in the coming years, with Euromonitor forecasting
that global spend by travellers combining business and leisure will
more than double by 2027 compared with 2021.
Alongside blended travel, the growth in popularity of co-working
can provide an opportunity for hotels to reimagine under-used
spaces and appeal to new guests, particularly younger generations,
and attract the local population.
Our responses include:
•
Continuing to roll out the innovative Open Lobby for Holiday Inn®
in new markets, which gives guests and visitors a welcoming
space to relax, work or socialise.
•
Launching new concepts such as Meetings Without Boundaries for
Crowne Plaza® Hotels & Resorts to capitalise on the rising demand
for
flexible meetings and gatherings.
•
Expanding our portfolio of extended stay properties across our
Suites collection, including Candlewood Suites® and Staybridge
Suites®, to offer guests an unparalleled extended stay experience.
See pages 20 to 24 for more information.
Trends shaping our industry
1
Blended
travel
Over the past few years,
the travel and tourism industry
has demonstrated its enduring
importance for millions globally.
Despite the backdrop of short-
term macro pressures and
uncertainty, consumers continue
to value and feel passionately
about travel, with surveys
indicating it to be among the
most resilient of discretionary
spending areas. As we look to
2024 and beyond, we are seeing
the evolution of several trends
and travel habits that are likely
to strengthen in our industry
over the coming years.
T
his section focuses on three trends that are
becoming increasingly prominent in our industry;
the rise of blended travel supported by the shift
to remote working in recent years; increased interest in
sustainable travel; and the growing role of technology,
which is creating more opportunities for personalised
travel experiences.
Strategic Report
14
IHG
| Annual Report and Form 20-F 2023
Guests and organisations are increasingly focused on the
environmental impact of their travel. A study by the World Travel and
Tourism Council (WTTC) revealed that 75% of travellers are looking
to choose sustainable travel in the future, while 59% have chosen
some form in recent years. Business customers are also increasingly
paying closer attention to sustainability, with 92% of business travel
professionals stating it is a priority for their organisation, according
to a recent survey by GBTA. This trend is set to strengthen, with
increased public scrutiny, more media coverage, and stricter reporting
rules leading to more companies reporting on their GHG emissions.
As sustainability concerns grow, guests are expected to choose
companies prioritising sustainable practices. However, according to
a Boston Consulting Group (BCG) study, 10% of consumers currently
prioritise sustainability as a top driver of choice when making travel
purchasing decisions. Travel companies must continue collaborating
to establish shared frameworks that enable guests to easily access
and act on sustainability information – for example, improving
booking tools to display relevant sustainability details across the
travel ecosystem.
Technology is redefining the travel experience,
from helping inspire
guests for their next trip to customising their in-room stay experience.
Guests increasingly rely on digital technology, such as social media,
web searches and online reviews, for inspiration and information.
In fact, 75% of travellers say they have been inspired to travel to
a specific destination by social media, while 48% want to travel
to destinations that will allow them to ‘show off on social media’,
according to a survey by American Express Travel.
According to Deloitte research, hotels are among the most popular
categories of personalisation among customers (47%) and many
customers are willing to pay more for a customised product or
service. This includes booking a room with a view or more space or
being able to stream content from their devices to their in-room TV.
Hotel companies are also continuing to leverage advances in artificial
intelligence (AI), machine learning (ML) and analytics to create more
personalised and targeted experiences for guests, and to help inform
marketing, customer service and revenue forecasting.
Our responses include:
•
Progressing towards our Science-Based Target (SBT) through
initiatives such as driving energy efficiency across our existing
hotels, facilitating access to renewable energy opportunities and
developing plans for new-build hotels that operate at low carbon.
•
Supporting hotels with the launch of the new Meeting for Good
sustainable meetings programme and by facilitating access
to leading third-party sustainability certification programmes.
•
Playing an active role in cross-industry conversations focused on
driving visibility, alignment and clarity in sustainability initiatives
relevant to travellers, including corporate customers.
See pages 33 to 35, and 52 to 59, for more information.
See our Responsible Business Report (RBR)
ihgplc.com/responsible-business/reporting
Our responses include:
•
Launching IHG® Wi-Fi Auto Connect to allow members to
connect to the hotel’s wi-fi automatically, seamlessly and securely
upon arrival.
•
Launching a next-generation IHG mobile app to give our guests
more choice and unlock the benefits o
f our transformed IHG One
Rewards loyalty programme.
•
Rolling out the ability to upsell unique room attributes across
the estate, enabling a more seamless and personalised
booking experience.
See pages 22 to 23, 26 to 27, and 36, for more information.
3
2
Increasing focus
on sustainability
Technology enhancing
guest experiences
Strategic Report
15
IHG
| Annual Report and Form 20-F 2023
Trends shaping our industry
A brand
for everyone
Our focus on having a diverse
selection of brands has transformed
our portfolio, enabling us to meet the
needs of a broader range of guests
and owners, while growing our estate
to more than 6,300 hotels globally.
O
ur investment in the quality of our established
brands, coupled with the introduction of
eight new additions over the past six years,
has significantly expanded our o
ffer across segments
ranging from Essentials and Suites to Premium and
Luxury & Lifestyle.
The demand for branded players continues to drive
fresh opportunities to reach scale in high-growth
markets, as guests seek new experiences and owners
look for more ways to grow with us. This year, we
launched our 19th brand, Garner. Designed for the
midscale conversion space and complementing our
new-build brand avid™ hotels, its arrival signals our
intent to establish an industry-leading presence in
midscale, just as we have in upper midscale with our
iconic Holiday Inn Express® and Holiday Inn® brands.
Accounting for 37% of openings and signings combined
globally in 2023, conversions continue to grow in
importance and Garner strengthens our offer by giving
owners quick access to IHG’s scale, enterprise platform
and loyalty programme.
We also continue to diversify the mix of our estate, with
our Luxury & Lifestyle brands increasing our exposure
to high-fee income segments. IHG is now one of the
industry’s biggest players in this segment, with Luxury
& Lifestyle collectively representing 22% of our pipeline
– around twice the size it was five years ago.
To support the growth of all our brands, we continue
to invest in our enterprise, including our digital channels,
a transformed IHG One Rewards loyalty programme and
a powerful marketing campaign behind our IHG Hotels
& Resorts masterbrand to grow awareness of our brands
and drive demand to our hotels.
14
%
Of system size made
up of Luxury & Lifestyle
brands, along with
22% of pipeline
Strategic Report
16
IHG
| Annual Report and Form 20-F 2023
25
open
42
pipeline
10
open
11
pipeline
222
open
100
pipeline
11
open
18
pipeline
78
open
54
pipeline
153
open
132
pipeline
62
open
74
pipeline
20
open
25
pipeline
408
open
126
pipeline
26
open
33
pipeline
PREMIUM
2
open
41
pipeline
325
open
164
pipeline
30
open
2
pipeline
376
open
151
pipeline
SUITES
MASTERBRAND AND LOYALTY
EXCLUSIVE PARTNERS
49
open
5
pipeline
IHG system size includes 124 other and unbranded hotels, of which eight will be rebranded to voco and
five will be rebranded to Vignette Collection.
IHG pipeline includes 14 other and unbranded hotels.
3,171
open
632
pipeline
1,202
open
246
pipeline
2
open
5
pipeline
67
open
141
pipeline
ESSENTIALS
LUXURY & LIFESTYLE
Strategic Report
17
IHG
| Annual Report and Form 20-F 2023
A brand for everyone
T
hese changes build on the investments
we have made to transform our business
in recent years, where we have expanded
our portfolio from 11 to 19 brands and signi
ficantly
strengthened our enterprise. This includes a
transformed 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, bring positive change in our
communities and deliver more sustainable hotels.
Our purpose of True Hospitality for Good remains at the
heart of our brands and culture and is therefore unchanged,
but as an organisation, we have simplified our ambition
to focus on what is central to accelerating growth: being
the hotel company of choice for guests and owners.
To make it happen, we have fine-tuned our strategic
pillars and introduced new behaviours to sharpen our
mindset for success and accelerate our growth by
capitalising on what we have built.
Over the long term, with disciplined execution, our strategy
drives the growth of our brands in high-value markets.
It creates value for all our stakeholders and delivers
sustained growth in cash flows and profits, which can be
reinvested in our business and returned to shareholders.
Our strategy
In 2023, to further strengthen our ability to drive future
growth, we evolved key elements of our strategy, including
our ambition, strategic pillars and growth behaviours.
WHAT WE DO
Provide True Hospitality for Good
WHY WE DO IT
To be the hotel company of choice
for guests and owners
HOW WE MAKE IT HAPPEN
AMBITIOUS
DEDICATED
COURAGEOUS
RELENTLESS
FOCUS ON GROWTH
BRANDS GUESTS
AND OWNERS LOVE
LEADING
COMMERCIAL
ENGINE
CARE FOR
OUR PEOPLE,
COMMUNITIES
AND PLANET
CARING
OUR GROWTH BEHAVIOURS
Our strategy
Strategic Report
18
IHG
| Annual Report and Form 20-F 2023
Strategic overview
Relentless focus
on growth
Brands guests
and owners love
We are accelerating the global growth of our brands
on the back of a transformed portfolio that’s giving
our guests and owners more choice across segments.
In 2023, we launched our midscale conversion brand
Garner, grew and strengthened both new and existing
brands, and extended our presence in Luxury & Lifestyle.
See pages 20 to 21.
We are focused on delivering tailored services and
solutions to meet the expectations of guests and owners.
In 2023, this included strengthening guest benefits
for
IHG One Rewards, building awareness of our masterbrand
and reducing costs for owners.
See pages 22 to 25.
275
Hotels opened in 2023
4
Our Guest Satisfaction Index continued to maintain a four-year high
Leading
commercial engine
Care for our people,
communities
and planet
We invest in the tools, technology and solutions that make
the biggest difference for guests and owners. In 2023, the
growth of IHG One Rewards membership at a record rate
and strengthened enterprise contribution were among key
strategic highlights.
See pages 26 to 27.
With more than 6,300 hotels in our global estate, it’s vital
that as we grow, we do so responsibly and sustainably
for our communities, the environment and the long-term
success of our business. In 2023, we made signi
ficant
progress in investing in our people and culture, bringing
positive change to our communities and delivering more
sustainable hotels.
See pages 28 to 35.
~
80
%
Enterprise contribution, up from 72% three years earlier
>
30,000
Participants received free access to skills and training through
our IHG Academy
Strategic Report
19
IHG
| Annual Report and Form 20-F 2023
Our strategy
Our strategy continued
W
e have grown our portfolio from
11 to 19 brands in just six years
alongside significantly investing
in the quality of our existing ones to fuel
demand from owners and guests globally.
This transformed portfolio is increasing the
breadth of our offer across every segment.
Supporting our brands is a sharper, stronger
enterprise, including our award-winning
IHG One Rewards loyalty programme,
masterbrand and a transformed web
and mobile experience.
Our focus is on using what we have built
to grow our brands at pace in high-value
markets and segments around the world.
What we achieved in 2023
We opened 275 hotels in 2023 to surpass
6,300 globally and signed another 556 to
our pipeline, taking it to 2,016 hotels. Our Q4
openings and signings performance was one
of our biggest-ever quarters for development
activity, while across the year we saw 31 hotel
openings represent a debut in a new country
for a particular IHG brand.
The enduring appeal of our heritage brands
was seen in Essentials, where our Holiday
Inn Brand Family generated 38% of hotel
openings and signings globally, and in
Premium, where Crowne Plaza reached
534 open and pipeline hotels, supported
by a modernised Americas estate and
growth in markets such as Greater China,
where it is the leading upscale brand.
To unlock the growth potential of what is
already one of the industry’s biggest Luxury &
Lifestyle portfolios, we made organisational
PRIORITY:
Relentless
focus on
growth
2023 AT A GLANCE
Surpassed
6,300
Open hotels globally
2,016
Pipeline hotels, equivalent
to 32% of today’s system size
>
40
%
Of global pipeline
under construction
37
%
Of openings and
signings combined
were conversions
Garner becomes
IHG’s 19th brand
Hotel openings
representing a debut
in a new country for
a particular IHG brand
31
20
IHG
| Annual Report and Form 20-F 2023
Strategic Report
Crowne Plaza Utrecht – Central Station,
the Netherlands
The first Garner Hotel officially opened in Auburn, Washington in the US on 18 December, 2023
changes to ensure central support teams
and regional colleagues work together to
create offers tailored to local market priorities.
We reached 150 openings and signings in this
segment in 2023, including the first Vignette™
Collection in the Americas and the return
of InterContinental® Hotels & Resorts to
Rome – one of 37 openings and signings for
the brand as its pipeline reached 100 hotels
for the
first time. With properties secured
in more than 20 countries, the rapid global
expansion of Kimpton® Hotels & Restaurants
continued, including a debut signing in Saudi
Arabia. The iconic Regent Carlton Cannes was
among several halo properties showcasing
key brand hallmarks in what was a strong year
for the brand, where other
flagship openings
included Shanghai on The Bund. Six Senses®
Hotels, Resorts & Spas reached a landmark
25th property, with the opening of the
Southern Dunes, The Red Sea in Saudi Arabia,
while a debut opening in Sydney was among
42 openings and signings for Hotel Indigo®.
Underlining the pace and scale of our
progress, our six Luxury & Lifestyle brands
now collectively represent 22% of our
rooms pipeline – around twice the size of
five years ago. In November, 31 Luxury &
Lifestyle properties were awarded Condé
Nast Traveler’s Readers’ Choice Awards
– 10 more than the previous year.
Our strategic focus on accelerating
conversion deals continued to drive
growth. They reached record levels in 2023,
comprising 37% of openings and signings
combined, thanks to our work to increase
the breadth of our portfolio and strengthen
our enterprise for owners looking for fast
access to our scale and systems.
To further accelerate our growth, we
launched our new Essentials midscale
conversion brand, Garner, to complement
our new-build avid hotels brand in the space.
Garner gives guests one-of-a-kind trusted
stays at a lower price point and serves
demand from hotel owners to convert to an
IHG brand and quickly benefit
from access
to our enterprise platform, including our
revenue-generating systems, distribution
channels and loyalty programme that
support performance, increase efficiencies
and drive returns. Since becoming
franchise-ready in the US in September,
Garner rapidly achieved its first seven
signings and two openings by the end of
the year. The brand will also head to other
markets in 2024, including Mexico and
Japan. We expect Garner to reach an estate
of over 500 hotels over the next 10 years
and 1,000 hotels over the next 20 years.
Strong progress with newer brands continued.
Celebrating its fi
fth birthday, avid reached
67 open hotels, including its first in New York,
while Atwell Suites™ grew its pipeline to 41.
To support demand in the US, we are
educating lenders about the performance,
revenue opportunities and return on
investment of these two brands and have
provided owners with ground-break incentives
to speed up building time. Also continuing
its growth trajectory, Vignette Collection has
now secured 29 Luxury & Lifestyle properties
in two years since launch, while fast-growing
Premium brand voco™ hotels achieved debut
openings in Japan and Vietnam on the way
to reaching 136 open and pipeline hotels.
In our Exclusive Partners category, 49 out
of up to 70 Iberostar Beachfront Resorts
properties were added to IHG’s system to
capitalise on the growing demand for resort
and all-inclusive stays.
Specifically in Greater China, we surpassed
700 open hotels in 2023. The pace of
development activity has increased since
we introduced our franchising model a few
years ago as part of a shift away from a more
managed estate. This model is now available
across Holiday Inn Express, Holiday Inn,
Crowne Plaza, EVEN™ Hotels and voco, and
by the end of 2023 had contributed to 38%
of our open estate and more than 50% of
our pipeline in the region.
What’s to come
We have grown our development pipeline
to more than 2,000 hotels, the equivalent
of 32% of today’s system size. This, coupled
with key investments in our enterprise, sets
the stage for sustainable system size growth
in the years ahead.
Our focus areas include extending the
leadership of our Essentials brands, such as
Holiday Inn and Holiday Inn Express, in major
markets by building on our work to optimise
the cost to build, open and operate.
We will speed up conversion deals to
capitalise on owner demand and growth
opportunities, including taking Garner
to scale quickly in the midscale segment.
We will also work closely with owners to
continue expanding other newer brands,
such as avid and Atwell Suites, as part of
a more comprehensive owner engagement
strategy designed to accelerate building and
ramp-up for new hotels across our estate.
In Luxury & Lifestyle, we will focus on
asserting our leadership of this higher-fee
space by embedding our growth strategy
and new operational approach, as well as
expanding our branded residences offer.
Strategic Report
21
IHG
| Annual Report and Form 20-F 2023
Our strategy |
Relentless focus on growth
O
ur success relies on putting our
guests and owners at the heart
of everything we do to ensure
our business and brands stand out as
the preferred choice for exceptional
experiences and strong returns.
What we achieved in 2023
With strong demand around the world
pushing RevPAR 16% ahead of 2022 levels
and almost 11% up on 2019, we are greeting
guests with fresh experiences, enhanced
service and the latest technology to meet
evolving expectations.
Our IHG One Rewards programme plays
a key role in capturing guest demand.
Since transforming our loyalty offer in 2022,
we have scaled its benefits, making Food
& Beverage Rewards redeemable at more
than 5,900 hotels globally and increasing
Reward Nights by around 40% since 2019.
The programme continues to gain notable
industry recognition, too, including winning
seven Freddie Awards in 2023, the most
prestigious member-generated awards in
the travel loyalty industry.
Our mobile app supports access to IHG One
Rewards and this year we have continued to
enhance its capabilities alongside creating
easier-to-navigate brand websites. These are
at the heart of a smoother, richer customer
Our strategy
continued
PRIORITY:
Brands
guests and
owners love
2023 AT A GLANCE
Extended reach of
Guest How You Guest
campaign, lifting
awareness and brand
favourability measures
New procurement
programmes
enabling owners
to benefit
from
IHG’s scale
IHG One Rewards loyalty
programme members
have grown to
>
130
m
Guest Satisfaction Index
maintained at
a four-year high
Advocated for our owners
and industry through
collaboration with
governments and
trade bodies
22
IHG
| Annual Report and Form 20-F 2023
Strategic Report
booking journey that features several stay
enhancements, including the upsell of unique
room attributes, where guests can seamlessly
select add-ons and tailor their stays.
Our technology continues to improve
customer service, with innovations being
made through artificial intelligence (AI)
that are providing a more intuitive guest
experience for our Digital Concierge chatbot
service. Speech AI is dealing with reservation
conversations, we continue to roll out IHG
Voice to automatically handle calls in hotels
to reduce the burden on busy teams and our
24/7 asynchronous service is enabling guests
to resolve their queries with reservations and
customer care agents via chat. 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 with a year earlier,
with the potential for this to continue growing
and driving additional cost-efficiency and
effectiveness for our owners, as well as
further increases in guest satisfaction.
We have also introduced further
enhancements on property. This includes a
next-generation payments system speeding
up check-in and reducing fees for owners
at more than 3,800 hotels in the US and
Canada and the rollout of IHG Wi-Fi Auto
Connect to connect IHG One Rewards
members to hotel wi-fi automatically.
Key updates to our brands included an
upgraded breakfast for Holiday Inn in the
US and Canada with streamlined labour
costs, a vibrant new service culture for
InterContinental to drive performance and
growth, and improved breakfast and design
for Holiday Inn Express in Greater China.
The work we are doing in collaboration
with our owners and hotel teams is making
a difference for guests, with our Guest
Satisfaction Index, which measures our
outperformance against peers, continuing
to maintain a four-year high.
For corporate guests, we are supporting
organisations in how they are bringing their
teams together in today’s hybrid world.
We launched Meeting for Good to provide
more sustainable meetings and events
and a new programme for Crowne Plaza in
Greater China that blends social areas and
work spaces to meet demand for combined
business and leisure travel.
For our hotel owners, we remain focused on
providing the operational and commercial
support they need to strengthen performance
and capture demand. IHG One Rewards is
playing a central role, having grown to more
than 130 million members in 2023. Supporting
it in attracting consumer attention and driving
revenue to our hotels is our masterbrand
strategy, which is putting IHG Hotels &
Resorts in more places, more often, to lift
awareness and brand favourability measures.
At the heart of this approach is our Guest
How You Guest global marketing campaign,
which extended its reach across markets,
channels and events to increase IHG’s
appeal with key demographics, supported
by targeted regional promotions and brand
marketing campaigns – including our largest
ever for Hotel Indigo.
We continue to engage closely with our
hotel teams and owners on how we can
best drive performance – connecting with
General Managers on regular calls and at
regional conferences, and with owners
through webinars, meetings and our
first-ever IHG Americas Premium Investors
& Leadership Conference in 2023.
During the year, we introduced more
efficient design prototypes for renovations
and new-builds across several of our brands
and expanded our procurement solutions
to create more resilient supply chains that
benefit
from IHG’s scale. This includes the
rollout of our new Hotel Purchasing Services
programme for our Essentials and Suites
brands in the Americas and select markets
throughout EMEAA, providing end-to-end
support to speed up renovations and
openings. Our Group Purchasing Organization
agreements now cover more than 100,000
items and our Procure-to-Pay platform in
Europe, Greater China and the Middle East
also allows hotels to purchase products
collectively to reduce costs.
Developing sustainable solutions is crucial
to the long-term success of IHG, our owners’
businesses and the industry, and this year we
have made progress while at the same time
strengthening owner returns. For example,
we have expanded our Community Solar
initiative to provide access to renewable
energy in several US states, helping reduce
hotel energy bills; our turnkey financing
solution is simplifying the installation of
energy conservation measures; and our
collaboration with certification programmes
is enabling owners to showcase their
sustainability credentials to guests and
corporate clients to increase bookings and
drive revenue.
See pages 33 to 35 to find out more.
Important work continues on supporting
the industry on a broader scale, as we
collaborate with governments, peers and
trade bodies on a range of issues. We also
launched IHG LIFT in 2023 to create more
hotel development support in the US and
Canada for historically under-represented
groups within the hospitality industry and
to further diversify our owner community.
We continue to
engage closely
with our hotel
teams and
owners on how
we can best drive
performance.”
Award-winning
7
Freddie Awards won by our
IHG One Rewards loyalty programme
voco Brussels City North, Belgium
Strategic Report
23
IHG
| Annual Report and Form 20-F 2023
Our strategy |
Brands guests and owners love
Our strategy
continued
Brands guests and owners love
continued
What’s to come
We are focused on making the IHG Hotels &
Resorts masterbrand a household name that
continues to drive awareness of our brands.
We will do this by showcasing the strength
of our offer across segments through
dedicated marketing support, global brand
campaigns and strategic partnerships.
The quality and consistency of the guest
experience also remains a key focus – from
loyalty recognition to property condition
– and we will deliver training, data insights
and property improvement plans to support
hotels. Enhanced loyalty benefits, service
and digital products will help create even
richer and more rewarding guest
experiences in 2024.
For our owners, we will continue to reduce
the cost to build, open and operate our hotels,
from delivering cost-effective brand formats
to creating efficiencies in furniture,
fixtures
and equipment. Supporting this, we will
bring our new Hotel Purchasing Services
programme to scale to ensure a more
seamless opening process for more of our
owners, while tailored supply chain solutions
will support further rapid growth of our newer
brands and Luxury & Lifestyle portfolio.
Hotel Indigo Galapagos, Ecuador
Strategic Report
24
IHG
| Annual Report and Form 20-F 2023
Hotel owners choose to work with IHG because of the trust they
have in our brands and our track record in delivering strong returns.
Why hotel owners choose to work with IHG
Strength of brands
A portfolio of brands across
industry segments, designed
to drive owner returns
Strong loyalty
programme and
enterprise contribution
Almost 80% of room
revenue delivered to
hotels by IHG’s managed
channels and sources
Commercial engine
We have invested in
our cloud-based IHG
Concerto
TM
platform,
including our Guest
Reservation System
and our digital
channels, to enhance
the guest experience
and strengthen
owner returns
Investment in hotel lifecycle
management and operations
We have invested in technology,
systems and processes to
support performance, increase
efficiencies and drive returns
for our owners
Procurement
We use our scale to reduce
costs for owners, with
procurement programmes
for hotel goods, services
and construction
Sustainability
tools and expertise
We have developed
tools, training and
programmes to
support hotels and
provide better data
and insights to enable
them to reduce their
energy, waste and
water consumption
Global sales organisation
We have developed
a global sales enterprise
to drive higher-quality,
lower-cost revenue to
our hotels
Strategic Report
25
IHG
| Annual Report and Form 20-F 2023
Our strategy |
Brands guests and owners love
I
nvestments in our loyalty programme,
technology platforms, data and analytics,
and partnerships are raising the bar on the
guest experience and driving commercial
performance for IHG. Every solution and
tool we are developing is firmly
focused
on gaining competitive advantage for our
brands, business and owners.
What we achieved in 2023
Illustrating the success of our commercial
engine across our technology platforms,
sales and distribution channels, in 2023
we saw enterprise contribution from
IHG-managed channels and sources reach
almost 80%, up from 72% three years ago.
Our ability to provide hotel owners with
higher-value customers at a lower cost
of customer acquisition in this way is key
to the attractiveness and proven success
of our entire enterprise.
Our transformed loyalty programme is
playing an important role in our progress.
Members spend approximately 20% more
in hotels than non-members and are around
10 times more likely to book direct. In 2023,
we achieved a record year for enrolments,
which were up 50% on 2022 and 24% ahead
of 2019, taking us to more than 130 million
members. Loyalty penetration also increased,
with members responsible for over 55% of
room nights globally during the year.
We know that recognised members are also
20% more likely to return to a property, so
we are working closely with our hotel teams
to embed a culture of loyalty. This includes
setting up a taskforce providing materials,
job aids and training for colleagues, and
Our strategy
continued
PRIORITY:
Leading
commercial
engine
2023 AT A GLANCE
50
%
Increase in loyalty enrolments
year-on-year
–
a record rise
~
80
%
Enterprise contribution
from IHG-managed
channels and sources
– up from 72% three years ago
38
%
Increase in revenue
driven by app
year-on-year
>
60
%
Increase in new US co-brand
credit card accounts
year-on-year
>
6,000
Hotels now featuring attribute
upsell, enabling guests to
personalise their stays
Loyalty penetration increased,
with members now responsible for
>
55
%
of room nights globally
26
IHG
| Annual Report and Form 20-F 2023
Strategic Report
introducing incentives like Food & Beverage
Rewards for guests to drive repeat bookings
in a way that minimises impact on the
bottom line for owners.
Following the update of US co-brand credit
cards alongside the relaunch of our loyalty
programme, the number of new accounts
have continued to increase very strongly
and, in 2023, were up more than 60%
year-on-year and over 80% on 2019 levels.
There has also been continued growth in
average card spend, both on a year-on-year
basis and vs 2019.
Further deepening our relationships with
guests and driving more business to our
hotels, we have expanded our strategic
partnerships to enable IHG One Rewards
members to redeem points in exchange for
more unique experiences at sporting events
and music festivals, as well as exclusive
member privileges with other leading brands.
As the gateway to IHG One Rewards, our
mobile app is also playing an integral role
in driving loyalty contribution, direct
bookings and incremental spend during
stays. Since relaunching it in 2022, we have
made thousands of enhancements to further
improve the guest experience and drive
revenue to our hotels. It has achieved strong
user ratings in the App and Google Play
stores and the IHG mobile app and other
mobile channels now account for 58% of all
digital bookings. The number of downloads
were up 60% year-on-year, too, with revenue
driven by the app increasing 38%.
In Greater China, we continue to enhance
our capabilities on WeChat – the region’s
popular messaging, social media and mobile
payment app. Updates to the IHG WeChat
channel contributed to an 8% increase in
booking conversion rates year-on-year and
it generated nearly twice as much revenue.
Our mobile app is part of a wider
transformation of the booking journey.
By the end of 2023, refreshed brand
websites covering 92% of open hotels had
been redesigned and relaunched. Linked to
this, the upsell of unique room attributes on
IHG’s Guest Reservation System (GRS) is
now available in over 6,000 hotels, enabling
guests to seamlessly select add-ons when
making reservations, and owners to
generate maximum value from their hotel’s
unique attributes. Guests who select an
upsell on 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.
What’s to come
We will continue to accelerate the impact
of IHG One Rewards by scaling bene
fits
and improving the on-property experience.
This will involve data-driven marketing
across our booking channels, while in our
hotels we will provide further training and
use innovative approaches to inspire
colleagues to deliver even more consistent
guest experiences. This includes IHG Climb
– a new interactive gaming-based platform
that engages hotel teams to help drive and
enhance performance towards their hotel
loyalty metrics. So far, it has been rolled
out across the US and parts of Canada,
where we are already seeing high levels of
engagement and improved performance.
Continuing our focus on providing best-in-
class platforms, IHG’s revenue management
system 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.
Work will also begin on our next-generation
property management system to create
greater value for owners – where a single
cloud-based view across properties will
enable us to deploy fast, efficient
enhancements at scale.
We will continue to integrate the Iberostar
Beachfront Resorts brand into our systems
and booking channels. This strengthens
our all-inclusive and resort offer and lays
the foundation for growing our Exclusive
Partners collection by underlining the value
of our commercial engine.
Building on the success of our relaunched
co-brand credit cards, we will focus on the
continued growth of our existing programmes
and explore opportunities globally to better
serve our growing loyalty base in key markets.
27
Strategic Report
IHG
| Annual Report and Form 20-F 2023
Our strategy |
Leading commercial engine
W
e recognise that profit and
growth are intrinsically linked
to doing the right thing and
caring for our people, the communities
in which we operate, and the world around
us has been at the heart of our business
for many years.
Guiding our actions is Journey to Tomorrow,
our responsible business plan consisting of
a series of commitments to 2030. This is
underpinned by our strategic priority to care
for our people, communities and planet, and
aligned with the UN Sustainable Development
Goals and IHG’s purpose of providing True
Hospitality for Good.
Progress against our commitments, which
include creating a more inclusive workplace,
supporting our communities and reducing
our carbon, waste and water usage, are
monitored and measured by the Board’s
Responsible Business Committee.
Not only are our actions crucial to the world
around us, they are increasingly important
to our guests, owners and investors, too,
and are therefore critical for our reputation
and growth. Reflecting a changing world,
each commitment focuses on areas where
we can make the biggest impact, so that
IHG continues to grow responsibly.
See key matters discussed by the Board on
page 101 to 103 and the Responsible Business
Committee Report on pages 112 and 113.
See our Responsible Business Report at
ihgplc.com/responsible-business/reporting
Our strategy
continued
PRIORITY:
Care for
our people,
communities
and planet
2023 AT A GLANCE
87
%
Overall employee
engagement +1%pt on 2022,
with IHG named a Global Best
Employer by Kincentric
>
89,000
Hours collectively
dedicated by colleagues
in 2023 during IHG’s
Giving for Good month
3.8
%
Reduction in carbon
emissions per occupied
room since 2019
15
The number of relief
efforts we responded to
around the globe alongside
our charity partners
Giving for Good month made a positive difference
to the lives of over 248,000 people globally
Strategic Report
28
IHG
| Annual Report and Form 20-F 2023
Our 10-year responsible business plan
Our goal is to help shape the future of responsible travel together with those who stay, work and
partner with us. We will support our people and make a positive difference to local communities,
while preserving our planet’s beauty and diversity… not just today but long into the future.
Champion a
diverse culture
where everyone
can thrive
Improve the lives
of 30 million
people in our
communities
around the world
Reduce our energy
use and carbon
emissions in line
with climate science
Pioneer the
transformation
to a minimal waste
hospitality industry
Conserve water
and help secure
water access in
those areas at
greatest risk
EMPOWER OUR PEOPLE TO HELP SHAPE THE FUTURE OF RESPONSIBLE TRAVEL
People
Champion a diverse culture
where everyone can thrive
Our 2030 commitments
•
Drive gender balance and a doubling
of under-represented groups across
our leadership.
•
Cultivate an inclusive culture for our
colleagues, owners and suppliers.
•
Support all colleagues to prioritise their
wellbeing and the wellbeing of others.
•
Drive respect for and advance
human rights.
Our people are fundamental to IHG achieving
its purpose and strategic goals. IHG’s business
model means that we do not employ all
colleagues. We directly employ individuals
in our corporate offices, certain reservation
centres, and managed, owned, leased and
managed lease hotels. However, not all
individuals in managed, owned, leased and
managed lease hotels are directly employed
and, in general, we do not employ any
individuals in franchised hotels (nor do we
control their day-to-day operations, policies
or procedures).
What we achieved in 2023
People engagement
We have numerous forums available for
employees to share their thoughts, including
Employee Resource Groups (ERGs), a
designated Non-Executive Director for
workforce engagement, and Colleague
HeartBeat, our employee engagement
survey, which allows people to express their
views on key aspects of working at IHG.
In our 2023 survey, our overall employee
engagement stood at 87%, a 1%pt
improvement on last year, which once again
saw IHG accredited as a Kincentric Global
Best Employer. The survey also highlighted
areas that we can strengthen further, including
enabling infrastructure, rapid and high-
quality decision making, and rewarding and
recognising strong performers. Ensuring
consistent experiences across all aspects
of work was identi
fied as a key driver
for
future performance. Actions taken during
2023 on talent and staffing saw a significant
improvement in perceptions in these areas.
Developing and retaining talent
To achieve our growth ambitions, we invest
in attracting and retaining a diverse and
talented workforce through our employer
brand, which includes our promise to
support employees throughout their career
by giving them Room to Belong, Room to
Grow and Room to Make a Difference.
Each promise is supported by programmes
designed to enable employees to thrive both
within the workplace and outside.
For example, this year we piloted a new
corporate onboarding programme in the
US, UK, India and the Philippines aimed
at embedding IHG’s culture with new
employees. We celebrated each of our
employer brand promises with a week of
learning events. This enabled the business
to spend time focusing on creating an
inclusive culture where everyone can thrive,
supporting employees in developing their
careers and helping make a difference to
the world around them.
We provide learning programmes,
masterclasses, resources and toolkits
to ensure colleagues have the capability to
support IHG’s performance and development
processes. Particular focus is placed on
having meaningful career conversations and
helping managers and employees support
career development.
Managers have continued to hold quarterly
check-ins with their teams as part of our
performance management process,
providing feedback and guidance on goals,
behaviours and development to ensure
everyone is focused on the right priorities.
29
Strategic Report
IHG
| Annual Report and Form 20-F 2023
Our strategy |
Care for our people, communities and planet
Our strategy
continued
Care for our people, communities and planet
continued
IHG University received the Brandon Hall
Group Bronze award for excellence within
the category of Best Advance in Custom
Content, as well as awards for Digital
Learning Best Practice and Best Digital
Learning Team by Online-Edu.
Attracting talent
To help attract the talent we need to ful
fil
our growth ambitions, we have invested
in a comprehensive suite of channels and
platforms. Our IHG careers website had over
2.46 million visitors in 2023, while there has
also been a 51% rise in visitors to our new
digital channels, which include Instagram,
YouTube and TikTok. This has generated
9.32 million views of our employer brand
content globally over the past year, which
we are boosting with paid sponsorship of
key job opportunities to drive thousands of
applications for frontline roles in our hotels.
To help tackle the industry shortage of
talented and experienced Luxury & Lifestyle
GMs, our dedicated Luxury & Lifestyle team
has implemented a specialised recruitment
strategy to address this gap and build
further trust with our owners.
We also continue to invest in tools and
guides to ensure a transparent, equitable,
inclusive and efficient hiring process to
elevate the recruitment experience for the
corporate and hotel candidates who apply
to IHG each year.
Recognising the importance of attracting
and developing talent whatever their
backgrounds, circumstances, or abilities,
we expanded the number of organisations
we’re working with in the US to attract
students to our 10-week paid internships.
This will enable us to further diversify our
early careers pipeline. Our work continues
with Historically Black Colleges and
Universities in the US, and the Leonard
Cheshire and 10,000 Black Interns Foundation
charities in the UK. While in Greater China,
we have established partnerships with five
special education schools to nurture talent
among people with disabilities.
Championing a diverse culture where
everyone can thrive
A cornerstone of our culture is our passion
for inclusion, and our Global DE&I Board and
regional DE&I councils help shape actions
across our markets that are aligned to our
Journey to Tomorrow commitments.
Our commitment is emphasised through,
and is backed up by our 2023 DE&I Progress
Report, which you can find on our website:
ihgplc.com/en/responsible-business/people
Driving gender balance across
our leadership
Globally, 35% of our leaders working at VP
level and above are female (vs an ambition
of 39% by 2025), and we are one of the
few large global organisations to have a
gender-balanced employee population,
of which 52% is female.
A key focus is attracting more women into
functions that have been historically less
gender-balanced, such as Commercial,
Operations, Technology and Development.
We’re also identifying and removing barriers
to increase the number of female GMs across
our estate, including establishing an alumni
network for graduates of our Rise mentoring
programme, which empowers our female
colleagues in our hotels. Overall, more
than 200 women have graduated from the
programme so far, and this year we welcomed
an additional 162 participants. We were
delighted to see Forbes recognise IHG as
one of the world’s top companies for women,
and 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.
As at 31 December 2023
Male
Female
Total
Directors
5
6
11
Executive Committee
6
3
9
Executive Committee
direct reports
30
24
54
Senior managers
(including
subsidiary directors)
70
31
101
All employees
(whose costs were
borne by the Group
or the System Fund)
5,546
7,916
13,462
Doubling under-represented groups
among our leaders
We remain committed to having leaders
who represent the diverse global nature of
our business. Thanks to the self-disclosure
of employees, we know that 22% of our
global leaders working at VP level and above
are racially or ethnically diverse and represent
16 nationalities.
We have identified the UK and US – where
we have our largest populations of corporate
colleagues – as markets in which we want
to increase ethnic representation. We have
set targets for the percentage of leaders
working at VP level and above that are
ethnically diverse in each market – 26% by
2025 in the US and 20% by 2027 in the UK,
with an overall global target of 26% by 2025.
IHG’s reward strategy aims to attract,
retain, motivate and engage top talent. It is
supported by a robust governance approach
that ensures our reward and recognition
practices are fair and consistent across
our employee and colleague population,
regardless of gender and other aspects of
diversity, and there is alignment between
the wider direct workforce and executive
remuneration. Further details between the
alignment of the wider workforce and executive
remuneration can be found in the Directors’
Remuneration Report on pages 116 to 140.
For our hotels, Journey to GM (our General
Manager talent acceleration programme)
continues to build a pipeline of talent to
meet both our growth ambitions as a business
and the aspirations of employees seeking
rewarding careers at IHG. Following our
first cohort in 2021, we have seen 65% o
f
participants either move into their first GM
role or receive a substantial promotion in
our EMEAA and Americas regions. For our
Luxury & Lifestyle GMs, we delivered brand
immersion sessions to bring each of our
brands to life. We also continued to develop
our hotel talent management practices
during 2023 so we can see critical gaps
we need to fill.
Investing in HR technology and
Global Learning
In 2023, we continued to evolve our HR
system by adding a new helpdesk and digital
assistant, in-sourcing our HR Shared Service
team and enhancing our support section
within Our People Tools HR platform.
We have transitioned from legacy payroll
systems within the UK and US.
Our Global Learning strategy is designed
to ensure that we all have the tools and
resources we need to perform at our best,
meet the needs of our stakeholders and
develop personally as part of our Room to
Grow commitment.
This year, our learning platform provided
345,000 users across our corporate offices,
franchised and managed hotels with access
to flexible training so they could personalise
their learning experience to address specific
needs and strengthen opportunities for
career development.
A key element of our offer is IHG University,
which was launched in 2023. There are four
schools to support corporate employees,
frontline colleagues in our hotels, GMs and
hotel department leaders, and owners.
The university champions individual
learning, career development, talent
acceleration and best practices.
Strategic Report
30
IHG
| Annual Report and Form 20-F 2023
As part of these plans, we continue to focus
on strengthening our approach to talent
planning, including embedding our diverse
talent programmes (Ascend in the US and
The Network of Networks’ (TNON) Ethnically
Diverse Programme, and Women in Hospitality,
Travel & Leisure’s (WiHTL) Ethnic Future
Leaders Programme in the UK) to develop
the next generation of talent through our
early career programmes and inclusive
hiring practices.
Furthermore, we are building relationships
and collaborating across our markets to
support people with disabilities.
As at 31 December 2023
Ethnically Diverse
Total
Executive Committee
2
9
Global VPs and above
53
238
UK VPs and above
5
58
US VPs and above
24
133
Creating a culture of inclusion for our
colleagues, owners and suppliers
All EC members have a DE&I-related goal
and, having rolled out conscious inclusion
training for GMs and corporate employees
in key markets in 2021, this year we made
the training available to more than 16,000
colleagues in our franchised hotels.
Insights from our Inclusion Index are also
among the ways we are tracking progress.
In 2023, the Index showed that nine out of
10 employees considered IHG to have an
inclusive culture. We were proud to have
been ranked second out of 850 companies
on the Financial Times Europe’s Diversity
Leaders 2024 list.
This year, we have seen significant growth
of our ERGs and now have 4,000 members
across 29 chapters. Playing a key role in
underlining the value of inclusion, they
brought employees together for moments
such as the International Day of Persons with
Disabilities, International Women’s Day and
Pride Month.
We are also continuing to drive inclusion
within our hotel owner communities in the
US and Canada by introducing IHG LIFT
– an owner growth programme focused on
creating more hotel development support
for historically under-represented groups
within the industry.
To help drive inclusion in our supply chain,
our Engaging Partnerships through Inclusion
and Collaboration (EPIC) supplier diversity
programme expanded to the UK during the
year, representing the first international
market outside North America. We also
recognised the diversity programmes run
by our key suppliers, and through our EPIC
Allies initiative they are now working with us
to identify diverse suppliers in their respective
supply chains. We launched our Supplier
Diversity Tier 2 programme, too, inviting
key suppliers who share our values to report
their diverse spend, so that IHG can influence
further how our supply chain creates value
for communities across the globe.
Working with advocacy groups is critical to
our success in diversifying our supply chain.
Collaborating in this way offers a bridge
between IHG and diverse businesses to
support our supply chain inclusion, market
capability influence and economic
impact goals.
As a result of collective action in 2023,
IHG’s total spend among diverse suppliers
was $111 million across North America, the
UK and Tier 2 reporting.
Supporting colleagues to prioritise their
wellbeing and that of others
In 2023, we achieved a 2%pt increase in our
Wellbeing Index score (to 89%) for our hotel
colleagues. Supporting our overall approach
to colleague wellbeing, we also launched
a UK network of mental health
first-aiders,
helping to ensure the right support is in
place for everyone to feel at their best,
and we made enhancements to our UK
healthcare plan.
InterContinental Marseille – Hotel Dieu, France
InterContinental Fujairah Resort, UAE
31
Strategic Report
IHG
| Annual Report and Form 20-F 2023
Our strategy |
Care for our people, communities and planet
Communities
Improve the lives of 30 million
people in our communities
around the world
Our 2030 commitments
•
Drive economic and social change
through skills training and innovation.
•
Support our communities when natural
disasters strike.
•
Collaborate to aid those facing
food poverty.
With more than 6,300 hotels spanning over
100 countries, we are proud to be at the
heart of thousands of communities around
the world, as we strive to make a difference
every day by delivering our purpose of True
Hospitality for Good. Through providing
skills training, supporting relief efforts
following natural disasters, and
fighting
food poverty, we aim to improve the lives of
30 million people. In addition to direct funding
and working with expert organisations, our
colleagues contribute their time, skills and
passion to address social needs within
their communities.
To ensure that we measure our impact and
maintain focus on areas where we can make
the greatest difference, we adhere to the
global standard for managing corporate
community impact as members of Business
for Societal Impact (B4SI).
What we achieved in 2023
Skills training and innovation
Our IHG Academy programme is aimed
at increasing social mobility and building
hospitality skills for the future. In 2023,
our IHG Academy offerings saw more
than 30,000 participants gain valuable
employment and life skills, as the programme
has grown to provide work experience,
internships, apprenticeships and free online
learning through our IHG Skills Academy
to users all around the world. This year, we
expanded our offer to include cognitive
assessments, which enabled users to
complete personality profiles and skills
mapping assessments to help them identify
their ideal roles.
To learn more about the impact of our
IHG Academy programmes, see our 2023
Responsible Business Report.
Number of people participating
in IHG Academy
2020
15,081
2019
2021
3,277
2022
5,815
2023
30,938
7,431
Local action and Giving for Good month
We recognise that being in the heart of
our communities, our hotels are best placed
to assess local needs and provide tailored
support where it is needed most, so we
encourage the development of local
collaborations in line with our policy and
strategy for community impact.
Each year we come together as a company
during September for IHG’s Giving for Good
month, which sees colleagues volunteer
and make a positive difference in their
communities. In 2023, we worked with
over 1,400 charities across events spanning
nearly 80 countries. Colleagues collectively
contributed more than 89,000 volunteering
hours to communities, causes and charities,
adding to a total of more than 121,000
volunteering hours during the year. Efforts
throughout the month made a positive
difference to the lives of over 248,000
people globally. Activities included giving
clothes to housing shelters in Canada,
raising money to provide clean water in
Egypt and providing meals to low-income
hospital patients in Mexico. More than
270 projects focused on protecting the
planet too, from beach and city clean-ups
to replanting green spaces. This year, we
also launched a tracker to help us better
understand and celebrate the way hotels
support their communities year-round.
Supporting our communities when
disasters strike
We are proud of being there for our
communities in times of need and continued
working with a range of humanitarian aid
organisations around the world to assist
in their critical relief and recovery efforts.
In 2023, we supported 15 global relief efforts,
which included responding to several natural
disasters, from the earthquake in Turkey and
Syria to the hurricanes in Mexico, working
closely with charity relief experts CARE
International and the American Red Cross.
We also activated the IHG Colleague Disaster
Relief Assistance Fund on several occasions
to support colleagues with immediate relief,
including those affected by typhoon Mawar
on the island of Guam.
Our strategy
continued
Care for our people, communities and planet
continued
Colleagues from our Shanghai office volunteered their time at a co
ffee shop, which employs individuals
with disabilities
Strategic Report
32
IHG
| Annual Report and Form 20-F 2023
Collaborating to aid those facing
food poverty
Our commitment to supporting local
charities across various markets is a vital
means of addressing food security for those
in need. This year, we expanded our work
with local organisations, including Windsor
Foodshare near our Global Headquarters,
as well as KiwiHarvest and UK Harvest.
This expansion helps support society’s
most vulnerable and reduce food waste.
Our existing collaborations continued to
thrive. We’re now in our fi
fth year of working
with OzHarvest, a food rescue organisation
in Australia, and we continue to build our
relationship with JapanHarvest and
VietHarvest. We also supported the Global
FoodBanking Network, which operates in
nearly 50 countries. This included expanding
our work with Green Food Bank, the official
branch of the network in China.
Our guests are also given the opportunity
to show their support, and in 2023, nearly
35 million points redeemed by our IHG One
Rewards members were donated to benefit
the efforts of the global charities we
work alongside.
Planet
The actions we take to deliver our Journey
to Tomorrow plan help protect our planet
and support the ongoing creation of more
sustainable guest stays. We provide tools
and information as well as work across the
industry to help set standards to enable our
hotels to reduce carbon emissions, manage
waste and conserve natural resources.
To do this, we continue to collaborate with
hotel owners, suppliers, industry peers
and governments.
See our TCFD, Responsible Business
Committee Report and GHG emissions
disclosures on pages 52 to 59, 112 and 113
and 238 to 240.
See our Responsible Business Report at
ihgplc.com/responsible-business/reporting
Energy and carbon
Reduce our energy use and
carbon emissions in line with
climate science
Our 2030 commitments
•
Implement a 2030 science-based
target that delivers 46% absolute
reduction in carbon dioxide emissions
from our franchised, managed, owned,
leased and managed lease hotels.
•
Target 100% new-build hotels to operate
at very low/zero carbon emissions
by 2030.
•
Maximise/optimise the role of
renewable energy.
Working closely with our hotel owners,
we aim to help them reduce costs while
decarbonising and future-proo
fing
their assets.
We have set a target to reach a 46%
absolute reduction in GHG emissions from
our franchised, managed, owned, leased
and managed lease hotels, from a 2019
baseline. This target has received validation
from the Science Based Targets initiative
(SBTi), aligning with climate science and
the UN Paris Agreement.
While there was an increase in year-on-year
emissions 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.
Given our business model and the
dependencies for achieving our ambitious
target, we have worked closely with our
colleagues, owners and partners to devise
a decarbonisation strategy focused on three
key areas: decarbonising existing hotels,
sourcing renewable energy, and developing
new-build hotels that operate at very low/
zero carbon emissions.
In 2023, we moved to a more regionalised
approach to ensure the measures we
introduce at hotels take into account varying
regional factors and still provide a good
return on investment for our hotel owners.
We continued to update our brand
standards and are integrating various Energy
Conservation Measures (ECMs) into the
expectations of hotels that work with us.
All ECMs integrated into hotel brand standards
are carefully considered, taking into account
costs and impact. In 2022, we established
our first set o
f energy efficiency global
brand standards, and this year introduced
further ECMs into our new-build hotel brand
standards globally, as well as for our existing
Essentials & Suites estate in the Americas.
Standards include measures for lighting
controls, occupancy-sensing thermostats
and heat pumps. We will continue working
on implementing additional brand standards
tailored to each region and segment.
These ECMs will further drive energy
reduction across our hotels and form part of
our new ESG measure for the 2023/25 cycle
of the Long Term Incentive Plan for Executive
Directors and other senior leaders.
The solar farm in Illinois, US, where our hotels can access our Community Solar programme
33
Strategic Report
IHG
| Annual Report and Form 20-F 2023
Our strategy |
Care for our people, communities and planet
Being part of IHG ensures hotel owners
receive the support, knowledge and
resources necessary to help reduce their
energy consumption and carbon emissions.
One key example of this is our Hotel Energy
Reduction Opportunities (HERO) tool, which
guides hotels on effective actions tailored to
specific buildings. It provides indicative
capital costs, energy savings and payback
periods based on the hotel’s facilities, climate
and energy use. In addition, we are actively
working to ensure that owners can access
government incentives for sustainability
measures requiring greater investment.
We are developing plans for hotels that
operate with very low/zero carbon emissions.
This includes a low-carbon hotel programme,
focused primarily on the operational aspects
of new-build hotels, to support delivery of
our carbon and energy goals. We expect
to launch this programme in 2024.
With the majority of our hotels operating
through franchise agreements, we cannot
directly procure renewable energy for most
of the properties in our estate. However, we
seek to help all our owners secure access to
renewable energy, and have been exploring
which options would be suitable for scaling
across our estate.
One example of how we have been able to
support our hotels is through our Community
Solar programme, which is available in
select markets across the US and requires
no capital expenditure. It is currently active
for IHG hotels across four states, with more
to follow soon, where legislation supports
the initiative and there is available capacity.
Our commitment also extends to procuring
renewable electricity for six of our global
offices, including our Global Headquarters
in Windsor in the UK and our Americas
Headquarters in Atlanta in the US, as well as
more than a quarter of our managed estate
in Europe.
Waste
Pioneer the transformation to
a minimal waste hospitality
industry
Our 2030 commitments
•
Eliminate single-use items, or move
to reusable or recyclable alternatives
across the guest stay.
•
Minimise food going to waste through
a ‘prevent, donate, divert’ plan.
•
Collaborate to achieve circular solutions
for major hotel commodity items.
Our overarching objective is to embrace
circularity by encouraging reuse or recycling
of resources. This involves initiatives such
as integrating recycled materials into new
product manufacturing or ensuring that
items at the end of hotel use
find meaning
ful
applications elsewhere. We also have
processes and tools in place to assess the
environmental sustainability of our suppliers
and advise our hotels accordingly (refer to
page 41 for updates on our responsible
procurement progress).
In 2019, we became the first global hotel
group to commit to replacing bathroom
miniatures with full-size amenities, which
has been implemented into brand standards
across all our hotels globally. We have also
committed to eliminating single-use items,
transitioning to reusable or recyclable
alternatives throughout the guest stay
by 2030.
To further assist our hotels, we have
developed a bespoke Single Use Items
Toolkit for our hotel operators. Initially
launched in EMEAA, in 2023 we made it
available globally. It provides hotels with
additional support and best-practice
approach to reducing, reusing, replacing
and recycling single-use items. Our updated
sustainability credentials for our guest
supplies, encompassing items like
toothbrushes and razors, have been
successfully implemented by many
of our hotels this year in EMEAA.
Food waste is a key issue for the hospitality
industry and we use a ‘prevent, donate,
divert’ plan to minimise landfill contributions.
At the industry level, we collaborate with
peers to ensure a unified approach to
collecting, measuring and reporting waste.
All our hotels have access to food waste
training as part of the GM training programme,
which encourages hotels to track food waste
and take action. Since its launch in 2022,
the training has been accessed by more
than 1,600 hotels and over 37,000 courses
have been completed by managed and
franchised colleagues.
We also use a range of technology to
address the challenge – whether that’s an
app that connects hotels with customers or
communities when they have unsold surplus
food or analytics to pinpoint areas of waste
and provide chefs with real-time information.
Our strategy
continued
Care for our people, communities and planet
continued
Strategic Report
34
IHG
| Annual Report and Form 20-F 2023
On average, these initiatives reduce water
consumption by 11 litres per minute and
three litres per minute respectively.
Collaborating with water specialists is crucial
when aiming to maximise impact and bring
about positive change in water-related issues.
When a devastating earthquake struck Turkey
and Syria in 2023, IHG donated to CARE
International to help it deliver essential WASH
items to those seeking refuge. The hygiene
kits provided included items that are crucial
to improving sanitation for vulnerable
communities and preventing disease,
such as soap and towels.
Water
Conserve water and help
secure water access in those
areas at greatest risk
Our 2030 commitments
•
Implement tools to reduce the water
footprint of our hotels.
•
Mitigate water risk through stakeholder
collaboration to deliver water
stewardship at basin level.
•
Collaborate to ensure adequate water,
sanitation and hygiene (WASH)
conditions for our operating communities.
With insufficient global water resources to
meet everyone’s needs compounded by the
escalating frequency of extreme weather
events and droughts, it is important that
we identify hotels in areas of high or very
high water stress. This insight is crucial for
tailoring our business strategy effectively,
providing targeted support to these hotels,
and implementing water-saving measures.
We have been part of the United Nations
(UN) CEO Water Mandate since 2019, which
represents a pledge to six core commitments
that mobilise business leaders on water,
sanitation and the UN Sustainable
Development Goals (SDGs). We are also
members of the Water Resilience Coalition,
which aims to raise global water stress to the
top of the corporate agenda and preserve
the world’s freshwater resources through
collective action and ambitious, quantifiable
commitments. Our membership has helped
to inform our work to identify and manage
water supply, so that we can build on the six
water stewardship pilot projects we have
carried out in recent years.
Acknowledging the challenges in sustaining
a reduction in water use in the coming years,
we mandate reporting on water usage in our
hotels through the IHG Green Engage™
system and have integrated water reduction
measures into our brand standards globally.
These standards require hotels to implement
high-efficiency, low-flow aerated shower
heads and taps by the end of 2025.
What’s to come
People
Communities
Planet
We will continue to support our employees
throughout their career journey, providing
tools and resources to ensure everyone
has Room to Grow, Belong and Make a
Difference. We will focus on building line
manager capability and enabling a
high-performance culture.
We will continue to invest in talent
management to enhance our approach
to recruitment, alongside building on our
successful 2022 campaign to strengthen
our General Manager pipeline in support
of our growth aspirations, particularly in
the Luxury & Lifestyle segment. We will also
enhance our learning curriculum for this
population, centred around the key luxury
capabilities we know we need to build for
the future.
We will continue embedding our inclusive
culture and working towards clear
commitments to make IHG a place where
everyone can thrive at all levels within
the business.
We are committed to ongoing
collaboration with expert charities to
assist those in greatest need globally.
We will actively seek new opportunities
within our communities to further
strengthen our collective impact and
engage our guests, employees
and colleagues.
To ensure our hotels make the biggest
possible positive impact within their
communities, we will support them in
establishing local collaborations to help
those who need it most. To encourage
further engagement, we will use our new
Community Tracker to measure the
impact of actions and celebrate success
by continuing a monthly recognition
programme.
We will continue to expand our IHG
Academy, including providing more work
experience opportunities in our hotels
and more learning resources on the IHG
Skills Academy virtual learning platform.
Work has begun upgrading our IHG
Green Engage system so that it is more
user-friendly and makes greater use of
analytics to provide hotels with even richer
insights across energy, water and waste.
Pilots were completed during the year,
resulting in positive feedback from hotel
teams, and our improved environmental
management platform will be launched
in 2024.
To support the delivery of our carbon and
energy goals, we will also be launching
a low-carbon hotel programme, which
is primarily focused on new-build hotels
that operate with a very low/zero
carbon footprint.
Collaboration remains crucial to meeting
our goals, and we will continue to use our
scale and standing when engaging with
peers, trade bodies and governments to
help shape policy relating to our owners
and the sector more broadly, as well as
secure government incentives for
introducing sustainability measures.
35
Strategic Report
IHG
| Annual Report and Form 20-F 2023
Our strategy |
Care for our people, communities and planet
Our stakeholders
S
takeholder engagement at all levels of the business is of the
utmost importance to IHG. Various methods of engagement
are used based on experience and developing best practice,
including face-to-face meetings, feedback and performance
reviews, employee forums and training. We adjust our engagement
methods as required to ensure they remain effective for all our
stakeholders and IHG.
Stakeholders
What impacted them in 2023
Engagement
Outcomes
Guests
Our ability to offer a wide
selection of brands, with
quality stay experiences,
plenty of choices, great
value and loyalty rewards,
are key to attracting and
building trust with IHG’s
guests, while continuing
to drive commercial
performance and revenue.
•
Increased desire to travel and for
access to a broader range of
locations and experiences.
•
Rising cost of living and effect
of in
flation.
•
Significant interest in the ESG
profiles o
f companies.
•
Continued desire to book and
stay seamlessly.
•
Teamed up with major events to
allow IHG One Rewards members
to redeem points in exchange for
unique experiences.
•
Continued improvement to
next-generation mobile app.
•
Guest satisfaction surveys.
•
Expanded choice of locations for
our Luxury & Lifestyle brands.
•
New public space and guest
room designs.
•
Rollout of IHG Wi-Fi Auto Connect.
•
Continuous improvement to IHG
One Rewards, providing more ways
to earn and redeem points.
•
Expanded our portfolio to 19 brands
with the addition of Garner.
•
Enhanced digital customer service
support, including automation to
speed up response time and
direction to the right team.
•
Continued enhancement of meetings
offered for corporate clients.
•
Launched Meeting for Good to
provide more sustainable meetings
and events.
See our Guest Love KPI on page 62 and how the Board had regard for guests as part of its consideration of strategic and operational matters on
pages 102 to 103.
Shareholders
and investors
Our ability to maintain
strong relationships with
shareholders and
institutional investors is
fundamental to our ability
to access capital markets
and ensure IHG’s
long-term success.
•
The impact of geopolitical unrest
on the hospitality sector in certain
regions, which could affect IHG’s
trading performance and
financial
results or influence its capital
allocation policy.
•
Executive remuneration policies,
including the potential use of
discretion, alignment with
workforce pay and talent retention.
•
Concerns about climate change
and wider sustainability issues.
•
CEO succession and Board
composition.
•
Regular roadshow investor
meetings and participation at
investor conferences by Executive
Directors, senior leadership and the
Investor Relations team.
•
Extensive consultations between
the Chair of the Remuneration
Committee and institutional
investors and proxy vote advisers.
•
Meetings with the Chair, IHG’s
Chief Sustainability Officer and the
Investor Relations team to discuss
governance, sustainability and
workforce practices.
•
Continued investor confidence
in IHG’s performance, long-term
viability and leadership, as
demonstrated through feedback
received and across AGM results.
•
Enhanced understanding of
shareholder and investor focus
areas, including in relation to
remuneration policy and
ESG matters.
•
Continued investor confidence in
the composition of IHG’s Board.
See also a description of our dividend policy on page 13, our KPIs on pages 60 to 63, key matters discussed by the Board on pages 102 and 103 and
engagement with shareholders relating to Executive Director remuneration on pages 116 to 117 and 125.
Visit
ihgplc.com/investors
for further information.
Suppliers
Responsible supplier
relationships are vital for
IHG in driving efficiency
and effectiveness
throughout our
supply chains.
•
Ongoing uncertainty and disruption
in supply chains.
•
Increased focus on sustainability
and integrity within supply chains.
•
Increased consumer desire for
sustainable goods and services.
•
Engaged with high–performing
suppliers in sustainability and the
circular economy that provide key
goods and services to our hotels
and corporate functions.
•
Following the introduction of
Ecovadis, a supply chain due
diligence tool, in 2023 IHG became
a founding member of the
Hospitality Alliance for Responsible
Procurement (HARP).
•
Identified alternative solutions with
suppliers where supply was
impacted across our corporate and
hotel estate.
•
Remained agile by adjusting our
approach to goods and services
sourced from affected regions.
•
Increased collaboration
opportunities with sustainable
suppliers and for sustainable goods
in alignment with our Journey to
Tomorrow ambitions.
Further information about how the Board considered supply chain and procurement is on pages 102 and 103, and our business relationships, including
our statement of business relationships with suppliers, customers and others, is on page 237.
Visit
ihgplc.com/responsible-business
for further information about our approach to responsible procurement.
IHG measures the effectiveness of our engagement methods
through a range of metrics, including our KPIs (such as signings and
pipeline), performance, ability to attract and retain talent, employee
engagement survey results, adherence to the policies covered by
our Code of Conduct and AGM results. The views and interests of
other stakeholders, such as regulators and industry bodies, are also
taken into consideration. They help provide a framework against
which we measure ourselves, protect our reputation and develop
our commercial and social awareness.
Strategic Report
36
IHG
| Annual Report and Form 20-F 2023
Stakeholders
What impacted them in 2023
Engagement
Outcomes
Hotel owners
IHG’s success relies on
hotel owners investing
in our brands. To remain
attractive, we focus on
the breadth of our brand
portfolio and the
effectiveness of our IHG
One Rewards loyalty
programme and wider
enterprise.
•
Increased operating costs,
including energy, food
and beverage.
•
Labour shortages, supply chain
challenges and financial and
operational constraints caused
by global macro-economic factors.
•
Ability to capture and drive demand
for their hotels.
•
Evolving brand standards.
•
Direct meetings with CEO and
Regional CEOs.
•
IHG Owners Association
collaboration.
•
Owners and investors conferences.
•
Portfolio and individual hotel
reviews covering operational,
strategic and industry
trend updates.
•
Conferences, training, webinars,
regular newsletters and bulletins.
•
Hotel lifecycle and
finance
team support.
•
Collaboration with governments
and industry to support recovery.
•
Continued focus on IHG One
Rewards loyalty programme.
•
Expanded brand portfolio
with Garner.
•
Streamlined operations, including
removed and relaxed brand
standards.
•
Tailored marketing and promotions,
supported by new data-driven
resources and services that help
hotels quickly identify and act on
revenue opportunities.
•
Procurement programmes to drive
savings for owners.
•
Increased training, guidance and
recruitment support for hotel teams.
•
Next-generation formats for
Holiday Inn, Holiday Inn Express,
Candlewood Suites and
Staybridge Suites.
See our net rooms supply, signings, gross revenue and enterprise contribution KPIs on pages 60 to 63 and how the Board had regard for hotel owners as
part of its consideration of strategic and operational matters on pages 102 to 103.
Visit
owners.org
for further information about the IHG Owners Association.
People
Delivery of our purpose
to provide True Hospitality
for Good and the strategic
priorities that drive future
success rely on our people
and our ability to maintain
and evolve an engaged,
diverse and inclusive culture
where careers can grow.
•
Attracting the talent we need to
ful
fil our growth ambitions.
•
Employees wishing to grow and
develop their careers at IHG.
•
IHG’s approach to diversity and
inclusion.
•
Evolution of our core HR and
learning technology platforms.
•
Employee engagement survey.
•
Pilot launch of Corporate
onboarding programme in the US,
UK, India and the Philippines.
•
Continued Voice of the Employee
feedback sessions with the Board.
•
Addition of new helpdesk, digital
assistant and insourced HR Shared
Services team.
•
Significantly grown ERG
memberships, increasing Inclusion
Index scores and driving gender
and ethnic leadership
representation.
•
Celebrated Room to Grow Week
with a series of events and
resources to outline how to grow
your career at IHG.
•
Dedicated L&L hiring team to
address the shortage of GMs.
•
Recognised as a leader in DE&I by
the FT Europe’s Diversity Leaders
list and rated by Fortune as one
of the Best Large Workplaces
for Women.
•
Overall employee engagement
score of 87%, as IHG continued
to be named as a Kincentric
Global Best Employer.
•
2%pt increase in Wellbeing Index
score for hotel colleagues.
•
Launched network of mental health
first-aiders in UK Corporate offices.
•
Launched IHG University to support
career development.
See our employee engagement KPI on page 63, how the Board had regard for people in Board and remuneration decisions on pages 117, 118, 123, 124
and 127, Voice of the Employee disclosure on page 113, and our statement on employee engagement on page 236.
Communities
The communities we are a
part of support, and bene
fit
from, our responsible
business approach and
the commitments we have
made to achieve a better
and more sustainable
future for everyone through
our Journey to Tomorrow
programme.
•
Access to business skills
development and local employment.
•
Cost-of-living challenges and food
poverty, including from
geopolitical unrest.
•
Modern slavery and human
rights issues.
•
Climate change and other wider
environmental challenges.
•
Natural disasters, from the
earthquake in Turkey and Syria
to the hurricanes in Mexico.
•
Collaboration with local education
providers and community
organisations, as part of our focus
on offering skills building and
training opportunities.
•
Giving for Good month: a
programme of activities and
employee volunteering days.
•
Industry collaboration on human
rights and labour conditions in
specific markets.
•
Continued close collaboration with
international and local charities and
NGOs, such as CARE International
and American Red Cross.
•
Support for 15 relief efforts around
the globe and for our colleagues
and their families through the IHG
Colleague Disaster Relief
Assistance Fund.
•
Support of the Global FoodBanking
Network, which operates in nearly
50 countries.
•
30,000+ people trained and
mentored through our IHG
Academy offerings in 2023.
•
More than 89,000 hours of
colleague volunteering dedicated
to communities during Giving for
Good month.
See our IHG Academy KPI on page 62, and Responsible Business Committee Report on pages 112 and 113.
Visit
ihgplc.com/responsible-business
for further information on our community commitments.
37
Strategic Report
IHG
| Annual Report and Form 20-F 2023
Our stakeholders
Our culture – how we
operate responsibly
Our culture shapes our conduct
and sets the tone for how we
operate responsibly, driving
forward our purpose of providing
True Hospitality for Good.
OUR VALUES
Led by the Board and Executive Committee, our values underpin
our behaviours and business ethics, and guide how we deliver
our strategy, make decisions and live our purpose.
Do the right thing
Show we care
Aim higher
Celebrate difference
Work better together
T
he long-term success of IHG
is shaped by a number of
interdependent factors, including
our purpose, the effectiveness of our
strategy and the resilience of our business
model. Underlying all of these is our strong
workplace culture, which is aligned with
our reputation as a trusted and ethical
company that is well governed.
Our culture is driven by our approach
to business, including our structure and
governance, risk appetite, controls and
systems, workplace environment, behaviours,
values and policies (including our Code
of Conduct). Therefore, understanding
these aspects of our business is critical
to understanding how we deliver on our
strategic priorities, risk management
and KPIs.
Our structure and governance
The overall responsibility for ensuring that
our culture and ways of working are aligned
with our purpose and strategy sits with the
IHG Board. Throughout the year, the Board
and its Committees receive updates and
presentations, and review metrics, reports
and scorecards, on the delivery of our
strategic priorities, all with the appropriate
governance lens and in the context of our
culture. The Board challenges and supports
the Group’s senior leaders, particularly
where there is a need to adopt or amend
policies and initiatives to ensure the continued
alignment of strategy and culture.
The Board delegates day-to-day
responsibility for setting and embedding
Company culture to the CEO who, together
with the Executive Committee (EC), sets the
tone from the top in relation to attitudes and
behaviours to create an open and honest
workplace environment, empowering
employees to give feedback and freely ask
questions about matters that concern them.
The EC is responsible for executing the
Group’s strategy, and keeping the Board
informed of the Group’s operations and
workplace culture.
IHG’s hotel development and operations
are organised on a regional basis (Americas,
EMEAA and Greater China) and are
supported by global functions in the key
areas of Marketing, Commercial &
Technology, Finance, Human Resources,
Corporate Affairs, and Business Reputation
and Responsibility.
Management of the regional and global
teams is organised into leadership teams,
who are responsible for executing IHG’s
strategic priorities in a manner that aligns
with the Group’s culture and values.
Decisions on hotel developments and
capital expenditure go through the
appropriate deal approval and expenditure
committees in line with the Group’s Global
Delegation of Authority Policy (DOA).
Strategic Report
38
IHG
| Annual Report and Form 20-F 2023
The DOA sets out financial commitment and
expenditure approval controls. For those
commitments over specified thresholds or
for certain types of proposals, approval is
required from the Group’s Capital Committee,
which reports into the Executive Committee.
The Group’s corporate legal structure is
comprised of around 370 subsidiaries
worldwide. These entities provide the legal
framework required to support the Group
in making individual contracts and
commitments.
Information on the Board’s monitoring and
assessment of our culture is included on
page 103.
Risk appetite, controls and systems
Although our strategy does not consciously
expose the business to inappropriately
heightened risk, our risk appetite and
tolerance are continuously reviewed by the
Board in relation to the Group’s pursuit of
our strategic and operational objectives and
the expectations of our stakeholders. The
Board reviews the portfolio of uncertainties
that we inherently face as a fast-moving
business, operating in a highly competitive
market, and considers whether the choices
we make achieve an appropriate and
balanced response overall to opportunities
and threats. As part of its review, the Board
considers the impact of macro-external
factors, including, but not limited to,
ongoing geopolitical tensions and conflicts
and macro-economic pressures such as
inflation, as well as increasing expectations
from stakeholders on our response to ESG
issues such as climate change.
Our risk appetite is cascaded through
our values and behaviours, our Code of
Conduct, DOA and other global policies,
and how we set our goals and targets, and
is further reinforced by frequent leadership
communications to guide decisions and set
priorities, including the EC’s recent refresh
of our strategic ambitions and behaviours.
We are committed to a framework of
monitoring and assurance processes in
relation to our initiatives and policies,
reviewing whether they have operated
within acceptable risk tolerances where
priorities have shifted or additional actions
were required. Board and Committee
agenda topics allow the Board to identify
and discuss the nature and extent of
principal (and emerging) risks, and how risk
management arrangements have been
adapted where required.
See our Governance pages 100, 108 and 109.
Workplace environment
As part of our employer brand commitment
to provide employees with Room to Belong,
we have taken steps to create more flexible
workspaces that bring to life the bene
fits o
f
hybrid working. We have leveraged modern
office spaces and the latest technology to
bring colleagues together for global learning
events, town halls and workshops while also
continuing to support our teams in finding a
balance between remote and office working.
In 2023 we delivered cybersecurity
awareness training to hotel colleagues
and corporate employees, emphasising the
importance of staying vigilant to protect
our company against evolving cyber threats.
Topics ranged from social engineering
awareness and phishing prevention best
practices, to the ways that generative AI
introduces new information security risks
to IHG. While we continue to implement
measures to safeguard the integrity,
confidentiality and availability o
f IHG data,
our employees remain the most important
layer in our control framework.
See our people disclosures on pages 28 to 31,
and key matters discussed by the Board on
page 102.
Human rights
An integral part of our global approach to
responsible business is to drive respect for
and advance human rights in accordance
with internationally recognised standards.
Our Human Rights Policy sets out our
commitment to respect the human rights
of all individuals impacted by our business
activities – our guests, our colleagues,
workers in our supply chain and the
communities in which we operate – and our
expectation that those with whom we do
business – including our suppliers, owners,
and franchisees – uphold similar standards.
We seek to advance human rights by working
with others to strengthen our practices and
address common industry challenges.
IHG is a member of the United Nations
Global Compact (UNGC) and is committed
to aligning IHG’s operations, culture, and
strategies with the UNGC’s 10 universally
accepted principles in relation to human rights,
labour, environment and anti-corruption.
To continue to enhance our human rights
programme, a global human rights risk
assessment was conducted this year to
update our understanding of salient issues
and how they are being addressed. Teams
across our business are working together
to develop and implement action plans in
response to findings
from this assessment.
In 2023, we remained focused on
addressing risks related to migrant workers
by further embedding our Responsible
Labour Requirements across our managed,
owned, leased and managed lease estate.
This year we also strengthened our
approach to human rights due diligence
in the supply chain, commencing with a
review of policies and our approach to risk
assessment when contracting with
new suppliers.
For further details on our human rights
progress, please see pages 20 and 21 of
our Responsible Business Report and our
Modern Slavery Statement.
Our behaviours
By demonstrating our growth behaviours,
our leaders and employees create an
environment that encourages high
performance, while operating responsibly
in a way that helps us achieve our strategic
priorities and purpose. Our policies,
communications, learning programmes
and performance management processes
reflect these behaviours, ensuring they act
as a compass for how we do things and help
us create an inclusive culture for all.
Code of Conduct and related policies
IHG’s Code of Conduct (Code) sets the
standard for how we do business at IHG,
and underpins our commitment to providing
True Hospitality for Good.
The Code seeks to enable colleagues to make
the right decisions, in compliance with the
law and IHG’s expectations about conduct.
The Board, EC and all colleagues working in
IHG corporate offices, reservation centres,
managed, owned, leased and managed
lease hotels must comply with the Code.
We expect those we do business with,
including our franchisees, to uphold similar
principles and standards.
The Code is reviewed and approved by the
Board on an annual basis, and is supported
by annual e-learning requirements. We
continue to enhance our engagement and
measurement approaches. We monitor and
assess how our values are being embedded
into our culture through a variety of methods,
such as through direct engagement,
employee engagement surveys, tracking of
e-learning completion and our confidential
reporting hotline.
The Code contains an overview of our values
and Group-level policies, including those
relating to human rights, respect in the
workplace, DE&I and equal opportunities,
accurate reporting, information security,
anti-bribery and corruption and the
environment. It also provides guidance on
how colleagues can raise concerns or seek
further help.
Additional detail regarding other areas of the
Code, such as our DE&I, human rights and
modern slavery commitments, are outlined
on pages 30 and 39. Initiatives to respond
to legal, regulatory, ethical and compliance
risks are on page 47.
IHG’s Code of Conduct is available in
14 languages on the Company’s intranet
and at
ihgplc.com/en/investors/corporate-
governance/code-of-conduct
Strategic Report
39
IHG
| Annual Report and Form 20-F 2023
Our culture – how we operate responsibly
Our culture – how we
operate responsibly
continued
Section 172 statement
Details of how the Directors have
had regard to the matters set forth in
Section 172(1)(a) to (f) of the Companies
Act 2006 is provided in the Section 172
statement on pages 102 to 103.
Further details can be found throughout
the Strategic and Governance Reports,
including in our key stakeholder
engagement disclosures on pages 36
and 37.
Non-financial and sustainability
information statement
Non-financial and sustainability
information, produced to comply
with sections 414CA and 414CB of the
Companies Act 2006, including a
description of policies, due diligence
processes, outcomes and risks and
opportunities can be found as set out
below. Internal verification and disclosure
controls apply to all information covered
in these areas.
•
Impact of the Company’s activities on
the environment on pages 33 to 35, 52
to 59, and 238 to 240.
•
Social matters on pages 32 and 33.
•
Anti-corruption and anti-bribery matters
on page 40.
•
Employee matters on pages 29 to 31,
103, 117, 118, 123, 124 and 127.
•
Respect for human rights on page 39.
•
A description of the Group’s business
model on pages 10 to 13.
•
The Group’s principal risks on pages 42
to 49.
•
The Group’s KPIs on pages 60 to 63.
See our relevant policies at
ihgplc.com/responsible-business
Climate-related financial disclosures
In accordance with Sections 414CB of the
UK Companies Act 2006, the required
climate-related financial in
formation
disclosures can be found integrated
throughout the Strategic Report, primarily
in the TCFD report on pages 52 to 59.
Speaking up
A core component of our people culture
is respect in the workplace. IHG has zero
tolerance to any form of discrimination,
harassment or bullying, in line with our
Respect in the Workplace Policy. While we
uphold our responsibility to behave ethically
and protect IHG’s reputation, it is possible
that in limited instances, a colleague may
act in a way that conflicts with the principles
set out in the Code. Guidance is given to
report concerns directly to line managers,
supervisors or local HR representatives.
A confidential reporting hotline and online
reporting facility are available and globally
advertised. Concerns can also be reported
to the Head of Risk and Assurance or the
General Counsel and Company Secretary.
The Board routinely reviews summaries of
reported concerns and ensures processes
are in place for investigations and follow-up.
Safety and security
IHG is committed to providing a safe, secure
and healthy environment for all colleagues,
guests and visitors. All operations must comply
with all applicable health, safety and security
laws. Beyond compliance with the law, IHG
works to identify further improvements to the
way safety and security risks are managed,
and has mandatory Brand Safety Standards
in place for all hotels globally to drive
consistency in this area. Initiatives to respond
to safety and security risks are on page 48.
Bribery and corruption
IHG is committed to operating with integrity.
Colleagues are not permitted to engage
in bribery or any form of
financial crime,
including fraud, money laundering, violations
or circumvention of economic and trade
sanctions and tax evasion or the facilitation
of tax evasion. This standard also applies
to agents, consultants and other service
providers who do work on our behalf.
Our Anti-Bribery Policy sets out our zero
tolerance approach and is applicable to all
Directors, Executive Committee members,
employees and colleagues in managed,
owned, leased and managed lease hotels.
It is accompanied by anti-bribery content in
our mandatory Code of Conduct e-learning
module. Our Gifts and Entertainment Policy
and guidance further support our approach
in this area.
Initiatives to respond to legal, regulatory,
ethical and compliance risks are more broadly
discussed on page 47.
IHG is a member of Transparency
International UK’s Business Integrity
Forum and participates in its Corporate
Anti-Corruption Benchmark. The results
from this benchmark help to measure
the effectiveness of our anti-bribery and
corruption programme and identify
areas for continuous improvement.
Handling information responsibly
We are committed to ensuring that guests,
loyalty programme members, colleagues,
shareholders, owners and other stakeholders
trust the way we manage data. As part of
our privacy and information security
programmes, we have standards, policies
and procedures in place to manage how
personal data can be used and should
be protected. Our e-learning training
for employees on handling information
responsibly is a mandatory annual
requirement and covers topics such as
password and email security, using personal
data in accordance with our policies and
privacy commitments, how to work with
vendors and transferring data securely.
In addition to the cybersecurity awareness
training mentioned on the previous page,
this year we held tabletop exercises to
practise our ability to detect and respond to
potential security events, such as ransomware
attacks. We continue to develop our privacy
and security programmes to address
evolving requirements and take account
of developing best practice. The Board
regards cybersecurity as a critical business
discipline and it regularly receives updates
on the Group’s cybersecurity risk
management and control arrangements.
See page 46 for further detail on uncertainties
relating to data and information usage, storage,
security and transfer and cybersecurity on
page 248.
Reporting requirements
Page
a)
Group’s governance for assessing and managing climate-related risks
and opportunities
52 and 53
b)
How climate-related risks and opportunities are identified, assessed
and managed
54 to 56
c)
How processes for identifying, assessing, and managing climate-related
risks are integrated into the overall Group Risk Management
59
d)
Description of climate-related risks and opportunities, and time periods
over which they are assessed
54-56
e)
Impact of the climate-related risks and opportunities on the Group’s business
model and strategy
54-56
f)
Analysis of the resilience of the Group’s business model and strategy
(climate-related scenarios)
54
g)
Targets used by the Group to manage climate-related risks and to realise
climate-related opportunities
59
h)
Key performance indicators (including basis of calculating) used to assess
progress against targets identified under (g)
63, 238 and 239
Strategic Report
40
IHG
| Annual Report and Form 20-F 2023
Responsible procurement
G
rowing our business innovatively
and sustainably, while working
to the highest standards of
business conduct, plays a crucial role
in our supplier selection processes and
in how we continue to work with our
existing suppliers. We are committed to
working with suppliers who not only meet
our minimum ethical standards but also
share the values of our responsible
business plan – Journey to Tomorrow.
What we do already
Our supply chains are split between hotel
and corporate spend. Hotel procurement
predominantly occurs at the local level
because our hotels are primarily owned
by independent third-party franchisees
responsible for managing their own
supply chains. In some key markets,
the IHG Procurement team has created
procurement programmes for certain
goods and services related to building,
opening, renovating and operating a hotel,
which hotels and owners can leverage.
Our corporate supply chain covers
expenditure areas such as technology,
office buildings and facilities management,
marketing and professional services.
To help manage and monitor our
corporate supply chain, an enterprise-wide
procurement system is in place to govern
and oversee third-party corporate
expenditure. We are also continuing to
roll out procure-to-pay systems to support
managed hotels. Several global technology
and outsourcing providers have been
identified as strategic supplier relationships
given the nature of their services. IHG
engages with these suppliers to harness
innovation, provide customer service,
manage risk, and promote value realisation.
We annually review this list of strategic
suppliers and their delivery of our
business objectives.
We continue to integrate ESG pre-contract
criteria in our supply chain due diligence
activities. To ensure that suppliers operate
with the same integrity and respect as we
do, IHG requires new corporate suppliers
to confirm their acceptance o
f the IHG
Supplier Code of Conduct (Supplier Code)
at the onboarding stage or demonstrate
that they have equivalent policies in place.
It is also a contractual requirement for
centrally-negotiated programmes from
which our hotels can purchase.
Recommended guidance is additionally
provided to managed and franchised
hotels when purchasing locally. At the
end of 2023, 100% of new suppliers had
signed the Supplier Code.
Our spend intelligence tool is enriched
with additional data feeds to provide a
broader view of the supplier, including
better visibility of IHG’s focus areas such
as labour practices, supplier diversity,
sustainability (including emissions),
and financial risks.
IHG continues to comply with the statutory
reporting duties on payment practices
and performance.
What we achieved in 2023
In 2023, we revised our Procurement
Policy. Key updates included expanding
its scope to cover above-property hotel
deals, revised criteria on when to engage
Procurement, supplier due diligence
checks required in support of our Journey
to Tomorrow ambition, and updated our
standard payment terms.
Informed by a benchmarking exercise,
we also revised our Supplier Code and
translated it into 11 new languages.
Some of the most signi
ficant evolutions
were a refresh to environmental criteria,
reflecting IHG’s Journey to Tomorrow
commitments, and strengthening
alignment with international human rights
standards. With the additional translations
of the Supplier Code, we have increased
our ability to introduce it further across
our supply chains.
Following the 2022 introduction of
EcoVadis, a supply chain due diligence tool,
in 2023 IHG became a founding member
of the Hospitality Alliance for Responsible
Procurement (HARP). The Alliance aims to
improve supplier sustainability by fostering
close collaboration with trading partners
to build transparency and scale positive
impact across the industry’s value chains
while operating with the appropriate
governance and compliance controls.
To date, we have requested 123 suppliers
globally to participate in the EcoVadis ESG
risk assessment and, where applicable,
it has become part of our new supplier
selection processes in 2023. Insights from
the scorecards are used to understand
supplier performance, identify ESG risks
in our supply chain and work with suppliers
to improve their sustainability performance.
With the use of a new digital solution, we
made the first step towards segmenting
our suppliers based on carbon emissions
profiles. By mapping our carbon emissions
from Purchased Goods and Services
where we have data available, we gained
visibility of the highest emitting categories.
Textiles are a substantial supply chain
commodity in the hospitality industry and
are integral to the operation of a hotel.
In 2021, we partnered with CARE
International UK and a key textile supplier
to complete a workplace gender analysis.
This year, CARE hosted two workshops to
understand the supplier’s gender equality
priorities, developed a gender action plan,
and supported this with implementation
guidance. Looking ahead, we will monitor
all progress made by the supplier and
provide support if required.
What’s to come
We will continue our goal to increase the
consideration of sustainable, diverse and
resilient suppliers and explore how EcoVadis
can be further incorporated into our due
diligence processes. Throughout 2024,
the ongoing deployment of integrated
procure-to-pay systems in managed
hotels across various regions will enhance
responsible procurement oversight.
This will be achieved through group-
configured systems, data management,
streamlined processes, and enhanced
controls. Working in partnership with our
key suppliers, we will continue our supply
chain mapping activities next year.
We will also continue to support the
implementation of sustainable solutions
to advance the progress of our Journey
to Tomorrow commitments and build
hotel supply chain solutions for energy
conservation measures. Additionally,
as part of our supplier decarbonisation
initiative, we will begin to monitor and
collaborate with key suppliers to minimise
carbon emissions associated with the
goods and services we procure.
Corporate and hotel supply activities
are driven by our Procurement
strategy and guided by our
responsible business agenda, with
oversight from IHG’s Responsible
Business Committee and Audit
Committee. In 2023, we continued
to build our risk programmes with
further resourcing and refreshed
risk profiles based on IHG’s material
supply chain risks. Recognising that
global supply chain risks go beyond
Procurement, we continue cross-
functional collaboration through the
Supply Chain Risk Council.
Strategic Report
41
IHG
| Annual Report and Form 20-F 2023
Our culture – how we operate responsibly
Refreshed principal risks – 2024-26
Our principal risks are articulated as
uncertainties that will often present an
opportunity and a threat at the same time:
1
Guest preferences or loyalty for
branded hotel experiences
2
Owner preferences for or ability
to invest in our brands
3
Talent and capability attraction
or retention
4
Data and information usage, storage
and transfer
5
Ethical and social expectations
6
Legal and regulatory complexity
or litigation trends
7
Global and local supply chain efficiency
and resilience
8
Operational resilience to incidents
or disruption or control breakdown
(including geopolitical, safety and
security, cybersecurity, fraud and
health-related)
9
Our ability to deliver technological
or digital performance or innovation
(at scale, speed, etc.)
10
The impact of climate change on
hospitality (physical and transition risks)
Our risk management
uncertainties during the year from external
events and IHG initiatives, which
management has reacted to accordingly and
built in to management processes. In order
to enhance our risk management processes,
we routinely look to apply learnings to
continuously enhance our future resilience.
The description of the 2023 focus areas and
activities for the Board and its delegated
committees (see pages 90 to 142)
demonstrates active ongoing consideration
of emerging and evolving uncertainties
across a wide range of topics and timeframes.
The Audit Committee reviews the principal
risks and the appropriateness of our risk
management system, and considers risk
and control implications of strategic topics,
for example, supply chain risk management
and future assurance requirements for ESG
targets. Across the year, this discussion of
risk, supported by the Risk and Assurance
team, allows for review of the overall level
of risk within the business, our resilience to
individual and aggregated uncertainties and
implications for strategic decision-making.
Further detail on formal risk appetite
and tolerance is provided in this report.
For example, our appetite for
financial risk
is described in note 24 to the Group
Financial Statements.
See pages 199 to 203 and our approach
to taxation on page 67.
The Board’s role – constantly evolving
our resilience in a volatile environment
The Board is ultimately accountable for
establishing a framework of prudent and
effective controls, that enable risk to be
assessed and managed. It is supported in
this by the Audit Committee, the Executive
Committee and delegated committees.
Our governance framework and committee
agendas enable Board members to request
and receive information on risk from the
Executive Committee and senior leaders,
together with other internal and external
sources. New Board members are fully briefed
on risk discussions as part of their induction.
The delivery of IHG’s refreshed individual
strategic objectives and overall ambition
requires us to continuously balance
opportunities for strategic advantage or
efficiency with the need to remain resilient
and agile in the short and longer term. The
Board considers and defines its risk appetite
and tolerance as an active part of determining
our strategic priorities. We describe the
Board’s approach to risk appetite on page 39,
and management teams have also considered
their attitudes to risk during 2023. We
recognise the trade-offs inevitably required
to achieve our growth ambitions between
responding to individual uncertainties and
the need to balance interests of multiple
stakeholders. We have again faced
significant individual and accumulated
How we think about and anticipate risk
in relation to our strategic objectives
Like many companies, we continue to face a
hugely dynamic and uncertain environment
in 2024, which includes multiple realities
from outside IHG and other inherent
execution risks relating to our own internal
initiatives (for example, the delivery of
complex technology innovation, such as
the evolution of our revenue management
solutions and property management systems
– see page 23 – and integrating Iberostar
within our portfolio of brands and commercial
platforms – see page 27). In this context,
during 2023, we continued to keep the focus
and balance of our principal risk pro
file under
review with management teams to further
reinforce ownership and enhance discussion
of attitudes to risk and uncertainty within
key decisions. The uncertainties we articulate
as our principal risks often present both
opportunity and threat at the same time
and require considered decision-making
to achieve the best overall outcome for our
various stakeholders. The graphic below
illustrates the relationship between these
realities and our principal risks.
The headlines for our principal risks are
materially unchanged, other than further
clarifying the contributing factors and key
elements of resilience. These were discussed
with management teams during the year and
when reviewing the rearticulated strategy with
Realities for 2024-26…
We are monitoring a range of external and internal factors that
affect the level of uncertainty we face in relation to our
principal risks:
•
Macroeconomic pressures – recessionary, inflationary
and interest rate dynamics, energy and other
cost-of-living pressures
•
Geopolitical tension and conflict, heightening cyber threats
and supply chain disruption
•
Uncertain central bank policies and increasing development
or financing costs
for owners
•
Complex IHG initiatives or investments, including
dependency on technology
•
Onerous and increasing legal, ethical or regulatory and
compliance developments
•
Evolving third-party relationships and exclusive partnerships
(for example, Iberostar Beachfront Resorts)
•
The volume and pace of growth efforts, including new
territories and through new brands
•
Aggressive brand, loyalty and partnership strategies from
existing and new competitors
•
Pace of digitalisation, including Generative AI developments
•
Labour and talent scarcity and costs, including expectations
for compensation
•
Pressure on colleague wellbeing and labour relations in
certain markets
•
Operational efficiency and e
ffectiveness opportunities
•
Increasing ESG regulation and stakeholder expectations
relating to climate
which
affect the
level of
uncertainty
we face in
relation to
Strategic Report
42
IHG
| Annual Report and Form 20-F 2023
How we consider emerging risks
Our business model and the long term
nature of our relationships with our hotel
owners mean that we must remain vigilant
to emerging risks capable of impacting the
achievement of our strategic priorities and
also our longer-term growth, competitiveness,
viability and sustainability.
We think about emerging risks as:
•
new risks, or existing risks in a new context,
when the nature and value of the impact
is not yet fully known or understood; and
•
factors with an increasing impact and
probability over a longer time horizon.
As in previous years, there are emerging
elements in many of our principal risks.
These include continuing shifts in
international and domestic real estate
ownership, the increasing reach of
regulations, consumer travel patterns and
evolving demands, including the use of data
and technology across all areas of the guest
journey and the workplace implications of
advances in Generative AI.
As part of our annual senior leaders meeting,
IHG management review emerging and
evolving megatrends with potential future
relevance for IHG’s strategic ambitions,
including society, technology and economic
factors. Groups have been established to
focus on key emerging topics, including
a Generative AI steering committee.
We also have an ongoing focus on the
risks of climate change through our TCFD
governance structures, including the
development of scenarios to help model
and plan for future resilience.
See also pages 14 to 15 for more detailed
discussion of trends impacting our industry.
How we identify, discuss and escalate
risks, including emerging factors
Management teams across IHG are aware of
the challenges our current industry context
creates, and that our ambition and strategic
priorities inevitably expose us to uncertainty
in the short, medium and longer term.
Our confidence in achieving our priorities
is reviewed regularly:
•
at the Executive Committee (see pages
97 to 100 for more detail of their remit);
•
by first-line management teams with
day-to-day responsibility for identifying
and managing risk within key decisions,
programmes and transactions and
escalating where appropriate; and
•
by second-line management functions,
which provide specialist expertise,
support, monitoring and challenges to
decision-makers on risk-related matters.
The Risk and Assurance team works with
first- and second-line teams to maintain and
evolve risk profiles. During 2023, we observed
extended discussions of existing and known
risks, certain trends that are growing in
focus and emerging risk factors that may
impact us over the next 3-5+ years and
which are being considered by various
teams and external bodies.
Discussions also consider how risk trends,
shifts in risk appetite or tolerance and/or
changes to management’s assessment of
levels of preparedness may impact future
decision-making, and whether any other
leadership interventions may be required.
This enables teams to identify
interdependencies across IHG, for example,
the consideration of supply chain-related
factors within other risk pro
files. Consolidated
insights are reviewed by the Executive
Committee and the Audit Committee every
six months, and we consider risk continuously
as part of key decisions.
How senior management and the Board
obtain assurance in our risk management
and resilience
The Governance section outlines focus
areas and activities that enable the Board
and its delegated committees to receive
management updates on risks within key
decisions. In addition, pages 45 to 49
explain how senior management and the
Board are able to source ongoing assurance
on our risk management and internal control
system during the year and how actions may
impact future risk levels.
teams in late 2023. Delivering our strategic
objectives actively creates highly dynamic
uncertainties with potentially fast impact. We
continue to review trends carefully to evaluate
the current behaviour of these risks relative to
each other, and to discuss with management
teams whether these trends create a need for a
specific individual or port
folio-level response,
including how leadership teams allocate their
attention and the level of reporting visibility
and assurance that may be required in 2024.
To extend our insight on how risks are
evolving, we also completed a survey of key
expert contributors to risk profiles across
IHG. They were asked to evaluate potential
trends for each risk as we move from 2023
into 2024, with the desired outcome to drive
discussion by management on potential
responses. Each Principal Risk scored an
above-average risk rating, which suggests
they are all trending upwards in the view
of the survey participants.
All principal risks are considered material
in absolute terms. The graphic below
shows an assessment of risk trending
into 2024-26. We consider trending of
inherent uncertainty levels (impact and/
or likelihood) and velocity (potential
speed of effect on IHG’s objectives).
Further detail for each risk is provided
on the following pages.
Inherent uncertainty trend
Inherent velocity trend
7
3
1
8
2
5
10
4
6
9
Stable
Increasing
Principal risks
Stable
Increasing
See page 42 for full list of principal risks.
Strategic Report
43
IHG
| Annual Report and Form 20-F 2023
Our risk management
Our risk management
continued
maturity of management’s own reporting,
and acceptable risk tolerances. Internal
Audit also monitors the confidential
disclosure channel to identify any emerging
trends requiring management and/or
Board intervention.
The Audit Committee considers future
assurance needs within the Internal Audit
planning process, and has also debated
potential assurance considerations for
non-financial data disclosures, with
The external Auditors and the Risk and
Assurance team continue to monitor and
engage the Audit Committee in relation
to corporate governance developments.
The Audit Committee will continue to
consider its approach to sourcing assurance,
for example, from direct reporting or
attestations provided by first- and second-
line management teams on risk and control
matters. The third-line Internal Audit plan
identifies where independent assurance
may be valuable, taking into account the
incoming regulations in many territories. An
assurance roadmap has been developed for
carbon data, including where assurance can
be obtained internally on controls and when
external independent input may be necessary
in the coming years.
This section should be read together with the
rest of the Strategic Report, Governance on
pages 90 to 142, the going concern statement
on page 241 and Risk Factors on pages 243
to 247.
The risk management system remains fully
integrated with the way we run the business,
including how the Executive Committee
reinforces key principles of
culture and
leadership
(including ‘tone from the top’),
how we adapt key
processes and controls,
and how
monitoring and reporting
is used to
update on status and inform decision-making.
Overall management have not made any
material changes or repositioning of risk
management and controls strategies, although
several teams have reprioritised or bolstered
While risk management and internal control
arrangements are designed to provide
appropriate response to the risks we face,
we also need to be prepared for fast-moving
disruptions and crises. We do not need to be fully
prepared for every ‘unknown’, but we need to
harness our collective knowledge and insights
activities in response to complexities of current
work (for example, integration of partners
and response to data regulation and geopolitical
factors), and fast-paced technology initiatives
(including HR and Finance system changes).
During 2023, we also commissioned an external
review of the maturity of IHG’s enterprise risk
management arrangements, which has enabled us
to identify opportunities to further enhance the
design and consistent application of risk
management activities in the coming years.
to deliver an appropriate IHG response overall.
We have continued to maintain our overall incident
and crisis management framework, reviewing
learnings from our response to the war in Ukraine
and the unauthorised systems access experienced
in 2022, and applying these to management
teams’ response to conflict in the Middle East.
The identified areas o
f focus in the graphic
below provide mitigation for many of the risks
shown on the following pages.
These should be read in conjunction with detail
elsewhere in the Strategic Report, which helps
to position IHG to respond to future opportunities
and risks in delivering our ambitions, including
strengthening our organisation through key
strategic investments (pages 16 to 35), engaging
proactively with stakeholders (pages 36 and
37) and by reinforcing our strong workplace
culture (pages 38 to 40).
Risk and Assurance and Commercial &
Technology leadership have collaborated to
conduct tabletop exercises for cyber incidents
and to undertake business impact analysis of
processes and dependencies for key booking
channels and develop playbooks in relation to
evolving data legislation.
We made adjustments and clarifications to several policies which articulate risk appetite and tolerance.
Changes were made to delegated authority levels, supplier code of conduct, procurement, information
security, anti-bribery, sanctions and gifts and entertainment policies.
Our annual Code of Conduct training was relaunched and new corporate onboarding and executive
leadership training introduced. All corporate colleagues received communications on topics such
as human rights, handling information responsibly (including phishing training), DE&I, wellbeing
and sustainability.
Several teams evolved governance accountabilities and arrangements, including for supply chain risk
oversight, fraud risk management and regional decarbonisation plans.
We keep our processes and controls under review and in 2023, we undertook risk assessments for
several targeted topics. This included initial privacy impacts within projects to leverage customer data
for enhanced personalisation, human rights due diligence and the maturity of our fraud risk
management framework in advance of upcoming UK legislation.
Teams have implemented specific enhancements to process and control arrangements in relation to
new country entry protocols for development teams, threat management for physical security risks,
formalising and documenting privacy risk assessment processes and reviewing protocols for
investigations arising from our con
fidential reporting hotline.
The use of data and technology to enable risk management and control is a key focus.
Several teams have evolved and enhanced monitoring and reporting arrangements (including cyber,
safety, supply chain, loyalty, privacy, channels teams), for example, presenting refreshed key risk indicators.
We have also developed technology tools and capabilities to support management of privacy, supply
chain risk monitoring, human rights, financial governance, resilience and climate change risks.
Culture
and leadership
Processes
and controls
Monitoring
and reporting
Risk
Management
‘System’
components
How we think about our risk management ‘system’
Strategic Report
44
IHG
| Annual Report and Form 20-F 2023
In pursuing our ambition,
we face inherent
uncertainties relating to:
Why these uncertainties are important to the achievement
of our strategic objectives over the next 2-3 years
How senior management and the Board obtained
assurance in our risk management and resilience in 2023
Guest preferences
for branded hotel
experiences and loyalty
Executive Risk Sponsor:
Global Chief
Customer Officer
Link to strategy:
In a highly competitive industry with increasing demands for
personalisation, we must at all times anticipate and respond
to evolving guest expectations, preferences and loyalty, while
strengthening returns for the owners of our hotels through the
services, technology platforms and experiences our brands
provide, including ever increasing digitalisation of the
guest journey.
Our strategic objectives and ambition mean we actively pursue
opportunities for effective investment to support our new brands,
our loyalty programme, new exclusive partners, our Luxury & Lifestyle
ambitions and our digital platforms. We also aim to carefully deliver
on fundamental expectations of our individual and corporate
guests, underpinning their trust in, and loyalty for, our brands, for
example, for cleanliness and safety, or in relation to our response
to climate change and our brands’ impact on the environment.
We are very conscious that the macroeconomic environment
remains highly uncertain and that customer sensitivity to price
also remains heightened. There are also inherent uncertainties
due to the way our business model operates and is evolving. As our
franchised hotels operate as independent businesses, we are limited
in our ability to control delivery on the ground in these properties
and must introduce and implement guest experience initiatives
effectively to support our owners.
If we are unable to manage this uncertainty effectively it could impact
our competitive positioning, our growth ambitions and our guests’
and owners’ trust in and preference for our brands.
The Board considers reporting and insight from
management, including on:
•
individual and brand category, loyalty and responsible
business strategies and investments;
•
discussions led by regional CEOs of operational and
strategic plans, including identified risks;
•
new brand projects and potential opportunities
to pursue exclusive partners and adjacencies;
•
global sales strategies; and
•
analysis of competitor activities.
External insight is obtained where valuable (for example,
on responsible business strategies).
The Executive Committee also reviews these areas
frequently, including analysis of speci
fic trends (
for
example, business travel and commercial platforms)
and has obtained insights on key brand strategies and
performance and loyalty. The Executive Committee also
remains focused on regional quality mechanisms to
support guest experience and how we update standards.
A global Guest Experience team and programme provides
oversight of speci
fic initiatives including Luxury & Li
festyle.
The Internal Audit plan also provides independent
assurance on the execution of key initiatives (including
loyalty, brand integration and responsible business), guest
survey data integrity and hotel compliance management.
Owner preferences
for or ability to invest
in our brands
Executive Risk Sponsor:
Global Chief Customer
Officer and
Regional CEOs
Link to strategy:
Our growth ambitions require us to take calculated risks to attract
owners while continuing to drive returns for our existing and potential
owners. Our owners’ choice to work with IHG is dependent on our
ability to build a portfolio of loved and trusted brands with a track
record in delivering returns, while also continuing to invest in our
commercial engine, brands guests and owners love, and care for
our people, communities and planet.
Continuing macroeconomic uncertainty and inflation create
significant pressures on owners’ financial capacity that must be
considered carefully as we pursue opportunities to drive brand
preference and focus on relentless growth. Our owners have
increasing choices in how they invest in a highly competitive market,
and we need to move fast to pursue opportunities in relation to
hotel building, hotel conversions, renovations and hotel opening
projects, while evolving and enhancing our brand portfolio and
continuing to drive loyalty delivery across our open hotels.
These opportunities need to be balanced with the risks associated
with increasingly complex deal structures with owners and other
possibilities for new strategic relationships, uncertainties as we
expand into new markets and a need to risk our own capital to
pursue inorganic growth or to incentivise deals in key locations for
key brands. We also recognise our responsibilities as a franchisor
or manager of our brands (including our role in hotel safety and
security, ethical and social matters, and increasing expectations
in relation to decarbonisation).
If we fail to respond effectively to this risk, we will lose competitiveness
and may not realise the opportunities to grow our brand footprint.
The Board considers reporting and insight from
management on:
•
individual and brand category performance and market
prioritisation strategies;
•
opportunities for new brands, exclusive partners and
adjacencies and analysis of the competitor landscape;
•
performance of existing exclusive partners and
commercial agreements;
•
responsible business strategies and investments;
•
impacts of macro events (including con
flicts in the
Middle East) and impacts on specific markets;
•
performance and prospects for key areas of capital
investment, including controls over growth decision-
making and post-project reviews of investment
effectiveness; and
•
external insight where valuable (for example,
on investor perceptions).
The Executive Committee also reviews these areas
frequently and obtains reports on loyalty and brand
performance and initiatives, including implementation
of owner-facing technology and revenue management
systems, and specific market strategic considerations.
The Internal Audit plan provides independent assurance
on initiatives supporting owner returns, for example key
owner-facing systems, initiatives such as loyalty programme
enhancement and key processes including talent
management for Luxury & Lifestyle GMs.
Key
Strategic priorities
Relentless focus on growth
Brands guests and owners love
Leading commercial engine
Care for our people, communities and planet
Strategic Report
45
IHG
| Annual Report and Form 20-F 2023
Our risk management
In pursuing our ambition,
we face inherent
uncertainties relating to:
Why these uncertainties are important to the achievement
of our strategic objectives over the next 2-3 years
How senior management and the Board obtained
assurance in our risk management and resilience in 2023
Our ability to attract
and retain talent
and capability
Executive Risk Sponsor:
Chief Human
Resources Officer
Link to strategy:
Our growth ambitions are dependent on high-quality talent across
our hotels, reservations offices and corporate functions. We continue
to face a competitive market and uncertainties in relation to the
availability, recruitment and retention of sufficient quality, quantity
and diversity of talent, for example, next-generation hotel GMs to
support our Luxury & Lifestyle growth and a robust pipeline of
leadership succession talent.
Our priority to care for our people, communities and planet also
means that we need to balance short- and longer-term growth
risks and opportunities with our broader responsibilities and
commitments. This requires us to enable colleague development
and growth, to look out for our colleagues’ wellbeing during the
current cost of living crisis in many locations we operate within,
and to maintain productivity, collaboration and appropriate labour
relations. This also necessitates continued adaptation and innovation
of our operational procedures and remuneration structures to be
agile to the changing interests of our stakeholders.
IHG has the ability to manage talent and retention risks directly
in relation to IHG employees but relies on owners and third-party
suppliers to manage these risks within their businesses.
Our Procurement, Legal and Risk teams also consider indirect
workforce risks.
If we do not anticipate and respond appropriately to this
uncertainty, it could impact our ability to operate and grow hotels,
the effectiveness and e
fficiency of our key corporate functions and
executive leadership, and it could heighten risks of exposure to
non-compliance or litigation.
The Board considers reporting and insight from
management, including on:
•
overall HR and talent strategy;
•
remuneration and incentive strategy and policy,
including directors and executive management and
wider structures for all colleagues, supported by
external advisers;
•
specific talent and succession planning;
•
DE&I updates; and
•
direct employee feedback via the Voice of the
Employee programme.
The Executive Committee directly reviews talent
(both as a group and through individual talent reviews
with the CEO) and receives regular updates on colleague
engagement and broader culture and behaviours. The HR
team also has a dedicated Talent & Leadership steering
committee. Regular all-employee calls are held with the
Chief Executive Officer, and there are ongoing leadership
communications and virtual team meetings at regional
and functional levels.
The 2023 Internal Audit plan has provided independent
assurance on employee relations management,
recruitment of critical GM talent and implementation
and data integrity checks within a strategic HR
system transformation.
Data and information
usage, storage, security
and transfer
Executive Risk Sponsor:
Chief Commercial and
Technology Officer,
Chief Customer Officer
and Executive Vice
President General
Counsel and
Company Secretary
Link to strategy:
By its nature, our business involves the management of large
volumes of data globally and our stakeholders (including guests,
loyalty members, colleagues, owners and external authorities)
expect that this will be done safely and responsibly.
Our strategic objectives continue to transform how we use our
commercial and marketing data to improve and personalise the
customer experience, grow loyalty and empower our owners to
make better decisions. This involves a roadmap engaging many
IHG teams in many initiatives, including increasing use of
cloud-based applications, storage and partnering with third-party
specialists, as well as exploiting technology advancements and
innovation, involving the use of personal data and arti
ficial
intelligence. Our growth strategies, including new business
partnerships, also increase the complexity of data
flows.
The opportunities presented by this ambition are consciously
balanced with the inherent exposures our digital footprint
presents to data, information security and privacy-related threats,
including threat actors (e.g. criminals, third parties and inherent
colleague risk), and the need to demonstrate to stakeholders that
we are using data appropriately. This includes an evolving global
and local regulatory environment and requirements for localisation
of data in certain territories. Our ability to deliver our strategies
confidently is based on investments in recent years in cybersecurity
and information governance and the maturing of our risk
management system.
If we fail to respond to this risk effectively, we face operational,
financial and reputational impacts to the range o
f high-value assets
we are responsible for, or we may miss chances to capitalise on the
opportunities that effective use of data can bring, including to our
guests, owners and loyalty members. In addition, if the data we use
is not accurate, this may impair decision-making and/or lead to lack
of trust or satisfaction by our guests, loyalty members or owners.
The Board considers reporting and insight from
management, including:
•
governance over developments in cross-border data
transfer arrangements to respond to evolving
regulation;
•
direct presentations from the Chief Information
Security Officer, including third-party expertise on risk
assessments, progress on the information security
roadmap and advice on specific topics;
•
within the wider roadmap, specific lessons learned and
initiatives to further enhance security posture following
the criminal unauthorised system access event in 2022
and to respond to the ongoing dynamic cybersecurity
threat environment;
•
information on emerging risks and opportunities of
generative artificial intelligence, how management
teams are considering these risks and how they relate
to the broader assessment of principal risks;
•
updates on the cyber insurance renewal strategy;
•
second-line reporting on our privacy programme and
policies for handling information responsibly; and
•
updates on metric integrity, including review of ESG
data principles and future assurance arrangements,
supported by third-party experts.
The Executive Committee reviews specific areas o
f digital
strategy, for example in relation to Greater China, and
receives briefings
from the Chief Information Security
Officer on emerging risks during the year.
The Internal Audit plan includes independent focus
on governance of both cybersecurity and data and
information, assurance on foundational controls at both
corporate and hotel levels and, for example, in relation to
data transfers within our loyalty programme, third parties
and cloud environments.
Our risk management
continued
Strategic Report
46
IHG
| Annual Report and Form 20-F 2023
In pursuing our ambition,
we face inherent
uncertainties relating to:
Why these uncertainties are important to the achievement
of our strategic objectives over the next 2-3 years
How senior management and the Board obtained
assurance in our risk management and resilience in 2023
Ethical and social
expectations
Executive Risk Sponsor:
Executive Vice President
General Counsel
and Company Secretary,
Executive Vice President
Global Corporate Affairs
and Chief Human
Resources Officer
Link to strategy:
As IHG operates in more than 100 countries and continues to
explore new opportunities for growth, we are continually exposed
to evolving expectations from our stakeholders in relation to ethical
and responsible business conduct, extending beyond compliance
with laws. We are committed to monitoring, reinforcing and
communicating the continued effectiveness of our human rights
approach, our social responsibility and environmental performance,
and recognise that expectations are increasing for us to manage
and drive ethical and responsible business through our supply
chains and across our wider business, which involves extensive
engagement with our franchisees around the world.
Our stated priority to care for our people, communities and planet
creates risks and opportunities in relation to our growth ambitions,
including how we build brands which guests and owners love while
also considering our wider stakeholder responsibilities, including to
our colleagues, guests, workers in our supply chains and our local
communities in a challenging operating environment in many markets.
We manage these risks carefully so as to operate responsibly and
with integrity, and to guide decision-making across IHG’s corporate
and hotel operations.
If we fail to effectively respond to this risk, it has the potential
to impact our performance and growth in key markets as well
as cause reputational damage with respect to key stakeholder
and investor expectations.
The Board considers reporting and insight from
management, including:
•
requests for Board approval of the Code of Conduct,
the Supplier Code of Conduct, the Communities Policy
and the Human Rights Policy;
•
second-line reports on ethics and compliance strategy,
including external benchmarking where appropriate
(e.g. Transparency International UK’s Corporate
Anti-Corruption Benchmark);
•
reports from Internal Audit on con
fidential reporting
arrangements and updates from our Voice of the
Employee programme;
•
updates provided and awareness raising from the
external Auditor on ESG and climate-related reporting
and from external specialist advisers; and
•
further second-line function reports on our
communities, human rights and responsible
procurement programmes and key disclosures
including the Modern Slavery Statement.
The Executive Committee monitors our ambition and
commitments to our people, communities and planet,
including the progress of set initiatives and how these
objectives interrelate to our growth strategy.
The Internal Audit plan includes independent focus
on ethics and compliance, including consideration
of management and external assessments of maturity,
controls relating to marketing and commercial
campaigns, due diligence controls and broader
ESG-related programme governance.
Legal and regulatory
complexity or
litigation trends
Executive Risk Sponsor:
Executive Vice President
General Counsel
and Company Secretary
Link to strategy:
The global business regulatory and contractual environment
continues to evolve rapidly, with ongoing legislative changes in
many jurisdictions that will affect the way in which we operate our
existing business and where we target growth or digital innovation.
This includes the nature of our franchise relationships with hotel
owners, our interactions with our suppliers, and our responsibilities
to consumers and to colleagues. We consider such exposures
carefully as part of our decision-making, drawing on an extensive
network of legal advisers.
These changing laws and regulations continue to add complexity
and uncertainty to compliance, particularly where there are
diverging standards between territories (for example, in relation to
increasing protections and conditions on cross-border data transfer).
The ongoing use of sanctions and countermeasures as foreign
policy tools also continues to present operational challenges and
associated legal and regulatory exposures.
We recognise that failing to address this risk effectively, and
non-compliance and/or inadequate compliance, could expose us
to regulatory breaches, significant monetary and non-monetary
penalties, adverse litigation and associated reputational harm
which could impact confidence in the IHG brand and our ability
to perform in key markets.
The Board considers reporting and insight from
management, including on:
•
corporate governance and regulatory developments
from the General Counsel and the external Auditor;
•
relevant corporate affairs topics, including briefings
from external advisers;
•
material litigation matters and serious operational safety
and security incidents and threats;
•
second-line updates on specific regulatory matters,
including tax, as well as fraud risk management
controls, supported by external insight and
benchmarking where appropriate;
•
regional trends within Regional CEO updates; and
•
management strategies to procure appropriate
insurance coverage, including for casualty, property,
cyber and directors’ and officers’ liability risks.
The Executive Committee also actively monitors the
management of key regulatory and/or litigation risks,
including developments in cross-border data
transfer regulation.
The Internal Audit plan considers regulatory management
and provides independent assurance on the
proportionality of controls: for example, due diligence
protocols for vendors and owners, third-party guest data
management and broader contract management.
Strategic Report
47
IHG
| Annual Report and Form 20-F 2023
Our risk management
In pursuing our ambition,
we face inherent
uncertainties relating to:
Why these uncertainties are important to the achievement
of our strategic objectives over the next 2-3 years
How senior management and the Board obtained
assurance in our risk management and resilience in 2023
Global and local supply
chain efficiency and
resilience
Executive Risk Sponsor:
Chief Financial Officer,
Chief Commercial and
Technology Officer and
Executive Vice President
General Counsel
and Company Secretary
Link to strategy:
In an increasingly interconnected world, our strategic ambitions
require us to expand our interdependencies with third parties to
access capabilities and innovation and to source cost-efficient
products or services from available markets to support our owners.
We need to balance these opportunities with early identification
and resilience planning for anticipated and unanticipated
emerging risks.
Macroeconomic uncertainties, including geopolitical tensions,
commodity price shifts and labour disputes, continue to impact
supply chains, which may increase costs and limit availability of
materials, including to open and operate hotels. Our ability to
respond to these uncertainties presents both a threat and a
competitive opportunity, and may occasionally require us to
consciously expose ourselves to increased risk to secure and
safeguard supply chains for our owners.
As we pursue our ambitions as a responsible company, we recognise
that the regulatory environment continues to evolve, with increasing
demands for transparency across global supply chains, requiring us
to scan the horizon for emerging risks to IHG’s objectives. We also
need to remain vigilant to threats to information security as we work
with an increasing range of third-party suppliers.
If we fail to effectively address the uncertainties that this risk
presents, including through closer alignment with our suppliers and
across supply chains to enhance our resiliency, this may impact the
design, opening and operation of hotels, the ongoing effectiveness
of our commercial channels and margins for our owners, as well as
fees to IHG.
The Board considers reporting and insight from
management, including:
•
presentations by second-line functional leaders on
supply chain risk management to the Responsible
Business and Audit Committees, including wider
third-party risk management and internal control
arrangements; and
•
clarifications o
f risk management arrangements within
presentations on new business models and relationships.
The Executive Committee reviews our operational risk
posture in relation to key digital initiatives, including the
transformation of hotel technology arrangements, and
has approved a refreshed Procurement policy during 2023.
The Executive Risk Sponsors receive updates from the
Chief Procurement Officer on supply chain strategy and
risks, supported by a Supply Chain Risk Council, which
draws on external insight where appropriate.
The Internal Audit plan provides independent review
of third-party and contract risk management as well as
control arrangements, for example, relating to technology
resilience and data governance, and in relation to due
diligence relating to responsible and ethical
vendor sourcing.
Operational resilience
to incidents or
disruption or control
breakdown (including
geopolitical, safety
and security,
cybersecurity, fraud
and health-related)
Executive Risk Sponsor:
Executive Vice President
General Counsel
and Company Secretary,
Chief Financial Officer,
Chief Commercial and
Technology Officer
and Regional CEOs
Link to strategy:
The high growth, fast pace and increasingly complex nature of
our global business and our growth ambitions exposes us to a
growing range of inherent operational risks and places ever greater
importance on the overall resilience of key processes, applications
and relationships that we depend upon. We aim to avoid harm to,
and enhance the reputation of, IHG and our brands, and to support
our people and communities wherever possible.
We recognise that we need to prepare for predictable and
unpredictable uncertainties, from macro external to internal
disruptions. This preparation includes considering fire, li
fe safety
and security threats including from geopolitical volatility,
health-related concerns and natural disasters impacting our hotels
and corporate locations. We need to be able to respond to disruption
to technology and information security from external threats and
operational breakdown. We also need to anticipate the potential
for breakdowns in our
financial management and control systems,
including the risk of fraudulent behaviour, which may be
heightened in the current challenging economic environment.
The complexity of our evolving global and regional business model
and the introduction of different commercial arrangements and
adjacencies also include inherent uncertainties, for example, in
relation to our ability to control and influence day-to-day operations
in our franchised estate, or in our ability to balance ongoing
robustness of controls while we actively pursue opportunities
for efficiency.
Building resilience not only supports IHG’s long-term viability but
also enables us to take advantage of opportunities to drive growth
and strengthen returns for our owners. However, if we fail to respond
effectively to this risk it could impact IHG’s reputation, lead to
financial loss and claims against IHG and undermine our
stakeholders’ confidence in our brands.
The Board considers reporting and insight from
management, including:
•
second-line reporting to the Audit Committee on
operational safety and security arrangements and
reported serious incidents and threats;
•
ongoing review of incident handling (including ad hoc
updates as required and within a broader review of our
risk management system), describing how management
teams are coordinating efforts;
•
reports to Audit Committee from the second-line
financial governance team, including control
implications for managed hotels and major technology
and process changes;
•
an annual review by Risk and Assurance of fraud risk
management activities; and
•
an independent assurance by PwC of SOC1 control
reports provided for the bene
fit o
f hotel owners.
The Executive Committee is closely involved with
emerging incidents to consider the appropriateness of
management action plans to deal with disruption. There is
also an established Financial Control Steering Committee,
which brings together various functions and discusses
risks to financial controls, including
fraud risk management.
Internal Audit provided an independent review of key
functional resilience capabilities, including scenario
planning, third-party technology resilience and reports
on the governance of service organisation controls.
Our risk management
continued
Strategic Report
48
IHG
| Annual Report and Form 20-F 2023
In pursuing our ambition,
we face inherent
uncertainties relating to:
Why these uncertainties are important to the achievement
of our strategic objectives over the next 2-3 years
How senior management and the Board obtained
assurance in our risk management and resilience in 2023
Our ability to deliver
technological or digital
performance or
innovation (at scale,
at speed, etc.)
Executive Risk Sponsor:
Chief Commercial and
Technology Officer
and Global Chief
Customer Officer
Link to strategy:
Delivering our portfolio of technology investments effectively and
efficiently is a fundamental enabler of our short- and long-term
strategic priorities. We continue to pursue opportunities to innovate
in booking technology, to maintain and enhance the functionality
and resilience of our channel management and technology
platforms (including those of third parties, on which we rely directly
or indirectly), and to respond to ever-changing stakeholder needs
and preferences, which may evolve rapidly in an environment of
macroeconomic uncertainty and significant cost and
labour pressures.
This context will require us to generate value by defining and
implementing new technology-based products or services or by
approaching existing products, services or processes in new ways
that generate revenue or reduce costs for our owners. We will need
to maintain the right balance between disruptive, sustaining and
incremental innovation and, in doing this, we will often consciously
expose ourselves to uncertainty.
We are pursuing a high paced, multi-year roadmap of signi
ficant
investments to enhance the performance of our technology,
developing our own talent and working with a wide range of
suppliers, partners and academic institutions to leverage their
insights, while the pace of innovation and competition in digital
behaviours in the hospitality industry and wider society continues
to accelerate rapidly. This involves leveraging Generative AI to
improve guest experiences, generate personalised marketing,
expand analytics capabilities and improve effectiveness and
efficiency, including in-hotel operations.
If we fail to address this risk, we may not capitalise on opportunities
to maintain or increase guest and owner preferences for IHG and its
brands and/or reduce our resilience on ageing channel management
and technology platforms (including those of third parties, on
which we rely directly or indirectly).
The Board considers reporting and insight from
management, including on:
•
our China digital strategy and the integration of our
commercial and technology platforms within our
Iberostar Beachfront Resorts partnership;
•
options for technology to support more effective and
efficient collation of ESG data across our global estate;
•
budget allocation, including funding of key technology
products and post-project reviews by finance teams o
f
major capital investments; and
•
information security strategy and risk pro
file.
The Executive Committee considers the pace of innovation
and delivery of key technology initiatives relating to mobile,
loyalty and booking transformation and hotel technology.
This involves identifying critical enablers and prioritising
investments. The Global Marketing and Commercial &
Technology teams coordinate a joint technology roadmap,
and a dedicated Generative AI steering committee monitors
opportunities across various IHG processes and teams.
The 2023 Internal Audit plan included focus on
programme governance and the effectiveness of controls
over expenditure and benefit delivery
for various critical
functional and guest and owner-facing technology
initiatives. This has provided independent assurance in
relation to overall programme management, tracking and
financial governance controls, and delivery o
f initiatives
at high pace across the hotel estate and within the loyalty
transformation programme. The team also continues to
support and advise several programme teams in real time,
including on HR system changes.
The impact of climate
change on hospitality
(physical and transition
risks for IHG)
Executive Risk Sponsor:
Chief Financial Officer
and Executive Vice
President Global
Corporate Affairs
Link to strategy:
As a global business with a portfolio of brands in over 100 countries,
IHG faces fast-evolving stakeholder expectations and uncertainties
relating to our ability to continue to operate and grow in an
environment impacted by physical and transition risks relating
to climate change.
Our business model means that we share these threats and
opportunities with our owners, including our dependency on their
capacity to invest in the short- and long term. We will continue to
set ambitious targets, to assess the aggregate impact of climate
change and to capitalise on opportunities that the low-carbon
transition will bring for the hospitality industry by responding to
evolving guest and colleague preferences.
Our TCFD assessment considers both physical and transition risks
to IHG, and we will continue to assess the aggregate impact of
climate change on our wider stakeholders including our third-party
hotel owners.
The potential impact of climate change-related uncertainties is
evaluated as an integral part of other principal risks; however, if we
fail to react to physical and transition risks effectively overall, then
this has the potential to impact IHG’s reputation, performance and
growth in key markets. Our management of these risks is also
subject to scrutiny from a wide range of stakeholders, including
regulators and investor groups, corporate clients, guests
and colleagues.
The Board considers reporting and insight from
management, including:
•
reporting from corporate responsibility on TCFD
disclosures and the embedding of climate considerations
into strategy, governance, risk management and
performance management, supported by external
subject matter expertise; and
•
updates from various second-line teams on approaches
to ESG data disclosure and future strategies for
assurance (including to comply with changing
regulatory requirements).
The CEO, CFO, General Counsel and EVP Global Corporate
Affairs have executive oversight of our TCFD reporting
and the embedding of climate considerations into our
wider business growth strategy. Oversight of the Journey
to Tomorrow programme is provided by the Executive
Responsible Business Governance Committee.
The Head of Internal Audit supports the TCFD programme
efforts, including advising on the approach to data
collection and data assurance. This group is also advised
by external experts. Internal Audit has also reviewed
broader ESG programme governance.
Strategic Report
49
IHG
| Annual Report and Form 20-F 2023
Our risk management
Viability statement
T
rading in 2023 remained strong,
with RevPAR and profitability
exceeding pre-pandemic highs.
Our ef
ficient operating model resulted in
Group adjusted free cash
flow
a
of $819m
during 2023 and net debt
a
increased by
$421m, after $1,035m of ordinary dividends
and the share buyback. The Group’s
business model is discussed in more
detail on pages 10 to 13.
Looking forward, the Directors have
determined that the three-year period to
31 December 2026 is an appropriate period
to be covered by the viability statement.
The Group’s annual financial planning process
builds a three-year plan. This detailed plan
takes into consideration the principal risks,
the Group’s strategy and current and
emerging market conditions. The plan then
forms the basis for strategic actions taken
across the business and is used as the
basis for longer-range planning. The plan
is reviewed annually by the Directors.
Once approved, the plan is then cascaded
to the business and used to set performance
metrics and objectives. Performance against
those metrics and objectives is regularly
reviewed by the Directors.
Principal risks
The relative strength and resilience of the
IHG business model to severe shocks has
been proven by performance through the
Covid-19 pandemic, with positive cash flows
being generated through one of the most
challenging periods of trading in the history
of the industry. In assessing the viability of
the Group, the Directors have considered
the impact of the principal risks as outlined
on pages 42 to 49. The discussion on those
pages includes a description of why these
risks are important to the achievement of
our objectives and how the Group manages
these risks.
We have considered which principal risks
could have the most significant and direct
impact to the viability of the Group during
the three-year period of assessment and
they are shown below, alongside the
scenario that is used to model those risks.
a
Definitions
for Non-GAAP measures can be found on
pages 84 to 88. Reconciliations of these measures to the
most directly comparable line items within the Group
Financial Statements can be found on pages 226 to 231.
Scenarios modelled
Related to principal risks
Changes in RevPAR
Severe Downside Case
This scenario models a prolonged decrease
in RevPAR, which may be driven by external
or internal factors.
Operational resilience to incidents or
disruption or control breakdown
Guest preferences or loyalty for branded
hotel experiences
Talent and capability attraction
or retention
Our ability to deliver technological or
digital performance or innovation
Owner preferences for or ability to invest
in our brands
One-off events
This scenario models the impact of a
specific material incident, which could relate
to cybersecurity or an alternative material
impact on the cash flow statement.
Data and information usage, storage
and transfer
Legal and regulatory complexity
or litigation trends
There are a range of possible planning
scenarios over the three-year period
considered in this review due to macro
uncertainties and geopolitical risks affecting
markets in each of our regions. In the US and
Europe, an uncertain trajectory for interest
rates and inflation links to concerns over the
strength of consumer spending and broader
economic growth and potential impact on
travel demand. In Greater China, challenges
in the property sector means it is more
difficult to accurately predict the pace of
further recovery of domestic demand and
also international travel of Chinese consumers.
In assessing the viability of the Group, the
Directors have reviewed a number of
scenarios, weighting downside risks that
would threaten the business model, future
performance, solvency and liquidity of the
Group more heavily than opportunities.
Viability scenarios and assumptions
In performing the viability analysis,
the Directors have considered a ‘Base
Case’ which assumes global RevPAR in
2024 to 2026 continues to grow in line
with market expectations in each of
our regions. The assumptions applied
in the viability assessment are
consistent with those used for Group
planning purposes, the going concern
assessment, for impairment testing
and for reviewing recoverability of
deferred tax assets (see further detail
on page 161).
The Directors have also reviewed a
‘Severe Downside Case’ which is based
on a severe but plausible scenario
equivalent to the market conditions
experienced through the 2008-09
global financial crisis. This assumes
that the performance during 2024
starts to worsen and then RevPAR
decreases significantly by 17% in 2025
and increases by 5% in 2026.
Strategic Report
50
IHG
| Annual Report and Form 20-F 2023
We have considered the potential impact
of the severe downside scenario on our net
system size growth. We do not believe a
change in system size growth would have
a material impact on the Group during the
period under review.
We have also considered the principal risks
that may impact the viability of the Group
over a longer period; for example, the impact
of climate change on hospitality. The physical
and transition climate risks to which IHG is
most exposed are discussed in the TCFD
statement on pages 52 to 59. Physical risks
are not considered material to the long-term
viability of the Group, and transition risks
present both opportunities and risks. Whilst
some transition risks have been assessed as
being potentially material to the Group over
the next one to five years under a 1.5°C
scenario, this scenario is not considered
a likely outcome leading to the probability
of a material impact on the Group’s viability
assessment through 31 December 2026
as low.
Funding
The Group’s $1,350m revolving credit facility
was extended by one year in 2023 and now
matures in 2028 (‘the bank facility’).
There are two financial covenants in the
bank facility – interest cover and leverage
ratio. 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. In the event a covenant
test was failed whilst the bank facility was
undrawn, the facility could be cancelled by
the lenders but would not trigger a repayment
demand on the bonds which threatened the
viability of the Group. See note 24 in the
Group Financial Statements for further details.
In November 2023 the Group issued a six-year
€600m bond. During the assessment period
there is a €500m bond maturing in October
2024, a £300m bond maturing in August
2025 and a £350m maturity in August 2026.
It has been assumed that the bond maturing
in 2024 will be repaid from cash reserves
and the 2025 and 2026 bonds will be
refinanced up to one year be
fore maturity.
Conclusion
The Directors have assessed the viability
of the Group over the three-year period to
31 December 2026, taking account of the
Group’s current position, the Group’s
strategy and the principal risks documented
in the Strategic Report. Based on this
assessment, the Directors have a reasonable
expectation that the Group will be able to
continue in operation and meet its liabilities
as they fall due over the period to
31 December 2026.
See also our business model on pages 10 to 13,
the going concern assessment on page 161,
and the impact of the principal risks on
pages 42 to 49.
Viability assessment
At 31 December 2023 the Group had cash
and cash equivalents of $1,322m plus an
undrawn bank facility of $1,350m.
Under the Base Case and Severe
Downside Case the Group is forecast to
generate positive free cash
flow over the
2024-26 period and the bank facility is
undrawn. The principal risks that could
be applicable have been considered and
are able to be absorbed within the
covenant requirements.
Under the Severe Downside scenario,
there is also headroom to the covenants
over the 2024-26 period to absorb
multiple additional risks; for example,
additional RevPAR impacts and a
widespread cybersecurity incident.
The bank facility would remain undrawn.
The Directors reviewed a number of
actions that could be taken if required
to reduce discretionary spend, creating
substantial additional headroom to
the covenants.
The Directors reviewed a reverse stress
test scenario to determine what decrease
in RevPAR would create a breach of the
covenants and the cash reserves that
would be available to the Group at that
time. The Directors concluded that it
was very unlikely that a single risk or
combination of the risks considered
could create the sustained RevPAR
impact required to breach the covenants,
except for a signi
ficant global event.
None of the scenarios modelled indicates
that a covenant amendment would be
required but, in the event that it was,
the Directors believe it is reasonable to
expect that such an amendment could
be obtained based on experience of
negotiating the waivers and amendments
during 2020. The Group also has
alternative options to manage this risk,
including raising additional funding in
the capital markets. We continue to plan
to maintain an investment-grade credit
rating which provides good access to the
debt capital markets.
Strategic Report
51
IHG
| Annual Report and Form 20-F 2023
Viability statement
The Audit Committee
The Audit Committee is responsible on behalf
of the Board for reviewing IHG’s climate-
related risks and opportunities as identified
by management, and ensuring that IHG
maintains robust risk management and
internal control systems to manage climate
impact. The Audit Committee also reviews
the integrity of IHG’s
financial reporting
and the potential impact of climate change,
and considers data validation, assurance
and controls around non-financial ESG data.
See pages 107 to 111 for our
Audit Committee Report.
Delivering on the
recommendations of TCFD
Governance and management
of climate-related risks and
opportunities
Board oversight of climate-related risks
and opportunities
Our approach to responsible business is
driven by a culture of strong governance
and supported by robust policies. The Board
oversees the Group’s strategy, considering
our decarbonisation strategy as an integral
component and ensuring effective controls
and risk management systems are in place.
It holds teams accountable for managing
IHG’s climate risks and assessing
performance against climate targets.
See our Governance section
on pages 89 to 142.
The Chairs of the following Board
Committees also provide advice to the
Board on risk topics within their respective
remits, all of which encompass the
consideration of climate-related risks:
The Responsible Business Committee
The Responsible Business Committee
advises the Board on IHG’s responsible
business strategy and objectives, which
covers climate change within the context of
our wider Group Strategy. The Committee
provides oversight of our Journey to
Tomorrow goals, transition plan and
decarbonisation commitments, including
recommending and reporting progress
on ESG Long Term Incentive Plan (LTIP)
measures to the Remuneration Committee.
See pages 112 and 113 for more on our 2023
Responsible Business Committee Report.
Compliance with Listing Rule 9.8.6(8)
We confirm that our disclosures are in
line with the UK Listing Rule 9.8.6(8)
and are consistent with the TCFD
recommendations and the Guidance
for All Sectors. We recognise that our
disclosures are limited in part by current
data availability and are working with
our hotel owners to improve our data
and underlying assumptions.
TCFD section
Summary of recommended disclosure
Page reference
a
Future disclosure actions
Governance
IHG’s governance around climate-
related risks and opportunities.
52 to 53
•
Prepare TCFD disclosure for regulatory updates from
the UK Sustainability Disclosure Requirements.
Strategy
Scenario analysis
An overview of the scenario analysis
used to assess business resilience
against climate risks and identify
potentially significant risks and
opportunities. This overview provides
insights into the outcomes of the
analysis and outlines the mitigation
actions we are implementing to
enhance our business resilience.
53 to 56
•
Enhance the quality of data capture to measure risks
that have been identified as potentially significant.
•
Continue to build business resilience against the
identified climate-related risks and opportunities,
including physical risks.
•
Develop a roadmap to quantify direct and indirect
impacts of climate-related risks and opportunities for
future disclosure, where material.
Transition plan
Our plan to make progress towards
our science-based target (SBT) to
reduce GHG emissions across our
estate by 46% by 2030.
56 to 58
•
Evolve our decarbonisation strategy to align with the
Transition Plan Taskforce (TPT) best practice guidance
on developing an effective transition plan in line with
regulatory updates.
Risk
management
How IHG identifies, assesses and
manages climate-related risks.
59
•
Continue to enhance integration of IHG’s climate-related
risks and opportunities into our risk management
framework and business decision-making processes.
Metrics
and targets
The metrics and targets used to
assess and manage relevant
climate-related risks and
opportunities, where such
information is material.
59
KPIs on
page 63
•
Continue to improve data collection to develop and
align metrics and targets to the TCFD’s recommended
cross-industry metrics and targets, focusing on the
management of climate-related risks and opportunities
most relevant for IHG.
a
Please see individual sections of the TCFD disclosure for further references to supplementary information.
W
e have reported against the 11
recommendations of the TCFD
within our 2023 Annual Report,
as referenced in the table below. We will
continue to work towards enhancing our
disclosure by developing the methodology
used for our climate scenario analysis,
integrating our climate-related risks and
opportunities into our business strategy,
and expanding the scope of our metrics
and targets.
We have outlined our focus areas for evolving
our disclosure to improve consistency with
the TCFD recommendations, and will provide
an update on our progress against these in
the 2024 Annual Report.
We are also continually tracking emerging
climate regulations, including specific
requirements for the reporting and disclosure
of climate change risk, and we will take steps
to align to the UK Sustainability Disclosure
Requirements, when applicable.
Strategic Report
52
IHG
| Annual Report and Form 20-F 2023
The Remuneration Committee
The Remuneration Committee determines
the Executive Board, Executive Committee
and Chair of the Board remuneration and
reviews wider workforce remuneration to
ensure this is aligned with the interests of
shareholders, the UK corporate governance
environment, and our environmental and
climate-related goals.
To further embed our climate goals across
the business and ensure accountability
at the senior level, the Remuneration
Committee, as advised by the Responsible
Business Committee, has incorporated ESG
measures, including relating to our carbon
commitment, into the LTIP and reports to the
Board on progress against these measures.
Find more details of our Directors’
Remuneration Policy at
ihgplc.com/investors/
corporate-governance/directors-
remuneration-policy
See page 59 for more details of our metrics
and targets, including remuneration.
Management’s governance of
climate-related risks and opportunities
The management of climate-related risks
and opportunities is the responsibility of our
Executive Committee, with execution at the
operational level overseen by the TCFD
Steering Committee and the Regional
Decarbonisation Steering Committees
(see diagram below).
The TCFD Steering Committee has
responsibilities for identifying and reviewing
potential impacts of climate-related risks and
opportunities, measuring their impact and
integrating climate scenario analysis into our
business strategy. We introduced Regional
Steering Committees in 2023 to oversee
development as well as implementation
of regional decarbonisation strategies,
reflecting the need
for approaches tailored
to different geographies.
The Chief Sustainability Officer is responsible
for monitoring progress against our carbon
reduction commitment and reporting
progress to the Executive Committee and
the Responsible Business Committee.
Stakeholder engagement
The relationships we build with our
stakeholders are critical to informing our
business decisions and delivering on our
purpose of providing True Hospitality for
Good. Understanding and balancing the
interests of our stakeholders is intrinsic to
good governance. It provides a foundation
against which we measure ourselves, to
protect our reputation and develop our
commercial and social awareness.
To guide our work and ensure that we can
plan and prioritise our impact, we regularly
conduct materiality assessments of ESG
issues, which helps us to focus on issues
that are the most relevant to society, our
industry and the long-term success of IHG.
See pages 36 and 37 for our approach
to stakeholder engagement.
See pages 13 to 15 of our 2023 Responsible
Business Report for more details of our
materiality assessment and climate-related
stakeholder engagement.
Strategy
The Executive Committee and Board
regularly assess the impact of climate
change on IHG within their decision-making
processes. It is acknowledged not only as
one of our 10 principal risks but also as an
integral component of our business strategy,
aligning with our fourth strategic priority,
‘Care for our people, communities
and planet’.
We address climate-related risks through
this priority and our Journey to Tomorrow
programme, which includes critical elements
relating to carbon and energy that form the
basis of our transition plan.
This section describes our key climate-
related risks and opportunities, their potential
impact on our business, and its resilience
to such impacts, which has been assessed
using scenario analysis.
See page 19 for an overview of IHG’s four
strategic priorities, including ‘Care for our
people, communities and planet’.
See our 2023 Responsible Business Report for
more on our decarbonisation strategy and
performance.
See how the Board considered strategic and
operational matters on page 101 and 103.
THE BOARD
Executive Committee
Audit Committee
Remuneration Committee
Nomination Committee
Responsible Business
Committee
General Purposes Committee
Disclosure Committee
BOARD COMMITTEES
MANAGEMENT COMMITTEES
Climate change governance structure
EC Environment Sponsor Group
Regional
Decarbonisation
Steering Committees
TCFD Steering
Committee
REPORTING
Strategic Report
53
IHG
| Annual Report and Form 20-F 2023
Delivering on the recommendations of TCFD
continue to evolve, and these will be
assessed against the Group’s judgements
and estimates.
We acknowledge the interconnectedness
of the speci
fic risks outlined on pages 55
and 56 and the overarching risk posed by
climate change to both our hotel owners
and IHG. The cumulative impact of climate-
related risks has the potential to influence
the overall appeal of investments in the
industry at a broader scale. In the future,
we will assess the aggregate impact on
our wider stakeholders, including our
hotel owners.
Identifying and assessing IHG’s
climate-related risks and opportunities
While our principal risks outline uncertainties
that might threaten the ability to achieve
our objectives throughout our business plan,
climate change has the potential to impact
IHG’s prospects over a range of future
temperature scenarios and time horizons.
With the support of external experts,
we have undertaken scenario analysis to
identify and assess which climate-related
risks and opportunities are most relevant
and potentially impactful for IHG over the
short, medium and long term. Our analysis
focused on the assessment of both
transition and physical climate change
uncertainties across all hotels in our three
regions (Americas, EMEAA and Greater
China) under three different temperature
scenarios and timeframes, as outlined in
the adjacent tables.
Our climate scenario analysis identifies
risks as having a ‘potential impact’ on IHG
if they could directly impact revenue,
costs or IHG’s reputation without mitigation.
Our qualitative assessment of climate
impacts on IHG’s financial per
formance
considered future revenue growth from
our 10-year business plan and aligns with
long-term market growth rates projected
to 2050.
While scenario analysis is not designed to
deliver precise forecasts, we are actively
enhancing and refining our data and
assumptions to evolve the transparency
of our TCFD disclosure to cover both
quantitative and qualitative impacts in
future. We will look to determine the
materiality of climate-related risks and
opportunities following the same criteria
used to determine the significance o
f
other information in our
financial filings.
See the forward-looking statement
on page 263.
Our initial analysis was conducted during
a period of pronounced variability in the
recovery of the hospitality industry following
the Covid-19 pandemic. This situation led
to limited visibility in forecasting. Our
assessment is now based on an assumption
of reduced volatility in the medium- and
longer-term outlook.
We prioritise climate-related uncertainties
that we feel could be most signi
ficant to
IHG and our stakeholders, building our
business’s resilience to climate change by
embedding operational decision-making
and business processes that appropriately
consider and address climate-related risks.
Since our 2022 report, we have evolved
the framing of our identi
fied climate-related
risks and opportunities to consider potential
qualitative impacts across all relevant risk
categories. We have also begun to assess
chronic physical risks in addition to acute
ones, and we will review how these and the
wider impacts considered on pages 55 and
56 can be factored into future quanti
fication.
Determining the significance o
f climate-
related risks and opportunities to IHG
In preparing our 2023 Annual Report, the
potential impacts of climate change have
been considered. There are no climate-
related estimates and assumptions that have
a material impact on asset values in the
Group Financial Statements (see page 172).
While there is currently no material medium-
term impact expected from climate change,
the risks attached to climate change
Delivering on the
recommendations of TCFD
continued
Climate risk time horizons
How IHG defines/reasoning
Short
(1–5 years)
Our short-term time horizon incorporates our financial going concern
and viability statement assessments, along with our budget-setting
timeline. Our hotel energy performance targets are also aligned to
this timeframe.
Medium
(6–15 years)
Our medium-term time horizon reflects our 10-year responsible
business plan, Journey to Tomorrow, and our climate-related targets.
It also reflects our time horizon
from a strategic planning perspective.
Long
(16–30 years)
A long-term time horizon of up to 30 years aligns with national
government policy and regulatory timeframes: for example, the UK’s
2050 net-zero target and the Paris Agreement. It also reflects the
longer-term nature of the contracts we sign with our owners.
a
To assess potential physical impacts, we have aligned the temperature rise scenarios in our analysis with the
Intergovernmental Panel on Climate Change’s (IPCC) 1.5°C, 2°C and 4°C aligned Representative Concentration
Pathways (RCPs) 2.6, 4.5 and 8.5, respectively.
b
To assess potential transition impacts, we have based our analysis on the International Institute for Applied Systems
Analysis’ (IIASA) Shared Socioeconomic Pathways (SSPs) to capture how societal, economic and technological trends
could evolve over time and under three selected temperature rise scenarios.
Scenario analysis
Physical risks
Transition risks
Key characteristics of scenarios
Temperature
alignment
RCP
a
used in
scenario model
SSP
b
used in
scenario model
1.5˚C
scenario
2.6
1
Stronger policy action
The world takes immediate
and substantial action to
reduce GHG emissions in line
with the UN Paris Agreement,
with higher use of renewable
energy and widespread
carbon capture and systematic
change, influenced by policies
such as carbon taxes. Lower
likelihood of signi
ficant acute
and chronic physical
climate risks.
Lower policy action
The world takes limited to
no action to reduce GHG
emissions, with continued high
use of fossil fuels. Increased
likelihood and intensity of
significant acute and chronic
physical climate risks.
2˚C
scenario
4.5
1
4˚C
scenario
8.5
3
Strategic Report
54
IHG
| Annual Report and Form 20-F 2023
However, we believe by taking action to
decarbonise, we can drive long-term
business value for both our hotel owners
and all other IHG stakeholders. We can
enhance the IHG Hotels & Resorts
masterbrand by reducing our environmental
impact and supporting our hotel owners
to manage increasing operational costs,
secure supply chains and reduce exposure
to increasing climate risks, regulation
and taxes.
See page 162 for critical accounting policies
and the use of judgements, estimates
and assumptions.
Summary of IHG’s most signi
ficant climate-related risks and opportunities
Risk/opportunity description
a
Unmitigated potential risks and opportunities
IHG’s risk management and strategic response
to build business resilience
Transition risks and opportunities
b
IHG’s ability to decarbonise in line
with stakeholder expectations
Potential short term (1-5 years)
impact under a 1.5°C scenario,
if unmitigated
Reputational:
In scenarios projecting global temperature increases of 1.5°C,
2°C and 4°C, our analysis showed a potential reputational
impact of IHG not decarbonising in line with stakeholder
expectations in the short-term, if unmitigated. Under a 1.5°C
scenario, this impact would remain a potential impact in the
medium to long term if IHG fell further behind competitors
and peers in meeting its carbon target. Alternatively, IHG may
outperform peers and enhance the sustainable reputation
of the IHG brand. Under a 4°C scenario, the longer-term
reputational risk will be lower as most companies and
governments will fail to meet their own targets.
Market:
If investors’ expectations for businesses to demonstrate
a shift towards low-carbon increase, this may in
fluence
decision-making and disadvantage companies unable to
evidence sufficient progress and advantage those that are.
Should the expectations of hotel owners not align with IHG’s
decarbonisation plans, potential challenges and conflicts may
arise that inhibit IHG’s ability to influence and deliver on its
commitments.
Policy and legal:
The speed at which governments align their policies and plans
to their climate change commitments will impact the rate at
which IHG can decarbonise.
Our work on decarbonisation supports our
overarching corporate aim of ‘Care for our people,
communities and planet’ – one of IHG’s four strategic
priorities. Our decarbonisation strategy and
Transition Plan can be found on page 57.
See details of the actions we are taking to
make progress towards our commitment and
to maximise the opportunities associated with
decarbonising in our Responsible Business Report
on pages 28 to 32.
The dependencies associated with our decarbonisation
strategy are outlined on page 58 and the metrics and
targets we have developed to measure this risk are
detailed on page 59.
Additionally, our approach to stakeholder engagement
supports the management of this potential risk or
opportunity. This includes developing partnerships
and working with governments, trade associations
and industry peers to influence policy positively
and to present opportunities for IHG hotel owners
to decarbonise.
See more on our stakeholder engagement relating
to climate change on pages 13 to 15 of our 2023
Responsible Business Report.
See IHG’s business strategy on pages 18 to 35.
See page 58 for further details on the key external
factors that in
fluence IHG’s decarbonisation.
Our key stakeholders have
increasing expectations for
businesses to influence positive
change and deliver on their
environmental commitments.
This includes increasing
questions from corporate clients
and regulatory intervention
by governments.
Decarbonising our business in
line with expectations presents
a potential opportunity for IHG to
enhance its brand, by supporting
owners to decarbonise and
capture a greater share of guests
seeking more sustainable hotels.
Failure to meet expectations could
cause reputational damage.
Changing consumer preferences
towards sustainable travel
Potential short term (1-5 years)
impact under a 1.5°C scenario,
if unmitigated
Market:
Under 1.5°C, 2°C and 4°C scenarios, our analysis identified a
potential financial impact in the short-term. This impact could
be negative if IHG fails to adapt to a potential shift in customer
demand favouring sustainable stays. Alternatively, IHG could
capitalise on this trend and secure a substantial share of the
growing market.
We continue to receive sustainability-related questions
from corporate customers, particularly when they seek
accommodation providers that can support them with their
own ESG ambitions. To enhance our understanding of this risk,
we monitor ESG-related questions from corporate customers
submitting Requests For Proposals (RFPs). In 2023, we saw
more than 70% of customer accounts include ESG questions
in RFPs, including requests for environmental data about
our hotels. We have also conducted an internal analysis and
found that nearly all top strategic global customers’ accounts
have their own carbon targets.
We support our hotels in reducing the impact of
their operations and improving their sustainable
credentials through the provision of training, tools,
and resources, as well as cross-industry collaboration
and partnerships that enable hotels to innovate.
Whether our guests are travelling for business
or leisure, we see a real opportunity to help them
have a more sustainable stay as part of the IHG
guest experience. In 2023, we continued to promote
our Greener Stay initiative, as well as facilitating
hotels’ access to leading third-party sustainability
certification programmes and launching IHG’s
Meeting for Good sustainable meetings programme,
which helps hotels to respond to the growing demand
for sustainable meeting offerings, post-pandemic.
Increasing appetite to travel
sustainably could have a direct
positive or negative impact on
IHG’s financial per
formance,
depending on IHG’s response
and ability to adapt to changing
consumer preferences for
sustainable travel.
a
The terminology used for our climate uncertainties has been adjusted to better align with IHG’s risk management framework: however, the scenario analysis remains unchanged.
See last year’s Annual Report for previous wording.
b
In our 2022 Annual Report, we identified a decline in aviation as a priority transition risk, however, external
forecasts show that aviation is set to increase in the future and leisure and
business travel has returned to pre-Covid-19 levels. As a result, we have transferred this risk from one that we actively mitigate and report on, to monitoring as part of our sustainable
travel risk.
Strategic Report
55
IHG
| Annual Report and Form 20-F 2023
Delivering on the recommendations of TCFD
Delivering on the
recommendations of TCFD
continued
Risk/opportunity description
a
Unmitigated potential risks and opportunities
IHG’s risk management and strategic response
to build business resilience
Physical risks – acute and chronic
Increased frequency and severity
of extreme weather events
Potential long term (13-30 years)
impact under a 2°C and 4°C
scenario, if unmitigated
Under 2°C and 4°C temperature scenarios, our initial analysis
found that acute physical risks could have a potential
financial
impact to IHG, if unmitigated. However, our tracking of the
current impact of natural disasters on IHG’s revenue has shown
this is not the case. To date, our asset-light franchise business
model and geographical spread have helped to protect IHG’s
revenue exposure.
However, we recognise the need to support our hotel teams,
guests and the communities in which we operate, and in 2023,
we conducted additional analysis on acute physical risks at the
hotel level to assess our existing and pipeline hotels’ current
and future exposure to 2030 and 2050.
Analysis found the most prominent risks, where we have a
significant hotel presence, to be drought risk in countries such
as the US, UAE and Saudi Arabia, and severe storms, tropical
storms and cyclones in countries such as the US, China,
Thailand, Singapore and Malaysia. Countries with the overall
highest exposure to acute risks included China, the Caribbean
nations, the Philippines and Oman. Acute risks are shown to
increase over time, with significant increases in heatwave
duration and drought length by 2050 across our existing and
pipeline hotel locations.
Our focus has been on the identi
fication and
mapping of our acute physical risks, understanding
and monitoring the impact on hotels, and assessing
whether this is significant
for IHG at the Group level.
We are refining our understanding o
f this risk by
continuing to develop our financial modelling.
The analysis conducted in 2023, focusing on the
physical risk at both existing and pipeline hotel, will
help us identify the hotels most exposed. We will take
into account their climate adaptive capacity and
support hotels in developing mitigation strategies
where needed.
We will also use our analysis to further integrate
physical climate risks into our business decision-
making processes and will explore where IHG
mitigation and adaptation strategies might be needed.
At present, we provide support to our hotels and
surrounding communities following natural disasters
through our humanitarian aid partners, as well as
through access to IHG colleague assistance funds
and natural disaster guides.
See page 26 of our 2023 Responsible Business
Report for the disaster response support we
provide to hotels and our partners.
Rising temperatures and in turn
increasing likelihood and severity
of acute or extreme weather
events creates an inherent risk of
disruption to IHG hotel operations.
Such disruptions could impact
revenues and the fee income
received by IHG, potentially
diminishing the appeal of the
hotel industry to owners in
specific locations.
IHG also faces potential
reputational consequences if
it fails to effectively respond to
extreme events and provide
appropriate support to owners
and affected communities.
Significant changes in long-term
weather patterns
Impact to be determined
In 2023, we conducted analysis with third-party experts to
identify geographical locations with high chronic physical risk.
This analysis found that IHG’s hotel locations are more exposed
to long-term persistent chronic climate risks than to short-term
acute shocks, and has therefore informed our decision to
transition chronic physical risks from an uncertainty that we
monitor to one that we report on and begin to actively manage.
The existing risks found to be most prominent are heat stress in
countries such as Thailand, Vietnam, Indonesia, UAE, China and
India and water stress in the US, China, Australia, Mexico, India
and Saudi Arabia. Extreme temperature, heatwave duration and
heavy rainfall are also expected to rise signi
ficantly under 4°C
scenario (RCP 8.5) to 2030 and 2050.
IHG will conduct scenario analysis to consider the
potential impact of the chronic risks identi
fied to
IHG’s financial prospects and per
formance and seek
to update business decision-making processes to
consider physical climate risks, where needed.
We will establish which hotels are most exposed, with
consideration to the local infrastructure and individual
hotels’ capacity to adapt, as well as understanding
how hotels are currently being affected by changing
weather and what support we can provide
moving forward.
See pages 37 and 38 of our 2023 Responsible
Business Report for more detail on our Journey
to Tomorrow water commitments and
performance monitoring.
As temperatures rise, chronic
physical risks are expected to
intensify. Responding to these risks
may lead to heightened operating
costs for hotel owners, alterations
in customer travel patterns and
impacts on hotel resource
availability due to population
migration and supply chain
disruption. These may impact
IHG’s financial per
formance and
ability to grow in certain markets.
a
The terminology used for our climate uncertainties has been adjusted to better align with IHG’s risk management framework: however, the scenario analysis remains unchanged.
See last year’s Annual Report for previous wording.
b
In our 2022 Annual Report, we identified a decline in aviation as a priority transition risk, however, external
forecasts show that aviation is set to increase in the future and leisure and
business travel has returned strongly to pre-Covid-19 levels. As a result, we have transferred this risk from one that we actively mitigate and report on, to monitoring as part of our
sustainable travel risk.
Transition plan
We are targeting a 46% absolute reduction
in our GHG emissions by 2030 from a 2019
base year (Scope 1 and 2 emissions and
Scope 3 from fuel and energy-related
activities and franchised hotels energy).
The SBTi has validated this target, confirming
its alignment with climate science and the
Paris Agreement. This validation ensures that
the target is designed to prevent the worst
impacts of climate change.
Our decarbonisation strategy has a strong
governance structure to support our
progress towards our ambitions. Regional
Steering Committees now help to account
for geographical differences and are
responsible for developing and executing
regional decarbonisation plans which target
actions that are most impactful within each
region, alongside resource requirements.
Refer to page 53 for our climate
governance structure.
See pages 28 to 32 of our 2023 Responsible
Business Report for more details on the
decarbonisation actions we are taking to
deliver our transition plan.
IHG values the Transition Plan Taskforce’s
(TPT) guidance on best practice reporting,
and actively participated in the consultation
period as members of the TPT Sandbox
coalition. While awaiting additional sectoral
guidance and updates to the regulatory
framework, we will work towards alignment
with the TPT framework.
We will also look at how we might align our
future biodiversity and natural capital work
with the Taskforce for Nature Related
Financial Disclosures (TNFD) to enhance
transparency around our nature-related risks,
opportunities and mitigation strategies.
See pages 39 and 40 of our 2023 Responsible
Business Plan for more information on how we
are helping to preserve nature.
Our SBT: To reduce
absolute Scope 1, 2
and Scope 3 GHG
emissions from FERA
and franchised estate
energy 46% by 2030
from a 2019 base year.”
Strategic Report
56
IHG
| Annual Report and Form 20-F 2023
How we plan to drive towards our
2030 SBT
To make progress towards our
decarbonisation target while continuing
to grow our business, we are acting across
three principal levers: decarbonising our
existing hotels; supporting our hotels to
access renewable energy; and developing
new-build hotels that operate at very low/
zero carbon.
Our decarbonisation model enables
us to analyse various scenarios of grid
decarbonisation, energy conservation
measure implementation and renewable
procurement across different periods,
geographies and hotel archetypes. Estimated
emission reduction potential, costs and return
on investment (ROI) for energy reduction
initiatives guides decarbonisation efforts. Our
modelling also incorporates projected growth
across our portfolio in our decarbonisation
estimates, incorporating our long-range
plan for system size growth to 2030.
Our plan does not include the use of carbon
offsets. Instead, we are focused on the
absolute reduction of emissions, aligned
with SBTi guidance. Our carbon footprint
is reported as one of IHG’s KPIs (see page 63).
Our transition plan (below) outlines our
actions across each of our decarbonisation
levers over the short and medium term.
Our transition plan
•
Rolling out ECMs across all existing estate hotels, focused on those
measures with a ROI of less than 5 years, supported by brand standards
and reflected in corporate remuneration targets.
•
Continued focus on energy reduction via the hotel energy metric.
•
Investing in tools and training, such as the HERO tool and Green Engage,
to support our owners with decarbonisation initiatives.
•
Embedding ECMs into our new-build hotels, supported by brand
standards and reflected in corporate remuneration targets.
•
Developing a programme to accelerate the number of new-build hotels
that operate at very low/zero carbon.
•
Transitioning to renewable energy through mechanisms such as green
tariffs, community solar and on-site renewable generation, where
commercially viable.
•
Identifying
financial mechanisms to support widespread adoption
of on-site and off-site renewables.
Policy frameworks
Further government tax relief
or financial incentives are
needed to encourage and
support hotel owners to drive
efficiency measures.
Access to fossil-free energy
Ability of our third-party-owned
hotels to move away from fossil
fuel usage is dependent on
both grid decarbonisation and
access to cost-effective
renewable energy.
Behavioural change
Decarbonisation is heavily
reliant on a sustained change
in mindset and behaviour in
day-to-day operations by hotel
owners, teams and guests.
Our
engagement
strategy
Our key
dependencies
Our collaboration
with stakeholders
a
Our hotels and
owners
Developing tools,
training, metrics
and incentives
that help hotels
to meet energy
targets and
increase
customer and
regulatory
expectations.
Governments
Engaging with
governments
to advocate
for support for
hotel owners
to decarbonise.
Trade bodies
Engaging on
climate policy
through our
memberships
and trade
associations.
Peers
Using our
influence
in industry
associations
to align on
standards
on sector
decarbonisation
and highlight
common
challenges.
Partnerships
Partnering with
NGOs to support
the wider
economy
transition and
with innovators
to help reduce
our impact.
a
Supply chain emissions are not included in our 2030 SBT, as they were not deemed material for inclusion under IHG’s science-based target scope, as per the SBTi criteria.
Nevertheless, we engage with our supply chain to support our Journey to Tomorrow commitments and the wider economy transition: see pages 41 to 43 of our 2023 Responsible
Business Report and page 46 of the same report for more details on our methodology and scope de
finitions.
CROSS-CUTTING CONSIDERATIONS
Primary
decarbonisation levers
•
Energy and carbon
modelling to map
decarbonisation
pathways.
•
Integration of
business growth
plans and external
dependencies into
carbon pathways.
•
Analysis of return
on investment and
impact of energy
efficiency
measures,
incorporating
regional variations
in markets.
•
Understanding
availability of
renewable energy
at scale.
Energy ef
ficiency in
the existing estate
Target new-build
hotels to operate at
very low/zero carbon
emissions by 2030
Renewable energy
purchases and
on-site generation
•
Continue to increase
hotel adoption of ECMs.
•
Partner with
organisations that can
incentivise hotel owners
to adopt ECMs with
longer payback periods.
•
Expand the number of
new-build hotels in our
estate that operate at
very low/zero carbon.
•
Scale access and
adoption of renewable
energy as markets
deregulate.
•
Advocate for policy
frameworks that
encourage and support
hotel owners to adopt
efficiency measures,
move away from fossil
fuel combustion and
access renewable
energy.
2019
2030
SHORT-TERM
MID-TERM
PLAN
ACTION
SCALE
Strategic Report
57
IHG
| Annual Report and Form 20-F 2023
Delivering on the recommendations of TCFD
Delivering on the
recommendations of TCFD
continued
Description
Response
Further government financial incentives are needed to encourage and support hotel owners to drive e
f
ficiency measures
The combination of high capital investment costs and longer payback periods for many ECMs is a barrier to
reducing hotel energy consumption. Further government financial incentives (
for example, tax relief) would
support IHG hotel owners to prioritise the investment needed to improve the efficiency of their hotels and
therefore drive accelerated decarbonisation across hotels operating under IHG brands.
See pages 13 to 15 of
our 2023 Responsible
Business Report for
our stakeholder
engagement and
pages 28 to 32 for our
carbon and energy
reduction progress.
Ability of our third-party owned hotels to move away from fossil fuel use is dependent on several factors
IHG predominantly franchises and manages hotels in more than 100 countries around the world, including
many where electricity grids are heavily dependent on fossil fuels. In 2023, managed and franchised hotels
consumed over 8 million MWh of electricity, which equates to 76% of our total reported GHG emissions.
We anticipate this electricity percentage to grow as hotel owners look to electrify their hotels to reduce their
reliance on fossil fuels. In order for these actions to translate into meaningfully lower carbon emissions,
there are several inter-related dependencies:
Electricity grids decarbonising in line with the Paris Agreement
We are reliant on governments implementing policies and plans that decarbonise electricity grids in line
with a 1.5°C trajectory. Government inaction in this area would significantly impact IHG’s ability to meet
its targets.
Owners’ ability to access scalable, cost-effective renewable energy
A crucial element of our transition plan is to support our franchised and managed hotels (which bear the
costs of energy) to access renewable energy at scale. While IHG can in
fluence renewable energy adoption,
for example, by negotiating renewable energy tariffs or setting up contracts with approved suppliers for our
community solar programme, we have a limited ability to enforce adoption. Large-scale solutions such as
virtual Power Purchase Agreements (vPPAs) present unknown long-term financial exposure
for IHG due to
market price uncertainty, while potential changes to GHG accounting of renewable energy creates further
barriers to adoption.
Additionally, the geographic spread of our hotel portfolio means that by 2030, over half of our emissions
will be from regulated energy markets such as China, Saudi Arabia and the UAE. IHG is therefore dependent
on those markets deregulating and the availability of solutions to enable cost-effective renewable energy
to be procured at scale.
The business case for switching from gas to electricity needs to become more
financially compelling
for hotel owners
The price disparity between electricity and gas (in Western and Middle Eastern markets) presents a
significant challenge to transitioning energy use to renewable sources. Rebalancing o
f electricity and gas
prices would improve the rate of decarbonisation that could be achieved by hotel electri
fication.
See page 31 of our
2023 Responsible
Business Report for
progress on sourcing
renewable energy.
Decarbonisation is heavily reliant on a sustained change in mindset and behaviour in day-to-day operations by hotel owners, teams
and guests
Meeting our SBT requires new operational behaviours and mindset shifts to adapt to low-energy products
and services. Guests’ expectations will need to evolve to align with more sustainable practices: for example,
electrification will require a move away
from speciality cooking techniques associated with fossil-fuel-based
cooking, such as gas or charcoal – an industry-wide consideration. In addition, operational efficiencies can
significantly reduce energy consumption at a hotel level; however, in an environment o
f high employee
turnover across the hospitality industry, ongoing training and industry-wide initiatives are required to
embed and sustain new practices.
See page 31 of our
2023 Responsible
Business Report for
progress on sourcing
renewable energy.
Transition plan dependencies
Given IHG has a predominantly asset-light
business model, with the majority of hotels
owned by third parties, we’re working
closely with our owners and teams across
our entire estate in relation to our
climate targets.
Unlike company-owned properties,
franchised and managed hotels have
independent ownership, including decisions
related to infrastructure, utilities and carbon
reduction programmes. While we can
provide guidelines and support, the
decentralised nature of the franchise
system requires a collaborative approach,
incentivisation and effective communication
to drive sustainability initiatives across the
entire network.
There are a number of additional external
factors that impact the rate at which IHG
hotel owners can decarbonise. Some of
these key external dependencies are
outlined below, and the impacts of these
dependencies are considered in how we
progress towards our SBT.
We recognise that our role in collaborating
with governments, peers and trade bodies
will be crucial to supporting owners and the
industry in decarbonising successfully.
See further details of how we engage with
stakeholders on pages 13 to 15 of our 2023
Responsible Business Report.
Strategic Report
58
IHG
| Annual Report and Form 20-F 2023
Risk management
Identification, assessment, management
and integration of climate-related risks
At IHG, we assess the connections between
climate-related risks and opportunities and
other key principal risks to ensure climate
change is embedded in our risk management
processes and addressed through our
business strategy. We consider climate
change to be a major uncertainty affecting
our industry, reflecting this as a principal risk
and indicating that it may affect other core
areas of our business, including guest and
owner preference for our brands. Our
business model means that we share threats
and opportunities with our owners, including
our dependency on their capacity to invest,
uphold our brand standards and achieve
our commitments.
The Audit Committee provides oversight of
the effectiveness of IHG’s risk management
and internal control processes, including
those relating to climate. To enable our risks
to inform business decisions effectively,
our risk reviews are conducted by the Board,
Executive Committee and management
teams to align with the business decision-
making cycle. Our Risk and Assurance team
conducts regular meetings with IHG leaders
and teams responsible for assessing and
managing risks. These conversations consider
a range of uncertainties, such as the effect
of climate change on hospitality, and the
steps being taken to reduce IHG’s exposure,
which may be relevant to the delivery of
teams’ objectives and IHG’s success.
Enhancing awareness and improving
understanding of IHG’s principal risks
across the business, particularly around
the complexities of climate change, helps
ensure the consideration of risk factors
within decision-making. IHG’s Corporate
Responsibility team has developed climate
training and tools for our corporate and
hotel colleagues, and conducts regular
workshops with key business functions to
engage them on our decarbonisation and
our Journey to Tomorrow programme.
Refer to pages 42 to 49 for more information on
our approach to risk governance, management
and IHG’s principal risks.
See pages 55 to 56 for information on our most
significant climate-related risks and
opportunities.
See page 32 of our 2023 Responsible Business
Report for information on climate training,
tools and resources.
Metrics and targets
To help us manage our climate-related risks
and opportunities, we are developing
metrics and targets in line with TCFD
recommended disclosures. Where metrics
and targets are still in progress or we do not
consider the category to be relevant to IHG,
we have provided details below.
GHG emissions and progress against SBT
Our GHG emissions are measured by our
performance against our SBT commitment
to reduce Scope 1 and 2 emissions and
Scope 3 emissions from our franchised
estate energy and FERA by 46% by 2030,
from a 2019 base year. Our target is
approved by the SBTi and our methodology
to calculate our GHG emissions follows the
GHG Protocol Corporate Accounting
and Reporting Standard methodology.
The Scope 3 emissions included within our
SBT are material to IHG in accordance with
the SBTi criteria and include Category 14
– Franchises and Category 3 – FERA.
Other Scope 3 categories are not included
in our 2030 SBT, as they were not deemed
material for inclusion under IHG’s Science-
based target scope, as per the SBTi criteria.
We use our carbon footprint as a metric to
track progress against our decarbonisation
strategy and we report this within the KPI
section on page 63. We also track our
year-on-year absolute GHG emissions
against our 2019 baseline.
A breakdown of our GHG emissions, intensity
metrics and methodology can be found on
pages 238 to 240 in our Streamlined Energy
and Carbon Reporting (SECR).
See pages 46 to 49 of our 2023 Responsible
Business Report pages for further details of
our GHG methodology and data.
Remuneration
To support our decarbonisation strategy and
transition opportunities, we have embedded
ESG metrics into executive remuneration
under the Directors’ Remuneration Policy.
The 2023/25 LTIP cycle includes targets
relating to the integration of ECMs into brand
standards across new-build and existing
hotels and the adoption of speci
fic ECMs by
owned, leased, managed lease and managed
hotels. We track these measures during the
cycle and will report on achievement in our
Directors’ Remuneration Report at the end
of the LTIP cycle. New measures will also be
included in future LTIP cycles.
For more details of our Directors’ Remuneration
Policy see
ihgplc.com/investors/corporate-
governance/directors-remuneration-policy
See pages 116 to 140 for more on our Director’s
Remuneration Report and 2024/26 LTIP cycle.
Capital deployment
Given the asset-light nature of our business
model, we do not consider capital deployment
to be a significant lever
for managing our
climate-related risks and opportunities, or
for implementing our transition plan. We may
incur operational costs associated with
initiatives, such as new software systems,
and any capital that is required is included
within our typical capital expenditure levels
of up to $350m gross per annum. We do not
monitor capital expenditure by third-party
owners of our franchised hotels.
Internal carbon pricing
Given that a significant portion o
f our
emissions stems from our franchised estate,
where our control is limited, we have
determined that a conventional internal
carbon price would not be the most
impactful decarbonisation mechanism.
Consequently, our efforts are directed
toward more suitable mechanisms, as
outlined in our transition plan on page 57.
External carbon price
We analysed the IHG Group and individual
hotel-level exposure to carbon pricing
legislation by applying a projected carbon
price to our GHG emissions under a 1.5°C
temperature scenario. At the IHG Group
level, analysis found that we are largely
insulated by our revenue-based fee
structure, which mitigates a substantial
proportion of costs being passed through
to the Group from our hotels. However, we
acknowledge that exposure could increase
the risk of hotels becoming less pro
fitable
or less desirable as an asset class in future.
By supporting our hotels in decarbonising,
we aim to reduce this risk.
Transition risk and opportunities
We track the year-on-year performance of
our GHG emissions and other environmental
indicators, including energy, renewables and
water and waste data, to evaluate progress
in mitigating transition risks and optimising
opportunities. We use energy reduction
metrics and targets, as well as our
remuneration target, to drive the uptake
of ECMs across our estate.
We will explore further potential metrics
that may be relevant for IHG to monitor and
manage our climate-related opportunities
and will disclose these if and when
appropriate.
See our environmental performance data
on pages 47 to 51 of our 2023 Responsible
Business Report.
See pages 28 to 32 of our 2023 Responsible
Business Report for more details on how IHG
captures climate-related opportunities.
Physical risks
In 2023, we analysed the exposure of IHG’s
existing and pipeline estate hotel locations
to acute and chronic physical risks. We plan
a deeper examination of this data set,
conducting further analysis to understand
the potential impacts on our hotels.
Additionally, we aim to identify and establish
metrics for consistently monitoring the most
significant risks. The findings will be
disclosed in future reporting.
See risk table on page 56 for details of the
physical risks IHG is most exposed to.
Strategic Report
59
IHG
| Annual Report and Form 20-F 2023
Delivering on the recommendations of TCFD
A guide to this KPI section
Key performance indicators (KPIs)
O
ur KPIs are carefully selected to allow us to monitor
the delivery of our strategy and long-term success.
They are organised around our strategy, which
articulates our purpose, ambition and priorities (see page 18).
KPIs are reviewed annually by senior management to ensure
continued alignment to our strategy and are included in internal
reporting and regularly monitored.
Measures included are those considered most relevant in assessing
the performance of the business and relate to our growth agenda
and commitment to our key stakeholders including owners, guests,
employees, shareholders and the communities in which we work.
KPIs should be read in conjunction with the other sections of the
Strategic Report, and where applicable, references to speci
fic
relevant topics are noted against each KPI.
KPIs
2023 status and 2024 priorities
Net rooms supply
Net total number of rooms in the
IHG System.
Increasing our rooms supply
provides significant advantages
of scale, including increasing the
value of our loyalty programme.
This measure is a key indicator of
achievement of our growth agenda
(see page 18).
A
LT
2023 status
Gross system growth of 5.3%, with net system size growth of 3.8%, as
removals rate returned to historical average of 1.5%. Total rooms supply
946,203 at 31 December 2023.
Signings of 79,220 rooms (556 hotels) represented a 1.4% decline on the prior
year which included 18,467 rooms (48 hotels) under the Iberostar Beachfront
Resorts brand. Total pipeline of 296,954 rooms increased by 5.5% compared
to 2022, with more than 40% under construction.
•
Further growth of the Holiday Inn Brand Family with 18,274 rooms opened
and 30,062 rooms signed, representing nearly 40% of our rooms signings.
•
Expansion of our Luxury & Lifestyle portfolio with 9,033 rooms opened
and a further 18,319 rooms signed.
•
5,098 rooms opened for Iberostar Beachfront Resorts with a further
1,424 rooms signed.
•
Continued growth of our recently launched brands with:
–
voco growing to 62 hotels open and a further 74 properties in the pipeline
across 38 countries.
–
16 Atwell Suites signed, taking the pipeline to 41 properties.
–
Vignette Collection growing to 29 hotels secured since its launch in 2021.
–
avid hotels adding eight openings and 23 signings taking the estate
to 67 hotels open with a further 141 in the pipeline.
–
The launch of Garner, our new midscale conversion brand, with seven
properties signed and the first two hotels open.
2024 priorities
•
Continue to focus on delivering strong net system size growth,
with well-invested brands in the largest markets and segments.
•
Further scale of avid hotels, Atwell Suites and Garner.
•
Continue to expand voco and Vignette Collection globally.
•
Grow the footprint of our Luxury & Lifestyle brands, including
branded residences.
•
Continue to explore further opportunities for growth through other
commercial agreements.
Signings
Gross total number of rooms added
to the IHG pipeline.
Continued signings secure the
future growth of our system and
continued efficiencies of scale.
Signings indicate our ability to
deliver sustained growth
(see page 18).
A
a
Use of Non-GAAP measures: In addition to performance measures directly observable in the Group Financial Statements (IFRS measures), additional
financial measures (described
as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not de
fined under IFRS or are adjusted
IFRS figures. Further explanation in relation to these measures can be
found on pages 84 to 88, and reconciliations to IFRS
figures, where they have been adjusted, are on pages 226
to 231.
2020
883,563
2019
2021
886,036
2022
880,327
2023
946,203
911,627
79,220
80,338
97,754
56,146
68,870
2020
2019
2021
2022
2023
Link between KPIs and Director remuneration
As we continue to focus on delivering
high-quality growth as in prior years, Directors’
remuneration for 2023 was directly related
to key aspects of our strategy. The following
indicates which KPIs have impacted
Directors’ remuneration:
For more information on Directors’
remuneration, see pages 116 to 140.
A
Annual Performance Plan
•
70% was linked to operating profit
from
reportable segments
a
•
15% was linked to strategic focus on net system
size growth through openings
•
15% was linked to strategic focus on future net
system size growth through signings
LT
Long Term Incentive Plan
•
30% was linked to Total Shareholder Return
•
40% was linked to relative net system
size growth
•
30% was linked to cash flow generation
Link to our strategy
Our four strategic priorities are core to our
success and represented as follows:
Brands guests
and owners love
Relentless
focus on growth
Leading
commercial engine
Care for our people,
communities and planet
Strategic Report
60
IHG
| Annual Report and Form 20-F 2023
KPIs
2023 status and 2024 priorities
Global RevPAR growth
Revenue per available room: rooms
revenue divided by the number of
room nights that are available.
RevPAR growth indicates the
increased value guests ascribe to our
brands in the markets in which we
operate and is a key measure widely
used in our industry (see page 8).
Definition o
f this key performance
measure can be found on page 84.
2023 status
•
Strong trading in 2023 resulted in RevPAR improving year-on-year across all
regions with levels exceeding pre-pandemic peaks in all quarters of the year.
This was driven by continued strength in leisure and the further return of
corporate and group bookings.
•
Throughout 2023 we have remained committed to supporting our owners
to optimise returns as we:
–
Increased IHG One Rewards member enrolments and direct bookings
following the investments made in our loyalty programme in the prior
year, enabling our owners to benefit
from strong member engagement.
–
Further enhanced revenue management systems to quickly identify and
act on revenue opportunities using business intelligence and data.
–
Improved rate negotiations on behalf of our owners using IHG’s centralised
RFP processes, with more than 3,000 hotels now using the service.
–
Continued to focus on quality, design and innovation to meet evolving
needs of guests and drive guest satisfaction while optimising for
owner returns.
–
Provided owners with end-to-end support to shorten the time taken for
renovations and openings with our Hotel Purchasing Services, and
achieved up to 30% savings across various goods and services
categories.
–
Reduced owner costs through collective purchasing with our Group
Purchasing Organization agreements across more than 100,000 items.
–
Utilised data-driven, targeted campaigns and offers to appeal to our
largest, fastest-growing and highest-value segments.
•
Enterprise contribution improved to 79% in 2023, with increased adoption
and performance of the IHG mobile app since its redesign in 2022. Online
conversion rate continued to improve from investments in improving the
online guest experience. GDS also increased as corporate demand
continued to recover.
•
Increased IHG One Rewards member enrolments year-on-year following the
transformation of the loyalty programme in 2022. Reward Nights exceeded
2019 levels driving returns for owners, particularly through dynamic pricing.
•
Re-launched US co-brand credit cards driving an increase in new accounts
by over 60% and double digit percentage spend growth year-on-year,
further driving owner returns and customer satisfaction.
2024 priorities
•
Continue to use data-driven insights, including mobile and AI, to enhance
and personalise the guest experience, and to build on revenue-enhancing
tools that drive returns for our owners.
•
Leverage our GRS capabilities to generate stay enhancements through the
cross-sell of extras through for guest stays, maximising revenue generation
to owners by leveraging the unique attributes of their inventory.
•
Continue to develop our digital-first approach, leveraging cloud-based
technology to help owners and hotel colleagues better understand and
drive the business.
•
Further expand and strengthen our IHG Hotels & Resorts masterbrand
to better promote our portfolio of brands.
•
Continue to scale and invest in IHG One Rewards to support the growth
and engagement of loyalty members.
•
Increase contribution from IHG One Rewards members by driving direct
booking through our mobile and web channels.
•
Further rollout of new cloud-based Revenue Management System (RMS),
enabling data and forecasting insights to owners.
•
Commence work on the next-generation Property Management System
(PMS) offering owners a single platform across properties to enable
efficient enhancements.
Growth in underlying
fee revenues
a,b
Group revenue from reportable
segments excluding revenue
from insurance activities, revenue
from owned, leased and managed
lease hotels, significant liquidated
damages and current year
acquisitions, stated at
constant currency.
Underlying fee revenue growth
demonstrates the continued
attractiveness to owners and guests
of IHG’s franchised and managed
business (see page 11).
Total gross revenue from hotels
in IHG’s System
Total rooms revenue from franchised
hotels and total hotel revenue from
managed, exclusive partner and
owned, leased and managed lease
hotels. Other than for owned, leased
and managed lease hotels, it is not
revenue wholly attributable to IHG,
as it is mainly derived from hotels
owned by third parties.
The growth in gross revenue from
IHG’s System illustrates the value
of our overall System to our owners
(see page 11). Definition o
f this key
performance measure can be found
on page 84.
A
LT
Enterprise contribution to revenue
The percentage of room revenue
booked through IHG managed
channels and sources: direct via our
websites, apps and call centres;
through our interfaces with Global
Distribution Systems (GDS) and
agreements with Online Travel
Agencies (OTAs); other distribution
partners directly connected to our
reservation system; and Global Sales
Office business or IHG One Reward
members that book directly at
a hotel.
Enterprise contribution is one
indicator of IHG value-add and the
success of our technology platforms
and our marketing, sales and loyalty
distribution channels (see page 26).
a
Use of Non-GAAP measures: In addition to performance measures directly observable in the Group Financial Statements (IFRS measures), additional
financial measures (described
as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not de
fined under IFRS or are adjusted
IFRS figures. Further explanation in relation to these measures can be
found on pages 84 to 88, and reconciliations to IFRS
figures, where they have been adjusted, are on pages 226
to 231.
b
Re-presented to reflect the adoption o
f IFRS 17 ‘Insurance Contracts’. The 2019 and 2020
figures have not been restated and there
fore the 2019, 2020 and 2021 growth
figures are
excluded from the comparison.
2020
2019
-0.3%
-52.5%
2022
2021
46.0%
2023
16.1%
36.6%
2022
2023
17.5%
27.9%
2019
2020
$27.9bn
2021
$13.5bn
2022
$19.4bn
2023
$31.6bn
$25.8bn
2019
2020
76%
2021
72%
2022
74%
2023
79%
77%
Strategic Report
61
IHG
| Annual Report and Form 20-F 2023
Key performance indicators (KPIs)
Key performance indicators (KPIs)
continued
KPIs
2023 status and 2024 priorities
Guest Love
IHG’s guest satisfaction
measurement indicator.
Guest satisfaction is fundamental to
our continued success and is a key
measure to monitor our ability to
deliver an experience that meets
and exceeds guests’ expectations
(see page 22 for details).
A
2023 status
•
Guest satisfaction of 80.3% improved compared to 2022 re
flecting
increases in quality and consistency across the guest experience.
•
Externally measured Guest Satisfaction Index (GSI) achieved a score over
100, outperforming our competitors, as we focus on guest experience
improvements.
•
Continued plans to ensure a consistent high-quality experience for each
of our brands, including enhancements in food & beverage, hotel condition
and service.
•
Evolved our mobile app and digital booking to help enhance guest experience.
2024 priorities
•
Enhance the guest journey and strengthen brands while maintaining a focus
on quality and consistency across all aspects, including loyalty recognition,
digital experience, food & beverage, service, and property condition.
•
Leverage tools such as training and data insights to further increase
performance across our estate.
Fee margin
a,b
Operating profit as a percentage
of revenue, excluding System Fund,
reimbursement of costs, revenue
and operating profit
from owned,
leased and managed lease hotels,
significant liquidated damages,
insurance activities and
exceptional items.
Our fee margin progression indicates
the profitability o
f our fee revenue
growth and benefit o
f our asset-light
business model (see page 10).
A
2023 status
•
Fee margin grew by 340bps to 59.3%, driven by continued strength
in trading in EMEAA and Greater China.
2024 priorities
•
Maintain our cost and efficiency focus.
•
Leverage technology applications and process enhancements to achieve
operational efficiencies.
•
Continue to reinvest in the business to drive growth and further expand
margin over the long term.
Adjusted free cash
flow
a
Cash flow
from operating activities
excluding payments of contingent
purchase consideration, less
purchase of shares by employee
share trusts, maintenance capital
expenditure and lease payments.
Adjusted free cash
flow provides
funds to invest in the business,
sustainably grow the dividend and
return any surplus to shareholders
(see page 12). It is a key component
in measuring the ongoing viability
of our business (see page 50).
LT
2023 status
•
Adjusted free cash
flow increased by $254m to $819m due to growth in
operating profit
from reportable segments
a
and an improvement in the
System Fund and reimbursable result, partly offset by increased contract
acquisition costs, higher tax payments and lower working capital cash
inflow. Closing liquidity was $2,572m.
2024 priorities
•
Continue to deliver consistent, sustained growth in cash flow.
•
Timely management of capital deployment in line with business priorities.
IHG® Academy
Number of people participating in
one of our in person IHG Academy
programmes and the number of
registered users on the IHG Skills
Academy platform.
Sustained participation indicates the
strength of our progress in creating
career building opportunities and
engagement with the communities
in which we operate (see page 12).
2023 status
•
Refreshed the wider IHG Academy offering to hotel and corporate functions.
•
Increased internships and work experience placements across hotels and
corporate functions, utilising both in-house experiences and virtual solutions.
•
Expanded our IHG Skills Academy registrations by over 500%.
•
Implemented a new IHG Skills Academy interface to improve user experience.
•
Added additional language translations to IHG Skills Academy to increase
global reach.
2024 priorities
•
Launch refreshed IHG Academy offering to hotel and corporate functions
to activate within their local communities.
•
Introduce updated tracking tool to hotels and upgrade IHG Academy global
metrics dashboard.
•
Raise awareness of all IHG Academy offerings to increase skills training
opportunities and maximise IHG Academy participants.
a
Use of Non-GAAP measures: In addition to performance measures directly observable in the Group Financial Statements (IFRS measures), additional
financial measures (described
as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not de
fined under IFRS or are adjusted
IFRS figures. Further explanation in relation to these measures can be
found on pages 84 to 88, and reconciliations to IFRS
figures, where they have been adjusted, are on pages 226
to 231.
b
2022 and 2021 fee margin re-presented to re
flect the adoption o
f IFRS 17 ‘Insurance Contracts’ in 2023. The 2019 and 2020
figures have not been restated and are there
fore excluded
from the comparison.
2019
2020
82.4%
2021
81.6%
2022
78.9%
2023
80.3%
78.6%
2021
2022
49.5%
2023
59.3%
55.9%
2019
$509m
2020
$29m
2022
2021
$571m
2023
$819m
$565m
2019
2020
15,081
2021
3,277
2022
5,815
2023
30,938
7,431
Strategic Report
62
IHG
| Annual Report and Form 20-F 2023
KPIs
2023 status and 2024 priorities
Employee engagement
survey scores
Colleague HeartBeat survey,
completed by IHG employees or
colleagues employed at owned,
leased or managed leased and
managed hotels (excluding our
joint ventures).
We measure employee
engagement to monitor risks relating
to talent (see page 46) and to help
us understand the issues that are
relevant to our people as we build
a diverse and inclusive culture
(see page 29).
A
2023 status
•
The score of 87% improved on the prior year and was 10% higher than
external benchmarks.
•
Prioritised employee development and retention activities:
–
Focused on launching the ‘squiggly career’ concept and an interactive
critical experiences framework that helps employees explore the different
career journeys available within IHG corporate.
–
Evolved our leadership development programme content to include
further support for people leaders on how to develop their teams through
focused career conversations, performance check-ins and providing
timely feedback.
–
Launched a new corporate onboarding programme to help our new
starters in four pilot locations learn the business and network with people
across teams.
•
Continuing to focus on employee wellbeing, including piloting a mental
health first aider programme in the UK, highlighting and investing in our
Employee Assistance Programme, and celebrating key calendar events
such as World Mental Health Day.
•
Delivered on diversity, equity and inclusion (DE&I) initiatives:
–
Continuing to expand our Employee Resource Group (ERG) membership
and presence globally.
–
Celebrated key calendar events such as International Women’s Day, Pride
and International Day of Persons with Disabilities.
–
Launched new inclusive hiring practices to help increase our
representation of diverse leaders across our senior leadership population.
•
Launched Leading for Growth Executive Development Programme,
designed specifically
for those at VP level and above to help stimulate
thinking around how we lead today along with exploring future development.
2024 priorities
•
Continue to foster an inclusive culture and further raise our representation
of diverse leaders across our senior leadership.
•
Increase support for employees to plan their development internally.
•
Continue to develop our people leadership capability through learning,
communications, events and toolkits.
•
Scale our corporate onboarding programme to all corporate locations.
•
Continued focus on our L&L capability and talent.
•
Integrate more of the L&L hotel estate into our HR platforms.
Absolute carbon footprint
Total GHG emissions (Tonnes
of CO2e), calculated using the
market-based methodology to
take account of renewable energy.
For more information on our
carbon footprint methodology
see page 239.
Our global target is to reduce
absolute Scope 1, 2 and Scope 3
(FERA and franchised hotels energy)
GHG emissions 46% by 2030 from
a 2019 baseline year.
This target has been validated by the
SBTi as being consistent with climate
science to limit global temperature
rise to 1.5°C above pre-industrial
levels. To ensure progress against
this target, we work with our hotels
to drive energy efficiency and carbon
reductions across our estate.
A
2023 status
•
While 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.
•
Continued rollout of ECMs across existing estate hotels and new-builds,
focused on those measures with a ROI of less than 5 years, supported by
brand standards and reflected in corporate remuneration targets.
•
Ongoing access to training, tools and resources to help hotels maximise
their energy efficiency, including resources in the US for owners to identify
tax and other financial incentives to help
fund energy efficiency investments.
•
Expanded US owner access to renewable electricity through our community
solar programme.
2024 priorities
•
Continue to rollout our decarbonisation roadmap focusing on
energy-efficiency measures in the existing estate, transitioning to renewable
energy and developing new-build hotels operating with very low/zero
carbon emissions. See pages 56 to 58 for more information on our
transition plan.
•
Developing a programme to accelerate the number of new-build hotels that
are energy-efficient, have no fossil fuels combusted on-site and are fully
powered by renewable energy where available.
2019
2020
87.0%
2021
79.0%
2022
85.0%
2023
87.0%
86.0%
2020
2019
6.5 tCO2
e
2021
4.6 tCO2e
2022
5.7 tCO2e
2023
6.4 tC02e
5.9 tCO2e
Strategic Report
63
IHG
| Annual Report and Form 20-F 2023
Key performance indicators (KPIs)
Conversions represented 37% of openings
and signings combined, as our brand portfolio
including our newly launched midscale
conversion brand, Garner, enables us to more
readily capture these opportunities that
contribute to delivering our system growth.
Our continued focus on the quality of our
estate resulted in a removals rate of 1.5%
year-on-year, in line with our historical
underlying average. Net system size
increased by 3.8%.
Operating profit
Operating profit was $1,066m, an increase
of $438m from the prior year. Operating
profit
from reportable segments
a
improved
to $1,019m compared to $828m in 2022.
The strong growth in revenue and our cost
management resulted in a 3.4%pts
improvement in fee margin
a
to 59.3%.
Our growth in operating profit was achieved
alongside continued investment to support
future growth, including in the expansion of
our brand portfolio and investments in our
enterprise platform.
Cash generation and liquidity
Demonstrating the highly cash-generative
nature of our business, net cash from
operating activities increased by $247m
to $893m, and adjusted free cash
flow
a
improved by $254m to $819m, compared
to the prior year. During 2023, we returned
$1.0bn to shareholders through a
combination of ordinary dividends and
share buybacks.
a
Use of Non-GAAP measures: In addition to performance measures directly observable in the Group Financial Statements (IFRS measures), additional
financial measures
(described as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not de
fined under IFRS
or are adjusted IFRS figures. Further explanation in relation to these measures can be
found on pages 84 to 88, and reconciliations to IFRS
figures, where they have been adjusted,
are on pages 226 to 231.
T
rading strengthened through
the year, with RevPAR exceeding
pre-pandemic highs in each quarter.
This, combined with growth in our
well-invested brand portfolio and ef
ficient
cost base, drove higher profitability and
fee margin. Our proven cash-generative
business model resulted in $1.0bn returned
to shareholders in 2023, while continuing
to invest for future growth.
Trading performance
Following the investments made in our
loyalty and technology platforms, guest
enrolments and bookings increased through
the year, and our owners were able to
leverage our enterprise to capture demand
as guests returned, yielding rate and
occupancy gains.
Travel demand remained healthy, supported
by strong leisure and continued recovery in
business and groups, with RevPAR exceeding
pre-pandemic highs in the year.
The degree of RevPAR growth varied
across the regions. Performance in the
Americas and EMEAA continued to exceed
pre-pandemic levels through 2023. Greater
China rebounded significantly
following the
lifting of Covid-19 related restrictions in late
2022, with the region also exceeding 2019
levels by the third quarter.
System growth
During the year, gross system size increased
by 5.3%, demonstrating the strength of our
brand portfolio.
Our net debt:adjusted EBITDA ratio at
the end of the year
finished at 2.1x, beneath
the 2.5-3.0x range we aim to maintain.
At the year-end, the Group’s total liquidity
was $2,572m.
The Board has proposed a final dividend
of 104.0¢, +10% vs 2022, taking the
dividend for the year to 152.3¢. The Board
has also approved a further share buyback
programme to return an additional $800m
to shareholders.
Our uses of cash remain unchanged:
ensuring the business is appropriately
invested in to optimise growth; funding
a sustainably growing dividend; and then
returning excess funds to shareholders.
Future growth and 2024 priorities
Looking to 2024, we are confident that travel
demand will continue to trend ahead of
pre-pandemic levels.
We remain focused on our multi-year
commitment to invest in our brand portfolio,
loyalty programme and technology platforms.
Our support to owners has continued through
uplifts in revenue generation, targeted
procurement solutions and the management
of in
flationary pressures through build and
operational efficiencies.
We are confident in our asset-light,
fee-
based business model, combined with our
track record of fee margin growth through
focused cost management, which is proven
to be highly cash-generative, enabling us
to fund further investments and additional
shareholder returns.
Michael Glover
Chief Financial Officer
Chief Financial Of
ficer’s review
Michael Glover
Chief Financial Officer
Robust trading
drove RevPAR
and profitability
to exceed
pre‑pandemic
highs in 2023,
demonstrating
the strength of our
business model.”
Strategic Report
64
IHG
| Annual Report and Form 20-F 2023
Group Income Statement summary
12 months ended 31 December
2023
$m
2022
a
$m
2023 vs 2022
% change
2021
a,f
$m
2022 vs 2021
% change
Revenue
b
Americas
1,105
1,005
10.0
774
29.8
EMEAA
677
552
22.6
303
82.2
Greater China
161
87
85.1
116
(25.0)
Central
221
199
11.1
197
1.0
Revenue from reportable segments
c
2,164
1,843
17.4
1,390
32.6
System Fund and reimbursable revenues
2,460
2,049
20.1
1,517
35.1
Total revenue
4,624
3,892
18.8
2,907
33.9
Operating profit
b
Americas
815
761
7.1
559
36.1
EMEAA
215
152
41.4
5
NM
d
Greater China
96
23
317.4
58
(60.3)
Central
(107)
(108)
(0.9)
(88)
22.7
Operating profit
from reportable segments
c
1,019
828
23.1
534
55.1
Analysed as:
Fee business
992
805
23.2
569
41.5
Owned, leased and managed lease
29
19
52.6
(36)
NM
d
Insurance activities
(2)
4
NM
d
1
NM
d
System Fund and reimbursable result
19
(105)
NM
d
(11)
854.5
Operating profit be
fore exceptional items
1,038
723
43.6
523
38.2
Operating exceptional items
28
(95)
NM
d
(29)
227.6
Operating profit
1,066
628
69.7
494
27.1
Net financial expenses
(52)
(96)
(45.8)
(139)
(30.9)
Analysed as:
Adjusted interest expense
c
(131)
(122)
7.4
(142)
(14.1)
System Fund interest
44
16
175.0
3
433.3
Foreign exchange gains
35
10
250.0
–
–
Fair value (losses)/gains on contingent purchase
consideration
(4)
8
NM
d
6
33.3
Profit be
fore tax
1,010
540
87.0
361
49.6
Tax
(260)
(164)
58.5
(96)
70.8
Analysed as:
Adjusted tax
c
(253)
(194)
30.4
(124)
56.5
Tax attributable to System Fund
(3)
–
NM
d
–
–
Tax on foreign exchange gains
3
4
(25.0)
–
–
Tax on fair value gains on contingent purchase consideration
–
–
–
(1)
NM
d
Tax on exceptional items and exceptional tax
(7)
26
NM
d
29
(10.3)
Profit
for the year
750
376
99.5
265
41.9
Adjusted earnings
e
635
511
24.3
269
90.0
Basic weighted average number of ordinary shares (millions)
169
181
(6.6)
183
(1.1)
Earnings per ordinary share
Basic
443.8¢
207.2¢
114.2
145.4¢
42.5
Adjusted
c
375.7¢
282.3¢
33.1
147.0¢
92.1
Dividend per share
152.3¢
138.4¢
10.0
85.9¢
61.1
Average US dollar to sterling exchange rate
$1:£0.80
$1: £0.81
(1.2)
$1: £0.73
11.0
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’
on page 172.
b
Americas and EMEAA include revenue and operating profit be
fore exceptional items from both fee business and owned, leased and managed lease hotels. Greater China includes
revenue and operating profit be
fore exceptional items from fee business.
c
Definitions
for non-GAAP measures can be found in the ‘Key performance measures and non-GAAP measures’ section on pages 84 to 88 along with reconciliations of these measures
to the most directly comparable line items within the Group Financial Statements which can be found on pages 226 to 231.
d
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.
e
Adjusted earnings as used with adjusted earnings per share, a non-GAAP measure.
f
Re-presented for a change to the de
finition o
f adjusted tax (see page 231).
Performance
Group
Strategic Report
65
IHG
| Annual Report and Form 20-F 2023
Performance
Highlights for the year ended
31 December 2023
Trading improved significantly in the first
quarter, 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 RevPAR
exceeding pre-pandemic levels in the third
quarter. By the fourth quarter, average daily
rate remained above pre-pandemic highs
and occupancy had recovered to within
1%pt of 2019 levels.
Revenue
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% in the full year. When compared
to the pre-pandemic levels of 2019, Group
comparable RevPAR increased 6.8% in the
first quarter, 9.9% in the second quarter,
12.8% in the third quarter, 12.7% in the fourth
quarter and 10.9% in the full year. Overall,
average daily rate exceeded 2019 levels by
12.7% and occupancy was 1.1%pts lower.
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 revenue.
Revenue from reportable segments
a
increased by $321m (17.4%) to $2,164m,
driven by the improved trading conditions.
Underlying revenue
a
increased by $347m
to $2,164m, with underlying fee revenue
a
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 segments
a
increased by $191m (23.1%) to $1,019m,
with fee business operating pro
fit 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 profit
a
increased by $201m (24.6%) to $1,019m.
Fee margin
a
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 segments
a
when calculated
as restating 2022 figures at 2023 exchange
rates, but negatively impacted operating
profit
from reportable segments
a
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
segments
a
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 speci
fied 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 o
f 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 revenue represents
reimbursements of expenses incurred
on behalf of managed and franchised
properties and relates, predominantly,
to payroll costs at managed properties
where we are 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, 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.
Operating exceptional items
Exceptional items are identified by virtue
of their size, nature or incidence and are
excluded from the calculation of adjusted
earnings per ordinary share
a
as well as other
Non-GAAP measures (see Use of Non-GAAP
measures, pages 226 to 231) in order
to allow a better understanding of the
underlying trading performance and trends
of the Group and its reportable segments.
Examples of exceptional items can 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.
Operating exceptional items totalled $28m
income, driven by the following items:
•
share of pro
fits
from the InterContinental
New York Barclay associate of $18m, due
to an increase in the fair value of the hotel,
which resulted in the reversal of an $18m
liability recognised in 2022; and
•
other operating income of $10m 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 6 to the Group
Financial Statements.
a
Definitions
for Non-GAAP revenue and operating
profit measures can be
found on pages 84 to 88.
Reconciliations of these measures to the most directly
comparable line items within the Group Financial
Statements can be found on pages 226 to 231.
Performance
continued
Group
continued
Strategic Report
66
IHG
| Annual Report and Form 20-F 2023
Net financial expenses
Net financial expenses decreased to $52m
from $96m, including $35m in foreign
exchange gains. Adjusted interest
a
, as
reconciled on page 231, and 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 interest
b
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 o
f $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 tax
a
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).
IHG pursues an approach to tax that is
consistent with its business strategy and
its overall business conduct principles.
The approach seeks to ensure full compliance
with all tax filing, payment and reporting
obligations on the basis of communicative
and transparent relationships with tax
authorities. The IHG Audit Committee
reviews IHG’s approach to tax annually,
including consideration of the Group’s
current tax profile. Further in
formation on
tax can be found in note 8 to the Group
Financial Statements.
IHG’s Approach to Tax policy is available at
ihgplc.com/responsible-business
under policies.
Earnings per ordinary share
The Group’s basic earnings per ordinary
share is 443.8¢ (2022: 207.2¢). Adjusted
earnings per ordinary share
a
increased by
93.4¢ to 375.7¢.
Dividends and returns
The Board is proposing a final dividend o
f
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.
The dividend payments in 2023 have
returned close to $250m to IHG’s
shareholders. An additional $750m of
surplus capital was returned to shareholders
through a share buyback programme
that concluded in 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 approved a further share
buyback programme to return an additional
$800m to shareholders in 2024.
Share price and market capitalisation
The IHG share price closed at £70.90 on
Friday 29 December 2023, up 49.5% from
£47.44 on 30 December 2022. The market
capitalisation of the Group at the year-end
was £11.7bn.
For discussion of 2022 results, and
the changes compared to 2021, refer to
the 2022 Annual Report and Form 20-F.
The impact of IFRS 17 adoption on
those years was not material (see
new accounting standards and other
presentational changes on page 172)
ihgplc.com/investors
under Annual Report.
a
Definitions
for Non-GAAP revenue and operating
profit measures can be
found on pages 84 to 88.
Reconciliations of these measures to the most directly
comparable line items within the Group Financial
Statements can be found on pages 226 to 231.
Accounting principles
The Group results are prepared under
International Financial Reporting
Standards (IFRS) as described on page
161 of the Group Financial Statements.
The application of IFRS requires
management to make judgements,
estimates and assumptions, and those
considered critical to the preparation
of the Group results are set out on
page 162.
The Group discloses certain financial
information both including and excluding
exceptional items. For comparability
of the periods presented, some of
the performance indicators in this
performance review are calculated
after eliminating these exceptional
items. An analysis of exceptional items
is included in note 6.
Strategic Report
67
IHG
| Annual Report and Form 20-F 2023
Performance
Adjusted EBITDA
a
reconciliation
12 months ended 31 December
2023
$m
2022
$m
2023 vs 2022
$m change
2021
$m
2022 vs 2021
$m change
Cash flow
from operations
1,219
961
848
Cash flows relating to exceptional items
29
43
12
Impairment reversal/(loss) on financial assets
1
(5)
–
Other non-cash adjustments to operating profit
(60)
(61)
(71)
System Fund and reimbursable result
(19)
105
11
System Fund depreciation and amortisation
(83)
(86)
(94)
Other non-cash adjustments to System Fund result
(23)
(24)
(6)
Working capital and other adjustments
(79)
(101)
(110)
Capital expenditure: contract acquisition costs
(key money), net of repayments
101
64
42
Adjusted EBITDA
a
1,086
896
190
632
264
Group Cash Flow summary
12 months ended 31 December
2023
$m
2022
$m
2023 vs 2022
$m change
2021
$m
2022 vs 2021
$m change
Adjusted EBITDA
a
1,086
896
190
632
264
Working capital and other adjustments
79
101
110
Impairment (reversal)/loss on financial assets
(1)
5
–
Other non-cash adjustments to operating profit
60
61
71
System Fund and reimbursable result
19
(105)
(11)
Non-cash adjustments to System Fund result
106
110
100
Capital expenditure: contract acquisition costs
(key money) net of repayments
(101)
(64)
(42)
Capital expenditure: maintenance
(38)
(44)
(33)
Cash flows relating to exceptional items
(29)
(43)
(12)
Net interest paid
(83)
(104)
(126)
Tax paid
(243)
(211)
(86)
Principal element of lease payments
(28)
(36)
(32)
Purchase of own shares by employee share trusts
(8)
(1)
–
Adjusted free cash
flow
a
819
565
254
571
(6)
Capital expenditure: gross recyclable investments
(61)
(15)
(5)
Capital expenditure: gross System Fund
capital investments
(46)
(35)
(19)
Deferred purchase consideration paid
–
–
(13)
Disposals and repayments, including other
financial assets
8
16
58
Repurchase of shares, including transaction costs
(790)
(482)
–
Dividends paid to shareholders
(245)
(233)
–
Dividends paid to non-controlling interest
(3)
–
–
Net cash flow be
fore other net debt
a
movements
(318)
(184)
(134)
592
(776)
Add back principal element of lease repayments
28
36
32
Exchange and other non-cash adjustments
(131)
178
24
(Increase)/decrease in net debt
d
(421)
30
(451)
648
(618)
Net debt
a
at the beginning of the year
(1,851)
(1,881)
(2,529)
Net debt
a
at the end of the year
(2,272)
(1,851)
(421)
(1,881)
30
a
Definitions
for non-GAAP measures can be found in the ‘Key performance measures and non-GAAP measures’ section on pages 84 to 88.
Performance
continued
Group
continued
Strategic Report
68
IHG
| Annual Report and Form 20-F 2023
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
flow
a
Adjusted free cash
flow
a
was an inflow o
f
$819m, an increase of $254m on the prior
year. Adjusted EBITDA
a
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 in
flow
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 expenditure
a
was $157m
(2022: $59m) and gross capital expenditure
a
was $253m (2022: $161m). Gross capital
expenditure
a
comprised: $146m maintenance
capex and key money; $61m gross recyclable
investments; and $46m System Fund capital
investments. Net capital expenditure
a
includes the offset from $8m proceeds
from other
financial assets, $7m key money
repayments and $81m System Fund
depreciation and amortisation.
Net debt
a
Net debt
a
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 debt
a
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
$m
2022
$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 31 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 of
$1,099m decreased by $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 li
fe
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).
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.
Cash and borrowings
Net debt
a
of $2,272m (2022: $1,851m)
is analysed by currency as follows:
2023
$m
2022
$m
Borrowings
Sterling*
2,076
2,378
US dollar*
1,481
416
Euros
4
4
Other
33
29
Cash and cash equivalents
Sterling
(918)
(380)
US dollar
(266)
(494)
Euros
(19)
(15)
Canadian dollar
(7)
(7)
Chinese renminbi
(55)
(37)
Other
(57)
(43)
Net debt
a
2,272
1,851
Average net debt level
2,155
1,763
*
Including the impact of derivative
financial instruments.
Cash and cash equivalents includes $30m
(2022: $24m) that is not available for use by
the Group due to local exchange controls,
$14m (2022: $11m) which is restricted for
use on capital expenditure under hotel lease
agreements and $12m (2022: $12m) subject
to contractual and regulatory restrictions.
Information on the maturity pro
file and interest
structure of borrowings is included in notes 22
to 24 to the Group Financial Statements.
Borrowings included bank overdrafts of
$44m (2022: $55m), which were matched
by an equivalent amount of cash and cash
equivalents under the Group’s cash pooling
arrangements. Under these arrangements,
each pool contains a number of bank
accounts with the same financial institution,
and the Group pays interest on net overdraft
balances within each pool. Overseas
subsidiaries are typically in a cash-positive
position and the matching overdrafts are
held by the Group’s central treasury
company in the UK.
Information on the Group’s approach to
allocation of capital resources can be found
on pages 12 and 13.
a
Definitions
for Non-GAAP measures can be found on
pages 84 to 88. Reconciliations of these measures to the
most directly comparable line items within the Group
Financial Statements can be found on pages 226 to 231.
Strategic Report
69
IHG
| Annual Report and Form 20-F 2023
Performance
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
a
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 lenders
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 24 to the 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.
Off-balance sheet arrangements
At 31 December 2023, the Group had no
off-balance sheet arrangements that have,
or are reasonably likely to have, a current
or future material effect on the Group’s
financial condition, revenues or expenses,
results of operations, liquidity, capital
expenditures or capital resources.
Contingent liabilities
Contingent liabilities include guarantees
over loans made to facilitate third-party
ownership of hotels of up to $50m and
outstanding letters of credit of $68m. The
Group may also be exposed to additional
liabilities resulting from litigation and security
incidents. See note 30 to the Group
Financial Statements for further details.
Disaggregation of total gross revenue
b
in IHG’s System
Total gross revenue 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 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. The definition o
f this key performance measure can be found
on page 84.
12 months ended 31 December
2023
$bn
2022
$bn
%
change
c
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
Other
d
3.3
1.5
121.5
Total
31.6
25.8
22.6
Analysed by ownership type
Franchised
e
(revenue not attributable to IHG)
20.0
16.7
19.6
Managed
e
(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 as a result of improved trading conditions and growth in the number of hotels in
our system.
a
As shown in the Cash Flow summary on page 68.
b
Definitions
for the key performance measures can be found in the ‘Use of key performance measures and non-GAAP
measures’ section, which can be found on pages 84 to 88. Reconciliations of these measures to the most directly
comparable line items within the Group Financial Statements can be found on pages 226 to 231.
c
Year-on-year percentage movement calculated from source
figures.
d
Includes Holiday Inn Club Vacations.
e
Includes exclusive partner hotels.
Future cash requirements from
contractual obligations
The Group’s future cash
flows arising
from contractual commitments relating
to long-term debt obligations (including
interest payable), derivatives, lease liabilities
and other financial liabilities are analysed in
note 24 to the Group Financial Statements.
Other cash requirements relate to future
pension scheme contributions (see note 27
to the Group Financial Statements) and
capital commitments (see note 30 to the
Group Financial Statements).
The Group also has future commitments for
key money payments which are contingent
upon future events and may reverse.
Performance
continued
Group
continued
Strategic Report
70
IHG
| Annual Report and Form 20-F 2023
During the year, 47,919 rooms (275 hotels)
opened, compared to 49,443 rooms
(269 hotels) in the prior year which included
12,402 rooms (33 hotels) under the Iberostar
Beachfront Resorts brand.
Openings included 18,274 rooms (134 hotels)
in the Holiday Inn Brand Family, 5,098 rooms
(16 hotels) under the Iberostar Beachfront
Resorts brand and the first 158 rooms
(two hotels) under Garner, our newly
launched conversion brand.
In 2023, 13,343 rooms (76 hotels) left the
IHG system, compared to 18,143 rooms
(96 hotels) in 2022 which included
6,457 rooms (28 hotels) as part of ceasing
operations in Russia. The removals rate
of 1.5% was in line with our historical
underlying average.
Net system size increased by 3.8%
year-on-year to 946,203 rooms.
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.
Total number of hotels
6,363
Total number of rooms
946,203
Group hotel and room count
Hotels
Rooms
At 31 December
2023
Change over
2022
2023
Change over
2022
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
Other
a
124
1
39,893
751
Total
6,363
199
946,203
34,576
Analysed by ownership type
Franchised
b
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
Strategic Report
71
IHG
| Annual Report and Form 20-F 2023
Performance
At the end of 2023, the global pipeline
totalled 296,954 rooms (2,016 hotels), an
increase of 15,486 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, 79,220 rooms (556 hotels)
were signed, compared to 80,338 rooms
(467 hotels) in the prior year which included
18,467 rooms (48 hotels) under the Iberostar
Beachfront Resorts brand. Signings in 2023
included 30,062 rooms (220 hotels) for
the Holiday Inn Brand Family, 808 rooms
(13 hotels) under the Six Senses brand and
490 rooms (seven hotels) as part of our
newly launched brand, Garner.
a
Includes exclusive partner hotels.
Total number of hotels in the pipeline
2,016
Total number of rooms in the pipeline
296,954
Group pipeline
Hotels
Rooms
At 31 December
2023
Change over 2022
2023
Change over 2022
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
Franchised
a
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
Performance
continued
Group
continued
Strategic Report
72
IHG
| Annual Report and Form 20-F 2023
51%
Americas revenue 2023
($1,105m)
55%
Americas number of rooms
(519,594)
Comparable RevPAR 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%
W
e continued our growth
momentum across our brand
portfolio in 2023 by delivering
industry-leading guest experiences,
driving competitive owner returns and
deepening owner relationships. Building
on our midscale expertise, we launched
Garner, our new conversion brand, and
strengthened our Luxury & Lifestyle
proposition, preparing us for further
acceleration in years to come.
Industry performance in 2023
Industry RevPAR in the Americas increased
by 14.5% year-on-year (increased by 31.7%
against 2019) driven by both average daily
rate and occupancy which increased by
12.8% and 0.9%pts, respectively. Canada
and Latin America drove RevPAR growth
across the region, followed by the US upper
upscale and upscale chain scales.
US lodging industry growth continued to
normalise in 2023, with RevPAR increasing
by 4.9% (increased 13.2% against 2019)
and average daily rate increasing by 4.3%.
Occupancy increased by 0.4%pts on the
prior year, as strong recovery in urban
locations and group activity was partially
offset by increased outbound travel. Room
supply increased by 0.3%, while conversion
activity accelerated. RevPAR in the US upper
midscale chain scale, where the Holiday Inn
and Holiday Inn Express brands operate,
increased by 4.2%.
Industry RevPAR increased by 18.3% in
Canada driven by both occupancy and
average daily rate increases. RevPAR in
Latin America increased by 38.0% and
in Mexico RevPAR increased by 1.4%.
IHG’s regional performance in 2023
IHG’s comparable RevPAR in the Americas
increased by 7.0% compared to 2022
(increased by 13.0% against 2019), driven by
a 1.5%pts increase in occupancy and a 4.6%
increase in average daily rate. The region
is predominantly represented by the US,
where comparable RevPAR increased by
5.4% compared to 2022 (increased by 11.1%
against 2019), and where we are most
weighted towards our upper midscale
brands, Holiday Inn and Holiday Inn Express.
US RevPAR for the Holiday Inn brand
increased by 4.3%, while the Holiday Inn
Express brand increased by 5.3%.
Comparable RevPAR in Canada increased
by 18.7%, while Mexico increased by 15.5%.
Kimpton Hotel Monaco, Washington DC, US
Jolyon Bulley
Chief Executive Officer, Americas
Our growth
momentum
across our
brand portfolio
in 2023 prepares
us for further
acceleration.”
Americas
Strategic Report
73
IHG
| Annual Report and Form 20-F 2023
Performance
For discussion of 2022 results, and the
changes compared to 2021, refer to
the 2022 Annual Report and Form 20-F.
ihgplc.com/investors
under Annual Report.
a
Definitions
for Non-GAAP revenue and operating
profit measures can be
found on pages 84 to 88.
Reconciliations of these measures to the most directly
comparable line items within the Group Financial
Statements can be found on pages 226 to 231.
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.
Review of the year ended
31 December 2023
With 519,594 rooms (4,414 hotels), the
Americas represented 55% of the Group’s
room count. The key profit-generating
market is the US, and the Group is also
represented in Latin America, Canada,
Mexico and the Caribbean. 93% of rooms in
the region are operated under the franchised
business model, primarily under our brands
in the upper midscale segment (including
the Holiday Inn Brand Family). In the
upscale market segment, Crowne Plaza is
predominantly franchised, whereas, in the
luxury market segment, InterContinental
branded hotels are operated under both
franchise and management agreements,
while Kimpton is mainly managed. 17 of the
Group’s 19 hotel brands are represented in
the Americas.
Trading in the Americas was ahead of
pre-pandemic levels throughout 2023 and
travel demand remained strong. Double-
digit RevPAR growth in the first quarter
reflected the prior year comparative period
being impacted by localised restrictions;
from April onwards, the comparatives
strengthened, as government-mandated
restrictions eased in 2022.
Continued strength in leisure demand
resulted in US RevPAR growth ahead of
pre-pandemic levels. This was further
supported by the return of corporate and
group activity through the year.
In Q4, average daily rate increased by
3.1% and occupancy reduced by 1.0%pts
year-on-year. Across our US franchised
estate, which is weighted to domestic
demand in upper midscale hotels, RevPAR
was broadly flat in the
fourth quarter. The US
managed estate, weighted to upper upscale
and luxury hotels in urban locations, saw
RevPAR increase by 1.8%.
Americas comparable RevPAR grew 18% in
the first quarter, 6% in the second quarter,
4% in the third quarter, 1% in the fourth
quarter and 7% in the full year, all compared
to 2022. Compared to 2019, RevPAR
increased 11% in the first quarter, 12% in the
second quarter, 14% in the third quarter, 14%
in the fourth quarter and 13% in the full year.
Revenue from the reportable segment
a
increased by $100m (10.0%) 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. Operating profit
from the reportable segment
a
increased
by $54m (7.1%) to $815m.
Revenue and operating profit
from the
reportable segment
a
are further analysed
by fee business and owned, leased and
managed lease hotels.
Fee business revenue
a
increased by $78m
(8.9%) to $957m. Fee business operating
profit
a
increased by $46m (6.2%) to $787m,
driven by improved trading. Fee margin
a
decreased to 82.2%, compared to 84.3% in
2022, reflecting cost investment in growth
initiatives, including Garner. There were
$21m of incentive management fees earned
(2022: $18m).
Owned, leased and managed lease
revenue increased by $22m to $148m,
with comparable RevPAR up 16.8% vs 2022
leading to an increase in owned, leased and
managed leased operating profit o
f $28m
compared to $20m in the prior year.
Americas results
12 months ended 31 December
2023
$m
2022
$m
2023 vs 2022
% change
2021
$m
2022 vs 2021
% change
Revenue from the reportable segment
a
Fee business
957
879
8.9
691
27.2
Owned, leased and managed lease
148
126
17.5
83
51.8
Total
1,105
1,005
10.0
774
29.8
Operating profit
from the reportable segment
a
Fee business
787
741
6.2
568
30.5
Owned, leased and managed lease
28
20
40.0
(9)
NM
b
815
761
7.1
559
36.1
Operating exceptional items
27
(46)
NM
b
(22)
109.1
Operating profit
842
715
17.8
537
33.1
Performance
continued
Americas
continued
Strategic Report
74
IHG
| Annual Report and Form 20-F 2023
Americas hotel and room count
Hotels
Rooms
At 31 December
2023
Change over
2022
2023
Change over
2022
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
–
Other
a
97
(1)
21,294
(689)
Total
4,414
58
519,594
4,098
Analysed by ownership type
Franchised
b
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.
Total number of hotels
4,414
Total number of rooms
519,594
Gross system size growth was 2.0%
year-on-year. We opened 10,405 rooms
(101 hotels) during the year, compared to
20,568 rooms (125 hotels) in 2022 which
included 9,027 rooms (23 hotels) under
the Iberostar Beachfront Resorts brand.
Over half of the region’s openings were in
our Holiday Inn Brand Family. Openings also
included 11 Candlewood Suites, four voco
hotels and the first two properties o
f our
newly launched conversion brand, Garner,
in the US.
There were 6,307 rooms (43 hotels)
removed in the year. The removal rate of
1.2%, up from 0.8% in the prior year, was
closer to the historical underlying average
of 1.5%. Net system size growth was 0.8%
year-on-year.
Strategic Report
75
IHG
| Annual Report and Form 20-F 2023
Performance
Total number of hotels in the pipeline
1,040
Total number of rooms in the pipeline
109,164
At 31 December 2023, the pipeline totalled
109,164 rooms (1,040 hotels), representing
21% of the region’s system size.
Signings of 28,297 rooms (271 hotels) in 2023,
compared to 32,464 rooms (231 hotels) in
2022 which included 11,418 rooms (28 hotels)
under the Iberostar Beachfront Resorts brand.
The majority of signings were in our midscale
and upper midscale brands including the
Holiday Inn Brand Family (11,299 rooms,
103 hotels), avid hotels (1,594 rooms,
23 hotels) and Atwell Suites (1,648 rooms,
16 hotels). Other notable signings included
eight Kimpton hotels and seven
Garner properties.
9,047 rooms (84 hotels) were removed from
the pipeline in 2023, compared to 8,180
rooms (78 hotels) in the prior year.
Americas pipeline
Hotels
Rooms
At 31 December
2023
Change over
2022
2023
Change over
2022
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
Franchised
a
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.
Performance
continued
Americas
continued
Strategic Report
76
IHG
| Annual Report and Form 20-F 2023
31%
EMEAA revenue 2023
($677m)
26%
EMEAA number of rooms
(247,267)
Comparable RevPAR 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%
EMEAA
Crowne Plaza, Ankara, Turkey
W
e delivered a strong overall
2023 by investing in long-term
growth across our priority
markets. This included opening iconic
properties under Regent and Vignette
Collection within Luxury & Lifestyle, and
creating elevated guest experiences with
greater consistency across our brands.
We are in a stronger position than before
to accelerate growth.
Industry performance in 2023
Industry RevPAR in EMEAA increased by
26.0% year-on-year (increased by 26.4%
against 2019), driven by an improvement in
both occupancy and average daily rate by
6.0%pts and 14.7%, respectively. In Europe,
RevPAR increased by 19.3% (increased 28.4%
against 2019) driven by both occupancy and
average daily rate. In the UK, industry RevPAR
increased by 14.5% compared to 2022
(increased 25.9% against 2019), where UK
room demand increased by 5.7% and supply
increased by 0.4%. In Germany, RevPAR
increased by 18.5% (increased 3.0% against
2019). France saw RevPAR increase by 18.1%,
driven by a 14.2% increase in average
daily rate.
RevPAR increased by 37.4% (increased
55.2% against 2019) in the Middle East,
driven by average daily rate.
Elsewhere in EMEAA, RevPAR in Australia
increased 10.8% (increased 21.4% against
2019), Japan increased by 66.0% (increased
10.4% against 2019) and Thailand increased
by 58.2% (increased 10.4% against 2019),
driven by both occupancy and average
daily rate.
IHG’s regional performance in 2023
EMEAA comparable RevPAR increased by
23.7% compared to 2022 (increased 15.4%
against 2019), driven by a 9.8% increase in
average daily rate coupled with a 7.9%pts
increase in occupancy. In the UK, the
region’s largest market, RevPAR increased
by 13.7% compared to 2022 (increased by
16.9% against 2019). Germany saw a RevPAR
increase of 27.0% and France increased
by 23.3%.
RevPAR in the Middle East increased by 11.7%
(increased 13.2% against 2019), with the
fourth quarter down 1% as the comparative
period benefitted
from FIFA World Cup.
India increased by 27.3% (increased 37.0%
against 2019).
Elsewhere in EMEAA, the variances in
performance largely re
flected the timing
of travel restrictions being lifted in the prior
year. RevPAR increased in Australia by 18.5%
(increased 14.2% against 2019), increased
by 57.3% (decreased 5.6% against 2019) in
Japan and increased by 67.9% (increased
14.7% against 2019) in Thailand.
We delivered
a strong overall
2023 by investing
in long-term
growth across our
priority markets.”
Kenneth Macpherson
Chief Executive Officer, EMEAA
Strategic Report
77
IHG
| Annual Report and Form 20-F 2023
Performance
Performance
continued
EMEAA
continued
For discussion of 2022 results, and the
changes compared to 2021, refer to
the 2022 Annual Report and Form 20-F.
ihgplc.com/investors
under Annual Report.
a
Definitions
for Non-GAAP revenue and operating pro
fit
measures can be found on pages 84 to 88. Reconciliations
of these measures to the most directly comparable line
items within the Group Financial Statements can be
found on pages 226 to 231.
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.
Review of the year ended
31 December 2023
Comprising 247,267 rooms (1,237 hotels) at
the end of 2023, EMEAA represented 26%
of the Group’s room count. Revenues are
primarily generated from hotels in the UK
and gateway cities in continental Europe, the
Middle East and Asia. The largest proportion
of rooms in the UK and continental Europe
are operated under the franchised business
model, primarily under our upper midscale
brands (Holiday Inn and Holiday Inn
Express). In the upscale market segment,
Crowne Plaza is evenly proportioned
between the franchised and managed
operating models, whereas in the luxury
market segment, the majority of
InterContinental branded hotels are
operated under management agreements.
The majority of hotels in markets outside
Europe are operated under the managed
business model.
Through the year, the dispersion of RevPAR
performance across the region narrowed
as the easing of travel restrictions impacted
trading in all markets. RevPAR rebounded
significantly in the first hal
f of the year when
compared to 2022; with the pace of recovery
in the second half re
flecting per
formance in
the comparable prior period. Leisure travel
remained the strongest category, with
corporate bookings and group activity
continuing to improve as the year went on.
The UK, which saw one of the earlier easing
of restrictions in the prior year, saw RevPAR
up 13.7%. Continental Europe increased
by 25.5%, Australia increased by 18.5%
and South East Asia & Korea increased by
41.5%. Elsewhere, RevPAR in the Middle East
increased 11.7%, as Q4 in the prior year
benefitted
from the FIFA World Cup. RevPAR
in Saudi Arabia increased by 21.2% and India
increased by 27.3%.
EMEAA comparable RevPAR increased
64% in the first quarter, 27% in the second
quarter, 16% in the third quarter, 7% in the
fourth quarter and 24% in the full year, all
compared to 2022. Compared to 2019,
RevPAR increased 10% in the first quarter,
15% in the second quarter, 17% in the third
quarter, 19% in the fourth quarter and 15%
in the full year.
Revenue from the reportable segment
a
increased by $125m (22.6%) to $677m.
Operating profit increased by $113m to
$216m, driven by improved trading, together
with the non-recurrence of the $49m of
operating exceptional charges in the prior
year. Operating profit
from the reportable
segment
a
increased by $63m to $215m
profit. Incentive management
fees earned
improved to $101m (2022: $69m).
Revenue and operating profit
from the
reportable segment
a
are further analysed
by fee business and owned, leased and
managed lease hotels.
Fee business revenue
a
increased by $70m
(24.6%) to $354m. Fee business operating
profit
a
increased to $214m from $153m in
the prior year, driven by the improvement
in trading. Fee margin
a
recovered to 60.5%
in 2023, compared to 52.7% in 2022.
Owned, leased and managed lease
revenue increased by $55m to $323m,
with comparable RevPAR up 32% vs 2022.
The easing of trading challenges on this
largely urban-centred portfolio resulted
in an owned, leased and managed lease
operating profit o
f $1m, up from a $1m
loss in 2022.
EMEAA results
12 months ended 31 December
2023
$m
2022
$m
2023 vs 2022
% change
2021
$m
2022 vs 2021
% change
Revenue from the reportable segment
a
Fee business
354
284
24.6
149
90.6
Owned, leased and managed lease
323
268
20.5
154
74.0
Total
677
552
22.6
303
82.2
Operating profit/(loss)
from the reportable segment
a
Fee business
214
153
39.9
32
378.1
Owned, leased and managed lease
1
(1)
NM
b
(27)
(96.3)
215
152
41.4
5
NM
b
Operating exceptional items
1
(49)
NM
b
(7)
600.0
Operating profit
216
103
109.7
(2)
NM
b
Strategic Report
78
IHG
| Annual Report and Form 20-F 2023
EMEAA hotel and room count
Hotels
Rooms
At 31 December
2023
Change over
2022
2023
Change over
2022
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
Other
a
19
3
11,444
1,616
Total
1,237
68
247,267
17,603
Analysed by ownership type
Franchised
b
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.
Total number of hotels
1,237
Total number of rooms
247,267
Gross system size growth was 9.2%
year-on-year. During the year, 21,174 rooms
(87 hotels) opened, an increase of 4,963 rooms
(8 hotels) compared to 2022. Openings
included 4,700 rooms (26 hotels) in our
Holiday Inn Brand Family and 5,098 rooms
(16 hotels) under our Iberostar Beachfront
Resorts brand. Other notable openings
included four Vignette Collection hotels
representing new country entries for the
brand, eight InterContinental hotel openings
and four Six Senses properties.
3,571 rooms (19 hotels) were removed in the
year, two thirds less than in the prior year
(10,747 rooms, 47 hotels) which included
6.5k (28 hotels) related to the ceasing of
operations in Russia. Net system size
increased 7.7% year-on-year.
Total number of hotels in the pipeline
469
Total number of rooms in the pipeline
82,226
At 31 December 2023, the EMEAA pipeline
totalled 82,226 rooms (469 hotels),
representing 33% of the region’s
system size.
Signings of 24,787 rooms (151 hotels) in 2023,
compared to 25,847 rooms (128 hotels) in
the prior year which included 7,049 rooms
(20 hotels) under the Iberostar Beachfront
Resort brand. Over a quarter of signings
were in the luxury segment including
2,500 rooms (12 hotels) under Vignette
Collection and 531 rooms (six hotels)
under the Six Senses brand.
EMEAA pipeline
Hotels
Rooms
At 31 December
2023
Change over
2022
2023
Change over
2022
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
a
–
(16)
–
(2,583)
Total
469
35
82,226
(1,184)
Analysed by ownership type
Franchised
a
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.
Strategic Report
79
IHG
| Annual Report and Form 20-F 2023
Performance
7%
Greater China revenue 2023
($161m)
19%
Greater China number of rooms
(179,342)
Performance
continued
Greater China
A
s the Chinese economy recovered,
we welcomed guests back with
evolved brand offerings and
supported owners with enhanced
enterprise delivery, resulting in performance
across our hotels exceeding pre-pandemic
levels. Alongside the debut of Vignette
Collection and the Regent on the Bund in
Shanghai, we celebrated the opening of
our 700th hotel, underlining our continued
rapid growth in Greater China.
Industry performance in 2023
The industry saw strong recovery across
Greater China in 2023 following the lifting
of localised lockdowns at the end of the
prior year. Industry RevPAR in Greater China
increased by 61.1% compared to 2022
(decreased by 0.8% against 2019).
Supply increased by 3.3% and demand
increased 40.2%.
RevPAR across all tiers increased compared
to 2022. Tier 1 cities saw a 68.8% increase
in RevPAR, as room demand increased by
44.4%. In Tier 2 cities, RevPAR increased
47.2%, driven by both occupancy and
average daily rate, while in Tier 3 cities,
RevPAR increased by 43.9%. In Tier 4 cities,
RevPAR increased by 55.0%, driven by
demand increasing by 39.3%. RevPAR in
Hong Kong SAR increased by 70.3% driven
by average daily rate which increased
34.2%. Macau SAR RevPAR increased
391.9%, with demand increasing 175.0%
driven by inbound Mainland China travel.
IHG’s regional performance in 2023
IHG’s comparable RevPAR in Greater China
increased by 71.7% compared to 2022
(increased by 0.7% against 2019), driven
by a 19.1%pts increase in occupancy and
an 18.0% increase in average daily rate as
trading conditions improved following
the lifting of travel restrictions in
December 2022.
In Mainland China, RevPAR increased by
70.7%. Tier 1 cities increased by 96.6% as
they benefitted
from domestic leisure and
the prior year comparables reflecting
travel restrictions, compared to 61.6%
in Tier 2-4 cities.
RevPAR in Hong Kong SAR increased by
93.8% while RevPAR in Macau SAR
increased by 279.9%.
Comparable RevPAR 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%
Daniel Aylmer
Managing Director, Greater China
Our evolved
brand offerings
and enterprise
delivery resulted
in performance
exceeding pre-
pandemic levels.”
Crowne Plaza Hotel & Suites Landmark
Shenzhen, China
Strategic Report
80
IHG
| Annual Report and Form 20-F 2023
Review of the year ended
31 December 2023
Comprising 179,342 rooms (712 hotels)
at 31 December 2023, Greater China
represented approximately 20% of the
Group’s room count. The majority of rooms
in Greater China operate under the
managed business model, although the
franchised segment continues to grow,
representing approximately one-third of
the region’s open rooms.
Following the lifting of localised travel
restrictions in December 2022, the trading
conditions in Greater China rebounded
significantly through 2023. Monthly RevPAR
growth against the prior year peaked in the
March to May period, lapping the travel
restrictions in place in the comparable prior
period, with RevPAR peaking in April, up
more than 170% year-on-year; by July and
August, RevPAR was up 40% and 38%
respectively as leisure demand was strong in
the prior summer period; the fourth quarter
saw RevPAR improve to 72% year-on-year,
as more restrictions were re-introduced in
the prior year comparative period.
For the year, Tier 1 cities saw RevPAR up 97%
as they lapped travel restrictions in place in
the comparable period, and benefitted
from
increased domestic travel.
Tier 2-4 cities saw RevPAR increase 62%
reflecting the lesser impact
from Covid-19
in 2022.
Compared to 2022, overall Greater China
RevPAR increased 75% in the first quarter
and 110% in the second quarter, as the
comparable prior year trading was impacted
by travel restrictions, before increasing 43%
in the third quarter and 72% in the fourth
quarter, with 72% in the full year. Compared
to 2019, RevPAR declined 9% in the first
quarter, declined 1% in the second quarter,
increased 9% in the third quarter, before
declining 1% in the fourth quarter, with the
full year increasing 1%.
Revenue from the reportable segment
a
in
2023 increased by $74m (85.1%) to $161m
and operating profit increased by $73m
(317.4%) to $96m. The improvement in
trading at our managed hotels led to
incentive management fees increasing from
$16m in 2022 to $46m in 2023. Fee margin
a
increased to 59.6%, compared to 26.4%
in 2022.
For discussion of 2022 results, and the
changes compared to 2021, refer to
the 2022 Annual Report and Form 20-F.
ihgplc.com/investors
under Annual Report.
a
Definitions
for Non-GAAP revenue and operating pro
fit
measures can be found on pages 84 to 88. Reconciliations
of these measures to the most directly comparable line
items within the Group Financial Statements can be
found on pages 226 to 231.
Greater China results
12 months ended 31 December
2023
$m
2022
$m
2023 vs 2022
% change
2021
$m
2022 vs 2021
% change
Revenue from the reportable segment
a
Fee business
161
87
85.1
116
(25.0)
Total
161
87
85.1
116
(25.0)
Operating profit
from the reportable segment
a
Fee business
96
23
317.4
58
(60.3)
Operating profit
96
23
317.4
58
(60.3)
Strategic Report
81
IHG
| Annual Report and Form 20-F 2023
Performance
Greater China hotel and room count
Hotels
Rooms
At 31 December
2023
Change over
2022
2023
Change over
2022
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
Other
a
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.
Total number of hotels
712
Total number of rooms
179,342
Gross system size growth was 9.8%
year-on-year, with 16,340 rooms (87 hotels)
added to our system in 2023, an increase
from 12,664 rooms (65 hotels) in 2022.
Openings were mainly in our Holiday Inn
Brand family (7,552 rooms, 51 hotels), with a
further four voco properties, three Vignette
Collection hotels and our sixth Regent hotel
in the region.
Removals included 3,465 rooms (14 hotels)
in the year, representing a removal rate of
2.1%. Net system size growth was 7.7%
year-on-year.
Total number of hotels in the pipeline
507
Total number of rooms in the pipeline
105,564
As at 31 December 2023, the pipeline
totalled 105,564 rooms (507 hotels),
representing 59% of the region’s
system size.
Signings of 26,136 rooms (134 hotels) were
ahead of last year by 4,109 rooms (26 hotels).
Almost half of signings were in our Holiday
Inn Brand family. Other notable signings
included 17 Crowne Plaza hotels, 12 voco
hotels and three Kimpton properties.
Greater China pipeline
Hotels
Rooms
At 31 December
2023
Change over
2022
2023
Change over
2022
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
Performance
continued
Greater China
continued
Strategic Report
82
IHG
| Annual Report and Form 20-F 2023
Review of the year ended
31 December 2023
Central revenue, which is mainly comprised
of technology fee income and revenue from
insurance activities, increased by $22m (11.1%)
to $221m. Central revenue was primarily
driven by the growth of IHG system size
and the 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 year-on-year.
Central results
12 months ended 31 December
2023
$m
2022
$m
2023 vs 2022
% change
2021
$m
2022 vs 2021
% change
Revenue
221
199
11.1
197
1.0
Gross costs
(328)
(307)
6.8
(285)
7.7
(107)
(108)
(0.9)
(88)
22.7
Operating loss
(107)
(108)
(0.9)
(88)
22.7
Central
Regent Hotel, Shanghai on the Bund, China
Strategic Report
83
IHG
| Annual Report and Form 20-F 2023
Performance
Linkage of performance measures to Directors’ remuneration and KPIs
A
Annual Performance Plan
LT
Long Term Incentive Plan
KPI
Key Performance Indicators
See pages 116 to 140 for
more information on Directors’
remuneration and pages 60 to 63
for more information on KPIs.
Key performance measures and non-GAAP measures used by management
The Annual Report and Form 20-F presents certain financial measures when discussing the Group’s per
formance which are not measures
of
financial per
formance 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, pro
fitability, 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 these measures exclude certain items (for example, impairment and the costs of individually signi
ficant 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 Group Financial Statements (see pages 154 to 160).
Measure
Commentary
Global revenue per available
room (RevPAR) growth
KPI
RevPAR, average daily rate
and occupancy statistics are
disclosed on pages 232 to 234.
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 (see Glossary, page 268) rooms revenue divided by the number of
room nights available and can be derived from occupancy rate multiplied by the 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$ conversion 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
A
LT
KPI
Owned, leased and managed
lease revenue as recorded in the
Group Financial Statements is
reconciled to total gross revenue
on page 70.
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. IHG’s business model is described on pages 10 to 13. 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.
Performance
continued
Key performance measures and non-GAAP measures
Strategic Report
84
IHG
| Annual Report and Form 20-F 2023
Measure
Commentary
Revenue and operating
profit measures
The reconciliation of the most
directly comparable line item
within the Group Financial
Statements (i.e. total revenue
and operating profit,
accordingly) to the non-IFRS
revenue and operating profit
measures is included on
pages 226 to 231.
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 pro
fit
from
reportable segments’, respectively, within note 2 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 re
flect 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 bene
fit o
f the hotels within the IHG system. As described
within the Group’s accounting policies (page 164), the System Fund is operated to collect and
administer cash assessments from hotel owners for speci
fic purposes o
f use including marketing,
the Guest Reservation System and hotel loyalty programme.
As described within the Group’s accounting policies (page 164), 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 o
f 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 o
f either 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 signi
ficant 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. The Group’s accounting policy for exceptional
items and further detail of those items presented as such are included in the Group Financial
Statements (see pages 165 and 179 to 180).
In further discussing the Group’s performance in respect of revenue and operating pro
fit, 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, be
fore interest and tax. The Group’s reported operating
profit additionally excludes
fair value changes in contingent purchase consideration, which relates to
financing o
f 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 bene
fits and because o
f 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 per
formance and provide improved comparability between
periods, there are limitations in their use as compared to measures of
financial per
formance 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 pro
fit
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 pro
fitability. The revenue and
operating profit o
f 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 per
formance.
Strategic Report
85
IHG
| Annual Report and Form 20-F 2023
Performance
Performance
continued
Key performance measures and non-GAAP measures
continued
Measure
Commentary
Revenue and operating
profit measures
continued
Underlying fee revenue growth
KPI
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
A
KPI
Fee margin is presented at actual exchange rates and is a measure of the pro
fit arising
from fee
revenue. Fee margin is calculated by dividing ‘fee operating pro
fit’ by ‘
fee revenue’. Fee revenue and
fee operating pro
fit are calculated
from revenue from reportable segments and operating pro
fit
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 signi
ficant
liquidated damages.
Management believes fee margin is meaningful to investors and other stakeholders as an indicator
of the sustainable long-term growth in the pro
fitability o
f IHG’s core fee-based business, as the scale
of IHG’s operations increases with growth in IHG’s system size.
Adjusted interest
Financial income and financial
expenses as recorded in the
Group Financial Statements is
reconciled to adjusted interest
on page 231.
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
The tax expense and the tax
rate as recorded in the Group
Financial Statements are
reconciled to adjusted tax
and the adjusted tax rate
on page 231.
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, as outlined above, 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 pro
fit and tax provides a better view o
f 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
Profit available
for equity
holders is reconciled to adjusted
earnings per ordinary share on
page 231.
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 included in note 23
to the Group Financial
Statements.
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 o
f 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 23 to the Group Financial Statements.
Strategic Report
86
IHG
| Annual Report and Form 20-F 2023
Measure
Commentary
Adjusted EBITDA
Cash from operations as
recorded in the Group Financial
Statements is reconciled to
adjusted EBITDA on page 68.
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 de
fined 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 24 to the Group
Financial Statements.
Gross capital expenditure,
net capital expenditure,
adjusted free cash
flow
The reconciliation of the Group’s
statement of cash
flows (i.e. net
cash from investing activities,
net cash from operating
activities, accordingly) to the
non-IFRS capital expenditure
and cash flow measures is
included on page 230.
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 use
fulness 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 (see page 13 for a description of System Fund capital investments and
recent examples).
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 o
f 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 (see page 13).
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.
Strategic Report
87
IHG
| Annual Report and Form 20-F 2023
Performance
Measure
Commentary
Gross capital expenditure,
net capital expenditure,
adjusted free cash
flow
continued
Adjusted free cash
flow
LT
KPI
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 re
flecting 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 use
ful 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 de
finitions have been amended:
•
The definition and calculation o
f 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 pro
fit 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 pro
fit measures
have also been amended. Comparative periods have been restated for this change.
•
The definition and reconciliation o
f 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 re-presented 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 restated for prior years to show consistent presentation.
The performance review should be read in conjunction with the Non-GAAP reconciliations on pages 226 to 231 and the Glossary on pages 267 to 268.
Performance
continued
Key performance measures and non-GAAP measures
continued
Strategic Report
88
IHG
| Annual Report and Form 20-F 2023
Governance
90
Chair’s overview
92
Our Board of Directors
96
Changes to the Board, and its Committees,
and Executive Committee
96
Board and Committee membership
and attendance in 2023
97
Our Executive Committee
100
Governance structure
101
Board activities
101
Key areas of focus during the year
102
Key matters discussed in 2023
and Section 172 statement
104
Our shareholders and investors
104
Director appointments and induction
105
Board effectiveness evaluation
107
Audit Committee Report
112
Responsible Business Committee Report
114
Nomination Committee Report
116
Directors’ Remuneration Report
141
Statement of compliance
Governance
89
IHG
| Annual Report and Form 20-F 2023
Chair’s overview
The Board was further pleased to support the Group’s creation
of value for shareholders by approving the $750m share buyback
programme announced and completed during the year as well as
the regular dividend payments.
Cybersecurity was again a significant area o
f focus for the Board.
The Board discussed the broad nature of cyber risk with external
specialists, including emerging risk areas, such as the rise of AI,
and the approach to prioritising mitigating initiatives. The Board also
monitored throughout the year the Group’s approach to cyber risk
and the increased investment in security measures, as well as the
culture of security awareness and the approach to training across
the organisation.
Board composition
During the year, we also saw the successful execution of Board
succession planning with changes at both the Executive and
Non-Executive levels. At the Executive level, Elie Maalouf and
Michael Glover succeeded Keith Barr and Paul Edgecliffe-Johnson
as Chief Executive Officer and Chief Financial Officer respectively.
At the Non-Executive level, in the first hal
f of the year, as previously
announced, Graham Allan and Byron Grote transitioned to become
Chair of the Responsible Business Committee and Chair of the Audit
Committee respectively.
The execution of succession planning continued with Angie Risley
joining the Board in September and succeeding Jo Harlow as Chair
of the Remuneration Committee from 1 January 2024, following Jo’s
retirement from the Board. We also announced the appointment of
Ron Kalifa as Non-Executive Director with effect from 1 January 2024.
Further information on Board appointments during the year can be
found in the Nomination Committee Report on page 115.
I would again like to express my and the Board’s sincere gratitude
to Keith, Paul and Jo for their contribution to IHG.
D
uring 2023, the Board sought to build on the Group’s
strong foundation and culture of governance and to gain
a deeper understanding of the trends and factors affecting
the long-term sustainable success, resilience and future prospects
of the Group.
The Board strives to enhance an environment of transparency
and accountability, to ensure that reliable governance frameworks
and processes are maintained, while encouraging an approach to
decision-making that facilitates the Group’s strategic priorities in
a constantly evolving geopolitical and regulatory environment.
Across the year, the Board maintained a high level of engagement
and interaction with the Group’s stakeholders. Extensive shareholder
consultation was undertaken by the Board, particularly in relation
to the approach to remuneration and the Directors’ Remuneration
Policy approved during the year.
The Board also enjoyed continued constructive engagement with
owners and colleagues throughout the year. For example, I was
pleased to spend time meeting with the CEO of the IHG Owners
Association, which provided valuable insight into the perspectives
of our owners on the Group’s strategic initiatives. I also enjoyed
meeting and hearing directly from a number of colleagues as part
of the Board’s Voice of the Employee engagement programme.
Focus areas and activities
The Board had another active year in 2023, and more information
on its activities is given on pages 101 to 103.
The Board oversaw the evolution of the Group’s strategy and
endorsed the refinement o
f the Group’s ambition to focus on
accelerating growth, as well as the enhancements to the strategic
pillars and the new growth behaviours.
The Board actively engaged with the Group’s growth agenda,
supporting and approving the launch of the Garner brand.
The Board seeks
to ensure that
IHG’s culture and
governance promote
the Group’s long-term
success and deliver
sustainable value for
our shareholders.”
45
%
Women on IHG’s Board
36
%
IHG Directors from a
minority ethnic background
Governance
90
IHG
| Annual Report and Form 20-F 2023
I am also proud to report that at the end of 2023, our Board
continues to exceed the FTSE 100 Women Leaders Review target
for women on a FTSE 100 Board. With regard to the Parker Review
(the FTSE 350 Ethnic Diversity Submission), IHG continues to
exceed the original target set by the Review of at least one director
from an ethnically diverse background, with four ethnically diverse
directors. Likewise, IHG has set targets for ethnic diversity in relation
to senior management. Further detail and reporting on these targets
can be found on pages 30 and 31.
Committee activities
The Board delegates certain responsibilities to its Committees to
assist in ensuring effective corporate governance across the business.
During 2023:
•
the Audit Committee focused on monitoring the Group’s risk
management and internal controls systems (see its report on
pages 107 to 111);
•
the Remuneration Committee focused on developments in relation
to incentive plans, including approval of the Deferred Award Plan
rules and the inclusion of ESG metrics in the Long Term Incentive
Plan (see its report on pages 116 to 140);
•
the Responsible Business Committee focused on progress
against the 2023 responsible business priorities, which support
the Company’s Journey to Tomorrow responsible business plan
(see its report on pages 112 and 113); and
•
the Nomination Committee focused on the execution of Board
and Committee succession plans and the external evaluation
(see its report on pages 114 and 115).
Further detail on the Group’s governance structure is given on
page 100.
Board performance review
During the year, an external review of the effectiveness of the Board
and its Committees was undertaken. I am pleased to report that
overall the review supported the positive conclusions of the Board
and its Committees as to their effectiveness. Further details of the
external evaluation can be found on pages 104 to 106. Individual
director feedback assessments were also conducted, details of
which can be found on page 106.
Compliance and our dual listing
IHG continues to operate as a dual-listed company with a premium
listing on the London Stock Exchange and a secondary listing on the
New York Stock Exchange (NYSE). Under the UK listing rules, we are
obliged to make a statement as to how we have applied the principles
of the UK Corporate Governance Code (the Code). Under the NYSE
listing rules, as a foreign private issuer, we are required to disclose
any significant ways in which our corporate governance practices
differ from those of US companies. To ensure consistency of
information provided to both UK and US investors, we produce
a combined Annual Report and Form 20-F.
Our Statement of compliance with the Code is on pages 141 and 142.
A summary outlining the differences between the Group’s UK
corporate governance practices and those followed by US
companies can be found on page 258.
Looking forward
In 2024, the Board will focus on the outcomes of the external
evaluation completed in 2023 and the delivery of the Group’s
strategic objectives, while ensuring that the integrity of the
Group’s governance framework is maintained.
Deanna Oppenheimer
Chair of the Board
19 February 2024
Governance
91
IHG
| Annual Report and Form 20-F 2023
Chair’s overview
Deanna Oppenheimer
Non-Executive Chair
Appointed to the Board: 1 June 2022
Skills and experience:
Deanna is founder
of CameoWorks, LLC, an advisory
firm to
CEOs of early-stage technology companies,
and BoardReady. Between 2005 and 2011,
Deanna worked at Barclays plc where
she was Chief Operating Officer of the UK
business before becoming CEO of UK
and Western Europe Retail Banking and
subsequently Vice Chair, Global Retail
Banking. Prior to this, Deanna was the
President of Consumer Banking at
Washington Mutual, Inc. She previously
held a number of Non-Executive board
positions, including with Tesco PLC (as
Senior Independent Director), Whitbread
PLC, Worldpay, Inc., and AXA S.A.,
among others.
Board contribution:
Deanna has extensive
board-level and executive leadership
experience, across a number of high-pro
file
consumer-focused brands, and brings
valuable insights and perspectives to IHG.
As Chair, Deanna is responsible for leading
the Board and ensuring it operates in an
effective manner, promoting constructive
relations with IHG’s shareholders and with
stakeholders.
Other appointments
Deanna is a Non-Executive Director of
Thomson Reuters Corporation. She also
sits on the private board of Slalom, LLC.
Elie Maalouf
Chief Executive Officer (CEO)
Appointed to the Board: 1 January 2018
Skills and experience:
Elie was appointed
Chief Executive Officer at IHG in July 2023.
Prior to this, Elie served as Chief Executive
Officer, Americas since February 2015.
He joined the Group having spent six years
as President and Chief Executive Officer
of HMSHost Corporation, where he was
also a member of the board of directors.
Elie brings a broad global experience
spanning hotel development, branding,
finance, real estate and operations
management as well as food and beverage
expertise. Prior to joining IHG, Elie was
Senior Advisor with McKinsey & Company
from 2012 to 2014.
Board contribution:
Elie is responsible for
the executive management of the Group
and ensuring the implementation of Board
strategy and policy.
Other appointments
Elie is a member of the Executive Committee
of the World Travel & Tourism Council and
the U.S. Travel Association CEO Roundtable.
Our Board of Directors
Board Committee membership key
A
Audit Committee member
R
Remuneration Committee member
RB
Responsible Business
Committee member
N
Nomination Committee member
Chair of a Board Committee
At 19 February 2024, our
Board of Directors comprises:
N
R
Governance
92
IHG
| Annual Report and Form 20-F 2023
6
8
6
6
5
2
10
5
3
4
6
3
Financial
a
Strategy
b
Risk
Hotels/Hospitality
Brands/Consumer
c
Real Estate
International
d
Tech/Digital
Sustainability
Franchising
US/UK Corporate
Governance
e
CEO
f
Skills of Directors
Michael Glover
Chief Financial Officer (CFO)
Appointed to the Board: 20 March 2023
Skills and experience:
Michael is an
Accounting and Finance graduate of Baylor
University and a certified public accountant.
He was previously Chief Financial Officer
of the Americas and Group Head of
Commercial Finance, where he had
group-wide responsibility for commercial
finance operations, including the global
procurement, sales and marketing and
technology functions, as well as IHG’s
System Fund. During his tenure with the
business, Michael has held several roles
at Group and regional levels, including CFO
of IHG’s China region from February 2013
to September 2015, at which time Michael
became Group Financial Controller, where
he oversaw Tax, Treasury and Financial
Reporting group-wide, and delivered a
finance trans
formation programme that
enabled significant simplification,
automation and the transfer of work to
IHG’s service centre.
Before IHG, Michael worked with several
large Fortune 250 companies in a wide
range of roles, beginning his career at
Halliburton Energy Services in 1995.
Board contribution:
Michael is responsible,
together with the Board, for overseeing the
financial operations o
f the Group.
Other appointments
N/A.
Graham Allan
Senior Independent Non-Executive Director
(SID)
Appointed to the Board: 1 September 2020
a
Skills and experience:
Graham was Group
Chief Executive of Dairy Farm International
Holdings Ltd from 2012 to 2017, a leading
Asian retailer headquartered in Hong Kong.
He previously served in several senior
positions at Pepsico/Yum! Brands from 1992
to 2012. He assumed the role of President of
Yum! Restaurants International in 2003 and
led the development of global brands KFC,
Pizza Hut and Taco Bell in more than 120
international markets. Prior to his tenure at
Yum! Restaurants, he worked as a consultant,
including at McKinsey & Company. Graham
has also been a Director of Americana Foods,
the former operating company of the
Americana Restaurants business.
Board contribution:
Graham brings to the
Board more than 40 years of strategic,
commercial and brand experience within
consumer–focused businesses across
multiple geographies. Graham was appointed
as Senior Independent Non-Executive
Director from 1 January 2022 and became
Chair of the Responsible Business Committee
from 1 March 2023.
Other appointments
Graham is Senior Independent Non-Executive
Director at Intertek plc, Independent
Non-Executive Director of Associated British
Foods plc and Independent Non-Executive
Director of Americana Restaurants
International plc. He also serves as Chairman
of Bata Footwear, a private company.
N
RB
A
a
Graham was a member of the Board from 1 January 2010 to 15 June 2012 prior to being appointed as Chief Operating Officer of Dairy Farm International Holdings Limited.
a
Experience in a CFO/senior finance role and/or
investment banking sector
b
Experience in a role leading corporate strategy,
a management consulting role and/or a divisional
CEO role
c
Experience in consumer/brands organisation or a role
as marketing executive with multibrand background
d
Experience in a multinational organisation holding
responsibility globally/across several regions
e
Experience in a UK and US listed organisation
f
Experience in a global CEO role
Daniela Barone Soares
Independent Non-Executive Director
Appointed to the Board: 1 March 2021
Skills and experience:
Daniela is currently
Chief Executive Officer of Snowball Impact
Management Ltd. She was formerly Chief
Executive Officer of
financial advisory and
strategic consultancy, Granito Group.
Prior to this, she was Chief Executive Officer
at Impetus, a private equity foundation, and
Executive Chair of Gove.digital, a private
technology business working with the public
sector to improve social services in Brazil.
She has served on various commercial and
non-profit boards and advisory boards,
including Halma plc, Evora S.A. in Brazil and
the UK National Advisory Board to the G8
Social Impact Investment Taskforce. She
also spent nearly 15 years combined in roles
at Save the Children, BancBoston Capital
private equity, Citibank and Goldman Sachs.
Board contribution:
Daniela brings
to the IHG Board a clear commitment to
Environmental, Social and Governance (ESG)
responsibilities and in-depth knowledge of
the role of technology in driving change.
Other appointments
Daniela is a Designated Member of Snowball
Impact Investments GP LLP, a diversified
investment fund focused on generating
financial returns with a positive social and
environmental impact. She is also a Trustee
of the Haddad Foundation, a Member of
the Advisory Board of Forward Institute and
Trustee of the Institute for the Future of Work.
RB
R
Governance
93
IHG
| Annual Report and Form 20-F 2023
Our Board of Directors
Arthur de Haast
Independent Non-Executive Director
Appointed to the Board: 1 January 2020
Skills and experience:
Arthur has held
several senior roles in the Jones Lang LaSalle
(JLL) group, including Chair of JLL’s Capital
Markets Advisory Council and Chair and
Global CEO of JLL’s Hotels and Hospitality
Group. Arthur is also a former Chair of the
Institute of Hospitality.
Board contribution:
Arthur has more than
30 years’ experience in the capital markets,
hotels and hospitality sectors, along with
significant board-level knowledge around
sustainability.
Other appointments
Arthur is Chair of JLL’s Capital Markets
Advisory Council, an Independent
Non-Executive Director of Chalet Hotels
Limited and Chair of its Risk Management
Committee, and a member of the Advisory
Board of the Scottish Business School,
University of Strathclyde, Glasgow.
Duriya Farooqui
Independent Non-Executive Director
Appointed to the Board: 7 December 2020
Skills and experience:
Duriya is an
Independent Director at Intercontinental
Exchange, Inc. (ICE), a leading operator of
global exchanges and clearing houses, and
provider of mortgage technology, data and
listings services. She is also an executive
coach and mentor with The Exco Group,
focused on helping Fortune 500 companies
develop high-performing leadership teams.
Duriya was previously President of Supply
Chain Innovation at Georgia-Pacific, leading
an organisation responsible for supply
chain transformation. Prior to this, she was
Executive Director of Atlanta Committee
for Progress, a coalition of over 30 CEOs
providing leadership on economic growth
and inclusion opportunities in Atlanta. Duriya
has also been a principal at Bain & Company
and Chief Operating Officer of the City
of Atlanta.
Board contribution:
Duriya’s diverse board
and executive-level experience brings
valuable insights and perspectives to IHG.
She combines more than two decades of
relevant expertise in business strategy,
transformation and innovation, with a clear
commitment to driving responsible
operations and diversity.
Other appointments
Duriya is an Independent Director of
Intercontinental Exchange, Inc. She serves
on the boards of NYSE and ICE NGX, both
subsidiaries of ICE, and co-chairs the NYSE
Board Advisory Council. She is also a Trustee
of Agnes Scott College, a member of the
Board of Councilors of The Carter Center and
a Board Commissioner of Atlanta Housing.
RB
A
RB
A
Byron Grote
Independent Non-Executive Director
Appointed to the Board: 1 July 2022
Skills and experience:
Byron’s career
spanned over 30 years in the international
oil and gas sector, including Standard Oil
of Ohio and subsequently BP p.l.c, where
he held management positions in retail
marketing, trading, mining, exploration and
production, renewables, petrochemicals,
and finance. He served as an Executive
Director on the Board of BP p.l.c. for 13 years
and was the Chief Financial Officer from
2002 until 2011. He previously served as
the Senior Independent Director and Audit
Committee Chair at Anglo American plc,
as a Non-Executive Director and Audit
Committee Chair at Unilever PLC and Unilever
N.V., and Non-Executive Director at Standard
Chartered PLC.
Board contribution:
Byron has extensive
experience across a range of leading
international businesses, both at board
level and in senior management positions,
particularly in finance and chairing audit
committees. He is a participant in the
European Audit Committee Leadership
Network and a member of the Regulation
Group of the Audit Committee Chairs’
Independent Forum. Byron assumed the
role of Chair of the IHG Audit Committee
in March 2023.
Other appointments
Byron is the Senior Independent Director
and Chair of the Audit Committee at Tesco
PLC. He is also a Non-Executive Director at
Inchcape PLC and on the Supervisory Board
of Akzo Nobel N.V., where he is the Deputy
Chair and Audit Committee Chair.
Our Board of Directors
continued
Board Committee membership key
A
Audit Committee member
R
Remuneration Committee member
RB
Responsible Business
Committee member
N
Nomination Committee member
Chair of a Board Committee
N
A
R
Governance
94
IHG
| Annual Report and Form 20-F 2023
Sharon Rothstein
Independent Non-Executive Director
Appointed to the Board: 1 June 2020
Skills and experience:
Sharon currently
serves as Operating Partner of Stripes
Group, a growth equity firm investing in
high-growth consumer and SaaS (Software
as a Service) companies. She previously
served as Executive Vice President, Global
Chief Marketing Officer and, subsequently,
as Executive Vice President, Global Chief
Product Officer for Starbucks Corporation.
In addition, Sharon has held senior marketing
and brand management positions at
Sephora LLC, Godiva Chocolatier, Inc.,
Starwood Hotels & Resorts Worldwide, Inc.,
Nabisco Biscuit Company and Procter
& Gamble Company.
Board contribution:
Sharon brings
extensive brands, marketing and digital
expertise, having worked in senior positions
for more than 25 years at iconic global
companies. In addition to her knowledge
of the hospitality industry, Sharon has
wide-ranging board-level experience in a
number of consumer-focused businesses.
Other appointments
Sharon serves on the boards of Yelp, Inc.
and Block, Inc., and also for private
companies Califia Farms, LLC and Levain
Bakery, Inc.
Angie Risley
Independent Non-Executive Director
Appointed to the Board: 1 September 2023
Skills and experience:
Angie’s career in
human resources has spanned executive
roles across a number of sectors, including
at United Biscuits; Whitbread as an Executive
Director, Group HR Director; and Lloyds
Banking Group as a member of the
Executive Committee as Group HR Director.
She recently retired from Sainsbury’s where
she was Group HR Director for 10 years and
a member of the Operating Board.
Angie previously served as Non-Executive
Director of Serco Group plc (and was Chair
of the Remuneration Committee) as well as
Sainsbury’s Bank plc, Arriva and Biffa, and
she has been a member of the Low
Pay Commission.
Board contribution:
Angie brings to the
IHG Board a wide range of experience from
a variety of sectors and a strong background
in human resources. Angie became Chair
of the Remuneration Committee from
1 January 2024.
Other appointments
Angie is currently a Non-Executive Director
at Smith & Nephew plc, where she is Chair
of the Remuneration Committee and a
member of the Nomination and Governance
Committee and the Compliance and
Culture Committee.
RB
A
R
A
Sir Ron Kalifa
Independent Non-Executive Director
Appointed to the Board: 1 January 2024
Skills and experience:
Ron was formerly
Chief Executive Officer of Worldpay for over
10 years, serving as Vice Chairman thereafter
and an Executive Director until February
2020. His longstanding career in financial
services has allowed him to gain experience
in marketing, strategy and operations on
a global scale. Ron led a government-
commissioned, independent Review of UK
Fintech, which proposed a recommended
strategy and delivery model to maintain the
UK’s position as a global leader in financial
services. Ron was knighted in the Queen’s
Jubilee Birthday 2022 Honours List for
services to financial services, technology
and public service.
Board contribution:
Ron brings to the IHG
Board in-depth knowledge of high-growth
sectors of
financial markets, including
payments and fintech strategy. He also has
a wealth of experience through his tenure on
various boards, including not-for-pro
fit boards.
Other appointments
Ron is Chairman of Network International
Holdings Plc. He is a Non-Executive Director
and the Senior Independent Director on the
Court of Directors of the Bank of England
and a Non-Executive Director for the
England & Wales Cricket Board. He is also
Vice Chair at Brookfield Asset Management.
Ron is a Trustee of the Royal Foundation
of the Prince and Princess of Wales.
RB
R
N
Governance
95
IHG
| Annual Report and Form 20-F 2023
Our Board of Directors
Changes to the Board, and its Committees, and Executive Committee
Graham Allan
Graham became Chair of the Responsible Business Committee and stood down from the Remuneration Committee with effect
from 1 March 2023
Heather Balsley
Heather was appointed to the Executive Committee as Global Chief Customer Officer from 1 November 2023
Keith Barr
Keith stood down from the Board, the Executive Committee and his role as Chief Executive Officer on 30 June 2023
Claire Bennett
Claire stood down from the Executive Committee and her role as Global Chief Customer Officer on 31 October 2023
Jolyon Bulley
Jolyon was appointed as Chief Executive Officer, Americas from 1 July 2023
Arthur de Haast
Arthur joined the Audit Committee and stood down as a member of the Remuneration Committee with effect from 1 January 2023
Ian Dyson
Ian retired from the Board on 28 February 2023
Paul Edgecliffe-Johnson
Paul stood down from the Board, the Executive Committee and his role as Chief Financial Officer and Group Head of Strategy
on 19 March 2023
Michael Glover
Michael joined the Board as an Executive Director as well as the Executive Committee when he was appointed as Chief Financial
Officer from 20 March 2023
Byron Grote
Byron became the Audit Committee Chair and joined the Nomination Committee from 1 March 2023
Jo Harlow
Jo retired from the Board on 31 December 2023
Ron Kalifa
Ron was appointed to the Board as a Non-Executive Director with effect from 1 January 2024
Elie Maalouf
Elie was appointed as Chief Executive Officer from 1 July 2023
Jill McDonald
Jill retired from the Board on 28 February 2023
Deanna Oppenheimer
Deanna became a member of the Remuneration Committee with effect from 1 January 2023
Angie Risley
Angie was appointed to the Board from 1 September 2023 and became Chair of the Remuneration Committee and joined the
Nomination Committee from 1 January 2024
Board and Committee membership and attendance in 2023
Appointment
date
Committee
appointments
Board
Audit
Committee
a
Responsible
Business
Committee
Nomination
Committee
Remuneration
Committee
Total meetings held
8
5
4
6
6
Chair
Deanna Oppenheimer
b
01/06/22
N
R
8/8
–
–
6/6
6/6
Chief Executive Officer
Keith Barr
c
01/07/17
3/4
–
–
–
–
Elie Maalouf
d
01/01/18
8/8
–
–
–
–
Executive Directors
Paul Edgecliffe-Johnson
e
01/01/14
1/1
–
–
–
–
Michael Glover
f
20/03/23
7/7
–
–
–
–
Senior Independent Non-Executive Director
Graham Allan
g
01/09/20
A
N
RB
SID
8/8
5/5
4/4
6/6
3/3
Non-Executive Directors
Daniela Barone Soares
h
01/03/21
R
RB
7/8
–
4/4
–
6/6
Arthur de Haast
01/01/20
A
RB
8/8
5/5
4/4
–
–
Ian Dyson
i
01/09/13
A
N
R
1/1
1/1
–
1/1
2/3
Duriya Farooqui
07/12/20
A
RB
8/8
5/5
4/4
–
–
Byron Grote
j
01/07/22
A
N
R
8/8
5/5
–
5/5
6/6
Jo Harlow
01/09/14
N
R
8/8
–
–
6/6
6/6
Jill McDonald
k
01/06/13
A
N
RB
1/1
1/1
1/1
1/1
–
Angie Risley
l
01/09/23
R
RB
3/3
–
1/1
–
2/2
Sharon Rothstein
m
01/06/20
A
RB
7/8
5/5
4/4
–
–
a
In principle, the full Board attends the relevant sections
of the Audit Committee meetings when
financial results
are considered.
b
In principle, the Chair attends all Committee meetings.
c
Keith Barr stood down as Chief Executive Officer on
30 June 2023 and did not attend the Board strategy
meeting prior to stepping down.
d
Elie Maalouf was appointed Chief Executive Officer from
1 July 2023.
e
Paul Edgecliffe-Johnson stood down as Chief Financial
Officer on 19 March 2023.
f
Michael Glover was appointed to the Board as Chief
Financial Officer from 20 March 2023.
g
Graham Allan stood down from the Remuneration
Committee and became Chair of the Responsible Business
Committee from 1 March 2023 following Jill McDonald’s
retirement from the Board on 28 February 2023.
h
Daniela Barone Soares did not attend a Board meeting
due to a prior commitment.
i
Ian Dyson retired from the Board on 28 February 2023
and did not attend a Remuneration Committee meeting
prior to his retirement.
j
Byron Grote became Chair of the Audit Committee from
1 March 2023 following Ian Dyson’s retirement from the
Board on 28 February 2023. Byron also joined the
Nomination Committee from 1 March 2023.
k
Jill McDonald retired from the Board on 28 February 2023.
l
Angie Risley was appointed to the Board from
1 September 2023.
m
Sharon Rothstein was unable to attend a Board meeting
due to a prior commitment.
Board Committee membership key
A
Audit Committee member
R
Remuneration Committee member
RB
Responsible Business
Committee member
N
Nomination Committee member
Chair of a Board Committee
SID
Senior Independent
Non-Executive Director
Our Board of Directors
continued
Governance
96
IHG
| Annual Report and Form 20-F 2023
Heather Balsley
Global Chief Customer Officer
Appointed to the Executive Committee:
November 2023 (joined the Group: 2007)
Skills and experience:
Before being
appointed as Global Chief Customer Officer,
Heather served as SVP, Global Loyalty &
Partnerships for four years. During that time,
Heather was responsible for the Company’s
loyalty and partnerships business, including
the re-launch of IHG One Rewards and
co-brand credit card business, delivering
significant successes. She has also served
as SVP, Global Marketing, Mainstream Brands,
developing and delivering brand strategies
that enhance the guest experience and
drive performance.
Heather also worked across all brand
segments as SVP, Americas Brands and
Marketing and held leadership roles in
strategy. Throughout her time at IHG, she
has worked extensively across markets
globally and with our owners.
Prior to joining IHG, Heather spent seven
years as a consultant with Marakon Associates
in New York, where she advised Fortune 500
companies on performance-enhancing
strategies.
She holds an MBA from Harvard Business
School and a bachelor’s degree in Economics
and Sociology from Duke University.
Key responsibilities:
Heather leads all
aspects of IHG’s brand strategy, positioning,
marketing, commercial performance,
customer data and analytics and the
end-to-end customer experience across
IHG’s portfolio of 19 brands, including
our award-winning IHG One Rewards
loyalty programme.
Jolyon Bulley
Chief Executive Officer, Americas and Group
Transformation Lead, Luxury & Lifestyle
Appointed to the Executive Committee:
November 2017 (joined the Group: 2001)
Skills and experience:
A career hotelier,
Jolyon has held a number of signi
ficant roles
at IHG and, before being appointed as CEO,
Americas in 2023, was CEO for Greater
China from 2018.
Prior to that, he was Chief Operating Officer
(COO) for the Americas from 2014 to 2017,
leading the region’s operations for franchised
and managed hotels, in addition to cultivating
franchisee relationships and enhancing hotel
operating performance. Jolyon also served as
COO for Greater China for almost four years,
with oversight of the region’s hotel portfolio
and brand performance, new hotel openings
and owner relations. In 2021, in addition to
his role as CEO for Greater China, Jolyon was
appointed to lead the Luxury & Lifestyle
Transformation Team.
Jolyon joined IHG in 2001, as Director of
Operations, New South Wales in Australia,
and then held roles of increasing
responsibility across IHG’s Asia-Pacific
region. He became Regional Director Sales &
Marketing for Australia, New Zealand & South
Pacific in 2003, relocated to Singapore in
2005 and held positions of Vice President
Operations South East Asia & India, Vice
President Resorts, and Vice President
Operations, South East & South West Asia.
Jolyon graduated from William Angliss
Institute in Melbourne with a concentration
in Tourism and Hospitality.
Key responsibilities:
Jolyon is responsible
for the management, growth and
profitability o
f the Americas region and the
development and defining o
f a clear strategy
for our Luxury & Lifestyle brands’
performance and growth.
In addition to Elie Maalouf and
Michael Glover, the Executive
Committee comprises:
Our Executive Committee
Governance
97
IHG
| Annual Report and Form 20-F 2023
Our Executive Committee
Yasmin Diamond, CB
Executive Vice President, Global Corporate
Affairs
Appointed to the Executive Committee:
April 2016 (joined the Group: 2012)
Skills and experience:
Before joining IHG in
2012, Yasmin was Director of Communications
at the Home Office, where she advised the
Home Secretary, ministers and senior
officials on the strategic development and
daily management of all the Home Office’s
external and internal communications. She
was previously Director of Communications
at the Department for Environment, Food
and Rural Affairs; Head of Communications
for Welfare to Work and New Deal; and Head
of Marketing at the Department for Education
and Skills. Before joining government
communications, Yasmin was Publicity
Commissioner for the BBC, where she led
communications activity around the launch
of a new digital learning channel and around
the BBC’s educational output for both adults
and children.
In 2011, Yasmin was awarded a Companion
of the Order of the Bath (CB) in the New Year’s
Honours List in recognition of her career in
government communications. In addition,
Yasmin is an Independent Non-Executive
Director of the Rugby Football Union and is
a Board Trustee member of the Sustainable
Hospitality Alliance.
Key responsibilities:
Yasmin is responsible
for all global corporate affairs activity, focused
on supporting and enabling IHG’s broader
strategic priorities. This includes all external,
internal, hotel and owner communications;
global government affairs work; and leading
IHG’s Corporate Responsibility strategy.
Nicolette Henfrey
Executive Vice President, General Counsel
and Company Secretary
Appointed to the Executive Committee:
February 2019 (joined the Group: 2001)
Skills and experience:
Nicolette joined
IHG in 2001. Prior to leading the Business
Reputation and Responsibility function, she
held a number of senior legal roles, including
Deputy Company Secretary. During that
time, she worked with the Board, Executive
Committee and wider organisation to ensure
best-in-class delivery and compliance
across legal, governance and regulatory
areas. Nicolette is a solicitor qualified in
England and South Africa and previously
worked as a corporate lawyer at Linklaters
in London and Findlay & Tait (now Bowmans)
in South Africa.
Key responsibilities:
Nicolette has global
responsibility for all areas of corporate
governance, legal, risk management,
insurance, regulatory compliance, internal
audit and hotel standards.
Wayne Hoare
Chief Human Resources Officer
Appointed to the Executive Committee:
September 2020 (joined the Group: 2020)
Skills and experience:
Wayne has more
than 30 years of experience in HR and
joined IHG from RCL FOODS, where he
spent seven years as the company’s Chief
Human Resources Officer, leading the
culture building and talent strategy for
25,000 employees. Prior to joining RCL
FOODS, Wayne spent 26 years at Unilever,
where he worked across a broad range of
roles in mature and developing markets
across Europe, North America, Asia, Africa
and the Middle East.
Wayne’s most recent role at Unilever was as
SVP, HR – Global Centres of Expertise, where
he held responsibility for the Global Talent,
Leadership Development and Reward teams.
He led the development of the company’s
HR strategy to enable a performance culture
focused on growth.
Key responsibilities:
Wayne has global
responsibility for talent management,
learning and capability building, diversity,
organisation development, reward and
benefit programmes, employee relations
and all aspects of the people and
organisation strategy for the Group.
Our Executive Committee
continued
Governance
98
IHG
| Annual Report and Form 20-F 2023
Kenneth Macpherson
Chief Executive Officer, EMEAA
Appointed to the Executive Committee:
April 2013 (joined the Group: 2013)
Skills and experience:
Kenneth became
CEO, EMEAA in January 2018. He was
previously IHG’s CEO for Greater China,
a role he held from 2013 to 2017. He has
extensive experience across sales, marketing
strategy, business development and
operations. In addition to 12 years living and
working in China, Kenneth’s career includes
experience in Asia, the UK, France and South
Africa. Before IHG, he worked for 20 years
at Diageo, one of the UK’s leading branded
companies. His senior management positions
included serving as Managing Director of
Diageo Greater China, where he helped to
build the company’s presence and led the
landmark deal to acquire ShuiJingFang,
a leading manufacturer of China’s national
drink, and one of the
first
foreign acquisitions
of a Chinese listed company.
Key responsibilities:
Kenneth is responsible
for the management, growth and pro
fitability
of the EMEAA region. He also manages a
portfolio of hotels in some of the world’s
most exciting destinations, in both mature
and emerging markets.
George Turner
Chief Commercial and Technology Officer
Appointed to the Executive Committee:
January 2009 (joined the Group: 2008)
Skills and experience:
In February 2019,
George was appointed as Chief Commercial
and Technology Officer. Prior to this, he
spent over a decade as IHG’s EVP, General
Counsel and Company Secretary, with
responsibility for corporate governance,
risk and assurance, legal, corporate
responsibility and information security.
He is a solicitor, qualifying to private practice
in 1995. Before joining IHG, George spent
over 10 years with Imperial Chemical
Industries PLC, where he held various key
positions including Deputy Company
Secretary and Senior Legal Counsel.
Key responsibilities:
George’s
responsibilities include distribution;
channels; revenue management; property,
owner, guest and enterprise solutions;
guest reservations and customer care;
digital; information security; technology;
and global sales.
Gender of Board and Executive Committee
Number of
Board members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
Executive
Committee
Percentage of
Executive
Committee
Men
6
55%
3
6
67%
Women
5
45%
1
3
33%
Not specified/pre
fer not to say
–
–
–
–
–
Ethnic background of Board and Executive Committee
Number of
Board members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
Executive
Committee
Percentage of
Executive
Committee
White British or other White (including minority-white groups)
7
64%
3
7
78%
Mixed/Multiple Ethnic Groups
1
9%
–
–
–
Asian/Asian British
2
18%
–
1
11%
Black/African/Caribbean/Black British
–
–
–
–
–
Other ethnic group, including Arab
1
9%
1
1
11%
Not specified/pre
fer not to say
–
–
–
–
–
The information in the tables above is compiled from self-reported data from the relevant individuals.
As at 19 February 2024, the Company complies with the following targets on board diversity in accordance with Listing Rule 9.8.6R(9):
(i) at least 40% of the individuals on the Board are women; (ii) at least one senior position, namely the Chair of the Board, is held by a woman;
and (iii) at least one individual on the Board is from a minority ethnic background.
Governance
99
IHG
| Annual Report and Form 20-F 2023
Our Executive Committee
Governance structure
Our governance framework is headed by the Board, which
delegates certain management and oversight responsibilities to
various Committees to further IHG’s purpose, values and strategy,
while conducting business in a responsible manner.
Executive management is responsible for the implementation
of strategy that is delivered by the Group’s workforce.
THE BOARD
The Board is responsible for promoting
the long-term sustainable success of
the Group and establishes its purpose,
values and strategy. Operational matters,
routine business and information
disclosure procedures are delegated by
the Board to Management Committees,
with the exception of a number of key
decisions and matters that are reserved
for the Board. The schedule of matters
reserved for the Board was reviewed and
approved at the December 2023 Board
meeting and is available on our website.
The Board is supported by its four
Principal Committees (Audit, Nomination,
Remuneration and Responsible Business),
all of which consist of Non-Executive
Directors. These committees assist the
Board in carrying out its functions and
in overseeing the delivery of the strategic
objectives it sets for management.
See pages 101 to 103 for information.
Audit Committee
Leads on internal controls
and risk management;
financial reporting; internal
audit; fraud and external
audit and compliance.
Maintains working
relationships with
management; Global
Internal Audit; Disclosure
Committee; and the
external Auditor.
See pages 107 to 111.
Nomination Committee
Leads on and examines
nominations and
appointments to the Board
and its Committees and
makes recommendations
to the Board.
Responsible for reviewing the
Group’s leadership needs.
See pages 114 and 115.
Remuneration Committee
Leads on and reviews all
aspects of remuneration
of the Executive Directors
and Executive Committee
members and remuneration
policy for senior executives.
See pages 116 to 140.
Responsible
Business Committee
Leads on responsible
business objectives and
strategy, including our
approach to sustainable
development and
responsible procurement.
Reviews our impact on
the environment and
communities.
Reviews the Board’s
engagement with the
workforce and the Group’s
diversity, equity and
inclusion (DE&I) agenda.
See pages 112 and 113.
Executive Committee
Chaired by the CEO, it considers and
manages the day-to-day strategic and
operational issues facing the Group.
Its remit includes executing the
strategic plan once agreed upon by
the Board, monitoring the Group’s
performance and providing assurance
to the Board in relation to overall
performance and risk management.
General Purposes Committee
Chaired by an Executive Committee
member, it attends to items of a routine
nature and to the administration of
matters, the principles of which have
been agreed previously by the Board or
an appropriate Committee.
Disclosure Committee
Chaired by the Group’s Financial
Controller, it ensures that proper
procedures are in place for statutory and
listing requirements. This Committee
reports to the Chief Executive Officer,
the Chief Financial Officer and the
Audit Committee.
Operational matters, routine business and information disclosure procedures are delegated by the Board to Management
Committees. The Management Committees are comprised of senior executives, including, where relevant, the Executive Directors.
Governance framework
BOARD COMMITTEES
MANAGEMENT COMMITTEES
REPORTING
Governance
100
IHG
| Annual Report and Form 20-F 2023
Board activities
Key areas of focus during the year
Board meetings
The table below gives an overview of some of the regular and
standing items discussed and decisions made at Board meetings
during the year. The table overleaf sets out information on the
key matters discussed by the Board in 2023 and our Section 172
statement includes information about how stakeholders were
considered and impacted outcomes.
In several areas, much of the substantive preparation work took
place within the Board’s Committees and was later confirmed by the
Board or the whole Board attended certain sections of Committee
meetings. Where this was the case, the discussions are treated as
having taken place at Board level.
The Board received regular updates from the CEO and CFO on recent and current trading, including RevPAR, operating pro
fit,
net system size growth and cash flow per
formance. These were also compared to the results of competitors and budget.
Internal projections were compared with the consensus of forecasts by analysts to ensure that the Company’s prospects were
appropriately reflected in market expectations. The Board also monitored the progress o
f the share buyback programme.
Throughout the year, the Board also received regional performance updates from each of the regional Chief Executive Officers,
covering regional market and competitive landscapes, financial per
formance, regional strategy and progress on regional
initiatives, and risks and mitigation measures.
The Board received regular updates on principal and emerging risks, internal controls, risk management systems, the Group’s risk
appetite, litigation, cybersecurity, compliance programmes and the global insurance programme. Committee Chairs also
delivered reports on risk topics in relation to the areas of remit for their respective Committees.
The Board received regulatory development updates from the General Counsel and Company Secretary, covering regulatory
changes in areas such as corporate reporting and governance, executive remuneration, climate change, shareholder body voting
guidelines and other ESG matters. The Board also reviewed and approved the Group’s Code of Conduct.
The Board receives a regular report outlining share register movements, relative share price performance, investor relations
activities and engagement with shareholders. The Board also considered views shared from the regular investor and analyst
perception studies and feedback surveys, as well as individual meetings with investors.
The Board receives a regular report outlining various geopolitical and social issues pertaining to IHG and its business; corporate
affairs activity supporting IHG’s corporate reputation, brands and responsible business agenda; owner and colleague
engagement; government and advocacy programmes; and industry-body engagement.
Performance
Governance and assurance
Stakeholders
Governance
101
IHG
| Annual Report and Form 20-F 2023
Board activities
Key matters discussed in 2023 and Section 172 statement
Section 172 of the Companies Act 2006 requires a director of a company to promote the success of that company, and in doing so, the director
must have regard to six factors. These are: the long-term consequences of a decision; the interests of its employees; business relationships
with suppliers, customers and others; its impact on the community and environment; the desirability of maintaining high standards of
business conduct; and the need to act fairly between members of the company. The table below summarises some of the main matters
dealt with by the Board during the year and how it took the Section 172 factors into account. The relevant Section 172 factors are identi
fied
in the key at the bottom of the page.
Finance and performance
Financial plan
The Board evaluated and approved
the financial plan
for the period
2023 to 2025.
In approving the financial plan, the Board considered the dividend and
shareholder return approach and assumptions, as well as taking into account the
challenges for owners of the lending environment and construction
financing.
B
C
E
Shareholder returns
The Board considered and approved
a final dividend
for 2022, an interim
dividend for 2023 and a $750m
share buyback programme.
In considering the dividends paid during the year and the share buyback
programme, the Board took into account the creation of value for shareholders,
the expectations of analysts in the context of the Company’s trading and viability
assessments and capacity to pay as well as the external environment, including
the geopolitical situation and macroeconomic developments, while having regard
to the Group’s dividend policy.
A
E
F
Group finance
The Board approved the update of
the Group’s Euro Medium Term Note
(EMTN) bond programme and the
issuance of a €600m bond.
In approving the EMTN programme update and the €600m bond issuance, the
Board considered in particular the Group’s longer-term debt maturity and liquidity
profiles as well as the benefits o
f prudent
financial management to the Group’s
employees and shareholders.
A
B
E
F
Financial statements
The Board considered and approved
the full and half-year
financial results
statements, including the going
concern and viability statements,
and whether the Annual Report was
fair, balanced and understandable.
In reviewing and approving for publication the Group Financial Statements, the
Board ensured that the Group had met its regulatory requirements in relation to
providing shareholders and other stakeholders with accurate information regarding
the Group and further maintained the Group’s reputation for operating with
high standards.
E
F
Strategic and operational matters
Brand portfolio
The Board approved the launch
of the Garner brand.
In considering the new brand launch, the Board focused in particular on the
owner proposition and the return on investment for owners; the brand’s offering
for IHG One Rewards members and other guests; the value the brand can
generate for shareholders and investors; and the capabilities of the Group’s
employees needed to support the launch.
A
B
C
Corporate strategy refresh
The Board endorsed the Group’s
refreshed corporate strategy.
In considering and endorsing the corporate strategy refresh, including the new
strategic pillars, associated metrics and growth behaviours, the Board had regard
for the Group’s approach to driving performance to generate both short and
long-term value for hotel owners and shareholders as well as the Group’s impact
on communities and the environment. The Board further considered the impact
of the new growth behaviours on employees, as well as the role the strategy plays
in maintaining the Group’s high standards of business conduct.
A
B
C
D
E
Luxury & Lifestyle
The Board endorsed the
InterContinental brand refresh.
The Board considered and endorsed the InterContinental brand refresh strategy,
noting in particular the focus on implementing new service and culture training
to deliver enhanced guest experiences, colleague behaviours and owner returns
and noting the positive momentum shown by improved guest satisfaction data.
A
B
C
E
Growth strategy in regions
– Americas, EMEAA and
Greater China
The Board received in-depth
regional updates from the CEOs of
each of the Group’s three regions,
and provided oversight with regard
to the Group’s growth strategy and
strategic priorities.
The Board received regular updates from the Group’s operating regions, covering
the Group’s positioning and performance in relevant markets and in relation to
brand performance, underlying growth drivers and the competitive environment,
and further focused on actions to accelerate the Group’s growth. In its discussions,
the Board paid particular attention to critical owner considerations in relation to
optimising owner returns as well as initiatives to reduce energy consumption and
food waste.
A
C
D
Key to considerations
A
Long term
C
Suppliers and customers
E
High standards
B
Employees
D
Community and environment
F
Act fairly between members
Board activities
continued
Key areas of focus during the year
continued
Governance
102
IHG
| Annual Report and Form 20-F 2023
Board governance
Board composition
The Board approved the
appointments of Elie Maalouf as
Chief Executive Officer, Angie Risley
as Chair Designate of the
Remuneration Committee and Ron
Kalifa as a Non-Executive Director.
When approving Board appointments and succession plans, the Board had
particular regard for ensuring that both the Board and its Principal Committees
have the appropriate mix of skills, experience and knowledge to provide effective
oversight over the short and long-term strategic objectives of the Group and
effectively consider the interests of its stakeholders while also maintaining high
standards of business conduct and complying with the UK Corporate
Governance Code.
A
B
E
Executive Committee
appointments
The Board endorsed the changes
and appointments to the Executive
Committee during the year.
In considering the talent and succession planning at the Executive Committee
level, the Board focused on the skills, experience and pro
file required to optimise
the Executive Committee, including relevant regional and functional leadership,
to facilitate the delivery of the Group’s strategic objectives.
A
B
E
Regulatory Compliance
The Board approved new or
refreshed regulatory compliance
policies.
Across the year, the Board approved new or refreshed global policies in relation to
Communities, Environment, Human Rights and Sanctions. In approving the
policies, the Board considered, in particular, the various regulatory requirements
and the external environment underpinning each policy, the impact of the
policies on employees, owners, shareholders and suppliers as well as the Group’s
reputation for operating with high standards.
B
C
D
E
People
Incentive plan
The Board approved the adoption
of new Deferred Award Plan rules.
In considering the new Deferred Award Plan rules, the Board considered the
potential impact on employees in different territories and jurisdictions, as well
as the need to balance corporate governance expectations with the regulatory
requirements in different territories.
A
B
E
Our people and culture
Voice of the Employee workforce
engagement programme.
The Board participated in employee feedback sessions, and received and
considered regular updates from the Voice of the Employee workforce
engagement programme, noting continued positive feedback from
engagement sessions.
B
E
See pages 36 and 37 for information about how we have engaged with our stakeholders in 2023. Further details of our regard for our people, communities
and the planet are on page 3 and pages 28 to 35.
The 2023 Annual Board strategy meeting was held in Atlanta at the Group’s Americas region headquarters. The Board undertook a
detailed review in respect of the following areas:
•
the industry landscape and performance;
•
the competitive context;
•
IHG’s business model, financial model and strategy; and
•
strategic choices to strengthen performance.
The meeting also included an ‘outside-in’ perspective from an external adviser on the Group’s trajectory, further opportunities
for growth and risks to delivery of the plan.
Each Board member received a full brie
fing in advance o
f the Board strategy meeting, which enabled a productive and
wide-ranging discussion with concrete outcomes, oriented around a relentless focus on growth, a strong commercial engine and
a high-performance culture. Outcomes and action items were also addressed at subsequent Board meetings.
Board members also had the opportunity to engage informally with colleagues from our Atlanta office.
Annual Board strategy meeting
Governance
103
IHG
| Annual Report and Form 20-F 2023
Board activities
Board activities
continued
Our shareholders and investors
Director appointments and induction
During 2023, IHG continued its open dialogue with shareholders
and investors and conducted its annual programme of investor
relations activities with support from its brokers and advisers.
The Board received regular updates and considered feedback
as outlined on page 101. In addition, our Registrar and American
Depositary Receipts (ADR) programme custodians have supported
shareholders and ADR holders with their queries.
Committee Chairs and the Senior Independent Director are available
for shareholders if they have concerns they wish to discuss.
Annual General Meeting (AGM)
The Board was pleased to meet shareholders in person at the
2023 AGM.
Our 2024 AGM will be held on Friday 3 May 2024. The notice of
meeting will be sent to shareholders and made available on our
website in due course.
Visit
ihgplc.com/investors
under Shareholder centre.
Further information on the Board’s engagement with shareholders
and investors is included on page 36.
Director appointments
Details of the appointments to the Board made during 2023 are
described in the Nomination Committee Report on pages 114 and 115.
New Director inductions
Upon appointment, all new Directors undergo a comprehensive and
formal induction programme that is tailored to meet their individual
needs and respective roles on the Board. We believe this is crucial
to ensure our Directors have a full understanding of all aspects of
our business and familiarity with the Group’s purpose, culture and
values to ensure they can contribute effectively to the Board.
For Michael Glover, a bespoke induction plan focused on his transition
to an Executive Director and Executive Committee role was prepared,
with a particular focus on his responsibilities as CFO. His induction
included meetings with key external advisers and stakeholders and
an overview of corporate governance requirements in relation to his
responsibilities as an Executive Director.
Given Elie Maalouf’s longstanding role on the Board and Executive
Committee, following his appointment as CEO, a targeted transition
plan was put in place focusing on aspects speci
fic to his role as
CEO, with a particular emphasis on key investor, colleague, owner,
media and industry relationships.
For Angie Risley and Ron Kalifa, tailored induction plans were prepared
in advance of their appointment to the Board. Their plans broadly
covered the following topics, while being tailored to their Committee
appointments and roles, with a particular emphasis on understanding
IHG’s business, long-term strategy, risks and opportunities within
the business and governance processes and controls:
•
information on the Group’s purpose, culture, values and strategy,
including its business model, brands and the markets in which
it operates;
•
key strategic initiatives;
•
our approach to internal controls and our risk management strategy;
•
information on the Board, its Committees and IHG’s governance
processes;
•
a reminder of the rules relating to maintaining the con
fidentiality o
f
inside information and restrictions in dealing in IHG shares, together
with a briefing on the policies and procedures IHG has in place to
ensure compliance with such rules; and
•
meetings with members of the Board and the Executive Committee,
senior management from functions across the Group, the external
Auditor and other key external advisers.
Additional appointments
During 2023, the Board considered and endorsed the following
additional appointments of Directors:
•
Graham Allan as Chair of the Remuneration Committee
of Associated British Foods PLC.
•
Arthur de Haast as a member of the Audit Committee
of Chalet Hotels Limited.
•
Byron Grote as Interim Chair of Tesco PLC.
•
Jo Harlow as Senior Independent Director of Halma PLC.
•
Elie Maalouf as a member of the World Travel & Tourism Council’s
Executive Committee.
In each case, the Board took into account other appointments, the
time commitment required for each role and the context of the UK
Corporate Governance Code, including institutional investor and
proxy adviser guidelines concerning over-boarding. It was concluded
that the additional appointments should not adversely impact their
performance but should enhance their ability to provide
constructive challenge and strategic guidance.
Ongoing Director training and development
We understand the importance of an ongoing training programme
for Directors to enable them to fully understand the Group’s business
and operations in the context of the rapidly developing environment
in which it operates. The Chair regularly reviews the training and
development needs with each Director and the Board is made aware
of training opportunities.
Board and Committee meetings are regularly used to update
Directors on developments in the environment in which the business
operates and in-depth presentations are provided on key topical
areas. In 2023, these sessions included updates on assurance and
governance matters; perspectives in relation to corporate philanthropy
and community investment; and market updates in relation to
remuneration and pensions.
In addition, the Company Secretary provides regular updates on
regulatory, corporate governance and legal matters, and Directors
are able to meet individually with senior management if necessary.
External evaluation
In line with best practice, each year, the performance and
effectiveness of the Board and its Committees are carefully
reviewed through a formal evaluation process, which is traditionally
facilitated externally every three years. An external evaluation was
last completed in 2019, with internal evaluations completed in 2020,
2021 and 2022 following agreement to defer an external evaluation
to 2023 due to the recent appointment of the Chair in 2022.
In 2023, an external evaluation was undertaken and conducted
by Independent Audit Limited (‘IA’), following a comprehensive
evaluation of several providers. IA has no prior connection with the
Company or any of its Directors, with the exception of conducting
an external review for Hargreaves Lansdown PLC in 2021, a company
on which the Chair has previously served as a director.
An outline of the evaluation process and details of the results of the
review are set out on the following pages.
Governance
104
IHG
| Annual Report and Form 20-F 2023
Board effectiveness evaluation
Appointment
Following a review
of several external
board evaluation
providers, IA was
commissioned
to facilitate the
evaluation of
the Board and
its Committees.
Stage 1
Preparation
Questionnaires for
the Board and four
Committees were
prepared by IA in
discussion with the
Company Secretary
and the Chair and
agreed by each
Committee Chair.
Stage 2
Completion of
questionnaires and
follow – up
interviews
The Board
questionnaires were
completed by all
Board members, the
Company Secretary
and relevant
members of senior
management and
follow-up interviews
with each member
of the Board and
Company Secretary
were conducted.
Stage 3
Review of Board
papers and meeting
observation
A review of Board
papers and the
observation of
meetings of the
Board and of the
Audit, Nomination,
and Responsible
Business Committees
was conducted by IA.
Stage 4
Reporting
IA analysed the
results and complied
a report for the
Board and each
Committee which
was discussed in
draft with the Chair
and Company
Secretary and
presented to the
Board and each
of the Committees
for discussion
and consideration.
IA invited Board
members to follow up
individually if desired.
Stage 5
Strengths:
The results of IA’s external review noted
several strengths:
1)
The Board’s composition is comprised
of a good mix of skills, experience, and
personalities that work well with each other
and management.
2)
New Board members have brought a
high degree of openness and willingness
to engage.
3)
Engagement has been open and
transparent, and Board members are able
to contribute to productive debate in the
decision-making process.
Results of Governance Review
Areas of focus for the year ahead:
1)
Consideration of the ‘Big Trends’:
continued consideration of industry trends
and dynamics, including ever-changing
customer needs and expectations and
competitor actions.
2)
Executive succession planning:
following
both CEO and CFO succession, looking to
the capabilities, skills, diversity and
characteristics needed for the future,
focusing on Executive succession planning
and strengthening the Board’s relationship
with recently promoted senior
management.
3)
Risk, technology & ESG:
given the
dynamic external environment, continued
focus on IHG’s overarching Risk
Management Framework, emerging
technologies and the wider ESG landscape.
Board evaluation process
Governance
105
IHG
| Annual Report and Form 20-F 2023
Board activities
Board Committees
The external evaluation process also assessed the effectiveness
and support provided by and to the Board Committees. Through the
process, it was confirmed that they have the necessary attributes to
support their effective operation and that the Committees are well
integrated into the Board decision-making processes. Each of the
Committees reviewed the findings and agreed the respective
actions with consideration of the overall Board
findings where they
were deemed relevant to the Committee’s work. Further details are
set out in each Committee Report on pages 107, 112, 115 and 125.
Performance evaluation of Directors
In addition to the external Board evaluation process outlined
above, the Chair assessed the individual performance of the
Non-Executive Directors and carried out one-to-one meetings
with each of them, focusing on their contribution to the Board
and Principal Committees and engagement with fellow
Directors, taking into account their relevant skills, knowledge
and experience. Particular points of note were shared with the
individual Directors and overall, the Chair concluded that the
Directors perform their duties independently and effectively
and that they dedicate sufficient time to discharge their
Board responsibilities.
The performance assessment of the Chair was led by the SID.
The evaluation focused on:
•
overall leadership of the Board;
•
the Board’s culture and the Chair’s ability to facilitate
constructive Board relations; and
•
managing the Board in accordance with high standards
of corporate governance.
The CEO evaluation was led by the Chair, who collected
feedback to a series of questions from the Non-Executive
Directors. Key areas of focus included:
•
the Group’s performance and impact of the CEO;
•
the relationship and ability to work collaboratively
and transparently with the Board;
•
delivery of the Group’s growth agenda;
•
regard for community and the environment;
•
building talent and organisational capabilities; and
•
progress in relation to IHG’s 2023 plan and future
strategic priorities.
Board activities
continued
Board effectiveness evaluation
continued
Governance
106
IHG
| Annual Report and Form 20-F 2023
Audit Committee Report
•
the conclusions and recommendations of an external quality
assessment of the Group’s Risk and Assurance function;
•
review of the internal
financial control
framework of owned, leased,
managed lease and managed hotels, including deployment of
software to enhance controls and property-level work
flows; and
•
the Group’s approach to managing on-going compliance risks,
including in relation to hotel operational safety and security,
supply chain, data privacy and ethics and compliance.
Membership and attendance at meetings
Details of the Committee’s membership and attendance at meetings
are set out on page 96. The Chair of the Board, CEO, CFO, Group
Financial Controller, Head of Risk and Assurance, Deputy Company
Secretary and our external Auditor attended all meetings in 2023.
The General Counsel and Company Secretary also normally attends
all meetings and in 2023, attended all but one of the meetings.
Other attendees are invited to meetings as appropriate and the CEO
and all other Directors were invited to Committee meetings where
the approval of
financial reporting was considered and discussed.
The Committee continues to hold private sessions with the internal
and external Auditors without the presence of management to
ensure that a culture of transparency is maintained.
The Committee Chair continues to have recent and relevant
financial experience and all members o
f the Committee are
Independent Non-Executive Directors. In accordance with the Code,
the Board also considers that the Committee as a whole possesses
competence relevant to the Company’s sector, having a range of
financial and commercial experience in the hospitality industry and
the broader commercial environment in which the Group operates.
Further details of the skills and experience of the Committee
members can be found on pages 93 to 95.
Reporting to the Board
Following each Committee meeting, the Committee Chair updates
the Board on key issues discussed. The papers and minutes for each
meeting are circulated to all Board members, who are invited to
request further information if required and to provide any challenge
where necessary.
Effectiveness of the Committee
During the year, the Committee’s effectiveness was reviewed as part
of the external Board evaluation process. The Committee concluded
that it remains effective, focuses on the right issues and provides a
good level of challenge. An area identi
fied
for future focus is further
developing Committee papers to continue to enhance discussions.
Key duties and role of the Committee
Key objectives and summary of responsibilities
The Audit Committee is responsible for ensuring that IHG maintains
a strong control environment. It monitors the integrity of IHG’s
financial reporting, including significant financial reporting
judgements; maintains oversight and reviews our systems of internal
control and risk management; monitors and reviews the effectiveness
and performance of internal and external audit functions; and reviews
the behaviours expected of IHG’s employees through the Code of
Conduct and related policies.
The Committee’s role, responsibilities and authority delegated to it
by the Board are set out in its Terms of Reference (ToR), which are
reviewed annually and approved by the Board.
The ToR are available at
ihgplc.com/investors
under Corporate governance.
As noted, the Committee focused its attention on reviewing and
obtaining assurance in relation to emerging and evolving risks as
well as the Group Financial Statements and controls. Key areas
of focus over the year have been:
•
the evolution of the Group’s
financial governance programme,
including streamlining processes and automation of controls;
•
internal controls and assurance in connection with the Group’s
HR system transition and Iberostar integration;
Strong governance
and controls, and
the assessment
of evolving risks
remain at the
core of how
IHG operates
responsibly.”
Byron Grote
Chair of the Audit Committee
Highlights:
•
Ongoing review of the Group’s work to streamline and further
automate core financial processes to drive efficiency while
maintaining robust controls.
•
Review of the disclosure of, and assurance over,
financial and
non-financial data, including both climate-related and wider
ESG data, in line with evolving regulatory developments and
external trends.
•
Review of emerging and evolving risks linked to IHG’s growth
strategy, changes in technology and other major initiatives,
and regulatory developments.
•
Review of governance and assurance of systems transitions
in Finance and HR.
•
Overview of the Group’s response to the Financial Reporting
Council (FRC) consultation relating to the UK Corporate
Governance Code.
Governance
107
IHG
| Annual Report and Form 20-F 2023
Audit Committee Report
Internal control and risk management
The Board is responsible for establishing procedures to manage
risk, overseeing the internal control framework and determining
the nature and extent of the principal risks the Company is willing
to take to achieve its long-term objectives. The Committee supports
the Board by reviewing the effectiveness of the Group’s internal
control and risk management systems and assessing emerging and
principal risks and undertook such a review in respect of 2023.
In order to effectively review the internal control and risk
management systems, the Committee:
•
receives regular reports from management, the Risk and Assurance
team and the external Auditor on the effectiveness of the systems
for risk management and internal controls, including
financial,
operational and compliance controls;
•
reviews the process by which risks are identified (including
procedures in place to identify emerging risks and linkage to wider
consideration of strategy and resilience) and assesses the timeliness
and effectiveness of action taken by management, including regular
reports on the Company’s overall risk management and internal
controls systems and principal risks; and
•
receives regular reports relevant to risk management and internal
controls, both financial and non-financial, to ensure that current
and emerging risks are identified and assessed and that there is
an appropriate management response (see pages 42 to 49 for
further detail on our risks and initiatives to manage them).
As part of the Committee’s review of the internal control and risk
management systems, key financial, operational and compliance
controls across the business continue to be monitored and tested
throughout the year. The Committee assesses the approach to
Sarbanes-Oxley Act 2002 (SOX) compliance in accordance with
our US obligations and reviews reports on the progress of the SOX
programme at each meeting. During the year, the Committee
received updates on the delivery of the training programme for
SOX control owners and the longer-term objective of reducing the
overall control count.
During 2023, the Committee considered the activity undertaken by
the Risk and Assurance team to review and refresh risk pro
files and
integrate resilience planning into the prioritisation and capability
building of the Group’s business teams. The Committee also
received updates on:
•
key assurance projects relating to the transition of the Group’s
primary HR system and integration in respect of the
Iberostar alliance;
•
supply chain risks and the strategy for mitigating uncertainties,
noting the work of the Supply Chain Risk Council to drive awareness
of emerging issues among relevant stakeholders and embedding
risk management and internal control approaches in relation to
supply chain; and
•
the Group’s approach to managing hotel operational safety and
security risks, including the impact of conversion hotels and the
development and integration of new business models such as
branded residential and all-inclusive resorts on IHG’s operational
safety and security framework.
Having reviewed the internal controls and risk management systems
throughout the year, the Committee concluded that the Group
continues to have an effective system of risk management and
internal controls, and that there are no material weaknesses in the
control environment.
Tax risks, policies and governance
The Group’s CFO has responsibility for tax and tax policies at Board
level. These policies and procedures are subject to regular review
and update and are approved by the Audit Committee. Procedures
to minimise risk include the preparation of thorough tax risk
assessments for all transactions carrying material tax risk and,
Focus areas and activities
Financial and narrative reporting
During the year, the Committee reviewed and recommended
approval of the interim and annual Financial Statements
(considering the relevant accounting and reporting matters such
as key judgement areas, going concern and viability statements,
the financial reporting impacts o
f commercial litigation and
disputes, exceptional items and impairment reviews) and the
Group’s quarterly trading updates. All members of the Board
are asked to attend these meetings.
As well as receiving input and guidance from the external Auditor
on the areas outlined above, the Committee also received regular
reports from the Chair of the Disclosure Committee, which liaised
closely with other external advisers of the Group to ensure that
disclosure and regulatory requirements were being appropriately
considered and met. Copies of the Disclosure Committee’s minutes
were also provided to the Committee.
The Committee received early drafts of the Annual Report and
Form 20-F 2023 (Annual Report), and when providing comments
considered: (i) the process for preparing and verifying the Annual
Report, which included review by the Executive Committee and
input from senior employees in the Company Secretariat, Legal,
Operations, Strategy, Human Resources, Finance, Risk and
Assurance teams; (ii) a report from the Chair of the Disclosure
Committee; and (iii) a checklist prepared by the Annual Report team
confirming compliance with the relevant regulatory requirements.
The Committee also considered management’s analysis of how the
content, taken as a whole, was ‘fair, balanced and understandable’,
and whether it contained the necessary information for shareholders
to assess the Group’s position, performance, business model and
strategy. In order to reach this conclusion, a dedicated project
team worked on the contents of the Annual Report and a detailed
verification process to confirm the accuracy o
f the information
contained within the Annual Report was undertaken by the Financial
Planning and Analysis department. The Committee then considered
both the structure and content of the Annual Report to ensure that
the key messages were effectively and consistently communicated
and that meaningful links between the business model, strategy, KPIs,
principal risks and remuneration were clearly identified throughout
the Annual Report. The Committee also considered the proportionate
and consistent consideration of climate matters across the Annual
Report, including the Task Force on Climate-Related Financial
Disclosures (TCFD) statement and an asset-by-asset review for
impairment purposes.
Alongside this review, the Committee considered guidance provided
by the FRC throughout the year, including in relation to the concept
of an Audit and Assurance Policy within the proposed changes to
the UK Corporate Governance Code. The Company’s consultation
response to the FRC on the proposal was reviewed by the Committee.
The Committee also reviewed trends in ESG reporting requirements
and considered governance and assurance implications.
Following a review of the contents of the Annual Report alongside
the aforementioned criteria, the Committee reported its
recommendation to approve the Annual Report to the Board.
Significant matters in the 2023 Financial Statements
Throughout 2023, the Committee provided ongoing challenge
to management’s accounting, reporting and internal controls.
The Committee discussed with management and the external
Auditor the significant areas o
f complexity, management judgement
and estimation in relation to the Financial Statements, and the
impact of any accounting developments or legislative changes.
The Committee has satisfied itsel
f that management had adequately
identified and considered all potentially significant accounting and
disclosure matters. The key items discussed are outlined on pages
110 and 111.
Audit Committee Report
continued
Governance
108
IHG
| Annual Report and Form 20-F 2023
where appropriate, material tax uncertainties are discussed and
resolved with tax authorities in advance.
Our Approach to Tax document is available at
ihgplc.com/en/responsible-business/policies-and-position-statements
Principal risk areas
During the year, the Committee discussed and assessed the range
and aggregate impact of dynamic risks that the Group faced in the
context of the ongoing volatility in the geopolitical and macroeconomic
environment. Alongside the review of the overall portfolio of risks,
the Committee requested and received updates on the following
specific areas:
•
emerging risks in relation to the use and management of
Generative Artificial Intelligence (Gen AI) and the management by
the business of both upside and downside risks relating to Gen AI;
•
physical and chronic climate risks to the hospitality sector; and
•
the approach to cross-border data transfers.
Further details of our principal risks, uncertainties and review
process can be found on pages 42 to 49.
Non-audit services
IHG’s Audit and Non-Audit Services Pre-Approval Policy helps to
ensure that the external Auditor’s independence and objectivity are
not impacted by non-audit services provided by the external Auditor.
The policy is reviewed by the Audit Committee annually.
The policy requires that pre-approval is obtained from the Audit
Committee for all services provided by the external Auditor before
any work can commence, without any de minimis threshold in line
with US SEC requirements and UK ethical standards. The Committee
reviewed the audit and non-audit fees incurred with the external
Auditor and noted that there had been no prohibited services
(as defined by SOX or under UK ethical standards) provided to the
Group during the year. The Committee is prohibited from delegating
non-audit services approval to management and compliance with
the policy is actively managed.
IHG is committed to maintaining non-audit fees at a low level and
the Committee remains cognisant of the guidelines of investor
advisory bodies on non-audit fees. During 2023, 10% of services
provided to the Group were non-audit services (2022: 11%), primarily
related to System and Organisation Controls (SOC) Reports. These
services are typically performed by external auditors as knowledge
of the Company or Group is necessary for the provision of the
non-audit services. Details of the fees paid to PwC for non-audit and
statutory audit work during 2023 can be found on page 178. The
Committee is satisfied that the Company was compliant during the
year with the FRC’s Ethical and Auditing Standards in respect of the
scope and maximum permitted level of fees incurred for non-audit
services provided by PwC. Where non-audit work is performed by
PwC, both the Company and PwC ensure adherence to robust
processes to prevent the objectivity and independence of the
external Auditor being compromised.
Risk and assurance – Internal Audit
The Committee discusses and approves the Internal Audit annual
plan, which aims to provide objective and insightful assurance that
appropriate controls are in place to support our strategy and growth
ambitions. Progress against the Internal Audit plan is reported at
each meeting and, during 2023, the Committee reviewed several
areas set out in the plan, including programme governance and
oversight of expenditure and bene
fit delivery.
The 2024 plan presented to the Committee in November 2023
maintains focus on the integrity of the risk management and internal
control system, providing independent assurance to complement
management’s own activities where these are relatively mature,
well governed and/or regulated. Areas of focus in 2024 include
management of interdependencies between major technology
programmes, control arrangements for data and information usage,
storage and transfer and management’s preparedness for fast-
evolving legislation.
Following consideration, the Committee confirmed its agreement
to the 2024 Internal Audit plan, including the assurance objectives
identified. The Committee reviews the results o
f completed audits
and observations from other ongoing assurance and control
improvement support, as well as actions taken by management
in response to Internal Audit’s work.
The functional effectiveness of Internal Audit is assessed on an
ongoing basis and reported to the Committee throughout the
year. During 2023, this involved an independent external quality
assessment of the function. The Committee reviewed and
considered the conclusions of the external assessment, with
particular focus on the future methodology and capabilities
required for the function, including the use of external expertise.
Governance and compliance
The Committee is also responsible for reviewing the Group’s Code
of Conduct and related policies.
Looking forward
During 2024, the Committee will remain focused on the Group’s
internal control and risk management environment and approach to
financial reporting. In doing so, the Committee will take into account
developments in reporting responsibilities, including those relating
to changes in the UK Corporate Governance Code and other
regulatory requirements.
External Auditor – reappointment of PwC
The Committee reviewed and assessed PwC’s performance during
the year and considered its reappointment as the Group’s external
Auditor. PwC was originally appointed as the Group’s Auditor in
March 2021, following a tender process in 2019. Giles Hannam
remained as PwC’s lead audit partner in 2023.
The Committee regularly reviewed and assessed the progress of the
audit throughout the year and also undertook a detailed effectiveness
assessment through two surveys; one for Committee members and
the other for senior management.
The surveys focused on the following areas:
•
the quality and service of the audit team;
•
audit planning and execution;
•
communication with the Committee and senior management;
•
contribution to process controls and financial reporting; and
•
the independence and objectivity of the Auditors.
The responses to the surveys were positive and noted in particular
that the PwC audit team had developed a clear audit plan that was
effectively communicated, demonstrated strong technical expertise
and provided constructive challenge.
During 2023, the Committee also agreed with PwC that reporting
would be provided against a series of audit quality indicators to
support the Committee’s assessment of audit quality. This reporting
was provided for the
first time in February 2024.
Accordingly, the Committee concluded that the PwC audit team
was providing the required quality in its provision of audit services
and maintained appropriate levels of independence and objectivity.
The Committee therefore recommended the continued
appointment of PwC to the Board.
The Group has complied with the requirements of the Statutory
Audit Services for Large Companies Market Investigation (Mandatory
Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014, which relates to the frequency and
governance of tenders for the appointment of the external Auditor
and the setting of a policy on the provision of non-audit services.
Governance
109
IHG
| Annual Report and Form 20-F 2023
Audit Committee Report
Significant matters in the 2023 Financial Statements
Area for focus
Issue/Role of the Committee
Conclusions/Actions taken
Accounting for
IHG One Rewards
Accounting for IHG One Rewards requires
significant use o
f estimation techniques
and represents a material deferred revenue
balance. The Committee reviews the
controls, judgements and estimates related
to accounting for IHG One Rewards.
The Committee reviewed the deferred revenue balance, the
valuation approach, the results of the external actuarial review and
procedures completed to determine the breakage assumption for
outstanding IHG One Rewards points.
The Committee reviewed management’s papers supporting the
removal of an adjustment made in recent years that placed more
emphasis on pre-Covid-19 redemption behaviours.
The Committee concluded that the deferred revenue balance
is appropriately stated.
Accounting for
the System Fund
Given the unique nature of the System Fund,
the Committee reviews the controls and
processes related to System Fund accounting.
The Committee met with senior finance management to review
and evaluate the risk areas associated with the System Fund.
The Committee reviewed a paper from management summarising
the principles determining the allocation of revenues and expenses
to the System Fund and the related governance and internal control
environment. The Committee concluded that the accounting
treatment of the System Fund and related disclosures are appropriate.
Impairment testing
Judgement is applied in assessing whether
triggering events for impairment testing
of assets or cash-generating units have
occurred. The Committee scrutinises the
methodologies applied and the potential
for asset impairment or impairment reversal.
The Committee reviewed management reports outlining the
approach taken on impairment testing and key assumptions and
sensitivities supporting the conclusion on the various asset
categories. The Committee examined in detail whether triggering
events for impairment testing had occurred. The Committee agreed
with the determinations reached on impairment.
Litigation and
contingencies
From time to time, the Group is subject
to legal proceedings with the ultimate
outcome of each being subject to many
uncertainties. The Committee reviews and
evaluates the need for provisioning and
considers the adequacy of the disclosure.
At each meeting during the year, the Committee considered reports
detailing all material litigation matters including commercial
disputes. The Committee discussed and agreed any provisioning
requirements based on underlying factors. Disclosures were
assessed, with particular emphasis on the completeness of
uncertainties disclosed.
Exceptional items
The Group exercises judgement in presenting
exceptional items. The Committee reviews
and challenges the classification o
f items
as exceptional based on their size, nature
or incidence, with consideration given to
consistency of treatment with prior years
and between gains and losses.
The Committee reviewed papers by management and considered
the consistency of treatment and nature of items classi
fied as
exceptional. The Committee reviewed and challenged the significance,
timing and nature of the exceptional items (see pages 179 to 180).
The Committee also considered the sufficiency of disclosure and
whether such disclosure explained the rationale for why each item
is considered to be exceptional. The Committee concluded that the
disclosures and the treatment of the items shown as exceptional
are appropriate.
Going concern
and viability
The Committee reviews management’s
financial modelling to conclude on the
appropriateness of the going concern
and viability statement.
The Committee reviewed and challenged the scenarios considered
by management, the detailed cash flow
forecasts and the mitigating
actions available to management considered in its going concern
assessment to June 2025 and the three-year viability assessment
and concluded these were appropriate. The Committee also reviewed
and challenged the reverse stress test assumptions to confirm the
viability of the Group. The Committee reviewed going concern
disclosures (page 161) and the viability statement (pages 50 and 51)
and is satisfied these are appropriate.
Climate risk
In preparing the Group Financial Statements,
the potential impacts of climate change
have been considered.
The Committee reviewed an analysis from management
summarising the approach taken to consider climate risk in the
Group Financial Statements and concluded that the disclosures
were appropriate. The Committee agreed that the disclosures made
in respect of the TCFD were appropriate. The Committee satis
fied
itself that the approach across the Annual Report has been
proportionate and consistent.
Audit Committee Report
continued
Governance
110
IHG
| Annual Report and Form 20-F 2023
Area for focus
Issue/Role of the Committee
Conclusions/Actions taken
UK deferred
tax asset
Given the size of the Group’s UK deferred
tax asset ($113m), the Committee reviewed
and challenged the key assumptions
determining the recoverability of the
deferred tax asset and whether this should
be disclosed as a significant estimate.
The Committee confirmed the estimates used to support the recovery
of the UK deferred tax asset were consistent with those used in the
impairment and going concern and viability assessments. Given the
recovery to levels of pro
fitability assumed in these estimates, the
Committee concluded that it agreed with the recognition of the
deferred tax asset, that this was not a signi
ficant estimate, as a
material change in estimate is not expected in the next 12 months,
and that the disclosures are appropriate.
Financial Statement
disclosures
The Committee considers the
appropriateness of disclosures in the Group
Financial Statements.
The Committee reviewed disclosures required on adoption of IFRS
17 ‘Insurance Contracts’. The Committee also reviewed management’s
proposals to improve the clarity and succinctness of the Group
Financial Statements by omitting immaterial disclosures and
combining disclosures around System Fund and reimbursable
expenses in certain areas of the Financial Statements. The Committee
concluded that the disclosures to the Group Financial Statements
are appropriate and proportional.
Governance
111
IHG
| Annual Report and Form 20-F 2023
Audit Committee Report
Responsible Business Committee Report
Key duties and role of the Committee
Key objectives and summary of responsibilities
The Committee reviews and advises the Board on the Group’s
responsible business objectives and strategy, including its impact
on the environment and climate change; social, community and
human rights issues; its approach to sustainable development and
responsible procurement; and stakeholder engagement in relation
to the Group’s approach to responsible business. The Committee
is also responsible for assessing the Board’s engagement with the
workforce and the Group’s DE&I agenda.
The Committee’s role, responsibilities and authority delegated to
it by the Board are set out in its Terms of Reference (ToR), which are
reviewed annually and approved by the Board.
The ToR are available at
ihgplc.com/investors
under Corporate governance.
Membership and attendance at meetings
The Committee’s membership and attendance at meetings are
set out on page 96. The Chair of the Board, CEO, Executive Vice
President, Global Corporate Affairs, Chief Sustainability O
fficer
and Deputy Company Secretary attended all meetings held during
the year. The General Counsel and Company Secretary attended
all but one meeting.
Reporting to the Board
The Committee Chair updates the Board on all key issues raised at
Committee meetings. Papers and minutes for each meeting are also
circulated to all Board members, who are invited to request further
information where necessary.
Effectiveness of the Committee
In 2023, the Committee’s effectiveness was reviewed as part of the
external Board evaluation process. The Committee concluded that
it remains effective and meets its responsibilities well. Focus areas
identified include continued assessment o
f the risks relating to
climate change and further engagement with the supply chain.
Focus areas and activities
Responsible business commitments
The Committee’s key responsibilities and focus areas over the year
have been:
•
assessing the 2023 strategic priorities that support the Group’s
2030 responsible business commitments and monitoring the
progress against them;
•
reviewing the status of the Group’s DE&I targets and the work
undertaken by management to drive achievement of the targets,
including progress in relation to increasing gender and ethnic
diversity within management at both the corporate and hotel level;
•
monitoring the progress of climate risk reporting and the Group’s
approach to TCFD reporting disclosures for 2023. Further information
on TCFD is included on pages 52 to 59;
•
assessing the progress of, and challenges to, the decarbonisation
strategy and workstreams, with particular focus on the integration
of ECMs into brand standards for operating hotels, developing
new-build hotels that operate with very low carbon emissions and
future options for a renewable energy programme, as well as the
costs and impact on owners in relation to each;
•
working with the Remuneration Committee to consider current
and future ESG metrics included in the LTIP for Executive Directors
and senior leaders, involving measures relating to people and
the environment;
•
reviewing the Group’s human rights programme and Modern
Slavery Statement, with particular focus on identifying and
addressing human rights risks specific to the hospitality industry;
Graham Allan
Chair of the Responsible
Business Committee
Highlights
•
Worked together with the Remuneration Committee with
respect to the inclusion of ESG metrics in the LTIP.
•
Review of the Group’s strategy, workstreams and metrics in
relation to each of the Group’s Journey to Tomorrow pillars.
•
Review and approval of Group policies regarding key ESG
areas, including Communities, Environment, Responsible
Procurement and Human Rights.
•
Expanded engagement with the Group’s workforce through
the Voice of the Employee programme.
We remain
focused on
ensuring IHG’s
strategy on people,
communities and
planet underpins
our long-term
performance.”
Governance
112
IHG
| Annual Report and Form 20-F 2023
Further information on our 10-year responsible business plan can
be found on pages 28 to 35.
Looking forward
During 2024, the Committee will continue to focus on the progress
of the Group’s 2030 responsible business commitments and the
strategic priorities that support them. The Committee will also focus
on developments in the regulatory landscape around ESG matters,
particularly in relation to climate and environmental reporting.
Our Responsible Business Report is available at
ihgplc.com/responsible-business
•
monitoring the Group’s responsible procurement programme:
the Committee considered the progress of key workstreams of the
Group’s responsible procurement strategy, including its alignment
with the Group’s responsible business commitments and with
particular focus on supplier diversity, including how green and
diverse suppliers are defined and certified; and
•
assessing the Group’s approach to meeting its commitment to
improve the lives of people in our communities around the world
and strategic collaboration with expert charities to assist those
in greatest need.
2023 engagement
Throughout 2023, Duriya, with the participation of several other
NEDs and Chair Deanna Oppenheimer, hosted fi
fteen employee
interface meetings to engage with a cross-section of employees
and received detailed feedback. These feedback sessions, which
were a mix of in person and virtual meetings/forums, included
leader groups within the US and UK hotels, reservations and
corporate populations, and ERGs across the UK, US, India, China
and various EMEAA countries as well as colleagues who have
recently joined the organisation.
Discussion topics and themes in relation to the feedback received
from employees included: workplace culture; leader
communications; strategy, prioritisation and collaboration;
talent attraction; onboarding and retention; personal and career
development; technology and systems; and agile ways of working
and decision-making.
Additional engagement and activities undertaken by Duriya,
the Chair of the Board, and other NEDs during the year included:
•
monitoring and reviewing the content and feedback from global
‘all employee’ CEO calls;
•
reviewing employee engagement survey results;
•
engaging with the Global HR Leadership team to receive
broader cultural insights; and
•
engaging directly with senior leaders at Board and Committee
meetings, the Board strategy event and the Group’s senior
leaders’ meeting.
Insights and learnings
Duriya provided regular feedback to the Responsible Business
Committee and the Board throughout the year, with key Board
discussions taking place around the insights as well as action
planning arising from employee engagement survey results.
Plans for 2024
Duriya will remain as the Board member with responsibility for
workforce engagement in 2024, assisted by additional NEDs.
A schedule of discussions and feedback sessions has been
arranged for 2024 and will continue to encompass a wide group
of employees and leaders from across all regions, including ERGs,
Lean In Circles and new starters. The discussion topics will be
tailored to specifically
focus on those areas that support the
strategy. Additionally, the Board will continue to keep the
functioning of the Voice of the Employee programme under
review to ensure it meets best practice and complies with
regulatory developments.
As IHG’s designated Non-Executive Director (NED) with
responsibility for workforce engagement (Voice of the
Employee), Duriya Farooqui, supported by the Group’s
Global HR team, held a series of employee interface sessions
throughout the year to engage directly with members of
IHG’s corporate and hotel workforces, with the aim of
sharing feedback with the Board for consideration in its
decision-making.
Role and responsibilities
The role and responsibilities of the designated Voice of the
Employee NED are to:
•
support the design of the structure and content of Board
discussions on employee engagement and culture;
•
evaluate employee engagement approaches and their
effectiveness;
•
ensure that employee feedback and interests are factored
into the Board’s decisions and KPI setting;
•
ensure that the Board, through the Executive Committee,
has effective methods of receiving feedback from employees
and communicating Board and executive decisions and
priorities throughout the organisation;
•
ensure all significant business and budget proposals include
a management assessment of the impact on employees; and
•
ensure executives share employee feedback openly,
transparently and in a balanced way, including reviewing
employee engagement surveys and other employee reports,
including whistleblowing.
Voice of the Employee
Governance
113
IHG
| Annual Report and Form 20-F 2023
Responsible Business Committee Report
Key duties and role of the Committee
Key objectives and summary of responsibilities
The Committee reviews the composition of the Board and its
Principal Committees, evaluating the balance of skills, experience,
independence, knowledge and diversity requirements before
making appropriate recommendations to the Board as to any
changes. It also ensures plans are in place for orderly succession
both for Directors and other senior executives, and is responsible
for reviewing the Group’s senior leadership needs.
The Committee’s role, responsibilities and authority delegated to it
by the Board, including processes in relation to appointments, are
set out in its Terms of Reference (ToR), which are reviewed annually
and approved by the Board. The ToR state that the Committee is
responsible for considering potential candidates for appointment
to the Board based on merit, cognitive and personal strengths with
due regard for the bene
fits o
f diversity, including gender and social,
ethnic and geographic backgrounds.
The ToR are available at
ihgplc.com/investors
under Corporate governance.
The Committee’s key responsibilities and focus areas during the year
have been:
•
assessing the composition of the Board and the Principal
Committees and succession planning, including consideration of
gender balance and ethnic and geographical diversity, in accordance
with the ToR and consistent with the Group’s Global Diversity,
Equity, Inclusion and Equal Opportunities Policy (DE&I Policy);
•
engaging with external search consultancies and making
recommendations on appointments to the Board;
•
overseeing the external performance evaluation of the Board and
its Principal Committees as well as the evaluation of individual
Non-Executive Directors; and
•
monitoring the Executive Committee and senior leadership talent
and succession planning.
Membership and attendance at meetings
The Committee’s membership and attendance at meetings
are available on page 96. All members of the Committee are
Non-Executive Directors. When the Committee considers matters
relating to the Chair of the Nomination Committee position, the
Senior Independent Non-Executive Director (SID) acts as
Committee Chair.
Deanna Oppenheimer
Chair of the
Nomination Committee
Highlights
•
Successful execution of Board succession planning with the
new appointments of Elie Maalouf as CEO, Angie Risley as
Remuneration Committee Chair Designate and Ron Kalifa as
Non-Executive Director, maintaining an appropriate balance
of skills and enhancing Board diversity.
•
The Board remains well positioned to provide constructive
challenge, strategic guidance and offer appropriate advice to
the Group’s management as it looks to deliver on the Group’s
refreshed strategy.
•
Oversaw the completion of the external Board and
Committee evaluation process.
•
Remained focused on succession planning at the Executive
Committee and senior management level.
Nomination Committee Report
Governance
114
IHG
| Annual Report and Form 20-F 2023
Reporting to the Board
The Committee makes recommendations to the Board for all Board
appointments. Minutes are circulated to and reviewed by Committee
members, and the Committee Chair reports back to the Board on
the activities of the Committee following each meeting.
Effectiveness of the Committee and External Evaluation
During 2023, the Committee was reviewed as part of the external
Board evaluation process. Details of the external evaluation, including
how it was conducted, the nature and extent of the evaluator’s
contact with the Board and the actions arising from the evaluation,
are set out on pages 104 to 106. The Committee concluded that it
remains effective and succeeds at ensuring that the right number
and mix of directors with appropriate core skills are brought onto
the Board. Succession planning at Executive Committee and senior
management level was identified as an area
for continued focus.
Focus areas and activities
Executive Director succession planning
An overview of the CFO succession process, following which
Michael Glover was appointed as CFO, was included in last year’s
Nomination Committee Report on page 113 of the Company’s
Annual Report and Form 20-F 2022.
During 2023, the Committee oversaw the CEO succession process
and the appointment of Elie Maalouf as CEO.
The Committee explored both internal and external candidates for
the CEO role. A desktop review of possible external candidates was
conducted by Spencer Stuart; the Chair also met with members
of the Executive Committee to assess career aspirations and CEO
capabilities. The Committee considered in particular the relative
merits of internal and external candidates.
Following the interview process, including a presentation by
Elie Maalouf to, and discussion with, all Non-Executive Directors,
the Committee concluded that it should recommend to the Board
the appointment of Elie as CEO.
The Committee also oversaw induction plans for both Michael and
Elie in respect of their new roles. Further details of the induction
plans are provided on page 104.
Board and Principal Committee composition
and succession planning
The Committee continued to maintain and review throughout the
year a Board skills matrix and a Board refreshment schedule, which
track the skills, competencies and experiences of the Board members
and provide an overview of the Board’s tenure, gender, ethnicity and
Committee assignment considerations. These helped to inform
future Board appointments and rotations.
Using this resource, and in anticipation of Jo Harlow reaching a
nine-year term during the year, the Committee led the process to
recruit a new Remuneration Committee Chair.
In addition, the Committee determined that the Board would benefit
from recent CEO experience and further expertise in the technology
and digital sector. Accordingly, the Committee initiated a search for
an additional Non-Executive Director to meet this profile.
Spencer Stuart was engaged in connection with the Remuneration
Committee Chair search (as well as the CEO succession) and
Heidrick & Struggles was engaged in connection with the other
Non-Executive Director search. Neither Spencer Stuart nor Heidrick
& Struggles has any other connection with the Company or any
individual Directors.
With regard to both searches, desktop reviews were conducted
to identify suitable candidates for the roles. Shortlisted candidates
met with various members of the Board and management as relevant,
with assessments being made on the appropriate competencies,
functional experience, cultural characteristics and consideration
of candidates’ other commitments in line with the provisions of the
UK Corporate Governance Code.
Following completion of an interview process and reference and
background checks, the Committee recommended to the Board the
appointment of Angie Risley as Non-Executive Director and Chair
Designate of the Remuneration Committee, which was approved
by the Board with effect from 1 September 2023.
Likewise, following similar completion of an interview process and
reference and background checks, the Committee recommended
to the Board the appointment of Ron Kalifa as Non-Executive
Director, which was approved by the Board with effect from
1 January 2024.
Executive Committee talent and succession
Throughout the year, the Committee also received updates on
talent and succession planning at Executive Committee and senior
leadership levels, noting in particular progress against
DE&I objectives.
Information on the gender and ethnicity balance of the Board and
the Executive Committee is included on page 99. Information on the
gender and ethnicity balance of senior management is included on
pages 30 and 31.
The Group’s DE&I Policy applies in respect of the Board and its
Principal Committees. The DE&I Policy aims to create a diverse
culture and support diversity and inclusion. When assessing and
considering succession planning at Board and Executive Committee
levels, the Committee takes diversity considerations into account
consistent with the DE&I Policy. The DE&I Policy aligns to the
Group’s responsible business commitments and a description of
progress against these commitments is included in the 2023 DE&I
Progress Report, available at
ihgplc.com/Responsible Business
under Reporting.
Looking forward
In 2024, the Committee will continue to ensure that we have
appropriate plans in place for orderly succession of appointments to
the Board and to senior management, so that an appropriate balance
of skills, experience, knowledge and diversity is maintained.
Governance
115
IHG
| Annual Report and Form 20-F 2023
Nomination Committee Report
Directors’ Remuneration Report
Remuneration Committee Chair’s statement
On behalf of the Board, I am delighted to represent the
Remuneration Committee (the Committee) as Chair and present
my first Directors’ Remuneration Report (DRR)
for the year ended
31 December 2023. I joined the IHG Board as a Non-Executive
Director in September 2023, and assumed the role of Chair of the
Committee on 1 January 2024. I would like to thank my predecessor,
Jo Harlow, who has successfully overseen the Committee through
periods of signi
ficant change and increasing
focus on the Executive
Remuneration landscape, for her leadership and valuable years of
service in the role, and for the robust and thorough handover which
ensured a seamless transition. I would also like to thank all of the
shareholders I have met so far for their time, insight and support.
2023 business performance context
Guest demand grew again during 2023 as appetite for travel
continued to improve. We passed the milestone of 6,300 open
hotels in delivering net system size growth of 3.8% for the year.
Operating profit
from reportable segments, at $1,019 million,
was up 23% on 2022. Strong growth in revenue combined with our
disciplined approach to cost management resulted in a 3.4%pts
improvement in fee margin to 59.3%. From a shareholder perspective,
we have seen continued growth in shareholder value with the Board
proposing a final dividend o
f 104.0¢, representing a growth of 10%
on 2022, and resulting in a total dividend for the year of 152.3¢.
Additionally, as a result of strong cash management, we completed
a share buyback programme to return $750 million of surplus capital
in December 2023, and a further $800 million programme has been
approved for 2024.
Overview of 2023 remuneration outcomes
The key highlights of Executive Director incentive plan awards for
2023 are presented below, and the awards reflect our strong
business performance during 2023:
•
the achievement on Annual Performance Plan (APP) metrics
(operating profit
from reportable segments, room openings and
room signings) resulted in awards for Executive Directors of 81.8%
of maximum re
flecting the strong per
formance of the business
in 2023;
•
the outcome of the 2021/23 Long Term Incentive Plan (LTIP) award
cycle, covering the three years from 1 January 2021 to 31 December
2023, was 57.8% of maximum. The business continued to deliver
exceptional absolute cash flow management and strong growth
in relative net system size growth (NSSG). For the first time since
the 2018/20 cycle, the business also achieved above threshold
performance over three years against our peers in relative Total
Shareholder Return (TSR);
•
the total average of short- and long-term incentive plan awards
for the respective period ending 2023 was therefore 67.9% of
maximum for the Chief Executive Officer (CEO), Elie Maalouf; and
•
the Committee reviewed the performance outcomes in line with
the Directors’ Remuneration Policy (DR Policy) and its framework for
assessing discretion and found no rationale for applying discretion
to the formulaic outcomes of the 2023 APP and 2021/23 LTIP.
Directors’ Remuneration Policy – shareholder engagement
We received shareholder approval for our updated DR Policy at
the 5 May 2023 AGM. The full DR Policy can be found in our 2023
Notice of AGM and is also summarised on page 121 of this report.
Ahead of the vote, we directly engaged with owners of around 60%
of the share capital of the Company and we were pleased that the
majority of our shareholders supported our new policy. The votes
of 74.85% in favour of the DR Policy and 76.94% in favour of the
DRR both represented slightly less than 80% support and, as such,
Jo Harlow and I met a range of shareholders within a six-month
window after the AGM vote, as required by the Corporate Governance
Code. We met with holders of more than 25% of share capital,
including both those who voted for and against the DR Policy and
DRR, as well as Institutional Shareholder Services (ISS) and the
Investment Association. The main points of discussion were:
•
introducing myself as the incoming Remuneration Committee
Chair with effect from 1 January 2024;
•
following up on comments and concerns on the 2022 DRR and the
2023 DR Policy; and
•
the new CEO pay arrangements, as set out in the notice published
following the appointment of Elie Maalouf.
In these meetings, we heard strong levels of support for the 2023 DR
Policy and an understanding of the competitive executive pay context,
consistent with what we had heard in our pre-AGM meetings. For those
shareholders who had voted against the DRR and DR Policy, the
rationale commonly related to internal voting guidelines that formed
red lines for speci
fic DR Policy
features, which were not related to the
I am delighted
to join the Board
and present my
first Directors’
Remuneration
Report as Chair of
the Remuneration
Committee.”
Angie Risley
Chair of the Remuneration
Committee
Table of contents
116
Directors’ Remuneration Report
(subject to advisory vote at the 2024 AGM)
•
116 Remuneration Committee Chair’s statement
•
119 At a glance
•
121 Our approach to remuneration
•
128 Annual Report on Directors’ Remuneration
Governance
116
IHG
| Annual Report and Form 20-F 2023
increase in LTIP quantum for Executive Directors, and which differed
by shareholder. The increase in LTIP quantum was thoroughly
discussed and explained in the consultations leading up to the
approval of the 2023 DR Policy at the 2023 AGM and in our follow up
discussions, and was well understood and supported by shareholders,
based on the transparent benchmarking of the hotel industry.
In the context of this feedback, and the overall level of support for
the DR Policy (at almost 75%), the Committee concluded that the
DR Policy changes reflected the supportive views o
f a signi
ficant
majority of shareholders, who continue to agree that the commercial
rationale for the DR Policy changes is critical to the retention and
development of global talent in order to drive the long-term success
of the business. Feedback on votes against the DRR indicated that
these related either to the use of discretion on the LTIP 2020/22
cash flow outcome or to other shareholder-specific concerns.
The Committee considers that the 76.94% voting level demonstrated
strong support for their view that the outcome re
flected the
exceptional performance of the Executive Directors in managing
cash flow during the pandemic.
Having met with more shareholders in January 2024, their support
of IHG’s continuous need to improve the competitiveness of
Executive Director pay was evident. The Board is of the view that
further changes to Executive Director pay will need to be considered
in order to help protect our Executive Director retention and talent
pipeline, which are key for successful future business growth.
The approved DR Policy is available on IHG’s website at
ihgplc.com/investors
under Corporate governance.
Board changes
The business criticality of attracting and retaining high performing
Executive Directors and their succession pipeline has been highlighted
in the departures of the Chief Financial Officer & Group Head of
Strategy and the Group Chief Executive Officer during 2023. It is
vital to IHG’s continued growth that the quality of talent existing
in our current Executive Director team is reflected in our internal
and external candidates for succession. The vast majority of our
competitors are based in the US, therefore the corresponding talent
market is US-based. There remains a significant difference between
our CEO pay level and that of our US competitors, as well as differences
in the structure and mix of incentives, and the Committee will remain
focused and will continue to engage with shareholders going forward
on how this can be addressed in the context of retaining existing
talent and developing and retaining successor talent.
As announced by the Company on 5 May 2023 and the s430(2B)
of the Companies Act 2006 declaration released on 28 June 2023,
Keith Barr stepped down from the role of CEO, and from the Board,
on 30 June 2023. The Committee exercised its discretion to treat
Keith Barr as a ‘good leaver’, in accordance with the relevant
provisions of applicable incentive and share plan rules. Elie Maalouf
succeeded Keith Barr as CEO with effect from 1 July 2023. Elie was
already a member of IHG’s Board and had been leading IHG’s
Americas business as regional CEO for eight years.
Historically, our succession strategy has generally been to grow
executive level successors within the business, particularly in the US.
Whilst we remain focused on maintaining our ability to secure a strong
executive level internal succession pipeline, this has become more
challenging in recent years as those potential successors move to
positions outside IHG offering more attractive packages at their level
and above, both in terms of structure (for example, restricted stock
units) and quantum. The ability to attract Elie Maalouf into the role
of CEO has enabled us to secure a leader with signi
ficant US market
experience and who continues to maintain key government and
industry relationships in the US, as well as having an in-depth global
knowledge of IHG. We are committed to ensuring that there remains
a robust succession plan in place at executive level.
We shared remuneration details for Elie Maalouf upon his
appointment in a voluntary published statement in July 2023,
as well as in discussions with shareholders in October 2023.
In our AGM follow-up meetings, strong support was expressed by
shareholders regarding the way in which succession planning had
been conducted, as well as for the pay arrangements for Elie, with
recognition of the competitive challenges we face operating across
UK and US markets, where pay structures vary substantially.
Elie’s annual base salary of £990,000 represents a 7% increase
on that of his predecessor; the outgoing CEO Keith Barr would
have received an estimated 4% increase to his salary in April 2024,
reducing the difference to 2.9%. Furthermore, Elie will not be subject
to a salary review until April 2025. We estimate that Elie’s full year
CEO single total figure o
f remuneration will not exceed that of Keith
Barr’s until 2025. Elie’s remuneration remains proportionate in the
context of both the international hotel peer company and FTSE 100,
and follows our strategy of growing successor talent in-house.
The Board is fully supportive of the salary positioning in this context.
External US recruitment would have involved a more significant pay
increase and an externally recruited CEO, who would have not yet
been tested in the IHG environment, would have represented a
greater risk with less proven value. Full details of the remuneration
arrangements for Elie Maalouf’s changes are in line with the approved
DR Policy and can be found on page 126.
As reported in the 2022 Directors’ Remuneration Report,
Paul Edgecliffe-Johnson stepped down from the role of Chief
Financial Officer & Group Head of Strategy, and from the Board,
and left IHG on 19 March 2023. Michael Glover succeeded Paul
as Chief Financial Officer (CFO), e
ffective 20 March 2023. We were
delighted to be able to appoint someone with Michael’s expertise
and experience. He has held several roles in his 18 years at IHG,
including CFO of IHG’s China region, Group Financial Controller, and
his most recent role as CFO Americas with group-wide responsibility
for commercial
finance operations.
Jill McDonald and Ian Dyson both stepped down from the Board
as Non-Executive Directors on 28 February 2023. Subsequently,
Graham Allan was appointed Chair of the Responsible Business
Committee and Byron Grote was appointed Chair of the Audit
Committee; both appointments took effect on 1 March 2023. I was
appointed to the Board with effect from 1 September 2023, with
membership of the Remuneration and Responsible Business
Committees from that date, and assumed the Remuneration
Committee Chair role on 1 January 2024. Sir Ron Kalifa joined the
Board, with effect from 1 January 2024, becoming a member of the
Remuneration and Audit Committees. The remuneration arrangements
in respect of all changes were in line with the approved DR Policy
and are covered on pages 126 and 127.
Wider workforce remuneration and employee engagement
The Committee is extremely mindful of ongoing in
flationary pressures
across many of our markets and its impact on the
financial and
emotional wellbeing of our employees. In 2023, salary increases for
the UK and US corporate populations were above that for the CEO in
role at the time. The overall average budget for 2024 increases is 4%
for our global corporate workforce, with total budgets in the UK and
the US being 4.2% and 3.6% respectively. The CEO is not eligible to
receive a merit increase for 2024 following his appointment in July
2023, as explained above. We have also made an additional 15%
available to the budgeted amount for the personal performance
element of our 2023 Annual Performance Plan to increase bonus
amounts for our strongest performers.
For the UK leased hotel estate, in agreement with the owner, budgeted
2023 salary increases ranged from 5% to 8%, with higher increases
applicable for frontline employees, and one-off payments made to
employees in 2023 for those who had worked for at least the
final
three months of 2022. Budgeted 2024 salary increases range from
3% to 13% with higher increases applicable for frontline employees.
Governance
117
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
The Real Living Wage will be applied for 12 months from April 2024,
as a minimum for all staff, in line with the Real Living Wage Foundation
level, and zero-hour contracts are not utilised in the UK leased estate.
In 2023, we also introduced a salary sacrifice electric car scheme
for UK corporate colleagues, enhanced maternity and paternity
pay for our UK managed hotels, and partnered with Busy Bees to
provide both our UK corporate colleagues and our UK managed
hotels a 20% discount on childcare fees. Further details of our
approach to remuneration across the wider workforce, in general
and throughout the year, are outlined on pages 123 to 124.
We were pleased to see overall employee engagement scores
remain resilient at 87%, exceeding external benchmarks by 10%.
Perceptions of pay also remained strong, exceeding external
benchmarks across our hotel, reservations and general manager
populations (see page 124). It is also pleasing to see that we have
reduced our Gender Pay gap in the UK by 16% since 2017. I look
forward to participating in some employee engagement sessions
during 2024, as noted on page 127, and hearing views about
remuneration more generally.
Implementation of Directors’ Remuneration Policy in 2024
As covered in more detail on pages 138 to 140:
•
With regards to salary increases for Executive Directors, as
mentioned above, the CEO will not receive an increase in 2024;
the CFO will receive an increase in line with that of the
global corporate workforce following an assessment of
2023 performance.
•
The non-financial measures
for the 2024 Annual Performance Plan
will remain as room openings and room signings, aligned to our
key strategic objectives for our future growth priorities, and the
financial measure will remain as operating profit
from reportable
segments, as in 2023.
•
LTIP 2024/26 cycle measures will remain as relative TSR, relative
net system size growth, absolute cash flow, adjusted earnings per
share and ESG. Retaining the same balance of measures for the
2024/26 cycle maintains an overall business performance focus.
–
The TSR comparator group has been expanded from 8 to 15
global hotel companies. Details of the new TSR comparator
group can be found on pages 138 and 140.
–
New ESG metrics have been implemented, with environmental
metrics based on Energy Conservation Measures (ECMs) and
hotels that operate at low/zero carbon, as key areas in
management control that support delivery of our carbon and
energy goals. New People measures build on our 2023/25 LTIP
representation targets. The new measures focus on quantitative
targets in relation to driving greater inclusion and growing our
next generation of hotel general managers from our talent
pipelines. The Committee considers this innovative approach to
People measures to be relevant and appropriate for the Company
and fully aligned to our priorities in this area. See pages 139 and
140 for more details.
•
Retirement benefits
for incumbent UK Executive Directors will
continue to align with the maximum company contribution available
to all other participants in the UK Pension plan.
About this report
As always, we strive to make this report as easy to read as possible.
Following this statement, there is a reminder of the approved DR
Policy applicable in 2023 and its alignment with the UK Corporate
Governance Code principles. There is an ‘At a glance’ section on
pages 119 to 120 providing an illustration of 2023 remuneration
outcomes and, over the following pages, there is a summary of how
executive remuneration aligns to Company strategy; a summary of
remuneration across the wider workforce; and, on pages 125 to 127,
further background on the Remuneration Committee.
This Directors’ Remuneration Report (pages 116 to 140) will be put
to an advisory vote by shareholders at the May 2024 Annual
General Meeting.
Angie Risley
Chair of the Remuneration Committee
19 February 2024
Committee members
Position
Member since
Meetings
attended
Angie Risley
Remuneration Committee Chair (effective 1 January 2024)
1 September 2023
2/2
Jo Harlow
Remuneration Committee Chair (1 October 2017 to 31 December 2023)
1 September 2014
6/6
Deanna Oppenheimer
Chair of the Board
1 January 2023
6/6
Graham Allan
a
Senior Independent Non-Executive Director
1 September 2020 to 1 March 2023
3/3
Daniela Barone Soares
Non-Executive Director
1 March 2021
6/6
Ian Dyson
b
Audit Committee Chair (until 28 February 2023)
1 September 2013 to 28 February 2023
2/3
Byron Grote
Audit Committee Chair (effective 1 March 2023)
1 July 2022
6/6
a
Graham Allan stood down from the Remuneration Committee from 1 March 2023 when he became Chair of the Responsible Business Committee.
b
Ian Dyson retired from the Board on 28 February 2023. He did not attend one Remuneration Committee meeting that took place on 27 February 2023, one day prior to his retirement.
Use of Non-GAAP measures: in addition to performance measures directly observable in the Group Financial Statements (IFRS measures),
additional financial measures (described as Non-GAAP) are presented that are used internally by management as key measures to assess
performance. Non-GAAP measures are either not de
fined under IFRS or are adjusted IFRS figures. Further explanation in relation to these
measures can be found on pages 84 to 88 and reconciliations to IFRS
figures, where they have been adjusted, are on pages 226 to 228.
Directors’ Remuneration Report
continued
Remuneration Committee Chair’s statement
Certain KPIs and Non-GAAP measures are used throughout the Directors’ Remuneration Report. See pages 84 to 88 for additional detail.
Governance
118
IHG
| Annual Report and Form 20-F 2023
0
0
0
1,000
2,000
3,000
4,000
5,000
6,000
1,000
2,000
3,000
4,000
5,000
6,000
3,339
1,832
2,093
3,850
5,023
0
Keith Barr,
Former Chief Executive Officer
Value (£000)
2023
actual
2022
actual
2023
potential
1,000
2,000
3,000
4,000
5,000
6,000
3,456
5,193
4,273
Elie Maalouf,
Chief Executive Officer
Value (£000)
2023
actual
2022
actual
2023
potential
Michael Glover,
Chief Financial Officer
Value (£000)
2023
actual
2023
potential
1,000
2,000
3,000
4,000
5,000
6,000
3,131
175
175
Paul Edgecliffe-Johnson,
Former Chief Financial Officer
Value (£000)
2023
actual
2022
actual
2023
potential
Key for potential
Minimum = Fixed pay
Target = Fixed pay and on-target award for APP (115%) and 50% of maximum LTIP vesting
Maximum = Fixed pay and maximum award for APP and LTIP
Over the following pages of the report, we give an overview of how our remuneration arrangements are aligned to our purpose, ambition
and strategic priorities. We have included a summary of our approved DR Policy on page 121, together with a reminder of how the Committee
has addressed Provision 40 of the 2018 UK Corporate Governance Code in respect of remuneration policy and practice throughout 2023.
Alignment of pay structures throughout the organisation and the implementation of remuneration policy across the wider workforce is
covered on pages 123 to 124. Pages 125 to 127 contain a summary of Committee actions during the year.
Executive Director remuneration
2023 actual remuneration vs potential remuneration
The charts below show the 2023 potential remuneration opportunity and actual achievement compared to the 2022 actual achievement.
The relevant figures
for each of the elements that make up the single total
figure o
f remuneration, as shown below for the Executive Directors,
can be found in the table on page 128. See above for the key to individual elements of actual remuneration for 2022 and 2023.
For the purpose of reading the charts below, please note the following:
•
Elie Maalouf’s 2023
figures are a combined total based on his CEO, Americas role
for the 1 January to 30 June period and Group CEO role
for the 1 July to 31 December period.
•
For Michael Glover, we have not shown 2022 figures as he was promoted to the Board on 20 March 2023 and was not an Executive
Director for the 2022 period. His 2023
figures are based on fixed pay and APP
for the period 20 March to 31 December and LTIP for the full
2021/23 cycle.
•
The one-off relocation payments made to Elie Maalouf and Michael Glover in 2023 have been included within their bene
fits figure
for the
purpose of the charts below. The respective amounts have been disclosed in the Other column of the single total
figure table on page 128.
•
For both Keith Barr and Paul Edgecliffe-Johnson, their 2023 actual and potential figures are based on the period in which they were
Executive Directors only (1 January-30 June 2023 for Keith Barr; and 1 January-19 March 2023 for Paul Edgecliffe-Johnson).
Table of contents
119
At a glance
122
Our approach to remuneration – link to strategy
123
Remuneration at IHG – the wider context
125
Remuneration Committee details
How to use this report
Within the Directors’ Remuneration
Report, we have used colour coding
to denote different elements of
remuneration. The colours used and
the corresponding remuneration
elements are:
Salary
Benefits
Pension benefit
Annual Performance Plan (APP)
50% cash and 50% deferred shares
Long Term Incentive Plan (LTIP)
Shareholding
Audited information
Content contained within a tinted
panel highlighted with an ‘Audited’
tab indicates that all the information
within the panel is audited.
AUDITED
At a glance
Governance
119
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Measures used for AP
P
Operating profit from reportable segments
($m)
Operating profit
from reportable segments
Room signings
Room openings
Total Shareholder Return
Net system size growth
Absolute cash flow
Absolute cash flow
($bn)
Relative net system size growth
(%)
Relative Total Shareholder Return
(%)
Measures used for LTIP
Room signings
(k rooms)
Threshold
864.0
Target
960.0
Maximum
1,056.0
Maximum
87.9
Maximum
57.0
Threshold
41.6
Maximum
83.4
Threshold
1.06
Maximum
1.41
Maximum
5.1
Threshold
2.6
Threshold
71.9
Actual 1,026.6
Target
79.9
Actual 79.2
Target
51.9
Actual 47.9
Threshold
46.7
Room openings
(k rooms)
30%
15%
15%
70%
30%
40%
Actual 47.1
Actual 3.42
Actual 2.81
How we performed in 2023
The Company delivered another year of strong performance against target in operating pro
fit
from reportable segments. Room openings
were below target this year and room signings narrowly missed target, by less than one percent, however, both these measures achieved
well above threshold performance. In the round, this meant the formulaic 2023 APP achievement was 142.2% of target, resulting in awards
for Executive Directors of 163.5% of salary (81.8% of the capped maximum award). Under the LTIP, improved TSR performance against
comparators resulted in the vesting of this element for the
first time since the 2018/20 cycle. This, combined with a solid net system size
growth performance relative to our largest competitors and an exceptional management of cash
flow, resulted in a
formulaic outcome of
57.8% of maximum. Further details on the actual achievement for operating pro
fit
from reportable segments and absolute cash
flow can
be found on pages 128 and 129.
2023 APP achievement
(% of maximum)
81.8
%
2021/23 LTIP achievement
(% of maximum)
57.8
%
Directors’ Remuneration Report
continued
At a glance
continued
Governance
120
IHG
| Annual Report and Form 20-F 2023
Summary of approved Directors’ Remuneration Policy (DR Policy)
Element
2023
2024
2025
2026
2027
Framework
Purpose
Fixed
Base salary
Increases are generally in line with
the range applying to the corporate
population. Reviewed annually and
fixed
for 12 months from 1 April.
To attract and retain the key talent
responsible for delivering our strategic
objectives. Recognises the value of
the role and the individual’s skill,
performance and experience.
Benefits
Relevant benefits are aligned to the
typical level for the role/location.
To attract and retain the key talent
responsible for delivering our strategic
objectives with competitive benefits
that are consistent with an individual’s
role and location.
Pension/
retirement
benefit
A Defined Contribution or cash
in lieu amount for UK Directors.
Employee contributions with
matching company contributions
at a rate in line with the wider UK
workforce. Salary is the only part of
pay that is pensionable. See page 123
for further details regarding UK and
US pension benefits.
To attract and retain the key talent
responsible for delivering our strategic
objectives with appropriate contribution
rates to provide funding for retirement.
Variable
Annual
Performance
Plan (cash)
Cash
With effect from the 2024
financial
year APP, the target award has been
reduced from 115% to 100% of salary,
maximum opportunity will remain
200% of salary with 70% based on
a financial measure and 30% on
key strategic measures. Where the
minimum shareholding requirement
has been met, awards may be made
in up to 70% cash and at least 30% in
the form of shares deferred for three
years. If the minimum shareholding
has not been met, then awards will
be made in 50% cash and 50%
shares deferred for three years.
To reward the achievement of stretching
targets that support the Company’s
annual financial and strategic goals.
For 2024, the key strategic
objectives are:
•
room signings (15% weighting); and
•
room openings (15% weighting).
Annual
Performance
Plan (deferred
shares)
Long Term
Incentive Plan
(LTIP)
The maximum potential LTIP
quantum is 500% of salary for the
CEO and US Executive Directors,
and up to 300% of salary for other
Executive Directors; a two-year
post-vest holding period applies.
A focus on accelerating the growth of
our brands in high-value markets is at
the heart of our strategy. Together with
TSR, cash flow, adjusted earnings per
share and ESG metrics, there is a strong
alignment between Executive Director
remuneration and shareholder interests.
Other
Minimum
shareholding
requirements
The guideline shareholding
requirement is 500% for the CEO
and US Executive Directors and
300% for other Executive Directors.
In respect of the post-employment
shareholding requirement, the full
guideline shareholding requirement
will normally continue for two years
post-cessation of employment.
To align experience with shareholders
and focus on continued growth of
shareholder value.
A copy of the DR Policy, approved in May 2023, is available on IHG’s website at
ihgplc.com/investors
under Corporate Governance.
The Committee has considered the remuneration policy and practices in the context of Provision 40 of the UK Corporate Governance Code:
Principle
IHG’s approach
Clarity
Through the combination of short- and long-term incentive plan measures, the DR Policy is structured to support
financial objectives and
the strategic priorities of the business that deliver shareholder returns and long-term value creation. Further alignment with shareholder
interests is driven by the significant proportion o
f share-based incentives and Executive Director shareholding requirements. Our reward
policies are aligned throughout the organisation and include a proportion of performance-related reward, driving engagement for the whole
of the workforce. We always seek to report our DR Policy and performance-related remuneration measures, targets and outcomes in a clear,
transparent and balanced way, with relevant and timely communication with all of our stakeholders, including shareholders.
Simplicity
Our remuneration structure comprises straightforward and well-understood components. The purpose, structure and strategic alignment
of each element is clearly laid out in the remuneration policy summary table:
•
fixed pay: base salary, pension and benefits that are consistent with role and location and are designed to attract and retain talent;
•
short-term incentive: annual performance-related bonus which incentivises and rewards the delivery of
financial and non-financial
strategic objectives. For senior employees, a proportion of this bonus is paid in cash and the remainder deferred in shares for a period
of at least three years; and
•
long-term incentive: a share-based award which incentivises performance over a three-year period based on measures that drive
long-term sustainable growth and value creation.
Deferral
Performance
Deferral
Our approach to remuneration
Governance
121
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Element
Measures and weightings
Link to strategy
Explanation
Annual Performance
Plan (APP)
Operating profit
from
reportable segments (70%)
•
The strength and breadth of our portfolio, tailored services
and solutions, as well as our technology and platforms drive
consumer preference, owner returns and rooms growth;
all contributing to our revenues and profit.
•
Openings and signings are two of our key drivers of system
size and central to our strategy of accelerating the growth
of our brands in high-value markets.
•
Performance on Global Metrics, including key ESG measures
(Employee Engagement, Guest Love, Responsible Business),
will be reviewed in considering the potential application
of discretion to formulaic outcomes on APP strategic
objective measures.
Room signings (15%)
Room openings (15%)
Long Term Incentive
Plan (LTIP)
Relative Total Shareholder Return
(20%)
•
Our strategy is intended to deliver unmatched guest
experiences and unrivalled owner returns for our stakeholders,
including competitive total shareholder returns.
•
Our strategy is to accelerate the growth of our brands in
high-value markets by using our global scale and expertise
so it is important that this forms a key element of our
management team’s Long Term Incentive Plan.
•
Enhancing our customer and owner offer and accelerating the
growth of our brands in high-value markets drives sustained
growth in cash flows and profits over the long term, which can
be reinvested in our business and returned to shareholders.
Relative net system size growth (20%)
Absolute cash flow (20%)
Environmental, social
and governance (20%)
•
Aligned to our people, communities, and planet strategy,
new ESG measures (decarbonisation, and diversity, equity
and inclusion) are included in our LTIP targets.
Adjusted earnings per share (20%)
•
EPS provides a measure of the efficiency of the capital
structure, as well as promoting further alignment with
shareholder experience and value.
Aligning variable elements of remuneration to strategy
Variable elements of remuneration are linked to our strategy, as shown below, in respect of the 2023 APP and 2023/25 LTIP cycle granted
in 2023.
Principle
IHG’s approach
Predictability
The range of possible values of rewards for Executive Directors is clearly disclosed in graphical form both at the time of approving the policy
and in the annual implementation report.
Risk
Our DR Policy contains a number of elements to ensure that it drives the right behaviours to incentivise the Executive Directors to deliver
long-term sustainable growth and shareholder returns and to reward them appropriately:
•
the maximum short- and long-term incentive awards are capped as a % of salary;
•
the Committee has clear discretion policies, linked to specific measures where necessary, to override
formulaic outcomes;
•
Executive Directors agree to clear and comprehensive malus and clawback provisions; and
•
significant shareholding requirements apply
for Executive Directors, including the deferral of 30% to 50% of bonus in shares; a two-year
post-vest holding period for LTIP shares and minimum shareholding requirements both during and after employment.
Proportionality
Individual rewards are aligned to the delivery of strategic business objectives. The Committee sets robust and stretching targets to ensure
that there is a clear link between the performance of the Group and the awards made to Executive Directors and others.
Alignment
to culture
IHG has a clear purpose and well-established values and behaviours. The alignment between remuneration incentives and our strategy for
relentless focus on growth, and the KPIs that underpin the delivery of our strategy, is outlined below. Other elements of reward, such as
salary reviews and, across the wider workforce, the short-term incentive plan and our global recognition scheme, reward employees for
performance and actions that demonstrate our values and behaviours.
What we do
Provide
True
Hospitality
for Good
Why we do it
To be the hotel
company of choice
for guests and
owners
How we make it happen
Relentless focus
on growth
Leading
commercial engine
Brands guests and
owners love
Care for our people,
communities and planet
Directors’ Remuneration Report
continued
Our approach to remuneration
continued
Governance
122
IHG
| Annual Report and Form 20-F 2023
Remuneration at IHG – the wider context
Our reward philosophy
Our reward arrangements are competitive, drive creation of value for stakeholders and make
us think and act as one team.
How our reward practices are aligned across all levels of the organisation
Our approach to fairness in reward is an important aspect of our overall reward philosophy and is designed to attract, retain, motivate and
engage top talent. It is supported by a robust governance approach that ensures our reward and recognition practices are fair and consistent
across our employee and colleague population, regardless of gender and other aspects of diversity, as well as an alignment between the wider
direct workforce and executive remuneration. We regularly review our approach externally, ensuring we are competitive in the different
markets in which we operate and meet the needs of employees by offering market-driven reward packages.
Examples of alignment and implementation of wider workforce reward strategy in 2023
Elements of reward
Participants
Commentary
Fixed
Salary
All
In the 2023 base salary review process, we continued to put our managers at the heart of the process, allowing them
to use their discretion in pay decisions. We also included an additional 25% on top of the standard merit budget in order
to address equity and recognise talent. With continuous improvements on our external benchmarking capability, we
provided additional line manager support with market data analysis and guidance so that the budget could be targeted
in areas where it would have the most impact. Our managers are reminded of our diversity, equity and inclusion statement
on making fair reward decisions consistent with our Code of Conduct to ensure all employees are rewarded fairly and
according to their contribution, skills and experience, with tips on avoiding any conscious and unconscious bias.
For 2024, an additional merit budget will again be made available to address individual equity and talent recognition.
Benefits
All
In 2023, we introduced an electric car salary sacrifice scheme allowing UK corporate colleagues to obtain an electric
car and receive both tax and national insurance savings, whilst at the same time supporting our Journey to Tomorrow
environmental commitments. So far, 5.8% of those eligible for the scheme have ordered vehicles to date, which is 16.8%
of those who have registered interest in the scheme. We also understand the demands faced by working parents and
carers when it comes to balancing their work and home life, so we partnered with Busy Bees to provide our UK corporate
colleagues, along with our UK managed hotels, a 20% discount on childcare fees. A key element of our employer brand
and beloved colleague benefits is our Employee Room Rate programme, which enables employees to book hotels across
many of our brands at a reduced rate. This year, we enabled colleagues to earn IHG One Reward points on Employee Rate
stays, and are working on additional enhancements to the programme in the future. The levels of healthcare cover on
offer in the UK continued to align across all UK corporate colleagues.
Pension
benefit
All
Pension and retirement benefits are provided in the UK and US in line with market practice.
UK:
the contribution rate for corporate and eligible hotel employees in the IHG UK pension plan is aligned across the
eligible population with a 2:1 matching ratio up to a maximum of 6% of salary from employees and 12% from the Company.
US:
US retirement saving plans are made up of a 401(k) plan which has a 1:1 matching contribution ratio up to a maximum
of 6% of salary for eligible corporate employees and a Deferred Compensation Plan (DCP) that provides for supplementary
company contributions of up to 16% provided at senior levels (a historic grandfathered rate of 20% applies for a small
number of employees who were already receiving this rate when it was removed effective 1 January 2017).
Variable
Annual
Performance
Plan (APP)
All
All corporate employees share the same corporate performance metrics with the Executive Committee and Executive
Directors. For senior management (generally at Executive Committee (EC) level and their direct reports), a proportion of
bonus is deferred into shares for a three-year period. The weightings of metrics for all corporate employees below EC
level are aligned and a greater portion of an award can be achieved through an employee’s individual performance and
contribution to the Company. In addition, in view of the strong performance in 2023, approximately 15% is being added
to the amount budgeted for the personal performance element to increase awards for those employees who performed
the strongest during 2023.
Long Term
Incentive Plan
(LTIP)
Executive
Directors
and senior
management
Senior/mid-management and certain specialist roles are eligible to participate in a Long Term Incentive Plan (LTIP).
Performance-based LTIP awards largely apply at the level of Executive Committee and their direct reports; Restricted
Stock Units typically apply for eligible employees below this level (see below). In 2023, at the same time as levels for
Executive Directors were increased under the new DR Policy, LTIP levels for senior management were adjusted for market
competitiveness and to better facilitate internal progression and relieve compression.
Restricted
Stock Units
(RSU)
Excludes
Executive
Directors
In line with typical market practice, particularly in the US, and due to line-of-sight over performance measures, a gradually
greater proportion of the LTIP award is made as RSUs (which are not subject to performance conditions but still align
employee interests with those of shareholders) for eligible roles from Executive Committee level down.
Colleague
Share Plan
Wider
workforce
only
IHG matches the number of shares purchased by employees, up to a value of USD 1,000 per year, on a 1-for-1 basis.
We expanded the offering of our Colleague Share Plan to include those in our Corporate Reservations o
ffices, as well
as a small number of corporate colleagues in countries that were not previously eligible, making the plan available to
approximately 98% of our corporate employees below the senior/mid-management level (who receive LTIP and/or
RSU awards). The registration for 2024 was open to eligible colleagues in Q4 2023, and the take-up rate for the 2024 plan,
including the newly eligible population is 34.8%. For a similar comparison on previous disclosures, the take-up rate
excluding the new population is 51.2% (vs. 50.3% for the 2023 plan). Over 26,100 matching shares vested from the
2021 Colleague Share Plan in January 2023; the 2022 plan’s matching share awards vested in January 2024 with over
30,900 shares vesting between 2,028 employees.
Governance
123
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Our approach to remuneration
continued
Elements of reward
Participants
Commentary
Recognition
schemes
All
Colleagues who are below Senior Leader level can be nominated for a cash award through our Bravo recognition
scheme, they can be nominated for going above and beyond in their jobs while displaying exceptional IHG behaviours.
All of the corporate workforce, including Executive Directors, are eligible to receive a Long-Term Service Award, of
varying value, once the employee reaches certain service milestones. In 2023, 3,834 one-off cash recognition awards
were made to corporate colleagues and 3,438 to hotel colleagues globally; 814 corporate colleagues and 995 hotel
colleagues globally received cash long-term service awards.
Employee engagement on pay
We have several forums available for employees to share their thoughts, including employee resource groups (ERGs), a designated
Non-Executive Director for workforce engagement and our employee engagement survey, known as Colleague HeartBeat, which allows
employees to express their views on key aspects of working at IHG. As the charts below show, the 2023 employee engagement scores for
participating hotel and reservations employees and general managers on the questions relating to reward and recognition exceeded our
survey provider’s top quartile benchmark.
Paid fairly
83%
78%
85%
62%
Benefit plan meets needs
85%
81%
86%
69%
Appropriate recognition
86%
83%
90%
68%
Performance impacts pay
84%
85%
89%
65%
Hotels
Reservations
GMs
Top quartile scores
Wellbeing
We have continued to promote myWellbeing – a framework to support employees across their health, lifestyle and workplace.
The myWellbeing suite of resources, which includes an employee Wellbeing Handbook and guidelines for people managers, has been
designed to provide a holistic wellbeing offering. Employees also have access to a global Employee Assistance Programme, which offers
counselling, practical guidance on topics such as legal, financial and work matters, and additional health and wellbeing resources.
In the UK, we introduced a network of Mental Health First Aiders. This is part of our commitment to ensure the right support is in place to help
everyone feel at their best and forms part of our approach to make mental health support more accessible and further unlock the stigma.
We trained a small number of people in 2023, with the potential to roll out more widely at IHG across other markets, including our UK
managed hotel estate. We increased our focus on
financial education, providing our UK corporate colleagues with
free expert information
and guidance to stay on track to achieve both financial goals and objectives and to support them on their personal financial journeys by
offering group webinar sessions and wellbeing articles.
We have also continued to champion initiatives such as Focused Fridays, where we limit meetings, and Recharge Days, where corporate
colleagues can spend the day doing whatever they need to unwind. In 2023, all corporate colleagues were given three recharge days
to spend as they please, on top of any contracted annual leave they are eligible to receive. These initiatives have helped us achieve a
3% increase in our Wellbeing Index scores for all of our colleagues, and a 2% increase to 89% for our hotel colleagues on last year’s scores.
UK leased hotel employees
As previously reported, following the acquisition of a number of UK hotels in 2019, employing entities for the estate’s hotels were transferred
to IHG. Employment terms, including remuneration and benefits, largely remained in place on their pre-acquisition basis. As with the model
for leased hotels generally, IHG provides hotel management support to the owners of these UK leased hotels and makes recommendations
on matters, including pay, based on market insight and experience. Decisions on implementing pay changes are ultimately determined by
the hotel estate owner in the context of their own commercial position and equities across the wider portfolio.
•
Salary increases for 2023 ranged from 5% to 8%, with higher increases applicable for frontline employees. The Real Living Wage will
continue to be applied as a minimum for all staff in line with the Real Living Wage Foundation level and zero-hour contracts are not utilised
in the UK leased estate.
•
Hotel colleagues receive similar benefits to corporate employees, including enrolment into a workplace pension, employee room rates,
Employee Assistance Programme, Bravo recognition programme, retail discount vouchers, the myWellbeing programme and refer-a-friend
bonus. Frontline colleagues can also receive incentives and performance-driven bonuses and eligible managers receive an annual
performance bonus. In April 2023, enhanced maternity and paternity pay was launched for all hotel colleagues and we also teamed up
with Busy Bees Nurseries to offer our managed hotel colleagues a 20% discount on childcare fees.
Championing a diverse culture where everyone can thrive
One of our 2030 commitments is to drive gender balance and a doubling of under-represented groups across our leadership, and we are
building on the significant progress we have made over the past decade towards achieving gender balance, with 35% o
f our leaders (VP and
above) being female (vs. an ambition of 39% by 2025), and a gender-balanced employee population, of which 52% is female. We are delighted
to be recognised by Forbes as one of the world’s top companies for women, and we were rated second on the Financial Times Diversity
Leaders in 2024. We have reduced our Gender Pay gap in the UK by 16% since 2017, our first year o
f reporting.
Our latest Gender Pay report is available on IHG’s website at
ihgplc.com/en/responsible-business/reporting
under Reporting.
Governance
124
IHG
| Annual Report and Form 20-F 2023
Key objectives and summary of responsibilities
The Remuneration Committee agrees, on behalf of the Board, all
aspects of remuneration for the Executive Directors, the Executive
Committee and the Chair of the Board, and also agrees the strategy,
direction and policy for the remuneration of the senior executives
who have a significant influence over the Group’s ability to meet
its strategic objectives. Additionally, the Committee reviews wider
workforce pay policies and practice to ensure alignment with
strategy, values and behaviours and takes this into account when
setting Executive Director remuneration. The Committee’s role and
responsibilities are set out in its Terms of Reference (ToR), which are
reviewed annually and approved by the Board.
The ToR are available on IHG’s website at
ihgplc.com/investors
under Corporate governance.
Membership and attendance at meetings
Details of the Committee membership and meeting attendance
are set out on pages 96 and 118.
During 2023, the Committee was supported internally by the
Company Chair, the Group’s CEO and CFO, and the heads of
Human Resources and Reward as necessary. All attend by invitation
to provide further background information and context to assist the
Committee in its duties. They are not present for any discussions
that relate directly to their own remuneration or where their
attendance would not be appropriate.
Reporting to the Board
The Committee Chair updates the Board on all key issues raised at
Committee meetings. Papers and minutes for each meeting are also
circulated to all Board members for review and comment.
Non-Executive Directors’ letters of appointment
and notice periods
Non-Executive Directors have letters of appointment, which are
available upon request from the Company Secretary’s office.
Deanna Oppenheimer, Non-Executive Chair, is subject to 12 months’
notice and is in compliance with Provision 19 of the UK Corporate
Governance Code. No other Non-Executive Directors are subject to
notice periods; all Non-Executive Directors are subject to an annual
re-election by shareholders at the AGM.
Effectiveness of the Committee
The effectiveness of the Committee is monitored and assessed
regularly by the Chair of the Committee and the Chair of the Board.
Remuneration advisers
IHG appointed Deloitte LLP to act as independent adviser to the
Committee in 2019 following a competitive tender process undertaken
by the Committee. Deloitte is a member of the Remuneration
Consultants Group and, as such, operates under the code of conduct
in relation to executive remuneration consulting in the UK.
Remuneration Committee details
Fees of £159,400 were paid to Deloitte in respect of advice provided
to the Committee in 2023, which included significant input into the
review and implementation of the DR Policy during the year. This was
in the form of an agreed fee for support in the preparation of papers
and attendance at meetings, with work on additional items charged
at hourly rates. The terms of engagement for Deloitte are available
from the Company Secretary’s office upon request. Separately,
other parts of Deloitte LLP also advised the Company in relation to
corporation tax, mobility and consulting services. The Committee
is satisfied that the advice received is objective and independent.
Approach to target setting
Targets are set by the Committee and senior management, taking
into account IHG’s growth ambitions and long-range business plan,
market expectations and the circumstances and relative performance
at the time, to set stretching achievement targets for senior executives
that will reflect success
ful outcomes for the business based on its
strategic and financial objectives
for the period.
Absolute targets may be set relative to budget and/or by reference
to prior results, generally containing a performance range with
additional stretch to incentivise outperformance and minimum
performance levels for payout. Relative targets are set against an
appropriate comparator group of companies for the relevant measure,
for example, relative NSSG in the LTIP was set against our six largest
competitors with over 500k rooms to reflect our strategy o
f
accelerating the growth of our brands in high-value markets.
Performance will be reviewed throughout the period in which it
is applicable for, and, if any corrections are required, this will be
disclosed in the Directors’ Remuneration Report for the year in
which the correction has been agreed. Details on a correction for
the 2023/25 LTIP calculation can be found on page 132.
Shareholder engagement
The Chair of the Committee engaged extensively with shareholders
during 2023 in respect of the DR Policy, both in advance of the AGM
and following the vote of less than 80% support at the AGM, in order
to understand the range of views held by shareholders and to take
these into account when setting and implementing the policy, as
well as outline the rationale for the changes made.
At the October 2023 meetings, in addition to follow-up comments
on the 2023 DRR and DR Policy, Angie Risley was introduced to
shareholders as the Committee Chair designate, effective 1 January
2024, and new CEO pay arrangements were discussed for
Elie Maalouf, following his appointment to the role. In January 2024,
shortly after Angie commenced her role as Committee Chair,
she held meetings with shareholders for more comprehensive
two-way introductions and discussions about current IHG-specific
remuneration challenges and shareholder views and expectations.
Further information on shareholder engagement is contained in the
Chair’s Statement on pages 116 to 118.
2023 focus areas
•
Review and approval of 2022 remuneration outcomes and 2023 incentive plan structures and targets.
•
In-year performance and relative performance tracking.
•
Wider workforce remuneration matters.
•
ESG in incentives.
•
Review, approval and implementation of the 2023 DR Policy.
•
Review, approval and implementation of the Deferred Award Plan (DAP) rules.
•
Shareholder engagement prior to, and following, the AGM vote.
•
CEO remuneration package.
Governance
125
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Our approach to remuneration
continued
Board changes
During the year, Byron Grote and Graham Allan replaced Ian Dyson
and Jill McDonald as Chair of the Audit Committee and Chair of the
Responsible Business Committee with effect from 1 March 2023
after Ian and Jill retired from the Board. Jo Harlow also stepped
down from the Board and as Chair of the Remuneration Committee
at the end of 2023. Angie Risley was appointed as a Non-Executive
Director prior to assuming the Chair of the Remuneration Committee
role effective 1 January 2024 and Sir Ron Kalifa was appointed to the
Board from 1 January 2024. The remuneration arrangements in
respect of all changes were in line with the approved DR Policy.
As announced by the Company on 5 May 2023 and the s430(2B)
of the Companies Act 2006 declaration released on 28 June 2023,
Keith Barr stepped down from the role of Chief Executive Officer,
and from the Board, on 30 June 2023. Elie Maalouf succeeded
Keith Barr as Group CEO with effect from 1 July 2023, Elie was already
a member of IHG’s Board in leading IHG’s Americas business as
regional CEO.
Paul Edgecliffe-Johnson stepped down from the role of Chief
Financial Officer & Group Head of Strategy, and from the Board,
leaving IHG on 19 March 2023. Michael Glover succeeded Paul
as Chief Financial Officer with e
ffect from 20 March 2023.
Details of the arrangements for all Executive Directors are as follows:
Remuneration component
How this was implemented in 2023
Elie Maalouf
Salary, pension and benefits
Elie’s base salary for the role of CEO from 1 July 2023 is £990,000 and he will not be eligible for a salary increase
until April 2025. Elie’s pension cash allowance is 12% of salary, which is within the maximum opportunity of the 2023
DR Policy and aligns to the wider IHG UK pension plan participants. Elie’s benefits are in line with the DR Policy.
Annual Performance Plan (APP)
Elie’s APP levels are in line with the maximum opportunity of the DR Policy. His 2023 APP award will be pro-rated
using the respective salaries for the respective periods before and after his appointment as Group CEO.
Long Term Incentive Plan (LTIP)
Elie’s LTIP award levels align with the maximum opportunity shown in the DR Policy.
Other
Elie relocated from the CEO, Americas role based out of the Atlanta office to the Group CEO role, which is primarily
based out of the UK office. On appointment, and in line with how we treat other international moves, Elie received
a one-off net cash payment of £50,000 towards costs associated with setting up a UK base. The grossed up value
of this payment has been disclosed in the single total
figure o
f remuneration table on page 128.
To facilitate Elie to carry out his UK-based role while maintaining his US home and IHG’s signi
ficant business,
government and industry interests in the US, he also receives a net amount of £10,000 per month towards UK
housing costs. The actual net cost per month on housing for 2023 was, on average, lower than this but will be
adjusted to allow for rental market dynamics over the longer term.
Michael Glover
Salary, pension and benefits
Michael’s base salary from 20 March 2023 is £620,000 and he was not eligible for a merit increase in April 2023.
His pension and other benefits are in line with the DR Policy.
Annual Performance Plan (APP)
Michael’s APP levels are in line with the DR Policy. His 2023 APP award will be pro-rated using the respective salaries
and targets for the respective periods before and after his appointment as Group CFO.
Long Term Incentive Plan (LTIP)
Michael’s LTIP award levels are in line with the DR Policy. He was granted an award at Executive Director level for the
full 2023/25 cycle, however, did not receive an uplift into in-
flight cycles at the increased Executive Director levels.
Other
Michael relocated from his CFO, Americas, role based out of the Atlanta office to the Group CFO role in the UK head
office. In line with how we treat other international moves, a series of one-o
ff payments to cover relocation and
associated costs apply for the
first three years: £150,000 payments both on appointment and on the first anniversary
of appointment and £100,000 on the second anniversary of appointment.
Keith Barr
Salary, pension and benefits
Keith received his base salary, pension cash allowance and benefits to 30 June 2023, details o
f which are included
in the single total figure o
f remuneration table on page 128. After he stepped down from the Board, he remained an
employee of the Company on his existing terms of employment until 31 December 2023 to ensure an orderly handover.
As an employee, he continued to be paid a salary and receive his existing benefits through to that date, apart
from
healthcare provision, which will continue for up to three months after this date.
Annual Performance Plan (APP)
Keith is eligible to receive an APP award in respect of the full 2023
financial year, which is assessed and paid in the
usual way and in accordance with the terms of the plan. Half of any APP earned will be delivered in cash following
the end of the performance year, with the other half deferred into shares for three years. The pro-rated element for
the 2023 period in which he served as Group CEO can be found in the single total
figure table. The Remuneration
Committee exercised its discretion to determine that he would be treated as a ‘good leaver’. Accordingly, his
unvested deferred APP shares will not be forfeited on departure and will vest in full on their original vesting dates.
Long Term Incentive Plan (LTIP)
Keith’s share awards, granted in 2021 and 2022, under the LTIP are preserved in accordance with the ‘good leaver’
provisions, subject to the achievement of the relevant performance conditions, adjusted for pro-ration until the date he
ceased employment with the Company, and vesting on their original vesting dates. In accordance with the DR Policy,
they will be subject to a two-year post-vest holding period. The LTIP 2021/23 cycle award is disclosed in the 2023 single
total figure o
f remuneration table on page 128. He has not received an LTIP award in respect of the 2023/25 cycle.
Minimum Shareholding Policy
The post-employment shareholding policy approved at the time of Keith’s termination has been applied. He is
required to hold shares equivalent to his minimum shareholding requirement of 500% of salary for six months
post-cessation and 50% of the minimum shareholding requirement for a further six months.
Other
IHG also agreed to settle fees of £13,850 plus VAT for legal advice to Keith on his leaving arrangements.
AUDITED
Governance
126
IHG
| Annual Report and Form 20-F 2023
Voting at the Company’s AGM
The 2022 Directors’ Remuneration Report and the new DR Policy were approved at the 2023 AGM. Further details regarding the action taken
by the Committee in response to the level of support received for these resolutions can be found in the Chair’s Statement on pages 116 to 118.
The outcome of the votes in respect of the DR Policy and Report for 2023 are shown below:
Directors’ Remuneration Policy (binding vote)
Directors’ Remuneration Report (advisory vote)
AGM
Votes for
Votes against
Abstentions
Votes for
Votes against
Abstentions
5 May 2023
103,155,928
(74.85%)
34,661,408
(25.15%)
2,043,591
103,932,823
(76.94%)
31,147,109
(23.06%)
4,780,994
Wider workforce remuneration and employee engagement
As outlined on pages 123 to 124, IHG operates an aligned approach
to remuneration throughout the organisation. During the year, the
Committee reviewed aspects of the Company’s wider workforce
remuneration approach as part of its regular meeting agenda.
The Company engaged with the workforce through its employee
engagement survey, which covers a number of areas, including pay
and benefits competitiveness, wellness and inclusion. Our overall
employee engagement increased to 87% (+1% on 2022), placing IHG
as a Global Best Employer by Kincentric. As noted on page 124,
perceptions of reward and recognition gained strong results across
our hotel, reservations and general manager populations.
During 2023, the Chair of the Committee joined IHG’s designated
Non-Executive Director responsible for workforce engagement in a
Voice of the Employee session. These sessions are held throughout
the year to engage directly with members of IHG’s corporate and
hotel workforce, with the aim of collating and sharing such feedback
with the Board for consideration in its decision-making. No concerns
were raised regarding Executive Director remuneration or how it
aligns with the wider IHG remuneration principles. Further details
about the 2023 Voice of the Employee engagement sessions can
be found on page 113. Further sessions are planned for 2024 for
Angie to attend as the new Chair of the Committee.
Deferred Award Plan rules
In 2023, the new DAP rules were approved by shareholders at the
May AGM. The DAP replaced both the previous APP and LTIP rules as
a simplified, combined set o
f plan rules to govern the share awards
made under the Company’s discretionary incentive arrangements.
The rules for both the APP and LTIP were due to expire in 2024, and
the Committee considered it appropriate to renew them a year early
to coincide with the adoption of the new DR Policy. Following approval
at the 2023 AGM, LTIP share awards were granted under the DAP
with effect from the 2023/25 cycle, and future APP share awards
will be granted under the DAP with effect from the 2024 plan year.
All awards granted under previous cycles will remain subject to the
APP and LTIP rules that were previously in place.
Service contracts and notice periods for Executive Directors
The Committee’s policy is for all Executive Directors to have service
contracts with a notice period of 12 months from the Company and
a notice period of 6 months for the employee, unless, on an
exceptional basis to complete an external recruitment successfully,
a longer initial notice period reducing to 12 months is used. This is
in accordance with the UK Corporate Governance Code.
All Executive Directors’ appointments and subsequent
re-appointments to the Board are subject to election and annual
re-election by shareholders at the AGM.
Details of current Executive Directors’ contracts (available upon
request from the Company Secretary’s office):
Executive Director
Date of original
appointment to the Board
Notice Period
Elie Maalouf
1 January 2018
12 months
Michael Glover
20 March 2023
12 months
Remuneration component
How this was implemented in 2023
Paul Edgecliffe-Johnson
Salary, pension and benefits
Paul’s salary, pension and benefits were paid up until 19 March 2023, details o
f which are included in the single total
figure o
f remuneration table on page 128. In line with our previous commitment, his pension had been reduced to
the rate of all other IHG UK pension plan participants, which is 12% of salary, from 1 January 2023. No further payments
in respect of these elements were paid beyond 19 March 2023, given he was taking up new employment.
Annual Performance Plan (APP)
Paul remained eligible to receive an APP award in respect of the full 2022 performance year. In line with our
termination policy, the cash element was paid in the usual way, but the deferred share awards portion was forfeited.
He was not eligible to receive an APP award in respect of 2023. All outstanding APP shares that had not vested on
19 March 2023 were forfeited.
Long Term Incentive Plan (LTIP)
Paul’s LTIP 2020/22 award was assessed in the same way as for the other Executive Directors and it vested on
22 February 2023, and is subject to a two-year holding period. He was not eligible to receive an LTIP award in respect
of 2023. All outstanding LTIP awards that had not vested on 19 March 2023 were forfeited.
Minimum Shareholding Policy
The post-employment shareholding policy approved at the time of Paul’s termination has been applied. He is
required to hold shares equivalent to his minimum shareholding requirement of 300% of salary as at the date of
leaving for six months post-cessation and 50% of the minimum shareholding requirements for a further six months.
He remained compliant with this policy throughout 2023.
Other
No other payments have been made in connection with his leaving.
AUDITED
Governance
127
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Single total figure o
f remuneration – Executive Directors
Fixed pay
Variable pay
Executive Directors
Year
Salary
£000
Benefits
£000
Pension
benefit
£000
Subtotal
£000
APP
£000
LTIP
£000
a
Subtotal
£000
Other
£000
f
Total
£000
Elie Maalouf
b
2023
849
203
133
1,185
1,403
1,178
2,581
84
3,850
2022
700
58
136
894
1,349
1,096
2,445
–
3,339
Michael Glover
c
2023
487
47
58
592
797
293
1,090
150
1,832
2022
–
–
–
–
–
–
–
–
–
Keith Barr
d
2023
456
45
55
556
750
2,150
2,900
–
3,456
2022
889
43
222
1,154
1,719
1,400
3,119
–
4,273
Paul Edgecliffe-Johnson
e
2023
144
14
17
175
–
–
–
–
175
2022
654
21
163
838
1,264
1,029
2,293
–
3,131
a
LTIP figures
for 2022 relate to the 2020/22 LTIP cycle and have been restated using actual share price on date of vesting. Figures for 2023 relate to the value of shares for the
2021/23 cycle.
b
Elie Maalouf’s 2023
figure combines his CEO, Americas role
for the period 1 January to 30 June, and his Group CEO role for the period 1 July to 31 December. Elie was paid in USD for
his CEO, Americas role and the sterling equivalent is calculated using an exchange rate of $1 = £0.80 in 2023 and $1 = £0.81 in 2022 (page 173). In line with 2023, the 2022 bene
fits
figure has been restated to reduce the residual value o
f UK tax paid in respect of UK duties while a US Director from £7k to nil due to subsequent foreign tax credit offsetting.
c
Michael Glover’s 2023 fixed pay elements relate to the period 20 March to 31 December 2023. His APP has been pro-rated
for the period in which he was Executive Director
and his LTIP award, inclusive of Restricted Stock Units, is for the full 2021/23 LTIP cycle. His LTIP and RSU 2021/23 awards were granted in May 2021 prior to becoming an
Executive Director, the same performance conditions applied to the LTIP award as they did for the Executive Directors; the RSU awards were not subject to any performance
conditions. No 2022 data has been provided because he was not in an Executive Director role at the time.
d
Keith Barr stepped down from the CEO role on 30 June 2023 so 2023
figures related to the period 1 January to 30 June 2023, with the exception o
f his LTIP 2021/23 which the
full cycle value has been disclosed. Further details on the treatment of his remuneration on leaving IHG can be found on page 126.
e
Paul Edgecliffe-Johnson left the Company on 19 March 2023 and his
fixed pay elements were paid up to this date. He was not eligible to receive an APP award
for 2023 and his
LTIP 2021/23 award was forfeited upon leaving IHG. Further details on the treatment of his remuneration on leaving IHG can be found on page 127.
f
Details of the ‘Other’ payments for Elie Maalouf and Michael Glover can be found in the notes to the single total
figure table section below.
The Annual Report on Directors’ Remuneration explains how
the Directors’ Remuneration Policy (DR Policy) was implemented
in 2023 and the resulting payments each of the Executive
Directors received.
The Directors’ Remuneration Report is subject to an advisory vote
by shareholders at the 2024 AGM. The notes to the single total figure
table provide further detail, where relevant, for each of the elements
that make up the total single figure o
f remuneration for each of the
Executive Directors.
Notes to the single total figure table
Fixed pay
Salary:
salary paid for the year. Salary increases in 2023 were
lower than the budget for the wider UK and US corporate
workforce. See pages 126 to 127 for information on Executive
Director changes during 2023.
Benefits:
for Executive Directors, this includes, but is not
limited to, taxable benefits such as company car or allowance
and healthcare.
As disclosed on page 126, to facilitate Elie Maalouf to carry
out his UK-based role whilst maintaining his US home and IHG’s
significant business, government and industry interests in the US,
he also receives a net amount of £10,000 per month towards UK
housing costs. The 2023 benefits figure
for Elie also includes
travel and accommodation costs in relation to his relocation.
Pension benefit:
for current Executive Directors, in line with
the DR Policy, includes the value of IHG contributions and any
cash allowances paid in lieu of pension contributions.
Elie Maalouf and Michael Glover both relocated to the UK for their
Group CEO and Group CFO roles; they did not participate in the
IHG UK pension plan in 2023 and instead received cash allowances
of 12% of salary. Keith Barr and Paul Edgecliffe-Johnson also did
not participate in any IHG pension plan in 2023 for their respective
periods of employment and instead received cash allowances of
12% of base salary. This is in line with the maximum level available
to all other participants in the UK pension plan.
Life assurance cover for all Executive Directors was provided
at four times base salary.
Elie Maalouf participated in the US 401(k) Plan and the US Deferred
Compensation Plan (DCP) for the period 1 January to 30 June 2023
whilst in his role as CEO, Americas. The US 401(k) Plan is a
tax-qualified plan providing benefits on a defined contribution
basis, with the member and company both contributing.
Contributions made by, and in respect of, Elie Maalouf in these
plans for the year ended 31 December 2023 were:
£
a
Director’s contributions to US Deferred Compensation Plan
364,001
Director’s contributions to US 401(k) Plan
14,146
Company contributions to US Deferred Compensation Plan
63,876
Company contributions to US 401(k) Plan
9,413
Age of Director at 31 December 2023
59
a
Sterling values have been calculated using an exchange rate of $1 = £0.80.
As outlined in last year’s report, Elie’s retirement benefits were
in line with other senior US employees and comprised of a 6%
of salary matched contribution (subject to IRS limits in respect of
401(k) contributions) and a 16% of salary supplemental employer
DCP contribution.
Other
Elie Maalouf received a net payment of £50,000 in July 2023 to
cover the transitional and transactional costs of setting up a UK
base. The value of this one-off payment has been grossed up for
disclosure in the single total figure o
f remuneration table above.
Michael Glover received a gross payment of £150,000 to cover
relocation and associated costs.
AUDITED
Directors’ Remuneration Report
continued
Annual Report on Directors’ Remuneration
Governance
128
IHG
| Annual Report and Form 20-F 2023
Variable pay
APP
(50% cash and 50% deferred shares)
Operation
Disclosed award levels are determined based on salary as at
31 December 2023, other than for Elie Maalouf whose award was
pro-rated based on his respective salaries and periods as CEO,
Americas and Group CEO, and on a straight-line basis between
threshold and target, and target and maximum, and are based
on achievement vs target under each measure:
•
threshold
is the minimum level that must be achieved for there
to be an award in relation to that measure; subject to Committee
discretion, no award is made for achievement below threshold;
•
target
is the target level of achievement and results in a target
award for that measure; and
•
maximum
is the level of achievement at which a maximum
award for that measure is received (capped at 200% of salary).
The Committee formally reviews performance against IHG’s
Global Metrics as part of the APP structure in considering
whether to apply discretion to adjust outcomes on the strategic
measures. Any application of discretion to the APP outcome,
would be disclosed in the relevant year’s Directors’ Remuneration
Report.
For Executive Directors, 50% of the 2023 APP award will be
made in the form of shares, deferred for three years, subject
to continued employment.
APP outcome for 2023
The performance measures for the 2023 APP were determined
in accordance with the DR Policy and were:
•
operating profit
from reportable segments (70%);
•
room signings (15%); and
•
room openings (15%).
Target award was 115% of salary and maximum was up to 200%
of target for each measure, subject to an overall cap on the award
of 200% of salary. The following chart and table shows threshold,
target and maximum opportunity, as well as weighting and actual
2023 achievement.
0
50
100
150
200
35
7.5
7.5
70
15
15
Actual
Maximum
140
118.5
30
30
Target
Threshold
Operating profit
from reportable segments
Room signings
Room openings
APP measures – % of target award
50
100
142.2
14.4
9.3
200
The Committee reviewed the performance against IHG’s Global
Metrics as well as relative to peers and was satisfied that no
discretion needed to be applied to the formulaic outcomes of the
APP measures.
Performance
Achievement
Weighting
Weighted
achievement
Operating profit
from reportable segments: performance relative
to target
Threshold
$864m
50%
70%
118.5%
Target
$960m
100%
Actual
$1,026.6m
169.3%
Maximum
$1,056m
200%
Room signings (k rooms)
Threshold
71.9
50%
15%
14.4%
Actual
79.2
95.7%
Target
79.9
100%
Maximum
87.9
200%
Room openings (k rooms)
Threshold
46.7
50%
15%
9.3%
Actual
47.9
62.1%
Target
51.9
100%
Maximum
57.0
200%
Total weighted achievement (as a % of target)
142.2%
Operating profit
from reportable segments is a Non-GAAP
measure and excludes certain items from operating pro
fit.
Additionally, in determining operating profit
from reportable
segments for APP purposes, budgeted exchange rates for the
year are used to ensure like-for-like comparison with the APP
target set at the start of the year.
Operating profit
from reportable segments
(at actual exchange rates) (see page 173)
$1,019.0m
Difference due to exchange rates
$7.6m
Operating profit
from reportable segments
(at 2023 budget exchange rates)
$1,026.6m
LTIP 2021/23
(granted in 2021)
Operation
Awards are made annually and eligible executives will receive
shares at the end of the cycle, subject to achievement of the
three-year performance conditions. These conditions and
weightings are described on page 130.
TSR measures the return to shareholders by investing in IHG
relative to a comparator group containing the following major
globally branded competitors: Accor S.A., Choice Hotels
International Inc., Hilton Worldwide Holdings Inc., Hyatt Hotels
Corporation, Marriott International Inc., Melia Hotels International
S.A., NH Hotels Group, and Wyndham Hotels & Resorts Inc.,
as per data provided by our corporate bankers sourced from
Refinitiv Datastream. Maximum payout is
for upper quartile
relative performance, and threshold is median of the
comparator group.
Any use of discretion, including the factors in
fluencing the decision,
will be clearly communicated in the Directors’ Remuneration
Report for the year in which the decision is made.
The share price in respect of the 2020/22 LTIP cycle has been
restated using the volume weighted average price of 5,467p
for all Executive Directors on the date of actual vesting on
22 February 2023. The corresponding values shown in the 2022
report (prior to the actual vesting) were an estimate calculated
using an average share price over the final quarter o
f 2022
of 4,687p.
AUDITED
Governance
129
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Adjustment to other measures
As disclosed in the 2022 Directors’ Remuneration Report, IHG announced the decision to cease all operations in Russia. Net system
size growth performance for IHG and all companies in the peer set for this relative measure has been adjusted to remove the Russia
system size from all companies for all years. The formulaic NSSG LTIP outcome also includes an adjustment to exclude room removals
incremental to our normal level due to the Holiday Inn and Crowne Plaza estate review in 2021.
These events were not budgeted for at the time of setting the 2021/23 targets, and the Committee, in its judgement, considered it was
appropriate to adjust for them on the basis of its view that LTIP participants should not have been disincentivised from making these
decisions in the long-term interest of shareholders.
The Committee considered performance against the ROCE underpin. The underpin level of 20% was met, with the
final ROCE average
of the three years being 23.7%, therefore the Committee did not need to consider adjusting the NSSG vesting level in respect of this.
Adjustments to absolute cash flow outcome
Over the performance period of the 2021/23 LTIP award, there have been events
that have impacted IHG’s cash flow that were unquantified or un
foreseen when
the original targets were set. In line with the adjustments reported in previous
Directors’ Remuneration Reports, the table opposite shows the reconciliation
between reported cash flow and the outcome
for the 2021/23 LTIP. This includes
adjustments agreed by the Committee to exclude the impact of the exit from
Russia, as described on page 128 of the 2022 Directors’ Remuneration Report,
and consider adjustment for the Holiday Inn and Crowne Plaza quality review to
the extent the final programme differed
from what was re
flected in the LTIP target.
These adjustments had no effect on the vesting outcome.
Reconciliation
Cash flow
$bn
Reported cash flow
from operations
3.03
Net cash from investing activities
(0.23)
Reported outcome per definition
2.80
Other adjustments (see text opposite)
0.01
Adjusted outcome
2.81
AUDITED
Directors’ Remuneration Report
continued
Annual Report on Directors’ Remuneration
continued
Performance measure and weighting
Performance targets
Result
Achievement
(% of maximum)
Weighted
achievement
Target
% Vesting
Total Shareholder Return:
Three-year growth relative to average
of competitors
30%
Maximum 83.4%
Maximum 100%
Outcome 47.1%
30.6%
9.2%
Threshold 41.6%
Threshold 20%
Relative net system size growth:
Three-year growth relative to competitors
40%
Maximum 5.1%
Maximum 100%
Outcome 3.42%
46.6%
18.6%
Threshold 2.6%
Threshold 20%
Absolute cash flow:
Based on IHG’s performance against
an absolute cash flow target
30%
Maximum $1.41bn
Maximum 100%
Outcome $2.81bn
100%
30.0%
Threshold $1.06bn
Threshold 20%
Total % of maximum opportunity vested
57.8%
LTIP outcome for 2021/23 cycle
The performance measures for the 2021/23 three-year LTIP cycle
were determined in accordance with the DR Policy and were:
•
Total Shareholder Return (30%);
•
net system size growth (40%); and
•
cash flow (30%).
The following tables show threshold and maximum opportunity,
as well as weighting and actual achievement, based on the
formulaic outcomes against the three-year targets set in 2021 for
each performance measure.
0
20
40
60
80
100
Maximum
30
30
18.6
9.2
30
40
6
8
6
Actual
Threshold
Total Shareholder Return
Cash flow
Net system size growth
LTIP measures – % of maximum opportunity
20
57.8
100
Governance
130
IHG
| Annual Report and Form 20-F 2023
Result of LTIP 2021/23 outcome
Achievement against target is measured by reference to the three years ended 31 December 2023. This cycle will vest on 21 February
2024 and Executive Directors are subject to a two-year post-vest holding period. The individual outcomes for this cycle are shown
below. The share price of 6,265p used to calculate the 2021/23 LTIP cycle value shown in the single total
figure table is the average
over the final quarter o
f 2023.
Executive Director
Award cycle
Maximum
opportunity at grant
(number of shares)
% of maximum
opportunity
vested
Outcome
(number of shares
awarded at vest)
Total value
of award
£000
Value of award
attributable to share
price appreciation
£000
Elie Maalouf
LTIP 2021/23
32,525
57.8%
18,799
1,178
221
Michael Glover
a
LTIP 2021/23
3,161
57.8%
1,827
114
22
Keith Barr
LTIP 2021/23
59,385
57.8%
34,324
2,150
404
a
Michael Glover also received an RSU award of 2,845 shares in the 2021/23 cycle prior to his appointment to the Board. All RSU shares are due to vest and the value, which has
been calculated on the same basis as the LTIP shares, is £178k of which £33k is attributable to share price appreciation. The combined value of his RSU and LTIP awards is
shown in the LTIP column of the single total
figure table on page 128 rounded to the nearest £000.
Other outstanding awards
Long Term Incentive Plan (LTIP) – scheme interests awarded during 2022 and 2023
During 2022, awards were granted under the LTIP cycle and made to each Executive Director over shares with a maximum value of
350% of salary for the CEO and 275% of salary for all other Executive Directors using an average of the closing mid-market share price
for the
five days prior to grant, as shown in the table below. These are in the
form of conditional awards over Company shares and
do not carry the right to dividends or dividend equivalents during the vesting period. The vesting date for the 2022/24 LTIP award
is the day after the announcement of our
financial year 2024 Preliminary Results in February 2025. These awards will vest to the extent
performance targets are met and will then be held in a nominee account for a further two years, transferring to the award-holder in
February 2027 in accordance with the two-year post-vest holding requirement.
Executive Director
Award date
Maximum
shares awarded
Market price
per share at grant
£
Face value of
award at grant
£000
Number of shares
received if minimum
performance achieved
(20%)
2022/24 cycle
Elie Maalouf
13 May 2022
40,101
48.42
1,942
8,020
Michael Glover
a
13 May 2022
3,860
48.42
187
772
Keith Barr
b
13 May 2022
43,268
48.42
2,095
8,653
a
Michael Glover was also granted an RSU award of 3,474 shares, under our LTIP for his role prior to becoming CFO, on 13 May 2022. RSU awards are not subject to
performance conditions.
b
Keith Barr stepped down from the role of CEO, and from the Board, on 30 June 2023 and the treatment of his unvested awards is described on page 126. He was originally
awarded 64,903 shares, pro-rated to 24/36 months at 31 December 2023.
During 2023, awards were granted under the LTIP cycle and made to each Executive Director over shares with a maximum value of
500% of salary for the CEO and 300% of salary for the CFO using an average of the closing mid-market share price for the
five days
prior to grant, as shown in the table below. These are in the form of conditional awards over Company shares and do not carry the
right to dividends or dividend equivalents during the vesting period. The vesting date for the 2023/25 LTIP award is the day after the
announcement of our
financial year 2025 Preliminary Results in February 2026. These awards will vest to the extent per
formance
targets are met and will then be held in a nominee account for a further two years, transferring to the award-holder in February 2028
in accordance with the two-year post-vest holding requirement.
Executive Director
Award date
Maximum
shares awarded
Market price
per share at grant
£
Face value of
award at grant
£000
Number of shares
received if minimum
performance achieved
(20%)
2023/25 cycle
Michael Glover
10 May 2023
33,812
55.01
1,860
6,762
Elie Maalouf
a
10 May 2023
65,512
55.01
3,604
13,102
Elie Maalouf
a
8 August 2023
19,770
56.74
1,122
3,954
a
Elie Maalouf was granted his original LTIP 2023/25 in May 2023 based on his CEO, Americas base salary. He received a pro-rated top up award following his appointment as
Group CEO based on the difference between his old and new salary.
Annual Performance Plan (APP) deferred shares awarded in 2023
One half of the bonus earned in respect of the 2022 APP was deferred into shares, as detailed below:
Executive Director
b
Award – deferred shares portion
Number of
shares granted
Award date
Market price
per share at grant
£
Face value of
award at grant
£000
Vesting date
Elie Maalouf
2022 APP
a
12,542
1 March 2023
55.17
692
27 February 2026
Keith Barr
2022 APP
a
15,575
1 March 2023
55.17
859
27 February 2026
a
Annual bonus shares are deferred shares which are subject to continued employment, but are not subject to further performance conditions.
b
Michael Glover was not an Executive Director for the periods to which these awards relate; Paul Edgecliffe-Johnson was not granted a deferred APP award in respect of FY2022
since his departure was known in advance of the award grant date of 1 March 2023.
AUDITED
Governance
131
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Performance measures
The performance measures for the 2022/24 LTIP cycle are as outlined below for the three years ending 31 December 2024. NSSG is
a relative measure and is measured to 30 September 2024, rather than 31 December 2024, due to the timing of the publication of
competitor data.
Measure and weighting
Threshold target
(20% of vesting)
Maximum target
(100% vesting)
Relative TSR (30%)
Median
Upper quartile
Relative NSSG with ROCE underpin
a
(40%)
Ranked 4th
Ranked 1st
Absolute cash flow (30%)
1.58bn USD
2.11bn USD
a
This measure is subject to the achievement of a Return on Capital Employed (ROCE) underpin of 20%, below which the Committee has the discretion to reduce the outcome
for the measure.
The performance measures for the 2023/25 LTIP cycle are as outlined below for the three years ending 31 December 2025. NSSG is
a relative measure and is measured to 30 September 2025, rather than 31 December 2025, due to the timing of the publication of
competitor data.
Measure and weighting
Threshold target
(20% of vesting)
Maximum target
(100% vesting)
Relative TSR (20%)
Median
Upper quartile
Relative NSSG (20%)
Ranked 4th
Ranked 1st
Absolute cash flow (20%)
1.667bn USD
2.565bn USD
ESG (20%) – split between four equally weighted measures
Expected energy reduction from introduction of new energy conservation measures
a
4.5% reduction
(new-build hotels)
2.8% reduction
(existing estate)
10.0% reduction
(new-build hotels)
6.3% reduction
(existing estate)
Adoption of existing ECMs in owned, leased, managed and managed lease hotels
80% of hotels
100% of hotels
Gender representation in senior management (% of females in roles)
37%
40%
Ethnicity representation in senior management (% of colleagues in roles)
24%
27%
Adjusted EPS (20%)
5% absolute CAGR
12% absolute CAGR
a
Following a disclosure of this measure in the 2023 DR Policy, a calculation error was identi
fied in the configuration o
f one aspect of the target for this metric. The Committee
has agreed to the correction of this mathematical error, which means the threshold and maximum targets for this metric are as disclosed above. It is important to note that this
correction, resulting from a technical modelling error in incentive plan target con
figuration, does not alter the intended level o
f stretch inherent in performance required to
meet targets as anticipated at the outset, nor does it impact the Company’s wider carbon reduction goals.
AUDITED
Directors’ Remuneration Report
continued
Annual Report on Directors’ Remuneration
continued
Consideration of discretion
Following Keith Barr’s 30 years with IHG, culminating in serving the last
six as Group CEO and ensuring a smooth transition to Elie Maalouf
after stepping down from the Board, the Committee exercised its
discretion to treat Keith as a ‘good leaver’ for the purpose of his
unvested share awards. In line with the UK Corporate Governance
Code, the Committee has adopted a robust, formal framework that
it will use to determine whether to exercise discretion. Some of the
key factors the Committee considers are shown below.
Performance relative to competitors
Historic performance outcomes
Impact of adjustments
Wider Company financial
and strategic performance
Consistency between APP and LTIP outcomes
Stakeholder experience: shareholders,
employees, owners and guests
Historic use of discretion
Possible
use of
discretion
Relative importance of spend on pay
The chart below sets out the actual expenditure of the Group
in 2023 and 2022, showing the differences between those years.
Operating profit
from reportable segments is included as this
is a significant constituent o
f the Annual Performance Plan.
Further information, including where 2022
figures have been
restated, can be found in the Group Financial Statements starting
on page 154 and the accompanying notes.
0
500
1,000
1,500
2,000
2,500
1,035
+44.8%
+23.1%
$m
+13.3%
2,013
2022
2023
2022
2023
2022
2023
Operating profit
from reportable
segments
Staff costs
1,019
715
1,776
828
Distributions to
shareholders by
way of dividend
and share buyback
Governance
132
IHG
| Annual Report and Form 20-F 2023
Current Directors’ shareholdings
The APP deferred share awards are not subject to additional performance conditions. Details on the performance conditions to which
the unvested LTIP awards are still subject can be found on page 132. There have been no changes in the shareholding interests of any
of the Directors since the end of the
financial year up to the publication o
f this report.
Shares and awards held by Executive Directors at 31 December 2023:
Number of shares held
outright, including those
subject to post-vest holding
APP deferred share awards
LTIP share awards (unvested)
Total number of
shares and awards held
2023
2022
2023
2022
2023
2022
2023
2022
Michael Glover
a
13,307
–
3,247
–
47,152
–
63,706
–
Elie Maalouf
99,265
83,340
24,833
21,308
157,908
111,089
282,006
215,737
Keith Barr
bd
60,318
93,263
17,270
29,090
102,653
173,441
180,241
295,794
Paul Edgecliffe-Johnson
cd
15,844
66,869
–
21,389
–
107,945
15,844
196,203
a
We have not included 2022 comparison figures
for Michael Glover as he was not in an Executive Director role at the time.
b
Keith Barr stepped down from the Board on 30 June 2023, however, we are disclosing the number of shares held for him as at 31 December 2023. Keith Barr’s 2023 APP
deferred share awards number is net of tax and his 2023 LTIP share awards number includes the LTIP 2022/24 award pro-rated to the date he left IHG (31 December 2023).
c
Paul Edgecliffe-Johnson stepped down from the Board on 19 March 2023, however, we are disclosing the number of shares held for him as at 31 December 2023. His unvested
LTIP and APP awards were forfeited upon leaving IHG.
d
Where shares were sold after stepping down from their Executive Director role, the balance of remaining shares were within the post-cessation shareholding requirement.
Executive Directors’ shareholdings and share interests
The Committee believes that share ownership by Executive
Directors and senior executives strengthens the link between
the individuals’ personal interests and those of shareholders.
Guideline Executive Director shareholding requirement
Executive Directors are required to hold shares equal to 500% of
salary for the Chief Executive Officer and any US-based Executive
Directors, and 300% for other Executive Directors. Executive
Directors are expected to hold all net shares earned until the
previous guideline shareholding requirement is achieved (300%
for the CEO and any US-based Executive Directors, and 200%
for other Executive Directors) and at least 50% of all subsequent
net shares earned until the current guideline shareholding is met.
The number of shares held outright includes all Directors’
beneficial interests and those held by their spouses and other
connected persons. It also includes the net value of unvested
shares that are not subject to any further performance conditions.
Percentages are calculated using the 29 December 2023 share
price of 7,090p.
We increased our post-employment shareholding requirement
with effect from the approval of our current DR Policy, approved
at the 2023 AGM, so that the full guideline minimum shareholding
requirement continues for two years post-cessation of employment.
As part of this requirement, since 2019, shares have been
granted and all unvested awards held in a nominee account with
Executive Directors required to electronically sign an agreement
to the terms of the grant, including the post-employment
shareholding requirement.
0
200
400
600
800
1,000 1,200 1,400 1,600 1,800 2,000 2,200
Shares held outright and net value of shares subject
to holding/deferral period as a % of base salary
Total number of shares and awards as a % of salary
Shares and awards held by Executive Directors
at 31 December 2023: % of salary
172
557
1,215
805
Michael Glover
Elie Maalou
f
Guideline shareholding
Percentages have been calculated using base salary in GBP at 31 December 2023.
A combined tax and social security rate of 47% is used for both Michael Glover and
Elie Maalouf.
Other information relating to Directors’ remuneration
Dividends paid to Executive Directors
A final dividend
for 2022 of 76.08p per ordinary share (94.5¢ per ADR) was paid on 16 May 2023 to shareholders on the Register of members
at the close of business on 31 March 2023.
An interim dividend of 38.7p per ordinary share (48.3¢ per ADR) was paid on 5 October 2023 to shareholders on the Register of members
at the close of business on 1 September 2023.
Dividends are payable on vested shares held outright, including those subject to a post-vest holding period, and deferred APP shares.
AUDITED
Governance
133
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Annual Report on Directors’ Remuneration
continued
Relative performance graph
InterContinental Hotels Group PLC is a member of the FTSE 100 share index and the graph below shows the Company’s TSR performance
from 31 December 2013 to 31 December 2023, assuming dividends are reinvested, compared with the TSR performance achieved by the
FTSE 100.
0
100
200
300
400
500
IHG PLC
FTSE 100 Index
2022
2013
2014
2015
2016
2017
2018
2019
2020
2021
2023
Chief Executive Officer’s remuneration
The table below shows the Chief Executive Officer’s single
figure o
f total remuneration for the 10 years to 31 December 2023.
Single figure
CEO
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Single figure
of remuneration
(£000)
Elie Maalouf
2,786
d
Keith Barr
2,161
3,143
a
3,376
1,484
3,199
4,273
3,456
e
Richard Solomons
6,611
b
3,197
3,662
2,207
c
Annual incentive
received
(% of maximum)
Elie Maalouf
81.8
Keith Barr
69.7
84.1
58.7
0
100.0
95.7
81.8
Richard Solomons
74.0
75.0
63.9
66.8
Shares received
under the LTIP
(% of maximum)
Elie Maalouf
57.8
Keith Barr
46.1
45.4
78.9
30.6
20.0
52.1
57.8
Richard Solomons
56.1
50.0
49.4
46.1
a
For Keith Barr, the 2018 figure includes a one-off cash payment
for relocation costs in lieu of bene
fits received while on international assignment prior to CEO position, which was
fully
explained in the 2017 report.
b
For Richard Solomons, the 2014 figure includes a one-off cash payment in respect o
f pension entitlements, which was fully explained in the 2014 report.
c
In respect of period 1 January to 30 June 2017.
d
For Elie Maalouf, the 2023
figure includes a one-off cash payment
for relocation costs, fully explained on page 126 of this report. All other elements included in the 2023
figure are
in respect of the period 1 July to 31 December 2023 only, except for LTIP which is the full value of Elie’s 2021/23 award granted before he became Group CEO.
e
In respect of period 1 January to 30 June 2023 only (except for LTIP which is the full value of the LTIP 2021/23 award).
Payments to past Directors
Sir Ian Prosser
Sir Ian Prosser, who retired as Director on 31 December 2003,
had an ongoing healthcare benefit o
f £1,710 during the year.
Payments for loss of office
Keith Barr
Keith Barr stepped down from the Board of IHG on 30 June 2023.
A statement to this effect was prepared pursuant to Section
430(2B) of the CA 2006 and can be found on the IHG PLC
website. He remained an employee of the Company until
31 December 2023 and therefore continued to receive salary and
benefits and remain eligible
for a 2023 APP award. The Committee
exercised its discretion to treat Keith as a ‘good leaver’ for the
purpose of his unvested share awards, pro-rated to his date of
leaving for the LTIP and they will continue to vest according to
the normal vesting schedule for the award. He did not receive a
grant in the 2023/25 LTIP cycle. IHG also agreed to settle fees of
£13,850 plus VAT in connection with legal advice to Keith on these
arrangements. Full details of his arrangements on leaving and the
use of discretion are shown on pages 126 and 132.
Pension entitlements
No Executive Director is entitled to any Defined Benefit pension
or related benefit
from IHG.
AUDITED
Governance
134
IHG
| Annual Report and Form 20-F 2023
CEO pay ratio
As we have noted in previous DRRs, pay ratios will differ significantly
between companies, even within the same industry, depending
on demographics and business models. The Group’s UK employee
demographic, which primarily consisted of largely professional,
management and senior corporate roles, changed in 2019 with the
addition of a number of hotel employing entities, comprising the
UK leased estate, which includes a large proportion of part-time
and flexible-working support and service roles. As per our past
disclosures, we show the ratio both including and excluding the
UK hotel employing entities.
Full population
Population excluding hotel
employing entities
Year
Method
25th
Median
75th
25th
Median
75th
Financial
year ended
31 December
2023
Option
C
212:1
136:1
68:1
82:1
62:1
40:1
Financial
year ended
31 December
2022
Option
C
193:1
113:1
67:1
71:1
56:1
35:1
Financial
year ended
31 December
2021
Option
C
163:1
65:1
41:1
59:1
42:1
27:1
Financial
year ended
31 December
2020
Option
C
89:1
44:1
25:1
35:1
26:1
18:1
Financial
year ended
31 December
2019
Option
C
180:1
122:1
59:1
71:1
49:1
32:1
Financial
year ended
31 December
2018
Option
C
–
–
–
72:1
48:1
29:1
The 2018-2022 figures have been restated to reflect the value o
f the CEO’s LTIP awards on
the date of actual vesting rather than the estimated vesting levels used in the respective
years’ DRRs.
What drives the difference in pay between our CEO
and other employees?
Pay ratios reflect how remuneration arrangements differ as
responsibility increases for more senior roles within the organisation,
for example:
•
this is the first year the increased LTIP quantum
from the 2020
DR Policy vests for the CEO, the increase was deferred by a year
so was not granted at the higher level until 2021. Although there
was a strong APP outcome for both the CEO and wider corporate
population, a greater proportion of performance-related variable
pay and share-based incentives apply for the more senior executives,
including Executive Directors, who will have a greater degree of
influence over per
formance outcomes;
•
role-specific specialist plans apply in certain areas such as
corporate reservations, sales, hotel development and General
Managers of IHG managed, owned, leased and managed lease
hotels. The target and maximum amounts that can be earned
under these plans are typically a higher percentage of base salary
for more senior employees, which in turn affect the pay ratio; and
•
incentive plans for other corporate employees are typically based
on a combination of individual performance and the Group’s
operating profit
from reportable segments.
The increase in ratio since 2020, reflects the strong per
formance
of the business and the resulting increases in variable pay outcomes.
The comparative CEO figure used
for calculating this year’s ratio
included some one-off costs associated with Elie Maalouf’s relocation.
The population demographics have also had a larger impact than
in previous years as the full population in 2023 includes a greater
number of hotel employees than it did in 2022. Overall, on this basis,
the Company believes the median pay ratio for the relevant
financial
year is consistent with the pay, reward and progression for the
Company’s UK employees taken as a whole.
Calculation methodology and supporting information
Option C has been selected for the identi
fication o
f the percentile
employees. IHG prefer to use this method as we are able to produce
the most accurate total remuneration figure
for all UK employees
on a basis comparable with the statutory reporting for Executive
Directors using the most recently available data at the time of
producing the Annual Report. Specifically, this involves:
•
compiling all monthly payroll data for all UK employees from
1 January to 31 December 2023 detailing complete variable and
fixed remuneration, including pension and taxable benefits such
as company car or allowance and healthcare; and
•
valuing APP for the corporate workforce based on actual 2023
company performance metrics but only target for the personal
performance metric, as actual outcomes for this element of the
award are not known at the time of writing this report, so that it
reflects as much o
f the same input as for the CEO data as possible
at the time of calculation. In practice, personal performance
outcomes are subject to manager discretion and can be flexed
between 0-200% of target.
As noted on page 126, we had a change of CEO during 2023, so we
have used pro-rated salary, benefits, pension and bonus amounts
for Keith Barr and Elie Maalouf for the respective periods in which
they were CEO for calculating the pay ratio this year. We have used
the full value of Keith Barr’s LTIP 2021/23 award, however, as this
award was granted at the full level available to the CEO as per the
DR Policy at the time, and we believe it is the most accurate figure
for this disclosure.
Option C requires three UK employees to be identified as the
equivalent of the 25th, 50th and 75th percentile. Having identi
fied
these employees, the 2023 remuneration is calculated on the same
basis as the CEO single total figure o
f remuneration.
The pay arrangements for the six employees, three from the full
population and three from the population excluding hotel employing
entities, were reviewed alongside those for the employees ranked
immediately above and below them to confirm that they were
representative of pay levels at these quartiles. The 2023 salary and
total pay for the individuals identi
fied at the lower, median and
upper quartiles are set out below:
Year
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
Financial year ended
31 December 2023
– Full population
Salary £
20,362
a
31,185
58,390
Total
remuneration £
23,933
37,132
74,278
Financial year ended
31 December 2023
– Excluding hotel
employing entities
Salary £
47,500
65,225
90,100
Total
remuneration £
61,434
81,843
125,842
a
The total salary figure used
for the 25th percentile for the full population includes
periods of unpaid absence and the base pay for the year excluding this would have
been £23,463.23.
In the 2022 Directors’ Remuneration Report, we confirmed that
the Real Living Wage would be applied as a minimum for all staff
from April 2023 and on reviewing the 25th percentile for this year’s
ratio, we can see that the annual salary for the 25th percentile (full
population) following April 2023 merit increases is £24,128. This is
above the annualised Real Living Wage salary for 2022/23 of £22,672
(£11.60ph vs £10.90ph).
Governance
135
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Annual Report on Directors’ Remuneration
continued
Single total figure o
f remuneration: Non-Executive Directors
Committee
appointments
Date of original
appointment
Fees
£000
Taxable benefits
£000
Total
Rounded to the nearest £000
Non-Executive Director
2023
2022
2023
2022
2023
2022
Deanna Oppenheimer
N
R
01/06/2022
475
174
33
10
508
184
Graham Allan
A
N
RB
SID
01/09/2020
132
116
4
2
136
118
Daniela Barone Soares
R
RB
01/03/2021
84
81
5
4
89
85
Arthur de Haast
A
RB
01/01/2020
84
81
6
5
90
86
Ian Dyson
A
N
R
01/09/2013
19
108
5
5
23
113
Duriya Farooqui
A
RB
07/12/2020
84
81
15
14
99
95
Byron Grote
A
N
R
01/07/2022
107
41
5
1
112
42
Jo Harlow
N
R
01/09/2014
111
108
11
5
123
113
Jill McDonald
A
N
RB
01/06/2013
16
95
6
6
22
101
Angie Risley
R
RB
01/09/2023
28
–
6
–
34
–
Sharon Rothstein
A
RB
01/06/2020
84
81
8
9
92
90
See page 96 for Board and Committee membership key and attendance.
Fees:
Fees are paid in line with the DR Policy. Jill McDonald and Ian Dyson stepped down from the Board on 28 February 2023, so all
fees and taxable bene
fits
for these Directors ceased on this date. Angie Risley joined the Board on 1 September 2023, so all fees and
taxable benefits
for this Director began on their appointment date.
Benefits:
For Non-Executive Directors, benefits include taxable travel and accommodation expenses to attend Board meetings away
from the designated home location. Under UK income tax legislation, the non-UK based Non-Executive Directors are not subject to tax
on some travel expenses; this is reflected in the taxable benefits
for Deanna Oppenheimer, Duriya Farooqui and Sharon Rothstein.
Other:
Non-Executive Directors are not eligible for any incentive awards or for any pension contribution/bene
fit.
Non-Executive Directors’ shareholding and share interests at 31 December 2023
Non-Executive Director
2023
b
2022
Deanna Oppenheimer
a
5,000
–
Graham Allan
600
–
Daniela Barone Soares
478
322
c
Ian Dyson
1,500
1,500
Arthur de Haast
1,000
1,000
Duriya Farooqui
a
200
–
Byron Grote
a
5,300
2,800
Jo Harlow
a
950
950
Jill McDonald
–
–
Angie Risley
848
–
Sharon Rothstein
a
2,000
–
a
Shares held in the form of American Depositary Receipts (ADRs).
b
Shares held as at 31 December 2023 or the date at which they ceased to be a Non-Executive Director.
c
The 2022 figure
for Daniela Barone Soares has been restated due to additional shares being acquired pursuant to a standing instruction in relation to a Dividend Reinvestment
Plan (DRIP).
Where Directors have remained in role, there have been no changes in the shareholding interests of any of the Directors since the end
of the
financial year up to the publication o
f this report.
Fees: Non-Executive Directors
The fees for Non-Executive Directors are reviewed and agreed
annually in line with the DR Policy; 2023 increases were lower than
the budget for the wider UK and US corporate workforce and 2024
increases are in line with the wider workforce budget. The basis for
setting fee levels for 2024 will be as follows, each element
independently rounded to the nearest £000:
Annual fee
Role
Increase
2024
£000
2023
£000
Chair of the Board
4%
494
475
Non-Executive Director
4%
87
84
Additional fees
Chair of Audit Committee
4%
29
28
Chair of Remuneration Committee
4%
29
28
Chair of Responsible Business Committee
4%
15
15
Senior Independent Director
4%
38
36
AUDITED
Governance
136
IHG
| Annual Report and Form 20-F 2023
Annual percentage change in remuneration of Directors compared to employees
The table below shows the percentage change in all Directors’ remuneration compared to that of an average employee between the
financial years ended 31 December 2019 to 31 December 2023.
The 2023 remuneration figures
for the Directors are taken from the data used to compile the single total
figure o
f remuneration tables
shown on pages 128 and 136, excluding any rounding up or down. No employees are directly employed by the Group’s Parent Company,
so the average employee data for this year’s report is based on the same UK corporate employee population as that on which the CEO pay
ratio is calculated.
Elie Maalouf became Group CEO on 1 July 2023 which involved a relocation to the UK. Elie’s salary in the previous year-on-year changes was
calculated in USD, with the equivalent single total figure table disclosures reported in GBP. From 1 July 2023, Elie’s salary has been in GBP so,
to reduce any impact of the currency conversion, we are now calculating his percentage change in GBP. This is the currency in which his
salary, bonus and a large sum of his bene
fits will be paid going
forward, and therefore will provide a more meaningful indication of his
year-on-year remuneration changes and align further with the intentions of this disclosure.
All corporate employees share the same corporate performance metrics with the Executive Directors; however, the weightings of these
metrics differ for corporate employees below Executive Committee level and measures include an individual performance portion, the
results of which are not available at the time of reporting. For average employee data, we assume that target performance is achieved.
Non-Executive Directors are not eligible for a bonus.
Taxable benefits
for Non-Executive Directors largely comprise of travel expenses whereas, Executive Director and average employee
taxable benefits typically comprise elements o
f their reward package, such as company car or allowance and healthcare bene
fits.
Year-on-year change
2023 vs 2022
Year-on-year change
2022 vs 2021
Year-on-year change
2021 vs 2020
Year-on-year change
2020 vs 2019
Salary
Bonus
Benefits
Salary
Bonus
Benefits
Salary
Bonus
Benefits
Salary
Bonus
Benefits
Executive Directors
Elie Maalouf
21%
-14.6%
247%
4%
-0.47%
-1%
22%
100%
91%
-15%
-100%
-9%
Michael Glover
–
–
–
–
–
–
–
–
–
–
–
–
Non-Executive Directors
Deanna Oppenheimer
–
N/A
–
–
N/A
–
–
N/A
–
–
N/A
–
Graham Allan
13%
N/A
108%
49%
N/A
684%
a
–
N/A
–
–
N/A
–
Daniela Barone Soares
3%
N/A
16%
–
N/A
–
–
N/A
–
–
N/A
–
Arthur de Haast
3%
N/A
28%
4%
N/A
1,706%
a
18%
N/A
-1%
–
N/A
–
Duriya Farooqui
3%
N/A
10%
4%
N/A
100%
a
–
N/A
–
–
N/A
–
Byron Grote
–
N/A
–
–
N/A
–
–
N/A
–
–
N/A
–
Jo Harlow
3%
N/A
114%
4%
N/A
1,970%
a
18%
N/A
100%
-13%
N/A
-94%
Angie Risley
–
N/A
–
–
N/A
–
–
N/A
–
–
N/A
–
Sharon Rothstein
3%
N/A
-10%
4%
N/A
100%
a
–
N/A
–
–
N/A
–
Average employee
8%
-9.1%
20%
14%
-6.01%
5%
3%
100%
-11%
-6%
-100%
-9%
a
Please see notes below for further details on these percentage change anomalies.
Notes to the annual percentage change in remuneration of Directors compared to employees table
•
No data has been reported for Byron Grote and Deanna Oppenheimer as they both joined the Board during 2022 and therefore only
part-year data is available, which does not enable a comparison with 2023. Similarly, Michael Glover and Angie Risley both joined the
Board during 2023, so there will be no full-year data comparisons for them in 2023 and 2024.
•
Graham Allan was appointed as Chair of the Responsible Business Committee in addition to his role as Senior Non-Executive Director
from 1 March 2023, so his salary percentage change increase incorporates the base fee increase and the addition of his role supplements.
•
As explained above, Elie Maalouf took on the role of Group CEO on 1 July 2023, therefore his salary percentage change increase
incorporates his new remuneration package for part of 2023. Elie’s 2023 taxable bene
fits figure also includes additional relocation costs,
including a one-off relocation payment and an ongoing housing allowance which were not applicable in 2022. The 2022 vs 2021
percentage change for Elie has been updated due to the 2022 bene
fits figure being restated as noted on page 128.
•
In 2023, more in-person Board Meetings were held than in 2022. Graham Allan incurred only £2,016.61 in expenses in 2022 but incurred
£4,200.55 in 2023, hence the percentage change increase for 2023 vs 2022 is 108%. Similarly, Daniela Barone Soares, Arthur de Haast
and Duriya Farooqui incurred an additional £734.70, £1,310.10 and £1,370.07 on 2022 figures respectively. As expected, the extreme
fluctuations shown in percentage change in last year’s disclosure have already begun to reduce and we expect these to even out more
going forward as Board meetings return to a more regular structure.
•
The bonus outcome for the average employee has fallen by a lower percentage than that of Executive Directors due to the difference
in weightings for measures and additional budget being made available for the individual performance element for employees below
Executive Committee level.
•
Any significant percentage changes in the previous year-on-year changes (2022 vs 2021, 2021 vs 2020 and 2020 vs 2019) are explained
in the relevant year’s Directors’ Remuneration Report.
Governance
137
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Annual Report on Directors’ Remuneration
continued
Implementation of Directors’ Remuneration Policy in 2024
This section explains how certain elements of the DR Policy will be applied in 2024.
Salary: Executive Directors
Directors’ salaries are agreed annually in line with the DR Policy.
The following salaries will apply from 1 April 2024:
Increase
%
2024
2023
Executive Director
£
£
Elie Maalouf
0
990,000
990,000
Michael Glover
4
644,800
620,000
Elie Maalouf is not eligible for a merit increase in 2024 following his appointment as Group CEO on 1 July 2023. Further details regarding
his appointment can be found on page 126. The increase for the CFO is shown above and is in line with the budget for the wider corporate
workforce. For Executive Director merit increases, we use a range of considerations including wider workforce merit increases, market data
and external benchmarking. In addition to FTSE 100 data and other hotel comparators, we use the following US comparator group for CEO
salary and overall pay benchmarking: Choice Hotels International Inc.; Hilton Worldwide Holdings Inc.; Hyatt Hotels Corporation; Marriott
International Inc.; and Wyndham Hotels & Resorts Inc..
Measures for 2024 APP
The 2024 APP structure is in line with the approved DR Policy and will be based on a 70% weighting for a measure of operating pro
fit
from
reportable segments and a 30% weighting for other key strategic measures that are reviewed annually and set in line with business priorities.
The target award has been reduced from 115% to 100% of salary, and subject to meeting minimum shareholding requirements, up to 70%
of the award may be paid in cash and at least 30% in deferred shares.
Operating profit
from reportable segments is a focal measure of business performance for our shareholders and is a function of other
critical measures, such as RevPAR, profit margin and
fee revenues. The Committee has determined that for 2024, it remains important
to the Company’s strategic objectives to focus on new room openings and new room signings in the APP. New room openings are critical
to driving both short- and long-term profitable growth and are a recognised key per
formance measure across the industry, whilst new room
signings provide the best gauge of future growth as they create the path for openings in future years, which will, in turn, drive pro
fit and
revenue growth. The two strategic measures will be evenly weighted, with each worth 15% of the overall APP. The targets are commercially
sensitive and will be disclosed in the 2024 Annual Report.
Measure
Definition
Weighting
Performance objective
Operating profit
from
reportable segments
A measure of IHG’s operating pro
fit
from reportable
segments for the year
70%
Achievement against target
Room signings
Absolute number of new room signings
15%
Achievement against target
Room openings
Absolute number of new room openings
15%
Achievement against target
Measures and targets for 2024/26 LTIP cycle
For the 2024/26 cycle, we will retain a net system size growth (NSSG) measure reflecting our strategy o
f accelerating the growth of our
brands in high-value markets, this will have a relative performance target against our six largest competitors and the weighting for this
measure will remain at 20%. The cash flow measure to deliver consistent and sustained growth remains in place with a weighting o
f 20%.
Total Shareholder Return (TSR) continues to make up another 20% of the 2024/26 cycle measures; the TSR comparator group has been
updated for the 2024/26 cycle. The existing comparator group (up to the 2023/25 LTIP cycle) can be found on page 129 of this report and
the new TSR comparator group (with effect from the 2024/26 LTIP cycle) can be found within the table below. Alongside the new companies
that have been added to the group, the existing member NH Hotels has been replaced with its majority shareholder, Minor International.
Adjusted earnings per share (EPS) was introduced as a balancing measure to TSR with effect from the 2023/25 LTIP cycle, and this will remain
in place with a 20% weighting as a balance to the more volatile and less controllable TSR measure. Adjusted EPS targets incorporate assumed
share buybacks as part of our ongoing shareholder return programme, so the Committee would not expect to adjust performance outcomes
at the end of the performance period for buybacks made during the cycle. Following the introduction of an ESG measure in our 2023/25
LTIP cycle, we have continued to include ESG in the 2024/26 cycle with a weighting of 20% made up of four equally weighted measures
based on IHG’s People and Planet goals. Further information, including on the underlying metrics for ESG, can be found on page 140.
The measures for the 2024/26 cycle are as follows:
Measure
Definition
Weighting
Performance objective
Relative total
shareholder
return (TSR)
IHG’s performance against a comparator group of global
hotel companies against which TSR outcomes are
measured: Accor S.A.; Choice Hotels International Inc.;
Dalata Hotel Group PLC; H World Group Limited; Hilton
Worldwide Holdings Inc.; Hyatt Hotels Corporation;
Indian Hotels Company Limited; Jin Jiang International
Holdings Company Limited; Marriott International Inc.;
Melia Hotels International S.A.; Minor International;
Scandic Hotels Group AB; Shangri-La Hotel Public
Company Limited; Whitbread plc.; and Wyndham Hotels
& Resorts Inc..
20%
Threshold: median of comparator group
(20% of TSR element vests);
Maximum: upper quartile of comparator group
(100% of TSR element vests); and
Vesting will be on a straight-line basis in between
the two points above.
Governance
138
IHG
| Annual Report and Form 20-F 2023
Measure
Definition
Weighting
Performance objective
Relative
net system
size growth
IHG’s aggregated compound annual growth rate (CAGR)
against our six largest competitors with over 500k
rooms: Marriott International Inc.; Hilton Worldwide
Holdings Inc.; Accor S.A.; Jin Jiang International Holdings
Company Limited; Wyndham Hotels & Resorts Inc.; and
Choice Hotels International Inc.. Targets will be set based
on increased room count that is consistent with the
relevant company’s business plan objectives and
practice as at the start of the LTIP cycle.
20%
Threshold: fourth ranked competitor excluding IHG
(20% of NSSG element vests);
Maximum: first ranked competitor excluding IHG
(100% of NSSG element vests); and
Vesting will be on a straight-line basis in between
the two points above.
Absolute
cash flow
Cumulative annual cash generation over the three-year
performance period. Absolute cash
flow includes
reported cash flow
from operations and net cash from
investing activities.
20%
Threshold: US 2.395bn
(20% of cash
flow element vests);
Maximum: US 3.421bn
(100% of cash
flow element vests); and
Vesting will be on a straight-line basis in between
the two points above.
Environmental,
social and
governance
1. Adoption of existing energy conservation measures
(ECMs)
Adoption of agreed ECMs by existing Americas Essentials
and Suites hotels that are the subject of licence renewal
or conversion property improve plans – (including
franchise – Scope 3).
2. Low/zero carbon hotels
Development of hotels that operate at very low/zero
carbon, focused primarily on new-build hotels, to
support delivery of our carbon and energy goals.
3. Inclusion
Improvement in ‘Inclusion Index’ scores for US and UK
ethnically diverse hotel and corporate colleagues
compared to all US and UK hotel and corporate
colleagues.
4. Talent interventions
Impact of our Journey to GM, Career Insights and RISE
Talent programmes.
20%
(5% each)
1. Threshold vesting will occur if there is aggregate
adoption of each of the
five ECMs at 80% o
f hotels
and maximum vesting will occur if there is
aggregate adoption of each of the
five ECMs at
100% of hotels. Vesting will be on a straight-line
basis for achievement between threshold
and maximum.
2. Threshold vesting will occur if 10 hotels are
open or under construction globally and maximum
vesting will occur if 15 hotels are open or under
construction globally. Vesting will be on a
straight-line basis for achievement between
threshold and maximum.
3. Threshold vesting will occur if the average of
Inclusion Index scores for US and UK ethnically
diverse hotel and corporate colleagues is not more
than 7% below that of the total population in the
final year o
f the performance period and maximum
vesting will occur if the average Inclusion Index
scores for US and UK ethnically diverse hotel and
corporate colleagues are at least in line with that
of the total population in the
final year o
f the
performance period. Vesting will be on a straight-
line basis between the above two points.
4. Threshold vesting will occur if 30% of talent who
took part in the programmes between 2022 and
2024 have been promoted by 31 December 2026
and maximum vesting will occur if 50% of talent
who took part in the programmes between 2022
and 2024 have been promoted by 31 December
2026. Vesting will be on a straight-line basis
between the above two points.
For each of the above performance objectives,
20% of the element vests at threshold achievement
and 100% of the element vests at maximum
achievement.
Adjusted
earnings per
share (EPS)
Absolute compound annual growth rate (CAGR)
20%
Threshold vesting will occur if adjusted EPS
CAGR is 5% per annum (20% of adjusted EPS
element vests);
Maximum vesting will occur if adjusted EPS CAGR
is 12% per annum or more (100% of adjusted EPS
element vests); and
Vesting will be on a straight-line basis in between
the two points above.
Governance
139
IHG
| Annual Report and Form 20-F 2023
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Annual Report on Directors’ Remuneration
continued
ESG measures
Our ESG measures for the 2024/26 LTIP cycle are again aligned to the Planet and People aspects of our Journey to Tomorrow responsible
business plan. The new measures build on the 2023/25 LTIP cycle, with the Planet measures focusing on the ongoing rollout of new Energy
Conservation Measures (ECMs) in the existing hotel estate as part of our brand standards and the development of hotels that operate at very
low/zero carbon, a programme for which is expected to launch in 2024. Stretching targets have been set for these metrics, with full payout
requiring 100% adoption of
five ECMs, including in
franchise hotels (Scope 3) and 15 new hotels that operate at low/zero carbon open or
under construction. These are important areas within management control which support the delivery of our long-term carbon and energy
goals.
The 2024/26 People measures build on and complement our representation measures in the 2023/25 cycle. They are focused on strengthening
our inclusive culture and talent-driven approach to growth, as part of our commitment to our people. A challenging maximum target has
been set to level up the average of ‘inclusion index’ scores, an aspect of our employee engagement survey (carried out by an external party),
for ethnically diverse US and UK corporate and hotel colleagues to be at least in line with those of the respective full employee populations.
Threshold for this measure has been set after careful consideration of the range of current differences in scores across these respective
populations. The second People measure for the 2024/26 cycle supports our hotel growth agenda through existing talent intervention
programmes targeted at developing the next generation of hotel managers. This includes the RISE programme, which aims to increase the
number of female colleagues in hotel leadership roles across our managed and leased estates. The threshold for this measure is set in line
with the average post-programme promotion rate for the three years to the end of 2023. The maximum target requires achievement of
a very stretching 50% promotion rate from the 2022, 2023 and 2024 cohorts of the Journey to GM, Career Insights and RISE programmes
by the end of the cycle in 2026.
Total Shareholder Return (TSR) comparator group
Our existing TSR comparator group was agreed in 2016 and originally included two additional companies that have since been removed
due to a merger and delisting. The exit of these from public capital markets, and thus from the comparator group, resulted in a relatively
small remaining comparator group. As a result, the Committee has made the decision to expand the comparator group from 8 to 15 global
hotel companies. We believe that this mitigates the potential for the existing comparator group to become smaller due to industry
consolidation or other factors.
The Committee applied a robust set of
filters to select the additions to the comparator group and believe that the broadening o
f the comparator
group reflects that IHG has an international
footprint; competes with a wide range of hotel peers across the world; and that we have a diverse
investor base, with some shareholders more focused on European and globally listed businesses, in addition to those with a US-listed
business focus.
Angie Risley
Chair of the Remuneration Committee
19 February 2024
Governance
140
IHG
| Annual Report and Form 20-F 2023
Statement of compliance
Our Statement of compliance summarises how the Group has
applied the principles of the 2018 UK Corporate Governance Code
(available at
frc.org.uk/library/standards-codes-policy/corporate-
governance/uk-corporate-governance-code/
under UK Corporate
Governance Code) as published in July 2018 (the Code) and
comments on compliance with the Code’s provisions.
This should be read in conjunction with the Strategic Report
on pages 2 to 88, and Governance, including the Directors’
Remuneration Report, on pages 89 to 140, as a whole.
The Board considers that the Group has complied in all material
respects with the Code’s provisions for the year ended 31 December
2023, save as noted below in section 5 P (Remuneration policies and
practices) in respect of provision 38.
1.
Board Leadership and Company Purpose
A.
The role of the Board
The Board continues to lead the Group’s strategic direction and
long-term objectives. Further responsibilities of the Board are set
out on page 100.
The Board met eight times during 2023 and all Directors continue
to act in what they consider to be the best interests of the Company,
consistent with their statutory duties. Further details of 2023 Board
meetings, including information on matters discussed and decisions
taken by the Board, are set out on pages 101 to 103; attendance
information is on page 96; and skills and experience and
biographical information is on pages 92 to 95.
A description of IHG’s business model is set out on pages 10 to 13.
An assessment of the principal risks facing the Group is included on
pages 42 to 49.
Potential conflicts o
f interest are reviewed annually and powers of
authorisation are exercised in accordance with the Companies Act
and the Company’s Articles of Association.
During the year, if any Director has unresolved concerns about the
operation of the Board or the management of the Company, these
would be recorded in the minutes of the meeting.
B.
The Company’s purpose, values and strategy
Our purpose is to provide True Hospitality for Good. A description
of our culture, including an overview of our values and information
on how the Board ensures alignment between our purpose,
values and strategy and our culture, is included on pages 38 to 41.
A summary of the Board’s activities in relation to the Voice of the
Employee is included on page 113. Information on the Group’s
approach to rewarding its workforce is contained on pages 29 to 30
and 123 and 124.
C.
Resources
The Board delegates oversight of the allocation of day-to-day resources
to management (principally through the Executive Committee).
Information on the Group’s key performance indicators, including
the measures used to monitor them, is included on pages 60 to 63.
A summary of the procedures for identifying and discussing emerging
risks is set out on pages 42 to 49.
D.
Shareholders and stakeholders
The Board engaged actively throughout 2023 with shareholders
and other stakeholders. The Chair held a number of meetings with
major institutional shareholders to discuss the role of the Board and
other general governance issues, following which the Chair ensured
that their views were communicated to the Board as a whole.
The (then) Chair of the Remuneration Committee also engaged
extensively with shareholders during the year. Further details are
on page 125.
Information on the Board’s consideration of and engagement with
other stakeholders, including employees, suppliers, hotel owners
and guests, is included on pages 36 and 37.
E.
Workforce policies and practices
The Board has overarching responsibility for the Group’s workforce
policies and practices and delegates day-to-day responsibility to
the CEO and Chief Human Resources Officer to ensure that they
are consistent with the Company’s values and support its
long-term success.
Employees are able to report matters of concern con
fidentially
through our Confidential Disclosure Channel. The Board routinely
reviews reports generated from the disclosures and ensures that
arrangements are in place for investigation and follow-up action
as appropriate.
2.
Division of Responsibilities
F.
The Chair
Deanna Oppenheimer leads the operation and governance of the
Board and its Committees. The Chair has been in post since
September 2022 and was independent on appointment.
G.
Board composition
The size and composition of the Board and its Committees are kept
under review by the Nomination Committee to ensure the appropriate
combination of Executive and Non-Executive Directors. Details of
the composition of the Board and Committees are available on
pages 92 to 96.
At least half of the Board, excluding the Chair, are Independent
Non-Executive Directors. Provision 10 of the Code considers the
independence of Non-Executive Directors and circumstances that
might impair their independence, including holding office for over
nine years. Jo Harlow reached a nine-year tenure in September
2023, before retiring from the Board on 31 December 2023. In light
of Jo’s role as Chair of the Remuneration Committee, the Board
considered a slight extension to her nine-year tenure as appropriate
to facilitate an orderly transition to Angie Risley, who succeeded Jo
as Chair of the Remuneration Committee from 1 January 2024.
The Board carefully considered Jo’s contributions and commitments
in light of her extended tenure, and concluded that she remained
independent.
H.
Non-Executives
Non-Executive Director terms of appointment outline IHG’s time
commitment expectations required to ful
fil their role.
The commitments of each Director are included in the Directors’
biographical details on pages 92 to 95. Details of Non-Executive
Director appointment terms are set out on page 125.
The Chair annually reviews the time each Non-Executive Director
dedicates to IHG as part of the performance evaluation of Directors
(see page 106) and is satisfied that their other duties and time
commitments do not conflict with those as Directors.
Graham Allan is the Senior Independent Non-Executive Director (SID).
The SID provides a sounding board for the Chair and serves as an
intermediary for the other Directors and shareholders. Graham also
led the annual performance review of the Chair (see page 106).
After each Board meeting, Non-Executive Directors and the Chair
meet without Executive Directors being present.
Governance
141
IHG
| Annual Report and Form 20-F 2023
Statement of compliance
I.
Policies, processes, information and resources
The Chair and Company Secretary ensure that the Board and its
Committees have the necessary policies and processes in place and
that they receive timely, accurate and clear information. The Board
and its Committees also have access to the Company Secretary,
independent advice and other necessary resources, at the Company’s
expense. They receive the administrative and logistical support of
a full-time executive assistant.
3.
Composition, Succession and Evaluation
J.
Appointments
Appointments to the Board are led by the Nomination Committee
in accordance with its Terms of Reference (available on our website
at
ihgplc.com/investors
under Corporate governance).
The Nomination Committee also supports the Board in succession
planning for the Board and senior management. Further details of
the role of the Nomination Committee and what it did in 2023 are
in the Nomination Committee Report on pages 114 and 115.
The overall process of appointment and removal of Directors is
overseen by the Board as a whole.
All of the Directors retire and seek election or re-election at each AGM.
K.
Skills
Details of the skills, experience and biographical information of the
Board are set out on pages 92 to 95.
The Chair and Company Secretary ensure that new Directors receive
a full induction, and that all Directors continually update their skills
and have the requisite knowledge and familiarity with the Group to
ful
fil their role (see page 104).
The length of service of Non-Executive Directors is reviewed regularly.
L.
Annual evaluation
The Board undertakes either an internal or external annual Board
effectiveness evaluation. In 2023, the Board undertook an external
evaluation. Details of the process and results of the evaluation are
included on pages 104 to 106.
Performance evaluations of Directors, including the Chair, are also
carried out on an annual basis. Directors’ biographies are set out on
pages 92 to 95, and details of performance evaluations carried out
in 2023 are on page 106.
4.
Audit, Risk and Internal Control
M. Audit functions
The Audit Committee is comprised entirely of Independent
Non-Executive Directors (see page 96 for membership details).
Byron Grote, the Audit Committee’s Chair, has recent and relevant
financial experience, and the Committee as a whole has
competence relevant to the sector in which we operate. Details of
the Committee’s role, responsibilities and activities are set out on
pages 107 to 111.
The Audit Committee reviewed the effectiveness of the Group’s
Internal Audit function and also assessed PricewaterhouseCoopers
LLP’s performance during 2023, including its independence,
effectiveness and objectivity. Details of these reviews are set out
in the Audit Committee Report on pages 107 to 109.
N.
Assessment of the Company’s position and prospects
The Statement of Directors’ Responsibilities (including the Board’s
statement confirming that it considers that the Annual Report and
Form 20-F, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group’s position, performance, business model and strategy)
is set out on page 144.
The status of IHG as a going concern is set out in the Directors’
Report on page 241. An explanation of the Group’s performance,
business model, strategy and the risks and uncertainties relating to
IHG’s prospects, including the viability of the Group, is set out in the
Strategic Report on pages 2 to 88.
O.
Risk management
The Board determines the nature and extent of the principal risks
the organisation is willing to take to achieve its strategic objectives.
The Board completed an assessment of the principal and emerging
risks facing the Group during the year, including those risks that
would threaten the Group’s business model, future performance,
solvency or liquidity and reputation (see pages 42 to 49 for further
details of the principal risks). The Board and Audit Committee
monitor the Group’s risk management and internal controls systems
and conduct an annual review of their effectiveness. Throughout the
year, the Board has directly, and through delegated authority to the
Executive Committee and the Audit Committee, overseen and
reviewed all material controls, including financial, operational and
compliance controls. See pages 42 to 49 and 107 to 109.
5.
Remuneration
P.
Remuneration policies and practices
The Remuneration Committee is responsible for developing policy
on executive remuneration and determining remuneration packages
of Directors and senior management. The Directors’ Remuneration
Report is set out on pages 116 to 140. Details of the Remuneration
Committee’s focus areas during 2023 are set out on page 125 and
its membership details are on pages 96 and 118.
Provision 38 of the Code states that pension contribution rates for
executive Directors should be aligned with those available to the
workforce. As explained in the Annual Report and Form 20-F 2019,
this was to be the case for new UK appointments and (then) existing
UK Executive Directors from January 2023. US retirement bene
fit
arrangements differ in a number of ways from the UK and include
a Deferred Compensation Plan for senior employees.
Given the importance of the CEO, Americas’ role to the business and
the market competitiveness concerns over Executive Director pay,
the arrangements as they related to Elie Maalouf in his role as CEO,
Americas were maintained up to the end of his tenure in that role on
30 June 2023. With effect from 1 July 2023, Elie was promoted to
Group CEO and transferred to a UK pension basis. As such, effective
from 1 July 2023, the pension arrangements for Executive Directors
are now in line with Provision 38 of the Code. Further details can be
found on pages 123 and 126.
Q.
Procedure for developing policy on executive remuneration
Details of how the Directors’ Remuneration Policy (DR Policy) was
implemented in 2023 are set out on pages 128 to 137.
During 2023, no individual Director was involved in deciding his
or her own remuneration outcome.
R.
Independent judgement and discretion
The Remuneration Committee has formal discretions in place in
relation to outcomes under the Deferred Award Plan rules, and these
are disclosed as part of the DR Policy. When determining outcomes
under incentive plans, the Committee considers whether it is
appropriate to adjust outcomes under these discretions, taking
account of the Group’s performance, relative performance against
competitors and other relevant factors. Information on the
Remuneration Committee’s consideration of the use of discretion
during 2023 is set out on page 132.
Statement of compliance
continued
Governance
142
IHG
| Annual Report and Form 20-F 2023
144
Statement of Directors’ Responsibilities
145
Independent Auditor’s UK Report
151
Independent Auditor’s US Report
154
Group Financial Statements
161
Accounting policies
173
Notes to the Group Financial Statements
Group
Financial
Statements
Group Financial Statements
143
IHG
| Annual Report and Form 20-F 2023
Disclosure of information to Auditor
The Directors who held office as at the date of approval of this
report confirm that they have taken steps to make themselves aware
of relevant audit information (as de
fined by Section 418(3) o
f the
Companies Act 2006). None of the Directors are aware of any
relevant audit information that has not been disclosed to the
Company’s and Group’s Auditor.
Management’s report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate
internal control over financial reporting
for the Group, as de
fined in
Rule 13a–15(f) and 15d–15(f) under the Securities Exchange Act of
1934 as a process designed to provide reasonable assurance
regarding the reliability of
financial reporting and the preparation o
f
financial statements
for external purposes in accordance with IFRSs.
The Group’s internal control over financial reporting includes
policies and procedures that:
•
pertain to the maintenance of records that, in reasonable detail,
accurately and fairly re
flect the Group’s transactions and
dispositions of assets;
•
are designed to provide reasonable assurance that transactions
are recorded as necessary to permit the preparation of the
Consolidated Financial Statements in accordance with UK-adopted
international accounting standards and IFRSs as issued by the
IASB, and that receipts and expenditure are being made only in
accordance with authorisation of management and the Directors
of the Company; and
•
provide reasonable assurance regarding prevention or timely
detection of unauthorised acquisition, use or disposition of the
Group’s assets that could have a material effect on the
Consolidated Financial Statements.
Any internal control framework has inherent limitations and
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate.
Management has undertaken an assessment of the effectiveness
of the Group’s internal control over
financial reporting at
31 December 2023 based on criteria established in the Internal
Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 Framework).
Based on this assessment, management has concluded that as
at 31 December 2023 the Group’s internal control over financial
reporting was effective.
During the period covered by this document there were no changes
in the Group’s internal control over financial reporting that have
materially affected or are reasonably likely to materially affect the
effectiveness of the internal controls over
financial reporting.
The Group’s internal control over financial reporting at 31 December
2023, together with the Group’s Consolidated Financial Statements,
were audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm. Their auditor’s report can be
found on page 151.
For and on behalf of the Board
Elie Maalouf
Michael Glover
Chief Executive Officer
Chief Financial Officer
19 February 2024
19 February 2024
Financial Statements and accounting records
The Directors are required to prepare the Annual Report and Form
20-F and the Financial Statements for the Company and the Group
at the end of each
financial year in accordance with applicable law
and regulations. Under company law, directors must not approve the
Financial Statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Company and the Group
and the profit or loss o
f the Group for that period. The Directors have
prepared the Consolidated Financial Statements in accordance with
UK-adopted international accounting standards and International
Financial Reporting Standards (‘IFRSs’) issued by the International
Accounting Standards Board (‘IASB’). The Company Financial
Statements have been prepared in accordance with UK accounting
standards, comprising Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’ (‘FRS 101’), and applicable law.
In preparing these Financial Statements, IHG Directors are required to:
•
select suitable accounting policies and apply them consistently;
•
make judgements and accounting estimates that are reasonable;
•
state whether the Consolidated Financial Statements have
been prepared in accordance with UK-adopted international
accounting standards;
•
state for the Company Financial Statements whether applicable
UK accounting standards, comprising FRS 101, have been
followed; and
•
prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company and the
Group will continue in business.
The Directors have responsibility for ensuring that the Company
and the Group keep adequate accounting records sufficient to
show and explain the Company’s and the Group’s transactions, and
which disclose with reasonable accuracy the financial position o
f the
Company and the Group to enable them to ensure that the Financial
Statements and the Directors’ Remuneration Report comply with the
Companies Act 2006.
The Directors are also responsible for the system of internal control,
for safeguarding the assets of the Company and the Group, and
taking reasonable steps to prevent and detect fraud and other
irregularities.
Disclosure Guidance and Transparency Rules
The Board confirms that to the best o
f its knowledge:
•
The Consolidated Financial Statements have been prepared in
accordance with UK-adopted international accounting standards,
and IFRSs as issued by the IASB, and give a true and fair view of the
assets, liabilities, financial position and profit or loss o
f the Group
taken as a whole;
•
The Company Financial Statements have been prepared in
accordance with UK accounting standards, comprising FRS 101,
and give a true and fair view of the assets, liabilities and
financial
position of the Company; and
•
The Annual Report, including the Strategic Report, includes a
fair review of the development and performance of the business
and the position of the Company and the Group taken as a whole,
together with a description of the principal risks and uncertainties
that it faces.
UK Corporate Governance Code
Having taken advice from the Audit Committee, the Board considers
that this Annual Report and Form 20-F, taken as a whole, is fair,
balanced and understandable and that it provides the information
necessary for shareholders to assess the Company’s and the
Group’s position and performance, business model and strategy.
Group Financial Statements
144
IHG
| Annual Report and Form 20-F 2023
Statement of Directors’ Responsibilities
Independent auditors’ report to the members
of InterContinental Hotels Group PLC
Report on the audit of the Financial Statements
Opinion
In our opinion:
•
InterContinental Hotels Group PLC’s Group Financial Statements
and Parent Company Financial Statements (the “Financial
Statements”) give a true and fair view of the state of the Group’s
and of the Parent Company’s affairs at 31 December 2023 and
of the Group’s pro
fit and cash flows
for the year then ended;
•
the Group Financial Statements have been properly prepared in
accordance with UK-adopted international accounting standards
as applied in accordance with the provisions of the Companies
Act 2006;
•
the Parent Company Financial Statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”, and
applicable law); and
•
the Financial Statements have been prepared in accordance with
the requirements of the Companies Act 2006.
We have audited the Financial Statements, included within the
Annual Report and Form 20-F (the “Annual Report”), which
comprise: the Group and Parent Company statements of
financial
position at 31 December 2023; the Group income statement, Group
statement of comprehensive income, Group statement of cash
flows
and Group and Parent Company statements of changes in equity for
the year then ended; the accounting policies; and the notes to the
Financial Statements.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in the accounting policies, the Group, in addition to
applying UK-adopted international accounting standards, has also
applied international financial reporting standards (“IFRSs”) as
issued by the International Accounting Standards Board (“IASB”).
In our opinion, the Group Financial Statements have been properly
prepared in accordance with IFRSs as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the auditors’
responsibilities for the audit of the Financial Statements section of
our report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the
ethical requirements that are relevant to our audit of the Financial
Statements in the UK, which includes the FRC’s Ethical Standard, as
applicable to listed public interest entities, and we have ful
filled our
other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in note 5 to the Group Financial
Statements, we have provided no non-audit services to the Parent
Company or its controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
•
PwC component audit teams were engaged to perform a full
scope audit in the US and specified procedures over transactions
processed at the Group’s Global Business Service Centre in India.
The Group audit team carried out audit procedures over the
consolidation and material balances and transactions processed
centrally. The territories where we conducted audit procedures,
together with work performed at corporate functions and at the
Group level, accounted for approximately: 90% of the Group’s
revenue; 85% of the Group’s statutory pro
fit be
fore tax; and 78%
of the Group’s pro
fit be
fore tax adjusted for exceptional items and
the System Fund.
•
The Group audit team performed substantive procedures over all
of the material balances and transactions of the Parent Company.
Key audit matters
•
Breakage assumption used to estimate IHG One Rewards deferred
revenue (Group)
•
Allocation of expenses to the System Fund (Group)
•
Recognition of the UK deferred tax asset (Group and Parent Company)
Materiality
•
Overall Group materiality: $48.0 million (2022: $37.0 million) based
on approximately 5% of pro
fit be
fore tax adjusted for exceptional
items and the System Fund
•
Overall Parent Company materiality: £21.9 million (2022: £14.8 million)
based on approximately 1% of net assets
•
Performance materiality: $36.0 million (2022: $27.7 million) (Group)
and £16.4 million (2022: £11.1 million) (Parent Company)
The scope of our audit
As part of designing our audit, we determined materiality and assessed
the risks of material misstatement in the Financial Statements.
Group Financial Statements
145
IHG
| Annual Report and Form 20-F 2023
Independent Auditor’s UK Report
Independent Auditor’s UK Report
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most signi
ficance in the audit o
f the Financial
Statements of the current period and include the most signi
ficant assessed risks o
f material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation o
f resources in the
audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the Financial Statements as a whole and in forming our opinion thereon and we do
not provide a separate opinion on these matters. This is not a complete list of all risks identi
fied by our audit. The key audit matters below
are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Breakage assumption used to estimate IHG One Rewards deferred revenue (Group)
At 31 December 2023, the deferred revenue balance relating to the IHG One Rewards
loyalty programme was $1,529m (2022: $1,411m).
The loyalty programme, IHG One Rewards, enables members to earn points during
each qualifying stay at an IHG branded hotel and through other partnerships and
programmes. Members are able to consume those points at a later date for free or
reduced accommodation or other benefits. Points revenue includes hotel assessments,
revenue from third-party partners and proceeds from points purchased directly by
members. The Group recognises deferred revenue in an amount that re
flects the
Group’s unsatisfied per
formance obligations, valued at the stand-alone selling price
of the future bene
fit to the member. The amount o
f revenue recognised and deferred
is impacted by the estimate of breakage (i.e. points that will never be consumed).
On an annual basis, the Group engages an external actuary who uses statistical
formulae to assist in the estimate of breakage. In 2022 and 2021, the breakage
estimate was formed using pre Covid-19 behaviour patterns as a base, but giving
some weight to activity since 2020 and incorporating the impact of 2022 programme
changes. In 2023, the breakage estimate has been formed without any equivalent
adjustment, reflecting normalising patterns o
f redemption behaviour.
Significant estimation uncertainty exists in projecting members’
future consumption
activity. A small change in the breakage assumption would result in a material difference
in the deferred revenue balance at 31 December 2023 and therefore in the revenue
recognised in the year.
Refer to the estimates section of the accounting policies and to note 3 to the Group
Financial Statements for management’s disclosures.
We evaluated and tested the design and operation of key controls in
place over management’s determination of the breakage assumption.
We tested a sample of data used by management’s external actuary in
deriving the breakage assumption to underlying records. We assessed
the competence and objectivity of management’s actuary and we
understood the methods and assumptions adopted by it in determining
breakage. We deployed our own actuarial experts to develop an
independent expectation of a reasonably possible range for deferred
revenue based on independently determined breakage assumptions.
We compared the deferred revenue balance, which no longer includes
a Covid-19 adjustment, with our independently calculated range.
We assessed the appropriateness of the related disclosures including
sensitivity analysis in the estimates section of the accounting policies
and in note 3 to the Group Financial Statements.
Based on the procedures performed, we noted no material issues
arising from our work.
Allocation of expenses to the System Fund (Group)
The Group operates a System Fund to collect and administer cash assessments
from hotel owners for speci
fied purposes o
f use including marketing, reservations
and the Group’s loyalty programme, IHG One Rewards. Costs that are incurred are
allocated to the System Fund in accordance with the principles agreed with the IHG
Owners Association. For the year ended 31 December 2023, the Group recorded
System Fund expenses of $1,545m (2022: $1,322m).
System Fund expenses are excluded from the Group result to determine operating
profit
from reportable segments, a key metric used by the Group.
There is judgement involved in developing the Group’s internal policies in order to
apply the principles agreed with the IHG Owners Association to expenses incurred
and there is complexity in subsequently evaluating whether expenses are appropriately
allocated to the System Fund in line with these internal policies.
Refer to the accounting policies and to note 32 to the Group Financial Statements
for management’s disclosures.
We evaluated and tested the design and operation of key controls
over the allocation of expenses to the System Fund.
We understood and assessed the internal policies and governance
structure that the Group has put in place in order to apply the
principles agreed with the IHG Owners Association to expenses
incurred. We inspected correspondence and minutes of meetings
with the IHG Owners Association to identify whether allocations
have been challenged or disputed. For a sample of cost centres,
we validated the basis for any changes in the proportion of costs
allocated to the System Fund compared to the prior year. We tested
a sample of expenses that had been allocated to the System Fund to
assess whether they were accurately calculated, in compliance with
the Group’s internal policies and consistent with historical practice.
We checked whether there were any manual journal entries that
transferred expenses to the System Fund to evaluate whether there
was an appropriate rationale for any such journals. We determined
whether the resulting classification o
f expenses was in line with the
principles agreed with the IHG Owners Association.
Based on the procedures performed, we noted no material issues
arising from our work.
Recognition of the UK deferred tax asset (Group and Parent Company)
At 31 December 2023, the Group recognised a deferred tax asset of $113m (2022:
$109m) related to the UK tax group. The Parent Company, which is part of the UK tax
group, recognised a deferred tax asset of £43m (2022: £40m). The assets largely
represent brought forward revenue tax losses. The asset recognised by the Group
also includes future tax deductions for amortisation.
Judgement is used when assessing the extent to which deferred tax assets, particularly
in respect of tax losses, should be recognised. Deferred tax assets are only recognised
to the extent that it is regarded as probable that there will be sufficient and suitable
taxable profits or de
ferred tax liabilities in the relevant legal entity or tax group against
which such assets can be utilised in the future. Tax assumptions are overlaid to pro
fit
forecasts to estimate the future taxable pro
fits. This process has demonstrated that the
UK deferred tax assets should reverse over a seven to ten year period, with the lower
end of the range based on the Group’s base case forecast and the upper end of the
range based on the Group’s severe downside case forecast. The losses do not expire,
although they can only be offset against 50% of annual UK taxable pro
fits. The Group’s
TCFD disclosures describe how physical and transitional climate risks present both
risks and opportunities for the Group. The potential downside risks have been
considered in the context of the UK deferred tax asset recoverability assessment,
without taking account of opportunities or mitigating actions.
Refer to note 8 to the Group Financial Statements and note 5 to the Parent Company
Financial Statements for management’s disclosures.
We evaluated and tested the design and operation of key controls in
place over the recognition of deferred tax assets and over the Group’s
forecasting process.
We evaluated the appropriateness of the assumptions re
flected in
the UK forecasts, including assessing the reasonableness of growth
projections compared to historical experience and industry data.
As part of this assessment, we benchmarked management’s
estimates to third-party sources and we considered how climate
risk had been incorporated.
We deployed tax specialists to assess the appropriateness of tax
overlay adjustments applied to the forecasts by reference to the
requirements of tax principles, including the restriction of losses to
50% of annual UK taxable pro
fits, and to assess whether the UK
deferred tax assets met the recognition criteria of IAS 12.
We assessed the reasonableness of the recovery period of seven
to ten years.
We assessed the appropriateness of the related disclosures in note 8
to the Group Financial Statements and note 5 to the Parent Company
Financial Statements.
Based on the procedures performed, we noted no material issues
arising from our work.
Group Financial Statements
146
IHG
| Annual Report and Form 20-F 2023
Independent Auditor’s UK Report
continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the Financial
Statements as a whole, taking into account the structure of the
Group and the Parent Company, the accounting processes and
controls and the industry in which they operate.
The Group Financial Statements are a consolidation of over
450 reporting units. The Group operates a Global Business Service
Centre (“BSC”) in India which processes transactions for the majority
of the Group’s reporting units. We identi
fied one aggregation o
f
components in the US which required a full scope audit due to its
size and because this aggregated component holds the IHG One
Rewards loyalty programme and System Fund. We engaged a PwC
component audit team in the US to carry out this audit. We also
instructed our US component team to undertake specified
procedures over certain balances and transactions in certain other
US reporting units. We engaged a second PwC component audit
team in India to undertake testing of transactions processed by the
BSC encompassing all reporting units within the BSC’s scope.
Where work was performed by component auditors, we determined
the appropriate level of involvement we needed to have in that audit
work to ensure that we could conclude that sufficient appropriate
audit evidence had been obtained for the Group Financial
Statements as a whole. In addition to instructing and reviewing
the reporting from our component audit teams, we conducted
file
reviews and participated in key meetings with local management.
We made one site visit to the US and one site visit to India to meet
with our component teams and local management in person and
we supplemented these site visits with regular dialogue with
component teams throughout the year.
The Group consolidation, financial statement disclosures and certain
balances and transactions processed centrally by management in the
UK, including certain Parent Company balances and transactions that
were included in Group audit scope, were audited by the Group audit
team. This included taxation, treasury, impairment reviews and elements
of expected credit losses on trade receivables. Taken together, the
audit procedures carried out by the Group and component audit teams
provided coverage of 90% of the Group’s revenue, 85% of the Group’s
statutory profit be
fore tax and 78% of the Group’s pro
fit be
fore tax
adjusted for exceptional items and the System Fund. This provided
the evidence we needed for our opinion on the Group Financial
Statements taken as a whole. This was before considering the
contribution to our audit evidence from performing audit work at the
Group level, including disaggregated analytical review procedures,
which covered certain of the Group’s smaller and lower risk
components that were not directly included in our Group audit scope.
Our audit of the Parent Company Financial Statements was
undertaken by the Group audit team and included substantive
procedures over all material balances and transactions.
The impact of climate risk on our audit
As part of our audit, we made enquiries of management to
Group Financial Statements
Parent Company Financial Statements
Overall materiality
$48.0 million (2022: $37.0 million)
£21.9 million (2022: £14.8 million)
How we
determined it
Approximately 5% of pro
fit be
fore tax adjusted for exceptional items and the
System Fund
Approximately 1% of net assets
Rationale for
benchmark
applied
The Group’s principal measure of performance is operating pro
fit
from reportable
segments, which excludes exceptional items and the System Fund result, in order
to present results from operating activities on a consistent basis and to exclude the
impact of the System Fund, which is not managed to generate a pro
fit or loss
for the
Group over the longer term. We took this measure into account in determining our
materiality as it is the metric against which the performance of the Group is most
commonly assessed by management and reported to shareholders. From operating
profit
from reportable segments, we deducted net
financial expenses and
fair value
losses on contingent purchase consideration to arrive at adjusted profit be
fore tax.
InterContinental Hotels Group PLC is the
ultimate parent company which holds the
Group’s investments and bonds. The strength
of the balance sheet is the key measure of
financial health that is important to shareholders
since the primary concern for the Parent
Company is the payment of dividends.
We therefore considered net assets to be
an appropriate benchmark.
understand the process that management adopted, with input from
its third party expert on climate change, to assess the extent of the
potential impact of climate risk on the Financial Statements and to
support the disclosures made within the climate change section of
the accounting policies. Using our knowledge of the business, we
challenged the completeness of management’s risk assessment.
This included reading Carbon Disclosure Project submissions made by
the Group and its competitors to ensure appropriate consistency with
the judgements and disclosures reflected in the Financial Statements.
Management considers that there are no climate-related estimates
or assumptions that have a material impact on the Financial
Statements. We assessed that the key areas in the Financial
Statements which are more likely to be materially impacted by
climate change are impairment of non-
financial assets, recognition
of deferred tax assets and going concern.
We tailored our audit approach to respond to the audit risks
identified in these areas. In particular, we:
•
Challenged management on how the Group’s commitment to
reduce emissions from its hotel estate by 46% by 2030 from a
2019 baseline will impact the assumptions within the discounted
cash flows prepared by management that are used in the Group’s
impairment analysis, for assessing the recognition of deferred tax
assets and for going concern purposes;
•
Evaluated whether the impact of both physical and transition
risks arising due to climate risk had been appropriately reflected
by management in the estimates of the recoverable value of the
Group’s non-financial assets including the discounted cash flows
prepared by management for impairment assessment purposes; and
•
Checked whether the impact of climate risk in the directors’
assessments and disclosures related to going concern and viability
were consistent with management’s climate impact assessment.
We also considered the consistency of the disclosures in relation
to climate change (including the disclosures in the Task Force on
Climate-related Financial Disclosures (“TCFD”) section) in the Annual
Report with the Financial Statements and with our knowledge
obtained from our audit.
Our procedures did not identify any material impact in the context
of our audit of the Financial Statements as a whole or on our key
audit matters for the year ended 31 December 2023.
Materiality
The scope of our audit was in
fluenced by our application o
f materiality.
We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of
our audit and the nature, timing and extent of our audit procedures
on the individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually and in
aggregate on the Financial Statements as a whole.
Based on our professional judgement, we determined materiality for
the Financial Statements as a whole as follows:
Independent Auditor’s UK Report
Group Financial Statements
147
IHG
| Annual Report and Form 20-F 2023
For each component in the scope of our Group audit, we allocated
a materiality that is less than our overall Group materiality. The range
of materiality allocated across components was approximately
$3.8 million to $45.6 million.
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our audit
and the nature and extent of our testing of account balances, classes
of transactions and disclosures, for example in determining sample
sizes. Our performance materiality was 75% (2022: 75%) of overall
materiality, amounting to $36.0 million (2022: $27.7 million) for the
Group Financial Statements and £16.4 million (2022: £11.1 million)
for the Parent Company Financial Statements.
In determining performance materiality, we considered a number of
factors, including the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls and we concluded
that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above $2.4 million
(Group) (2022: $1.8 million) and £1.0 million (Parent Company) (2022:
£0.7 million) as well as misstatements below those amounts that, in
our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the
Parent Company’s ability to continue to adopt the going concern
basis of accounting included:
•
Evaluation and testing of key controls over the Group’s budgeting
process and the assessment of going concern;
•
Evaluation of management’s Base Case and Severe Downside Case
scenarios and reverse stress testing calculations, understanding
and evaluating the key assumptions, including assumptions related
to RevPAR growth;
•
Validation that the cash flow
forecasts used to support
management’s impairment, deferred tax asset recoverability, going
concern and viability assessments were consistent and in line with
the Group’s Board approved plan;
•
Assessment of the historical accuracy and reasonableness of
management’s forecasting;
•
Identification o
f RevPAR as the key assumption inherent in
management’s cash flow
forecasts and validation of this
assumption to industry sources;
•
Consideration of the Group’s available
financing and debt maturity
profile and evaluation o
f the reasonableness of management’s
assumption that bank facilities will remain undrawn over the period
of the going concern assessment;
•
Testing of the mathematical integrity of management’s models and
liquidity headroom, covenant compliance, sensitivity and reverse
stress testing calculations;
•
Assessment of the reasonableness of management’s planned or
potential mitigating actions;
•
Consideration of whether climate change is expected to have any
significant impact during the period o
f the going concern
assessment; and
•
Review of the related disclosures in the Annual Report.
Based on the work we have performed, we have not identi
fied any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s
and the Parent Company’s ability to continue as a going concern for
a period of at least twelve months from when the Financial
Statements are authorised for issue.
In auditing the Financial Statements, we have concluded that
the directors’ use of the going concern basis of accounting in the
preparation of the Financial Statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the Group’s and
the Parent Company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the
UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the directors’ statement in the
Financial Statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.
Reporting on other information
The other information comprises all of the information in the Annual
Report other than the Financial Statements and our auditors’ report
thereon. The directors are responsible for the other information.
Our opinion on the Financial Statements does not cover the other
information and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this report, any
form of assurance thereon.
In connection with our audit of the Financial Statements, our
responsibility is to read the other information and, in doing so, to
consider whether the other information is materially inconsistent
with the Financial Statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we identify
an apparent material inconsistency or material misstatement, we
are required to perform procedures to conclude whether there is
a material misstatement of the Financial Statements or a material
misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also
considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic Report and Directors’
Report for the year ended 31 December 2023 is consistent with the
Financial Statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Group and
Parent Company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the Strategic
Report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the
Companies Act 2006.
Group Financial Statements
148
IHG
| Annual Report and Form 20-F 2023
Independent Auditor’s UK Report
continued
Corporate governance statement
The Listing Rules require us to review the directors’ statements in
relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Parent Company’s
compliance with the provisions of the UK Corporate Governance
Code specified
for our review. Our additional responsibilities with
respect to the corporate governance statement as other information
are described in the Reporting on other information section of
this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement, included within the Statement of compliance
is materially consistent with the Financial Statements and our
knowledge obtained during the audit, and we have nothing material
to add or draw attention to in relation to:
•
The directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
•
The disclosures in the Annual Report that describe those principal
risks, what procedures are in place to identify emerging risks and
an explanation of how these are being managed or mitigated;
•
The directors’ statement in the Financial Statements about whether
they considered it appropriate to adopt the going concern basis
of accounting in preparing them and their identi
fication o
f any
material uncertainties to the Group’s and Parent Company’s ability
to continue to do so over a period of at least twelve months from
the date of approval of the Financial Statements;
•
The directors’ explanation as to their assessment of the Group’s
and Parent Company’s prospects, the period this assessment
covers and why the period is appropriate; and
•
The directors’ statement as to whether they have a reasonable
expectation that the Parent Company will be able to continue in
operation and meet its liabilities as they fall due over the period of
its assessment, including any related disclosures drawing attention
to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term
viability of the Group and Parent Company was substantially less
in scope than an audit and only consisted of making inquiries and
considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant
provisions of the UK Corporate Governance Code; and considering
whether the statement is consistent with the Financial Statements
and our knowledge and understanding of the Group and Parent
Company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the corporate
governance statement is materially consistent with the Financial
Statements and our knowledge obtained during the audit:
•
The directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for the members to assess the
Group’s and Parent Company’s position, performance, business
model and strategy;
•
The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems;
and
•
The section of the Annual Report describing the work of the
Audit Committee.
We have nothing to report in respect of our responsibility to report
when the directors’ statement relating to the Parent Company’s
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code speci
fied under the Listing
Rules for review by the auditors.
Responsibilities for the Financial Statements and the audit
Responsibilities of the directors for the Financial Statements
As explained more fully in the Statement of Directors’ Responsibilities,
the directors are responsible for the preparation of the Financial
Statements in accordance with the applicable framework and for
being satisfied that they give a true and
fair view. The directors are
also responsible for such internal control as they determine is
necessary to enable the preparation of Financial Statements that
are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the directors are responsible
for assessing the Group’s and the Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group
or the Parent Company or to cease operations or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether
the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these Financial Statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud,
is detailed below.
Based on our understanding of the Group and industry in which it
operates, we identified that the principal risks o
f non-compliance
with laws and regulations related to the failure to comply with
employment laws and regulations and we considered the extent to
which non-compliance might have a material effect on the Financial
Statements. We also considered those laws and regulations that
have a direct impact on the Financial Statements such as the Listing
Rules, UK and overseas tax legislation and the Companies Act 2006.
We evaluated management’s incentives and opportunities for
fraudulent manipulation of the Financial Statements (including the
risk of override of controls) and we determined that the principal
risks were related to posting inappropriate journal entries and
management bias in allocating expenses to the System Fund and in
accounting for key estimates. The Group audit team shared this risk
assessment with the component auditors so that they could include
appropriate audit procedures in response to such risks in their work.
Audit procedures performed by the Group audit team and/or
component auditors included:
•
Inquiries of management, internal audit and the Group’s legal
counsel, including considerations of known or suspected instances
of non-compliance with laws and regulations and fraud;
•
Review of correspondence received, if any, from regulators and
consideration of the impact on our audit and the disclosures made
in the Financial Statements;
•
Evaluation and testing of the effectiveness of management’s
controls designed to prevent and detect irregularities;
•
Assessment of matters reported on the Group’s whistleblowing
helpline and the results of management’s investigation of
such matters;
Independent Auditor’s UK Report
Group Financial Statements
149
IHG
| Annual Report and Form 20-F 2023
•
Identification and testing o
f signi
ficant manual journal entries,
in particular any journal entries which resulted in an increase to
revenue from fee business or from owned, leased and managed
lease hotels through unusual account combinations and any
journal entries which resulted in a reduction to the System Fund
result; and
•
Challenging assumptions and judgements made by management
in making significant accounting estimates.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related
to events and transactions reflected in the Financial Statements.
Also, the risk of not detecting a material misstatement due to fraud
is higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery
or intentional misrepresentations or through collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number
of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on
their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population
from which the sample is selected.
A further description of our responsibilities for the audit of
the Financial Statements is located on the FRC’s website at:
frc.org.uk/auditorsresponsibilities
. This description forms part
of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only
for the Parent Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
•
We have not obtained all the information and explanations we
require for our audit; or
•
Adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
Certain disclosures of directors’ remuneration speci
fied by law
are not made; or
•
The Parent Company Financial Statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were
appointed by the members at the Annual General Meeting on
7 May 2021 to audit the Financial Statements for the year ended
31 December 2021 and subsequent financial periods. The period o
f
total uninterrupted engagement is three years, covering the years
ended 31 December 2021 to 31 December 2023.
Other matters
In due course, as required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rule 4.1.14R, these Financial
Statements will form part of the ESEF-prepared annual
financial
report filed on the National Storage Mechanism o
f the Financial
Conduct Authority in accordance with the ESEF Regulatory
Technical Standard (“ESEF RTS”). This auditors’ report provides no
assurance over whether the annual financial report will be prepared
using the single electronic format speci
fied in the ESEF RTS.
Giles Hannam (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
19 February 2024
Group Financial Statements
150
IHG
| Annual Report and Form 20-F 2023
Independent Auditor’s UK Report
continued
Report of Independent Registered Public
Accounting Firm
To the Board of Directors and Shareholders of InterContinental
Hotels Group PLC
Opinions on the Financial Statements and Internal Control
over Financial Reporting
We have audited the accompanying Group statements of
financial
position of InterContinental Hotels Group PLC and its subsidiaries
(the “Group”) as of 31 December 2023 and 31 December 2022 and
the related Group income statements and Group statements of
comprehensive income, changes in equity and cash flows
for each
of the three years in the period ended 31 December 2023, including
the accounting policies and the related notes (collectively referred
to as the “Group Financial Statements”). We also have audited the
Group’s internal control over financial reporting as o
f 31 December
2023, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the Group Financial Statements referred to above
present fairly, in all material respects, the
financial position o
f the
Group as of 31 December 2023 and 2022 and the results of its
operations and its cash flows
for each of the three years in the
period ended 31 December 2023 in conformity with (i) International
Financial Reporting Standards as issued by the International
Accounting Standards Board and (ii) UK-adopted International
Accounting Standards. Also in our opinion, the Group maintained,
in all material respects, effective internal control over financial
reporting as of 31 December 2023, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Group’s management is responsible for these Group Financial
Statements, for maintaining effective internal control over
financial
reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in management’s report
on internal control over financial reporting on page 144.
Our responsibility is to express opinions on the Group Financial
Statements and on the Group’s internal control over financial
reporting based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with
respect to the Group in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the Group
Financial Statements are free of material misstatement, whether due
to error or fraud, and whether effective internal control over
financial
reporting was maintained in all material respects.
Our audits of the Group Financial Statements included performing
procedures to assess the risks of material misstatement of the Group
Financial Statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and
disclosures in the Group Financial Statements. Our audits also
included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the Group Financial Statements. Our audit of internal
control over financial reporting included obtaining an understanding
of internal control over
financial reporting, assessing the risk that a
material weakness exists and testing and evaluating the design and
operating effectiveness of internal control based on the assessed
risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
Definition and Limitations o
f Internal Control over
Financial Reporting
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of
financial reporting and the preparation o
f
financial statements
for
external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and
fairly re
flect the transactions and dispositions o
f the assets of the
company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of
financial statements
in accordance with generally accepted accounting principles and
that receipts and expenditures of the company are being made only
in accordance with authorisations of management and directors
of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorised acquisition, use or
disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over
financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising
from the current period audit of the Group Financial Statements
that were communicated or required to be communicated to the
audit committee and that (i) relate to accounts or disclosures that
are material to the Group Financial Statements and (ii) involved
our especially challenging, subjective or complex judgements.
The communication of critical audit matters does not alter in any
way our opinion on the Group Financial Statements, taken as a
whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or
on the accounts or disclosures to which they relate.
Independent Auditor’s US Report
Group Financial Statements
151
IHG
| Annual Report and Form 20-F 2023
Independent Auditor’s US Report
Breakage assumption used to estimate IHG One Rewards
loyalty programme deferred revenue
As described in the Estimates section of the Accounting policies
and in Note 3 to the Group Financial Statements, deferred revenue
relating to the IHG One Rewards loyalty programme was $1,529m
as of 31 December 2023. The hotel loyalty programme, IHG One
Rewards, enables members to earn points during each qualifying
stay at an IHG branded hotel and through other partnerships and
programmes. Members are able to consume those points at a
later date for free or reduced accommodation or other bene
fits.
Points revenue includes hotel assessments, revenue from third-party
partners and proceeds from points purchased directly by members.
The Group recognises deferred revenue in an amount that re
flects
the Group’s unsatisfied per
formance obligations, valued at the
stand-alone selling price of the future bene
fit to the member.
The amount of revenue recognised and deferred is impacted by
the estimate of breakage (points that will never be consumed).
On an annual basis, the Group engages an external actuary who
uses statistical formulae to assist in the estimate of breakage.
Significant estimation uncertainty exists in projecting members’
future consumption activity. In 2022 and 2021, the breakage estimate
was formed using pre Covid-19 behaviour patterns as a base, but
giving some weight to activity since 2020 and incorporating the
impact of 2022 programme changes. In 2023, the breakage estimate
has been formed without any equivalent adjustment, re
flecting
normalising patterns of redemption behaviour. If future member
behaviour deviates significantly
from expectations, breakage
estimates could increase or decrease.
The principal considerations for our determination that performing
procedures relating to the breakage assumption used to estimate
IHG One Rewards loyalty programme deferred revenue is a critical
audit matter are (i) the significant judgement by management when
projecting members’ future consumption of points; (ii) a high degree
of auditor judgement, subjectivity and effort in performing procedures
and evaluating management’s breakage assumption; and (iii) the
audit effort involved the use of professionals with specialised skill
and knowledge.
Addressing the matter involved performing procedures and
evaluating audit evidence in connection with forming our overall
opinion on the Group Financial Statements. These procedures included
testing the effectiveness of controls relating to management’s
determination of the breakage assumption. These procedures also
included, among others, (i) testing a sample of data used by
management’s external actuary in deriving the breakage assumption
to underlying records; (ii) assessing the competence and objectivity
of management’s actuary and understanding the methods and
assumptions adopted by it in determining breakage; (iii) developing
an independent expectation of a reasonably possible range for
deferred revenue based on independently determined breakage
assumptions; (iv) comparing the deferred revenue balance, which
no longer includes a Covid-19 adjustment, with our independently
calculated range; and (v) assessing the appropriateness of the related
disclosures including sensitivity analysis in the Group Financial
Statements. Professionals with specialised skill and knowledge were
used to assist in the evaluation of the breakage assumption.
Allocation of expenses to the System Fund
As described in the System Fund and other co-brand revenues
section of the Accounting policies and in Note 32 to the Group
Financial Statements, the Group recorded System Fund expenses of
$1,545m for the year ended 31 December 2023. The Group operates
a System Fund to collect and administer cash assessments from
hotel owners for speci
fied purposes o
f use including marketing,
reservations and the Group’s loyalty programme, IHG One Rewards.
Costs are incurred and allocated to the System Fund in accordance
with the principles agreed with the IHG Owners Association.
The principal considerations for our determination that performing
procedures relating to the allocation of expenses to the System
Fund is a critical audit matter are (i) the significant judgement by
management when developing the Group’s internal policies in order
to apply the principles agreed with the IHG Owners Association
to expenses incurred; and (ii) a high degree of auditor judgement,
subjectivity and effort in performing procedures and evaluating the
appropriateness of management’s classi
fication o
f expenses to
the System Fund in line with the agreed principles.
Addressing the matter involved performing procedures and
evaluating audit evidence in connection with forming our overall
opinion on the Group Financial Statements. These procedures
included testing the effectiveness of controls relating to allocation
of expenses to the System Fund. These procedures also included,
among others, (i) understanding and assessing the internal policies
that the Group has put in place in order to apply the principles
agreed with the IHG Owners Association to expenses incurred;
(ii) inspecting correspondence and minutes of meetings with the
IHG Owners Association to identify whether allocations have been
challenged or disputed; (iii) validating for a sample of cost centres
the basis for any changes in the proportion of costs allocated to
the System Fund compared to the prior year; (iv) testing a sample
of expenses that had been allocated to the System Fund to assess
whether they were accurately calculated, in compliance with the
Group’s internal policies and consistent with historical practice;
(v) checking whether there were any manual journal entries that
transferred expenses to the System Fund to evaluate whether there
was an appropriate rationale for any such journals; and (vi) determining
whether the resulting classification o
f the expenses was in line with
the principles agreed with the IHG Owners Association.
Group Financial Statements
152
IHG
| Annual Report and Form 20-F 2023
Independent Auditor’s US Report
continued
Recognition of the UK deferred tax asset
As described in the Taxes section of the Accounting policies and
in Note 8 to the Group Financial Statements, a deferred tax asset
of $113m was recognised related to the UK tax group as of
31 December 2023. Judgement is used when assessing the extent
to which deferred tax assets, particularly in respect of tax losses,
should be recognised. Deferred tax assets are only recognised to
the extent that it is regarded as probable that there will be sufficient
and suitable taxable profits or de
ferred tax liabilities in the relevant
legal entity or tax group against which such assets can be utilised
in the future. Tax assumptions are overlaid to pro
fit
forecasts to
estimate future taxable pro
fits. This process has demonstrated that
the UK deferred tax asset should reverse over a seven to ten year
period, with the lower end of the range based on the Group’s base
case forecast and the upper end of the range based on the Group’s
severe downside case forecast. The losses do not expire, although
they can only be offset against 50% of annual UK taxable pro
fits.
The Group’s TCFD disclosures describe how physical and transitional
climate risks present both risks and opportunities for IHG. The
potential downside risks have been considered in the context of
the UK deferred tax asset recoverability assessment, without taking
account of opportunities or mitigating actions.
The principal considerations for our determination that performing
procedures relating to recognition of the UK deferred tax asset is a
critical audit matter are (i) the significant judgement by management
involved in determining the future taxable pro
fits o
f the UK tax group
including the impact of climate risk; (ii) a high degree of auditor
judgement, subjectivity and effort in performing procedures and
evaluating the reasonableness of management’s forecast of a seven
to ten year period to recover this asset; and (iii) the audit effort
involved the use of professionals with specialised skill and knowledge.
Addressing the matter involved performing procedures and
evaluating audit evidence in connection with forming our overall
opinion on the Group Financial Statements. These procedures
included testing the effectiveness of controls relating to the
recognition of deferred tax assets and the Group’s forecasting
process. These procedures also included, among others,
(i) evaluating the appropriateness of the assumptions re
flected in
the UK forecasts, including assessing the reasonableness of growth
predictions compared to historical experience and industry data,
benchmarking management’s estimates to third-party sources and
considering how climate risk has been incorporated; (ii) assessing
the appropriateness of tax overlay adjustments applied to the
forecasts by reference to the requirements of tax principles,
including the restriction of losses to 50% of annual UK taxable
profits; (iii) assessing whether the UK de
ferred tax asset meets the
recognition criteria of IAS 12; (iv) assessing the appropriateness of
the forecast recovery period of seven to ten years; and (v) assessing
the appropriateness of the related disclosures in the Group Financial
Statements. Professionals with specialised skills and knowledge
were used to assist in the evaluation of recognition of the UK
deferred tax asset.
/s/PricewaterhouseCoopers LLP
London, United Kingdom
19 February 2024
We have served as the Group’s auditor since 2021.
Group Financial Statements
153
IHG
| Annual Report and Form 20-F 2023
Independent Auditor’s US Report
For the year ended 31 December 2023
Note
2023
$m
2022
Re-presented
a
$m
2021
Re-presented
a
$m
Revenue from fee business
3
Revenue from owned, leased and managed lease hotels
3
Revenue from insurance activities
3, 21
System Fund and reimbursable revenues
32
Total revenue
2
Cost of sales
(742 )
(648 )
(486 )
System Fund and reimbursable expenses
32
(2,441 )
(2,154 )
(1,528 )
Administrative expenses
(338 )
(353 )
(292 )
Insurance expenses
21
(23 )
(11 )
(8 )
Share of pro
fits/(losses) o
f associates and joint ventures
6, 15
(59 )
(8 )
Other operating income
Depreciation and amortisation
2
(67 )
(68 )
(98 )
Impairment reversal/(loss) on financial assets
(5 )
Other net impairment reversals/(charges)
6
(4 )
Operating profit
2
Operating profit analysed as:
Operating profit be
fore System Fund, reimbursables and exceptional items
System Fund and reimbursable result
(105 )
(11 )
Operating exceptional items
6
(95 )
(29 )
Financial income
7
Financial expenses
7
(91 )
(118 )
(147 )
Fair value (losses)/gains on contingent purchase consideration
25
(4 )
Profit be
fore tax
Tax
8
(260 )
(164 )
(96 )
Profit
for the year from continuing operations
Attributable to:
Equity holders of the parent
Non-controlling interest
(1 )
Earnings per ordinary share
10
Basic
Diluted
a
Re-presented for the adoption of IFRS 17 ‘Insurance Contracts’ and to combine System Fund revenues and reimbursables (see New accounting standards and other
presentational changes).
Accounting policies and notes on pages 161 to 216 form an integral part of these Group Financial Statements.
Group Financial Statements
154
IHG
| Annual Report and Form 20-F 2023
Group Financial Statements
Group income statement
Group statement of comprehensive income
For the year ended 31 December 2023
2023
$m
2022
Re-presented
a
$m
2021
$m
Profit
for the year
Other comprehensive (loss)/income
Items that may be subsequently reclassified to profit or loss:
(Losses)/gains on cash flow hedges, including related tax o
f $nil (2022: $2 m credit, 2021: $7 m charge)
(30 )
(69 )
Gains/(losses) on net investment hedges
(6 )
Costs of hedging
Hedging losses/(gains) reclassified to financial expenses
(43 )
Exchange (losses)/gains on retranslation of foreign operations, including related tax charge of $4 m
(2022: $5 m credit, 2021: $4 m charge)
(137 )
(124 )
Items that will not be reclassified to profit or loss:
(Losses)/gains on equity instruments classified as
fair value through other comprehensive income,
including related tax charge of $1 m (2022: $2 m credit, 2021: $1 m charge)
(3 )
Re-measurement (losses)/gains on defined benefit plans, including related tax o
f $nil
(2022: $6 m charge, 2021: $nil )
(2 )
Tax related to pension contributions
(5 )
Total other comprehensive (loss)/ income for the year
(129 )
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
(1 )
a
In 2023, gains/(losses) on net investment hedges have been presented on a separate line. The 2022 amount was previously presented within ‘Exchange (losses)/gains on retranslation
of foreign operations’.
Accounting policies and notes on pages 161 to 216 form an integral part of these Group Financial Statements.
Group Financial Statements
Group Financial Statements
155
IHG
| Annual Report and Form 20-F 2023
Equity
share
capital
$m
Capital
redemption
reserve
$m
Shares
held by
employee
share trusts
$m
Other
reserves
$m
Fair value
reserve
$m
Cash flow
hedge
reserves
$m
Currency
translation
reserve
$m
Retained
earnings
$m
IHG share-
holders’
equity
$m
Non-
controlling
interest
$m
Total
equity
$m
At 1 January 2023
(37 )
(2,856 )
(1,615 )
(1,608 )
Profit
for the year
Other comprehensive loss
Items that may be subsequently
reclassified to profit or loss:
Losses on cash flow hedges
(30 )
(30 )
(30 )
Gains on net investment hedges
Hedging losses reclassified
to financial expenses
Exchange losses on retranslation
of foreign operations
(137 )
(137 )
(137 )
(2 )
(122 )
(124 )
(124 )
Items that will not be reclassified
to profit or loss:
Losses on equity instruments
classified as
fair value through
other comprehensive income
(3 )
(3 )
(3 )
Re-measurement losses
on defined benefit plans
(2 )
(2 )
(2 )
(3 )
(2 )
(5 )
(5 )
Total other comprehensive loss
for the year
(3 )
(2 )
(122 )
(2 )
(129 )
(129 )
Total comprehensive income
for the year
(3 )
(2 )
(122 )
Repurchase of shares, including
transaction costs
(3 )
(765 )
(765 )
(765 )
Purchase of own shares by
employee share trusts
(8 )
(8 )
(8 )
Transfer of treasury shares
to employee share trusts
(21 )
Release of own shares by
employee share trusts
(32 )
Equity-settled share-based cost
Tax related to share schemes
Equity dividends paid
(245 )
(245 )
(3 )
(248 )
Exchange adjustments
(1 )
(7 )
At 31 December 2023
(35 )
(2,863 )
(2 )
(1,950 )
(1,946 )
All items within total comprehensive income are shown net of tax.
Accounting policies and notes on pages 161 to 216 form an integral part of these Group Financial Statements.
Group Financial Statements
156
IHG
| Annual Report and Form 20-F 2023
Group Financial Statements
continued
Group statement of changes in equity
Equity share
capital
$m
Capital
redemption
reserve
$m
Shares
held by
employee
share trusts
$m
Other
reserves
$m
Fair value
reserve
$m
Cash flow
hedge
reserves
$m
Currency
translation
reserve
$m
Retained
earnings
$m
IHG share-
holders’
equity
$m
Non-
controlling
interest
$m
Total
equity
$m
At 1 January 2022
(22 )
(2,873 )
(1,481 )
(1,474 )
Profit
for the year
Other comprehensive income
Items that may be subsequently
reclassified to profit or loss:
Gains on cash flow hedges
Losses on net
investment hedges
a
(6 )
(6 )
(6 )
Costs of hedging
Hedging gains reclassified
to financial expenses
(43 )
(43 )
(43 )
Exchange gains on retranslation
of foreign operations
a
(1 )
(5 )
(1 )
Items that will not be reclassified
to profit or loss:
Gains on equity instruments
classified as
fair value through
other comprehensive income
Re-measurement gains
on defined benefit plans
Total other comprehensive
income for the year
(5 )
(1 )
Total comprehensive income
for the year
(5 )
Repurchase of shares, including
transaction costs
(1 )
(513 )
(513 )
(513 )
Purchase of own shares by
employee share trusts
(1 )
(1 )
(1 )
Transfer of treasury shares
to employee share trusts
(26 )
Release of own shares by
employee share trusts
(12 )
Equity-settled share-based cost
Tax related to share schemes
Equity dividends paid
(233 )
(233 )
(233 )
Exchange adjustments
(16 )
(1 )
At 31 December 2022
(37 )
(2,856 )
(1,615 )
(1,608 )
All items within total comprehensive income are shown net of tax.
a
‘Losses on net investment hedges’ previously presented within ‘Exchange gains on retranslation of foreign operations’.
Accounting policies and notes on pages 161 to 216 form an integral part of these Group Financial Statements.
Group Financial Statements
Group Financial Statements
157
IHG
| Annual Report and Form 20-F 2023
Equity share
capital
$m
Capital
redemption
reserve
$m
Shares
held by
employee
share trusts
$m
Other
reserves
$m
Fair value
reserve
$m
Cash flow
hedge
reserves
$m
Currency
translation
reserve
$m
Retained
earnings
$m
IHG share-
holders’
equity
$m
Non-
controlling
interest
$m
Total
equity
$m
At 1 January 2021
(1 )
(2,875 )
(24 )
(1,857 )
(1,849 )
Profit
for the year
(1 )
Other comprehensive income
Items that may be subsequently
reclassified to profit or loss:
Losses on cash flow hedges
(69 )
(69 )
(69 )
Costs of hedging
Hedging losses reclassified
to financial expenses
Exchange gains on retranslation
of foreign operations
Items that will not be reclassified
to profit or loss:
Gains on equity instruments
classified as
fair value through
other comprehensive income
Re-measurement gains
on defined benefit plans
Tax related to pension
contributions
Total other comprehensive
income for the year
Total comprehensive income
for the year
(1 )
Transfer of treasury shares
to employee share trusts
(34 )
Release of own shares by
employee share trusts
(13 )
Equity-settled share-based cost
Tax related to share schemes
Exchange adjustments
(2 )
At 31 December 2021
(22 )
(2,873 )
(1,481 )
(1,474 )
All items within total comprehensive income are shown net of tax.
Accounting policies and notes on pages 161 to 216 form an integral part of these Group Financial Statements.
Group Financial Statements
158
IHG
| Annual Report and Form 20-F 2023
Group Financial Statements
continued
Group statement of changes in equity
continued
31 December 2023
Note
2023
$m
2022
Re-presented
a
$m
ASSETS
Goodwill and other intangible assets
12
Property, plant and equipment
13
Right-of-use assets
14
Investment in associates and joint ventures
15
Retirement benefit assets
27
Other financial assets
16
Derivative financial instruments
24
Deferred compensation plan investments
Non-current other receivables
17
Deferred tax assets
8
Contract costs
3
Contract assets
3
Total non-current assets
Inventories
Trade and other receivables
17
Current tax receivable
Other financial assets
16
Cash and cash equivalents
18
Contract costs
3
Contract assets
3
Total current assets
Total assets
LIABILITIES
Loans and other borrowings
22
(599 )
(55 )
Lease liabilities
14
(30 )
(26 )
Derivative financial instruments
24
(25 )
Trade and other payables
19
(711 )
(697 )
Deferred revenue
3
(752 )
(681 )
Provisions
20
(10 )
(44 )
Insurance liabilities
21
(12 )
(9 )
Current tax payable
(51 )
(32 )
Total current liabilities
(2,190 )
(1,544 )
Loans and other borrowings
22
(2,567 )
(2,341 )
Lease liabilities
14
(396 )
(401 )
Derivative financial instruments
24
(11 )
Retirement benefit obligations
27
(66 )
(66 )
Deferred compensation plan liabilities
(250 )
(216 )
Trade and other payables
19
(75 )
(81 )
Deferred revenue
3
(1,096 )
(1,043 )
Provisions
20
(26 )
(20 )
Insurance liabilities
21
(25 )
(23 )
Deferred tax liabilities
8
(68 )
(78 )
Total non-current liabilities
(4,569 )
(4,280 )
Total liabilities
(6,759 )
(5,824 )
Net liabilities
(1,946 )
(1,608 )
EQUITY
IHG shareholders’ equity
(1,950 )
(1,615 )
Non-controlling interest
Total equity
(1,946 )
(1,608 )
a
Re-presented for the adoption of IFRS 17 ‘Insurance Contracts’ (see New accounting standards and other presentational changes).
Signed on behalf of the Board,
Michael Glover
19 February 2024
Accounting policies and notes on pages 161 to 216 form an integral part of these Group Financial Statements.
Group Financial Statements
Group Financial Statements
159
IHG
| Annual Report and Form 20-F 2023
Group statement of
financial position
For the year ended 31 December 2023
Note
2023
$m
2022
$m
2021
$m
Profit
for the year
Adjustments reconciling profit
for the year to cash
flow
from operations
26
Cash flow
from operations
Interest paid
(119 )
(126 )
(134 )
Interest received
Tax paid
8
(243 )
(211 )
(86 )
Net cash from operating activities
Cash flow
from investing activities
Purchase of property, plant and equipment
(28 )
(54 )
(17 )
Purchase of intangible assets
(54 )
(45 )
(35 )
Investment in associates
(3 )
(1 )
Investment in other financial assets
(60 )
(5 )
Deferred purchase consideration paid
25
(13 )
Lease incentives received
Disposal of property, plant and equipment
Disposal of hotel assets, net of costs and cash disposed
11
Repayments of other
financial assets
Net cash from investing activities
(137 )
(78 )
(12 )
Cash flow
from
financing activities
Repurchase of shares, including transaction costs
29
(790 )
(482 )
Purchase of own shares by employee share trusts
(8 )
(1 )
Dividends paid to shareholders
9
(245 )
(233 )
Dividend paid to non-controlling interest
(3 )
Repayment of commercial paper
(828 )
Issue of long-term bonds, including effect of currency swaps
23
Repayment of long-term bonds
23
(209 )
Principal element of lease payments
23
(28 )
(36 )
(32 )
Net cash from
financing activities
(417 )
(961 )
(860 )
Net movement in cash and cash equivalents in the year
(393 )
(236 )
Cash and cash equivalents at beginning of the year
18
Exchange rate effects
(77 )
Cash and cash equivalents at end of the year
18
Accounting policies and notes on pages 161 to 216 form an integral part of these Group Financial Statements.
Group Financial Statements
160
IHG
| Annual Report and Form 20-F 2023
Group Financial Statements
continued
Group statement of cash
flows
Accounting policies
were authorised for issue in accordance with a resolution of the
The Consolidated Financial Statements of IHG have been prepared
on a going concern basis (see below) and under the historical cost
convention, except for assets and liabilities measured at fair value
under relevant accounting standards. The Consolidated Financial
Statements have been prepared in accordance with UK -adopted
international accounting standards and with applicable law and
regulations, including the Companies Act 2006, and with International
Financial Reporting Standards (‘IFRSs’) as issued by the International
Accounting Standards Board (‘IASB’). UK-adopted international
accounting standards differ in certain respects from IFRSs as issued
by the IASB. However, the differences have no impact on the
A period of 18 months has been used, from 1 January 2024 to
30 June 2025, to complete the going concern assessment.
In adopting the going concern basis for preparing the Group
financial statements, the Directors have considered a ‘Base Case’
scenario, as prepared by management, which assumes continued
growth in RevPAR in 2024 and 2025 in line with market expectations.
The assumptions applied in the Base Case scenario are consistent
with those used for Group planning purposes, for impairment testing
(impairment tests adjusted for factors speci
fic to individual properties
or portfolios) and for assessing recoverability of deferred tax assets.
The Directors have also reviewed a ‘Severe Downside Case’ which
is based on a severe but plausible scenario equivalent to the market
conditions experienced through the 2008/09 global financial crisis.
This assumes that the performance during 2024 starts to worsen
and then RevPAR decreases significantly by 17% in 2025.
A large number of the Group’s principal risks would result in an
impact on RevPAR, which is one of the sensitivities assessed against
the headroom available in the Base Case and Severe Downside Case
scenarios. Climate risks are not considered to have a significant
impact over the 18-month period of assessment. Other principal
risks that could result in a large one-off incident that has a material
impact on cash flow have also been considered,
for example a
cybersecurity event.
A one-year extension to the Group’s revolving credit facility of
$1,350m was exercised in 2023 and the facility now matures in
2028. The Group’s key covenant requires net debt:EBITDA below
4.0x. See note 24 for additional information. In November 2023
the Group issued a six-year €600m bond. The only debt maturity
in the period under consideration is the €500m October 2024
bond which is assumed to be repaid with cash on maturity.
Under the Base Case and Severe Downside Case, bank covenants
are not breached and there is significant headroom to the
covenants to absorb multiple additional risks and uncertainties.
Additional funding is not required in the period under consideration.
The Directors also reviewed a number of actions that could be taken
if required to reduce discretionary spend, creating substantial
additional headroom to the covenants.
The Directors reviewed a reverse stress test scenario to determine
what decrease in RevPAR would create a breach of the covenants.
The Directors concluded that it was very unlikely that a single risk
or combination of the risks considered could create the sustained
RevPAR impact required, except for a signi
ficant global event.
The leverage and interest cover covenant tests up to 30 June 2025
(the last day of the assessment period) have been considered
as part of the Base Case and Severe Downside Case scenarios.
Neither of these scenarios indicate that a covenant amendment
would be required but, in the event that it was, the Directors believe
it is reasonable to expect that such an amendment could be obtained
based on experience of negotiating the waivers and amendments in
2020, however the going concern conclusion is not dependent on
this expectation. The Group also has alternative options to manage
this risk including raising additional funding in the capital markets.
Having reviewed these scenarios, the Directors have a reasonable
expectation that the Group has sufficient resources to continue
operating until at least 30 June 2025. Accordingly, they continue to
The Consolidated Financial Statements are presented in millions
of US dollars re
flecting the profile o
f the Group’s revenue and
operating profit which are primarily generated in US dollars or
US dollar-linked currencies.
In the Consolidated Financial Statements, equity share capital,
the capital redemption reserve and shares held by employee share
trusts are translated into US dollars at the relevant rate of exchange
on the last day of the period; the resultant exchange differences
non-trading holding company located in the United Kingdom that
has sterling denominated share capital and whose primary activity
is the payment and receipt of sterling dividends and of interest on
IHG
| Annual Report and Form 20-F 2023
estimates and assumptions
In determining and applying the Group’s accounting policies,
management are required to make judgements, estimates and
assumptions. An accounting policy is considered to be critical if its
selection or application could materially affect the reported amounts
of assets and liabilities at the date of the Consolidated Financial
Statements, or the reported amounts of revenues and expenses
during the reporting period, or could do so within the next
financial year.
Judgements
System Fund
The Group operates a System Fund (the ‘Fund’) to collect and
administer cash assessments from hotel owners for speci
fied
purposes of use including marketing, reservations and the Group’s
loyalty programme, IHG One Rewards. Assessments are generally
levied as a percentage of hotel revenues.
The Fund is not managed to generate a surplus or deficit
for IHG over
the longer term, but is managed for the bene
fit o
f the IHG System
with the objective of driving revenues for the hotels in the System.
In relation to marketing and reservation services, the Group’s
performance obligation under IFRS 15 ‘Revenue from Contracts
with Customers’ is determined to be the continuous performance of
the services rather than the spending of the assessments received.
Accordingly, assessment fees are recognised as hotel revenues
occur, Fund expenses are charged to the Group income statement
as incurred and no constructive obligation is deemed to exist under
IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’.
Accordingly, no liability is recognised relating to the balance of
unspent funds.
No other critical judgements have been made in applying the Group’s
accounting policies.
Estimates
Management consider that significant estimates and assumptions
are used as described below. Estimates and assumptions are
evaluated by management using historical experience and other
factors believed to be reasonable based on current circumstances.
Loyalty
programme
The loyalty programme, IHG One Rewards, enables members to earn
points during each qualifying stay at an IHG branded hotel and through
other partnerships and programmes. Members are able to consume
those points at a later date for free or reduced accommodation or
other benefits. Points revenue includes hotel assessments, revenue
from third-party partners and proceeds from points purchased directly
by members.
The Group recognises deferred revenue in an amount that re
flects
IHG’s unsatisfied per
formance obligations, valued at the stand-alone
selling price of the future bene
fit to the member. The amount o
f
revenue recognised and deferred is impacted by ‘breakage’ (points
that will never be consumed). On an annual basis the Group engages
an external actuary who uses statistical formulae to assist in the
estimate of breakage.
Significant estimation uncertainty exists in projecting members’
future consumption activity. In 2022 and 2021, the breakage estimate
was formed using pre-Covid-19 behaviour patterns as a base, but
giving some weight to activity since 2020 and incorporating the
impact of 2022 programme changes. In 2023, the breakage estimate
has been formed without any equivalent adjustment, re
flecting
normalising patterns of redemption behaviour. If future member
behaviour deviates significantly
from expectations, breakage
estimates could increase or decrease. At 31 December 2023,
deferred revenue relating to the loyalty programme was $1,529m
(2022: $1,411m, 2021: $1,292m). Based on the conditions existing
at the balance sheet date, a one percentage point decrease/increase
in the breakage estimate relating to earned points would increase/
reduce this liability by $75m.
Actuarial gains and losses would correspondingly adjust the amount
of System Fund and reimbursable revenues recognised and deferred
revenue in the Group statement of
The Consolidated Financial Statements comprise the financial
statements of the Parent Company and entities controlled by
the Group. Control exists when the Group has:
•
power over an investee (i.e., existing rights that give it the current
ability to direct the relevant activities of the investee);
•
exposure, or rights, to variable returns from its involvement with
the investee; and
•
the ability to use its power over the investee to affect its returns.
All intra-group balances and transactions are eliminated on
consolidation.
The assets, liabilities and results of those businesses acquired or
disposed of are consolidated for the period during which they were
Within the Group’s subsidiaries, transactions in foreign currencies are
translated to the subsidiary’s functional currency at the exchange
rates ruling on the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies are retranslated to the
subsidiary’s functional currency at the relevant rates of exchange
ruling on the last day of the period. On consolidation:
•
The assets and liabilities of foreign operations of the Group’s
subsidiaries with a functional currency other than US dollars are
translated into US dollars at the relevant rates of exchange ruling
on the last day of the period. The revenues and expenses of foreign
operations are translated into US dollars at average rates of exchange
for each month of the reporting period. The Group treats speci
fic
intercompany loan balances, which are not intended to be repaid
in the foreseeable future, as part of its net investment. The exchange
differences arising on retranslation are taken to the currency
translation reserve; and
•
Exchange differences arising from the translation of borrowings
that are designated as a hedge against a net investment in a
foreign operation are taken to the currency translation reserve.
On disposal of a foreign operation, the cumulative amount
recognised in the currency translation reserve relating to that
particular foreign operation is recycled as part of the gain or
IHG
| Annual Report and Form 20-F 2023
Accounting policies
continued
Revenue is recognised at an amount that reflects the consideration
to which the Group expects to be entitled in exchange for transferring
goods or services to a customer.
Fee business revenue
Under franchise agreements, the Group’s performance obligation
is to provide a licence to use IHG’s trademarks and other intellectual
property. Franchise royalty fees are typically charged as a percentage
of hotel gross rooms revenues and are treated as variable
consideration, recognised as the underlying hotel revenues occur.
Under management agreements, the Group’s performance
obligation is to provide hotel management services and a licence
to use IHG’s trademarks and other intellectual property. Base and
incentive management fees are typically charged. Base management
fees are typically a percentage of total hotel revenues and incentive
management fees are generally based on the hotel’s pro
fitability or
cash flows. Both are treated as variable consideration. Like
franchise
fees, base management fees are recognised as the underlying hotel
revenues occur. Incentive management fees are recognised over
time when it is considered highly probable that the related
performance criteria for each annual period will be met, provided
there is no expectation of a subsequent reversal of the revenue.
Application and re-licensing fees are not considered to be distinct
from the franchise performance obligation and are recognised over
the life of the related agreement.
Franchise and management agreements also contain a promise
to provide technology support and network services to hotels.
A monthly technology fee, based on either gross rooms revenues
or the number of rooms in the hotel, is charged and recognised
over time as these services are delivered. Technology fee income
is included in Central revenue.
Technical service fees are received in relation to design and
engineering support provided prior to the opening of certain hotel
properties. These services are a distinct performance obligation
and the fees are recognised as revenue over the pre-opening period
in line with the Group’s assessment of the stage of completion of the
project, based on the latest expectation of hotel opening date and
its knowledge and experience of the pattern of work performed on
comparable projects.
The Group has applied the practical expedient in IFRS 15 not to
disclose the aggregate amount of the transaction price allocated to
performance obligations that are unsatis
fied or partially unsatisfied
as at the end of the reporting period for all amounts where the
Group has a right to consideration in an amount that corresponds
directly with the value to the customer of the Group’s performance
completed to date (including franchise and management fees).
Contract assets
Amounts paid to hotel owners to secure management and franchise
agreements (‘key money’) are treated as consideration payable to
a customer. A contract asset is recorded which is recognised as
a deduction to revenue over the initial term of the agreement.
In limited cases, loans can be provided to an owner, in such cases
the initial credit risk will be low. The difference, if any, between the
face and market value of the loan on inception is recognised as
a contract asset.
In limited cases, the Group may provide performance guarantees
to third-party hotel owners. The expected value of payments under
performance guarantees reduces the overall transaction price and is
recognised as a deduction to revenue over the term of the agreement.
Typically, contract assets are not financial assets as they represent
amounts paid by the Group at the beginning of a contract, and so
are tested for impairment based on value in use rather than with
reference to expected credit losses. Contract assets are reviewed
for impairment when events or changes in circumstances indicate
that the carrying value may not be recoverable. If carrying values
exceed the recoverable amount, determined by reference to
estimated future cash
flows discounted to their present value using
a pre-tax discount rate, the contract assets are written down to the
recoverable amount.
Deferred revenue
Deferred revenue is recognised when payment is received before
the related performance obligation is satis
fied.
Revenue is also deferred when key money is committed and is highly
likely to be paid. The annual revenue deferral is equal to the reduction
to revenue that would arise if the key money were paid at inception
of the contract. When payment is made, a net contract asset is
recorded which is amortised over the remaining initial term of
the agreement.
Contract costs
Certain costs incurred to secure management and franchise
agreements, typically developer commissions, are capitalised and
amortised as an expense over the initial term of the related agreement.
These costs are presented as contract costs in the Group statement
of
financial position.
Contract costs are reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not
be recoverable with reference to the future expected cash
flows
from the contract.
Revenue from owned, leased and managed lease hotels
At its owned, leased and managed lease hotels, the Group’s
performance obligation is to provide accommodation and other
goods and services to guests. Revenue includes rooms revenue and
food and beverage sales, which are recognised when the rooms are
occupied and food and beverages are sold. Guest deposits received
in advance of hotel stays are recorded as deferred revenue in the
Group statement of
financial position. They are recognised as revenue
along with any balancing payment from the guest when the associated
stay occurs, or are returned to the customer in the event of
a cancellation.
IHG
| Annual Report and Form 20-F 2023
System Fund and reimbursable revenues
System Fund and other co-brand revenues
The Group operates the Fund to collect and administer cash
assessments from hotel owners for speci
fied purposes o
f use
including marketing, reservations and the Group’s loyalty programme,
IHG One Rewards. The 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 bene
fit o
f 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 Fund. This can lead to accounting losses in the Fund each year
as the deferred revenue balance grows.
Under both franchise and management agreements, the Group is
required to provide marketing and reservations services, as well as
other centrally managed programmes. These services are provided
by the Fund and are funded by assessment fees. Costs are incurred
and allocated to the Fund in accordance with the principles agreed
with the IHG Owners Association. The Group acts as principal in the
provision of the services as the related expenses primarily comprise
payroll and marketing expenses under contracts entered into by the
Group. The assessment fees from hotel owners are generally levied
as a percentage of hotel revenues and are recognised as those hotel
revenues occur.
Certain travel agency commission revenues within the Fund are
recognised on a net basis, where it has been determined that IHG
is acting as agent.
In respect of IHG One Rewards, the performance obligations are
to arrange for the provision of future bene
fits to members on
consumption of previously earned reward points and Milestone
Rewards. Points are exchanged for reward nights at an IHG hotel or
other goods or services provided by third parties. Milestone Rewards
comprise points or other benefits such as upgrades and
food and
beverage vouchers.
Under its franchise and management agreements, IHG receives
assessment fees based on total qualifying hotel revenue from IHG
One Rewards members’ hotel stays.
The Group’s performance obligation is not satis
fied in
full until the
member has consumed the relevant benefits. Accordingly, loyalty
assessments are allocated between points and Milestone Rewards
and deferred in an amount that re
flects the stand-alone selling price
of the future bene
fit to the member. Revenue is impacted by a
‘breakage’ estimate of the bene
fits that will never be consumed.
On an annual basis, the Group engages an external actuary who
uses statistical formulae to assist in formulating this estimate, which
is adjusted to reflect actual experience up to the reporting date.
As materially all of the awards will be either consumed at IHG
managed or franchised hotels owned by third parties, or exchanged
for awards provided by third parties, IHG is deemed to be acting as
agent on consumption and therefore recognises the related revenue
net of the cost of reimbursing the hotel or third party that is
providing the benefit.
Performance obligations under the Group’s co-brand credit card
agreements comprise:
a)
Arranging for the provision of future bene
fits to members who
have earned points or free night certi
ficates;
b) Marketing services; and
c) Providing the co-brand partner with the right to access the
loyalty programme.
Revenue from a) and b) are reported within System Fund and
reimbursable revenues and revenue from c) is reported within fee
business revenue.
Fees from these agreements comprise
fixed amounts normally
payable at the beginning of the contract, and variable amounts
paid on a monthly basis. Variable amounts are typically based on
the number of points and free night certi
ficates issued to members
and the marketing services performed by the Group. Total fees are
allocated to the performance obligations based on their estimated
stand-alone selling prices. Revenue allocated to marketing and
licensing obligations is recognised on a monthly basis as the
obligations are satisfied. Revenue relating to points and
free night
certificates is recognised when the member has consumed the
points or certificates at a participating hotel or has selected a reward
from a third party, net of the cost of reimbursing the hotel or third
party that is providing the benefit.
Judgement is required in estimating the stand-alone selling prices
which are based upon generally accepted valuation methodologies
regarding the value of the licence provided and the number of points
and certificates expected to be issued. However, the value o
f revenue
recognised and the deferred revenue balance at the end of the year
is not materially sensitive to changes in these assumptions.
Reimbursable revenues
In a managed property, the Group typically acts as employer of the
general manager and, in some cases, other employees at the hotel
and is entitled to reimbursement of these costs. The performance
obligation is satisfied over time as the employees per
form their
duties, consistent with when reimbursement is received.
Reimbursements for these services are shown as revenue with an
equal matching employee cost, with no profit impact. Certain other
costs relating to both managed and franchised hotels are also
contractually reimbursable to IHG and, where IHG is deemed to
be acting as principal in the provision of the related services, the
The Group has four reportable segments re
flecting its geographical
regions (Americas, EMEAA, Greater China) and its Central functions.
Central functions include technology, sales and marketing,
finance, human resources, corporate services and insurance results.
Central revenue arises principally from technology fee income.
No operating segments are aggregated to form these
reportable segments.
Management monitors the operating results of these reportable
segments for the purpose of making decisions about resource
allocation and performance assessment. Each of the geographical
regions is led by its own Chief Executive Officer or Managing
Director who reports to the Group Chief Executive Officer.
The System Fund is not managed to generate a profit or loss
for IHG
over the longer term and cost reimbursements do not impact in-year
profit or loss. System Fund and reimbursable revenues and results
are therefore not regularly reviewed by the Chief Operating Decision
Maker (‘CODM’) and do not constitute an operating segment under
IFRS 8 ‘Operating Segments’.
Segmental performance is evaluated based on operating pro
fit or loss
and is measured consistently with operating profit or loss in the Group
Financial Statements, excluding System Fund, reimbursables and
exceptional items. Group financing activities,
fair value gains or losses
on contingent purchase consideration and income taxes are managed
IHG
| Annual Report and Form 20-F 2023
Accounting policies
continued
The Group receives government support income relating to the
Group’s corporate office presence in certain countries and, as a
result of Covid-19, has received support at certain of the Group’s
leased hotels.
Where grants are intended to compensate payroll costs they are
recognised as an offset within staff costs; those which are unrelated
to specific costs are presented within other operating income.
As grants are recognised only where there is reasonable assurance
that the grant will be received and all attached conditions will be
complied with, the grants may be recognised in subsequent years.
Receiving support at leased hotels may result in additional variable
Financial income and expenses include income and charges
on the Group’s financial assets and liabilities and related hedging
instruments, and foreign exchange gains and losses primarily related
to the Group’s internal funding structure.
Finance charges relating to bank and other borrowings, including
transaction costs and any discount or premium on issue, are
recognised in the Group income statement using the effective
interest rate method.
Borrowing costs attributable to the acquisition or development of
assets that necessarily take a substantial period of time to prepare
for their intended use are capitalised as part of the asset cost.
In the Group statement of cash
flows, interest paid and received is
presented within cash from operating activities, including any fees
and discounts on issuance or settlement of borrowings. Capitalised
The Group discloses certain financial in
formation both including
and excluding exceptional items. The presentation of information
excluding exceptional items allows a better understanding of the
underlying trading performance and trends of the Group and its
reportable segments. It also provides consistency with the Group’s
internal management reporting.
In determining whether an event or transaction is exceptional,
quantitative and qualitative factors are considered. Exceptional
items are identified by virtue o
f their size, nature or incidence, with
consideration given to consistency of treatment with prior years and
between gains and losses.
The tax effect of exceptional items is also presented as exceptional.
Examples of exceptional items include, but are not restricted to, gains
and losses on the disposal of assets, impairment charges and reversals,
the costs of individually signi
ficant legal cases or commercial
disputes and reorganisation costs. All exceptional items are subject
Basic earnings or loss per ordinary share is calculated by dividing
the profit or loss
for the year available for IHG equity holders by the
weighted average number of ordinary shares, excluding investment
in own shares, in issue during the year.
Diluted earnings or loss per ordinary share is calculated by adjusting
basic earnings or loss per ordinary share to reflect the notional
exercise of the weighted average number of dilutive ordinary share
awards outstanding during the year. Where the effect of the notional
exercise of outstanding ordinary share awards is anti-dilutive, these
On the acquisition of a business, identi
fiable assets acquired
and liabilities assumed are measured at their fair value. Contingent
liabilities assumed are measured at fair value unless this cannot
be measured reliably, in which case they are not recognised but
are disclosed in the same manner as other contingent liabilities.
The measurement of deferred tax assets and liabilities arising on
acquisition is as described in the general principles detailed within
the ‘Taxes’ accounting policy note on page 170 with the exception
that no deferred tax is provided on taxable temporary differences
in connection with the initial recognition of goodwill.
The cost of an acquisition is measured as the aggregate of the
fair value of the consideration transferred. Contingent purchase
consideration is measured at fair value on the date of acquisition and
is re-measured at fair value at each reporting date with changes in fair
value recognised on the face of the Group income statement below
operating profit. De
ferred purchase consideration is subsequently
measured at amortised cost and the effect of unwinding the discount
is recorded in financial expenses.
Payments of contingent and deferred purchase consideration
reduce the respective liabilities. In respect of contingent purchase
consideration, the portion of each payment relating to its original
estimate of fair value on acquisition is reported within cash
flow
from investing activities in the Group statement of cash
flows and
the portion of each payment relating to the increase or decrease
in the liability since the acquisition date is reported within cash
flow
from operating activities. In respect of deferred purchase
consideration, the cash paid in excess of the initial fair value is
reported within interest paid, and the remainder is reported within
cash flows
from investing activities.
Goodwill is recorded at cost, being the difference between the fair
value of the consideration and the fair value of net assets acquired.
Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses and is not amortised.
Transaction costs are expensed and are not included in the cost
IHG
| Annual Report and Form 20-F 2023
Brands
Externally acquired brands are initially recorded at cost if separately
acquired or fair value if acquired as part of a business combination,
provided the brands are controlled through contractual or other
legal rights, or are separable from the rest of the business.
Brands are tested for impairment at least annually if determined
to have indefinite lives.
The costs of developing internally generated brands are expensed
as incurred.
Management agreements
Management agreements acquired as part of a business combination
are initially recognised at the fair value attributed to those contracts
on acquisition and are subsequently amortised on a straight-line
basis over the term of the agreements, including any extension
periods at the Group’s option.
Software
Substantially all software is internally generated; amounts capitalised
include internal and third-party labour and consultancy costs.
Internally generated development costs are capitalised when all
of the following can be demonstrated:
•
The ability and intention to complete the project;
•
That the completed software will generate probable future
economic benefits;
•
The availability of adequate technical,
financial and other resources
to complete the project; and
•
The ability to measure the expenditure.
Following initial recognition, the asset is carried at cost less any
accumulated amortisation and impairment losses. Costs are
generally amortised over estimated useful lives of three to
five years
on a straight-line basis with the exception of the Guest Reservation
System which is amortised over seven to 10 years (see page 188).
Costs incurred in the research phase are expensed. In addition,
configuration and customisation costs relating to cloud computing
Property, plant and equipment are stated at cost less depreciation
and any accumulated impairment.
Repairs and maintenance costs are expensed as incurred.
Land is not depreciated. All other property, plant and equipment
are depreciated to a residual value over their estimated useful
lives, namely:
•
Buildings – over a maximum of 50 years; and
•
Fixtures, fittings and equipment – three to 25 years.
All depreciation is charged on a straight-line basis. Residual value
is reassessed annually.
Where the Group holds land or other property which it intends
to occupy and provide hotel services, either as owner or manager,
The Group as lessee
On inception of a contract, the Group assesses whether it contains
a lease. A contract contains a lease when it conveys the right to
control the use of an identi
fied asset
for a period of time in exchange
for consideration. The right to use the asset and the obligation under
the lease to make payments are recognised in the Group statement
of
financial position as a right-o
f-use asset and a lease liability.
Lease contracts may contain both lease and non-lease components.
The Group allocates payments in the contract to the lease and
non-lease components based on their relative stand-alone prices
and applies the lease accounting model only to lease components.
The right-of-use asset recognised at lease commencement includes
the amount of lease liability recognised, initial direct costs incurred
and lease payments made at or before the commencement date,
less any lease incentives received. Right-of-use assets are
depreciated to a residual value over the shorter of the asset’s
estimated useful life and the lease term. Right-of-use assets are also
adjusted for any re-measurement of lease liabilities and are subject
to impairment testing. Residual value is reassessed annually.
A lease liability is recorded when the leased asset is available for
use by the Group and is initially measured at the present value of
the lease payments to be made over the lease term. The lease
payments include fixed payments (including ‘in-substance fixed’
payments) and variable lease payments that depend on an index or
a rate (initially measured using the index or rate at commencement),
less any lease incentives receivable. ‘In-substance fixed’ payments
are payments that may, in form, contain variability but that, in
substance, are unavoidable. In calculating the present value of lease
payments, the Group uses its incremental borrowing rate at the
lease commencement date if the interest rate implicit in the lease
is not readily determinable.
The lease term includes periods subject to extension options which
the Group is reasonably certain to exercise and excludes the effect
of early termination options where the Group is reasonably certain
that it will not exercise the option. Minimum lease payments include
the cost of a purchase option if the Group is reasonably certain it will
purchase the underlying asset after the lease term.
After the commencement date, the amount of lease liabilities is
increased to reflect the accretion o
f interest and reduced for lease
payments made. The carrying amount of lease liabilities is re-measured
if there is a modi
fication, a change in the lease term or a change in
lease payments as a result of a rent review or change in the relevant
index or rate.
Variable lease payments are payable under certain of the Group’s
hotel leases and arise where the Group is committed to making
lease payments that are contingent on the performance of these
hotels. Such lease payments that do not depend on an index or
a rate are recognised as an expense in the period over which the
event or condition that triggers the payment occurs.
IHG
| Annual Report and Form 20-F 2023
Accounting policies
continued
The Group has opted not to apply the lease accounting model to
intangible assets, leases of low-value assets or leases which have
a term of less than 12 months. Costs associated with these leases
are recognised as an expense on a straight-line basis over the
lease term.
Payments and receipts are presented as follows in the Group
statement of cash
flows:
•
Short-term lease payments, payments for leases of low-value
assets and variable lease payments that are not included in the
measurement of the lease liabilities are presented within cash
flows
from operating activities;
•
Payments for the interest element of recognised lease liabilities are
included in interest paid within cash flows
from operating activities;
and
•
Payments for the principal element of recognised lease liabilities
are presented within cash flows
from
financing activities.
The Group as lessor
Leases, including subleases, for which the Group is a lessor are
classified as finance or operating leases. Whenever the terms o
f the
lease transfer substantially all the risks and rewards of ownership to
the lessee, the lease is classified as a finance lease. All other leases
are classified as operating leases. Where a leased property earns
rentals under an operating sublease outside of the normal course
of business, the Group’s interest in the lease is classi
fied as an
investment property within right-of-use assets; these are subsequently
When the lease is classified as an operating lease, rental income
arising is accounted for on a straight-line basis in the Group
income statement.
When the lease is classified as a finance lease, the Group’s interest
in the lease is derecognised and is replaced by a finance lease
receivable. Any difference between those amounts is recognised
in the Group income statement. Finance lease receivables are
presented within other receivables and are initially measured at the
present value of lease payments receivable under the sublease plus
any initial direct costs. Finance lease interest is recognised within
financial income in the Group income statement.
Receipts are presented as follows in the Group statement of
cash flows:
•
Receipts from operating leases and investment properties are
presented within cash flows
from operating activities; and
•
Receipts from
finance leases are presented within cash flows
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions o
f the entity, but is not
control or joint control over those policies. A joint venture exists
when two or more parties have joint control over, and rights to the
net assets of, the venture. Joint control is the contractually agreed
sharing of control which only exists when decisions about the
relevant activities require the unanimous consent of the parties
sharing control.
In determining the extent of power or signi
ficant influence,
consideration is given to other agreements between the Group,
the investee entity, and the investing partners. This includes any
related management or franchise agreements and the existence
of any performance guarantees.
Associates and joint ventures are accounted for using the equity
method unless the associate or joint venture is classified as held
for
sale. Under the equity method, the Group’s investment is recorded
at cost adjusted by the Group’s share of post-acquisition pro
fits and
losses, and other movements in the investee’s reserves, applying
consistent accounting policies. When the Group’s share of losses
exceeds its interest in an associate or joint venture, the Group’s
carrying amount is reduced to $nil and recognition of further losses
is discontinued except to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf of
an associate or joint venture.
If there is objective evidence that an associate or joint venture is
impaired, an impairment charge is recognised if the carrying amount
of the investment exceeds its recoverable amount.
Upon loss of signi
ficant influence over an associate or joint control
of a joint venture, any retained investment is measured at fair value
with any difference to carrying value recognised in the Group
financial assets
Non-financial assets are tested
for impairment when events or
changes in circumstances indicate that the carrying value may
not be recoverable and, in the case of goodwill and brands with
indefinite lives, at least annually.
Assets that do not generate independent cash inflows are allocated
to the cash-generating unit (‘CGU’), or group of CGUs, to which they
belong. For impairment testing of hotel properties, each hotel is
deemed to be a CGU.
If carrying values exceed their estimated recoverable amount,
the assets or CGUs are written down to the recoverable amount.
Recoverable amount is the greater of fair value less costs of disposal
and value in use. Value in use is assessed based on estimated future
cash flows, including the effect o
f in
flation, discounted to their
present value using a pre-tax nominal discount rate that reflects
current market assessments of the time value of money and the
risks specific to the asset.
IHG
| Annual Report and Form 20-F 2023
With the exception of goodwill, an assessment is made at each
reporting date to determine whether there is an indication that
previously recognised impairment losses no longer exist or have
decreased. A previously recognised impairment loss is reversed
only if there has been a signi
ficant change in the assumptions used
to determine the asset’s recoverable amount since the impairment
loss was recognised. The reversal is limited so that the carrying
amount of the asset does not exceed its recoverable amount, nor
exceed the carrying amount that would have been determined,
net of depreciation or amortisation, had no impairment loss been
recognised for the asset in prior years.
Impairment losses, and any subsequent reversals, are recognised
On initial recognition, the Group classifies its financial assets as
being subsequently measured at amortised cost, fair value through
other comprehensive income (‘FVOCI’) or fair value through pro
fit
or loss (‘FVTPL’).
Financial assets which are held to collect contractual cash flows
and give rise to cash flows that are solely payments o
f principal and
interest are subsequently measured at amortised cost. Interest on
these assets is calculated using the effective interest rate method
and is recognised in the Group income statement as financial
income. The Group recognises a provision for expected credit losses
for
financial assets held at amortised cost. With the exception o
f
trade receivables, where there has not been a significant increase
in credit risk since initial recognition, provision is made for defaults
that are possible within the next 12 months. Where there has been
a significant increase in credit risk since initial recognition,
for
example trade deposits and loans where the borrower is in financial
difficulty or has not met repayments as they fall due, provision is
made for credit losses expected over the remaining life of the asset.
The Group has elected to irrevocably designate equity investments
as FVOCI as they mainly comprise strategic investments in entities
that own hotels which the Group manages. Changes in their value
are recognised within gains or losses on equity instruments
classified as FVOCI in the Group statement o
f comprehensive
income and are never recycled to the Group income statement.
On disposal, any related balance within the fair value reserve is
reclassified to retained earnings. Dividends
from equity investments
classified as FVOCI are recognised in the Group income statement
as other operating income when the dividend has been declared,
when receipt of the funds is probable and when the dividend is not
a return of invested capital. Equity instruments classi
fied as FVOCI
are not subject to an impairment assessment.
Financial assets not meeting the above criteria are measured at
FVTPL. These include money market funds, investments which do
not meet the definition o
f equity and other
financial assets, including
those which do not have a fixed date o
A trade receivable is recorded when the Group has an unconditional
right to receive payment. In respect of franchise fees, base and
incentive management fees, Central revenue and revenues from
owned, leased and managed lease hotels, the invoice is typically
issued as the related performance obligations are satis
fied, as
described on page 163. Trade receivables typically do not bear
interest and are generally on payment terms of up to 30 days.
Trade receivables are initially recognised at fair value and subsequently
measured at amortised cost. A provision for impairment is made for
lifetime expected credit losses. The Group has established a provision
matrix that is based on its historical credit loss experience by region
and number of days past due. Where the historical experience is not
relevant to defined owner groups,
for example those in
financial
distress, lifetime expected credit losses are calculated by reference
to other sources of data.
Cash comprises cash on hand and demand deposits.
Cash and cash equivalents comprise short-term deposits, money
market funds and repurchase agreements that are readily convertible
to a known amount of cash and are subject to an insigni
ficant risk o
f
changes in value. They generally have an original maturity of three
months or less.
to regulatory or other contractual restrictions and are not available
Cash balances are classified as other financial assets when the Group
is not able to freely access the funds because they are subject to a
Money market funds
Money market funds are held at FVTPL, with distributions recognised
in financial income.
Bank and other borrowings are initially recognised at the fair value
of the consideration received less directly attributable transaction
costs. They are subsequently measured at amortised cost.
Borrowings are classified as non-current when the repayment date
is more than 12 months from the period-end date or where they are
IHG
| Annual Report and Form 20-F 2023
Accounting policies
continued
Derivatives are initially recognised and subsequently measured at
fair value. The subsequent accounting treatment depends on whether
the derivative is designated as a hedging instrument and, if so, the
nature of the item being hedged.
Changes in the fair value of derivatives which have either not been
designated as hedging instruments or relate to the ineffective portion
of hedges are recognised immediately in the Group income statement.
Documentation outlining the measurement and effectiveness of
any hedging arrangement is maintained throughout the life of the
hedge relationship.
Interest arising from currency derivatives and interest rate swaps
is recorded in either financial income or expenses over the term
of the agreement, unless the accounting treatment for the hedging
relationship requires the interest to be taken to reserves.
Within the Group statement of cash
flows, interest paid includes
interest paid on the Group’s bonds and the related derivative
financial instruments.
Cash flow hedges
Financial instruments are designated as cash flow hedges when
they hedge exposure to variability in cash flows that are attributable
to either a highly probable forecast transaction or a particular risk
associated with a recognised asset or liability.
Changes in the fair value are recorded in other comprehensive
income and cash flow hedge reserves to the extent that the hedges
are effective. When the hedged item is recognised, the cumulative
gains and losses on the related hedging instrument are reclassified
to the Group income statement, within financial expenses.
Net investment hedges
Financial instruments are designated as net investment hedges
when they hedge the Group’s net investment in foreign operations.
Changes in the fair value are recorded in other comprehensive
income and the currency translation reserve to the extent that the
hedges are effective. The cumulative gains and losses remain in
equity until the relevant foreign operation is disposed, at which point
they are reclassified to the Group income statement as part o
f the
In limited cases, the Group may guarantee part of mortgage
loans made to facilitate third-party ownership of hotels under IHG
management or franchise arrangements. The Group has elected
to apply the requirements of IFRS 9 ‘Financial Instruments’ to these
arrangements. Financial guarantee contracts are initially recognised
at fair value and subsequently measured at the higher of the amount
calculated under the Group’s expected credit loss model and any
amount initially recognised less cumulative amounts recognised in
accordance with the Group’s revenue recognition policy. The carrying
value of
financial guarantee liabilities is immaterial
for all
The Group measures each of the following at fair value
on a recurring basis:
•
Financial assets and liabilities measured at FVTPL;
•
Financial assets measured at FVOCI; and
•
Derivative financial instruments.
Other assets are measured at fair value when impaired or
re-measured on classification as held
for sale by reference to fair
value less costs of disposal.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants. Fair value is measured by reference to the principal
market for the asset or liability assuming that market participants
act in their economic best interests.
The fair value of a non-
financial asset assumes the asset is used
in its highest and best use, either through continuing ownership
or by selling it.
The Group uses valuation techniques that maximise the use of
relevant observable inputs using the following valuation hierarchy:
Level 1:
Quoted (unadjusted) prices in active markets for identical
assets or liabilities.
Level 2:
Other techniques for which all inputs which have a
significant effect on the recorded
fair value are observable,
either directly or indirectly.
Level 3:
Techniques which use inputs which have a significant effect
on the recorded fair value that are not based on observable
market data.
For assets and liabilities measured at fair value on a recurring basis,
the Group determines whether transfers have occurred between
levels in the hierarchy by reassessing categorisation (based on the
lowest level input that is significant to the
fair value measurement
as a whole) at the end of each reporting period.
Further disclosures on the particular valuation techniques used
by the Group are provided in note 25.
Where significant assets, such as property, are valued by re
ference
to fair value less costs of disposal, an external valuation will normally
be obtained using professional valuers who have appropriate market
financial assets and financial liabilities
Financial assets and financial liabilities are offset and the net amount
is reported in the Group statement of
financial position i
f there is
a currently enforceable legal right to offset the recognised amounts
and there is an intention to settle on a net basis or to realise the assets
and settle the liabilities simultaneously. To meet these criteria, the
right of set-off must not be contingent on a future event and must be
legally enforceable in all of the following circumstances: the normal
course of business; the event of default; and the event of insolvency
IHG
| Annual Report and Form 20-F 2023
Current tax
Current income tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered
from, or paid to, the tax authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or substantively
enacted at the end of the reporting period.
The calculation of the Group’s current tax charge involves
consideration of applicable tax laws and regulations in many
jurisdictions throughout the world. From time to time, the Group
is subject to tax audits and uncertainties in these jurisdictions.
The issues involved can be complex and audits may take a number
of years to conclude. Where the interpretation of local tax law is not
clear, management relies on judgement and accounting estimates
to ensure all uncertain tax positions are adequately provided for
in the Group Financial Statements, in accordance with IFRIC 23
‘Uncertainty over Income Tax Treatments’, representing the Group’s
view of the most likely outcome or, where multiple issues are
considered likely to be settled together, the probability weighted
amounts of the range of possible outcomes.
This may involve consideration of some or all of the following factors:
•
strength of technical argument, impact of case law and clarity
of legislation;
•
professional advice;
•
experience of interactions, and precedents set, with the particular
taxing authority; and
•
agreements previously reached in other jurisdictions on
comparable issues.
The Group has applied the exception to recognising and disclosing
information about deferred tax assets and liabilities related to
Pillar Two income taxes.
Deferred tax assets and liabilities arise and are generally recognised
in respect of temporary differences between the tax base and
carrying value of assets and liabilities.
Deferred tax is calculated at the tax rates that are expected to apply
in the periods in which the asset is released or the liability will be
settled, based on tax rates and laws enacted or substantively
enacted at the end of the reporting period.
Judgement is used when assessing the extent to which deferred tax
assets, particularly in respect of tax losses, should be recognised.
Deferred tax assets are only recognised to the extent that it is
regarded as probable that there will be sufficient and suitable
taxable profits or de
ferred tax liabilities in the relevant legal entity
or tax group against which such assets can be utilised in the future.
For this purpose, forecasts of future pro
fits are considered by
assessing estimated future cash
flows, consistent with those
disclosed on page 161 within ‘Going concern’. Tax assumptions
are overlaid to these profit
forecasts to estimate the future
taxable profits.
Deferred tax is not provided on temporary differences arising on
investments in subsidiaries where the Group is able to control the
timing of the reversal and it is probable that the temporary
difference will not reverse in the foreseeable future.
Where deferred tax assets and liabilities arise in the same entity, or
group of entities, and there would be a legal right to offset the assets
and liabilities were they to reverse, the assets and liabilities are also
offset in the Group statement of
Defined contribution plans
Payments to defined contribution plans are charged to the Group
income statement as they fall due.
Defined benefit plans
Plan assets are measured at fair value and plan liabilities are
measured on an actuarial basis using the projected unit credit
method, discounted at an interest rate equivalent to the current rate
of return on a high-quality corporate bond of equivalent currency
and term to the plan liabilities. The difference between the value
of plan assets and liabilities at the period-end date is the amount
of surplus or de
ficit recorded in the Group statement o
f
financial
position as an asset or liability. An asset is recognised when the
employer has an unconditional right to use the surplus at some
point during the life of the plan or on its wind-up.
The service cost of providing pension bene
fits to employees,
together with the net interest expense or income for the year,
is charged to the Group income statement within administrative
expenses. Net interest is calculated by applying the discount rate
to the net defined benefit asset or liability, a
fter any asset restriction.
Re-measurements comprise actuarial gains and losses, the return
on plan assets and changes in the amount of any asset restrictions.
Actuarial gains and losses may result from differences between
the actuarial assumptions underlying the plan liabilities and actual
experience during the year or changes in the actuarial assumptions
used in the valuation of the plan liabilities. Re-measurement gains
and losses, and taxation thereon, are recognised in other
comprehensive income and are not reclassified to profit or loss
in subsequent periods.
Actuarial valuations are carried out on a regular basis and are
updated for material transactions and other material changes in
circumstances (including changes in market prices and interest
rates) up to the end of the reporting period.
The Group operates a deferred compensation plan in the US which
allows certain employees to make additional provision for retirement
through the deferral of salary with matching company contributions
within a dedicated trust. The related assets and liabilities are
recognised in the Group statement of
financial position. The Group’s
obligation to employees under the plan is limited to the fair value of
assets held by the plan and so the assets and liabilities are valued at
The cost of equity-settled share-based payment transactions with
employees is measured by reference to fair value at the date at
which the right to the shares is granted. Fair value is determined
by an external valuer using option pricing models.
The cost of equity-settled share-based payment transactions is
recognised, together with a corresponding increase in equity,
over the period in which any performance or service conditions
are ful
filled, ending on the date on which the relevant employees
become fully entitled to the award (vesting date).
The Group income statement charge represents the movement in
cumulative expense recognised at the beginning and end of that
year. No expense is recognised for awards that do not ultimately
vest, except for awards where vesting is conditional upon a market
or non-vesting condition, which are treated as vesting irrespective
of whether or not the market or non-vesting condition is satis
fied,
provided that all other performance and/or service conditions
IHG
| Annual Report and Form 20-F 2023
Accounting policies
continued
Provisions are recognised when the Group has a present obligation
as a result of a past event, it is probable that a payment will be made
and a reliable estimate of the amount payable can be made. If the
effect of the time value of money is material, the provision is
discounted using a current pre-tax discount rate that reflects the
risks specific to the liability. No amounts are currently discounted.
Commercial litigation and disputes
A provision is made when management consider it probable that
payment may occur and the amount can be reliably estimated even
though the defence of the related claim may still be ongoing through
the court process.
Self insurance reserves
The Group holds insurance policies with third-party insurers
against certain risks relating to its corporate operations and owned
and leased properties. Certain risks are reinsured through the
Group’s captive insurance company (the ‘Captive’), SCH Insurance
Company. This reduces the cost of insurance to the Group.
For both the Group’s self insurance provisions and its external
insurance obligations, in addition to the Captive obtaining regulatory
approval, each line of insurance is subject to review and approval by
the Insurance Executive Sub-Committee. The level of retained risk
and expected loss is reviewed annually to balance the level of risk
against external risk transfer costs.
Insurance reserves are held principally in the Captive. They are
established using independent actuarial assessments, which reflect
current expectations of the future economic outlook, or are based
on past claims experience provided by third parties.
Amounts utilised are principally paid to third-party insurers or
dedicated claims handlers for subsequent settlement with the
claimant. In order to protect the third-party insurer against the
solvency risk of the Captive, the Group has outstanding letters
The Group has applied IFRS 17 for the
first time in 2023. IFRS 17
introduces a new measurement and disclosure model for insurance
contract arrangements. The Group has applied these changes
retrospectively.
The Group’s insurance reserves relating to managed hotels
(previously included within provisions) are now included in the
Group statement of
financial position as insurance liabilities.
Insurance liabilities include both claims which are incurred but
not reported (‘IBNR’) and those reported but not yet settled.
Reserves are established using IFRS 17’s premium allocation
approach, as all policies have a duration of 12 months or less,
and incorporate independent actuarial assessments which reflect
current expectations of the future economic outlook and past
claims experience.
The Group assesses other arrangements with guarantees and
similar features to determine whether an insurance contract exists.
No material contracts have been identified to date.
Insurance revenue and insurance expenses are presented separately
within the Group income statement. Insurance revenue comprises
reinsurance premiums which are recognised over the period of
coverage; insurance expenses comprise the cost of claims and
The Group recognises sales proceeds and any related gain or loss on
disposal on completion of the sales process. In determining whether
the gain or loss should be recorded, the Group considers whether it:
•
has a continuing managerial involvement to the degree associated
with asset ownership;
•
has transferred the signi
ficant risks and rewards associated with
asset ownership; and
•
Equity share capital and reserves
Equity share capital includes the total net proceeds (both nominal
value and share premium) on issue of the Company’s equity share
capital. Share premium represents the amount of proceeds received
Capital redemption reserve
The capital redemption reserve maintains the nominal value of the
equity share capital of the Company when shares are repurchased
and cancelled.
Shares held by employee share trusts
Shares held by employee share trusts comprise ordinary shares
held by employee share trusts.
Other reserves
Other reserves comprise the merger and revaluation reserves
previously recognised under UK GAAP, together with the reserve
arising as a consequence of the Group’s capital reorganisation in
June 2005. The revaluation reserve relates to the previous revaluations
of property, plant and equipment which were included at deemed
cost on adoption of IFRS. Following the change in presentational
currency to US dollars in 2008, this reserve also includes exchange
differences arising on retranslation to period-end exchange rates of
equity share capital, the capital redemption reserve and shares held
by employee share trusts.
Fair value reserve
The fair value reserve comprises movements in the value of
financial
assets measured at fair value through other comprehensive income.
Cash flow hedge reserves
The cash flow hedge reserves comprise:
•
Cash flow hedge reserve: the effective portion o
f the cumulative
net change in the fair value of hedging instruments used in cash
flow hedges pending subsequent recognition in profit or loss; and
•
Cost of hedging reserve: the gain or loss which is excluded from
the designated hedging instrument relating to the foreign currency
basis spread of currency swaps.
Currency translation reserve
The currency translation reserve comprises the movement in
exchange differences arising from the translation of foreign operations
and exchange differences on foreign currency borrowings and
derivative financial instruments that provide an effective hedge
against net investments in foreign operations. On adoption of IFRS,
cumulative exchange differences were deemed to be $nil.
Non-controlling interest
A non-controlling interest is equity in a subsidiary of the Group not
IHG
| Annual Report and Form 20-F 2023
There are no climate-related estimates and assumptions that have
a material impact on asset values in the Group Financial Statements.
In particular, the following have been considered:
•
In the case of goodwill and brands, the carrying value is recovered
in less than 5 years under the Base Case forecasts and is not
susceptible to medium-term risks.
•
In the case of the InterContinental Boston, for which the lease
expires in 2105, the last impairment test performed indicates
headroom above recoverable value of approximately 25% of the
asset value before the asset would be impaired.
•
In the case of other hotel assets (within property, plant and
equipment, right-of-use assets, associates or other
financial assets)
the remaining economic lives, whether they are sensitive to the
impact of transitional risks or are susceptible to physical risks.
•
In the case of contract assets, the term of the management
agreement and the significant headroom o
f fee income over the
asset carrying value.
•
The period of coverage of performance guarantees and owner
loan guarantees, together with caps on the Group’s exposure.
•
In the case of the recoverability of the UK deferred tax asset, the
impact of the potential downside risk on the Group’s forecasts
(see disclosure on page 185).
Additionally, increasing operating costs over a medium term, for
example energy, are not expected to have a material impact on any
of the Group’s assets.
While there is currently no material medium-term impact expected
from climate change, the risks attached to climate change continue
to evolve and these will continue to be assessed against the Group’s
New accounting standards and other presentational changes
Adoption of new accounting standards
IFRS 17 ‘Insurance Contracts’
IFRS 17, which replaces IFRS 4, introduces a new measurement and
disclosure model for insurance contracts issued. IFRS 17 applies to
all types of insurance contracts, regardless of the type of entities
that issue them.
The Group has adopted IFRS 17 using the full retrospective method
of adoption with the date of initial application being 1 January 2023.
On adoption of IFRS 17, the Group elected to apply the requirements
of IFRS 9 ‘Financial Instruments’ to
financial guarantee contracts
which were previously accounted for by applying IFRS 4.
The carrying value of
financial guarantee liabilities is immaterial
for all periods presented.
The Group’s contracts within the scope of IFRS 17 for the periods
presented include IHG’s global insurance programme which
provides coverage to managed hotels for certain risks. Premiums are
payable by the hotels to third-party insurance providers. Some of the
risk is reinsured by the Captive, in exchange for premiums paid from
the third-party insurance provider to the Captive.
The adoption of IFRS 17 had no impact on operating pro
fit, profit
before or after tax, net liabilities or cash
flows
for any period
presented. As a result, the Group has not included a third statement
of
financial position at 31 December 2021 within the Consolidated
Financial Statements.
The comparative information in these Consolidated Financial
Statements has been re-presented for the adoption of IFRS 17,
as summarised below.
•
The Group’s insurance reserves relating to managed hotels
(previously included within provisions) are now included in the
Group statement of
financial position as insurance liabilities.
As at 31 December 2022, current insurance liabilities of $9m and
non-current insurance liabilities of $23m have been reclassi
fied.
•
Insurance revenue (previously presented within revenue from fee
business) and insurance expenses (previously presented within
administrative expenses) are now presented separately within the
Group income statement. For the year ended 31 December 2022,
these amounts totalled $15m and $11m (2021: $9m and $8m)
respectively.
Amendments to IAS 12 ‘Income Taxes’ in relation to International
Tax Reform – Pillar Two Model Rules
The amendments to IAS 12 have been introduced in response to
the Organisation for Economic Co-operation and Development’s
(‘OECD’) base erosion and profit shi
fting (‘BEPS’) Pillar Two rules
and include:
•
a mandatory temporary exception to the recognition and
disclosure of deferred taxes arising from the jurisdictional
implementation of the Pillar Two model rules; and
•
disclosure requirements to help users of the
financial statements
better understand the Group’s exposure to Pillar Two income taxes
arising from that legislation, particularly before its effective date.
The Group has adopted the amendments to IAS 12 from 1 January
2023 with there being no impact to the Group’s reported financial
performance or position. The incremental disclosure required by
the amendment is provided in note 8.
Other standards adopted
The Group has applied the following amendments:
•
IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting
Policies;
•
IAS 8 – Definition o
f Accounting Estimates; and
•
IAS 12 – Deferred Tax related to Assets and Liabilities arising from
a Single Transaction.
None of these amendments have had a material impact on the
Group’s reported financial per
formance or position.
From 1 January 2024, the Group will apply the amendments to:
•
IAS 1 – Classification o
f Liabilities as Current or Non-current;
•
IAS 1 – Non-current Liabilities with Covenants;
•
IFRS 16 – Lease Liability in a Sale and Leaseback; and
•
IAS 7 and IFRS 7 – Supplier Finance Arrangements.
From 1 January 2025, the Group will apply the amendments to:
•
IAS 21 – Lack of Exchangeability
There is no anticipated material impact from these amendments on
the Group’s reported financial per
Revenues and expenses from the System Fund are presented
together with reimbursable revenue and expenses in the Group
income statement for clarity of presentation, consistency with
industry practice and to reflect the
fact that neither of these are
reported to the CODM and do not generate a profit or loss
for the
Group over the longer term. Analysis of these items continues to
IHG
| Annual Report and Form 20-F 2023
Accounting policies
continued
Notes to the Group Financial Statements
2023 | 2022 | 2021 | ||||
$1 equivalent | Average | Closing | Average | Closing | Average | Closing |
Sterling | £0.80 | £0.78 | £0.81 | £0.83 | £0.73 | £0.74 |
Euro | €0.92 | €0.90 | €0.95 | €0.94 | €0.85 | €0.88 |
Revenue
2022 | 2021 | ||
2023 | Re-presented a | Re-presented a | |
Year ended 31 December | $m | $m | $m |
Americas | 1,105 | 1,005 | 774 |
EMEAA | 677 | 552 | 303 |
Greater China | 161 | 87 | 116 |
Central | 221 | 199 | 197 |
Revenue from reportable segments | 2,164 | 1,843 | 1,390 |
System Fund and reimbursable revenues | 2,460 | 2,049 | 1,517 |
Total revenue | 4,624 | 3,892 | 2,907 |
a
Re-presented to combine System Fund and reimbursable revenues (see New accounting standards and other presentational changes).
Profit
2023 | 2022 | 2021 | |
Year ended 31 December | $m | $m | $m |
Americas | 815 | 761 | 559 |
EMEAA | 215 | 152 | 5 |
Greater China | 96 | 23 | 58 |
Central | (107) | (108) | (88) |
Operating profit from reportable segments | 1,019 | 828 | 534 |
System Fund and reimbursable result | 19 | (105) | (11) |
Operating exceptional items (note 6) | 28 | (95) | (29) |
Operating profit | 1,066 | 628 | 494 |
Net financial expenses | (52) | (96) | (139) |
Fair value (losses)/gains on contingent purchase consideration | (4) | 8 | 6 |
Profit be fore tax | 1,010 | 540 | 361 |
Tax | (260) | (164) | (96) |
Profit for the year | 750 | 376 | 265 |
In 2022, operating profit
from reportable segments included $6m relating to business insurance claims principally in the Americas region
and $16m government support income relating to the EMEAA region. The net impact of government support income on operating pro
fit
from reportable segments was $6m after deducting additional variable rent of $10m which became payable as a direct result of the
support received.
IHG
| Annual Report and Form 20-F 2023
2. Segmental information
continued
Non-cash items included within operating profit
from reportable segments
Greater | |||||
Americas | EMEAA | China | Central | Group | |
Year ended 31 December 2023 | $m | $m | $m | $m | $m |
Depreciation and amortisation a | 24 | 12 | 4 | 27 | 67 |
Contract assets deduction in revenue | 21 | 15 | 1 | – | 37 |
Equity-settled share-based payments cost | 9 | 4 | 2 | 16 | 31 |
Share of pro fit o f associates and joint ventures (excluding exceptional items) | (5) | (8) | – | – | (13) |
Greater | |||||
Americas | EMEAA | China | Central | Group | |
Year ended 31 December 2022 | $m | $m | $m | $m | $m |
Depreciation and amortisation a | 23 | 13 | 4 | 28 | 68 |
Contract assets deduction in revenue | 18 | 13 | 1 | – | 32 |
Equity-settled share-based payments cost | 8 | 4 | 2 | 14 | 28 |
Share of pro fit o f associates (excluding exceptional items) | (1) | – | – | – | (1) |
Greater | |||||
Americas | EMEAA | China | Central | Group | |
Year ended 31 December 2021 | $m | $m | $m | $m | $m |
Depreciation and amortisation a | 30 | 18 | 6 | 44 | 98 |
Contract assets deduction in revenue | 17 | 17 | 1 | – | 35 |
Equity-settled share-based payments cost | 8 | 4 | 3 | 11 | 26 |
Share of losses of associates | 7 | 1 | – | – | 8 |
a
Includes $17m (2022: $15m, 2021: $20m) relating to cost of sales in owned, leased and managed lease hotels and $50m (2022: $53m, 2021: $78m) relating to other assets. A further
$83m (2022: $86m, 2021: $94m) was recorded within System Fund and reimbursable expenses.
Capital expenditure
Greater | |||||
Americas | EMEAA | China | Central | Group | |
Year ended 31 December 2023 | $m | $m | $m | $m | $m |
Capital expenditure per management reporting | 128 | 35 | 3 | 87 | 253 |
Contract acquisition costs | (74) | (31) | (3) | – | (108) |
Timing differences and other adjustments | 1 | (2) | – | (7) | (8) |
Additions per the Group Financial Statements | 55 | 2 | – | 80 | 137 |
Comprising additions to: | |||||
Goodwill and other intangible assets | – | – | – | 53 | 53 |
Property, plant and equipment | 4 | 2 | – | 15 | 21 |
Investment in associates | 3 | – | – | – | 3 |
Other financial assets | 48 | – | – | 12 | 60 |
55 | 2 | – | 80 | 137 |
Greater | |||||
Americas | EMEAA | China | Central | Group | |
Year ended 31 December 2022 | $m | $m | $m | $m | $m |
Capital expenditure per management reporting | 71 | 21 | 2 | 67 | 161 |
Contract acquisition costs | (47) | (16) | (1) | – | (64) |
Lease incentives received | – | – | – | 6 | 6 |
Timing differences and other adjustments | – | – | (1) | 2 | 1 |
Additions per the Group Financial Statements | 24 | 5 | – | 75 | 104 |
Comprising additions to: | |||||
Goodwill and other intangible assets | – | – | – | 46 | 46 |
Property, plant and equipment | 23 | 5 | – | 29 | 57 |
Investment in associates | 1 | – | – | – | 1 |
24 | 5 | – | 75 | 104 |
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
2. Segmental information
continued
2023 | 2022 | 2021 | |
Year ended 31 December | $m | $m | $m |
Revenue | |||
United Kingdom | 263 | 243 | 142 |
United States | 1,777 | 1,659 | 1,263 |
Rest of World | 1,020 | 773 | 574 |
3,060 | 2,675 | 1,979 | |
System Fund revenues (note 32) | 1,564 | 1,217 | 928 |
4,624 | 3,892 | 2,907 |
For the purposes of the above table, fee business, owned, leased and managed lease and reimbursable revenues are determined according
to the location of the hotel and other revenue is attributed to the country of origin. In addition to the United Kingdom, revenue relating to an
individual country is separately disclosed when it represents 10% or more of total revenue. System Fund revenues are not included in the
geographical analysis as the Group does not monitor the Fund’s revenue by location of the hotel or, in the case of the loyalty programme,
according to the location where members consume their rewards.
2023 | 2022 | |
31 December | $m | $m |
Non-current assets | ||
United Kingdom | 100 | 102 |
United States | 1,332 | 1,308 |
Rest of World | 660 | 621 |
2,092 | 2,031 |
For the purposes of the above table, non-current assets comprise goodwill and other intangible assets, property, plant and equipment,
right-of-use assets, investments in associates and joint ventures, non-current other receivables, non-current contract costs and non-current
contract assets. In addition to the United Kingdom, non-current assets relating to an individual country are separately disclosed when they
represent 10% or more of total non-current assets, as de
Disaggregation of revenue
Greater | |||||
Americas | EMEAA | China | Central | Group | |
Year ended 31 December 2023 | $m | $m | $m | $m | $m |
Franchise and base management fees | 936 | 253 | 115 | – | 1,304 |
Incentive management fees | 21 | 101 | 46 | – | 168 |
Central revenue | – | – | – | 200 | 200 |
Revenue from fee business | 957 | 354 | 161 | 200 | 1,672 |
Revenue from owned, leased and managed lease hotels | 148 | 323 | – | – | 471 |
Revenue from insurance activities | – | – | – | 21 | 21 |
1,105 | 677 | 161 | 221 | 2,164 | |
System Fund revenues (note 32) | 1,564 | ||||
Reimbursable revenues (note 32) | 896 | ||||
Total revenue | 4,624 |
Greater | Central | Group | |||
Americas | EMEAA | China | Re-presented a | Re-presented a | |
Year ended 31 December 2022 | $m | $m | $m | $m | $m |
Franchise and base management fees | 861 | 215 | 71 | – | 1,147 |
Incentive management fees | 18 | 69 | 16 | – | 103 |
Central revenue | – | – | – | 184 | 184 |
Revenue from fee business | 879 | 284 | 87 | 184 | 1,434 |
Revenue from owned, leased and managed lease hotels | 126 | 268 | – | – | 394 |
Revenue from insurance activities | – | – | – | 15 | 15 |
1,005 | 552 | 87 | 199 | 1,843 | |
System Fund revenues (note 32) | 1,217 | ||||
Reimbursable revenues (note 32) | 832 | ||||
Total revenue | 3,892 |
a
Re-presented for the adoption of IFRS 17 ‘Insurance Contracts’ (see New accounting standards and other presentational changes).
IHG
| Annual Report and Form 20-F 2023
3. Revenue
continued
Greater | Central | Group | |||
Americas | EMEAA | China | Re-presented a | Re-presented a | |
Year ended 31 December 2021 | $m | $m | $m | $m | $m |
Franchise and base management fees | 683 | 120 | 91 | – | 894 |
Incentive management fees | 8 | 29 | 25 | – | 62 |
Central revenue | – | – | – | 188 | 188 |
Revenue from fee business | 691 | 149 | 116 | 188 | 1,144 |
Revenue from owned, leased and managed lease hotels | 83 | 154 | – | – | 237 |
Revenue from insurance activities | – | – | – | 9 | 9 |
774 | 303 | 116 | 197 | 1,390 | |
System Fund revenues (note 32) | 928 | ||||
Reimbursable revenues (note 32) | 589 | ||||
Total revenue | 2,907 |
a
Re-presented for the adoption of IFRS 17 ‘Insurance Contracts’ (see New accounting standards and other presentational changes).
Contract balances
2023 | 2022 | |
$m | $m | |
Trade receivables (note 17) | 580 | 493 |
Contract assets | 459 | 367 |
Deferred revenue | (1,848) | (1,724) |
2023 | 2022 | |
$m | $m | |
At 1 January | 367 | 346 |
Additions | 129 | 70 |
Recognised as a deduction to revenue | (37) | (32) |
Impairment charges (note 6) | – | (5) |
Impairment reversals (note 6) | – | 3 |
Repayments | (7) | (3) |
Exchange and other adjustments | 7 | (12) |
At 31 December | 459 | 367 |
Analysed as: | ||
Current | 35 | 31 |
Non-current | 424 | 336 |
459 | 367 |
The Group also has future commitments for key money payments which are contingent upon future events and may reverse.
At 31 December 2023, the maximum exposure remaining under performance guarantees was $80m (2022: $75m).
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
3. Revenue
continued
Deferred revenue
Other | Application & | ||||
Loyalty | co-brand | re-licensing | |||
programme | fees | fees | Other | Total | |
$m | $m | $m | $m | $m | |
At 1 January 2022 | 1,292 | 44 | 163 | 114 | 1,613 |
Increase in deferred revenue | 532 | – | 27 | 44 | 603 |
Recognised as revenue | (413) | (11) | (23) | (44) | (491) |
Exchange and other adjustments | – | – | – | (1) | (1) |
At 31 December 2022 | 1,411 | 33 | 167 | 113 | 1,724 |
Increase in deferred revenue | 672 | – | 27 | 63 | 762 |
Recognised as revenue | (554) | (11) | (23) | (48) | (636) |
Exchange and other adjustments | – | – | – | (2) | (2) |
At 31 December 2023 | 1,529 | 22 | 171 | 126 | 1,848 |
Analysed as: | |||||
Current | 649 | 11 | 22 | 70 | 752 |
Non-current | 880 | 11 | 149 | 56 | 1,096 |
1,529 | 22 | 171 | 126 | 1,848 | |
At 31 December 2022: | |||||
Current | 584 | 11 | 23 | 63 | 681 |
Non-current | 827 | 22 | 144 | 50 | 1,043 |
1,411 | 33 | 167 | 113 | 1,724 |
This table does not include amounts which were received and recognised as revenue in the same year. Amounts recognised as revenue
were included in deferred revenue at the beginning of the year.
Loyalty programme revenues, shown gross in the table above, are presented net of the corresponding redemption cost in the Group
income statement.
Transaction price allocated to remaining performance obligations
The expected timing of recognition of amounts received and not yet recognised relating to performance obligations that were unsatis
fied
at the year end are as follows:
2023 | 2022 | |||||
Loyalty and | Loyalty and | |||||
co-brand | Other | Total | co-brand | Other | Total | |
$m | $m | $m | $m | $m | $m | |
Less than one year | 660 | 92 | 752 | 595 | 86 | 681 |
Between one and two years | 346 | 43 | 389 | 339 | 46 | 385 |
Between two and three years | 195 | 32 | 227 | 199 | 32 | 231 |
Between three and four years | 118 | 24 | 142 | 114 | 27 | 141 |
Between four and five years | 73 | 20 | 93 | 70 | 22 | 92 |
More than five years | 159 | 86 | 245 | 127 | 67 | 194 |
1,551 | 297 | 1,848 | 1,444 | 280 | 1,724 |
Contract costs
2023 | 2022 | |
$m | $m | |
At 1 January | 80 | 77 |
Costs incurred | 15 | 13 |
Charged to income statement | (8) | (8) |
Exchange and other adjustments | – | (2) |
At 31 December | 87 | 80 |
Analysed as: | ||
Current | 5 | 5 |
Non-current | 82 | 75 |
87 | 80 |
IHG
| Annual Report and Form 20-F 2023
Staff costs and average number of employees
2022 | 2021 | ||
2023 | Re-presented a | Re-presented a | |
Staff costs | $m | $m | $m |
Wages and salaries | 1,808 | 1,604 | 1,315 |
Social security costs | 143 | 117 | 86 |
Pension and other post-retirement benefits: | |||
Defined benefit plans (note 27) | 4 | 2 | 2 |
Defined contribution plans | 58 | 53 | 41 |
2,013 | 1,776 | 1,444 | |
Analysed as: | |||
Costs borne by IHG b | 747 | 646 | 569 |
Costs borne by the System Fund or reimbursed | 1,266 | 1,130 | 875 |
2,013 | 1,776 | 1,444 |
a
Re-presented to combine System Fund and employees whose costs are reimbursed (see New accounting standards and other presentational changes).
b
In 2022, included $1m classified as exceptional relating to the costs o
f ceasing operations in Russia.
Staff costs are presented net of government support income of $nil (2022: $5m, 2021: $23m). The total comprises $nil (2022: $nil, 2021:
$12m) relating principally to employee costs at certain of the Group’s leased hotels and $nil (2022: $5m, 2021: $11m) relating to support
received in the form of tax credits which relate to the Group’s corporate office presence in certain countries. There are no unful
filled
conditions or other contingencies attached to these grants.
2022 | 2021 | ||
Monthly average number of employees, including part-time employees | 2023 | Re-presented a | Re-presented a |
Employees whose costs are borne by IHG: | |||
Americas | 1,578 | 1,548 | 1,481 |
EMEAA | 3,642 | 3,638 | 2,808 |
Greater China | 352 | 333 | 299 |
Central | 1,720 | 1,528 | 1,425 |
7,292 | 7,047 | 6,013 | |
Employees whose costs are borne by the System Fund or are reimbursed | 20,306 | 18,833 | 16,315 |
27,598 | 25,880 | 22,328 |
a
Re-presented to combine System Fund and employees whose costs are reimbursed (see New accounting standards and other presentational changes) and to correct the allocation
of 2022 between reportable segments.
Directors’ remuneration
2023 | 2022 | 2021 | |
$m | $m | $m | |
Base salaries, fees, annual performance payments and bene fits | 6.9 | 7.9 | 8.4 |
More detailed information on the remuneration including pensions, share awards and shareholdings for each Director is shown in the Directors’
2023 | 2022 | 2021 | |
$m | $m | $m | |
Audit of the Financial Statements | 7 | 6 | 4 |
Audit of subsidiaries | 3 | 2 | 3 |
Other assurance services | 1 | 1 | 1 |
11 | 9 | 8 | |
Under SEC regulations analysed as: | |||
Audit | 10 | 8 | 7 |
Other audit-related | 1 | 1 | 1 |
11 | 9 | 8 |
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
2023 | 2022 | 2021 | ||
Note | $m | $m | $m | |
Administrative expenses: | ||||
Costs of ceasing operations in Russia | (a) | – | (12) | – |
Commercial litigation and disputes | (b) | – | (28) | (25) |
– | (40) | (25) | ||
fits/(losses) o Share of pro f associate | (c) | 18 | (60) | – |
Other operating income | (d) | 10 | – | – |
Other net impairment reversals/(charges): | ||||
Management agreements – reversal | 12 | – | 12 | – |
Property, plant and equipment – charge | 13 | – | (10) | – |
– reversal | 13 | – | 3 | – |
Right-of-use assets – charge | 13 | – | (2) | – |
– reversal | 14 | – | 2 | – |
Associates – charge | – | – | (4) | |
– reversal | 15 | – | 2 | – |
Contract assets – charge | (e) | – | (5) | – |
– reversal | (e) | – | 3 | – |
– | 5 | (4) | ||
Operating exceptional items | 28 | (95) | (29) | |
Exceptional items before tax | 28 | (95) | (29) | |
Tax on exceptional items | (f) | (7) | 26 | 3 |
Exceptional tax | (g) | – | – | 26 |
Tax | (7) | 26 | 29 | |
Operating exceptional items analysed as: | ||||
Americas | 27 | (46) | (22) | |
EMEAA | 1 | (49) | (7) | |
28 | (95) | (29) |
The above items are defined by management as exceptional as
further described on page 165.
IHG
| Annual Report and Form 20-F 2023
6. Exceptional items
continued
(a) Costs of ceasing operations in Russia
On 27 June 2022, the Group announced it was in the process of ceasing all operations in Russia consistent with evolving UK, US and EU
sanction regimes and the ongoing and increasing challenges of operating there. The costs associated with the cessation of corporate
operations in Moscow and long-term management and franchise contracts were presented as exceptional due to the nature of the war
in Ukraine which drove the Group’s response.
(b) Commercial litigation and disputes
From time to time, the Group is subject to legal proceedings, the ultimate outcome of each is always subject to many uncertainties inherent
in litigation. The 2022 provision for commercial litigation and disputes principally related to the EMEAA region and was utilised in full in 2023
following settlement of the disputed matters.
In 2021, related to the agreed costs to settle two commercial disputes, $18m in the Americas region and $7m in the EMEAA region.
These costs were presented as exceptional reflecting the quantum o
f the costs and nature of the disputes.
(c) Share of pro
fits/losses o
f associate
As part of an agreed settlement of the 2021 Americas commercial dispute in relation to the Barclay associate, in 2022 the Group was allocated
expenses in excess of its actual percentage share which directly reduced the Group’s current interest in the associate. This resulted in $60m
of additional expenses being allocated to the Group in 2022, with a current tax bene
fit o
f $15m and, applying equity accounting to this
additional share of expenses, reduced the Group’s investment to $nil. In addition, a liability of $18m was recognised, re
flecting an unavoidable
obligation to repay this amount in certain circumstances. The value of the liability is linked to the value of the hotel; increases in the property
value are attributed first to the Group and are reflected as a reduction o
f the liability until it is reduced to $nil.
In 2023, the increase in fair value of the hotel (according to pricing opinions provided by a professional external valuer) resulted in a full
reversal of the liability but no further trigger for reversal of previous impairment charges.
The gain is presented as exceptional by reason of its size, the nature of the agreement and for consistency with the associated charges
in 2022 and 2021.
(d) Other operating income
Relates 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.
The income is presented as exceptional due to its size.
(e) Impairment charge/reversals on contract assets
In 2022, the $5m charge related to key money pertaining to managed and franchised hotels in Russia. The $3m reversal related to other
impairments originally recorded in 2020 and arises as a result of the improved
financial position o
f owners or performance of the
related hotels.
These costs are presented as exceptional for consistency with (a) above and, in respect of releases, with the treatment applied in prior years.
(f) Tax on exceptional items
The tax impacts of the exceptional items are shown in the table below:
2023 | 2022 | 2021 | ||||
Current | Deferred | Current | Deferred | Current | Deferred | |
tax | tax | tax | tax | tax | tax | |
$m | $m | $m | $m | $m | $m | |
Costs of ceasing operations in Russia | – | – | 3 | – | – | – |
Commercial litigation and disputes | – | – | 8 | (2) | – | 4 |
Share of (pro fits)/losses o f associate | – | (4) | 15 | – | – | – |
Other operating income | (3) | – | – | – | – | – |
Other net impairment reversals/(charges) | – | – | 1 | (5) | – | 1 |
Adjustments in respect of prior years a | – | – | 6 | – | (2) | – |
(3) | (4) | 33 | (7) | (2) | 5 | |
Total current and deferred tax | (7) | 26 | 3 |
a
In 2022, related to the release of tax contingencies no longer needed; one of these was as a result of the closure of a tax audit of the 2014 US federal income tax return. In 2021,
the tax charge related to the same audit.
(g) Exceptional tax
Related to the enactment of a change to the UK rate of corporate income tax from 19% to 25%, effective 1 April 2023. The change resulted in
the re-measurement of those UK deferred tax assets and liabilities which are forecast to be utilised or crystallise after this effective date, using
the higher tax rate. A further credit of $4m was recorded within the Group statement of comprehensive income in respect of movements in
deferred tax assets and liabilities originally recorded there. The value attributable to unrecognised deferred tax assets increased by $34m
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
2023 | 2022 | 2021 | |
$m | $m | $m | |
Financial income | |||
Financial income on deposits and money market funds | 33 | 17 | 2 |
Interest income on loans and other assets | 6 | 5 | 6 |
39 | 22 | 8 | |
Financial expenses | |||
Interest expense on external borrowings | 85 | 92 | 109 |
Interest expense on lease liabilities | 29 | 29 | 29 |
Unwind of discount on deferred purchase consideration | 1 | – | 1 |
Foreign exchange gains | (35) | (10) | – |
Other charges | 11 | 7 | 8 |
91 | 118 | 147 |
Financial income comprises $24m (2022: $12m, 2021: $8m) relating to financial assets held at amortised cost and $15m (2022: $10m, 2021: $nil)
relating to financial assets held at FVTPL.
Interest expense on external borrowings and unwind of discount on deferred purchase consideration relate to
financial liabilities which are
held at amortised cost. Other charges includes bank charges and non-bank interest expense.
In 2023, $43m (2022: $15m, 2021: $1m) was payable to the System Fund in relation to interest accumulated on the balance of cash received
in advance of the consumption of points awarded through the IHG One Rewards loyalty programme. The expense and corresponding System
Fund interest income are eliminated within financial expenses. On a net basis, financial income and expenses includes $1m (2022: $1m,
2021: $2m) of other interest which is also attributable to the System Fund.
Tax on profit/(loss)
United Kingdom | Other jurisdictions | Total | |||||||
2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |
$m | $m | $m | $m | $m | $m | $m | $m | $m | |
Current tax | |||||||||
Current period | 16 | 6 | 1 | 245 | 177 | 138 | 261 | 183 | 139 |
Adjustments in respect of prior periods | – | (2) | – | 12 | (5) | 4 | 12 | (7) | 4 |
16 | 4 | 1 | 257 | 172 | 142 | 273 | 176 | 143 | |
Deferred tax | |||||||||
Origination and reversal of temporary differences | 1 | (1) | (7) | (21) | (6) | (14) | (20) | (7) | (21) |
Changes in tax rates and tax laws | – | – | (25) | 2 | – | – | 2 | – | (25) |
Adjustments to unprovided or unrecognised | |||||||||
deferred tax a | – | (2) | 2 | 5 | – | – | 5 | (2) | 2 |
Adjustments in respect of prior periods | 1 | 2 | 1 | (1) | (5) | (4) | – | (3) | (3) |
2 | (1) | (29) | (15) | (11) | (18) | (13) | (12) | (47) | |
Income tax charge/(credit) for the year b | 18 | 3 | (28) | 242 | 161 | 124 | 260 | 164 | 96 |
a
Represents a reassessment of the recovery of deferred taxes in line with the Group’s pro
fit
forecasts.
b
‘Other jurisdictions’ includes $172m (2022: $134m, 2021: $112m) in respect of US taxes.
IHG
| Annual Report and Form 20-F 2023
8. Tax
continued
Reconciliation of tax charge
2023 | 2022 | 2021 | |
% | % | % | |
Tax at UK blended rate | 23.5 | 19.0 | 19.0 |
Tax credits | (0.5) | (0.1) | (0.1) |
System Fund a | (1.3) | 3.1 | 0.4 |
Foreign exchange gains | (1.0) | (0.9) | – |
Other permanent differences b | 0.9 | 0.5 | 1.4 |
Non-recoverable foreign taxes | 1.3 | 3.5 | 3.5 |
Net effect of different rates of tax c | 1.5 | 6.3 | 6.8 |
Effect of changes in UK tax rates and laws d | – | – | (7.0) |
Effects of substantive enactment of UAE tax rates and laws e | (0.9) | – | – |
Effect of changes in other tax rates and laws | 0.2 | 0.1 | – |
Reduction in current tax expense by previously unrecognised deferred tax assets | – | – | (0.1) |
Items on which deferred tax arose but where no deferred tax is recognised f | 0.2 | 1.2 | 2.0 |
Effect of adjustments to unprovided or unrecognised deferred taxes g | 0.5 | (0.4) | 0.5 |
Adjustment to tax charge in respect of prior periods h | 1.3 | (1.9) | 0.2 |
25.7 | 30.4 | 26.6 |
a
The System Fund is, in general, not subject to taxation.
b
Includes (0.6) percentage points (2022: (1.0) percentage points, 2021: (0.7) percentage points) in respect of the US Foreign-derived intangible income regime.
c
Includes 1.3 percentage points (2022: 6.9 percentage points, 2021: 7.1 percentage points) driven by the relatively high blended US rate, which includes US Federal and State taxes.
d
In 2021, the UK Government enacted an increase to the UK rate of Corporation Tax from 19% to 25%.
e
During 2023, law implementing a new corporate income tax regime was substantively enacted in the UAE. This resulted in the recognition of a deferred tax asset of $9m in the UAE.
Absent further law change, this bene
fit is not likely to reoccur.
f
Predominantly in respect of losses arising in the year.
g
Entirely in respect of adjustments relating to estimated recoverable deferred tax assets other than 2023. In 2023, includes 0.7 percentage points respectively relating to the provision
of previously unprovided deferred tax liabilities which arise on temporary differences in subsidiaries.
h
Relates to the finalisation o
f tax returns, activity from tax authorities such as tax audits and the reassessment of provisions for uncertain tax positions.
Factors that may affect the future tax charge
Many factors will affect the Group’s future tax rate, the main ones being future legislative developments, future pro
fitability o
f underlying
subsidiaries and tax uncertainties.
In 2021, the OECD made proposals for worldwide tax reform under a two ‘pillar’ system – Pillar One and Pillar Two. Pillar One has not been
enacted in any jurisdiction, but even if it were in its current form, the Group would not expect to be impacted.
Pillar Two seeks to impose a global minimum tax, essentially establishing a floor on corporate tax competition by ensuring a large
multinational enterprise is subject to tax in each jurisdiction at a 15% effective minimum tax rate regardless of where it operates. A total
of 145 jurisdictions have agreed in principle to implement the Pillar Two rules with approximately a third of these actively preparing and
implementing legislation. Notably the UK, the Group’s headquarter jurisdiction, substantively enacted the Pillar Two rules in 2023 and as
such they will apply to the Group on a worldwide basis from 1 January 2024, with the
first tax return due to be filed by 30 June 2026.
For the first three years o
f operation, transitional exemptions operate on a jurisdiction-by-jurisdiction basis to remove the need to prepare
full calculations. The Group has analysed these exemptions on the assumption that the Pillar Two rules were to have applied in the periods
2019 to 2022 and concluded that only three jurisdictions in the Group would have failed to meet the exemptions once transactions or items
that the Group would not expect to recur in the future were excluded. Failing to meet the exemptions does not mean that Pillar Two tax will
be due, but instead that the full calculations are performed, which are complex in nature. The pro
fit be
fore tax for these three territories in
2023 was c.$35m and accordingly the Group does not believe any material Pillar Two tax would have arisen.
Once the transitional exemptions cease to be available at the start of 2027, the Group will be required to perform full calculations for every
jurisdiction. The Group will continue to assess the future impact of the rules, taking into account the issuance of new guidance and re
finements
to the rules (including possible new exemptions), expected to occur within the next three years. However, given that a significant proportion
of the Group’s pro
fit be
fore tax was earned in legal entities in the US, UK and China, each of which has a blended future statutory tax rate of
25% or higher, the Group considers the likelihood of material future Pillar Two taxes arising to be low, based upon the current pro
file o
f the
Group’s business.
As a revenue protecting measure, more jurisdictions are beginning to implement their own minimum tax systems, in general, with rules
similar to those of Pillar Two. This has the impact of replacing any Pillar Two tax arising on the pro
fits o
f a jurisdiction with an equivalent
amount of domestic tax.
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
Tax paid
Total tax paid (net of refunds) is entirely in respect of operating activities. This comprises taxes paid directly by Group entities to taxing
authorities and taxes withheld at source in respect of fees payable to the Group. Taxes withheld at source are paid by hotel owners to their
local taxing authorities on behalf of the Group. The table below shows the territories to whom taxes are directly paid by the Group which
exceed $5m in the current or comparative periods, in addition to the UK, the Group’s headquarter jurisdiction. The year-on-year increases
are predominantly driven by corresponding increases to Group profitability and re
funds received in 2021 in respect of earlier periods.
2023 | 2022 | 2021 | |
$m | $m | $m | |
China a | 5 | 10 | 3 |
UK | 8 | 3 | (2) |
US b | 171 | 165 | 68 |
Other jurisdictions | 22 | 11 | 1 |
206 | 189 | 70 | |
Taxes withheld at source | 37 | 22 | 16 |
Tax paid per cash flow | 243 | 211 | 86 |
a
Tax payments are typically based upon the previous year’s profits.
b
Includes refunds in respect of earlier periods of $nil (2022: $nil, 2021: $15m).
A reconciliation of tax paid to the total current tax charge in the Group income statement is as follows:
2023 | 2022 | 2021 | |
$m | $m | $m | |
Current tax charge in the Group income statement | 273 | 176 | 143 |
Current tax credit in the Group statement of comprehensive income | (6) | (2) | – |
Current tax credit taken directly to equity | (5) | – | – |
Total current tax charge | 262 | 174 | 143 |
Movements to tax contingencies a | (2) | 10 | (4) |
Timing differences of cash tax paid and foreign exchange differences b | (17) | 27 | (53) |
Tax paid per cash flow | 243 | 211 | 86 |
a
Tax contingency movements are included within the current tax charge but do not impact cash tax paid in the year. Settlements of tax contingencies are included within cash tax
paid in the year but not recorded in the current year tax charge.
b
2021 included $20m of refunds in respect of earlier years, $12m of other receivables which have been allocated to payments that otherwise would have been due and $28m
of payments due in 2022.
8. Tax
continued
IHG
| Annual Report and Form 20-F 2023
8. Tax
continued
Property, | Expected | ||||||||||
plant, | credit | Intangible | Other | ||||||||
equipment | Deferred | losses | assets | short-term | |||||||
and | Application | gains on | Employee | Deferred | on trade | excluding | temporary | ||||
software | fees | loan notes a | Associates | Losses b | benefits | compensation | receivables | software | differences c,d | Total | |
$m | $m | $m | $m | $m | $m | $m | $m | $m | $m | $m | |
At 1 January 2022 | (81) | 40 | (34) | (55) | 84 | 39 | 48 | 20 | (16) | 9 | 54 |
Group income | |||||||||||
statement | 32 | 1 | – | (4) | 5 | 1 | 4 | (5) | (21) | (1) | 12 |
Group statement | |||||||||||
of comprehensive | |||||||||||
income | – | – | – | – | (1) | (6) | – | – | – | 8 | 1 |
Group statement | |||||||||||
of changes in equity | – | – | – | – | – | 1 | – | – | – | – | 1 |
Exchange and | |||||||||||
other adjustments | (4) | – | – | – | (9) | (3) | – | (1) | (3) | – | (20) |
At 31 December 2022 | (53) | 41 | (34) | (59) | 79 | 32 | 52 | 14 | (40) | 16 | 48 |
Group income | |||||||||||
statement | 22 | 1 | – | (1) | – | 2 | 2 | (3) | (9) | (1) | 13 |
Group statement | |||||||||||
of comprehensive | |||||||||||
income | – | – | – | – | (6) | – | – | – | – | (5) | (11) |
Group statement | |||||||||||
of changes in equity | – | – | – | – | – | 6 | – | – | – | – | 6 |
Exchange and | |||||||||||
other adjustments | 1 | – | – | – | 3 | 1 | – | – | 3 | 2 | 10 |
At 31 December 2023 | (30) | 42 | (34) | (60) | 76 | 41 | 54 | 11 | (46) | 12 | 66 |
a
Become due in 2025 unless prevailing law at that time allows further deferral.
b
Wholly in respect of revenue losses.
c
No balances exceeding $20m are contained within ‘Other short-term temporary differences’.
d
Primarily in respect of contract costs, right-of-use assets, lease liabilities and expenses for which tax relief has not yet been obtained.
The analysis of the deferred tax balance after considering the offset of assets and liabilities within entities where there is a legal right to do
so and an analysis of the deferred tax balance showing all territories with balances greater than $10m in either the current or prior year are
as follows:
2023 | 2022 | |
$m | $m | |
Deferred tax assets | 134 | 126 |
Deferred tax liabilities | (68) | (78) |
66 | 48 | |
Analysed as: | ||
United Kingdom | 113 | 109 |
United States | (53) | (73) |
Other | 6 | 12 |
66 | 48 |
A deferred tax asset of $nil (2022: $107m) has been recognised in legal entities which have made a loss in the current or the previous year.
Recoverability of UK deferred tax assets
The Group has recognised UK deferred tax assets of $113m (2022: $109m), including revenue losses of $73m (2022: $73m). The deferred
tax assets have been recognised following the consideration of both positive and negative evidence in respect of the probability of future
taxable profits against which the assets could be recovered. The losses have arisen by identifiable non-recurring events,
for example special
contributions into a former Group pension scheme and the impact of Covid-19, absent which, the UK tax group would have been pro
fitable.
The losses do not expire, although they can only be offset against 50% of annual UK taxable pro
fits. The UK de
ferred tax asset should reverse
over a seven- to ten-year period (2022: seven- to ten-year period), with the lower end of this range based on the Group’s Base Case forecast
(see page 161 within ‘Going concern’) and the upper end of the range based on the Group’s Severe Downside Case forecast.
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
8. Tax
continued
The Group’s TCFD disclosures describe how physical and transitional climate risks present both risks and opportunities for IHG. The potential
downside risk has been considered in the context of the UK deferred tax asset recoverability, without taking account of opportunities or
mitigating actions, and could be absorbed within the sensitivities disclosed above.
Unrecognised deferred tax assets
The Group does not recognise deferred tax assets if it cannot anticipate being able to offset them against existing deferred tax liabilities
or against future pro
fits or gains.
The total unrecognised deferred tax position is as follows:
Gross | Unrecognised deferred tax | |||
2023 | 2022 | 2023 | 2022 | |
$m | $m | $m | $m | |
Revenue losses | 450 | 430 | 79 | 78 |
Capital losses | 580 | 549 | 146 | 138 |
1,030 | 979 | 225 | 216 | |
Tax credits | 32 | 25 | 32 | 25 |
Other a | 16 | 31 | 5 | 8 |
1,078 | 1,035 | 262 | 249 | |
a
Primarily relates to costs incurred for which tax relief has not been obtained.
There is no expiry date to any of the above unrecognised assets other than for the losses and tax credits as shown in the table below:
Gross | Unrecognised deferred tax | |||
2023 | 2022 | 2023 | 2022 | |
Expiry date | $m | $m | $m | $m |
2023 | – | 1 | – | – |
2024 | 6 | 4 | 1 | 1 |
2025 | 11 | 9 | 2 | 1 |
2026 | 7 | 18 | 1 | 4 |
2027 | 7 | 3 | 1 | – |
2028 | 6 | – | 1 | – |
2029 | 10 | 10 | 10 | 10 |
After 2030 | 22 | 18 | 22 | 16 |
Unprovided deferred tax liabilities
No deferred tax liability has been provided in respect of $0.5bn (2022: $0.5bn) of taxable temporary differences relating to subsidiaries
Uncertain tax positions
Current tax payable includes $14m (2022: $9m) in respect of uncertain tax positions, with the largest single item not exceeding $3m
(2022: $3m). There are no amounts recognised in relation to uncertain tax positions within deferred tax in either the current or prior year.
The Group’s most material territories for tax are the US and the UK and the Group carries provisions of $6m (2022: $3m) in respect
of US federal and state tax uncertainties and $nil (2022: $nil) in respect of UK Corporation Tax uncertainties.
In the US, the Internal Revenue Service has the right to commence a routine audit of a federal income tax return for up to three years
following the
filing o
f the return. The Group has now agreed all federal tax returns up to and including 2019 and there are no ongoing audits.
In the UK, HM Revenue and Customs (‘HMRC’) has the right to commence a routine audit of a UK Corporation Tax return for up to 12 months
following the
filing o
f the return. The Group has agreed all UK tax returns for periods up to 2021 other than 2016. The Group received a
single question from HMRC in respect of the 2016 period in 2019, to which a response was provided also in 2019. The Group has received
IHG
| Annual Report and Form 20-F 2023
2023 | 2022 | 2021 | ||||
cents | cents | cents | ||||
Paid during the year | per share | $m | per share | $m | per share | $m |
Final (declared for previous year) | 94.5 | 166 | 85.9 | 154 | – | – |
Interim | 48.3 | 79 | 43.9 | 79 | – | – |
142.8 | 245 | 129.8 | 233 | – | – |
The final dividend in respect o
Basic earnings per ordinary share | 2023 | 2022 | 2021 |
Profit available for equity holders ($m) | 750 | 375 | 266 |
Basic weighted average number of ordinary shares (millions) | 169 | 181 | 183 |
Basic earnings per ordinary share (cents) | 443.8 | 207.2 | 145.4 |
Diluted earnings per ordinary share | |||
Profit available for equity holders ($m) | 750 | 375 | 266 |
Diluted weighted average number of ordinary shares (millions) | 170 | 182 | 184 |
Diluted earnings per ordinary share (cents) | 441.2 | 206.0 | 144.6 |
Basic and diluted share denominators are calculated as follows:
2023 | 2022 | 2021 | |
millions | millions | millions | |
Weighted average number of ordinary shares in issue | 177 | 187 | 187 |
Weighted average number of treasury shares | (8) | (6) | (4) |
Basic weighted average number of ordinary shares | 169 | 181 | 183 |
Dilutive potential ordinary shares | 1 | 1 | 1 |
Diluted weighted average number of ordinary shares | 170 | 182 | 184 |
In 2021, three hotels in the Americas region were sold. Total cash consideration of $46m was received with no gain or loss arising after
charging disposal costs. Net assets of $44m disposed comprised $45m property, plant and equipment and $2m right-of-use assets,
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
Management | Other | |||||
Goodwill | Brands | Software | agreements | intangibles | Total | |
$m | $m | $m | $m | $m | $m | |
Cost | ||||||
At 1 January 2022 | 532 | 439 | 878 | 122 | 26 | 1,997 |
Additions | – | – | 46 | – | – | 46 |
Fully amortised assets written off | – | – | (94) | – | – | (94) |
Disposals | (8) | – | – | – | – | (8) |
Exchange and other adjustments | (11) | – | (5) | – | – | (16) |
At 31 December 2022 | 513 | 439 | 825 | 122 | 26 | 1,925 |
Additions | – | – | 52 | – | 1 | 53 |
Fully amortised assets written off | – | – | (52) | – | (3) | (55) |
Disposals | – | – | (1) | – | – | (1) |
Exchange and other adjustments | 3 | – | 1 | – | – | 4 |
At 31 December 2023 | 516 | 439 | 825 | 122 | 24 | 1,926 |
Amortisation and impairment | ||||||
At 1 January 2022 | (191) | – | (485) | (113) | (13) | (802) |
Provided | – | – | (20) | – | (3) | (23) |
System Fund expense | – | – | (78) | – | (1) | (79) |
Impairment reversal | – | – | – | 12 | – | 12 |
Fully amortised assets written off | – | – | 94 | – | – | 94 |
Disposals | 8 | – | – | – | – | 8 |
Exchange and other adjustments | 5 | – | 3 | – | 1 | 9 |
At 31 December 2022 | (178) | – | (486) | (101) | (16) | (781) |
Provided | – | – | (18) | (1) | (2) | (21) |
System Fund expense | – | – | (76) | – | (1) | (77) |
Fully amortised assets written off | – | – | 52 | – | 3 | 55 |
Disposals | – | – | 1 | – | – | 1 |
Exchange and other adjustments | (2) | – | (1) | (1) | – | (4) |
At 31 December 2023 | (180) | – | (528) | (103) | (16) | (827) |
Net book value | ||||||
At 31 December 2023 | 336 | 439 | 297 | 19 | 8 | 1,099 |
At 31 December 2022 | 335 | 439 | 339 | 21 | 10 | 1,144 |
At 1 January 2022 | 341 | 439 | 393 | 9 | 13 | 1,195 |
Goodwill and brands
Brands
Brands relate to the acquisitions of Kimpton ($193m), Regent ($57m) and Six Senses ($189m). They are each considered to have an
indefinite li
fe given their strong brand awareness and reputation, and management’s commitment to continued investment in their growth.
The brands are protected by trademarks and there are not believed to be any legal, regulatory or contractual provisions that limit the useful
lives of the brands. In the hotel industry there are a number of brands that have existed for many years and IHG has brands that are over
60 years old.
Allocation of goodwill and brands to CGUs
Analysed as: | |||||||
At 1 January | Exchange | At 31 December | Exchange | At 31 December | |||
2022 | adjustments | 2022 | adjustments | 2023 | Goodwill | Brands | |
$m | $m | $m | $m | $m | $m | $m | |
Americas (group of CGUs) | 419 | – | 419 | – | 419 | 132 | 287 |
EMEAA (group of CGUs) | 337 | (6) | 331 | 1 | 332 | 196 | 136 |
Greater China | 24 | – | 24 | – | 24 | 8 | 16 |
780 | (6) | 774 | 1 | 775 | 336 | 439 |
IHG
| Annual Report and Form 20-F 2023
12. Goodwill and other intangible assets
continued
The recoverable amounts of the CGUs, or groups of CGUs, have been determined from value in use calculations. The key assumptions are
RevPAR growth (detailed on page 161 within ‘Going concern’), terminal growth rates and pre-tax discount rates. Cash flows beyond the
five-year period are extrapolated using terminal growth rates that do not exceed the average long-term growth rates
for the relevant markets.
Cash flow projections are discounted using pre-tax rates that are based on the Group’s weighted average cost o
f capital and incorporate
adjustments reflecting risks specific to the territory o
f the CGU.
The weighted average terminal growth rates and pre-tax discount rates are as follows:
2023 | 2022 | |||
Terminal | Pre-tax | Terminal | Pre-tax | |
growth | discount | growth | discount | |
rate | rate | rate | rate | |
% | % | % | % | |
Americas | 1.6 | 13.0 | 1.9 | 13.7 |
EMEAA | 2.4 | 15.1 | 2.5 | 16.2 |
Greater China | 2.5 | 12.1 | 2.5 | 13.8 |
The recoverable amounts of the CGUs, or groups of CGUs, exceeded their carrying value such that no impairment has arisen. Assumptions
were sensitised, including using the Severe Downside Case scenario (detailed on page 161 within ‘Going concern’), with no impairment
arising reflecting the number o
f years of Base Case forecasts required to recover the carrying value.
Software
Software includes $146m relating to the development of the next-generation Guest Reservation System with Amadeus. Internally developed
software with a net book value of $105m is being amortised over seven to ten years, with
five years remaining at 31 December 2023, reflecting
the Group’s experience of the long life of guest reservation systems and the initial term over which the Group is party to a technology
agreement with Amadeus. The remaining project value relates to enhancements to existing systems as part of the project, which are
amortised over five years.
In 2023 and 2022, no impairment was charged.
Management agreements
Management agreements relate to contracts recognised at fair value on acquisition. The weighted average remaining amortisation period
for all management agreements is 14 years (2022: 15 years).
2022 impairment reversal
The impairment reversal of $12m related to the Kimpton management agreement portfolio in the Americas region and arose due to strong
trading conditions in 2022 and significantly improved industry
forecasts. The key assumption was RevPAR growth which was approximately
in line with the Group forecast detailed in the 2022 Annual Report. Cash
flows beyond the five-year period were extrapolated using a 1.8%
long-term growth rate that did not exceed the average long-term growth rates for the relevant market.
The portfolio was valued at value in use (which exceeded fair value less costs of disposal) using discounted cash
flow techniques that measure
the present value of projected post-tax income
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
Fixtures, | |||
Land and | fittings and | ||
buildings | equipment | Total | |
$m | $m | $m | |
Cost | |||
At 1 January 2022 | 105 | 299 | 404 |
Additions | 15 | 42 | 57 |
Fully depreciated assets written off | – | (30) | (30) |
Disposals | (7) | (5) | (12) |
Exchange and other adjustments | (1) | (14) | (15) |
At 31 December 2022 | 112 | 292 | 404 |
Additions | 1 | 20 | 21 |
Fully depreciated assets written off | – | (15) | (15) |
Disposals | (2) | (3) | (5) |
Exchange and other adjustments | – | 6 | 6 |
At 31 December 2023 | 111 | 300 | 411 |
Depreciation and impairment | |||
At 1 January 2022 | (53) | (214) | (267) |
Provided | (3) | (17) | (20) |
System Fund expense | – | (4) | (4) |
Impairment charge | – | (10) | (10) |
Impairment reversal | – | 3 | 3 |
Fully depreciated assets written off | – | 30 | 30 |
Disposals | 4 | 5 | 9 |
Exchange and other adjustments | 1 | 11 | 12 |
At 31 December 2022 | (51) | (196) | (247) |
Provided | (6) | (18) | (24) |
System Fund expense | – | (4) | (4) |
Fully depreciated assets written off | – | 15 | 15 |
Disposals | 2 | 3 | 5 |
Exchange and other adjustments | 1 | (4) | (3) |
At 31 December 2023 | (54) | (204) | (258) |
Net book value | |||
At 31 December 2023 | 57 | 96 | 153 |
At 31 December 2022 | 61 | 96 | 157 |
At 1 January 2022 | 52 | 85 | 137 |
The Group’s property, plant and equipment mainly comprises buildings and leasehold improvements on 17 hotels (2022: 16 hotels), but also
offices and computer hardware, throughout the world.
Net book value by operating segment
Greater | |||||
Americas | EMEAA | China | Central | Total | |
$m | $m | $m | $m | $m | |
Land and buildings | 51 | 1 | – | 5 | 57 |
Fixtures, fittings and equipment | 31 | 4 | – | 61 | 96 |
82 | 5 | – | 66 | 153 |
Impairment and impairment reversals
2022 impairment
An impairment charge of $10m was recognised in the year on property, plant and equipment relating to one hotel in the EMEAA region.
A further $2m impairment of right-of-use assets was recognised in relation to the same hotel. The charge arose, and was classed as
exceptional, due to recent cost inflation which is impacting operating costs but also the projected variable rent payments. The assets
were measured at value in use, using a discounted cash flow approach based on the hotel’s five-year plan. Cash flows beyond the five-year
period were extrapolated using a long-term growth rate which did not exceed the long-term average growth rate for the relevant country.
Estimated future cash
flows were discounted at a pre-tax rate o
f 9.6%. The recoverable amount was $nil.
IHG
| Annual Report and Form 20-F 2023
13. Property, plant and equipment
continued
2022 impairment reversal
Impairment reversals of $3m were recognised in relation to the UK portfolio (EMEAA region) and arose as a result of the renegotiation
of contractual agreements which enhanced the cash-generating potential of those hotels. The recoverable amount was measured at value
in use, using a discounted cash flow
forecast used to assess the new deal with rentals based on the agreed contractual terms. A pre-tax
discount rate of 14.2% was applied.
In both 2022 impairment tests, hotel specific plans were used which used the IHG UK RevPAR
forecasts adjusted for factors speci
fic to the
Right-of-use assets
Land and | Investment | |||
buildings | property | Other | Total | |
$m | $m | $m | $m | |
Cost | ||||
At 1 January 2022 | 607 | – | 3 | 610 |
Additions and other re-measurements | 40 | – | – | 40 |
Transfers to investment property | (50) | 50 | – | – |
Transfers to finance lease receivable | (5) | – | – | (5) |
Terminations | (9) | – | (1) | (10) |
Exchange and other adjustments | (12) | – | – | (12) |
At 31 December 2022 | 571 | 50 | 2 | 623 |
Additions and other re-measurements | 15 | – | 2 | 17 |
Transfers to investment property | (2) | 2 | – | – |
Terminations | (51) | – | (1) | (52) |
Exchange and other adjustments | 1 | – | – | 1 |
At 31 December 2023 | 534 | 52 | 3 | 589 |
Depreciation and impairment | ||||
At 1 January 2022 | (334) | – | (2) | (336) |
Provided | (24) | – | (1) | (25) |
System Fund expense | (3) | – | – | (3) |
Impairment charge | (2) | – | – | (2) |
Impairment reversal | 2 | – | – | 2 |
Transfers to investment property | 47 | (47) | – | – |
Transfers to finance lease receivable | 3 | – | – | 3 |
Terminations | 9 | – | 1 | 10 |
Exchange and other adjustments | 8 | – | – | 8 |
At 31 December 2022 | (294) | (47) | (2) | (343) |
Provided | (22) | – | – | (22) |
System Fund expense | (2) | – | – | (2) |
Transfers to investment property | 2 | (2) | – | – |
Terminations | 51 | – | 1 | 52 |
Exchange and other adjustments | (1) | – | – | (1) |
At 31 December 2023 | (266) | (49) | (1) | (316) |
Net book value | ||||
At 31 December 2023 | 268 | 3 | 2 | 273 |
At 31 December 2022 | 277 | 3 | – | 280 |
At 1 January 2022 | 273 | – | 1 | 274 |
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
14. Leases
continued
The Group’s leased assets mainly comprise hotels and offices. Leases contain a wide range of di
fferent terms and conditions. The term of
property leases ranges from 1-99 years. The weighted average lease term remaining on the Group’s top eight leases (which comprise 94%
(2022: 95%) of the right-of-use asset net book value) is 56 years (2022: 56 years). The InterContinental Boston lease, expiring in 2105, has
a significant impact on this weighted average lease term; excluding this lease the weighted average lease term is 8 years (2022: 9 years).
Undiscounted cash flows on the Boston lease o
f $3,212m (2022: $3,233m) represent 94% (2022: 94%) of the total undiscounted cash
flows
relating to lease liabilities.
Many of the Group’s property leases contain extension or early termination options, which are used for operational
flexibility. The lease
agreement over the US corporate headquarters contains a material extension option which is not included in the calculation of the lease
asset and liability as the extension would not take effect before 2031 and there is no reasonable certainty the option will be exercised.
The value of the undiscounted rental payments relating to this lease and not included in the value of the lease asset and liability is $295m.
Additionally, the Group has the option to extend the term of the InterContinental Boston lease for two additional 20-year terms, the
first
of which would take effect from 2105. These extension options have not been included in the calculation of the lease liability.
Impairment and impairment reversals
2022 impairment
Details of the $2m impairment charge are contained in note 13.
2022 impairment reversal
Impairment reversals of $2m were recognised in relation to one hotel in the EMEAA region and arose due to improved recovery forecasts
as well as strong 2022 trading. The asset was measured at value in use, using a discounted cash flow
for the remaining
five-year lease term.
Estimated future cash
flows were discounted at a pre-tax rate o
f 17.6%. The recoverable amount was $9m which represents the depreciated
value of the original asset.
2021 impairment reversal
Impairment reversals of $3m were recognised in relation to the US corporate headquarters and arose as a result of contractual agreements
to sublease or surrender certain areas for the remainder of the lease term, removing uncertainty over future cash
flows
for those areas.
The recoverable amount was measured at value in use, using a discounted cash flow based on the agreed contractual terms. A pre-tax
discount rate of 9.5% was applied.
The impairment reversal was substantially all recognised in the System Fund in line with existing principles for cost allocation relating
to this facility.
Lease liabilities
The majority of the Group’s lease liabilities are discounted at incremental borrowing rates of up to 11%. The rate implicit in the
InterContinental Boston lease was 9.7% and was derived from a valuation of the hotel at lease inception in 2006.
2023 | 2022 | |
Currency | $m | $m |
US dollars | 357 | 363 |
Sterling | 32 | 31 |
Euros | 4 | 5 |
Other | 33 | 28 |
426 | 427 | |
Analysed as: | ||
Current | 30 | 26 |
Non-current | 396 | 401 |
426 | 427 |
The maturity analysis of lease liabilities is disclosed in note 24.
The Group’s lease liability is not materially sensitive to inflation as $342m (2022: $348m) relates to the InterContinental Boston and the
US corporate headquarters, which both include fixed payments and are not subject to inflationary adjustments.
Amounts recognised in the Group income statement
2023 | 2022 | 2021 | |
$m | $m | $m | |
Depreciation of right-of-use assets | 22 | 25 | 27 |
System Fund depreciation of right-of-use assets | 2 | 3 | 3 |
System Fund impairment reversal | – | – | (3) |
Expense relating to variable lease payments | 62 | 47 | 31 |
Expense relating to short-term leases and low-value assets | 2 | 1 | 1 |
Income from operating subleases of right-of-use assets | (2) | (1) | (1) |
Recognised in operating profit | 86 | 75 | 58 |
Interest on lease liabilities | 29 | 29 | 29 |
Total recognised in the Group income statement | 115 | 104 | 87 |
IHG
| Annual Report and Form 20-F 2023
14. Leases
continued
Variable lease payments
The UK portfolio leases contain guarantees that the Group will fund any shortfalls in lease payments up to an annual and cumulative cap.
These caps limit the Group’s exposure to trading losses, meaning that rental payments are reduced if insufficient cash
flows are generated
by the hotels. Since there is no floor to the rent reduction applicable under these leases, they are treated as
fully variable. In the event that
rent reductions are not applicable, annual base rental payments stabilise at £34m over the remaining lease term of 20 years. Additional
performance-based rental payments are calculated using hotel revenues and net cash
flows.
In addition, one German hotel lease under a similar structure is treated as fully variable. One further German hotel lease under a similar
structure is expected to commence in 2024.
Amounts recognised in the Group statement of cash
flows
2023 | 2022 | 2021 | |
$m | $m | $m | |
Operating activities | 92 | 72 | 55 |
Investing activities | – | (6) | – |
Financing activities | 28 | 36 | 32 |
Net cash paid | 120 | 102 | 87 |
2023 | 2022 | |
$m | $m | |
Cost | ||
At 1 January | 89 | 132 |
Additions | 3 | 1 |
Share of pro fits/(losses) a | 13 | (41) |
System Fund share of losses | (3) | (1) |
Dividends and distributions | (1) | (1) |
Exchange and other adjustments | – | (1) |
At 31 December | 101 | 89 |
Impairment | ||
At 1 January | (53) | (55) |
Impairment reversal | – | 2 |
At 31 December | (53) | (53) |
Net book value | 48 | 36 |
Analysed as: | ||
Barclay associate | 3 | – |
Other associates | 43 | 36 |
Joint ventures | 2 | – |
48 | 36 |
a
In 2023 and 2022, the total share of pro
fits/(losses)
from associates and joint ventures in the Group income statement included $18m gain and $18m loss, respectively, due to the
liability recognised in 2022 and its subsequent reversal (see note 6). In 2022, $42m was included within exceptional items in addition to the $18m above.
Barclay associate
The Group held one associate investment which had a significant impact on profit
for the current and prior year, a 19.9% interest in
111 East 48th Street Holdings, LLC (the ‘Barclay associate’) which owns InterContinental New York Barclay, a hotel managed by the Group.
The investment is classified as an associate and equity accounted. While the Group has the ability to exercise significant influence through
certain decision rights, approval rights relating to the hotel’s operating and capital budgets rest solely with the 80.1% majority member.
The Group’s ability to receive cash dividends is dependent on the hotel generating sufficient income to satisfy speci
fied owner returns.
$18m was provided in 2021 in relation to settlement of a commercial dispute regarding owner returns during the pandemic.
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
15. Investment in associates and joint ventures
continued
Summarised financial in
formation in respect of the Barclay associate is set out below:
2023 | 2022 | |
$m | $m | |
Non-current assets | 462 | 472 |
Current assets | 86 | 64 |
Current liabilities | (23) | (33) |
Non-current liabilities | (256) | (250) |
Net assets | 269 | 253 |
Group’s share of reported net assets at 19.9% | 53 | 50 |
Adjustments to reflect impairment, capitalised costs and additional rights and obligations under the shareholder agreement | (8) | (8) |
Effect of specially allocated expenses (note 6) | (42) | (42) |
Carrying amount | 3 | – |
2023 | 2022 | |
$m | $m | |
Revenue | 131 | 106 |
Profit from continuing operations and total comprehensive income for the year | 15 | 8 |
Group’s share of pro fit/(loss) for the year a | 3 | (42) |
a
Includes specially allocated expenses and the cost of funding owner returns.
Other associates and joint ventures
In 2022, impairment reversal of $2m related to an associate in the Americas region and arose due to strong trading conditions in 2022 and
significantly improved industry
forecasts. The recoverable amount was measured at fair value less costs of disposal, using a discounted
cash flow approach that measures the present value o
f projected income
flows (over a 10-year period) and the property sale. The key
assumptions were RevPAR growth (which was in line with the Group forecast detailed in the 2022 Annual Report), discount rate of 9.75%
2023 | 2022 | |
$m | $m | |
Equity securities | 102 | 103 |
Restricted funds: | ||
Ring-fenced amounts to satisfy insurance claims: | ||
Cash | 2 | 2 |
Money market funds | 14 | 3 |
Bank accounts pledged as security | 32 | 39 |
Other | 2 | 1 |
50 | 45 | |
Trade deposits and loans | 40 | 8 |
192 | 156 | |
Analysed as: | ||
Current | 7 | – |
Non-current | 185 | 156 |
192 | 156 |
Equity securities
The methodology to calculate fair value and the sensitivities to the relevant signi
ficant unobservable inputs are detailed in note 25.
The most significant investments are as
follows:
2023 | 2022 | |||
Dividend | Dividend | |||
Fair value | income | Fair value | income | |
$m | $m | $m | $m | |
Investment in entity which owns: | ||||
InterContinental The Willard Washington DC | 27 | 1 | 27 | – |
InterContinental Grand Stanford Hong Kong | 37 | – | 35 | – |
IHG
| Annual Report and Form 20-F 2023
16. Other financial assets
continued
Restricted funds
Amounts ring-fenced to satisfy insurance claims are principally held in the Group’s Captive, which is a regulated entity.
The bank accounts pledged as security are subject to a charge in favour of the members of the UK unfunded pension arrangement (see
note 27). The amounts pledged as security were reduced in the year with the trustees’ agreement, based on updated actuarial valuations.
The bank accounts will continue to be pledged as security until the date at which the UK unfunded pension liabilities have been fully
discharged, unless otherwise agreed with the trustees and amounts pledged may change in future years.
Expected credit losses
Other financial assets with a net value o
f $68m (2022: $50m) are subject to the expected credit loss model requirements of IFRS 9.
Equity securities, money market funds and other amounts measured at fair value are excluded. The gross value of trade deposits and loans
that were subject to the expected credit loss requirements is $40m with credit loss allowances of $9m (2022: $20m gross, $12m allowance).
Other expected credit losses are considered to be immaterial.
Credit risk
Restricted funds are held with bank counterparties which are rated at least A+ based on S&P’s ratings.
The maximum exposure to credit risk of other
financial assets at the end o
f the reporting period by geographic region is as follows:
2023 | 2022 | |
$m | $m | |
Americas | 99 | 54 |
EMEAA | 56 | 62 |
Greater China | 37 | 40 |
192 | 156 |
2023 | 2022 | |
$m | $m | |
Current | ||
Trade receivables | 580 | 493 |
Other receivables | 68 | 49 |
Prepayments | 92 | 104 |
740 | 646 | |
Non-current | ||
Finance lease receivables | 6 | 2 |
Other receivables | 3 | 1 |
Prepayments | 4 | – |
13 | 3 |
Expected credit losses
The ageing of trade receivables shown below re
flects the initial terms under the invoice rather than the revised terms where payment
flexibility has been provided to owners. The net balances presented in the table below could result in additional credit losses i
f they are
ultimately found to be uncollectable. Expected credit losses relating to other receivables following their initial recognition are immaterial.
2023 | 2022 | |||||
Credit loss | Credit loss | |||||
Gross | allowance | Net | Gross | allowance | Net | |
$m | $m | $m | $m | $m | $m | |
Not past due | 354 | (1) | 353 | 307 | (1) | 306 |
Past due 1 to 30 days | 88 | (5) | 83 | 76 | (7) | 69 |
Past due 31 to 90 days | 69 | (6) | 63 | 57 | (6) | 51 |
Past due 91 to 180 days | 51 | (8) | 43 | 46 | (9) | 37 |
Past due 181 to 360 days | 38 | (11) | 27 | 34 | (11) | 23 |
Past due more than 361 days | 86 | (75) | 11 | 90 | (83) | 7 |
686 | (106) | 580 | 610 | (117) | 493 |
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
17. Trade and other receivables
continued
2023 | 2022 | |
Movement in the allowance for expected credit losses | $m | $m |
At 1 January | (117) | (133) |
Reclassification to other receivables | – | 9 |
Impairment reversal/(loss) | 1 | (5) |
System Fund impairment loss | – | (7) |
Amounts written off | 9 | 17 |
Exchange and other adjustments | 1 | 2 |
At 31 December | (106) | (117) |
If the regional provision matrix was applied to all owner groups (rather than by reference to other sources of data), the provision would
reduce by $13m (2022: $15m).
Credit risk
The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit
terms are subject to credit verification procedures. The maximum exposure to credit risk
for trade and other receivables, excluding
prepayments, at the end of the reporting period by geographic region is as follows:
2023 | 2022 | |
$m | $m | |
Americas | 359 | 321 |
EMEAA | 199 | 152 |
Greater China | 99 | 72 |
657 | 545 |
2023 | 2022 | |
$m | $m | |
Cash at bank and in hand | 179 | 165 |
Short-term deposits | 632 | 421 |
Money market funds | 375 | 360 |
Repurchase agreements | 136 | 30 |
Cash and cash equivalents as recorded in the Group statement of financial position | 1,322 | 976 |
Bank overdrafts | (44) | (55) |
Cash and cash equivalents as recorded in the Group statement of cash flows | 1,278 | 921 |
Cash at bank and in hand includes bank balances of $51m (2022: $86m) which are matched by bank overdrafts of $44m (2022: $55m) under
the Group’s cash pooling arrangements. Under these arrangements, each pool contains a number of bank accounts with the same
financial
institution and the Group pays interest on net overdraft balances within each pool. The cash pools are used for day-to-day cash management
purposes and are managed as closely as possible to a zero balance on a net basis for each pool. Overseas subsidiaries are typically in a
cash-positive position with the matching overdrafts held by the Group’s central treasury company in the UK. Accordingly, bank overdrafts
are included within cash and cash equivalents for the purposes of the cash
flow statement.
2023 | 2022 | |
$m | $m | |
Countries with restrictions on repatriation | 30 | 24 |
Capital expenditure under lease agreements | 14 | 11 |
Other restrictions | 12 | 12 |
56 | 47 |
IHG
| Annual Report and Form 20-F 2023
2023 | 2022 | |
$m | $m | |
Current | ||
Trade payables | 127 | 152 |
Other tax and social security payables | 47 | 37 |
Other payables | 135 | 173 |
Deferred purchase consideration | 13 | – |
Accruals | 389 | 335 |
711 | 697 | |
Non-current | ||
Other payables | 6 | 4 |
Deferred purchase consideration | – | 12 |
Contingent purchase consideration (note 25) | 69 | 65 |
75 | 81 |
In 2022, current other payables included $29m and current accruals included $2m relating to the outstanding portion of the share
repurchase programme. Of the total, $20m related to the unavoidable contractual cost of shares to be repurchased and $11m to the associated
performance fee. Current other payables also included $18m relating to obligations created by the special allocation of expenses from an
associate investment (see note 6).
Third-party bank loan guarantees
At 31 December 2023, the Group has issued financial guarantee contracts o
f up to $50m (2022: $50m). The carrying amount of these
guarantees was $nil in all periods presented. The largest guarantee has a gross guaranteed amount of $21m (2022: $21m) and the underlying
loan matures in 2029. Should the Group fund any amount under the guarantee, there is a cross-indemnity that the Group would seek to
Commercial | Self | |||
litigation and | insurance | Dilapidations | ||
disputes | reserves | and other | Total | |
$m | $m | $m | $m | |
At 31 December 2022 a | 33 | 18 | 13 | 64 |
Provided | 6 | 7 | 3 | 16 |
Utilised | (32) | (11) | (2) | (45) |
Exchange and other adjustments | – | – | 1 | 1 |
At 31 December 2023 | 7 | 14 | 15 | 36 |
Analysed as: | ||||
Current | – | 5 | 5 | 10 |
Non-current | 7 | 9 | 10 | 26 |
7 | 14 | 15 | 36 |
a
Re-presented for the adoption of IFRS 17 ‘Insurance Contracts’ (see New accounting standards and other presentational changes). Amounts reclassi
fied as insurance liabilities are
shown in note 21.
Commercial litigation and disputes
The utilisation of the provision principally re
flects the settlement o
f commercial litigation and disputes in the Americas and EMEAA regions
which were fully provided for in the prior year.
Self insurance reserves
Self insurance reserves consist of $12m of incurred but not reported (‘IBNR’) reserves and $2m of claims reported but not yet settled.
$10m of these amounts relates to employment-related obligations. The utilisation of IBNR reserves is dependent on the timing of claims
being reported and ultimately being settled; based on historical experience this is expected to be approximately five years. The maximum
liabilities of the last
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
2023 | 2022 | |
$m | $m | |
At 1 January | 32 | 25 |
Insurance expenses | 21 | 9 |
Claims and other amounts paid | (15) | (2) |
Impact of discounting and other changes | (1) | – |
At 31 December | 37 | 32 |
Analysed as: | ||
Current | 12 | 9 |
Non-current | 25 | 23 |
37 | 32 | |
Incurred but not reported claims ('IBNR') a | 20 | 25 |
Reported but not settled claims | 17 | 7 |
37 | 32 |
a
Includes unallocated loss expenses.
Of the total reserves, $19m (2022: $21m) relates to international general liability and $14m (2022: $7m) relates to workers’ compensation.
The utilisation of IBNR reserves is dependent on the timing of claims being reported and ultimately being settled; based on historical
experience this is expected to be approximately five years (2022: five years). The maximum liabilities o
f the last
five policy years is $49m
(2022: $42m). Actual claims have not significantly differed to estimates in the last five years.
2023 | 2022 | |
$m | $m | |
Revenue from insurance activities | 21 | 15 |
Insurance expenses (inclusive of overhead costs) | (23) | (11) |
Insurance result | (2) | 4 |
Discount | ||||
Maturity | at issue | 2023 | 2022 | |
date | % | $m | $m | |
Current | ||||
Bank overdrafts (note 18) | n/a | n/a | 44 | 55 |
€500m 1.625% bonds 2024 | 8 October 2024 | 0.437 | 555 | – |
599 | 55 | |||
Non‑current | ||||
€500m 1.625% bonds 2024 | 8 October 2024 | 0.437 | – | 534 |
£300m 3.75% bonds 2025 | 14 August 2025 | 0.986 | 387 | 365 |
£350m 2.125% bonds 2026 | 24 August 2026 | 0.550 | 449 | 423 |
€500m 2.125% bonds 2027 | 15 May 2027 | 0.470 | 559 | 539 |
£400m 3.375% bonds 2028 | 8 October 2028 | 1.034 | 509 | 480 |
€600m 4.375% bonds 2029 | 28 November 2029 | 0.098 | 663 | – |
2,567 | 2,341 | |||
Total loans and other borrowings | 3,166 | 2,396 | ||
Denominated in the following currencies: | ||||
Sterling | 1,345 | 1,269 | ||
US dollars | 44 | 53 | ||
Euros | 1,777 | 1,073 | ||
Other | – | 1 | ||
3,166 | 2,396 |
IHG
| Annual Report and Form 20-F 2023
22. Loans and other borrowings
continued
Bonds
Interest is payable annually on the dates in the table, at the rates stated.
Revolving Credit Facility (‘RCF’)
The $1,350m facility matures in 2028, with an option to extend for a further one year at the lender’s discretion. A variable rate of interest
is payable on amounts drawn. There were no amounts drawn as at 31 December 2023 or 31 December 2022.
2023 | 2022 | |
$m | $m | |
Cash and cash equivalents | 1,322 | 976 |
Loans and other borrowings – current | (599) | (55) |
| – non-current | (2,567) | (2,341) |
Lease liabilities – current | (30) | (26) |
| – non-current | (396) | (401) |
Principal amounts payable/receivable on maturity of derivative financial instruments (note 24) | (2) | (4) |
Net debt | (2,272) | (1,851) |
2023 | 2022 | |
Movement in net debt | $m | $m |
Net increase/(decrease) in cash and cash equivalents, net of overdrafts | 339 | (393) |
Add back financing cash flows in respect o f other components of net debt: | ||
Principal element of lease payments | 28 | 36 |
(Issue)/repayment of long-term bonds | (657) | 209 |
(629) | 245 | |
Increase in net debt arising from cash flows | (290) | (148) |
Other movements: | ||
Lease liabilities | (25) | (48) |
Increase in accrued interest | (2) | (1) |
Exchange and other adjustments | (104) | 227 |
(131) | 178 | |
(Increase)/decrease in net debt | (421) | 30 |
Net debt at beginning of the year | (1,851) | (1,881) |
Net debt at end of the year | (2,272) | (1,851) |
Net debt as calculated for bank covenants can be found on page 201.
Notes to the Group Financial Statements
continued
IHG
| Annual Report and Form 20-F 2023
23. Net debt
continued
Loans and other borrowings (excluding bank overdrafts), lease liabilities and currency swaps and forwards comprise the liabilities included
in the financing activities section o
f the Group statement of cash
flows and their movements are analysed as
follows:
At 1 January | Financing | Exchange | At 31 December | ||
2023 | cash flows | adjustments | Other a,b | 2023 | |
$m | $m | $m | $m | $m | |
Lease liabilities | 427 | (28) | 2 | 25 | 426 |
€500m 1.625% bonds 2024 | 534 | – | 20 | 1 | 555 |
£300m 3.75% bonds 2025 | 365 | – | 22 | – | 387 |
£350m 2.125% bonds 2026 | 423 | – | 25 | 1 | 449 |
€500m 2.125% bonds 2027 | 539 | – | 20 | – | 559 |
£400m 3.375% bonds 2028 | 480 | – | 28 | 1 | 509 |
€600m 4.375% bonds 2029 | – | 657 | 8 | (2) | 663 |
2,768 | 629 | 125 | 26 | 3,548 | |
Currency swaps | 4 | – | – | 16 | 20 |
Currency forwards | – | – | – | (15) | (15) |
2,772 | 629 | 125 | 27 | 3,553 |
At 1 January | Financing | Exchange | At 31 December | ||
2022 | cash flows | adjustments | Other b | 2022 | |
$m | $m | $m | $m | $m | |
Lease liabilities | 419 | (36) | (4) | 48 | 427 |
£173m 3.875% bonds 2022 | 233 | (209) | (24) | – | – |
€500m 1.625% bonds 2024 | 565 | – | (32) | 1 | 534 |
£300m 3.75% bonds 2025 | 408 | – | (45) | 2 | 365 |
£350m 2.125% bonds 2026 | 473 | – | (50) | – | 423 |
€500m 2.125% bonds 2027 | 570 | – | (32) | 1 | 539 |
£400m 3.375% bonds 2028 | 537 | – | (57) | – | 480 |
3,205 | (245) | (244) | 52 | 2,768 | |
Currency swaps | 62 | – | – | (58) | 4 |
3,267 | (245) | (244) | (6) | 2,772 |
a
The non-cash increase in lease liabilities principally arises from additions and other re-measurements.
b
Overview
The Group is exposed to financial risks that arise in relation to underlying business activities. These risks include: market risk, liquidity risk,
credit risk and capital risk. There are Board approved policies in place to manage these risks. Treasury activities to manage these risks may
include money market funds, repurchase agreements, spot and forward foreign exchange instruments, currency swaps, interest rate swaps
and forward rate agreements.
Market risk is the risk that the fair value or future cash
flows o
f a
financial instrument will fluctuate because o
f changes in market prices.
Market risk comprises: foreign exchange risk and interest rate risk. Financial instruments affected by market risk include loans and other
borrowings, cash and cash equivalents, debt and equity investments and derivatives.
Foreign exchange risk
Movements in foreign exchange rates can affect the Group’s reported pro
fit or loss, net liabilities and its interest cover. The most significant
exposures of the Group are in currencies that are freely convertible. The Group’s reported debt has an exposure to borrowings held in sterling
and euros. After the effect of currency swaps, the Group holds its bond debt in sterling, which is the primary currency of shareholder returns,
and in US dollars, the predominant currency of the Group’s revenue and cash
flows. US dollar borrowing or currency derivatives may also
act as a net investment hedge of US dollar denominated assets.
When the Group borrows in currencies different from the functional currency of the borrowing entity, currency swaps are transacted at the
same time to minimise foreign exchange risk. Currency swaps were transacted against the €500m 2.125% 2027 and €500m 1.625% 2024
bonds, in November 2018 and October 2020 respectively, swapping the bonds’ proceeds and interest flows into sterling. Similar currency
swaps were transacted against the €600m 4.375% 2029 bonds in November 2023, swapping the bond proceeds and interest flows into
US dollars (see page 200).
Interest rate risk
The Group is exposed to interest rate risk in relation to its fixed and floating rate borrowings. The Group’s policy requires a minimum o
f 50%
fixed rate debt over the next 12 months. With the exception o
f overdrafts, 100% of borrowings were
fixed rate debt at 31 December 2023
(2022: 100%).
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
24. Financial risk management and derivative financial instruments
continued
Derivative financial instruments
Derivatives are recorded in the Group statement of
financial position at
fair value (see note 25) as follows:
2023 | 2022 | |
Derivatives | $m | $m |
Currency swaps | (20) | (4) |
Currency forwards | 15 | – |
Analysed as: | ||
Non-current assets | 20 | 7 |
Current liabilities | (25) | – |
Non-current liabilities | – | (11) |
(5) | (4) |
The carrying amount of currency swaps and forwards comprises $2m loss (2022: $4m loss) relating to exchange movements on the
underlying principal, included within net debt (see note 23), and a $3m loss (2022: $nil) relating to other fair value movements.
Details of the credit risk on derivative
financial instruments are included on page 203.
Currency swaps and forwards have been transacted as follows:
Date of designation | Hedge type | Pay leg | Interest rate | Receive leg | Interest rate | Maturity | Risk | Hedged item |
November 2018 | Cash flow | £436m | 3.5% | €500m | 2.125% | May 2027 | Foreign exchange | €500m 2.125% bonds 2027 |
October 2020 | Cash flow | £454m | 2.7% | €500m | 1.625% | October 2024 | Foreign exchange | €500m 1.625% bonds 2024 |
November 2023 | Cash flow | $657m | 6.0% | €600m | 4.375% | November 2029 | Foreign exchange | €600m 4.375% bonds 2029 |
October 2023 | Net | $425m | n/a | £344m | n/a | October 2028 | Spot foreign | Net assets of speci fied subsidiaries |
investment | exchange | with US dollar foreign currency |
Cash flow hedges
There is an economic relationship between the hedged item and the hedging instrument as the critical terms are aligned, such that the
hedge ratio is 1:1.
The change in the fair value of hedging instruments used to measure hedge ineffectiveness in the period mirrors that of the hypothetical
derivative (hedged item) and was $14m loss (2022: $48m gain).
Hedge ineffectiveness arises where the cumulative change in the fair value of the swaps exceeds the change in fair value of the future
cash flows o
f the bonds, and may be due to any opening fair value of the hedging instrument, or a change in the credit risk of the Group
or counterparty. There was no cumulative ineffectiveness in 2023 or 2022.
Amounts recognised in the cash flow hedge reserves are analysed in note 29.
Net investment hedges
The Group designates the following as net investment hedges of its foreign operations, being the net assets of certain Group subsidiaries
with a US dollar functional currency:
•
Borrowings under the RCF;
•
Long-dated currency forward contracts; and
•
Certain short-dated foreign exchange swaps.
There is an economic relationship between the hedged item and the hedging instrument as the net investment creates a foreign exchange
risk that will match the foreign exchange risk on the US dollar borrowings or foreign exchange swaps or forwards. The hedge ratio is 1:1
as the underlying risk of the hedging instrument is identical to the hedged risk component. Hedge effectiveness is assessed by comparing
changes in the carrying amount of the hedging instrument that is attributable to a change in the spot rate with changes in the investment
in the foreign operation due to movements in the spot rate.
The change in value of hedging instruments recognised in the currency translation reserve through other comprehensive income was a gain
of $15m (2022: $6m loss). There was no ineffectiveness recognised in the Group income statement during the current or prior year.
IHG
| Annual Report and Form 20-F 2023
24. Financial risk management and derivative financial instruments
continued
Interest and foreign exchange risk sensitivities
The following table shows the impact of a general strengthening in the US dollar against sterling and euro on the Group’s pro
fit or loss be
fore
tax and net liabilities, and the impact of a rise in US dollar, euro and sterling interest rates on the Group’s pro
fit be
fore tax. The impact of the
strengthening in the euro against sterling on net liabilities is also shown, as this impacts the fair value of the currency swaps.
2023 | 2022 | 2021 | ||
$m | $m | $m | ||
(Decrease)/increase in profit be fore tax | ||||
Sterling: US dollar exchange rate | $0.05 fall | (14) | (3) | 7 |
Euro: US dollar exchange rate | $0.05 fall | (3) | – | – |
US dollar interest rates | 1% increase | 2 | 4 | 7 |
Sterling interest rates | 1% increase | 9 | 4 | 5 |
(Increase)/decrease in net liabilities | ||||
Sterling: US dollar exchange rate | $0.05 fall | (12) | 27 | 29 |
Euro: US dollar exchange rate | $0.05 fall | 49 | 50 | 50 |
Sterling: euro exchange rate | €0.05 fall | 64 | 60 | 67 |
Interest rate sensitivity relates to cash balances and would only be realised to the extent deposit rates increase by 1%.
Group policy ensures sufficient liquidity is maintained to meet all foreseeable medium-term cash requirements and provide headroom
against unforeseen obligations.
Cash and cash equivalents are held in short-term deposits, repurchase agreements and cash funds which allow daily withdrawals of cash.
Most of the Group’s funds are held in the UK or US, although $30m (2022: $24m) is held in countries where repatriation is restricted
(see note 18).
Medium- and long-term borrowing requirements are met through committed bank facilities and bonds as detailed in note 22.
The RCF contains two financial covenants: interest cover (Covenant EBITDA: Covenant interest payable) and a leverage ratio (Covenant net
debt: Covenant EBITDA). These are tested at half year and full year on a trailing 12-month basis.
31 December | 31 December | |
2023 and 2022 | 2021 | |
Covenant test levels for RCF | ||
Leverage | <4.0x | waived |
Interest cover | >3.5x | waived |
Liquidity | n/a | $400m a |
a
Defined as unrestricted cash and cash equivalents (net o
f bank overdrafts) plus undrawn facilities with a remaining term of at least six months.
2023 | 2022 | 2021 a | |
Covenant measures | |||
Covenant EBITDA ($m) | 1,086 | 896 | 601 |
Covenant net debt ($m) | 2,328 | 1,898 | 1,801 |
Covenant interest payable ($m) | 88 | 109 | 133 |
Leverage | 2.14 | 2.12 | 3.00 |
Interest cover | 12.34 | 8.22 | 4.52 |
Liquidity ($m) | n/a | n/a | 2,655 |
a
At 31 December 2021, the leverage and interest covenants under the previous facilities were waived and replaced with a liquidity requirement of $400m.
The interest margin payable on the RCF is linked to the Group’s credit rating and is currently 0.60%.
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
24. Financial risk management and derivative financial instruments
continued
The following are the undiscounted contractual cash
flows o
f
financial liabilities, including interest payments. Liabilities relating to the Group’s
deferred compensation plan are excluded; their settlement is funded entirely by the realisation of the related deferred compensation plan
investments and no net cash flow arises.
Between | Between | ||||
Less than | 1 and 2 | 2 and 5 | More than | ||
1 year | years | years | 5 years | Total | |
31 December 2023 | $m | $m | $m | $m | $m |
Non-derivative financial liabilities: | |||||
Bank overdrafts | 44 | – | – | – | 44 |
€500m 1.625% bonds 2024 | 563 | – | – | – | 563 |
£300m 3.75% bonds 2025 | 14 | 397 | – | – | 411 |
£350m 2.125% bonds 2026 | 9 | 9 | 456 | – | 474 |
€500m 2.125% bonds 2027 | 12 | 12 | 577 | – | 601 |
£400m 3.375% bonds 2028 | 17 | 17 | 561 | – | 595 |
€600m 4.375% bonds 2029 | 29 | 29 | 87 | 694 | 839 |
Lease liabilities | 57 | 52 | 130 | 3,164 | 3,403 |
Trade and other payables (excluding deferred and contingent purchase consideration) | 651 | 1 | 3 | 2 | 657 |
Deferred and contingent purchase consideration | 13 | – | 81 | – | 94 |
Financial guarantee contracts | 50 | – | – | – | 50 |
Derivative financial liabilities: | |||||
Currency swaps hedging €500m 1.625% bonds 2024 outflows | 594 | – | – | – | 594 |
Currency swaps hedging €500m 1.625% bonds 2024 inflows | (563) | – | – | – | (563) |
Currency swaps hedging €500m 2.125% bonds 2027 outflows | 19 | 19 | 585 | – | 623 |
Currency swaps hedging €500m 2.125% bonds 2027 inflows | (12) | (12) | (577) | – | (601) |
Currency swaps hedging €600m 4.375% bonds 2029 outflows | 40 | 40 | 119 | 696 | 895 |
Currency swaps hedging €600m 4.375% bonds 2029 inflows | (29) | (29) | (87) | (694) | (839) |
Forward currency contract 2028 inflows | – | – | (438) | – | (438) |
Forward currency contract 2028 outflows | – | – | 425 | – | 425 |
Between | Between | ||||
Less than | 1 and 2 | 2 and 5 | More than | ||
1 year | years | years | 5 years | Total | |
31 December 2022 a | $m | $m | $m | $m | $m |
Non-derivative financial liabilities: | |||||
Bank overdrafts | 55 | – | – | – | 55 |
€500m 1.625% bonds 2024 | 9 | 543 | – | – | 552 |
£300m 3.75% bonds 2025 | 14 | 14 | 375 | – | 403 |
£350m 2.125% bonds 2026 | 9 | 9 | 439 | – | 457 |
€500m 2.125% bonds 2027 | 11 | 11 | 568 | – | 590 |
£400m 3.375% bonds 2028 | 16 | 16 | 49 | 498 | 579 |
Lease liabilities | 53 | 50 | 126 | 3,201 | 3,430 |
Trade and other payables (excluding deferred and contingent purchase consideration) | 660 | 1 | 1 | 2 | 664 |
Deferred and contingent purchase consideration | – | 13 | 39 | 42 | 94 |
Financial guarantee contracts | 50 | – | – | – | 50 |
Derivative financial liabilities: | |||||
Currency swaps hedging €500m 1.625% bonds 2024 outflows | 14 | 561 | – | – | 575 |
Currency swaps hedging €500m 1.625% bonds 2024 inflows | (9) | (543) | – | – | (552) |
Currency swaps hedging €500m 2.125% bonds 2027 outflows | 18 | 18 | 571 | – | 607 |
Currency swaps hedging €500m 2.125% bonds 2027 inflows | (11) | (11) | (568) | – | (590) |
a
Re-presented for the application of IFRS 9 ‘Financial Instruments’ to
IHG
| Annual Report and Form 20-F 2023
24. Financial risk management and derivative financial instruments
continued
Credit risk on cash and cash equivalents is minimised by operating a policy on the investment of surplus cash that generally restricts
counterparties to those with a BBB- credit rating or better or those providing adequate security. The Group uses long-term credit ratings
from S&P, Moody’s and Fitch Ratings as a basis for setting its counterparty limits.
In order to manage the Group’s credit risk exposure, the treasury function sets counterparty exposure limits using metrics including credit
ratings, the relative placing of credit default swap pricings, tier 1 capital and share price volatility of the relevant counterparty.
Repurchase agreements are fully collateralised investments, with a maturity of three months or less. The Group accepts only government
or supranational bonds where the lowest credit rating is AA- or better as collateral. In the event of default, ownership of these securities
would revert to the Group. The securities held as collateral are to protect against default by the counterparty.
The Group’s exposure to credit risk arises from default of the counterparty, with the maximum exposure equal to the carrying amount
of each
financial asset, including derivative financial instruments. The expected credit loss on cash and cash equivalents is considered
to be immaterial.
The table below analyses the Group’s short-term deposits, money market funds and repurchase agreement collateral classi
fied as cash and
cash equivalents by counterparty credit rating:
BBB+ and | |||||||||
AAA | AA+ | AA | AA‑ | A+ | A | A‑ | below | Total | |
31 December 2023 | $m | $m | $m | $m | $m | $m | $m | $m | $m |
Short-term deposits | – | – | – | 129 | 147 | 258 | 77 | 21 | 632 |
Money market funds | 375 | – | – | – | – | – | – | – | 375 |
Repurchase agreement collateral | 110 | 6 | – | 20 | – | – | – | – | 136 |
BBB+ and | |||||||||
AAA | AA+ | AA | AA- | A+ | A | A- | below | Total | |
31 December 2022 | $m | $m | $m | $m | $m | $m | $m | $m | $m |
Short-term deposits | – | – | – | 66 | 127 | 141 | 50 | 37 | 421 |
Money market funds | 360 | – | – | – | – | – | – | – | 360 |
Repurchase agreement collateral | 22 | 2 | 6 | – | – | – | – | – | 30 |
The Group manages its capital to ensure that it will be able to continue as a going concern. The capital structure consists of net debt, issued
share capital and reserves. The structure is managed with the objective of maintaining an investment grade credit rating, to provide ongoing
returns to shareholders and to service debt obligations, while maintaining maximum operational flexibility. A key characteristic o
f IHG’s
managed and franchised business model is that it is highly cash generative, with a high return on capital employed. Surplus cash is either
reinvested in the business, used to repay debt or returned to shareholders.
The Group’s debt is monitored on the basis of a cash
flow leverage ratio, being net debt divided by adjusted EBITDA. The Group has a stated
aim of maintaining this ratio at 2.5x to 3.0x. The ratio at 31 December 2023 (which differs from the ratio as calculated for covenant tests) was
2.09 (2022: 2.07).
The Group currently has a senior unsecured long-term credit rating of BBB from S&P and obtained, in 2023, a Baa2 rating from Moody’s.
In the event of either rating being downgraded below BBB- and Baa3 respectively (a downgrade of two levels) there would be an additional
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
f
financial instruments
Accounting classification and
fair value hierarchy
2023 | 2022 | ||||||||
Not | Not | ||||||||
categorised | categorised | ||||||||
Hierarchy of | Amortised | as a financial | Amortised | as a financial | |||||
fair value | Fair value a | cost | instrument | Total | Fair value a | cost | instrument | Total | |
measurement | $m | $m | $m | $m | $m | $m | $m | $m | |
Financial assets | |||||||||
Other financial assets | 1,3 b | 124 | 68 | – | 192 | 106 | 50 | – | 156 |
Cash and cash equivalents | 1 | 375 | 947 | – | 1,322 | 360 | 616 | – | 976 |
Derivative financial instruments | 2 | 20 | – | – | 20 | 7 | – | – | 7 |
Deferred compensation | |||||||||
plan investments | 1 | 250 | – | – | 250 | 216 | – | – | 216 |
Trade and other receivables | – | – | 651 | 102 | 753 | – | 542 | 107 | 649 |
Financial liabilities | |||||||||
Derivative financial instruments | 2 | 25 | – | – | 25 | 11 | – | – | 11 |
Deferred compensation | |||||||||
plan liabilities | 1 | 250 | – | – | 250 | 216 | – | – | 216 |
Loans and other borrowings | – | – | 3,166 | – | 3,166 | – | 2,396 | – | 2,396 |
Trade and other payables | 3 | 69 | 670 | 47 | 786 | 83 | 658 | 37 | 778 |
a
With the exception of equity securities of $87m (2022: $88m) measured at fair value through other comprehensive income, all are measured at fair value through pro
fit or loss.
Of those, the
financial assets related to the de
ferred compensation plan investments were designated as such upon initial recognition.
b
Of those measured at fair value, $14m (2022: $3m) are Level 1 and $110m (2022: $103m) are Level 3.
Financial assets and liabilities measured at amortised cost whose carrying amount is not a reasonable approximation of fair value are
as follows:
Hierarchy of | 2023 | 2022 | |||
fair value | Carrying value | Fair value | Carrying value | Fair value | |
measurement | $m | $m | $m | $m | |
€500m 1.625% bonds 2024 | 1 | 555 | 545 | 534 | 511 |
£300m 3.75% bonds 2025 | 1 | 387 | 373 | 365 | 344 |
£350m 2.125% bonds 2026 | 1 | 449 | 416 | 423 | 367 |
€500m 2.125% bonds 2027 | 1 | 559 | 535 | 539 | 492 |
£400m 3.375% bonds 2028 | 1 | 509 | 476 | 480 | 417 |
€600m 4.375% bonds 2029 | 1 | 663 | 689 | – | – |
Right of offset
Other than in relation to cash pooling arrangements (see note 18), there are no financial instruments with a significant
fair value subject
to enforceable master netting arrangements and other similar agreements that are not offset in the Group statement of
financial position.
Valuation techniques
Money market funds, deferred compensation plan investments and bonds
The fair value of money market funds, deferred compensation plan investments and bonds is based on their quoted market price.
Unquoted equity securities
Unquoted equity securities are fair valued using a discounted cash
flow model, either internally or using pro
fessional external valuers.
The significant unobservable inputs used to determine the
fair value of the equity securities are RevPAR growth (based on the market-
specific growth assumptions used by external valuers), pre-tax discount rate which ranged
from 6.4% to 10.0% (2022: 6.3% to 10.0%),
and a non-marketability factor which ranged from 20.0% to 30.0% (2022: 20.0% to 30.0%).
There is no material sensitivity arising from changes in assumptions.
IHG
| Annual Report and Form 20-F 2023
25. Classification and measurement o
f
financial instruments
continued
Derivative financial instruments and other payables
Currency swaps and currency forwards are measured at the present value of future cash
flows discounted back based on quoted
forward
exchange rates and the applicable yield curves derived from quoted interest rates. Adjustments for credit risk use observable credit default
swap spreads.
The put option over part of the Group’s investment in the Barclay associate was valued at $nil at 31 December 2023 and 2022. The value
is equal to the excess of the amount receivable under the option (which is based on the Group’s capital invested to date) over fair value
and is also affected by specially allocated expenses which resulted in an obligation of $18m in 2022 which reversed in 2023 (see note 6).
The fair value of the hotel was derived from a pricing opinion provided by a professional external valuer which is categorised as a Level 3
fair value measurement. The fair value of the hotel could fall by $38m before a liability arises.
Deferred purchase consideration
Deferred purchase consideration arose in respect of the acquisition of Regent, and comprises $13m payable in 2024. The
first instalment
of $13m was paid in 2021.
Contingent purchase consideration
Regent $69m (2022: $65m)
In 2018, the Group acquired a 51% controlling interest in Regent Hospitality Worldwide, Inc (‘RHW’), with put and call options existing over
the remaining 49% shareholding exercisable in a phased manner from 2026 to 2033. The Group has a present ownership interest in the
remaining shares and the acquisition was accounted for as 100% owned with no non-controlling interest recognised and contingent
purchase consideration comprising the present value of the expected amounts payable on exercise of the options based on the annual
trailing revenue of RHW in the year preceding exercise with a
floor applied.
The value of the contingent purchase consideration is subject to periodic reassessment as interest rates and RHW revenue expectations
change. At 31 December 2023, it is assumed that $39m will be paid in 2026 to acquire an additional 25% of RHW with the remaining 24%
acquired in 2028 for $42m. This assumes that the options will be exercised at the earliest permissible date which is consistent with the
assumption made on acquisition. The amount recognised is the discounted value of the total expected amount payable of $81m.
The discount rate applied is based on observable US corporate bond rates of similar term to the expected payment dates. The range
of possible outcomes remains unchanged from the date of acquisition at $81m to $261m (undiscounted).
The significant unobservable inputs used to determine the
fair value of the contingent purchase consideration are the projected trailing
revenues of RHW and the date of exercising the options. If the annual trailing revenue of RHW were to exceed the
floor by 10%, the amount
of the contingent purchase consideration recognised in the Group Financial Statements would increase by $7m (2022: $6m). If the date
for exercising the options is assumed to be 2033, the amount of the undiscounted contingent purchase consideration would be $86m
(2022: $86m).
Level 3 reconciliation
Other | Contingent | ||
financial | Other | purchase | |
assets | payables | consideration | |
$m | $m | $m | |
At 1 January 2022 | 106 | – | (73) |
Valuation losses recognised in other comprehensive income | (1) | – | – |
Unrealised changes in fair value a | – | (18) | 8 |
Exchange adjustments | (2) | – | – |
At 31 December 2022 | 103 | (18) | (65) |
Valuation losses recognised in other comprehensive income | (2) | – | – |
Additions | 8 | – | – |
Unrealised changes in fair value a | – | 18 | (4) |
Exchange and other adjustments | 1 | – | – |
At 31 December 2023 | 110 | – | (69) |
a
The change in the fair value of other payables was recognised within share of pro
fits/(losses)
from associates and joint ventures in the Group income statement and is presented as an
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
fit
for the year to cash
flow
from operations
2023 | 2022 | 2021 | |
$m | $m | $m | |
Profit for the year | 750 | 376 | 265 |
Adjustments for: | |||
Net financial expenses | 52 | 96 | 139 |
Fair value losses/(gains) on contingent purchase consideration | 4 | (8) | (6) |
Income tax charge | 260 | 164 | 96 |
Operating profit adjustments: | |||
Impairment (reversal)/loss on financial assets | (1) | 5 | – |
Other net impairment (reversals)/charges | – | (5) | 4 |
Other operating exceptional items | (28) | 100 | 25 |
Depreciation and amortisation | 67 | 68 | 98 |
38 | 168 | 127 | |
Contract assets deduction in revenue | 37 | 32 | 35 |
Share-based payments cost | 36 | 30 | 28 |
Share of (pro fits)/losses o f associates and joint ventures (before exceptional items) | (13) | (1) | 8 |
60 | 61 | 71 | |
System Fund adjustments: | |||
Depreciation and amortisation | 83 | 86 | 94 |
Impairment loss/(reversal) on financial assets | – | 7 | (6) |
Other impairment reversals | – | – | (3) |
Share-based payments cost | 20 | 16 | 13 |
Share of losses of associates | 3 | 1 | 2 |
106 | 110 | 100 | |
Working capital and other adjustments: | |||
Increase in deferred revenue | 123 | 108 | 39 |
Decrease in inventories | – | – | 1 |
Increase in trade and other receivables | (70) | (132) | (75) |
Increase in trade and other payables | 31 | 121 | 153 |
Other adjustments | (5) | 4 | (8) |
79 | 101 | 110 | |
Cash flows relating to exceptional items | (29) | (43) | (12) |
Contract acquisition costs, net of repayments | (101) | (64) | (42) |
Total adjustments | 469 | 585 | 583 |
Cash flow from operations | 1,219 | 961 | 848 |
IHG
| Annual Report and Form 20-F 2023
UK
Since 2014, UK retirement and death in service benefits are provided
for eligible employees by the IHG UK De
fined Contribution Pension Plan.
Members are provided with defined contribution arrangements under this plan; benefits are based on each individual member’s personal
account. The plan is HM Revenue & Customs registered and governed by an independent trustee, assisted by professional advisers as and
when required. The overall operation of the plan is subject to the oversight of The Pensions Regulator.
The former de
fined benefit plan, the InterContinental Hotels UK Pension Plan, was wound up in 2015
following the completion of the buy-out
and transfer of the de
fined benefit obligations to Rothesay Li
fe.
Residual defined benefit obligations remain in respect o
f additional bene
fits provided to members o
f an unfunded pension arrangement
(‘UK plan’) who were affected by lifetime or annual allowances under the former de
fined benefit arrangements. Accrual under this
arrangement ceased with effect from 1 July 2013 and a cash-out offer in 2014 resulted in the extinguishment of approximately 70% of the
unfunded pension obligations. The Group meets the bene
fit payment obligations o
f the remaining members as they fall due. A charge over
certain ring-fenced bank accounts totalling $32m (£25m) at 31 December 2023 (see note 16) is currently held as security on behalf of the
remaining members.
US
During 2018, the Group completed a termination of the US funded Inter-Continental Hotels Pension Plan, which involved certain qualifying
members receiving lump-sum cash-out payments with the remaining pension obligations subject to a buy-out by Banner Life Insurance
Company, a subsidiary of Legal & General America.
The Group continues to maintain the unfunded Inter-Continental Hotels Non-quali
fied Pension Plans (‘US plans’) and un
funded Inter-Continental
Hotels Corporation Postretirement Medical, Dental, Vision and Death Benefit Plan (‘US post-retirement plan’), both o
f which are de
fined
benefit plans. Both plans are closed to new members. A Retirement Committee, comprising senior Group employees and assisted by
professional advisers as and when required, has responsibility for oversight of the plans.
Movement in UK and US retirement benefit obligations
2023 | 2022 | 2021 | |
$m | $m | $m | |
At 1 January | 66 | 92 | 103 |
Recognised in profit or loss | |||
Interest expense | 3 | 2 | 2 |
3 | 2 | 2 | |
Recognised in other comprehensive income | |||
Actuarial loss/(gain) arising from changes in: | |||
Demographic assumptions | (1) | (1) | (3) |
Financial assumptions | 2 | (22) | (3) |
Experience adjustments | 1 | 2 | (1) |
Re-measurement loss/(gain) | 2 | (21) | (7) |
Exchange adjustments | – | (2) | (1) |
2 | (23) | (8) | |
Other | |||
Group contributions | (5) | (5) | (5) |
(5) | (5) | (5) | |
At 31 December | 66 | 66 | 92 |
Comprising: | |||
UK plan | 19 | 18 | 30 |
US plans | 34 | 35 | 45 |
US post-retirement plan | 13 | 13 | 17 |
66 | 66 | 92 |
The value of bene
fits paid is equal to contributions paid into the plans by the Group.
IHG
| Annual Report and Form 20-F 2023
27. Retirement benefits
continued
Assumptions
The principal financial assumptions used by the actuaries to determine the defined benefit obligations are:
2023 | 2022 | 2021 | |
% | % | % | |
UK plan only: | |||
Pension increases | 3.1 | 3.2 | 3.4 |
Inflation rate | 3.1 | 3.2 | 3.4 |
Discount rate: | |||
UK plan | 4.8 | 5.0 | 1.8 |
US plans | 4.7 | 4.9 | 2.4 |
US post-retirement plan | 4.7 | 4.9 | 2.4 |
US healthcare cost trend rate assumed for the next year: | |||
Pre-65 (ultimate rate reached in 2034) | 7.8 | 6.9 | 6.2 |
Post-65 (ultimate rate reached in 2034) | 8.6 | 7.3 | 6.5 |
Ultimate rate that the cost rate trends to | 4.5 | 4.5 | 4.5 |
Mortality is the most significant demographic assumption. The current assumptions
for the UK are based on the S3PA ‘light’ year of birth
tables with projected mortality improvements using the CMI_2022 model and a 1.25% per annum long-term trend and a smoothing parameter
(‘s-kappa’) of 7.0 with weightings of 92% and 86% for pensioners and 87% and 86% for non-pensioners, male and female respectively. In the
US, the current assumptions use rates from the Pri-2012 Mortality Study and Generationally Projected with Scale MP
-2021 mortality tables.
The assumptions applied to the UK plan and US plans for life expectancy at retirement age are as follows:
UK | US | ||||||
2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||
years | years | years | years | years | years | ||
Current pensioners at 65 a | – male | 23 | 24 | 24 | 22 | 22 | 22 |
– female | 25 | 26 | 26 | 23 | 23 | 23 | |
Future pensioners at 65 b | – male | 23 | 25 | 25 | 23 | 23 | 23 |
– female | 25 | 27 | 28 | 25 | 25 | 25 |
a
Relates to assumptions based on longevity following retirement at the end of the reporting period.
b
Relates to assumptions based on longevity relating to an employee retiring in 2043.
The assumptions allow for expected increases in longevity.
Sensitivities
Changes in assumptions used for determining retirement bene
fit costs and obligations may have an impact on the Group income statement
and the Group statement of
financial position. The key assumptions are the discount rate, the rate o
f in
flation, the assumed mortality rate
and the healthcare costs trend rate. The sensitivity analysis below relates to the increase/(decrease) in the benefit obligation and is based
on extrapolating reasonable changes in these assumptions, using year-end conditions and assuming no interdependency between
the assumptions:
2023 | 2022 | ||
$m | $m | ||
Discount rate | 1% decrease | 6 | 7 |
1% increase | (6) | (5) | |
Inflation rate | 0.25% decrease | (1) | (1) |
0.25% increase | 1 | 1 | |
Mortality rate | One-year increase | 3 | 3 |
Healthcare costs trend rate | 1% decrease | (1) | (1) |
1% increase | 1 | 1 |
Estimated future bene
fit payments
2023 | 2022 | |
$m | $m | |
Within one year | 5 | 5 |
Between one and five years | 21 | 20 |
More than five years | 86 | 89 |
112 | 114 |
Notes to the Group Financial Statements
continued
IHG
| Annual Report and Form 20-F 2023
27. Retirement benefits
continued
Average duration of pension obligations
2023 | 2022 | |
years | years | |
UK plan | 13.0 | 14.0 |
US plans | 7.5 | 7.6 |
US post-retirement plan | 8.0 | 8.0 |
Other pension plans
Philippines
The Group maintains a further, immaterial, pension plan for employees in the Philippines which is accounted for as a de
fined benefit plan.
At 31 December 2023, the net retirement benefit asset was $3m (2022: $2m) comprising plan assets o
f $12m (2022: $9m) and a de
fined
benefit obligation o
f $9m (2022: $7m). Plan assets comprise $7m (2022: $6m) domestic government securities, $3m (2022: $2m) domestic
equity investments, $1m (2022: $1m) money market funds and $1m (2022: $nil) domestic corporate bonds.
Contributions in the year were $2m (2022: $1m); the charge to System Fund and reimbursables was $1m (2022: $1m) and all other
movements were less than $1m (2022: less than $1m).
Key assumptions used in the valuation are the discount rate of 6.0% (2022: 7.0%) and the rate of salary increases of 6.0% (2022: 6.0%).
The weighted average duration of liabilities is 11 years (2022: 11 years); estimated future bene
fit payments are less than $1m in all years.
Defined contribution plans
The Group also operates a number of smaller pension plans outside the UK, the most signi
ficant o
f which is a de
fined contribution plan
In 2023, the new Deferred Award Plan rules (‘DAP’) replaced the IHG Annual Performance Plan (‘APP’) and Long Term Incentive Plan (‘LTIP’)
as a simplified, combined set o
f plan rules which govern the Company’s discretionary incentive plans.
Awards granted under the DAP can consist of Deferred Annual Incentive (‘DAI’), Long-Term Incentive (‘LTI’), Restricted Stock Unit (‘RSU’)
and other ad hoc awards.
The DAP rules were approved at the AGM on 5 May 2023, with all LTI and RSU awards granted after this date and DAI awards granted in
respect of 2024 and future APP years being subject to the rules of the DAP. All previously granted awards will still be subject to the LTIP
and APP rules respectively. In the transition to the DAP, there have been no changes to accounting for the awards.
Annual Performance/Deferred Annual Incentive Awards
Eligible employees (including Executive Directors) may receive all or part of their bonus in the form of deferred shares and/or receive
one-off awards of shares. Deferred shares in relation to annual performance-related bonus plans are released on the third anniversary of the
award date. Awards are conditional on the participants remaining in the employment of a participating company or leaving for a qualifying
reason. The grant of deferred shares under the APP/DAP is at the discretion of the Remuneration Committee.
The number of shares is calculated by dividing a speci
fic percentage o
f the participant’s annual performance-related bonus award by the
average of the middle market quoted prices on the three consecutive business days following the announcement of the Group’s results for
the relevant financial year.
Long Term Incentive Plan and Restricted Stock Units
Executive Directors and eligible employees may receive conditional share awards, which normally have a vesting period of three years,
subject to continued employment. In addition, certain LTI awards made to Executive Directors are normally subject to a further two-year
holding period after vesting.
LTI awards are subject to performance-based vesting conditions set by the Remuneration Committee, which are normally measured over
the vesting period.
Awards are normally made annually and, except in exceptional circumstances, will not exceed 3.5 or 5 times salary for eligible employees
under the LTIP or DAP rules respectively.
Colleague Share Plan
The Colleague Share Plan gives eligible corporate employees the opportunity to purchase shares up to an annual limit. After the end of the
plan year, the participant will be awarded the right to receive one matching share for every purchased share (subject to continued employment).
If the participant holds the purchased shares until the second anniversary of the end of the plan year, the conditional right to matching
shares vests.
The total fair value of the Colleague Share Plan is not signi
ficant.
More detailed information on the performance measures for awards to Executive Directors is shown in the Directors’ Remuneration Report
on pages 128 to 133.
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
28. Share‑based payments
continued
Costs relating to share‑based payment transactions
2023 | 2022 | 2021 | |
$m | $m | $m | |
Equity‑settled | |||
Operating profit be fore System Fund, reimbursables and exceptional items | 31 | 28 | 26 |
System Fund | 20 | 16 | 13 |
51 | 44 | 39 | |
Cash‑settled | |||
Operating profit be fore System Fund, reimbursables and exceptional items | 5 | 2 | 2 |
56 | 46 | 41 |
No consideration was received in respect of ordinary shares issued under option schemes during 2023, 2022 or 2021.
Option pricing models, assumptions and movements in awards outstanding
APP | LTIP | |||||
| Monte Carlo Simulation, Binomial | ||||||
| Binomial valuation model | and Finnerty valuation models | |||||
Option pricing models and assumptions | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 |
Weighted average share price (pence) | 5,571.7 | 5,018.3 | 5,009.0 | 5,318.0 | 4,875.0 | 4,980.0 |
Expected dividend yield | 2.52% to 2.77% | 2.29% to 2.67% | 1.11% | |||
Risk-free interest rate | 3.85% | 1.29% | 0.09% | |||
Volatility a | 29% to 30% | 35% to 45% | 43% | |||
Term (years) | 2.3 | 1.7 | 1.5 | 3.0 | 3.0 | 3.0 |
a
The expected volatility was determined by calculating the historical volatility of the Company’s share price corresponding to the expected life of the share award.
APP/DAP | LTIP/DAP | ||
Performance‑related | Restricted stock | ||
Number of share awards (thousands) | awards/LTI | units | |
Outstanding at 1 January 2021 | 413 | 814 | 1,421 |
Granted | 90 | 281 | 442 |
Vested | (147) | (70) | (391) |
Lapsed or cancelled | (8) | (153) | (122) |
Outstanding at 31 December 2021 | 348 | 872 | 1,350 |
Granted | 236 | 323 | 706 |
Vested | (254) | (23) | (391) |
Lapsed or cancelled | (9) | (239) | (90) |
Outstanding at 31 December 2022 | 321 | 933 | 1,575 |
Granted | 214 | 329 | 683 |
Vested | (186) | (180) | (533) |
Lapsed or cancelled | (17) | (246) | (63) |
Outstanding at 31 December 2023 | 332 | 836 | 1,662 |
Fair value of awards granted during the year (cents) | |||
2023 | 6,926.4 | 3,169.7 | 6,351.0 |
2022 | 6,180.2 | 3,770.0 | 5,656.4 |
2021 | 6,888.5 | 4,676.3 | 6,559.7 |
Weighted average remaining contract life (years) | |||
At 31 December 2023 | 1.5 | 1.3 | 1.3 |
At 31 December 2022 | 1.0 | 1.1 | 1.2 |
At 31 December 2021 | 0.5 | 1.2 | 1.2 |
The above awards do not vest until the performance and service conditions have been met.
The weighted average share price at the date of exercise for share awards vested during the year was 5,470.3p (2022: 4,950.5p). The closing
share price on 31 December 2023 was 7,090.0p (31 December 2022: 4,744.0p) and the range during the year was 4,832.0p to 7,118.0p
IHG
| Annual Report and Form 20-F 2023
Equity | ||||
Number | Nominal | Share | share | |
of shares | value | premium | capital | |
Allotted, called up and fully paid | millions | $m | $m | $m |
At 1 January 2021 (ordinary shares of 20 340 ⁄ 399 p each) | 187 | 53 | 103 | 156 |
Exchange adjustments | – | – | (2) | (2) |
At 31 December 2021 (ordinary shares of 20 340 ⁄ 399 p each) | 187 | 53 | 101 | 154 |
Repurchased and cancelled under share repurchase programme | (4) | (1) | – | (1) |
Exchange adjustments | – | (6) | (10) | (16) |
At 31 December 2022 (ordinary shares of 20 340 ⁄ 399 p each) | 183 | 46 | 91 | 137 |
Repurchased and cancelled under share repurchase programme | (11) | (3) | – | (3) |
Exchange adjustments | – | 3 | 4 | 7 |
At 31 December 2023 (ordinary shares of 20 340 ⁄ 399 p each) | 172 | 46 | 95 | 141 |
Under the authority given to the Company by shareholders at the AGM held on 6 May 2022 to purchase its own shares, in August 2022 the
Board approved a $500m share buyback programme that commenced on 9 August 2022 and completed on 31 January 2023. In February
2023 the Board approved a further $750m share buyback programme which completed on 29 December 2023. In the year ended 31 December
2023, 10.9m shares were repurchased for total consideration of $790m including $28m transaction costs and subsequently cancelled.
Of the total consideration, $38m relates to the completion of the 2022 programme and $752m relates to the 2023 programme. The cost of
treasury shares and related transaction costs have been deducted from retained earnings. In the year ended 31 December 2022, 9.1m shares
were repurchased for total consideration of $482m including $2m transaction costs, of which 4.5m were held as treasury shares and 4.6m
were cancelled.
When approving shareholder returns in 2022 and 2023, the Board first reviewed the Parent Company Financial Statements to confirm
availability of sufficient distributable reserves.
In February 2024, the Board approved a further $800m share buyback programme. A resolution to renew the authority to repurchase shares
will be put to shareholders at the AGM on 3 May 2024.
The Company no longer has an authorised share capital.
Shares held by employee share trusts
Number of | Carrying | Market | |
shares | value | value | |
millions | $m | $m | |
31 December 2023 | 0.8 | 35.0 | 73.6 |
31 December 2022 | 1.1 | 37.0 | 62.8 |
31 December 2021 | 0.9 | 21.7 | 57.3 |
Shares held by employee share trusts includes 0.2m shares (2022: 0.2m shares) held in a nominee account on behalf of participants.
Number of | Nominal | |
shares | value | |
millions | $m | |
At 1 January 2021 | 5.1 | 1.4 |
Transferred to employee share trusts | (1.4) | (0.4) |
At 31 December 2021 | 3.7 | 1.0 |
Transferred to employee share trusts | (0.7) | (0.2) |
Repurchased under share repurchase programme | 4.5 | 1.1 |
At 31 December 2022 | 7.5 | 1.9 |
Transferred to employee share trusts | (0.5) | (0.1) |
Exchange adjustments | – | 0.1 |
At 31 December 2023 | 7.0 | 1.9 |
IHG
| Annual Report and Form 20-F 2023
29. Equity
continued
Cash flow hedge reserves
Cash flow | Cost of | ||
hedge | hedging | ||
reserve | reserve | Total | |
$m | $m | $m | |
At 1 January 2021 | (11) | (13) | (24) |
Costs of hedging deferred and recognised in other comprehensive income | – | 2 | 2 |
Change in fair value of currency swaps recognised in other comprehensive income | (62) | – | (62) |
Reclassified from other comprehensive income to pro fit or loss – included in financial expenses | 96 | – | 96 |
Deferred tax | (7) | – | (7) |
At 31 December 2021 | 16 | (11) | 5 |
Costs of hedging deferred and recognised in other comprehensive income | – | 3 | 3 |
Change in fair value of currency swaps recognised in other comprehensive income | 33 | – | 33 |
Reclassified from other comprehensive income to pro fit or loss – included in financial expenses | (43) | – | (43) |
Deferred tax | 2 | – | 2 |
At 31 December 2022 | 8 | (8) | – |
Change in fair value of currency swaps recognised in other comprehensive income | (30) | – | (30) |
Reclassified from other comprehensive income to pro fit or loss – included in financial expenses | 28 | – | 28 |
At 31 December 2023 | 6 | (8) | (2) |
Amounts reclassified
from other comprehensive income to
financial expenses comprise $14m (2022: $14m, 2021: $15m) net interest payable
on the currency swaps and an exchange loss of $14m (2022: $57m gain, 2021: $81m loss) which offsets a corresponding gain or loss on the
2022 criminal unauthorised access to technology systems
On 6 September 2022, the Group announced that parts of the Group’s technology systems had been subject to unauthorised activity causing
disruption to IHG’s booking channels and other applications. No evidence of unauthorised access to systems storing guest data was
identified and precautionary regulatory notifications were filed and have been closed.
A class action has been filed, although alleged damages have not been specified. Given the uncertainty around the timing o
f the legal process
and the quantum of any damages, it is not practicable to make a reliable estimate of the possible
financial effect o
f any claims on the Group
at this time.
The Group holds third-party insurance policies in respect of cyber risks. It is expected that any further payment of claims will be recoverable
under insurance policies, subject to specific agreement with the insurance providers.
Litigation
From time to time, the Group is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties
inherent in litigation. These legal claims and proceedings are in various stages and include disputes related to specific hotels where the
potential materiality is not yet known; such proceedings, either individually or in the aggregate, have not in the recent past and are not likely
to have a material effect on the Group’s financial position or profitability. Previously reported contingent liabilities have been resolved or are
considered remote.
It is the view of the Directors that, other than to the extent that liabilities have been provided for in these Group Financial Statements (see
note 20), it is not possible to quantify any loss to which these proceedings may give rise, however, as at the date of reporting, the Group
does not believe that the outcome of these matters will have a material effect on the Group’s
financial position.
Other items
At 31 December 2023, the Group had outstanding letters of credit of $68m (2022: $55m) mainly relating to the Group’s Captive. The letters
of credit do not have set expiry dates, but are reviewed and amended as required.
The Group had total commitments for capital expenditure of $10m at 31 December 2023 (2022: $6m). The Group has also committed to
Notes to the Group Financial Statements
continued
IHG
| Annual Report and Form 20-F 2023
2023 | 2022 | 2021 | |
Total compensation | $m | $m | $m |
Short-term employment benefits | 18.6 | 18.7 | 19.3 |
Contributions to defined contribution pension plans | 0.5 | 0.5 | 0.5 |
Equity compensation benefits a | 15.8 | 13.4 | 8.1 |
34.9 | 32.6 | 27.9 |
a
As measured in accordance with IFRS 2 ‘Share-based Payment’.
There were no other transactions with key management personnel, defined as the Board and Executive Committee, during the years ended
Associates and joint ventures
2023 | 2022 | 2021 | |
$m | $m | $m | |
Fee revenue | 11 | 9 | 3 |
Amounts receivable | 19 | 10 | 11 |
Amounts payable | (10) | – | – |
The Group has a performance guarantee with a maximum exposure remaining of $6m (2022: $10m) for one associate. In 2021, the Group
had an outstanding guarantee of $12m against the bank loan of another associate.
The Group funds shortfalls in owner returns relating to the Barclay associate (see note 15). In addition, loans both to and from the Barclay
associate of $237m (2022: $237m) are offset in accordance with the provisions of IAS 32 ‘Financial Instruments: Presentation’ and presented
net in the Group statement of
financial position. Interest payable and receivable under the loans is equivalent. The loans have an average
interest rate of 4.0% (2022: 2.7%) and interest is presented net in the Group income statement. Notes 6 and 15 contain details of other
transactions with the Barclay associate.
Amounts receivable include $12m preferred equity investments in two associates which is presented within Other
System Fund and reimbursable revenues and expenses comprise:
2023 | 2022 | 2021 | |
$m | $m | $m | |
System Fund revenues | 1,564 | 1,217 | 928 |
Reimbursable revenues | 896 | 832 | 589 |
System Fund and reimbursable revenues | 2,460 | 2,049 | 1,517 |
System Fund expenses | (1,545) | (1,322) | (939) |
Reimbursable expenses | (896) | (832) | (589) |
System Fund and reimbursable expenses | (2,441) | (2,154) | (1,528) |
System Fund revenues include:
2023 | 2022 | 2021 | |
$m | $m | $m | |
Assessment fees and contributions received from hotels and other revenues | 1,185 | 989 | 727 |
Loyalty programme revenues, net of the cost of point redemptions | 379 | 228 | 201 |
System Fund expenses include:
2023 | 2022 | 2021 | |
$m | $m | $m | |
Marketing | 498 | 408 | 147 |
Staff costs | 399 | 341 | 304 |
Depreciation and amortisation | 83 | 86 | 94 |
Impairment loss/(reversal) on trade receivables (note 17) | – | 7 | (6) |
Other net impairment reversals (note 14) | – | – | (3) |
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
In accordance with Section 409 of the Companies Act 2006, a full list of entities in which the Group has an interest of greater than or equal
to 20%, the registered office and e
ffective percentage of equity owned as at 31 December 2023 are disclosed below. Unless otherwise stated,
the ownership interest disclosed comprises either ordinary shares, certificated or un-certificated membership interests which are indirectly
held by InterContinental Hotels Group PLC.
Fully owned subsidiaries | IHC Inter-Continental (Holdings) Corp. (k) | InterContinental Hotels Group (Greater China) |
10000 Champion Acquisition LLC (k) | IHC London (Holdings) (n) | Limited (ac) |
24th Street Operator Sub, LLC (k) | IHC May Fair Hotel Limited (n) | InterContinental Hotels Group (India) Private |
2250 Blake Street Hotel, LLC (k) | IHC M-H (Holdings) Corp. (k) | Limited (aq) |
36th Street IHG Sub, LLC (k) | IHC Overseas (U.K.) Limited (n) | InterContinental Hotels Group (Japan), Inc. (k) |
426 Main Ave, LLC. (k) | IHC United States (Holdings) Corp. (b) (k) | InterContinental Hotels Group (New Zealand) |
46 Nevins Street Associates, LLC (k) | IHC Willard (Holdings) Corp. (k) | Limited (an) |
Alpha Kimball Hotel, LLC (k) | IHG 24th Street JV LLC (k) | InterContinental Hotels Group (Shanghai) Ltd. (bb) |
Asia Pacific Holdings Limited (n) | IHG (Marseille) SAS (x) | InterContinental Hotels Group (Vietnam) Company |
Barclay Operating Corp. (k) | IHG (Myanmar) Limited (ah) | Limited (q) |
BHMC Canada Inc. (o) | IHG (Thailand) Limited (bu) | InterContinental Hotels Group Customer Services |
BHR Holdings B.V. (p) | IHG Amsterdam Management BV (p) | Limited (n) |
BHR Pacific Holdings, Inc. (k) | IHG Bangkok Ltd. (v) | InterContinental Hotels Group do Brasil Limitada (bc) |
BHTC Canada Inc. (o) | IHG Brasil Administracao de Hoteis e Servicos | InterContinental Hotels Group Healthcare Trustee |
Blythswood Square Glasgow Hotel OpCo Limited (n) | Ltda (ak) | Limited (n) |
BOC Barclay Sub LLC (k) | IHG Capital Lending LLC (k) | InterContinental Hotels Group Operating Corp. (e) (k) |
Bristol Oakbrook Tenant Company (k) | IHG Commissions Services SRL (co) | InterContinental Hotels Group Resources, LLC (b) (k) |
Cambridge Lodging LLC (k) | IHG de Argentina SA (al) | InterContinental Hotels Group Services Company (n) |
Capital Lodging LLC (k) | IHG ECS (Barbados) SRL (co) | InterContinental Hotels Italia, S.r.L. (be) |
CECNY Land Holdings LLC (k) | IHG Finance LLC- Incorporated 19/06/2023 (k) | InterContinental Hotels Limited (a) (n) |
CF Irving Owner, LLC (k) | IHG Franchising Brasil Ltda. (bd) | InterContinental Hotels Managementgesellschaft |
CF McKinney Owner, LLC (k) | IHG Franchising DR Corporation (k) | mbH (bf) |
Compañia Inter-Continental De Hoteles | IHG Franchising, LLC (k) | InterContinental Hotels Management Montenegro |
El Salvador SA (n) | IHG Honduras S. de R.L. (cr) | d.o.o. (ce) |
Crowne Plaza, LLC (k) | IHG Hotels (New Zealand) Limited (an) | InterContinental Hotels Nevada Corporation (k) |
Cumberland Akers Hotel, LLC (k) | IHG Hotels Limited (n) | InterContinental Hotels of San Francisco, Inc. (k) |
Dunwoody Operations, LLC (k) | IHG Hotels Management (Australia) Pty | Intercontinental IOHC (Mauritius) Limited (bg) |
Edinburgh George Street Hotel OpCo Limited (n) | Limited (b) (aa) | InterContinental Management AM, LLC (cm) |
EVEN Real Estate Holding LLC (k) | IHG Hotels Nigeria Limited (ao) | InterContinental Management Bulgaria EOOD (bp) |
General Innkeeping Acceptance Corporation (b) (k) | IHG Hotels South Africa (Pty) Limited (ap) | InterContinental Management France SAS (x) |
Grand Central Glasgow Hotel OpCo Limited (n) | IHG International Partnership (n) | InterContinental Management Poland sp. Z.o.o (cn) |
Guangzhou SC Hotels Services Ltd. (t) | IHG Istanbul Otel Yönetim Limited Sirketi (bx) | InterContinental Overseas Holdings, LLC (k) |
Hawthorne Land Holdings LLC (k) | IHG Japan (Management), LLC (ar) | KG Benefits, LLC (k) |
HC International Holdings, Inc. (k) | IHG Japan (Osaka), LLC (ar) | KG Gift Card Inc. (k) |
HH France Holdings SAS (x) | IHG Management (Maryland), LLC (k) | KG Liability LLC (k) |
HH Hotels (EMEA) B.V. (p) | IHG Management (Netherlands) B.V. (p) | KG Technology, LLC (k) |
HH Hotels (Romania) SRL (y) | IHG Management d.o.o. Beograd (cc) | KHRG 851 LLC (k) |
HIM (Aruba) NV (z) | IHG Management MD Barclay Sub, LLC (k) | KHRG Aertson LLC (k) |
Hoft Properties LLC (k) | IHG Management SL d.o.o. (bo) | KHRG Allegro, LLC (k) |
Holiday Hospitality Franchising, LLC (k) | IHG Mexico Operaciones SA de CV (ab) | KHRG Argyle, LLC (k) |
Holiday Inn Mexicana S.A. (ab) | IHG Middle East Management Consultancies LLC (br) | KHRG Atlanta Midtown LLC (k) |
Holiday Inns (China) Limited (ac) | IHG Peru SRL (cf) | KHRG Austin Beverage Company, LLC (k) |
Holiday Inns (Courtalin) Holding SAS (x) | IHG PS Nominees Limited (n) | KHRG Baltimore, LLC (k) |
Holiday Inns (Courtalin) SAS (x) | IHG Sermex SA de CV (ab) | KHRG Born LLC (k) |
Holiday Inns (Germany), LLC (k) | IHG Systems Pty Ltd. (b) (aa) | KHRG Boston Hotel, LLC (k) |
Holiday Inns (Jamaica), Inc. (k) | IHG Szalloda Budapest Szolgaltato Kft. (at) | KHRG Bozeman LLC (k) |
Holiday Inns (Middle East) Limited (ac) | IHG Technology Solutions, LLC (k) | KHRG Buckhead LLC (k) |
Holiday Inns (Philippines), Inc. (k) | InterContinental Berlin Service Company GmbH (au) | KHRG Canary LLC (k) |
Holiday Inns (Saudi Arabia), Inc. (k) | InterContinental (PB) 1 (n) | KHRG Cayman LLC (k) |
Holiday Inns (Thailand) Limited (ac) | InterContinental (PB) 3 Limited (n) | KHRG Cayman Employer Ltd. (cl) |
Holiday Inns (U.K.), Inc. (k) | Intercontinental D.C. Operating Corp. (k) | KHRG Charlottesville LLC (k) |
Holiday Inns Crowne Plaza (Hong Kong), Inc. (k) | Inter-Continental Florida Partner Corp. (k) | KHRG Dallas LLC (k) |
Holiday Inns Holdings (Australia) Pty Limited (aa) | InterContinental Gestion Hotelera SLU (by) | KHRG Dallas Beverage Company, LLC (k) |
Holiday Inns, Inc. (k) | Intercontinental Hospitality Corporation (k) | KHRG Employer, LLC (k) |
Holiday Inns Investment (Nepal) Limited (ac) | InterContinental Hotel Berlin GmbH (au) | SS Aetna Acquisition, LLC fka KHRG Goleta, LLC (k) |
Holiday Inns of Belgium N.V. (ad) | Inter-Continental Hoteleira Limitada (aw) | KHRG Gray LLC (k) |
Holiday Pacific Equity Corporation (k) | Inter-Continental Hotels (Montreal) Operating | KHRG Gray U2 LLC (k) |
Holiday Pacific Limited Liability Company (k) | Corp. (ax) | KHRG Huntington Beach LLC (k) |
Holiday Pacific Partners Limited Partnership (k) | Inter-Continental Hotels (Montreal) Owning | KHRG Key West LLC (k) |
Hotel InterContinental London (Holdings) Limited (n) | Corp. (ax) | KHRG King Street, LLC (k) |
Hotel Inter-Continental London Limited (n) | InterContinental Hotels (Puerto Rico) Inc. (az) | KHRG La Peer LLC (k) |
Hoteles Y Turismo HIH SRL (n) | Inter-Continental Hotels Corporation (k) | KHRG Miami Beach LLC (k) |
IC Hotelbetriebsführungs GmbH (ae) | Intercontinental Hotels Corporation de Venezuela | KHRG Muse LLC (k) |
IC Hotels Management (Portugal) Unipessoal, | C.A. (ba) | KHRG New Orleans LLC (k) |
Lda (af) | Intercontinental Hotels Corporation Limited (b) (m) | KHRG NPC LLC (k) |
IC International Hotels Limited Liability | InterContinental Hotels Group (Asia Pacific) | KHRG Palladian LLC (k) |
Company (ag) | Pte Ltd. (ai) | KHRG Palomar Phoenix LLC (k) |
IHC Arabia for Management, LLC (u) | InterContinental Hotels Group (Australia) Pty | KHRG Philly Monaco LLC (k) |
IHC Buckhead, LLC (k) | Limited (aa) | KHRG Pittsburgh LLC (k) |
IHC Hopkins (Holdings) Corp. (k) | InterContinental Hotels Group (Canada), Inc. (o) | KHRG Porsche Drive LLC (k) |
IHC Hotel Limited (n) | InterContinental Hotels Group (España) SAU (by) | KHRG Reynolds LLC (k) |
IHG
| Annual Report and Form 20-F 2023
33. Group companies
continued
KHRG Riverplace LLC (k) | Sustainable Luxury UK Limited (n) |
KHRG Sacramento LLC (k) | The Grand Central Hotel Glasgow Limited (ct) |
KHRG Schofield LLC (k) | The Met Hotel Leeds Limited (ct) |
KHRG SFD LLC (k) | The Principal Edinburgh George Street Limited (ct) |
KHRG SF Wharf LLC (k) | The Principal London Limited (ct) |
KHRG SF Wharf U2 LLC (k) | The Principal Manchester Limited (ct) |
KHRG South Beach LLC (k) | The Principal York Limited (ct) |
KHRG State Street LLC (k) | The Roxburghe Hotel Edinburgh Limited (s) |
KHRG Sutter LLC (k) | White Shield Company Limited (bk) |
KHRG Sutter Union LLC (k) | World Trade Centre Montreal Hotel Corporation (bl) |
KHRG Taconic LLC (k) | Wotton House Hotel OpCo Limited (n) |
KHRG Tariff LLC (k) | WY BLL Owner, LLC (k) |
KHRG Texas Hospitality, LLC (k) | York Station Road Hotel OpCo Limited (n) |
KHRG Texas Operations, LLC (k) | |
KHRG Tryon LLC (k) | Subsidiaries where the effective interest |
KHRG Vero Beach, LLC (k) | is less than 100% |
KHRG Vintage Park LLC (k) | IHG ANA Hotels Group Japan LLC (74.66%) (ar) |
KHRG VZ Austin LLC (k) | IHG ANA Hotels Holdings Co., Ltd. (66%) (ar) |
KHRG Wabash LLC (k) | Regent Hospitality Worldwide, Inc. (51%) (bt) |
KHRG Westwood, LLC (k) | Sustainable Luxury Holding (Thailand) Limited |
KHRG Wilshire LLC (k) | (49%) (c) (j) (aj) |
Kimpton Hollywood Licenses LLC (k) | Sustainable Luxury Hospitality (Thailand) Limited |
Kimpton Hotel & Restaurant Group, LLC (k) | (73.99%) (c) (j) (aj) |
Kimpton Hotel Frankfurt GmbH (bf) | Sustainable Luxury Management (Thailand) |
Kimpton Phoenix Licenses Holdings LLC (k) | Limited (73.99%) (c) (j) (aj) |
Louisiana Acquisitions Corp. (k) | Sustainable Luxury Operations (Thailand) Limited |
Luxury Resorts and Spas (France) SAS (ck) | (99.9998%) (j) (aj) |
Manchester Oxford Street Hotel OpCo Limited (n) | Universal de Hoteles SA (99.99%) (j) (bj) |
Mercer Fairview Holdings LLC (k) | |
Met Leeds Hotel OpCo Limited (n) | Associates, joint ventures and other |
MH Lodging LLC (k) | 111 East 48th Street Holdings LLC (19.9%) (g) (h) (k) |
Oxford Spires Hotel OpCo Limited (n) | Alkoer, Sociedad de Responsabilidad Limitada de |
Oxford Thames Hotel OpCo Limited (n) | Capital Variable (50%) (h) (cg) |
PML Services LLC (k) | ASR-JV One, LLC - (0%) (d) (h) (l) |
Pollstrong Limited (n) | Beijing Orient Express Hotel Co., Ltd. (16.25%) (bm) |
Powell Pine, Inc. (k) | Blue Blood (Tianjin) Equity Investment |
Priscilla Holiday of Texas, Inc. (k) | Management Co., Limited (30.05%) (bn) |
PT Regent Indonesia (bh) | Carr Clark SWW Subventure, LLC (26.67%) (g) (ca) |
PT SC Hotels & Resorts Indonesia (bh) | Carr Waterfront Hotel, LLC (11.73%) (g) (h) (ca) |
Raison d’Etre Holdings (BVI) Limited (v) | China Hotel Investment Ltd. (30.05%) (i) (am) |
Raison d’Etre Spas, Sweden AB (av) | Desarrollo Alkoer Irapuato S. de R.L. de C.V. |
Regent Asia Pacific Hotel Management Limited (bw) | (50%) (cg) |
Regent Asia Pacific Management Limited (cp) | Desarrollo Alkoer Saltillo S. de R.L. de C.V. |
Regent Berlin GmbH (cq) | (50%) (cg) |
Regent International Hotels Ltd (bw) | Desarrollo Alkoer Silao S. de R.L. de C.V. (50%) (cg) |
Roxburghe Hotel Edinburgh OpCo Limited (n) | EDG Alpharetta EH, LLC (0%) (d) (h) (r) |
Russell London Hotel OpCo Limited (n) | Gestion Hotelera Gestel, C.A. (50%) (c) (h) (ba) |
SBS Maryland Beverage Company LLC (k) | Groups360, LLC (11.83%) (h) (l) |
SC Hotels International Services, Inc. (k) | Inter-Continental Hotels Saudi Arabia Ltd. |
SC Leisure Group Limited (n) | (40%) (bs) |
SC NAS 2 Limited (n) | NF III Seattle, LLC (25%) (g) (r) |
SC Quest Limited (n) | NF III Seattle Op Co, LLC (25%) (g) (r) |
SC Reservations (Philippines) Inc. (k) | Nuevas Fronteras S.A. (23.66%) (cd) |
SCH Insurance Company (bi) | President Hotel & Tower Co Ltd. (30%) (bu) |
Semiramis for training of Hotel Personnel and | Shanghai Yuhuan Industrial Development Co., Ltd. |
Hotel Management SAE (ch) | (1%) (cj) |
Six Continents Holdings Limited (n) | Sustainable Luxury Gravity Global Private Limited |
Six Continents Hotels Belize Limited (cb) | (51%) (h) (bz) |
Six Continents Hotels de Colombia SA (bj) | SURF-Samui Pte. Ltd. (49%) (ay) |
Six Continents Hotels International Limited (n) | Tianjin ICBCI IHG Equity Investment Fund |
Six Continents Hotels, Inc. (k) | Management Co., Limited (21.04%) (bv) |
Six Continents International Holdings B.V. (p) | |
Six Continents Investments Limited (f) (n) | |
Six Continents Limited (n) | |
Six Continents Overseas Holdings Limited (n) | |
SixCo North America, Inc (k) | |
Six Senses Americas IP, LLC (k) | |
Six Senses North America Management, LLC (k) | |
SLC Sustainable Luxury Cyprus Limited (cs) | |
SPHC Management Ltd. (bq) | |
St. David’s Cardiff Hotel OpCo Limited (n) | |
Sustainable Luxury Holdings (BVI) Limited (v) | |
Sustainable Luxury Lanka Private Ltd (ci) | |
Sustainable Luxury Maldives Private Limited (w) | |
Sustainable Luxury Mauritius Limited (as) | |
Sustainable Luxury Services (BVI) Limited (v) | |
Sustainable Luxury Singapore Private Limited (ai) |
Key | |
(a) | Directly owned by InterContinental |
Hotels Group PLC | |
(b) | Ordinary shares and preference shares |
(c) | Ordinary A and ordinary B shares |
(d) | 12.5%/8% cumulative preference shares |
(e) | ¼ vote ordinary shares and |
ordinary shares | |
(f) | Ordinary shares, 5% cumulative |
preference shares and 7% cumulative | |
preference shares | |
(g) | The entities do not have share capital |
and are governed by an operating | |
agreement | |
(h) | Accounted for as associates and joint |
ventures due to IHG’s decision-making | |
rights contained in the partnership | |
agreement | |
(i) | Accounted for as an other financial |
asset due to IHG being unable to | |
exercise significant influence over the | |
financial and operating policy | |
decisions of the entity | |
(j) | Minority interest relates to one or more |
individual shareholders who are | |
employed or were previously employed | |
by the entity |
IHG
| Annual Report and Form 20-F 2023
Notes to the Group Financial Statements
continued
Registered addresses | (ar) | 20th Floor, Toranomon Kotoshira Tower, 2-8, | (bx) | Maslak Mah. Eski Büyükdere Cad. Orjin | |
(k) | Three Ravinia Drive, Suite 100, Atlanta, GA | Toranomon 1-chom, Minato-ku, 105 -0001, | Maslak İŞ, Merkezi Sitesi No: 27 IC KapiI No: 4 | ||
30346, USA | Tokyo, Japan | Sariyer/Istanbul, Turkey | |||
(l) | 251 Little Falls Drive, Suite 400, Wilmington, | (as) | Venture Corporate Services (Mauritius) Ltd, | (by) | Paseo de Recoletos 37 – 41, 28004 Madrid, |
New Castle County, DE19808, USA | Level 3, Tower 1, Nexteracom Towers, | Spain | |||
(m) | Clarendon House, 2 Church Street, Hamilton | Cybercity, Ebene, Mauritius | (bz) | B-11515 Bhikaj Cama Place, New Delhi, | |
HM11, Bermuda | (at) | 1052 Budapest, Apáczai Csere Jánus u. 12 | South Delhi, 110066 India | ||
(n) | 1 Windsor Dials, Arthur Road, Windsor, | –14A, Hungary | (ca) | Carr Hospitality, LLC, 1455 Pennsylvania | |
Berkshire, SL4 1RS, UK | (au) | Budapester Str. 2, 10787 Berlin, Germany | Avenue, NW, Suite 200, Washington, DC | ||
(o) | 333 Bay Street, Suite 400, Toronto M5H 2R2, | (av) | Grevgatan 13, 11453 Stockholm, Sweden | 20004, USA | |
Ontario, Canada | (aw) | Alameda Jau 536, Suite 3S-E, 01420-000 | (cb) | 84 Albert Street, Belize City, Belize, C.A. | |
(p) | Kingsfordweg 151, 1043 GR Amsterdam, | São Paulo, Brazil | (cc) | Krunska 73, 3rd floor, office no.3, Vračar, | |
The Netherlands | (ax) | 1980 Pérodeau Street, Vaudreuil-Dorion, | 11000 Belgrade, Serbia | ||
(q) | Room No. 23, Floor 16, Saigon Tower | J7V 8P7, Quebec, Canada | (cd) | Moreno 809 2 Piso, C1091AAQ Buenos Aires, | |
Building, 29 Le Duan Street, Ben Nghe Ward, | (ay) | 168 Robinson Road, #16-01 SIF Building, | Argentina | ||
District 1, Ho Chi Minh City, Vietnam | 068899, Singapore | (ce) | Bulevar Svetog Petra Cetinjskog 149 – 81000 | ||
(r) | The Corporation Trust Centre, 1209 Orange | (az) | 361 San Francisco Street Penthouse, | Podgorica, Montenegro | |
Street, Wilmington, DE 19801, USA | San Juan, PR 00901, Puerto Rico | (cf) | Bernard Monteagudo 201, 15076, Lima, Peru | ||
(s) | Atria One, 144 Morrison Street, Edinburgh, | (ba) | Hotel Tamanaco Inter-Continental, Final Av. | (cg) | Avenida Ejercito Nacional Mexicano No. 769, |
EH3 8EX, UK | Ppal, Mercedes, Caracas, Venezuela | Torre B Piso 8, Granada, Miguel Hidalgo, | |||
(t) | Building 4, No 13 Xiao Gang Zhong Ma Road, | (bb) | 22/F Citigroup Tower, No. 33 Huayanshiqiao | Ciudad de Mexico, CP 11520, Mexico | |
Zhuhai District, Guangzhou, Guangdong, | Road, Lujiazui, Pudong New Area, 200120, | (ch) | Ground Floor, Al Kamel Law Building, Plot | ||
P.R. China | Shanghai, P.R. China | 52-b, Banks Area, Six of October City, Egypt | |||
(u) | Level 6, Akaria Plaza, North Wing, Gate D, | (bc) | Alameda Jau 536, Suite 3S-C, 01420-000 | (ci) | Shop No. L3-6, Amity Building, No. 125 High |
Olaya Street, PO Box 93228, Riyadh 1148, | São Paulo, Brazil | Level Road, Maharagama, Colombo, Sri Lanka | |||
Saudi Arabia | (bd) | Alameda Jau 536, Suite 3S-D, 01420-000 | (cj) | 1st Floor, No. 68, Zhupan Road, Zhuqiao Town, | |
(v) | Flemming House, Wickhams Cay, P.O. Box | São Paulo, Brazil | Pudong New Area, Shanghai, P.R. China | ||
662, Road Town, Tortola VG1110, British | (be) | Viale Monte Nero n.84, 20135 Milano, Italy | (ck) | 95 Blvd. Berthier, 75017 Paris, France | |
Virgin Islands | (bf) | Thurn-und-Taxis-Platz 6 – 60313 Frankfurt | (cl) | PO Box 309, Ugland House, Grand Cayman, | |
(w) | Premier Chambers, M. Lux Lodge, 1st Floor, | am Main, Germany | KY1-1104, Cayman Islands | ||
Orchid Magu, Male, Republic of Maldives | (bg) | Juris Tax Services Ltd. Level 12, NeX Teracom | (cm) | 23/6 D, Anhaght Str., Yerevan, 0069, Armenia | |
(x) | 31-33 rue Mogador, 75009 Paris, France | Tower II, Ebene, Mauritius | (cn) | Generation Park Z – ul. Towarowa 28, 00-839 | |
(y) | Bucharest, 2nd District, 2 Gara Herăstrău | (bh) | Menara Imperium 22nd Floor, Suite D, JI. HR. | Warsaw, Poland | |
Street, 2nd floor, module 33, Romania | Rasuna Said Kav.1, Guntur Sub-district, | (co) | Suite 1, Ground Floor, The Financial Services | ||
(z) | J E Irausquin Boulevard 93, 1Eagle/ | Setiabudi District, South Jakarta 12980, | Centre, Bishops Court Hill, St. Michael, | ||
Paardenbaai, Oranjestad West, Aruba | Indonesia | BB14004, Barbados | |||
(aa) | Level 11, 20 Bond Street, Sydney NSW 2000, | (bi) | Primmer Piper Eggleston & Cramer PC, 30 | (cp) | Brumby Centre, Lot 42, Jalan Muhibbah, |
Australia | Main St., Suite 500, P.O. Box 1489, | 87000 Labuan F.T., Malaysia | |||
(ab) | Ontario # 1050, Col. Providencia, | Burlington, VT 05402-1489, USA | (cq) | Charlottenstrasse 49, 10117 Berlin, Germany | |
Guadalajara, Jalisco CP44630, Mexico | (bj) | Calle 49, Sur 45 A 300, Oficina 1102, 055422 | (cr) | Blvd, Morazan, Centro Comercial El Dorado, | |
(ac) | 5/F, Manulife Place, 348 Kwung Tong Road, | Envigado, Antioquia, Colombia | 6th Floor, Tegucigalpa, Honduras | ||
Kowloon, Hong Kong | (bk) | 21 Engineer Lane, Gibraltar, GX11 1AA, | (cs) | ATS Services Limited, Capital Center, 9th | |
(ad) | Rond-Point Robert Schuman 11, 1040 | Gibraltar | Floor, 2-4 Arch, Makarios III Ave., 1065 Nicosia, | ||
Brussels, Belgium | (bl) | Suite 2500, 1000 de La Gauchetiere St. | Cyprus | ||
(ae) | QBC 4 – Am Belvedere 4, 1100, Vienna, | West, Montreal C H3B OA2, Canada | (ct) | 1 More London Place, London, SE1 2AF, UK | |
Austria | (bm) | Room 311, Building 1, No. 6 East Wen Hua | |||
(af) | Avenida da Republica, no 52 – 9, 1069 – 211, | Yuan Road, Beijing Economy and | |||
Lisbon, Portugal | Technology Development Zone, Beijing, | ||||
(ag) | Room 60, Section 11 Floor 3 Premises I, | P.R. China | |||
Building 1, House 125, Varshavskoye shosse | (bn) | Room N306, 3rd Floor, Building 6, Binhai | |||
Str, Vn.Ter.G. Municipal District Severnoye | Financial Street, No. 52 West Xincheng Road, | ||||
Chertanovo, Moscow City, 117587, Russia | Tianjin Economy and Technology | ||||
(ah) | No. 84, Pan Haliain Street, Unit #1, Level 8, | Development Zone, Tianjin, P.R. China | |||
Uniteam Marine Office Building, Sanchuang | (bo) | Cesta v Mestni log 1, 1000 Ljubljana, Slovenia | |||
Township, Yangon, Myanmar | (bp) | 37A Professor Fridtjof Nansen Street, 5th Floor, | |||
(ai) | 230 Victoria Street, #13-00 Bugis Junction | District Sredets, Sofia, 1142, Bulgaria | |||
Towers, 188024, Singapore | (bq) | C/o Holiday Inn & Suites, Cnr Waigani Drive | |||
(aj) | 57, 9th Floor, Park Ventures Ecoplex, Unit | & Wards Road, Port Moresby, National | |||
902-904, Wireless Road, Limpini, Pathum | Capital District, Papua New Guinea | ||||
Wan Bangkok 103330, Thailand | (br) | Suite 2201, Festival Tower, Dubai Festival | |||
(ak) | Alameda Jau 536, Suite 3S-B, 01420-000 | City, Al Rebbat St., P.O. Box 58191, Dubai, | |||
São Paulo, Brazil | United Arab Emirates | ||||
(al) | Avenida Cordoba 1547, piso 8, oficina A, | (bs) | Madinah Road, Jeddah, P.O Box 9456, | ||
1055 Buenos Aires, Argentina | Post Code 21413, Jeddah, Saudi Arabia | ||||
(am) | The Phoenix Centre, George Street, Belleville | (bt) | Maples Corporate Services Ltd. – PO Box | ||
St. Michael, Barbados | 309, Ugland House, Grand Cayman – | ||||
(an) | Level 10, 55 Shortland Street, Auckland | KY-1104, Cayman Islands | |||
Central, Auckland 1010, New Zealand | (bu) | 971, 973 Ploenchit Road, Lumpini, | |||
(ao) | 1, Murtala Muhammed Drive, Ikoyi, Lagos, | Pathumwan, Bangkok 10330, Thailand | |||
Nigeria | (bv) | Room R316, 3rd Floor, Building 6, Binhai | |||
(ap) | Central Office Park Unit 4, 257 Jean Avenue, | Financial Street, No. 52 West Xincheng Road, | |||
Centurion 0157, South Africa | Tianjin Economy and Technology | ||||
(aq) | 11th Floor, Building No. 10, Tower C, DLF | Development Zone, Tianjin, P.R. China | |||
Phase-II, DLF Cyber City, Gurgaon, | (bw) | 14th Floor, South China Building, | |||
Haryana-122002, India | 1-3 Wyndham Street, Hong Kong, SAR | ||||
33. Group companies
continued
Group Financial Statements
216
IHG
| Annual Report and Form 20-F 2023
218
Parent Company Financial Statements
220
Notes to the Parent Company
Financial Statements
Parent
Company
Financial
Statements
Parent Company Financial Statements
217
IHG
| Annual Report and Form 20-F 2023
31 December 2023
Note
2023
£m
2022
£m
Fixed assets
Investments
3
3,227
3,198
Current assets
Debtors: due after more than one year
4
44
46
Debtors: due within one year
4
875
217
Creditors: amounts falling due within one year
7
(455)
(26)
Net current assets
464
237
Total assets less current liabilities
3,691
3,435
Creditors: amounts falling due after one year
8
(1,494)
(1,953)
Net assets
2,197
1,482
Capital and reserves
Called up share capital
10
36
38
Share premium account
75
75
Capital redemption reserve
10
8
Share-based payment reserve
475
431
Cash flow hedge reserves
6
1
–
Profit and loss account
1,600
930
Total equity
2,197
1,482
Signed on behalf of the Board,
Michael Glover
19 February 2024
The profit a
fter tax amounts to £1,473m (2022: £751m).
Registered number 05134420
Notes on pages 220 to 224 form an integral part of these Financial Statements.
Parent Company Financial Statements
Parent Company statement of
financial position
Parent Company Financial Statements
218
IHG
| Annual Report and Form 20-F 2023
Parent Company statement of changes in equity
Called up
share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Share-
based
payment
reserve
£m
Cash flow
hedge
reserves
£m
Profit
and loss
account
£m
Total
equity
£m
At 1 January 2022
39
75
7
393
3
820
1,337
Profit
for the year
–
–
–
–
–
751
751
Other comprehensive loss
Items that may be subsequently reclassified to profit or loss:
Gains on cash flow hedges, including related tax credit o
f £1m
–
–
–
–
30
–
30
Costs of hedging
–
–
–
–
2
–
2
Hedging gains reclassified to financial expenses
–
–
–
–
(35)
–
(35)
Total other comprehensive loss for the year
–
–
–
–
(3)
–
(3)
Total comprehensive income for the year
–
–
–
–
(3)
751
748
Repurchase of shares, including transaction costs
(1)
–
1
–
–
(447)
(447)
Equity-settled share-based payment cost
–
–
–
38
–
–
38
Equity dividends paid
–
–
–
–
–
(194)
(194)
At 31 December 2022
38
75
8
431
–
930
1,482
Profit
for the year
–
–
–
–
–
1,473
1,473
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Losses on cash flow hedges, including related tax o
f £nil
–
–
–
–
(29)
–
(29)
Costs of hedging
–
–
–
–
2
–
2
Hedging losses reclassified to financial expenses
–
–
–
–
28
–
28
Total other comprehensive income for the year
–
–
–
–
1
–
1
Total comprehensive income for the year
–
–
–
–
1
1,473
1,474
Repurchase of shares, including transaction costs
(2)
–
2
–
–
(605)
(605)
Equity-settled share-based payment cost
–
–
–
44
–
–
44
Equity dividends paid
–
–
–
–
–
(198)
(198)
At 31 December 2023
36
75
10
475
1
1,600
2,197
Notes on pages 220 to 224 form an integral part of these Financial Statements.
Parent Company Financial Statements
Parent Company Financial Statements
219
IHG
| Annual Report and Form 20-F 2023
1. Accounting policies
General information
The Parent Company Financial Statements of InterContinental Hotels
Group PLC (the ‘Company’) for the year ended 31 December 2023
were authorised for issue by the Board of Directors on 19 February
2024 and the Parent Company statement of
financial position was
signed on the Board’s behalf by Michael Glover. The Company is a
public limited company incorporated and registered in England and
Wales. The Company’s ordinary shares are publicly traded on the
London Stock Exchange and it is not under the control of any single
shareholder. The Company’s primary activity is acting as a holding
company for the Group’s investments.
The Parent Company Financial Statements are presented in sterling
and all values are rounded to the nearest million pounds (£m) except
when otherwise indicated.
No income statement is presented for the Company as permitted
by Section 408 of the Companies Act 2006.
Going concern
The Directors have assessed, in the light of current and anticipated
economic conditions, the Company’s ability to continue as a going
concern. Having considered the going concern status and liquidity
of the Group (see page 161), the Directors con
firm they have a
reasonable expectation that the Company has sufficient resources
to continue operating until at least 30 June 2025 and there are no
material uncertainties that may cast doubt on the Company’s going
concern status. Accordingly, they continue to adopt the going concern
basis in preparing the Parent Company Financial Statements.
Basis of preparation
The Parent Company Financial Statements have been prepared
in accordance with FRS 101, as applied in accordance with the
provisions of the Companies Act 2006. FRS 101 sets out a reduced
disclosure framework for a ‘qualifying entity’ as de
fined in the
standard which addresses the financial reporting requirements
and disclosure exemptions in the individual financial statements
of qualifying entities that otherwise apply the recognition,
measurement and disclosure requirements of UK-adopted IFRSs.
FRS 101 sets out amendments to adopted IFRSs that are necessary to
achieve compliance with the Companies Act and related Regulations.
The following disclosures have not been provided as permitted
by FRS 101:
•
A cash flow statement and related notes as required by IAS 7
‘Statement of Cash Flows’;
•
A comparative period reconciliation for share capital as required
by IAS 1 ‘Presentation of Financial Statements’;
•
Disclosures in respect of transactions with wholly owned
subsidiaries as required by IAS 24 ‘Related Party Disclosures’;
•
Disclosures in respect of capital management as required by
paragraphs 134 to 136 of IAS 1 ‘Presentation of Financial Statements’;
•
The following paragraphs of IAS 1 ‘Presentation of
financial
statements’ (removing the requirement to present):
–
10(d) (statement of cash
flows);
–
16 (statement of compliance with all IFRS); and
–
111 (cash flow statement in
formation).
•
The effects of new but not yet effective IFRSs as required by
paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes
in Accounting Estimates and Errors’; and
•
Disclosures in respect of the compensation of key management
personnel as required by paragraph 17 of IAS 24 ‘Related
Party Disclosures’.
Where the Consolidated Financial Statements of the Company
include the equivalent disclosures, the Company has also taken
the exemptions under FRS 101 available in respect of the
following disclosures:
•
The requirements of paragraphs 45(b) and 46 to 52 of IFRS 2
‘Share-based Payment’ in respect of group-settled share-based
payments; and
•
The requirements of paragraphs 91 to 99 of IFRS 13 ‘Fair Value
Measurement’ and the disclosures required by IFRS 7 ‘Financial
Instruments: Disclosures’.
The accounting policies set out herein have, unless otherwise
stated, been applied consistently to all periods presented in these
Financial Statements.
Critical accounting policies and the use of judgements,
estimates and assumptions
There are no critical estimates or judgements which are considered
to present significant risk o
f a material adjustment to the Parent
Company Financial Statements in the next financial year.
Notes to the Parent Company
Financial Statements
Parent Company Financial Statements
220
IHG
| Annual Report and Form 20-F 2023
1. Accounting policies
continued
Significant accounting policies
Foreign currencies
Transactions in foreign currencies are translated to the Company’s
functional currency at the exchange rates ruling on the dates of
the transactions. Monetary assets and liabilities denominated in
foreign currencies are retranslated to the functional currency at
the relevant rates of exchange ruling on the last day of the period.
Foreign exchange differences arising on translation are recognised
in the income statement.
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity
securities, amounts due from and amounts due to Group undertakings
and loans and other borrowings.
Investments in equity securities
Investments in subsidiaries are carried at cost plus deemed capital
contributions arising from share-based payment transactions less
any provision for impairment. The carrying amount is reviewed
at each reporting date, including a comparison to the market
capitalisation of the Company on 31 December 2023 (£11.7bn) to
determine whether there is any indication of impairment. If any such
indication exists, then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset
exceeds its estimated recoverable amount. Impairment losses are
recognised in the income statement.
Amounts due from Group undertakings
Amounts due from Group undertakings are recognised initially
at fair value and subsequently measured at amortised cost using
the effective interest rate method less provision for expected credit
losses. Allowances for expected credit losses are made based
on the risk of non-payment, taking into account ageing, previous
experience, economic conditions and forward-looking data.
Such allowances are measured as either 12-month expected credit
losses or lifetime expected credit losses, depending on changes
in the credit quality of the counterparty.
Amounts due to Group undertakings are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest rate method.
Amounts due from and to Group undertakings are only offset where
the relevant facilities permit such offset under all conditions described
in the Group accounting policy for offsetting of
financial assets and
financial liabilities on page 169 o
f the Group Financial Statements.
Loans and other borrowings
Loans and other borrowings are initially recognised at the fair value of
the consideration received less directly attributable transaction costs.
They are subsequently measured at amortised cost. Finance charges,
including transaction costs and any discount or premium on issue,
are recognised in the income statement using the effective interest
rate method.
Borrowings are classified as due a
fter more than one year when the
repayment date is more than 12 months from the period-end date
or where they are drawn on a facility with more than 12 months
to expiry.
Derivative financial instruments and hedging
Derivatives are initially recognised and subsequently measured at
fair value. The subsequent accounting treatment depends on whether
the derivative is designated as a hedging instrument and, if so, the
nature of the item being hedged.
Changes in the fair value of derivatives which have either not been
designated as hedging instruments or relate to the ineffective portion
of hedges are recognised immediately in the income statement.
Documentation outlining the measurement and effectiveness of
any hedging arrangement is maintained throughout the life of the
hedge relationship.
Interest arising from currency derivatives and interest rate swaps
is recorded in either financial income or expenses over the term
of the agreement, unless the accounting treatment for the hedging
relationship requires the interest to be taken to reserves.
Capital and reserves
Accounting policies relating to capital and reserves, which are also
applicable to the Company, can be found on page 171 of the Group
Financial Statements.
The share premium account represents the amount of proceeds
received for shares in excess of their nominal value.
Share-based payments
The cost of equity-settled shared-based payment transactions with
employees is measured by reference to fair value at the date at which
the right to the shares is granted. Fair value is determined by an
external valuer using option pricing models.
The cost of equity-settled share-based payment transactions is
recognised, together with a corresponding increase in equity, over
the period in which any performance or service conditions are
ful
filled, ending on the date on which the relevant employees
become fully entitled to the award (vesting date).
Where the Company grants awards over its own shares to the
employees of its subsidiaries, it recognises an increase in the cost
of investment in its subsidiaries equivalent to the equity-settled
share-based payment charge recognised in its Consolidated
Financial Statements with the corresponding credit being
recognised directly in equity. Any consideration received from
subsidiaries in relation to those awards does not represent an
increase in the cost of investment.
Parent Company Financial Statements
221
IHG
| Annual Report and Form 20-F 2023
Notes to the Parent Company Financial Statements
2. Directors’ remuneration
Average number of Directors
2023
2022
Non-Executive Directors
9
10
Executive Directors
2
3
11
13
Directors’ remuneration
2023
£m
2022
£m
Base salaries, fees, annual performance payments and bene
fits
5.6
6.4
More detailed information on the remuneration including pensions, share awards and shareholdings for each Director is shown in the Directors’ Remuneration
Report on pages 128 and 136. In addition, amounts received or receivable under long-term incentive schemes are shown on page 128.
2023
number
2022
number
Directors in respect of whose qualifying services shares were received or receivable under long-term incentive schemes
2
3
3. Investments
£m
Cost and net book value
At 1 January 2023
3,198
Share-based payments capital contribution
29
At 31 December 2023
3,227
The Company is the beneficial owner o
f all the equity share capital of InterContinental Hotels Limited, a company registered in England
and Wales.
A full list of subsidiary and other related undertakings is given in note 33 to the Group Financial Statements.
4. Debtors
2023
£m
2022
£m
Due after more than one year
Derivative financial assets (note 6)
1
6
Deferred tax (note 5)
43
40
44
46
Due within one year
Amounts due from Group undertakings
868
210
UK Corporation Tax
7
7
875
217
5. Deferred tax
Losses
£m
Currency
swaps
£m
Total
£m
At 1 January 2022
29
(1)
28
Income statement
11
–
11
Other comprehensive income
–
1
1
At 31 December 2022
40
–
40
Income statement
3
–
3
At 31 December 2023
43
–
43
Under UK tax law it is possible to realise certain categories of deferred tax assets, including all those of the Company, against future taxable
profits o
f any other UK entity within the Group. There is an expectation of sufficient future taxable pro
fits within the Group which supports
the recognition of the Company’s deferred tax asset.
More detailed information on the basis for deferred tax recognition is shown within the Group accounting policies and note 8 to the Group Financial
Statements on pages 170 and 184.
Notes to the Parent Company Financial Statements
continued
Parent Company Financial Statements
222
IHG
| Annual Report and Form 20-F 2023
6. Derivative financial instruments and hedging
Currency swaps have been transacted to swap the proceeds from the euro bonds to sterling as follows:
Fair value
Date of designation
Pay leg
Interest rate
Receive leg
Interest rate
Maturity
Hedged item
2023
£m
2022
£m
November 2018
£436m
3.5%
€500m
2.125%
May 2027
€500m 2.125% bonds 2027
1
6
October 2020
£454m
2.7%
€500m
1.625%
October 2024
€500m 1.625% bonds 2024
(20)
(9)
Hedge ineffectiveness arises where the cumulative change in the fair value of the swaps exceeds the change in fair value of the future
cash flows o
f the bonds. The change in value of the hedged item used as the basis for recognising hedge ineffectiveness for the period
was a £17m loss (2022: £39m gain).
Cash flow hedge reserves
Cash flow
hedge
reserve
£m
Cost of
hedging
reserve
£m
Total
£m
At 1 January 2022
11
(8)
3
Costs of hedging deferred and recognised in other comprehensive loss
–
2
2
Change in fair value of currency swaps recognised in other comprehensive loss
29
–
29
Reclassified
from other comprehensive income to pro
fit or loss
(35)
–
(35)
Deferred tax
1
–
1
At 31 December 2022
6
(6)
–
Costs of hedging deferred and recognised in other comprehensive income
–
2
2
Change in fair value of currency swaps recognised in other comprehensive income
(29)
–
(29)
Reclassified
from other comprehensive income to pro
fit or loss
28
–
28
At 31 December 2023
5
(4)
1
More detailed information on derivative
financial instruments and hedging is shown in note 24 to the Group Financial Statements.
7. Creditors: amounts falling due within one year
2023
£m
2022
£m
Other payables
–
24
Accruals
–
2
Derivative financial liabilities (note 6)
20
–
Loans and other borrowings:
€500m 1.625% bonds 2024
435
–
455
26
More detailed information on loans and borrowings is shown in note 22 to the Group Financial Statements.
8. Creditors: amounts falling due after one year
2023
£m
2022
£m
Derivative financial liabilities (note 6)
–
9
Loans and other borrowings:
€500m 1.625% bonds 2024
–
443
£300m 3.75% bonds 2025
304
303
£350m 2.125% bonds 2026
352
351
€500m 2.125% bonds 2027
439
448
£400m 3.375% bonds 2028
399
399
1,494
1,953
More detailed information on loans and other borrowings and derivative
financial instruments is shown in notes 22 and 24 respectively to the Group
Financial Statements.
Parent Company Financial Statements
223
IHG
| Annual Report and Form 20-F 2023
Notes to the Parent Company Financial Statements
9. Employee benefits
Share-based payments
The Company operates the Annual Performance Plan, Long Term Incentive Plan (performance-related awards and restricted stock units)
and the Colleague Share Plan.
More detailed information on share-based payments is shown in note 28 to the Group Financial Statements.
10. Capital and reserves
Allotted, called up and fully paid
Number
of shares
millions
Equity
share
capital
£m
At 1 January 2023 (ordinary shares of 20
340
/
399
p each)
183
38
Repurchased and cancelled under share repurchase programme
(11)
(2)
At 31 December 2023 (ordinary shares of 20
340
/
399
p each)
172
36
More detailed information on authorised share capital and shareholder returns is given in note 29 to the Group Financial Statements.
At 31 December 2023, 7,006,782 shares (2022: 7,506,782) with a nominal value of £1,461,063 (2022: £1,565,324) were held as treasury shares.
In February 2024, the Board approved a $800m share buyback programme. A resolution to renew the authority to repurchase shares will be
put to shareholders at the AGM on 3 May 2024.
11. Dividends
2023
2022
Paid during the year
pence
per share
£m
pence
per share
£m
Final (declared for previous year)
76.1
133
67.5
124
Interim
38.7
65
37.8
70
114.8
198
105.3
194
The final dividend in respect o
f 2023 of 104.0¢ per ordinary share (amounting to $171m) is proposed for approval at the AGM on 3 May 2024.
12. Contingencies
The following UK subsidiaries will take advantage of the audit exemption set out within Section 479A of the Companies Act 2006 for the
year ended 31 December 2023:
Company name
Company number
Asia Pacific Holdings Limited
03941780
Hotel InterContinental London (Holdings) Limited
06451128
IHC May Fair Hotel Limited
02323039
IHC Overseas (U.K.) Limited
02322038
IHG PS Nominees Limited
07092523
InterContinental (PB) 1
06724223
InterContinental (PB) 3 Limited
06947603
Met Leeds Hotel OpCo Limited
11360939
SC Leisure Group Limited
00658907
Six Continents Holdings Limited
03211009
Six Continents Hotels International Limited
00722401
Six Continents Investments Limited
00694156
Six Continents Overseas Holdings Limited
02661055
Wotton House Hotel OpCo Limited
11361057
York Station Road Hotel OpCo Limited
11360937
The Company will guarantee all outstanding liabilities of the above UK subsidiary undertakings as at the balance sheet date in accordance
with Section 479C of the Companies Act 2006. The Company has assessed the probability of loss under the guarantees as remote.
The Company has provided a guarantee in respect of the €600m bond issued by one of its subsidiaries, due for maturity in 2029. In 2022,
there were no contingent liabilities to disclose in respect of guarantees of the liabilities of subsidiaries.
Notes to the Parent Company Financial Statements
continued
Parent Company Financial Statements
224
IHG
| Annual Report and Form 20-F 2023
226
Other financial in
formation
235
Directors’ Report
242
Group information
255
Shareholder information
262
Exhibits
263
Forward-looking statements
264
Form 20-F cross
-reference guide
267
Glossary
269
Useful information
Additional
Information
225
Additional Information
IHG
| Annual Report and Form 20-F 2023
Other financial in
formation
Use of Non-GAAP measures
In addition to performance measures directly observable in the Group Financial Statements (IFRS measures), additional measures
(described as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP
measures are either not defined under IFRS or are adjusted IFRS figures.
Further explanation in relation to these measures and their definitions can be
found on pages 84 to 88.
Revenue and operating profit Non-GAAP reconciliations
Highlights for the year ended 31 December 2023
Reportable segments
Revenue
Operating profit
2023
$m
2022
(re-
presented)
a
$m
Change
$m
Change
%
2023
$m
2022
(re-
presented)
a
$m
Change
$m
Change
%
Per Group income statement
4,624
3,892
732
18.8
1,066
628
438
69.7
System Fund and reimbursables
(2,460)
(2,049)
(411)
20.1
(19)
105
(124)
NM
b
Operating exceptional items
–
–
–
–
(28)
95
(123)
NM
b
Reportable segments
2,164
1,843
321
17.4
1,019
828
191
23.1
Reportable segments analysed as:
Fee business
1,672
1,434
238
16.6
992
805
187
23.2
Owned, leased and managed lease
471
394
77
19.5
29
19
10
52.6
Insurance activities
21
15
6
40.0
(2)
4
(6)
NM
b
2,164
1,843
321
17.4
1,019
828
191
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
$m
2022
$m
Change
$m
Change
%
2023
$m
2022
$m
Change
$m
Change
%
Reportable segments (see above)
2,164
1,843
321
17.4
1,019
828
191
23.1
Significant liquidated damages
b
–
(7)
7
NM
a
–
(7)
7
NM
a
Owned and leased asset disposals
c
–
(19)
19
NM
a
–
(2)
2
NM
a
Currency impact
–
–
–
–
–
(1)
1
NM
a
Underlying revenue and underlying
operating profit
2,164
1,817
347
19.1
1,019
818
201
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 pro
fit
Revenue
Operating profit
2023
$m
2022
(re-
presented)
a
$m
Change
$m
Change
%
2023
$m
2022
(re-
presented)
a
$m
Change
$m
Change
%
Reportable segments fee business (see above)
1,672
1,434
238
16.6
992
805
187
23.2
Significant liquidated damages
b
–
(7)
7
NM
c
–
(7)
7
NM
c
Currency impact
–
(4)
4
NM
c
–
(2)
2
NM
c
Underlying fee revenue and underlying fee
operating profit
1,672
1,423
249
17.5
992
796
196
24.6
a
Re-presented for the adoption of IFRS 17 ‘Insurance Contracts’ and to combine System Fund and cost reimbursements (see ‘New accounting standards and other presentational
changes’ in the Group Financial Statements).
b
$7m recognised in 2022 reflects the significant liquidated damages related to one hotel in EMEAA.
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.
Additional Information
226
IHG
| Annual Report and Form 20-F 2023
Revenue and operating profit Non-GAAP reconciliations
continued
Americas
Revenue
Operating profit
b
2023
$m
2022
$m
Change
$m
Change
%
2023
$m
2022
$m
Change
$m
Change
%
Per Group financial statements, note 2
1,105
1,005
100
10.0
815
761
54
7.1
Reportable segments analysed as
a
:
Fee business
957
879
78
8.9
787
741
46
6.2
Owned, leased and managed lease
148
126
22
17.5
28
20
8
40.0
1,105
1,005
100
10.0
815
761
54
7.1
Reportable segments (see above)
1,105
1,005
100
10.0
815
761
54
7.1
Currency impact
–
2
(2)
NM
c
–
–
–
–
Underlying revenue and underlying
operating profit
1,105
1,007
98
9.7
815
761
54
7.1
a
Revenues as included in the Group Financial Statements, note 3.
b
Before exceptional items.
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.
EMEAA
Revenue
Operating profit
b
2023
$m
2022
$m
Change
$m
Change
%
2023
$m
2022
$m
Change
$m
Change
%
Per Group financial statements, note 2
677
552
125
22.6
215
152
63
41.4
Reportable segments analysed as
ª
:
Fee business
354
284
70
24.6
214
153
61
39.9
Owned, leased and managed lease
323
268
55
20.5
1
(1)
2
NM
e
677
552
125
22.6
215
152
63
41.4
Reportable segments (see above)
677
552
125
22.6
215
152
63
41.4
Significant liquidated damages
c
–
(7)
7
NM
e
–
(7)
7
NM
e
Owned asset disposals
d
–
(19)
19
NM
e
–
(2)
2
NM
e
Currency impact
–
3
(3)
NM
e
–
1
(1)
NM
e
Underlying revenue and underlying
operating profit
677
529
148
28.0
215
144
71
49.3
a
Revenues as included in the Group Financial Statements, note 3.
b
Before exceptional items.
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.
e
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.
227
Additional Information
IHG
| Annual Report and Form 20-F 2023
Other financial in
formation
Other financial in
formation
continued
Revenue and operating profit Non-GAAP reconciliations
continued
Greater China
Revenue
Operating profit
c
2023
$m
2022
$m
Change
$m
Change
%
2023
$m
2022
$m
Change
$m
Change
%
Per Group financial statements, note 2
161
87
74
85.1
96
23
73
317.4
Reportable segments analysed as
ª
:
Fee business
161
87
74
85.1
96
23
73
317.4
Reportable segments (see above)
161
87
74
85.1
96
23
73
317.4
Currency impact
–
(5)
5
NM
b
–
(1)
1
NM
b
Underlying revenue and underlying
operating profit
161
82
79
96.3
96
22
74
336.4
a
Revenues as included in the Group Financial Statements, note 3.
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
Before exceptional items.
Highlights for the year ended 31 December 2022
Reportable segments
Revenue
Operating profit
2022
(re-
presented)
a
$m
2021
(re-
presented)
a
$m
Change
$m
Change
%
2022
(re-
presented)
a
$m
2021
(re-
presented)
a
$m
Change
$m
Change
%
Per Group income statement
3,892
2,907
985
33.9
628
494
134
27.1
System Fund and reimbursables
(2,049)
(1,517)
(532)
35.1
105
11
94
854.5
Operating exceptional items
–
–
–
–
95
29
66
227.6
Reportable segments
1,843
1,390
453
32.6
828
534
294
55.1
Reportable segments analysed as:
Fee business
1,434
1,144
290
25.3
805
569
236
41.5
Owned, leased and managed lease
394
237
157
66.2
19
(36)
55
NM
b
Insurance activities
15
9
6
66.7
4
1
3
NM
b
1,843
1,390
453
32.6
828
534
294
55.1
a
Re-presented for the adoption of IFRS 17 ‘Insurance Contracts’ and to combine System Fund and cost reimbursements (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 fee revenue
Revenue
2022
(re-
presented)
a
$m
2021
(re-
presented)
a
$m
Change
$m
Change
%
Reportable segments fee business (see above)
1,434
1,144
290
25.3
Significant liquidated damages
(7)
(6)
(1)
16.7
Currency impact
–
(22)
22
–
Underlying fee revenue
1,427
1,116
311
27.9
a
Re-presented for the adoption of IFRS 17 ‘Insurance Contracts’.
Additional Information
228
IHG
| Annual Report and Form 20-F 2023
Fee margin reconciliation
2023
$m
2022
(re-
presented)
b
$m
2021
(re-
presented)
b
$m
Revenue
Reportable segments analysed as fee business (page 226)
1,672
1,434
1,144
Significant liquidated damages
–
(7)
(6)
1,672
1,427
1,138
Operating profit
c
Reportable segments analysed as fee business (page 226)
992
805
569
Significant liquidated damages
–
(7)
(6)
992
798
563
Fee margin
a
59.3%
55.9%
49.5%
a
Reported as a KPI on page 62.
b
Re-presented for the adoption of IFRS 17 ‘Insurance Contracts’.
c
Before exceptional items.
Fee margin is broken down by region as follows:
Year ended 31 December 2023
Americas
EMEAA
Greater
China
Central
Total
Revenue $m
Reportable segments analysed as fee business (pages 226 to 228)
957
354
161
200
1,672
957
354
161
200
1,672
Operating profit
b
Reportable segments analysed as fee business (pages 226 to 228)
787
214
96
(105)
992
787
214
96
(105)
992
Fee margin
82.2%
60.5%
59.6%
(52.5)%
59.3%
Year ended 31 December 2022 (Re-presented)
a
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
b
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%
Year ended 31 December 2021 (Re-presented)
a
Americas
EMEAA
Greater
China
Central
Total
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
b
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 for the adoption of IFRS 17 ‘Insurance Contracts’.
b
Before exceptional items.
229
Additional Information
IHG
| Annual Report and Form 20-F 2023
Other financial in
formation
Other financial in
formation
continued
Net capital expenditure reconciliation
12 months ended
31 December
$m
2023
$m
2022
$m
Net cash from investing activities
(137)
(78)
Adjusted for:
Contract acquisition costs, net of repayments
(101)
(64)
System Fund depreciation and amortisation
a
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 on right-of-use assets.
Gross capital expenditure reconciliation
12 months ended
31 December
$m
2023
$m
2022
$m
Net capital expenditure
(157)
(59)
Add back:
Disposal receipts
(8)
(16)
Repayments of contract acquisition costs
(7)
(3)
System Fund depreciation and amortisation
a
(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 on right-of-use assets.
Adjusted free cash
flow reconciliation
12 months ended 31 December
2023
$m
2022
$m
2021
$m
2020
$m
2019
$m
Net cash from operating activities
893
646
636
137
653
Adjusted for:
Payment of contingent purchase consideration
–
–
–
–
6
Principal element of lease payments
(28)
(36)
(32)
(65)
(59)
Purchase of shares by employee share trusts
(8)
(1)
–
–
(5)
Capital expenditure: maintenance (excluding contract acquisition costs)
(38)
(44)
(33)
(43)
(86)
Adjusted free cash
flow
a
819
565
571
29
509
a
Reported as a KPI on page 62.
Additional Information
230
IHG
| Annual Report and Form 20-F 2023
Adjusted interest reconciliation
12 months ended
31 December
2023
$m
2022
$m
2021
$m
Net financial expenses
Financial income
39
22
8
Financial expenses
(91)
(118)
(147)
(52)
(96)
(139)
Adjusted for:
Interest attributable to the System Fund
(44)
(16)
(3)
Foreign exchange gains
(35)
(10)
–
(79)
(26)
(3)
Adjusted interest
(131)
(122)
(142)
Adjusted tax and tax rate reconciliations
2023
2022
2021
Profit
before tax
$m
Tax
$m
Rate
%
Profit
before tax
Re-presented
a
$m
Tax
Re-presented
a
$m
Rate
Re-presented
a
%
Profit
before tax
Re-presented
a
$m
Tax
Re-presented
a
$m
Rate
Re-presented
a
%
Group income statement
1,010
(260)
25.7
540
(164)
30.4
361
(96)
26.6
Adjusted for:
Exceptional items
(28)
7
95
(26)
29
(29)
Foreign exchange gains
(35)
(3)
(10)
(4)
–
–
System Fund
(19)
3
105
–
11
–
System Fund interest
(44)
–
(16)
–
(3)
–
Fair value (losses)/gains
on contingent purchase
consideration
4
–
(8)
–
(6)
1
888
(253)
28.5
706
(194)
27.5
392
(124)
31.6
a
The definition o
f adjusted tax measures has been amended in 2023, see page 86. Prior year measures have been re-presented accordingly.
Adjusted earnings per ordinary share reconciliation
12 months ended
31 December
2023
$m
2022
$m
2021
$m
Profit/(loss) available
for equity holders
750
375
266
Adjusting items:
System Fund and reimbursable result
(19)
105
11
Interest attributable to the System Fund
(44)
(16)
(3)
Operating exceptional items
(28)
95
29
Fair value losses/(gains) on contingent purchase consideration
4
(8)
(6)
Tax on fair value gains on contingent purchase consideration
–
–
1
Foreign exchange gains
(35)
(10)
–
Tax attributable to the System Fund
3
–
–
Tax on foreign exchange gains
(3)
(4)
–
Tax on exceptional items
7
(26)
(3)
Exceptional tax
–
–
(26)
Adjusted earnings
635
511
269
Basic weighted average number of ordinary shares (millions)
169
181
183
Adjusted earnings per ordinary share (cents)
375.7
282.3
147.0
231
Additional Information
IHG
| Annual Report and Form 20-F 2023
Other financial in
formation
Revenue per available room (RevPAR), average daily rate and occupancy
RevPAR is the primary metric used by management to track hotel performance across regions and brands. RevPAR is also a commonly used
performance measure in the hotel industry. RevPAR comprises IHG system rooms revenue divided by the number of room nights available
and can be mathematically derived from occupancy rate multiplied by average daily rate (ADR). Occupancy rate is rooms occupied by hotel
guests expressed as a percentage of rooms that are available. ADR is rooms revenue divided by the number of room nights sold.
References to RevPAR, occupancy and ADR are presented on a comparable basis comprising groupings of hotels that have traded in both
the current and prior year. The principal exclusions in deriving this measure are new hotels, hotels closed for major refurbishment and hotels
sold in either of the two years. RevPAR and ADR are quoted at a constant US$ conversion rate, in order to allow a better understanding of
the comparable year-on-year trading performance excluding distortions created by
fluctuations in exchange rates.
The following tables present RevPAR statistics for the year ended 31 December 2023 and a comparison to 2022. Fee business and owned,
leased and managed lease statistics are for comparable hotels and include only those hotels in the Group’s System at 31 December 2023
and franchised, managed, owned, leased or operated under a managed lease by the Group since 1 January 2022. The comparison with
2022 is at constant US$ exchange rates.
Fee business
Owned, leased and
managed lease
2023
Change vs
2022
2023
Change vs
2022
Americas
InterContinental
Occupancy
65.6%
3.6%pts
–
–
Average daily rate
$231.96
5.8%
–
–
RevPAR
$152.16
12.0%
–
–
Kimpton
Occupancy
70.1%
4.7%pts
–
–
Average daily rate
$280.42
1.6%
–
–
RevPAR
$196.47
8.9%
–
–
Hotel Indigo
Occupancy
67.2%
2.5%pts
–
–
Average daily rate
$182.36
0.9%
–
–
RevPAR
$122.54
4.9%
–
–
Crowne Plaza
Occupancy
60.3%
3.4%pts
–
–
Average daily rate
$135.82
4.9%
–
–
RevPAR
$81.87
11.2%
–
–
EVEN Hotels
Occupancy
67.0%
0.5%pts
–
–
Average daily rate
$162.03
7.7%
–
–
RevPAR
$108.60
8.5%
–
–
Holiday Inn Express
Occupancy
69.8%
1.6%pts
–
–
Average daily rate
$130.29
4.0%
–
–
RevPAR
$90.90
6.4%
–
–
Holiday Inn
Occupancy
63.0%
1.7%pts
67.2%
4.3%pts
Average daily rate
$126.49
4.4%
$236.85
12.8%
RevPAR
$79.72
7.2%
$159.15
20.5%
avid hotels
Occupancy
63.4%
3.4%pts
–
–
Average daily rate
$104.36
2.7%
–
–
RevPAR
$66.12
8.6%
–
–
Staybridge Suites
Occupancy
76.1%
0.0%pts
–
–
Average daily rate
$131.73
6.1%
–
–
RevPAR
$100.28
6.1%
–
–
Candlewood Suites
Occupancy
74.2%
(1.6)%pts
–
–
Average daily rate
$100.70
4.7%
–
–
RevPAR
$74.76
2.4%
–
–
Other financial in
formation
continued
Additional Information
232
IHG
| Annual Report and Form 20-F 2023
Fee business
Owned, leased and
managed lease
2023
Change vs
2022
2023
Change vs
2022
EMEAA
Six Senses
Occupancy
42.7%
0.4%pts
–
–
Average daily rate
$1,094.25
16.7%
–
–
RevPAR
$466.91
17.7%
–
–
InterContinental
Occupancy
66.8%
8.7%pts
59.5%
18.4%pts
Average daily rate
$244.74
9.6%
$279.81
10.3%
RevPAR
$163.37
26.0%
$166.44
59.6%
Kimpton
Occupancy
69.1%
11.2%pts
74.5%
8.2%pts
Average daily rate
$316.75
23.2%
$291.63
8.2%
RevPAR
$218.75
47.1%
$217.38
21.5%
Hotel Indigo
Occupancy
75.0%
7.1%pts
–
–
Average daily rate
$167.47
12.6%
–
–
RevPAR
$125.57
24.5%
–
–
voco
Occupancy
74.0%
7.8%pts
78.9%
6.7%pts
Average daily rate
$148.57
(1.2)%
$163.52
2.6%
RevPAR
$109.94
10.5%
$129.07
12.0%
Crowne Plaza
Occupancy
67.4%
7.1%pts
–
–
Average daily rate
$131.95
10.6%
–
–
RevPAR
$88.91
23.7%
–
–
Holiday Inn Express
Occupancy
76.2%
9.3%pts
–
–
Average daily rate
$96.95
7.0%
–
–
RevPAR
$73.85
21.9%
–
–
Holiday Inn
Occupancy
69.5%
7.3%pts
–
–
Average daily rate
$106.51
10.3%
–
–
RevPAR
$73.99
23.4%
–
–
Staybridge Suites
Occupancy
80.3%
3.0%pt
–
–
Average daily rate
$124.38
8.2%
–
–
RevPAR
$99.90
12.5%
–
–
Greater China
Regent
Occupancy
75.3%
29.3%pts
–
–
Average daily rate
$171.35
28.6%
–
–
RevPAR
$128.97
110.8%
–
–
InterContinental
Occupancy
66.0%
24.8%pts
–
–
Average daily rate
$127.44
14.0%
–
–
RevPAR
$84.13
82.4%
–
–
Hotel Indigo
Occupancy
58.3%
20.6%pts
–
–
Average daily rate
$137.55
10.1%
–
–
RevPAR
$80.15
70.3%
–
–
HUALUXE
Occupancy
57.9%
17.3%pts
–
–
RevPAR, average daily rate and occupancy
continued
233
Additional Information
IHG
| Annual Report and Form 20-F 2023
Other financial in
formation
Fee business
Owned, leased and
managed lease
2023
Change vs
2022
2023
Change vs
2022
Average daily rate
$80.26
23.1%
–
–
RevPAR
$46.50
75.6%
–
–
Crowne Plaza
Occupancy
61.0%
19.9%pts
–
–
Average daily rate
$82.81
14.3%
–
–
RevPAR
$50.49
69.7%
–
–
Holiday Inn Express
Occupancy
60.5%
17.6%pts
–
–
Average daily rate
$45.05
13.5%
–
–
RevPAR
$27.26
60.3%
–
–
Holiday Inn
Occupancy
58.4%
15.6%pts
–
–
Average daily rate
$61.83
20.1%
–
–
RevPAR
$36.13
63.8%
–
–
RevPAR, average daily rate and occupancy
continued
Other financial in
formation
continued
Additional Information
234
IHG
| Annual Report and Form 20-F 2023
Directors’ Report
This Directors’ Report includes the information required to be given
in line with the Companies Act or, where provided elsewhere, an
appropriate cross reference is given. The Governance Report
approved by the Board is provided on pages 89 to 142 and
incorporated by reference herein.
Subsidiaries, joint ventures and associated undertakings
The Group has around 370 subsidiaries, joint ventures, associates
and related undertakings (including branches outside of the
United Kingdom). A list of subsidiaries and associated undertakings
disclosed in accordance with the Companies Act is provided at
note 33 of the Group Financial Statements on pages 214 to 216.
Directors
The Directors may exercise all the powers of the Company, subject
to the Articles of Association, legislation and regulation. This includes
the ability to exercise the authority to allot or purchase the Company’s
shares pursuant to authorities granted by shareholders at the
Company’s AGM every year. Further details of the powers of the
Company’s Directors can be found on page 251.
For biographies of the current Directors see pages 92 to 95.
Directors' and Of
ficers' (D&O) liability insurance and existence
of qualifying indemnity provisions
The Company maintains the Group’s D&O liability insurance policy,
which covers Directors and Officers of the Company defending civil
proceedings brought against them in their capacity as Directors or
Officers of the Company (including those who served as Directors or
Officers during the year). There were no indemnity provisions relating
to the UK pension plan for the bene
fit o
f the Directors during 2023.
Articles of Association
A summary is provided on pages 251 and 252.
The Company’s Articles of Association may only be amended by
special resolution and are available on the Company’s website at
ihgplc.com/investors
under Corporate governance.
The Company’s major shareholders have the same voting rights
as other shareholders. The Company does not know of any
arrangements, the operation of which may result in a change
in its control.
For further details on shareholder pro
files see page 261.
Major institutional shareholders
As at 16 February 2024, being the last practicable date, the Company had been notified o
f the following signi
ficant holdings in its ordinary
shares under section 5 of the UK Disclosure Guidance and Transparency Rules (DTRs).
As at 16 February 2024
As at 17 February 2023
As at 21 February 2022
Shareholder
Ordinary
shares/ADSs
a
%
a
Ordinary
shares/ADSs
a
%
a
Ordinary
shares/ADSs
a
%
a
BlackRock, Inc.
10,190,311
b
6.14
11,247,319
c
6.12
11,247,319
c
6.12
Boron Investments B.V.
8,280,000
5.01
6,890,000
3.77
6,890,000
3.77
Royal Bank of Canada
9,658,543
5.84
9,189,549
5.02
9,189,549
5.02
The Capital Group Companies, Inc.
8,980,505
5.12
8,980,505
5.12
9,071,574
4.98
PineStone Asset Management Inc.
12,950,002
7.08
–
–
–
–
a
The numbers of shares and percentages of voting rights are as set out in the relevant disclosures made in accordance with Rule 5 of the DTRs and do not necessarily re
flect the
impact of any share buyback programmes or any changes in shareholdings subsequent to the date of noti
fication that are not notified to the Company under the DTRs.
b
Total shown includes 1,913,249 qualifying
financial instruments to which voting rights are attached.
c
Total shown includes 2,080,427 qualifying
financial instruments to which voting rights are attached.
Shares
Share capital
The Company’s issued share capital at 31 December 2023 consisted
of 172,256,766 ordinary shares of 20 340/399 pence each, including
7,006,782 shares held in treasury, which constituted 4.07% of the
total issued share capital (including treasury shares).
There are no special control rights or restrictions on share transfers
or limitations on the holding of any class of shares.
During 2023, 500,000 shares were transferred from treasury to the
employee share ownership trust.
As far as is known to management, IHG is not directly or indirectly
owned or controlled by another company or by any government.
The Board focuses on shareholder value creation. When it decides
to return capital to shareholders, it considers all of its options,
including share buybacks and special dividends.
Share issues and buybacks
In December 2023, we completed our $750m share buyback
programme which was announced, and commenced, on
21 February 2023. As part of the buyback, 10,643,334 shares were
bought back and cancelled.
Further information on the transactions that took place this year can
be found on page 260.
Dividends
Dividends
Ordinary
shares
ADRs
Interim dividend
An interim dividend was paid on 5 October 2023 to
shareholders on the register at the close of business
on 1 September 2023.
38.7p
48.3¢
Final dividend
Subject to approval at the 2024 AGM, a final
dividend of 104¢ in respect of 2023 will be payable
on 14 May 2024 to shareholders on the register at
the close of business on 5 April 2024.
104¢
a
104¢
a
The sterling amount of the
final dividend will be announced on 25 April 2024 using the
average of the daily exchange rates for the three working days commencing 22 April 2024.
The Companies (Miscellaneous Reporting) Regulations 2018
Set out below is our employee engagement statement and on
page 237, our statement summarising how the Directors have had
regard to the need to foster the Company’s business relationships
with suppliers, customers and others.
Details of how the Directors have had regard to the matters set forth in
Section 172(1)(a) to (f) of the Companies Act are provided on pages 102
and 103.
Additional Information
Directors’ Report
235
IHG
| Annual Report and Form 20-F 2023
Employee engagement statement
Our statement relates to IHG’s directly employed individuals and
should be read in conjunction with our people section, Section 172
statement, Voice of the Employee and wider workforce remuneration
and employee engagement disclosures on pages 29 to 31, 102 and
103, 113, 117 and 118 and 123 and 124.
During 2023, the main communication channels to provide
information of concern to employees included weekly newsletters,
virtual town halls, CEO and regional leadership calls, podcasts, blogs,
email broadcasts, videos and business function team meetings.
Employees have been consulted and given opportunities to express
their views and concerns through participation in the employee
engagement survey, Voice of the Employee feedback sessions,
ERGs, Next events (interactive sessions relating to IHG’s strategy and
behaviours), quarterly performance, development and wellbeing
meetings, team meetings and the Q&A session as part of the CEO
quarterly business update call.
Each December, employees are invited to join the employee share
plan. The plan is available to around 98% of our corporate employees
below the senior/mid-management level (who received LTIP and
restricted stock units awards). Further details are on page 123.
Employees have been made aware of the
financial and economic
factors affecting the performance of the Company through quarterly
business update calls with the CEO, as well as business function
team meetings and other regional leadership calls.
The Chair and other Directors have engaged with employees
through a number of means, including direct interactions, Voice
of the Employee feedback sessions, Next events and a series of
opportunities held during the year to meet Executive Directors via
video meetings or in person.
Details of how Directors have had regard to employee interests, and
the effect of that regard, including principal decisions taken by IHG
during the year can be found on pages 38 to 40 and 101 to 103.
Employee numbers
Having a predominantly franchised and managed business model
means that many of those people who work at hotels operated
under our brands are not our employees.
The average number of IHG employees, including part-time
employees, during 2023 were as follows:
•
7,292 people worldwide (including those in our corporate offices,
central reservations offices and owned, leased and managed
leased hotels (excluding those in a category below)), whose costs
were borne by the Group; and
•
20,306 people who either worked directly on behalf of the
System Fund and whose costs were borne by the System Fund,
or as General Managers and (in the US predominantly) other hotel
workers, who work in managed hotels, who have contracts or are
directly employed by IHG and whose costs are borne by those
hotel owners.
See note 4 of the Group Financial Statements on page 178.
Employment of disabled persons
IHG continues to focus on providing an inclusive environment, in
which employees are valued for who they are and what they bring to
the Group, and in which talented individuals are retained through all
levels of the organisation.
We look to appoint the most appropriate person for the job and are
committed to providing equality of opportunity to all employees
without discrimination. Every effort is made to ensure that
applications for employment from disabled employees are fully
and fairly considered and that disabled employees have equal
opportunities to training, career development and promotion.
See our people disclosures on pages 29 to 31.
Visit
ihgplc.com/responsible-business
for more information.
2023 share awards and grants to employees
Our current policy is to settle the majority of awards or grants under
the Company’s share plans with shares purchased in the market or
from shares held in treasury; however, the Company continues to
review this policy. The Company’s share plans incorporate the
current Investment Association’s guidelines on dilution which
provide that commitments to issue new shares or re-issue treasury
shares under executive plans should not exceed 5%, and under all
plans should not exceed 10%, of the issued ordinary share capital of
the Company (adjusted for share issuance and cancellation) in any
10-year period. During the financial year ended 31 December 2023,
the Company transferred 500,000 treasury shares (0.29% of the
total issued share capital) to satisfy obligations under its share plans.
The estimated maximum dilution from awards made under the
Company’s share plans over the last 10 years is 4.49%.
As at 31 December 2023, there were no options outstanding.
The Company has not utilised the authority given by shareholders
at any of its AGMs to allot shares for cash without
first offering such
shares to existing shareholders.
Employee share ownership trust (ESOT)
IHG operates an ESOT for the bene
fit o
f employees and former
employees. The ESOT receives treasury shares from the Company
and purchases ordinary shares in the market and releases them
to current and former employees in satisfaction of share awards.
During 2023, the ESOT released 899,845 shares and at 31 December
2023, it held 589,077 ordinary shares in the Company. The ESOT
adopts a prudent approach to purchasing shares, using funds provided
by the Group, based on expectations of future requirements.
Certain shares that have been allocated to share plan participants
under the Annual Performance Plan (APP) are held in a nominee
account on behalf of those participants by Computershare Investors
Plc (Nominee). As at 31 December 2023, the Nominee held 225,688
forfeitable shares as part of the APP. The shares held by the Nominee
have been allocated to share plan participants on terms that entitle
those participants to request or require the Nominee to exercise the
voting rights relating to those shares. The Nominee exercises those
votes in accordance with the directions of the participants. Shares
that have not been allocated to share plan participants under such
terms are held by the ESOT and although the trustee has the right to
vote or abstain from exercising their voting rights in relation to those
shares, it has a policy of not voting, which is in line with guidelines.
The trustee also has the right to accept or reject any offer relating to
the shares in any way it sees fit.
Directors’ Report
continued
Additional Information
236
IHG
| Annual Report and Form 20-F 2023
Unless otherwise requested by the Company, the trustee of the
ESOT waives all ordinary dividends on the shares held in the ESOT,
other than shares which have been allocated to participants on
terms which entitle them to the benefit o
f dividends, except for such
amount per share as shall, when multiplied by the number of shares
held by it on the relevant date, equal one pence or less.
In 2023, the new Deferred Award Plan (‘DAP’) rules were approved
by shareholders at the May AGM. For more information, please see
the Remuneration Report on page 127.
Colleague Share Plan
The Company’s employee share plan, known as the Colleague Share
Plan, was first introduced in 2019
following approval by shareholders
at the Company’s 2019 AGM.
In accordance with the Colleague Share Plan Rules, participants’
contributions are used to purchase shares on a monthly basis on
behalf of the individuals (Purchased Shares) and held within the
Nominee. At the end of the Plan Year, the participants receive a
conditional right to receive one share (Matching Share) for every
one Purchased Share that they have purchased. Provided the
participants hold the Purchased Shares in the Nominee until the
second anniversary of the end of the Plan Year, the conditional right
to Matching Shares will vest.
In 2023, 45 shares vested outside of the usual timetable due to
deaths or good leavers, and in January 2024, 30,922 shares vested
as part of the third Plan Year. As at 16 February 2024, the Nominee
held 30,084 Purchased Shares in relation to the fourth Plan Year.
Code of Conduct
The Code of Conduct (Code) applies to all Directors, officers and
employees and complies with the NYSE rules as set out in Section
406 of the US Sarbanes-Oxley Act 2002. Further details on our
Code, including the Board's oversight of the Code, are set out in the
Strategic Report on pages 39 and 40.
Business relationships with suppliers, customers and others
Our business relationships with our guests, hotel owners and
suppliers are fundamental to our commercial success. During the
year, the Board considered matters related to them and had regard
to the impact of decisions on them as detailed in the key matters
discussed by the Board on pages 101 to 103. These included
strategic and operational matters relating to our brand portfolio,
global sales strategy and operating regions.
The Board monitors relationships through a mixture of presentations,
reports and direct engagement. The Responsible Business
Committee specifically reviews responsible procurement processes,
targets and the Supplier Code of Conduct.
Details of how relationships have been maintained during the year
are set out in the key stakeholder engagement tables on pages 36
and 37.
The Group is party to a technology agreement with Amadeus
Hospitality Americas, Inc. (Amadeus), for the next generation central
reservation system used by the Group. The initial term of 10 years
will expire in 2028, and the Group has the right to extend this
agreement for two additional periods of up to 10 years each on the
same terms, conditions and pricing. The financial and per
formance
obligations in this agreement are guaranteed by Amadeus IT Group
S.A., the parent company of Amadeus.
Otherwise, there are no specific individual contracts or arrangements
considered to be essential to the business of the Group as a whole.
Future business developments of the Group
Details on these are set out in the Strategic Report on pages 21 to 27.
Finance
Political donations
The Group made no political donations under the Companies Act
during the year and proposes to maintain this policy in respect of
such donations. Notwithstanding this policy, in accordance with US law,
one of IHG’s US subsidiaries provides administrative support to an
employee-operated Political Action Committee in the US (US PAC), which
is funded by voluntary political donations from eligible employees.
The US PAC is not controlled by IHG. All decisions regarding the amounts
and recipients of contributions are directed by the Board of Directors of
the US PAC, in accordance with its Charter and By-laws. In 2023, a total
of US $12,600 was expended on political contributions by the US PAC.
Financial risk management
The Group’s financial risk management objectives and policies, including
its use of
financial instruments, are set out in note 24 to the Group
Financial Statements on pages 199 to 203.
Significant agreements and change o
f control provisions
The Group is a party to the following arrangements which could be
terminated upon a change of control of the Company and which are
considered significant in terms o
f their potential impact on the
business of the Group as a whole:
•
The $1.35 billion syndicated loan facility agreement dated 28 April
2022 and (unless extended) maturing in April 2028, under which
a change of control of the Company would entitle each lender to
cancel its commitment and declare all amounts due to it payable.
•
The 10-year £300 million bond issued by the Company on
14 August 2015, under which, if the bond’s credit rating was
downgraded in connection with a change of control, the bond
holders would have the option to require the Company to redeem
or, at the Company’s option, repurchase the outstanding notes
together with interest accrued.
•
The 10-year £350 million bond issued by the Company on
24 August 2016, under which, if the bond’s credit rating was
downgraded in connection with a change of control, the bond
holders would have the option to require the Company to redeem
or, at the Company’s option, repurchase the outstanding notes
together with interest accrued.
•
The 8.5-year €500 million bond issued by the Company on
15 November 2018, under which, if the bond’s credit rating was
downgraded in connection with a change of control, the bond
holders would have the option to require the Company to redeem
or, at the Company’s option, repurchase the outstanding notes
together with interest accrued.
•
The four-year €500 million bond issued by the Company on
8 October 2020, under which, if the bond’s credit rating was
downgraded in connection with a change of control, the bond
holders would have the option to require the Company to redeem
or, at the Company’s option, repurchase the outstanding notes
together with interest accrued.
•
The eight-year £400 million bond issued by the Company on
8 October 2020, under which, if the bond’s credit rating was
downgraded in connection with a change of control, the bond
holders would have the option to require the Company to redeem
or, at the Company’s option, repurchase the outstanding notes
together with interest accrued.
•
The six-year €600 million bond issued by IHG Finance LLC on
28 November 2023, under which, if the bond’s credit rating was
downgraded in connection with a change of control, the bond
holders would have the option to require the Company to redeem
or, at the Company’s option, repurchase the outstanding notes
together with interest accrued.
Further details on material contracts are set out on page 253.
Disclosure of information to Auditor
For details, see page 144.
Additional Information
Directors’ Report
237
IHG
| Annual Report and Form 20-F 2023
Greenhouse gas (GHG) emissions
By delivering more environmentally sustainable hotels, we create
value for IHG, our hotel owners and all our stakeholders. We recognise
the risks from climate change and the importance of reducing our
carbon footprint and our 2030 Science Based Target (SBT) re
flects
this. Our SBT is approved by the SBTi and aligns with the most
ambitious goals of the Paris Agreement to keep global warming
within 1.5°C by targeting a reduction in market-based greenhouse
gas (GHG) emissions of 46% across our Scope 1 and 2 GHG emissions,
as well as our Scope 3 GHG emissions covering both our Fuel and
Streamlined Energy and Carbon Reporting (SECR)
2023
2022
2019 Baseline Year
Global
UK and UK
offshore only
Global
UK and UK
offshore only
Global
UK and UK
offshore only
Energy
(MWh)
Managed, owned,
leased and
managed lease
hotels
Electricity, heat, steam and cooling
4,275,818
23,249
3,621,830
22,885
3,759,820
26,221
Fuel consumption for boilers,
furnaces, generators
2,058,347
31,553
1,806,925
24,789
2,032,555
32,894
Franchised
hotels energy
Electricity, heat, steam and cooling
4,726,162
243,093
4,600,437
237,626
4,669,277
277,892
Fuel consumption for boilers,
furnaces, generators
3,206,875
271,871
3,007,008
241,749
3,339,195
311,019
Corporate
office energy
Electricity, heat, steam and cooling
14,773
3,458
17,606
4,971
26,995
6,694
Fuel consumption for boilers,
furnaces, generators
2,894
1,109
8,995
3,459
9,312
2,981
Company-owned vehicle fuel
221
221
214
214
557
557
Private vehicle mileage fuel
a
196
196
–
–
–
–
Total global
energy
(MWh)
Franchised,
managed, owned,
leased and
managed lease
hotels and
corporate offices
Electricity, heat, steam and cooling and
fuel consumption from boilers, furnaces,
generators and company-owned
vehicle fuel (excluding fuel from private
vehicle mileage)
a
14,285,090
574,554
13,063,015
535,693
13,837,711
658,258
GHG
emissions
(tonnes
of CO
2
e
(tCO
2
e))
Scope 1 + 2
Scope 1 (fuel consumption for boilers,
furnaces, generators and company-
owned vehicle fuel)
486,094
6,336
418,902
5,479
473,803
7,042
Scope 2 location-based (electricity,
heat, steam and cooling)
2,149,107
5,532
1,805,995
5,387
2,012,896
8,413
Scope 2 market-based (electricity, heat,
steam and cooling)
2,176,340
5,795
1,825,769
4,671
2,051,839
12,539
Total Scope 1 + 2 location-based
2,635,201
11,868
2,224,897
10,866
2,486,699
15,455
Total Scope 1 + 2 market-based
2,662,434
12,131
2,244,671
10,150
2,525,642
19,581
Scope 3
Scope 3 FERA
556,434
2,538
635,106
2,451
526,603
3,836
Scope 3 Franchises (including
franchises FERA)
3,150,412
174,880
3,057,648
167,945
3,442,793
200,496
Scope 3 Business Travel
(private vehicle mileage fuel)
a
56
56
Total Scope 3 (excluding private
vehicle mileage)
a
3,706,846
177,418
3,692,754
170,396
3,969,396
204,332
Total GHG
emissions
(tCO
2
e)
Total Scope
1 + 2 + 3
Scope 1 + 2 +3 market-based (excluding
private vehicle mileage fuel)
b
6,369,280
189,549
5,937,425
180,546
6,495,038
223,913
GHG
Intensity
metrics
Total Gross
Revenue (TGR)
TGR ($m) for managed, owned, leased
and managed lease hotels
c
11,593
258
9,056
247
11,952
310
GHG intensity
metrics
location-based
Scope 1 + 2 tCO
2
e per occupied
room night
d
0.0456
0.0196
0.0475
0.0162
0.0397
0.0163
Scope 1 + 2 + 3 tCO
2
e per occupied
room night
d
0.0298
0.0104
0.0317
0.0105
0.0305
0.0121
Scope 1 + 2 tCO
2
e per $m revenue
c
0.2273
0.0460
0.2457
0.0440
0.2081
0.0499
GHG intensity
metrics
market-based
Scope 1 + 2 tCO
2
e per occupied
room night
d
0.0461
0.0201
0.0479
0.0151
0.0403
0.0206
Scope 1 + 2 + 3 tCO
2
e per occupied
room night
d
0.0304
0.0139
0.0317
0.0142
0.0316
0.0153
Scope 1 + 2 tCO
2
e per $m revenue
c
0.2297
0.0470
0.2479
0.0411
0.2113
0.0632
a
Fuel use from UK private vehicle mileage is not included in the scope of IHG's SBT and therefore not included in the GHG and energy use totals within this table, however it is included
in the total figures within our third-party verification statement
found at
ihgplc.com/responsiblebusiness/reporting
.
b
Based on franchised, managed, owned, leased and manage lease hotels and corporate offices and calculated using a market-based methodology to align with IHG's SBT.
c
GHG intensity per $m revenue uses TGR from managed, owned, leased and managed lease hotels as reported in the table above and on page 70 of Group Performance.
d
GHG intensity per occupied room night excludes UK private mileage and uses actual occupied room nights from hotels that fall within the scope of the metric and our SBT, which
excludes our Exclusive Partners hotels (i.e. Iberostar Beachfront Resorts).
Energy Related Activities (FERA) and franchised hotels energy.
Our Exclusive Partners hotels (i.e. Iberostar Beachfront Resorts) are
not included within the scope of our ESG reporting and are therefore
not included in our Streamlined Energy and Carbon Reporting
(SECR) table at present.
Refer to page 63 for more information on our SBT and Carbon KPI and
pages 52 to 59 for more information on how we identify and manage
climate-related risks and the steps we are taking to mitigate these,
including our transition plan.
Directors’ Report
continued
Additional Information
238
IHG
| Annual Report and Form 20-F 2023
Our Performance
Our absolute Scope 1, 2 and Scope 3 market-based GHG emissions
have decreased by 1.9% compared to our 2019 baseline level despite
our system size growing from over 5,900 open hotels in 2019 to over
6,300 in 2023 across 100 countries. In addition, we have seen a
reduction of 3.8% in our GHG emissions intensity per occupied
room night on the same basis.
Even as our actions become more widely embedded across our
estate, the rate at which we can decarbonise will be impacted by
several factors, including rates of grid decarbonisation and
government’s climate change policies. We recognise that our role
in collaborating with governments, peers and trade bodies will be
crucial to supporting owners and the industry in decarbonising
successfully. Some of the key external dependencies we have
identified are outlined in our TCFD disclosure on page 58 and
have been factored into our decarbonisation plan.
To support our progress towards our decarbonisation target while
continuing to grow our business, we are taking action across three
main areas: decarbonising our existing hotels; sourcing renewable
energy; and developing new-build hotels that operate at very low/
zero carbon.
See pages 56 and 57 for more information on our decarbonisation
strategy and our transition plan.
See pages 47 to 49 of our 2023 Responsible Business Report for
a full breakdown of our GHG emissions and energy data including
renewable energy.
GHG Scope boundaries
We report Scope 1, Scope 2 and Scope 3 GHG emissions in tonnes
(tCO
2
e) as defined by the GHG Protocol Corporate Accounting
and Reporting Standard methodology, under the operational
control approach:
•
Scope 1 emissions are direct GHG emissions from the combustion
of fuels on-site, in company-owned vehicles and from refrigerant
losses from our managed, owned, leased and managed lease
hotels and corporate offices.
•
Scope 2 emissions are indirect GHG emissions generated by the
energy purchased or acquired from our managed, owned, leased
and managed lease hotels and corporate offices. A market-based
method has been used to calculate total GHG emissions as this
aligns with our SBT, however we have also reported Scope 2
location-based emissions for reference in the table above.
•
Scope 3 emissions are indirect GHG emissions that occur in IHG’s
value chain. The Scope 3 emissions included within our SBT are
material to IHG in accordance with the SBTi criteria. This includes
Category 3 (FERA) from IHG’s managed, owned, leased and
managed lease hotels and corporate offices, as well as Category 14
(Franchises), which includes the Scope 1 and 2 market-based
emissions of our franchised hotels energy consumption and their
Scope 3 FERA. For the purposes of SECR, IHG also report Scope 3
emissions from UK business travel in rental or employee-owned
vehicles where IHG is responsible for purchasing the fuel, in the
table above. However, these emissions are not in the scope of our
SBT and, therefore, not included in the total
figures above, reported
in our Carbon KPI or our 2023 Responsible Business Report.
See page 47 of our 2023 Responsible Business Report for more
information on our SBT and GHG emissions scopes and materiality.
Methodology
We work with data specialists to give us an up-to-date picture
of IHG’s carbon footprint and assess our performance over time.
To calculate our global energy consumption for the reporting period
1 January to 30 September 2023, we used energy consumption
data reported by hotels through IHG’s Green Engage system.
Energy consumption for the
final three months o
f 2023 has been
estimated using an average consumption from the previous 12 months,
applied to a projected number of occupied room nights to ensure
that all hotels have a consumption figure corresponding to their
likely occupancy. This approach was not used for fuel where it was
not possible to determine whether data was missed or fuel was not
used, or only purchased intermittently/ seasonally. Estimating Q4
enables us to gain assurance over the data we report for the
calendar year and aligns with our financial reporting period to
enable analysis of both
financial and non-financial indicators
for
the same period. Outlier checks were completed, and a gap-filling,
and extrapolation methodology was applied where necessary.
Any missing data points for energy consumption were
filled using
average consumption per room night from the nearest 12-month
period. The IHG system size and number of occupied room nights
used to estimate missing energy data is based on nine months of
actual data and three months of data from 2022. Our estimation
methodology is conservative to reduce the risk of under reporting.
For 2023, the energy sample included 86% of hotels reporting
energy consumption globally. As IHG’s system size is constantly
changing and as new data becomes available, each year we restate
the previous year’s figures (2019, 2020, 2021 and 2022).
For more information on our restatement method and historical GHG
emissions and utility data, see pages 46 to 51 of our 2023 Responsible
Business Report.
To calculate our emissions, we use the GHG Protocol Corporate
Accounting and Reporting Standard methodology. Energy (MWh)
and fuel (Litres) use was converted to GHG emissions using the
published conversion factors from sources including IEA, USEPA,
AIB and BEIS, and reported to the nearest tonne in tCO
2
e across
Scope 1, 2 and 3 emissions. The most recently published emissions
factors were used for all regions and applied to each energy data
point to give associated GHG emissions. Intensities were calculated
from the data in the sample group and divided by the total occupied
room nights in the sample group.
To ensure that our market-based emissions reporting is robust,
IHG only reports on renewable electricity where we have received
corresponding Renewable Energy Certificates (RECs) or energy
contracts that state that the electricity being purchased is 100%
renewable. This evidence is validated by our internal teams and
third-party verification provider. We are working to improve this
reporting and validation process to account for more of the
renewable energy that is being procured by our hotels going forward.
The full details of our methodology statements for GHG emissions and all
utilities are detailed on pages 46 to 51 of our 2023 Responsible Business
Report, where we report our carbon, energy (including renewables), water
and waste data since 2019, as part of a performance tracking towards our
Journey to Tomorrow commitments.
Our carbon, energy and water data has been verified by a third-party,
the assurance statements can be found at
ihgplc.com/
responsiblebusiness/reporting
Additional Information
Directors’ Report
239
IHG
| Annual Report and Form 20-F 2023
Energy reduction initiatives
We have devised a strategy to drive forward our carbon reduction
commitments while expanding our estate. To make progress against
our decarbonisation target while continuing to grow our business,
we are taking action across three main areas: decarbonising our
existing hotels; sourcing renewable energy; and developing new-build
hotels that operate at very low/zero carbon. Due to the different
challenges and opportunities across our three regions, we have
developed regional plans to take into consideration the significant
geographical and operational variances. These regional plans are
overseen by a new regional governance structure that incorporates
oversight of resource and capital planning requirements. These
regional plans have helped us to accelerate action in 2023 and
further support hotels where we can.
In 2022, we updated our brand standards to integrate ECMs;
these include high-efficiency, low-flow aerated shower heads and
taps and LED lighting. In 2023, we integrated further ECMs into
our existing estate across the Essentials & Suites (E&S) brands in
the Americas. These measures included guest room occupancy
sensing thermostats to ensure that heating/ cooling isn’t being used
unnecessarily in unoccupied rooms, public area and back-of-house
programmable thermostats (upon renovation) to ensure heating
and cooling operation is efficient, and switching traditional electric
resistance packaged terminal air- conditioners with more efficient
packaged terminal heat pumps upon replacement. All ECMs
integrated into hotel brand standards are carefully considered in
consultation with the Hotel Owners Association and supported by
our LTIP ESG metrics. We are now working on implementing
additional brand standards tailored to each region and segment.
Every hotel is given access to the IHG Green Engage system,
our comprehensive online environmental management platform,
which helps hotel teams to measure, track and report their utility
consumption and carbon footprint, as well as providing over
200 ‘Green Solutions’ with detailed guidance to support hotels
in reducing their energy, water and waste impacts. To comply with
the IHG Green Engage standard, hotels are required to report their
monthly energy consumption and complete key energy-saving
actions. Collaborating with our hotels, we actively promote energy
efficiency throughout our estate, assigning customised annual and
2025 energy reduction targets to each hotel. To motivate hotels to
reduce their energy consumption, these targets are integrated into
hotel-level metrics and key performance indicators, aligning with the
Executive Committee’s broader metrics, including Guest Satisfaction
and Guest Love. We track their performance through the veri
fiable
data required to enter into our IHG Green Engage system.
Listing Rules – compliance with LR 9.8.4C
The below table sets out only those sections of LR 9.8.4C which are relevant. The remaining sections of LR 9.8.4 are not applicable.
Section
Applicable sub-paragraph within LR 9.8.4C
Location
1
Interest capitalised
Group Financial Statements, note 7, page 181
4
Details of long-term incentive schemes
Directors’ Remuneration Report, pages 116 to 140
IHG continues to invest in utility data acquisition to improve data
quality and assurance to enhance our reporting. This includes our
collaboration with an energy specialist to offer all our hotels a
centralised data feed solution to collect utility information, which is
then sent directly into the Green Engage system. The collected data
enables improved analytics for hotels to drive efficiencies in utility
management and strengthen hotel RFP responses to corporate
clients globally.
Being part of IHG means hotel owners receive a range of support
to empower them with the knowledge and resources they need
to progress against their energy reduction targets. In 2022, we
launched the IHG HERO tool, which guides hotels on the most
effective energy conservation measures for their speci
fic building.
The tool provides indicative capital costs, energy reductions and
payback periods for a range of energy conservation measures based
on the hotel’s facilities, climate and energy consumption. Since we
launched the tool in 2022, over 560 hotels have used it to guide
their capital spending. The tool is available across our EMEAA and
Americas regions and is expected to launch in Greater China in
2024, following a successful pilot programme in 2023.
Our Energy & Carbon Reduction Training’ e-learning modules advise
hotel colleagues on how to reduce costs, drive revenue and increase
the asset value of their property by providing effective strategies
to reduce their hotel’s energy consumption and carbon footprint.
These modules also cover the global context, the commercial and
competitive advantages of sustainability efforts, and what hotels
need to do to meet their energy reduction targets. We also have a
decarbonisation module for our corporate colleagues. In 2023, we
led multiple training workshops for key business functions to engage
them on how their role can support us to deliver our decarbonisation
commitments.
We are supporting hotels to identify tax and other
financial incentives
available to them to help fund energy efficiency investments.
Owners in our Americas region have access, free of charge, to
reports on tax incentives and utility rebates available to their hotels.
We have also partnered with an ‘energy efficiency as a service’
supplier that provides financing, installation, and maintenance o
f
energy conservation measures and then shares the energy cost
savings with the hotel.
See pages 28 to 32 of our 2023 Responsible Business Report for further
information on our work across carbon and energy.
Directors’ Report
continued
Additional Information
240
IHG
| Annual Report and Form 20-F 2023
Going concern
An overview of the business activities of IHG, including a review of
the key business risks that the Group faces, is given in the Strategic
Report on pages 2 to 88 and in the Group information on pages 242
to 254.
As at 31 December 2023, the Group had total liquidity of $2,572m,
comprising $1,350m of undrawn bank facilities and $1,222m of cash
and cash equivalents (net of overdrafts and restricted cash).
There remains a wide range of possible planning scenarios over the
going concern period. The scenarios considered and assessment
made by the Directors in adopting the going concern basis for
preparing these financial statements are included on page 161.
Based on the assessment completed, the Directors have a
reasonable expectation that the Group has sufficient resources
to continue operating until at least 30 June 2025, and there are
no material uncertainties that may cast doubt on the Group’s
going concern status. Accordingly, they continue to adopt the
going concern basis in preparing the Financial Statements.
Please see the viability statement on pages 50 and 51.
By order of the Board,
Nicolette Henfrey
Company Secretary
InterContinental Hotels Group PLC
Registered in England and Wales, Company number 5134420
19 February 2024
Additional Information
Directors’ Report
241
IHG
| Annual Report and Form 20-F 2023
Group information
History and developments
Risk factors
The Company was incorporated and registered in England and
Wales with registered number 5134420 on 21 May 2004 as a limited
company under the Companies Act 1985 with the name Hackremco
(No. 2154) Limited. In 2004/05, as part of a scheme of arrangement
to facilitate the return of capital to shareholders, the following
structural changes were made to the Group: (i) on 24 March 2005,
Hackremco (No. 2154) Limited changed its name to New
InterContinental Hotels Group Limited; (ii) on 27 April 2005, New
InterContinental Hotels Group Limited re-registered as a public
limited company and changed its name to New InterContinental
Hotels Group PLC; and (iii) on 27 June 2005, New InterContinental
Hotels Group PLC changed its name to InterContinental Hotels
Group PLC and became the holding company of the Group.
The Group, formerly known as Bass, and then Six Continents,
was historically a conglomerate operating as, among other things,
a brewer, soft drinks manufacturer, hotelier, leisure operator, and
restaurant, pub and bar owner. In 1988 Bass acquired Holiday Inn
International and the remainder of the Holiday Inn brand in 1990.
The InterContinental brand was acquired by Bass in 1998 and the
Candlewood Suites brand was acquired by Six Continents in 2003.
On 15 April 2003, following shareholder and regulatory approval,
Six Continents PLC separated into two new listed groups,
InterContinental Hotels Group PLC, comprising the hotels and soft
drinks businesses, and Mitchells & Butler plc, comprising the retail
and standard commercial property developments business.
The Group is subject to a variety of inherent risks that may have
an adverse impact on its business operations, financial condition,
turnover, profits, brands and reputation. This section describes the
main risks that could materially affect the Group’s business. The risks
below are not the only ones that the Group faces. Some risks are
not yet known to the Group and some risks that the Group does not
currently believe to be material could later turn out to be material.
During 2023, the Group continued to face risks relating to macro
external factors, including the impact of continuing in
flationary
pressures and challenges to labour availability in key markets, ongoing
conflict in Ukraine and, towards the end o
f the year, in the Middle East.
These factors contributed to additional political, economic and
financial market developments and uncertainties, including global
supply chain disruptions, continuing cybersecurity threat levels,
and increases to the cost of borrowing due to rising interest rates.
Following the outbreak of the war in Ukraine, the Group ceased all
operations in Russia due to the ongoing and increasing challenges
of operating there and consistent with evolving UK, US and EU
sanction regimes. The Group continues to monitor the impact of the
war in relation to our two hotels in Ukraine, both of which are open
to the public.
The Group’s refreshed strategy will require balancing of short-term
execution and long-term goals, along with resilience in an
environment of uncertainties relating to, for example, its ability to
deliver innovation at scale and speed; how it uses, stores, secures
and transfers data; owner preferences for and ability to invest in its
brands; global and local supply chain efficiency and resiliency; and
legal and regulatory complexity and litigation trends.
The Group disposed of its interests in the soft drinks business by way
of an initial public offering of Britvic (Britannia Soft Drinks Limited for
the period up to 18 November 2005, and thereafter, Britannia SD
Holdings Limited (renamed Britvic plc on 21 November 2005), which
became the holding company of the Britvic Group on 18 November
2005), a manufacturer and distributor of soft drinks in the UK, in
December 2005. The Group now continues as a stand-alone
hotels business.
Recent acquisitions and divestitures
The Group made no acquisitions or disposals in 2023 or 2022.
In 2021, the Group disposed of a portfolio of three EVEN Hotels
in the Americas region resulting in a net cash inflow o
f $44m.
Further information is included in note 11 to the Group Financial
Statements on page 186.
Capital expenditure
•
Gross capital expenditure
a
in 2023 totalled $253 million compared
with $161 million in 2022 and $100 million in 2021, see page 230.
•
At 31 December 2023, capital committed (being contracts placed
for expenditure on property, plant and equipment and intangible
assets not provided for in the Group Financial Statements) totalled
$10 million, see page 212.
a
Definitions
for Non-GAAP revenue and operating pro
fit measures can be
found on
pages 84 to 88. Reconciliations of these measures to the most directly comparable line
items within the Group Financial Statements can be found on pages 226 to 231.
Several other factors will continue to remain important to the Group’s
outlook, including those relating to operational resilience, such as
the safety and security of hotel operations; guest preferences for
branded hotel experiences and loyalty in a competitive industry
where expectations continue to evolve; and its ability to attract and
retain talent and capability where key aspects of the Group’s growth
ambitions and operations are dependent on access to experience
and knowledge.
The Group also faces emerging risks where the impact and
likelihood are not yet fully understood or factors that may become
significant in the medium- to long-term. This includes uncertainty
linked to the rapidly evolving wider macroeconomic and geopolitical
factors, including government policy and how this might impact
travel patterns and business relationships, central bank policy and
how this might impact development and financing costs o
f owners,
rapid development of generative arti
ficial intelligence technology,
and the physical risks of climate change on the Group’s activities.
To enable focus on the material risk factors facing the Group, the
detail below has been organised under headings corresponding to
the ordering of the principal risks outlined earlier in this document.
The principal risks are on pages 45 to 49, the cautionary statements
regarding forward-looking statements are on page 263 and
financial and
forward-looking information in note 8 on pages 181 to 185, and note 24
on pages 199 to 203.
Additional Information
242
IHG
| Annual Report and Form 20-F 2023
1. Guest preferences for branded hotel experiences and loyalty
The Group is subject to a competitive and changing industry
The Group competes against other global hotel chains, local hotel
companies and independent hotels to win the loyalty of guests,
employees and owners. The competitive landscape also includes
other types of businesses, both global and speci
fic to certain markets,
such as web-based booking channels (which include online travel
agents and intermediaries), and alternative sources of accommodation,
such as short-term lets of private property. Failure to compete
effectively in traditional and emerging areas of the business could
impact the Group’s market share, system size, profitability and
relationships with owners and guests. The hospitality industry has
previously experienced consolidation, and further such activity may
result in such competitors having access to increased resources,
capabilities or capacity and provide advantages from scale of
revenues, marketing funds and/or cost structures.
The Group is reliant on the reputation of its existing brands
and is exposed to inherent reputation risks
Any event that materially damages the reputation of one or more of
the Group’s brands and/or fails to sustain the appeal of the Group’s
brands to its customers and owners may have an adverse impact
on the value of that brand and subsequent revenues from that brand
or business. In particular, if the Group is unable to create consistent,
valued and quality products and guest experiences across the
franchised, managed, owned, leased and managed lease hotels
or if the Group, its franchisees or business partners fail to act
responsibly, this could result in an adverse impact on its brand
reputation. In addition, the value of the Group’s brands could be
influenced by a number o
f external factors outside the Group’s
control, such as, but not limited to, changes in sentiments against
global brands, changes in applicable regulations related to the hotel
industry or to franchising, successful commoditisation of hotel
brands by online travel agents and intermediaries, or changes in
owners’ perceptions of the value of the Group.
The Group is exposed to inherent uncertainties associated
with brand development and expansion
The Group has launched eight brands in six years and also maintains
co-branded credit card relationships to support the IHG Rewards
programme. Since the rollout, integration and growth of these
brands (including associated loyalty programmes) is dependent on
market conditions, guest preference and owner investment, as well
as continued cooperation with third parties, there are inherent risks
that we will be unable to recover costs incurred in developing or
acquiring the brands or any new programmes or products, or those
brands, programmes, or products will not succeed as we intend.
The Group’s ongoing agenda to deliver industry-leading net rooms
growth creates risks relating to the transition of systems, new or
changed operating models, services and processes, and may result
in failures to improve commercial performance, leading to
financial
loss and undermining stakeholder confidence.
2. Owner preferences for or ability to invest in our brands
The Group is exposed to a variety of risks related to identifying,
securing and retaining franchise and management agreements
The Group’s growth strategy depends on its success in identifying,
securing and retaining franchise and management agreements.
This is an inherent risk for the hotel industry and the franchising
business and management model. Competition with other hotel
companies may generally reduce the number of suitable franchise,
management and investment opportunities offered to the Group
and increase the bargaining position of property owners seeking
to become a franchisee or engage a manager. The terms of new
franchise or management agreements may not be as favourable as
current arrangements; the Group may not be able to renew existing
arrangements on similarly favourable terms, or at all.
There can be no assurance that the Group will be able to identify,
retain or add franchisees to the IHG System, to secure management
contracts or open hotels in our development pipeline. For example,
the availability of suitable sites, market saturation, planning and other
local regulations or the availability and affordability of
finance, which
has remained a challenge in 2023, may restrict the supply of suitable
hotel development opportunities under franchise or management
agreements and mean that not every hotel in our development
pipeline may develop into a new hotel that enters our system.
In connection with entering into franchise or management agreements,
the Group may be required to make investments in, or guarantee the
obligations of, third parties or guarantee minimum income to third
parties. There are also risks that significant
franchisees or groups of
franchisees may have interests that con
flict, or are not aligned, with
those of the Group, including, for example, the unwillingness of
franchisees to support individual or masterbrand or system
improvement initiatives. This could result in franchisees prematurely
terminating contracts, which could lead to disputes, litigation,
damages and other expenses and would adversely impact the
overall IHG System size and the Group’s financial per
formance.
The Group is exposed to the risks of hotel industry overcapacity
The future operating results of the Group could be adversely affected by
industry overcapacity (by number of rooms) and weak demand due,
for example, to customer con
fidence in business and leisure travel,
whether related to pandemics, war, or otherwise, the cyclical nature of
the hotel industry, other differences between planning assumptions
and actual operating conditions, cost-of-living pressures and changes
in stakeholder expectations around environmental factors. These
conditions could result in reductions in room rates and occupancy levels,
which would adversely impact the financial per
formance of the Group.
3. Our ability to attract and retain talent and capability
The Group requires the right people, skills and capability
to manage growth and change
In order to remain competitive, the Group relies upon hiring and
retaining highly skilled employees with particular expertise or
leadership capability. The Group’s strategic business plans could
be undermined by a failure to build and sustain a resilient corporate
culture, failure to recruit or retain key personnel, unexpected loss
of key senior employees, inadequate succession planning and
incentive plans, or failure to invest in the development of key skills.
The Group must compete against other companies inside and
outside the hospitality industry for suitably quali
fied or experienced
employees, up to and including Executive Directors. Some of the
markets in which the Group operates may experience economic
growth and/or low levels of unemployment, pay compression, and
there may be attractive roles and competitive rewards available
elsewhere which limit the ability to attract and retain talent.
Labour shortages could restrict our ability and the ability of
franchisees to operate hotel properties or grow our business or
could result in increased costs that could adversely affect results of
operations. The Covid-19 pandemic negatively affected the labour
market for employers. Staffing shortages in various parts of the
world could hinder our ability to grow and expand our business.
Some emerging markets may not have the required local expertise
to operate a hotel, particularly for luxury and lifestyle brands, and
may not be able to attract the right talent.
If we or our franchisees are unable to attract, retain, train, manage
and engage skilled individuals, the ability to staff and operate the
hotels that we manage, own or franchise could be diminished.
This could reduce customer satisfaction and adversely affect the
reputation of our brands. Labour costs may also increase, threatening
the ability to operate hotels and our corporate support functions,
achieve business growth targets or impact the profitability o
f our
operations. Additionally, unless the Group maintains a sufficient
infrastructure to enable knowledge and skills to be passed on, the
Group risks losing accumulated knowledge if key employees leave.
Additional Information
Group information
243
IHG
| Annual Report and Form 20-F 2023
Group information
continued
Risk factors
continued
Collective bargaining activity could disrupt operations, increase
our labour costs or interfere with the ability of our management
to focus on executing our business strategies.
A significant number o
f the Group’s colleagues at its managed,
owned, leased and managed lease hotels in the US, Canada, Mexico,
Grand Cayman and Netherlands Antilles are covered by collective
bargaining agreements and similar agreements. If relationships
with those colleagues or the unions that represent them deteriorate,
the properties we own, lease or manage could experience labour
disruptions such as strikes, lockouts, boycotts and public
demonstrations. In 2024, bargaining agreements in major cities will
be expiring within several months of each other. There will be labour
activity in many of our major markets, including Washington DC,
San Diego, Boston and San Francisco. Hotel sector union member
participation continues to increase in key markets within the
Americas region, which may require IHG to enter into new labour
agreements as more employees become unionised in the future.
Labour disputes, which are generally more likely when collective
bargaining agreements are being renegotiated, could harm our
relationship with our colleagues, result in increased regulatory
inquiries and enforcement by governmental authorities and deter
guests. Further, adverse publicity related to a labour dispute could
harm our reputation and reduce customer demand for our services.
Labour regulation and the negotiation of new or existing collective
bargaining agreements could lead to higher wage and benefit costs,
changes in work rules that raise operating expenses, legal costs and
limitations on our ability or the ability of our third-party property
owners to take cost-saving measures during economic downturns.
We do not have the ability to control the negotiations of collective
bargaining agreements covering unionised labour employed by our
third-party property owners and franchisees. Increased unionisation
of our workforce, new labour legislation or changes in regulations
could disrupt our operations, reduce our profitability or inter
fere
with the ability of our management to focus on executing our
business strategies.
4. Data and information usage, storage, security and transfer
The Group is exposed to cybersecurity and data privacy risks
The Group is increasingly dependent upon the collection, usage,
retention, availability, integrity and confidentiality o
f information,
including, but not limited to: guest, employee and owner credit card,
financial and personal data, business per
formance,
financial reporting
and commercial development. The information is sometimes held in
different formats, such as digital, paper, voice recordings and video,
and could be stored in many places, including cloud-based storage
and facilities managed by third-party service providers, in our
managed hotels, and by our independently owned and operated
hotels, that are all subject to the same or similar risks.
Cyber breaches are increasingly becoming an unfortunate reality
for most companies and risks relating to cybersecurity appear to be
heightened in light of geopolitical con
flicts. The threats towards the
hospitality industry and the Group’s information are dynamic, and
include cyber-attacks, fraudulent use, loss or misuse by employees
and breaches of our vendors’ security arrangements, among others.
For example, in 2022, parts of the Group’s technology systems were
subject to unauthorised activity, causing disruption to the Group’s
booking channels and other applications. A putative class action suit
has been filed by a small group o
f hotel owners related to the incident.
This cybersecurity breach follows additional previous cybersecurity
incidents of a different nature in 2016.
The legal and regulatory environment around data privacy and
requirements set out by the payment card industry surrounding
information security across the many jurisdictions in which the
Group operates are constantly evolving (such as the EU GDPR,
China cybersecurity law, and US State privacy laws). If the Group
fails to protect information and ensure relevant controls are in place
to enable the acceptable use and release of information through the
appropriate channels in a timely and accurate manner, IHG System
performance, guest experience and the reputation of the Group
may be adversely affected. This could lead to revenue losses, fines,
penalties, litigation and other additional costs.
We are required to comply with marketing and advertising laws
relating to our direct marketing practices, including email marketing,
online advertising, including in our use of generative arti
ficial
intelligence, and postal mailings. Further restrictions to the content or
interpretations of these laws could adversely impact our current and
planned activities and the effectiveness or viability of our marketing
strategies to maintain, extend and acquire relationships with customers,
and impact the amount and timing of our sales of certain products.
For information of incidents and ongoing legal proceedings relating to
cybersecurity, data privacy and trade practices, see pages 212 and 254.
The Group is exposed to intellectual property risks
Given the importance of brand recognition to the Group’s business,
the protection of its intellectual property poses a risk due to the
variability and changes in controls, laws and effectiveness of
enforcement globally, particularly in jurisdictions that may not
have developed levels of protection for corporate assets, such
as intellectual property, trade secret, know-how and customer
information and records. Any widespread infringement,
misappropriation or weakening of the control environment could
materially harm the value of the Group’s brands and its ability
to develop the business and compete currently or in the future.
Third-party claims that we infringe their intellectual property
could lead to disputes, litigation, damages and other expenses.
5. Ethical and social expectations
The Group’s reputation and the value of its brands are in
fluenced
by the perception of various stakeholders of the Group
The reputation of the Group and the value of its brands are
influenced by a wide variety o
f factors, including the perception
of stakeholder groups, such as guests, owners, suppliers and
communities in which the Group operates. The social and
environmental impacts of its business are under increasing scrutiny,
and the Group is exposed to the risk of damage to its reputation
if it fails to (or fails to in
fluence its business partners to) undertake
responsible practices and engage in ethical behaviour, or fails to
comply with relevant regulatory requirements.
6. Legal and regulatory complexity or litigation trends
The Group is required to comply with existing and changing
regulations and act in accordance with societal expectations
across numerous countries, territories and jurisdictions
Government regulations affect countless aspects of the Group’s
business, including corporate governance, health and safety,
the environment, social responsibility, bribery and corruption,
employment law and diversity, franchise laws and regulation,
disability access, data privacy and information protection,
financial,
accounting and tax. Regulatory changes may require significant
changes in the way the business operates and may inhibit the
Group’s strategy, including the markets the Group operates in,
brand protection, and use or transmittal of personal data and use
of arti
ficial intelligence. I
f the Group fails to comply with existing
or changing regulations, the Group may be subject to fines,
prosecution, loss of licence to operate or reputational damage.
Companies that operate franchise systems may be subject to
liabilities and claims relating to the franchisor/franchisee relationship,
such as for allegedly being a ‘joint employer’ with a franchisee.
Changes in laws or regulations relating to this relationship could
result in a determination that we are a joint employer with our
franchisees or that our franchisees are part of one uni
fied system
subject to joint and several liability. Such a determination could
subject us to liability for employment-related and other liabilities
of our franchisees and could cause us to incur other costs that have
a material adverse effect on our results of operations and pro
fit.
Additional Information
244
IHG
| Annual Report and Form 20-F 2023
The Group is exposed to the risk of litigation
Certain companies in the Group are the subject of various claims
and proceedings. The ultimate outcome of these matters is subject
to many uncertainties, including future events and uncertainties
inherent in litigation. In addition, the Group could be at risk of
litigation claims made by many parties, including but not limited to:
guests, customers, joint venture partners, suppliers, employees,
regulatory authorities, franchisees and/or the owners of the hotels
it manages. Claims filed may include requests
for punitive damages
as well as compensatory damages. Unfavourable outcomes of
claims or proceedings could have a material adverse impact on the
Group’s results of operations, cash
flow and/or financial position.
Exposure to significant litigation or fines may also affect the
reputation of the Group and its brands. (See also legal proceedings
on page 254.)
Domestic and international environmental laws and regulations
may cause us to incur substantial costs or subject us to
potential liabilities
The Group is exposed to certain compliance costs and potential
liabilities under various foreign and US federal, state and local
environmental, health and safety laws and regulations. These laws
and regulations govern actions and reporting requirements relating
to matters including air emissions, the use, storage and disposal
of hazardous and toxic substances, and wastewater disposal.
The Group’s failure to comply with such laws, including any required
permits or licences, could result in substantial fines or possible
revocation of our authority to conduct some of our operations.
We could also be liable under such laws for the costs of investigation,
removal or remediation of hazardous or toxic substances at our
currently or formerly franchised, managed, owned, leased or
managed lease hotels or at third-party locations in connection
with our waste disposal operations, regardless of whether or not
we knew of, or caused, the presence or release of such substances.
The Group may also be required to remediate such substances or
remove, abate or manage asbestos, mould, radon gas, lead or other
hazardous conditions at our properties. The presence or release of
such toxic or hazardous substances could result in third-party claims
for personal injury, property or natural resource damages, business
interruption or other losses. Such claims and the need to investigate,
remediate or otherwise address hazardous, toxic or unsafe
conditions could adversely affect the Group’s operations, the value
of any affected property, or our ability to sell, lease or assign our
rights in any such property, or could otherwise harm our business
or reputation. Environmental, health and safety requirements are
increasingly stringent, and our costs may increase as a result.
The Group’s financial per
formance may be affected by changes
in tax laws
Many factors will affect the Group’s future tax rate, the key ones
being legislative developments, future pro
fitability o
f underlying
subsidiaries and tax uncertainties. Tax liabilities or refunds may also
differ from those anticipated, in particular as a result of changes in
tax law, changes in the interpretation of tax law, or clari
fication o
f
uncertainties in the application of tax law. The Group continues
to monitor significant tax re
form proposals, most notably the
development of the OECD’s ‘Pillar Two’ minimum tax regime;
further information is included in note 8 to the Group Financial
Statements on page 181.
7. Global and local supply chain efficiency and resilience
The Group is dependent upon a wide range of external
stakeholders and business partners
The Group relies on the performance, behaviours and reputation
of a wide range of business partners and external stakeholders,
including, but not limited to, owners, contractors, lenders, suppliers,
outsourced providers, vendors, joint-venture partners, online travel
agents, third-party intermediaries and other business partners
which may have different ethical values, interests and priorities.
Further, the number and complexity of interdependencies with
stakeholders is evolving. Breakdowns in relationships, contractual
disputes, deterioration of the
financial health o
f our partners, poor
vendor performance, sub-standard control procedures, business
continuity arrangements, insolvency, stakeholder behaviours or
adverse reputations, which may be outside of the Group’s control,
could adversely impact on the Group’s performance and
competitiveness, delivery of projects, guest experiences or the
reputation of the Group or its brands.
8. Operational resilience to incidents or disruption or control
breakdown (including geopolitical, safety and security,
cybersecurity, fraud and health-related)
The Group is exposed to a variety of risks associated with safety,
security and crisis management
There is a constant need to protect the safety and security of our
guests, employees and assets against natural and man-made threats.
These include, but are not limited to, exceptional events, such as
extreme weather, civil or political unrest, violence and terrorism,
serious and organised crime, fraud, employee dishonesty, cyber
crime, pandemics or contagious diseases, fire and day-to-day
accidents, incidents and petty crime, which impact the guest or
employee experience, could cause loss of life, sickness or injury and
result in compensation claims, fines
from regulatory bodies, litigation
and impact reputation. Serious incidents or a combination of events
could escalate into a crisis that, if managed poorly, could further
expose the Group and its brands to significant reputational damage.
The Group is reliant upon the resilience of its reservation system
and other key technology platforms and is exposed to risks that
could disrupt their operation and/or integrity
The value of the Group is partly derived from the ability to drive
reservations through its reservation system and technology
platforms which are highly integrated with other processes and
systems and linked to multiple sales channels, including the Group’s
own websites, in-house and third-party managed call centres,
hotels, third-party intermediaries and travel agents.
The scope and complexity of our technology infrastructure,
including increasing reliance on third-party suppliers to support and
protect our systems and information, as well as the rapidly evolving
cyber threats, means that we are inherently vulnerable to physical
damage, failures, disruptions, denial of service, phishing or other
malware attacks, ransomware, cyber terrorism and fraud, as well
as human error, negligence and wilful misuse. These risks may be
heightened when these capabilities are provided offshore or in
cloud-based environments. Our franchisees and suppliers are also
inherently vulnerable to the same risks.
Lack of resilience and operational availability of these systems
provided by the Group or third-party technology providers and
inability or difficulty in updating existing or implementing new
functionality could lead to prolonged service disruption. This might
result in significant business interruption, impact the guest booking
experience, lead to loss of or theft of data, and subsequently
adversely impact Group revenues, incur financial costs to remediate
or investigate, lead to regulatory and/or contractual enforcement
actions or lawsuits, or damage the Group’s reputation and
relationships with hotel owners.
The Group is exposed to political and economic developments
The Group is exposed to political, economic and financial market
developments, such as recession, inflation and availability and/or
cost of credit (due to rising interest rates) and currency
fluctuations
that could lower revenues and reduce income. The outlook for 2024
may worsen due to continued unrest and conflict in Ukraine, the
Middle East, parts of Africa and Asia and other geopolitical tensions;
potential disruptions in the US economy; uncertain central bank
policies; the impact of
fluctuating commodity prices (including oil)
on economies dependent on such exports; and barriers to global
trade, including unforeseeable changes in regulations, imposition
of tariffs or embargoes and other trade restrictions or controls.
Additional Information
Group information
245
IHG
| Annual Report and Form 20-F 2023
Group information
continued
Risk factors
continued
The interconnected nature of economies suggests any of these
events, or other events, could trigger a recession that reduces leisure
and business travel as demand for our services is closely associated
with the performance of the general economy and is sensitive to
business and personal discretionary spending levels. Decreased
global or regional demand for hospitality products and services can
be especially pronounced during economic downturns or low levels
of economic growth, and the hospitality industry may fail to keep
pace with overall economic improvement. Such declines in demand
for our products and services could adversely affect room rates and/
or occupancy levels and other income-generating activities.
Specifically, the Group is most exposed to the impact o
f political
and economic risk factors in relation to the US market, including
elections in 2024, and to Greater China. The owners or potential
owners of hotels franchised or managed by the Group face similar
risks that could adversely impact their solvency and the Group’s
ability to secure and retain franchise or management agreements.
Accordingly, the Group is particularly susceptible to adverse
changes in these economies, as well as changes in their currencies.
In addition to trading conditions, the economic outlook also affects
the financial health o
f current and potential owners and their ability
to access capital, which could impact existing operations, timely
payment of IHG fees and the health of the pipeline.
The Group is exposed to continued disruption and consequences
from the war in Ukraine
The Group continues to monitor the impact of the war in relation
to our two hotels in Ukraine, both of which are open to the public.
The Group has ceased all operations in Russia. Although these
operations were not material to consolidated financial results,
the Group continues to face uncertainty relating to the broader
consequences of this con
flict on global macroeconomic conditions.
These uncertainties include the potential for governments to
impose additional sanctions or other economic or military measures.
Further expansion or escalation of military confrontations or related
geopolitical tensions, including increased restrictions on global
trade, could also result in, among other things, depressed or
restricted travel demand, declines in consumer confidence and
economic growth, an increased likelihood of cyber attacks or
information technology disruption, supply chain disruptions,
increases in inflation rates, changes to
foreign currency exchange
rates, constraints, volatility or disruption in financial markets, the
decreased availability of raw materials, supplies, freight and labour,
and uncertainty about economic and global stability.
The Group is also exposed to disruption and consequences
from the con
flict in the Middle East
The Group continues to face some disruption relating to the broader
consequences of the Middle East con
flict on neighbouring countries
and on wider global macroeconomic uncertainty, including supply
chain disruption through the region. Further expansion or escalation
of military confrontations or related geopolitical tensions could also
result in similar factors to those listed above relating to the war
in Ukraine.
The Group may face dif
ficulties insuring its business
Historically, the Group has maintained insurance at levels
determined to be appropriate in light of the cost of cover and the
risk profile o
f the business. However, the Group’s claims experience
and wider external market forces may limit the scope of coverage
the Group can obtain and the Group’s ability to obtain coverage at
reasonable rates. Other forces beyond the Group’s control, such as
terrorist attacks or natural disasters, may be uninsurable or simply
too expensive to insure. Inadequate or insufficient insurance carried
by the Group, our owners or other partners for damage, other
potential losses or liabilities to third parties involving properties
that we own, manage or franchise could expose the Group to large
claims or could result in the loss of capital invested in properties.
The Group is exposed to risks related to executing and realising
benefits
from strategic transactions, including acquisitions
and restructuring
The Group may seek to make strategic transactions, including
acquisitions, divestments or investments in the future. The Group
may not be able to identify opportunities or complete transactions
on commercially reasonable terms, or at all, and may not realise the
anticipated benefits
from such transactions. Strategic transactions
come with inherent valuation, financial and commercial risks, and
regulatory and insider information risks during the execution of the
transactions. The Group may also continue to make organisational
adjustments to support delivery of our growth ambitions, including
the integration of acquisitions into the Group’s operating processes
and systems. This creates inherent risks of complexity and that any
changes made could be unsustainable or that we are unable to
achieve the return envisaged through reinvestment. In addition,
the Group may face unforeseen costs and liabilities, diversion of
management attention, as well as longer-term integration and
operational risks, which could result in a failure to realise bene
fits,
financial losses, lower employee morale and loss o
f talent.
The Group is exposed to a variety of risks associated with its
financial stability and ability to borrow and satis
fy debt covenants
While the strategy of the Group is to grow through activities that do
not involve significant amounts o
f its own capital, the Group does
require capital to fund some development opportunities, technological
innovations and strategic acquisitions; and to maintain and improve
owned, leased and managed lease hotels. The Group is reliant upon
having financial strength and access to capital markets and other
borrowing facilities to meet these expected capital requirements.
The Group’s $1,350m revolving credit facility (RCF) is only available
if the
financial covenants in the
facility are complied with.
Non-compliance with covenants could result in the Group’s lenders
demanding repayment of the funds advanced and any undrawn
facilities could be unavailable. In addition, if the RCF was drawn and
repayment was demanded, it would trigger a repayment of the bond
debt. If the Group’s
financial per
formance does not meet market
expectations, it may not be able to refinance existing bond and bank
facilities on terms considered favourable.
The Group currently has a senior unsecured long-term credit rating
of BBB from S&P and, since 2023, a Baa2 rating from Moody’s.
In the event of either rating being downgraded below BBB- and
Baa3 respectively (a downgrade of two levels) there would be an
additional step-up coupon of 1.25% payable on the public bonds
which are subject to those ratings.
The Group’s operations are dependent on maintaining suf
ficient
liquidity to meet all foreseeable medium-term requirements
and provide headroom against unforeseen obligations
Cash and cash equivalents are held in short-term deposits, money
market funds and repurchase agreements with short maturities.
Most of the Group’s funds are held in the UK or US, although
$30 million (2022: $24 million) is held in countries where repatriation
is restricted as a result of foreign exchange regulations. Medium and
long-term borrowing requirements are met through the bonds and
RCF. Short-term borrowing requirements may be met from drawings
under uncommitted overdrafts and RCF.
The Group is exposed to an impairment of the carrying value
of our brands, goodwill or other tangible and intangible assets
negatively affecting our consolidated operating results
Significant amounts o
f goodwill, intangible assets, right-of-use
assets, property, plant and equipment, investments and contract
assets are recognised on the Group balance sheet. We review the
value of our goodwill and inde
finite-lived intangible assets
for
impairment annually (or whenever events or circumstances indicate
impairment may have occurred). Changes to estimated values can
result from political, economic and
financial market developments
or other shifts in the business climate, the competitive environment,
the perceived reputation of our brands (by guests or owners),
Additional Information
246
IHG
| Annual Report and Form 20-F 2023
or changes in interest rates, operating cash flows, market
capitalisation, or developments in the legal or regulatory environment.
Because of the signi
ficance o
f our goodwill and other non-current
assets, we have incurred and may incur future impairment charges
on these assets which could have a material adverse effect on our
financial results. Due to significant challenges and uncertainty in the
data associated with both risks and opportunities, the Group is not
yet able to fully quantify the potential
financial impacts o
f climate
change. The Group continues to refine its workplan to enable
quantification in the
future and is focused on ensuring the identi
fied
risks and opportunities are integrated into our business strategy.
The Group is exposed to fluctuations in exchange rates, currency
devaluations or restructurings and to interest rate risk in relation
to its borrowings
The US dollar is the predominant currency of the Group’s revenue
and cash flows. Movements in
foreign exchange rates can affect the
Group’s reported profit, net liabilities and interest cover. The most
significant exposures o
f the Group are in currencies that are freely
convertible. The Group’s reported debt has an exposure to
borrowings held in pounds sterling (including €1,000 million euro
bonds which have been swapped into sterling using currency
swaps). Conducting business in currencies other than US dollars
exposes us to fluctuations in exchange rates, currency devaluations,
or restructurings. This could potentially lower our reported revenues,
increase our costs, reduce our profits or disrupt our operations.
Exposure to these factors is linked to the pace of our growth in
territories outside the US and, if the proportion of our revenues
grows, this may increase the potential sensitivity to currency
movements having an adverse impact on our results. The Group
is also exposed to interest rate risk in relation to its fixed and
floating rate borrowings and interest rates may be higher on new
or replacement borrowings compared to existing interest rates.
All of the current bond debt ($3,122m) is at
fixed rates. The Group
may use interest rate swaps to manage the interest rate exposure.
The Group could be affected by credit risk on treasury transactions
The Group uses long-term credit ratings from S&P, Moody’s and
Fitch Ratings as a basis for setting its counterparty limits. In order to
manage the Group’s credit risk exposure, the treasury function sets
counterparty exposure limits using metrics including credit ratings,
the relative placing of credit default swap pricings, tier 1 capital and
share price volatility of the relevant counterparty. The Group trades
only with recognised, creditworthy third parties. It is the Group’s
policy that all customers who wish to trade on credit terms are
subject to credit verification procedures. In respect o
f credit risk
arising from
financial assets, the Group’s exposure to credit risk
arises from default of the counterparty, with a maximum exposure
equal to the carrying amount of these instruments.
9. Our ability to deliver technological or digital performance
or innovation (at scale, speed, etc.)
The Group is exposed to inherent risks in relation to changing
technology and systems
As the use of the internet, arti
ficial intelligence, mobile and data
technology grows, and new and disruptive technology solutions
are developed, customer needs and expectations evolve at pace.
The Group may find that its evolving technology capability is not
sufficient and may have to make substantial additional investments
in new technologies or systems to remain competitive. Failure to
keep pace with developments in technologies or systems, and
also with regulatory, risk and ethical considerations of how these
developments are used, for example in relation to cross-border
transfers of data, may put the Group at a competitive disadvantage.
Generative artificial intelligence is an emerging technology that the
Group expects will create uncertainty for the travel and hospitality
sector and society in general. The primary impacts are considered
to be in relation to how guests will find and interact with hotels, how
colleagues will work and talent and capability attraction or retention
(among others).
In addition, the technologies or systems that the Group chooses to
deploy may not be commercially successful or the technology or
system strategy may not be sufficiently aligned with the needs of the
business. Any such failure could adversely affect guest experiences,
and the Group may lose customers, fail to attract new customers,
impact our appeal to owners, incur substantial costs or face other
losses. This could further impact the Group’s reputation in regards
to innovation.
(See also ‘4. Data and information usage, storage, security
and transfer’.)
The Group is exposed to competition from online travel agents
and intermediaries
A proportion of the Group’s bookings originate from large
multinational, regional and local online travel agents and
intermediaries with which the Group has contractual arrangements
and to which it pays commissions. These platforms offer a wide
range of products, often across multiple brands, have growing
booking and review capabilities, and may create the perception that
they offer the lowest prices. Some of these online travel agents and
intermediaries have strong marketing budgets and aim to create
brand awareness and brand loyalty among consumers, which may
impact the Group’s profitability, undermine the Group’s own booking
channels and value to its hotel owners.
10. The impact of climate change on hospitality
(physical and transition risks for IHG)
The Group is exposed to the risk of events or stakeholder
expectations that adversely impact domestic or international
travel, including climate change
The room rates and occupancy levels of the Group could be
adversely impacted by events that reduce domestic or international
travel, such as actual or threatened acts of terrorism or war, political
or civil unrest, epidemics and pandemics or threats thereof,
travel-related accidents or industrial action, natural or man-made
disasters, or other local factors impacting speci
fic countries, cities
or individual hotels, as well as increased transportation and fuel
costs. Additionally, the Group may be impacted by increasing
stakeholder and societal expectations and attitudes in relation to
factors contributing to climate change including overtravel and
overtourism, and those linked directly to hotels including waste,
water, energy, or impact on local communities. A decrease in the
demand for business and/or leisure hotel rooms as a result of such
events or attitudinal and demand shifts may have an adverse impact
on the Group’s operations or growth prospects and financial results.
In addition, inadequate planning, preparation, response or recovery
in relation to a major incident or crisis may cause loss of life, prevent
operational continuity, or result in financial loss, and consequently
impact the value of our brands and/or the reputation of the Group.
The Group is exposed to risks relating to our commitments
in relation to Climate Change
In line with our commitment to reduce our energy use and carbon
emissions in line with climate science, the Group has implemented a
2030 science-based target to reduce absolute scope 1, 2, and scope
3 greenhouse gas emissions from fuel and energy-related activities
and franchises by 46.2% by 2030 from a 2019 base year. This ambition
is challenging to implement and will require significant trans
formation
across IHG, hotel owners and supply chain partners, including
investment in physical assets and operational procedures. It is also
dependent on government financial incentives, the decarbonisation
of electricity grids and hotel owners having access to scalable,
cost-effective renewable energy, as well as new operational behaviours
and mindset shifts, including from guests, to adapt to low-energy
products and services. If these changes, many of which are outside
of IHG’s control, do not occur, the Group may have difficulty achieving
its public commitments, which may impact the reputation of
the Group.
Additional Information
Group information
247
IHG
| Annual Report and Form 20-F 2023
Cybersecurity governance
IHG’s board of directors is ultimately accountable for establishing a
framework of prudent and effective controls, which enable risk to be
assessed and managed. Management, including the Chief Information
Security Officer (CISO) and our cybersecurity team, regularly update
the Board on the company’s cybersecurity programmes, material
risks and mitigation strategies and provide status and risk reports at
least annually. The audit committee reviews the appropriateness of
IHG’s risk management system to address risks and has allocated
particular attention to cybersecurity and governance in the context
of previous criminal, unauthorised access to the Group’s
technology systems.
Management is responsible for identifying, considering and
assessing material cybersecurity risks on an ongoing basis,
establishing processes to ensure that such potential exposures are
monitored, putting in place appropriate mitigation measures and
maintaining cybersecurity programmes. This is guided by periodic
external third-party assessment of IHG’s cyber risks and the maturity
of the cybersecurity programme. The cyber incident response
framework uses de
fined playbooks, coordinating with external
incident response groups and aligning with wider IHG crisis
management and escalation protocols, including triggers for
reporting to senior management, board of directors and external
parties where required.
IHG’s CISO has overall responsibility for the Information Security
strategy and the development and management of the associated
programme. The CISO was hired by IHG in 2018 from Invesco,
a global investment management company, where he built and
ran the cybersecurity programme as CISO for more than 10 years.
The CISO is supported by a dedicated, certified and experienced
in-house team, complemented by outsourced groups for performing
either highly repetitive or operational tasks or for very specialised
skillsets such as penetration testing or cyber forensics. The CISO
receives reports from the team to enable the monitoring of the
prevention, detection, mitigation, and remediation of
cybersecurity incidents.
IHG employs several independent or third-party mechanisms to
provide a level of assurance that the different information security
capabilities are operating effectively and assessment of risk is also
informed by observations arising from a variety of independent
auditing either from IHG’s Internal Audit function or as part of
regulatory compliance work performed including Sarbanes-Oxley,
HIPAA, SWIFT, SOC-1 and MLPS (China). As noted above, periodic
external assessments are also conducted of the maturity of the
cybersecurity programme, which are also reported to the board
of directors.
Cybersecurity risk management
Cybersecurity is an integral part of IHG’s overall risk management
and internal control system. Our information security risk
management programme follows the National Institute of Standards
and Technology Cyber Security Framework and supports the
identification o
f the systems, data, and other information assets that
are considered most sensitive from a con
fidentiality perspective,
or most critical from an availability perspective. These include guest
data, credit card data, pre-public financial in
formation, and revenue
generating applications.
Standards, policies and procedures are in place to manage how
personal data can be used and protected across IHG, including a
requirement for participation by all employees in annual e-learning
training on handling information responsibly.
The Information Security programme incorporates:
•
Engagement with leaders from other IHG business functions,
including to identify and assess cybersecurity threats, and to act
as point of contact for escalation of issues and incidents.
•
User awareness and colleague engagement, including
communications to corporate and hotel teams on changing threats
and phishing simulation exercises to raise risk awareness.
•
Maintenance of information risk management processes including
a risk register and standard contract language.
•
Risk assessment of third parties based on access to IHG systems,
data, and operational reliance using a combination of manual
procedures, for example, completion of security questionnaires,
and independent cyber risk scoring. Critical rated third parties are
reviewed annually.
•
Security compliance to coordinate required tracking of
compliance for applicable regulations and standards, including
remediation of any regulatory and audit
findings.
•
Security engineering and architecture to define, implement and
maintain standards for the secure use of core technology platforms
and solutions, including new technology solutions and potential
business partners and acquisitions.
•
Assessment of the security of individual business applications
and platforms, including good security hygiene within coding.
•
Vulnerability management for all technical components of
infrastructure and core application platforms.
•
Identity and access management for global platforms and
solutions, including privileged access management, and loyalty
account members.
•
Cyber threat intelligence relationships with worldwide law
enforcement and intelligence sharing organisations, pro
filing likely
threat actors and methods, and providing insight on threat levels.
•
Security operations monitoring, triaging alerts to facilitate
response and action within agreed service level agreements.
•
Cyber incident response using agreed and practised playbooks
for security events, coordinating with external incident response
groups and wider IHG crisis protocols, and deploying tabletop
exercises to simulate scenarios and identify potential gaps
in response.
•
Center of Excellence project management, continuous process
improvement, tracking of key performance metrics, change
management, and communications to internal, executive and
external stakeholder groups.
In 2023 we did not identify any cybersecurity threats that have
materially affected or are reasonably likely to materially affect our
business strategy, results of operations, or
financial condition.
However, despite our efforts, we cannot eliminate all risks from
cybersecurity threats, or provide assurances that we have not
experienced an undetected cybersecurity incident. As we explained
in our 6 and 29 September 2022 Stock Exchange Announcements,
parts of our technology systems were subject to unauthorised
activity, causing disruption to our booking channels and other
applications. In line with our crisis management framework, teams
across IHG came together to evaluate and address the incident,
supported by external specialists. No evidence of unauthorised
access to systems storing guest data was identified. The Board
was engaged throughout the incident response.
For more information about our risks, please refer to pages 42 to 49
and pages 242 to 247.
Group information
continued
Cybersecurity
Additional Information
248
IHG
| Annual Report and Form 20-F 2023
As at 16 February 2024: (i) Executive Directors had a number of bene
ficial interests in shares (including Directors’ share awards under
IHG’s share plans) set out in the table below; (ii) Non-Executive Directors had the number of bene
ficial interests in shares set out in the table
on page 136; and (iii) Executive Committee members had the number of bene
ficial interests in shares (including members’ share awards
under IHG’s share plans) set out in the table below. These shareholdings indicate all Directors’ or Executive Committee members’ beneficial
interests and those held by their spouses and other connected persons. As at 16 February 2024, no Director or Executive Committee member
held more than 1.0% of the total issued share capital. None of the Directors have a bene
ficial interest in the shares o
f any subsidiary.
Executive
Committee
member
Number of shares held outright
APP deferred share awards
LTIP/DAP share awards (unvested)
Total number of shares held
16 Feb
2024
31 Dec
2023
31 Dec
2022
16 Feb
2024
31 Dec
2023
31 Dec
2022
16 Feb
2024
31 Dec
2023
31 Dec
2022
16 Feb
2024
31 Dec
2023
31 Dec
2022
Elie Maalouf
99,265
99,265
83,340
24,833
24,833
21,308
157,908
157,908
111,089
282,006
282,006
215,737
Michael Glover
13,307
13,307
–
3,247
3,247
–
47,152
47,152
–
63,706
63,706
–
Heather Balsley
–
–
–
3,174
3,174
–
34,544
34,544
–
37,718
37,718
–
Jolyon Bulley
52,164
52,164
52,164
17,034
17,034
14,228
62,472
62,472
57,380
131,670
131,670
123,772
Yasmin Diamond
5,043
5,043
2,902
11,151
11,151
9,877
36,929
36,929
39,070
53,123
53,123
51,849
Nicolette
Henfrey
11,351
11,351
4,815
12,545
12,545
8,981
42,232
42,232
43,417
66,128
66,128
57,213
Wayne Hoare
12,172
12,172
5,700
16,207
16,207
9,408
53,487
53,487
48,516
81,866
81,866
63,624
Kenneth
Macpherson
24,060
24,060
24,060
15,808
15,808
14,088
52,167
52,167
55,719
92,035
92,035
93,867
George Turner
20,928
20,928
37,059
16,376
16,376
14,052
53,555
53,555
57,616
90,859
90,859
108,727
All current Executive Directors have a rolling service contract with a notice period from the Group of 12 months. As an alternative, the Group
may, at its discretion, pay in lieu of that notice. Neither notice nor a payment in lieu of notice will be given in the event of gross misconduct.
Payment in lieu of notice could potentially include up to 12 months’ salary and the cash equivalent of 12 months’ pension contributions and
other contractual benefits. Where possible, the Group will seek to ensure that, where a leaver mitigates their losses by,
for example,
finding
new employment, there will be a corresponding reduction in compensation payable for loss of office.
Visit
ihgplc.com/investors
under Corporate governance in the Directors’ Remuneration Policy section for further details about the determination
of termination payments in the Directors’ Remuneration Policy.
Directors’ and Executive Committee
members’ shareholdings
Executive Directors’ benefits upon termination o
f of
fice
Additional Information
Group information
249
IHG
| Annual Report and Form 20-F 2023
Fees and charges payable to a depositary
Category
(as defined by SEC)
Depositary actions
Associated fee
Depositing or
substituting the
underlying shares
Each person to whom ADRs are issued against deposits of shares,
including deposits and issuances in respect of:
•
Share distributions, stock splits, rights, mergers
•
Exchange of securities or any other transactions or event or other
distribution affecting the ADSs or the deposited securities
$5 for each 100 ADSs (or portion thereof)
Receiving or
distributing
dividends
Distribution of stock dividends
$5 for each 100 ADSs (or portion thereof)
Distribution of cash
$0.05 or less per ADS (or portion thereof)
Selling or
exercising rights
Distribution or sale of securities, the fee being in an amount equal
to the fee for the execution and delivery of ADSs, which would have
been charged as a result of the deposit of such securities
$5 for each 100 ADSs (or portion thereof)
Withdrawing an
underlying security
Acceptance of ADRs surrendered for withdrawal of deposited
securities
$5 for each 100 ADSs (or portion thereof)
Transferring,
splitting or
grouping receipts
Transfers, combining or grouping of depositary receipts
$1.50 per ADS
General depositary
services, particularly
those charged on
an annual basis
Other services performed by the depositary in administering
the ADRs
$0.05 per ADS (or portion thereof) not more
than once each calendar year and payable
at the sole discretion of the ADR Depositary
by billing ADR holders or by deducting such
charge from one or more cash dividends
or other cash distributions
Expenses of
the depositary
Expenses incurred on behalf of ADR holders in connection with:
•
Compliance with foreign exchange control regulations or any law
or regulation relating to foreign investment
•
The ADR Depositary’s or its custodian’s compliance with applicable
laws, rules or regulations
•
Stock transfer or other taxes and other governmental charges
•
Cable, telex, facsimile transmission or delivery
•
Transfer or registration fees in connection with the deposit and
withdrawal of deposited securities
•
Expenses of the ADR Depositary in connection with the conversion
of foreign currency into US dollars (which are paid out of such
foreign currency)
•
Any other charge payable by the ADR Depositary or its agents
Expenses payable at the sole discretion of
the ADR Depositary by billing ADR holders
or by deducting charges from one or more
cash dividends or other cash distributions
are $20 per transaction
Fees and charges payable by a depositary
J.P. Morgan Chase Bank N.A. (the ADR Depositary) is the depositary for IHG’s ADR programme. The ADR Depositary’s principal executive
office is at: J.P. Morgan Depositary Receipts, 390 Madison Avenue, New York, NY 10017. The ADR Depositary has agreed to reimburse
certain reasonable Company expenses related to the Company’s ADR programme and incurred by the Company in connection with the
ADR programme. The Company did not receive any payments from the ADR Depositary during the year ended 31 December 2023 in respect
of legal, accounting and other fees incurred in connection with the preparation of the Annual Report and Form 20-F, ongoing SEC
compliance and listing requirements, investor relations programmes, and advertising and public relations expenditure.
Group information
continued
Description of securities other than equity securities
Additional Information
250
IHG
| Annual Report and Form 20-F 2023
Articles of Association
The Company’s Articles of Association (the Articles) were
first
adopted with effect from 27 June 2005, were most recently
amended at the AGM held on 7 May 2020 and are available on the
Company’s website at
ihgplc.com/investors
under Corporate
governance. The following summarises material rights of holders
of the Company’s ordinary shares under the material provisions of
the Articles and English law. This summary is qualified in its entirety
by reference to the Companies Act and the Articles.
The Company’s shares may be held in certificated or uncertificated
form. No holder of the Company’s shares will be required to make
additional contributions of capital in respect of the Company’s
shares in the future.
In the following description, a ‘shareholder’ is the person registered
in the Company’s register of members as the holder of the
relevant share.
Principal objects
The Company is incorporated under the name InterContinental Hotels
Group PLC and is registered in England and Wales with registered
number 5134420. The Articles do not restrict its objects or purposes.
Directors
Under the Articles, a Director may have an interest in certain matters
(‘Permitted Interest’) without the prior approval of the Board,
provided they have declared the nature and extent of such Permitted
Interest at a meeting of the Directors or in the manner set out in
Section 184 or Section 185 of the Companies Act.
Any matter in which a Director has a material interest, and which
does not comprise a Permitted Interest, must be authorised by
the Board in accordance with the procedure and requirements
contained in the Articles. In particular, this includes the requirement
that a Director may not vote on a resolution to authorise a matter in
which they are interested, nor may they count in the quorum of the
meeting at which such business is transacted.
Further, a Director may not vote in respect of any proposal in which
they, or any person connected with them, has any material interest
other than by virtue of their interests in securities of, or otherwise in
or through, the Company, nor may they count in the quorum of the
meeting at which such business is transacted. This is subject to
certain exceptions, including in relation to proposals: (a) indemnifying
them in respect of obligations incurred on behalf of the Company;
(b) indemnifying a third party in respect of obligations of the Company
for which the Director has assumed responsibility under an indemnity
or guarantee; (c) relating to an offer of securities in which they will be
interested as an underwriter; (d) concerning another body corporate
in which the Director is beneficially interested in less than one per
cent of the issued shares of any class of shares of such a body
corporate; (e) relating to an employee benefit in which the Director
will share equally with other employees; and (f) relating to liability
insurance that the Company is empowered to purchase for the
benefit o
f Directors of the Company in respect of actions
undertaken as Directors (or officers) of the Company.
The Directors have authority under the Articles to set their own
remuneration (provided certain criteria are met). While an agreement
to award remuneration to a Director is an arrangement with the
Company that comprises a Permitted Interest (and therefore
does not require authorisation by the Board in that respect), it is
nevertheless a matter that would be expected to give rise to
a conflict o
f interest between the Director concerned and the
Company, and such conflict must be authorised by a resolution o
f the
Board. The Director that is interested in such a matter may neither
vote on the resolution to authorise such conflict, nor count in the
quorum of the meeting at which it was passed. Furthermore, as noted
above, the interested Director is not permitted to vote in respect of
any proposal in which they have any material interest (except in
respect of the limited exceptions outlined above) nor may they count
in the quorum of the meeting at which such business is transacted.
As such, a Director has no power, in the absence of an independent
quorum, to vote on compensation to themselves, but may vote on
a resolution (and may count in the quorum of the meeting at which
it was passed) to award compensation to Directors provided those
arrangements do not confer a bene
fit solely on them.
The Directors are empowered to exercise all the powers of the
Company to borrow money, subject to any limitation in the Articles
(currently $5 billion), unless sanctioned by an ordinary resolution
of the Company.
Under the Articles, there are no age limit requirements relating to
a person’s qualification to hold office as a Director o
f the Company.
Directors are not required to hold any shares of the Company by way
of quali
fication.
The Articles require annual retirement and re-election of all Directors
at the AGM.
Rights attaching to shares
Dividend rights and rights to share in the Company’s profits
Under English law, dividends are payable on the Company’s ordinary
shares only out of pro
fits available
for distribution, as determined in
accordance with accounting principles generally accepted in the UK
and by the Companies Act. No dividend will bear interest as against
the Company.
Holders of the Company’s ordinary shares are entitled to receive
such dividends as may be declared by the shareholders in general
meeting, rateably according to the amounts paid up on such shares,
provided that the dividend cannot exceed the amount
recommended by the Directors.
The Company’s Board of Directors may declare and pay to
shareholders such interim dividends as appear to them to be justified
by the Company’s financial position. I
f authorised by an ordinary
resolution of the shareholders, the Board of Directors may also direct
payment of a dividend in whole or in part by the distribution of speci
fic
assets (and in particular of paid-up shares or debentures of any
other company).
Any dividend unclaimed by a member (or by a person entitled by virtue
of transmission on death or bankruptcy or otherwise by operation of
law) after six years from the date the dividend was declared, or became
due for payment, will be forfeited and will revert to the Company.
Voting rights
The holders of ordinary shares are entitled, in respect of their holdings
of such shares, to receive notice of general meetings and to attend,
speak and vote at such meetings in accordance with the Articles.
Voting at any general meeting of shareholders is by a show of hands
unless a poll, which is a written vote, is duly demanded. On a show
of hands, every shareholder who is present in person or by proxy at
a general meeting has one vote regardless of the number of shares
held. Resolutions put to the members at electronic general meetings
shall be voted on by a poll, which poll votes may be cast by such
electronic means as the Board in its sole discretion deems
appropriate for the purposes of the meeting.
Additional Information
Group information
251
IHG
| Annual Report and Form 20-F 2023
Group information
continued
Articles of Association
continued
In the UK, many employees of Group companies are covered by the
Working Time Regulations, which came into force on 1 October 1998.
These regulations implemented the EU Working Time Directive and
parts of the Young Workers Directive, and lay down rights and
protections for employees in areas such as maximum working hours,
minimum rest time, minimum days off and paid leave. The Working
Time Regulations continue to apply in the UK following the UK’s exit
from the EU as retained EU law under the European Union
(Withdrawal) Act 2018, as amended.
In the UK, there is in place a national minimum wage under the
National Minimum Wage Act 1998, as amended. At 31 December
2023, the minimum wage for individuals aged 18 to 20 was £7.49
per hour, aged 21 to 22 was £10.18 per hour and for those aged 23 or
over was £10.42 per hour in each case, excluding apprentices aged
under 19 years or, otherwise, in the first year o
f their apprenticeships.
This particularly impacts businesses in the hospitality and retailing
sectors. Compliance with the National Minimum Wage Act is being
monitored by the Low Pay Commission, an independent statutory
body established by the UK Government.
None of the Group’s UK employees are covered by collective
bargaining agreements with trade unions.
Continual attention is paid to the external market in order to ensure
that terms of employment are appropriate. The Group believes the
Group companies will be able to conduct their relationships with
trade unions and employees in a satisfactory manner.
On a poll, every shareholder who is present in person or by proxy
has one vote for every share held by that shareholder. A poll may
be demanded by any of the following:
•
the Chair of the meeting;
•
at least five shareholders present in person or by proxy and
entitled to vote at the meeting;
•
any shareholder or shareholders present in person or by proxy
representing in the aggregate not less than one-tenth of the total
voting rights of all shareholders entitled to vote at the meeting; or
•
any shareholder or shareholders present in person or by proxy
holding shares conferring a right to vote at the meeting and on
which there have been paid up sums in the aggregate at least
equal to one-tenth of the total sum paid up on all the shares
conferring that right.
A proxy form will be treated as giving the proxy the authority to
demand a poll, or to join others in demanding one.
The necessary quorum for a general meeting is two persons
carrying a right to vote upon the business to be transacted, whether
present in person or by proxy.
Matters are transacted at general meetings of the Company by the
proposing and passing of resolutions, of which there are two kinds:
•
an ordinary resolution, which includes resolutions for the election
of Directors, the approval of
financial statements, the cumulative
annual payment of dividends, the appointment of the Auditor, the
increase of share capital or the grant of authority to allot shares;
and
•
a special resolution, which includes resolutions amending the
Articles, disapplying statutory pre-emption rights, modifying the
rights of any class of the Company’s shares at a meeting of the
holders of such class or relating to certain matters concerning
the Company’s winding up or changing the Company’s name.
An ordinary resolution requires the affirmative vote of a majority of
the votes of those persons present and entitled to vote at a meeting
at which there is a quorum.
Special resolutions require the affirmative vote of not less than
three-quarters of the persons present and entitled to vote at
a meeting at which there is a quorum.
AGMs must be convened upon advance written notice of 21 days.
Other meetings must be convened upon advance written notice of
14 days. The days of delivery or receipt of the notice are not included.
The notice must specify the nature of the business to be transacted.
The Board of Directors may, if they choose, make arrangements for
shareholders, who are unable to attend the place of the meeting, to
participate at other places or to allow for shareholders to attend and
participate in shareholder meetings by electronic means.
Variation of rights
If, at any time, the Company’s share capital is divided into different
classes of shares, the rights attached to any class may be varied,
subject to the provisions of the Companies Act, with the consent
in writing of holders of three-quarters in nominal value of the issued
shares of that class or upon the adoption of a special resolution
passed at a separate meeting of the holders of the shares of that
class. At every such separate meeting, all of the provisions of the
Articles relating to proceedings at a general meeting apply, except
that the quorum is to be the number of persons (which must be two
or more) who hold or represent by proxy not less than one-third in
nominal value of the issued shares of that class.
Rights in a winding-up
Except as the Company’s shareholders have agreed or may
otherwise agree, upon the Company’s winding up, the balance of
assets available for distribution is to be distributed among the holders
of ordinary shares according to the amounts paid up on the shares
held by them:
•
after the payment of all creditors including certain preferential
creditors, whether statutorily preferred creditors or normal
creditors; and
•
subject to any special rights attaching to any class of shares.
This distribution is generally to be made in cash. A liquidator may,
however, upon the adoption of a special resolution of the shareholders,
divide among the shareholders the whole or any part of the
Company’s assets in kind.
Limitations on voting and shareholding
There are no limitations imposed by English law or the Articles on
the right of non-residents or foreign persons to hold or vote the
Company’s ordinary shares or ADSs, other than the limitations that
would generally apply to all of the Company’s shareholders.
Working Time Regulations 1998
Additional Information
252
IHG
| Annual Report and Form 20-F 2023
The following contracts have been entered into otherwise than in
the course of ordinary business by members of the Group: (i) in the
two years immediately preceding the date of this document in the
case of contracts which are or may be material; or (ii) that contain
provisions under which any Group member has any obligation or
entitlement that is material to the Group as at the date of this document.
To the extent that these agreements include representations,
warranties and indemnities, such provisions are considered standard
in an agreement of that nature, save to the extent identi
fied below.
Syndicated Facility
In April 2022, the Company, together with Six Continents Limited
and InterContinental Hotels Limited (as borrowers and guarantors),
signed a five-year $1.35 billion bank
facility agreement (Syndicated
Facility) with Bank of America Europe Designated Activity Company,
Bank of China Limited, London Branch, Barclays Bank PLC, BNP
Paribas, London Branch, Commerzbank Aktiengesellschaft, London
Branch, DBS Bank Ltd, London Branch, Mizuho Bank, Ltd., MUFG
Bank, Ltd., Standard Chartered Bank, Truist Securities, Inc., Unicredit
Bank AG, U.S. Bank National Association and Wells Fargo Bank, N.A.,
London Branch all acting as lenders, mandated lead arrangers and
joint bookrunners, and MUFG Bank, Ltd. as facility agent.
During 2023, IHG Finance LLC, a Group company, acceded to
the Syndicated Facility agreement as an additional guarantor and
the Syndicated Facility agreement was amended to ensure that
the implementation of IFRS 16 ‘Leases’ was accurately re
flected in
the agreement’s terms. The Company also exercised its ability to
extend the term of the Syndicated Facility by an additional period
of 12 months, taking its term to April 2028.
The interest margin payable on borrowings under the Syndicated
Facility is linked to the long-term credit rating assigned to the senior
unsecured and unsubordinated debt of the Company. The margin
can vary between the applicable reference rate + 0.50% and the
applicable reference rate + 1.00% depending on the credit rating.
The Syndicated Facility was undrawn as at 31 December 2023.
£4 billion Euro Medium Term Note programme
In 2023, the Group updated its Euro Medium Term Note programme
(EMTN Programme) and issued a tranche of €600 million 4.375%
notes due 28 November 2029 (2023 Issuance).
On 21 September 2023, an amended and restated trust deed (Trust
Deed) was executed by the Company and IHG Finance LLC (IHGFL)
as issuers (Issuers); the Company, IHGFL, Six Continents Limited and
InterContinental Hotels Limited as guarantors (Guarantors) and U.S.
Bank Trustees Limited as trustee (Trustee), pursuant to which the
trust deed dated 27 November 2009, as supplemented by five
supplemental trust deeds dated 7 July 2011, 9 November 2012,
16 June 2015, 11 August 2016 and 14 September 2020 between the
Company as issuer, Six Continents Limited and InterContinental
Hotels Limited as guarantors and HSBC Corporate Trustee Company
(UK) Limited as trustee relating to the Programme, was amended and
restated. Under the Trust Deed, the Issuers may issue notes (Notes)
unconditionally and irrevocably guaranteed by the Guarantors,
up to a maximum nominal amount from time to time outstanding
of £4 billion (or its equivalent in other currencies). Notes are to be
issued in series (each a Series) in bearer or registered form. Each
Series may comprise one or more tranches (each a Tranche) issued
on different issue dates. A Tranche of Notes may be issued on the
terms and conditions set out in a base prospectus as amended
and/or supplemented by a document setting out the final terms
(Final Terms) of such Tranche or in a separate prospectus speci
fic
to such Tranche.
Under the Trust Deed, each of the Issuers and the Guarantors has
given certain customary covenants in favour of the Trustee.
The Final Terms issued under the 2023 Issuance provide that
the holders of the Notes have the right to repayment if the Notes
(a) become non-investment grade within the period commencing
on the date of announcement of a change of control and ending
90 days after the change of control (Change of Control Period) and
are not subsequently, within the Change of Control Period, reinstated
to investment grade; (b) are downgraded from a non-investment
grade and are not reinstated to its earlier credit rating or better
within the Change of Control Period; or (c) are not credit rated and
do not become investment grade credit rated by the end of the
Change of Control Period.
On 21 September 2023, the Issuers and the Guarantors entered into
an amended and restated agency agreement (Agency Agreement)
with Elavon Financial Services DAC, UK Branch as principal paying
agent, Elavon Financial Services DAC as transfer agent and registrar
and the Trustee, pursuant to which the Issuers and the Guarantors
appointed paying agents and calculation agents in connection with
the EMTN Programme and the Notes.
Under the Agency Agreement, each of the Issuers and the Guarantors
has given a customary indemnity in favour of the paying agents and
the calculation agents.
On 21 September 2023, the Issuers and the Guarantors entered into
an amended and restated dealer agreement (Dealer Agreement)
with Barclays Bank PLC as arranger and Bank of China Limited, London
Branch, Barclays Bank PLC, Commerzbank Aktiengesellschaft, Merrill
Lynch International, MUFG Securities EMEA plc, Truist Securities, Inc.
and Wells Fargo Securities International Limited as dealers (Dealers),
pursuant to which the Dealers were appointed in connection with
the EMTN Programme and the Notes.
Under the Dealer Agreement, each of the Issuer and the Guarantors
has given customary warranties and indemnities in favour of
the Dealers.
There are no restrictions on dividend payments to US citizens.
Although there are currently no UK foreign exchange control
restrictions on the export or import of capital or the payment of
dividends on the ordinary shares or the ADSs, economic sanctions
which may be in force in the UK from time to time impose restrictions
on the payment of dividends to persons resident (or treated as so
resident) in or governments of (or persons exercising public
functions in) certain countries.
Other than economic sanctions which may be in force in the UK
from time to time, there are no restrictions under the Articles of
Association or under English law that limit the right of non-resident
or foreign owners to hold or vote the ordinary shares or the ADSs.
In addition, the Articles contain certain limitations on the voting and
other rights of any holder of ordinary shares whose holding may, in
the opinion of the Directors, result in the loss or failure to secure the
reinstatement of any licence or franchise from any US governmental
agency held by Six Continents Hotels, Inc. or any subsidiary thereof.
Exchange controls and restrictions on payment of dividends
Material contracts
Additional Information
Group information
253
IHG
| Annual Report and Form 20-F 2023
Group companies have extensive operations in the UK, as well as
internationally, and are involved in a number of legal claims and
proceedings incidental to those operations. These legal claims and
proceedings are in various stages and include disputes related to
specific hotels where the potential materiality is not yet known. It is
the Company’s view that such proceedings, either individually or in
the aggregate, have not in the recent past and are not likely to have
a significant effect on the Group’s financial position or profitability.
Notwithstanding the above, the Company notes the matters set out
below, which are ongoing. Litigation is inherently unpredictable and,
as of 16 February 2024, unless stated otherwise, the outcome of
these matters cannot be reasonably determined.
A claim was filed on 5 July 2016 by CPTS Hotel Lessee, LLC (CPTS)
against Holiday Hospitality Franchising, LLC (HHF). The claimant
alleged breach of the licence agreement and sought a declaratory
judgement from the court that it had the right to terminate its
licence with HHF. In June 2023, this case was dismissed.
A claim was filed on 26 June 2017 against InterContinental Hotels
Corporation, InterContinental Hotels Group Resources, Inc., and
InterContinental Hotels Group (Canada), Inc. seeking class action
status and alleging breach of
fiduciary duty, negligence, breach o
f
confidence, intrusion upon seclusion, breach o
f contract, breach
of privacy legislation, and unjust enrichment regarding an alleged
data breach. The claim was amended in March 2018 to name Six
Continents Hotels, Inc. as the sole defendant. The claimant alleges
that security failures allowed customers’
financial in
formation to be
compromised. As of 16 February 2024, the likelihood of a favourable
or unfavourable result cannot be reasonably determined, and it is
not possible to determine whether any loss is likely or to estimate
the amount of any loss.
Seven claims were filed in March 2022 against Holiday Hospitality
Franchising LLC, Six Continents Hotels, Inc., and the IHG Owner’s
Association, seeking class action status on behalf of IHG franchisees.
Following dismissal of two claims and consolidation of the remaining,
an amended claim was filed against Holiday Hospitality Franchising
LLC and Six Continents Hotels, Inc., alleging claims for breach of
contract, breach of implied covenant of good faith and fair dealing,
breach of
fiduciary duty, declaratory judgement, violation o
f the
Sherman Act and demand for accounting. The claims allege that
IHG, as franchisor, is engaged in unlawful business practices relating
to numerous programmes, products and requirements which are
purportedly part of IHG’s franchise system. The Court dismissed the
majority of the claims, and the remaining claims allege breach of
contract and deceptive trade practices. As of 16 February 2024,
the likelihood of a favourable or unfavourable result cannot be
reasonably determined and it is not possible to determine whether
any loss is likely or to estimate the amount of any loss.
A claim was filed on 15 September 2022 against Holiday Hospitality
Franchising LLC, Six Continents Hotels, Inc., and IHG Technology
Solutions, Inc. seeking class action status and damages for alleged
claims for breach of contract, deceptive trade practices under state
law, negligence and unjust enrichment. The allegations relate to the
criminal, unauthorised access into IHG’s systems. As of 16 February
2024, the likelihood of a favourable or unfavourable result cannot be
reasonably determined, and it is not possible to determine whether
any loss is likely or to estimate the amount of any loss.
An arbitration was filed on December 11, 2022, alleging that Holiday
Inns Middle East Limited breached its contractual obligations by
causing delay in relation to the opening of a hotel. The claim seeks
monetary damages for various alleged losses. As of 16 February 2024,
the likelihood of a favourable or unfavourable result cannot be
reasonably determined, and it is not possible to determine whether
any loss is likely or to estimate the amount of any loss.
Group information
continued
Legal proceedings
Additional Information
254
IHG
| Annual Report and Form 20-F 2023
This section provides a summary of material US federal income tax
and UK tax consequences to the US holders, described below, of
owning and disposing of ordinary shares or ADSs of the Company.
This section addresses only the tax position of a US holder who
holds ordinary shares or ADSs as capital assets. This section does
not, however, discuss all of the tax considerations that may be
relevant to any particular US holder, such as the provisions of the
Internal Revenue Code of 1986, as amended (IR Code) known as
the Medicare Contribution tax or tax consequences to US holders
subject to special rules, such as:
•
certain financial institutions;
•
insurance companies;
•
dealers and traders in securities who use a mark-to-market
method of tax accounting;
•
persons holding ordinary shares or ADSs as part of a straddle,
conversion transaction, integrated transaction or wash sale,
or persons entering into a constructive sale with respect to the
ordinary shares or ADSs;
•
persons whose functional currency for US federal income tax
purposes is not the US dollar;
•
partnerships or other entities classified as partnerships
for
US federal income tax purposes;
•
persons liable for the alternative minimum tax;
•
tax-exempt organisations;
•
persons who acquired the Company’s ADSs or ordinary shares
pursuant to the exercise of any employee stock option or otherwise
in connection with employment; and
•
persons who, directly or indirectly, own ordinary shares or ADSs
representing 10% or more of the Company’s voting power or value.
This section does not generally deal with the position of a US holder
who is resident in the UK for UK tax purposes or who is subject to UK
taxation on capital gains or income by virtue of carrying on a trade,
profession or vocation in the UK through a branch, agency or
permanent establishment to which such ADSs or ordinary shares
are attributable (‘trading in the UK’).
As used herein, a ‘US holder’ is a person who, for US federal income
tax purposes, is a beneficial owner o
f ordinary shares or ADSs and is:
(i) a citizen or individual resident of the US; (ii) a corporation, or other
entity taxable as a corporation, created or organised in or under the
laws of the US, any state therein or the District of Columbia; (iii) an
estate whose income is subject to US federal income tax regardless
of its source; or (iv) a trust, if a US court can exercise primary
supervision over the trust’s administration and one or more US
persons are authorised to control all substantial decisions of
the trust.
This section is based on the IR Code, its legislative history, existing
and proposed regulations, published rulings and court decisions,
and on UK tax laws and the published practice of HM Revenue and
Customs (HMRC), all as of the date hereof. These laws, and that
practice, are subject to change, possibly on a retroactive basis.
This section is further based in part upon the representations of
the ADR Depositary and assumes that each obligation in the
deposit agreement and any related agreement will be performed
in accordance with its terms. For US federal income tax purposes,
an owner of ADRs evidencing ADSs will generally be treated as the
owner of the underlying shares represented by those ADSs. For UK
tax purposes, in practice, HMRC will also regard holders of ADSs
as the beneficial owners o
f the ordinary shares represented by
those ADSs (although case law has cast some doubt on this).
The discussion below assumes that HMRC’s position is followed.
Generally, exchanges of ordinary shares for ADSs, and ADSs for
ordinary shares, will not be subject to US federal income tax or UK
taxation on capital gains, although UK stamp duty or stamp duty
reserve tax (SDRT) may arise as described below.
Investors should consult their own tax advisers regarding the US
federal, state and local, the UK and other tax consequences of
owning and disposing of ordinary shares or ADSs in their particular
circumstances.
The following disclosures assume that the Company is not, and will
not become, a passive foreign investment company (PFIC), except
as described below.
Taxation of dividends
UK taxation
Under current UK tax law, the Company will not be required to
withhold tax at source from dividend payments it makes.
A US holder who is not resident for UK tax purposes in the UK and
who is not trading in the UK will generally not be liable for UK taxation
on dividends received in respect of the ADSs or ordinary shares.
US federal income taxation
A US holder is generally subject to US federal income taxation on the
gross amount of any dividend paid by the Company out of its current
or accumulated earnings and profits (as determined
for US federal
income tax purposes). Distributions in excess of the Company’s
current and accumulated earnings and profits, as determined
for
US federal income tax purposes, will be treated as a return of capital
to the extent of the US holder’s basis in the ordinary shares or ADSs
and thereafter as capital gain. Because the Company has not
historically maintained, and does not currently maintain, books in
accordance with US tax principles, the Company does not expect
to be in a position to determine whether any distribution will be in
excess of the Company’s current and accumulated earnings and
profits as computed
for US federal income tax purposes. As a result,
it is expected that amounts distributed will be reported to the
Internal Revenue Service (IRS) as dividends.
Subject to applicable limitations, dividends paid to certain
non-corporate US holders will be taxable at the preferential rates
applicable to long-term capital gain if the dividends constitute
‘qualified dividend income’. The Company expects that dividends
paid by the Company with respect to the ordinary shares or ADSs
will constitute qualified dividend income. Non-corporate US holders
should consult their own tax advisers to determine whether they are
subject to any special rules that limit their ability to be taxed at these
preferential rates.
Dividends must be included in income when the US holder, in the
case of shares, or the ADR Depositary, in the case of ADSs, actually
or constructively receives the dividend, and will not be eligible for
the dividends-received deduction generally allowed to US
corporations in respect of dividends received from other US
corporations. For foreign tax credit limitation purposes, dividends
will generally be income from sources outside the US.
The amount of any dividend paid in pounds sterling will be the US
dollar value of the sterling payments made, determined at the spot
sterling/US dollar rate on the date the dividend distribution is
includible in income, regardless of whether the payment is in fact
converted into US dollars. If the dividend is converted into US dollars
on that date, a US holder should not be required to recognise foreign
currency gain or loss in respect of the dividend income. Generally,
any gain or loss resulting from currency exchange
fluctuations
during the period from the date the dividend payment is includible
in income to the date the payment is converted into US dollars will
be treated as ordinary income or loss from sources within the US.
Shareholder information
Taxation
Additional Information
255
IHG
| Annual Report and Form 20-F 2023
Shareholder information
Taxation of capital gains
UK taxation
A US holder who is not resident for UK tax purposes in the UK
and who is not trading in the UK will not generally be liable for UK
taxation on capital gains, or eligible for relief for allowable losses,
realised or accrued on the sale or other disposal of ADSs or ordinary
shares. A US holder of ADSs or ordinary shares who is an individual
and who, broadly, has temporarily ceased to be resident in the UK or
has become temporarily treated as non-resident for UK tax purposes
for a period of not more than
five years and who disposes o
f ordinary
shares or ADSs during that period may, for the year of assessment
when that individual becomes resident again in the UK, be liable to
UK tax on capital gains (subject to any available exemption or relief),
notwithstanding the fact that such US holder was not treated as
resident in the UK at the time of the sale or other disposal.
US federal income taxation
A US holder who sells or otherwise disposes of ordinary shares or
ADSs will recognise a capital gain or loss for US federal income tax
purposes equal to the difference between the amount realised and
its tax basis in the ordinary shares or ADSs, each determined in US
dollars. Such capital gain or loss will be a long-term capital gain or
loss where the US holder has a holding period greater than one year.
Losses may also be treated as long-term capital losses to the extent
of certain ‘extraordinary dividends’ that quali
fied
for the preferential
tax rates on qualified dividend income described above. The capital
gain or loss will generally be income or loss from sources within the
US for foreign tax credit limitation purposes. The deductibility of
capital losses is subject to limitations.
PFIC rules
Based on the manner in which the Group operates its business
and estimates of the value of its assets (which estimates are based,
in part, on the market value of the Company’s ADSs) the Company
believes that it was not a PFIC for US federal income tax purposes
for its 2023 taxable year. However, the Company’s PFIC status is an
annual factual determination and thus may be subject to change.
If the Company were a PFIC for any taxable year during which a US
holder owned ordinary shares or ADSs, gain realised on the sale or
other disposition of ordinary shares or ADSs would, in general, not
be treated as capital gain. Instead, gain would be treated as if the US
holder had realised such gain rateably over the holding period for
the ordinary shares or ADSs and, to the extent allocated to the
taxable year of the sale or other disposition and to any year before
the Company became a PFIC, would be taxed as ordinary income.
The amount allocated to each other taxable year would be taxed
at the highest tax rate in effect (for individuals or corporations, as
applicable) for each such year to which the gain was allocated,
together with an interest charge in respect of the tax attributable to
each such year. In addition, similar rules would apply to any ‘excess
distribution’ received on the ordinary shares or ADSs (generally, the
excess of distributions received on the ordinary shares or ADSs
during the taxable year over 125% of the average amount of
distributions received during a specified prior period). The pre
ferential
rates for quali
fied dividend income described above would not apply
if the Company were a PFIC for the taxable year of the distribution or
the preceding taxable year.
Certain elections may be available (including a market-to-market
election) to US holders that would result in alternative treatments
of the ordinary shares or ADSs. If the Company were a PFIC for any
taxable year in which a US holder held ordinary shares or ADSs, a US
holder would generally be required to file IRS Form 8621 with their
annual US federal income tax returns, subject to certain exceptions.
Additional tax considerations
UK inheritance tax
An individual who is neither domiciled nor deemed domiciled in
the UK is only chargeable to UK inheritance tax to the extent the
individual owns assets situated in the UK. As a matter of UK law,
it is not clear whether the situs of an ADS for UK inheritance tax
purposes is determined by the place where the depositary is
established and records the entitlements of the deposit holders,
or by the situs of the underlying share which the ADS represents,
but HMRC may take the view that the ADSs, as well as the ordinary
shares, are or represent UK-situs assets.
However, an individual who is domiciled in the US (for the purposes
of the Estate and Gift Tax Convention (the Convention)), and is not
a UK national as defined in the Convention, will not be subject to UK
inheritance tax (to the extent UK inheritance tax applies) in respect
of the ordinary shares or ADSs on the individual’s death or on a
transfer of the ordinary shares or ADSs during their lifetime, provided
that any applicable US federal gift or estate tax is paid, unless the
ordinary shares or ADSs are part of the business property of a UK
permanent establishment or pertain to a UK fixed base o
f an
individual used for the performance of independent personal
services. Where the ordinary shares or ADSs have been placed in
trust by a settlor, they may be subject to UK inheritance tax unless,
when the trust was created, the settlor was domiciled in the US and
was not a UK national. If no relief is given under the Convention,
inheritance tax may be charged on death and also on the amount by
which the value of an individual’s estate is reduced as a result of any
transfer made by way of gift or other undervalue transfer, broadly
within seven years of death, and in certain other circumstances.
Where the ordinary shares or ADSs are subject to both UK
inheritance tax and to US federal gift or estate tax, the Convention
generally provides for either a credit against US federal tax liabilities
for UK inheritance tax paid or for a credit against UK inheritance tax
liabilities for US federal tax paid, as the case may be.
UK stamp duty and SDRT
Neither stamp duty nor Stamp Duty Reserve Tax (SDRT) will
generally be payable in the UK on the purchase or transfer of an
ADS, provided that the ADS and any separate instrument or written
agreement of transfer are executed and remain at all times outside
the UK. UK legislation does however provide for stamp duty or
SDRT to be payable at the rate of 1.5% on the amount or value of the
consideration (or, in some cases, the value of the ordinary shares)
where ordinary shares are transferred to a person (or a nominee or
agent of a person) whose business is or includes issuing depositary
receipts or the provision of clearance services. In accordance with
the terms of the deposit agreement, any tax or duty payable on
deposits of ordinary shares by the depositary or by the custodian of
the depositary will typically be charged to the party to whom ADSs
are delivered against such deposits. However, such transfers will not
attract stamp duty or SDRT where they satisfy the conditions of an
exemption, including exemptions which can apply to certain capital
raising or qualifying listing arrangements.
The discussion above assumes that the provisions affecting stamp
duty and SDRT contained in the Finance Bill currently proceeding
through the UK Parliament (which, broadly, provide for the repeal
of certain 1.5% SDRT charges on the issue of securities by a UK
company to depositary receipt issuers and clearance services
and the exemptions mentioned above which can apply to certain
transfers of securities made in the course of capital raising or
qualifying listing arrangements) are enacted in substantively the
same form as currently published and have retroactive effect from
1 January 2024. Until the Finance Bill receives Royal Assent (which
is likely to be later in 2024), relevant provisions affecting stamp duty
and SDRT have been given provisional statutory effect, as if they
were contained in an Act of Parliament, under (in the case of SDRT)
the Provisional Collection of Taxes Act 1968 and (in the case of
stamp duty) the Finance Act 1973, through resolutions of the
Shareholder information
continued
Taxation
continued
Additional Information
256
IHG
| Annual Report and Form 20-F 2023
House of Commons passed on 27 November 2023. Speci
fic
professional advice should be sought before paying a 1.5% SDRT
or stamp duty charge in any circumstances.
A transfer of the underlying ordinary shares will generally be subject
to stamp duty or SDRT, normally at the rate of 0.5% of the amount or
value of the consideration (rounded up to the next multiple of £5 in
the case of stamp duty). A transfer of ordinary shares from a nominee
to its beneficial owner, including the trans
fer of underlying ordinary
shares from the depositary to an ADS holder, under which no
beneficial interest passes, will not be subject to stamp duty or SDRT.
Any UK stamp duty or SDRT imposed upon transfers of ADSs or
ordinary shares will not be creditable for US federal income tax
purposes. US Holders should consult their tax advisers regarding
whether any such UK stamp duty or SDRT may be deductible or
reduce the amount of gain (or increase the amount of loss) recognised
upon a sale or other disposition of the ADSs or ordinary shares.
US backup withholding and information reporting
Payments of dividends and sales proceeds with respect to ADSs
and ordinary shares may be reported to the IRS and to the US holder.
Backup withholding may apply to these reportable payments if the
US holder fails to provide an accurate taxpayer identi
fication number
or certification o
f exempt status, or fails to report all interest and
dividends required to be shown on its US federal income tax returns.
Certain US holders (including, among others, corporations) are
not subject to information reporting and backup withholding.
The amount of any backup withholding from a payment to a US
holder will be allowed as a credit against the holder’s US federal
income tax liability and may entitle the holder to a refund, provided
that the required information is furnished in a timely manner to the
IRS. US holders should consult their tax advisers as to their
qualification
for exemption from backup withholding and the
procedure for obtaining an exemption.
Certain US holders who are individuals (and certain specified entities),
may be required to report information relating to their ownership
of non-US securities unless the securities are held in accounts at
financial institutions (in which case the accounts may be reportable
if maintained by non-US
financial institutions). US holders should
consult their tax advisers regarding any reporting obligations they
may have with respect to the Company’s ordinary shares or ADSs.
As of the end of the period covered by this report, the Group carried
out an evaluation under the supervision and with the participation
of the Group’s management, including the Chief Executive Officer
and Chief Financial Officer, of the e
ffectiveness of the design and
operation of the Group’s disclosure controls and procedures
(as defined in Rules 13a–15(e) and 15d–15(e) o
f the Securities
Exchange Act 1934).
These are defined as those controls and procedures designed to
ensure that information required to be disclosed in reports
filed
under the Securities Exchange Act 1934 is recorded, processed,
summarised and reported within the specified periods. Based on
that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Group’s disclosure controls and
procedures were effective.
Disclosure controls and procedures
Additional Information
257
IHG
| Annual Report and Form 20-F 2023
Shareholder information
Shareholder information
continued
Summary of signi
ficant corporate governance
differences from NYSE listing standards
The Group’s statement of compliance with the principles and
provisions specified in the UK Corporate Governance Code issued in
July 2018 by the Financial Reporting Council (the Code) is set out on
pages 141 and 142.
IHG has also adopted the corporate governance requirements of
the US Sarbanes-Oxley Act and related rules and of the NYSE, to the
extent that they are applicable to it as a foreign private issuer. As a
foreign private issuer, IHG is required to disclose any signi
ficant
ways in which its corporate governance practices differ from those
followed by US companies. These are as follows:
Basis of regulation
The Code contains a series of principles and provisions. Listed
companies are required to state how they have applied the Code’s
principles, and the provisions operate on a ‘comply or explain’ basis,
where any areas of non-compliance should be disclosed with an
explanation for the non-compliance.
In contrast, US companies listed on the NYSE are required to adopt
and disclose corporate governance guidelines adopted by the NYSE.
Independent Directors
The Code’s principles recommend that at least half the Board,
excluding the Chair, should consist of independent non-executive
directors. As at 16 February 2024, the Board consisted of the Chair,
independent at the time of her appointment, two Executive Directors
and eight independent Non-Executive Directors. NYSE listing rules
applicable to US companies state that companies must have a
majority of independent directors. The NYSE has set out six bright
line tests for director independence. The Board’s judgement is that
all of its Non-Executive Directors are independent. However, it did
not explicitly take into consideration the NYSE’s tests in reaching
this determination.
Chair and Chief Executive Officer
The Code recommends that the Chair and Chief Executive Officer
should not be the same individual to ensure that there is a clear
division of responsibility for the running of the Company’s business.
There is no corresponding requirement for US companies. The roles
of Chair and Chief Executive Officer were, as at 16 February 2024
and throughout 2023, ful
filled by separate individuals.
Committees
The Company has a number of Board Committees which are similar
in purpose and constitution to those required for domestic companies
under NYSE rules. The NYSE requires US companies to have audit,
remuneration and nominating/corporate governance committees
composed entirely of independent directors, as de
fined under the
NYSE rules. The Company’s Nomination, Audit and Remuneration
Committees consist entirely of Non-Executive Directors who are
independent under the standards of the Code, which may not
necessarily be the same as the NYSE independence standards.
The nominating/governance committee is responsible for identifying
individuals qualified to become Board members and to recommend
to the Board a set of corporate governance principles. As the Company
is subject to the Code, the Company’s Nomination Committee is
responsible for nominating, for approval by the Board, candidates
for appointment to the Board, including recommending suitable
candidates for the role of Senior Independent Non-Executive
Director. The Company’s Nomination Committee consists of the
Chair and independent Non-Executive Directors.
The Chair of the Company is not a member of the Audit Committee.
As set out on page 94, the Audit Committee is chaired by an
independent Non-Executive Director who, in the Board’s view, has
the experience and qualifications to satis
fy the criterion under US
rules for an ‘audit committee
financial expert’.
Non-Executive Director meetings
NYSE rules require that non-management Directors of US companies
must meet on a regular basis without management present, and
independent Directors must meet separately at least once per year.
The Code recommends: (i) the Board Chair to hold meetings with
the Non-Executive Directors without the Executive Directors present;
and (ii) the Non-Executive Directors to meet at least annually without
the Chair present to appraise the Chair’s performance. The Company’s
Non-Executive Directors have met frequently without Executive
Directors being present, and intend to continue this practice, after
every Board meeting if possible.
Shareholder approval of equity compensation plans
The NYSE rules require that shareholders must be given the
opportunity to vote on all equity compensation plans and material
revisions to those plans. The Company complies with UK
requirements, which are similar to the NYSE rules. The Board does
not, however, explicitly take into consideration the NYSE’s detailed
definition o
f ‘material revisions’.
Code of Conduct
The NYSE requires companies to adopt a code of business
conduct and ethics, applicable to Directors, officers and employees.
Any waivers granted to Directors or officers under such a code must
be promptly disclosed. As set out on pages 39 and 40, IHG’s Code
of Conduct is applicable to all Directors, officers and employees, and
is available on the Company’s website at
ihgplc.com/corporate-
governance/code-of-conduct
. No waivers have been granted
under the Code of Conduct.
Compliance certification
Each chief executive of a US company must certify to the NYSE each
year that he or she is not aware of any violation by the Company of
any NYSE corporate governance listing standard. As the Company is
a foreign private issuer, the Company’s Chief Executive Officer is not
required to make this certification. However, he is required to noti
fy
the NYSE promptly in writing after any of the Company’s executive
officers become aware of any non-compliance with those NYSE
corporate governance rules applicable to the Company.
Additional Information
258
IHG
| Annual Report and Form 20-F 2023
Since March 2003, the Group has returned over £7 billion of funds to shareholders by way of special dividends, capital returns and share
repurchase programmes.
Return of funds programme
Timing
Total return
Returned to date
£501m special dividend
a
Paid in December 2004
£501m
£501m
£250m share buyback
Completed in 2004
£250m
£250m
£996m capital return
a
Paid in July 2005
£996m
£996m
£250m share buyback
Completed in 2006
£250m
£250m
£497m special dividend
a
Paid in June 2006
£497m
£497m
£250m share buyback
Completed in 2007
£250m
£250m
£709m special dividend
a
Paid in June 2007
£709m
£709m
£150m share buyback
N/A
b
£150m
£120m
$500m special dividend
ac
Paid in October 2012
£315m
d
($500m)
£315m
e
($505m)
$500m share buyback
Completed in 2014
£315m
d
($500m)
£315m
($500m)
f
$350m special dividend
Paid in October 2013
£229m
g
($350m)
£228m
($355m)
h
$750m special dividend
a
Paid in July 2014
£447m
i
($750m)
£446m
($763m)
j
$1,500m special dividend
a
Paid in May 2016
£1,038m
k
($1,500m)
£1,038m
($1,500m)
$400m special dividend
a
Paid in May 2017
£309m
l
($400m)
£310m
($404m)
$500m special dividend
a
Paid in January 2019
£389m
m
($500m)
£388m
($510m)
$500m share buyback
Completed in January 2023
£432m
($496m)
£432m
($496m)
$750m share buyback
Completed in December
2023
£595m
($746m)
£595m
($746m)
Total
£7,672m
£7,640m
a
Accompanied by a share consolidation.
b
This programme was superseded by the share buyback programme announced on 7 August 2012.
c
IHG changed the reporting currency of its Consolidated Financial Statements from sterling to US dollars effective from the Half-Year Results as at 30 June 2008.
d
The dividend was first determined in US dollars and converted to sterling immediately be
fore announcement at the rate of $1=£0.63, as set out in the circular detailing the special
dividend and share buyback programme published on 14 September 2012.
e
Sterling dividend translated at $1=£0.624.
f
Translated into US dollars at the average rates of exchange for the relevant years (2014 $1=£0.61; 2013 $1=£0.64; 2012 $1 = £0.63).
g
The dividend was first determined in US dollars and converted to sterling immediately be
fore announcement at the rate of $1=£0.65, as announced in the Half-Year Results
to 30 June 2013.
h
Sterling dividend translated at $1=£0.644.
i
The dividend was first determined in US dollars and converted to sterling immediately be
fore announcement at the rate translated at $1=£0.597.
j
Sterling dividend translated at $1=£0.5845.
k
The dividend was first determined in US dollars and converted to sterling at the rate o
f $1 = £0.6923, as announced on 12 May 2016.
l
The dividend was first determined in US dollars and converted to sterling at the rate o
f $1 = £0.7724, as announced on 11 May 2017.
m
The dividend was first determined in US dollars and converted to sterling at the rate o
f £1 = $1.2860, as announced on 17 January 2019.
Return of funds
Additional Information
259
IHG
| Annual Report and Form 20-F 2023
Shareholder information
The Group’s $750m share buyback programme was announced on 21 February 2023 and completed on 8 December 2023. As at
31 December 2023, 10,643,334 shares had been repurchased at an average price of £55.8797 per share (approximately £595m).
Total number of shares
(or units) purchased
Average price paid
per share (or unit) (£)
Total number of shares
(or units) purchased
as part of publicly
announced plans or
programmes
Maximum number of
shares (or units) that
may be purchased
under the plans or
programmes
Month 1 (no purchases this month)
–
–
–
18,401,631
a
Month 2
197,021
55.4399
197,021
18,401,631
a
Month 3
53,665
53.8770
53,665
18,401,631
a
Month 4
3,284,657
54.6737
3,284,657
18,401,631
a
Month 5
622,030
53.6625
622,030
17,515,456
b
Month 6
998,070
54.1602
998,070
17,515,456
b
Month 7
2,415,477
54.1101
2,415,477
17,515,456
b
Month 8
419,276
57.2867
419,276
17,515,456
b
Month 9
2,073,696
61.1512
2,073,696
17,515,456
b
Month 10
210,503
58.9185
210,503
17,515,456
b
Month 11
368,361
59.4679
368,361
17,515,456
b
Month 12
578
64.7148
578
17,515,456
b
a
Reflects the resolution passed at the Company’s AGM held on 6 May 2022.
b
Reflects the resolution passed at the Company’s AGM held on 5 May 2023.
The table below sets forth the amounts of ordinary dividends on each ordinary share and special dividends, in respect of each
financial
year indicated.
Interim dividend
Final dividend
Total dividend
Special dividend
pence
cents
pence
cents
pence
cents
pence
cents
2023
38.7
48.3
N/A
a
104
N/A
a
152.3
–
–
2022
37.8
43.9
76.08
94.5
113.88
138.4
–
–
2021
–
–
67.50
85.9
67.50
85.9
–
–
2020
–
–
–
–
–
–
–
–
2019
32.0
39.9
–
b
–
b
32.0
39.9
–
–
2018
27.7
36.3
60.4
78.1
88.1
114.4
203.8
ce
262.1
ce
2017
24.4
33.0
50.2
71.0
74.6
104.0
156.4
c
202.5
c
2016
22.6
30.0
49.4
64.0
72.0
94.0
438.2
c
632.9
c
2015
17.7
27.5
40.3
57.5
58.0
85.0
–
–
2014
14.8
25.0
33.8
52.0
48.6
77.0
174.9
c
293.0
c
2013
15.1
23.0
28.1
47.0
43.2
70.0
87.1
133.0
2012
13.5
21.0
27.7
43.0
41.2
64.0
108.4
c
172.0
c
2011
9.8
16.0
24.7
39.0
34.5
55.0
–
–
2010
8.0
12.8
22.0
35.2
30.0
48.0
–
–
2009
7.3
12.2
18.7
29.2
26.0
41.4
–
–
2008
d
6.4
12.2
20.2
29.2
26.6
41.4
–
–
2007
5.7
11.5
14.9
29.2
20.6
40.7
200
c
–
2006
5.1
9.6
13.3
25.9
18.4
35.5
118
c
–
a
The sterling amount of the
final dividend will be announced on 25 April 2024 using the average o
f the daily exchange rates for the three working days commencing 22 April 2024.
b
The Board withdrew its recommendation of a
final dividend in respect o
f 2019 of 85.9¢ per share.
c
Accompanied by a share consolidation.
d
IHG changed the reporting currency of its Consolidated Financial Statements from sterling to US dollars effective from the Half-Year Results as at 30 June 2008. Starting with the
interim dividend for 2008, all dividends have
first been determined in US dollars and converted into sterling prior to payment.
e
This special dividend was announced on 19 October 2018 and paid on 29 January 2019.
Dividend history
Shareholder information
continued
Purchases of equity securities by
the Company and af
filiated purchaser
Additional Information
260
IHG
| Annual Report and Form 20-F 2023
Shareholder profile by type as at 31 December 2023
Category of shareholder
Number of
shareholders
Percentage of
total shareholders
Number of
ordinary shares
Percentage of
issued share capital
Private individuals
27,873
95.24
6,903,273
4.01
Nominee companies
1,054
3.60
130,457,086
75.73
Limited and public limited companies
176
0.60
16,828,012
9.77
Other corporate bodies
157
0.54
18,060,803
10.48
Banks and unknown
7
0.02
7,592
0
Total
29,267
100
172,256,766
100
Shareholder profile by size as at 31 December 2023
Range of shareholdings
Number of
shareholders
Percentage of
total shareholders
Number of
ordinary shares
Percentage of
issued share capital
1–199
20,303
69.37
1,178,392
0.68
200–499
4,958
16.94
1,550,178
0.90
500–999
1,956
6.68
1,357,640
0.79
1,000–4,999
1,349
4.61
2,639,651
1.53
5,000–9,999
173
0.59
1,202,834
0.70
10,000–49,999
275
0.94
6,322,715
3.67
50, 000–99,999
84
0.29
5,741,501
3.33
100,000–499,999
126
0.43
27,664,401
16.06
500,000–999,999
19
0.06
12,789,629
7.42
1,000,000 and above
24
0.08
111,809,825
64.91
Total
29,267
100
172,256,766
100
Shareholder profile by geographical location as at 31 December 2023
Country/Jurisdiction
Percentage of
issued share capital
UK
35.8%
Rest of Europe
20.3%
North America (including ADRs)
41.8%
Rest of world
2.1%
Total
100%
The geographical profile presented is based on an analysis o
f shareholders (by manager) of 10,000 shares or above where geographical
ownership is known. This analysis only captures 93% of total issued share capital. Therefore, the known percentage distributions have been
multiplied by 100/93 to achieve the figures shown in the table above.
As of 16 February 2024, 13,057,667 ADRs equivalent to 13,057,667 ordinary shares, or approximately 7.58% of the total issued share capital,
were outstanding and were held by 405 holders. Since certain ordinary shares are registered in the names of nominees, the number of
shareholders on record may not be representative of the number of bene
ficial owners.
As of 16 February 2024, there were a total of 30,018 recorded holders of ordinary shares, of whom 228 had registered addresses in the US
and held a total of 275,706 ordinary shares (0.16% of the total issued share capital).
Shareholder profiles
Additional Information
261
IHG
| Annual Report and Form 20-F 2023
Shareholder information
The following exhibits are
filed as part o
f this Annual Report on Form 20-F with the SEC, and are publicly available through the SEC’s website.
Visit
sec.gov
and search InterContinental Hotels Group PLC under Company Filings.
Exhibit 1
a
Articles of Association of the Company dated 7 May 2020 (incorporated by reference to Exhibit 1 of the
InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated 4 March 2021)
Exhibit 2(d)
Description of Securities Registered Under Section 12 of the Exchange Act
Exhibit 4(a)(i)
Amended and restated trust deed dated 21 September 2023 relating to a £4 billion Euro Medium Term Note
Programme, among InterContinental Hotels Group PLC, IHG Finance LLC, Six Continents Limited, InterContinental
Hotels Limited and U.S. Bank Trustees Limited
Exhibit 4(a)(ii)
a
$1.35 billion bank facility agreement dated 28 April 2022, among InterContinental Hotels Group PLC and certain of
its subsidiaries, and Bank of America Europe Designated Activity Company, Bank of China Limited, London Branch,
Barclays Bank PLC, BNP Paribas, London Branch, Commerzbank Aktiengesellschaft, London Branch, DBS Bank Ltd,
London Branch, Mizuho Bank, Ltd., MUFG Bank, Ltd., Standard Chartered Bank, Truist Securities, Inc., Unicredit Bank
AG, U.S. Bank National Association and Wells Fargo Bank, N.A., London Branch (incorporated by reference to Exhibit
4(a)(ii) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated 2 March 2023)
Exhibit 4(a)(iii)
Extension letter dated 10 March 2023 relating to the $1.35 billion bank facility agreement dated 28 April 2022
Exhibit 4(a)(iv)
Amendment letter dated 10 August 2023 relating to the $1.35 billion bank facility agreement dated 28 April 2022
Exhibit 4(a)(v)
Accession letter dated 12 October 2023 relating to the $1.35 billion bank facility agreement dated 28 April 2022
Exhibit 4(c)(i)
Michael Glover’s service contract dated 12 December 2022, commenced on 20 March 2023
Exhibit 4(c)(ii)
a
Rules of the InterContinental Hotels Group Long Term Incentive Plan as approved by shareholders on 2 May 2014
and as amended on 14 February 2019, 4 December 2019 and 7 May 2020 (incorporated by reference to Exhibit 4(c)
(ii) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated 4 March 2021)
Exhibit 4(c)(iii)
a
Rules of the InterContinental Hotels Group Annual Performance Plan as amended (incorporated by reference to
Exhibit 4(c)(iii) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated
4 March 2021)
Exhibit 4(c)(iv)
Elie Maalouf’s service contract dated 4 May 2023, commenced on 1 July 2023
Exhibit 4(c)(v)
Rules of the InterContinental Hotels Group Deferred Award Plan as approved by shareholders on 5 May 2023 and
as amended on 18 October 2023
Exhibit 8
List of subsidiaries as at 31 December 2023 (can be found on pages 214 to 216)
Exhibit 12(a)
Certification o
f Elie Maalouf
filed pursuant to 17 CFR 240.13a–14(a)
Exhibit 12(b)
Certification o
f Michael Glover
filed pursuant to 17 CFR 240.13a–14(a)
Exhibit 13(a)
Certification o
f Elie Maalouf and Michael Glover furnished pursuant to 17 CFR 240.13a–14(b) and 18 U.S.C.1350
Exhibit 15(a)
Consent of independent registered public accounting
firm, PricewaterhouseCoopers LLP
Exhibit 97
Incentive-Based Compensation Recovery Policy approved on 18 October 2023
Exhibit 101.INS
Inline XBRL Instance Document
Exhibit 101.SCH
Inline XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
a
Incorporated by reference.
Exhibits
Additional Information
262
IHG
| Annual Report and Form 20-F 2023
The Annual Report and Form 20-F 2023 contains certain forward
-
looking statements as defined under US legislation (Section 21E o
f
the Securities Exchange Act of 1934) with respect to the
financial
condition, results of operations and business of the Group and certain
plans and objectives of the Board of Directors of InterContinental
Hotels Group PLC with respect thereto. Such statements include,
but are not limited to, statements made in the Chair’s statement
and in the Chief Executive Officer’s review. 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 the Group’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, including, but not limited to: the Group’s
exposure to a competitive and changing industry; the Group’s
reliance on the reputation of its existing brands and exposure
to inherent reputation risks; the Group’s exposure to inherent
uncertainties associated with brand development and expansion;
the Group’s exposure to a variety of risks related to identifying,
securing and retaining franchise and management agreements;
the Group’s exposure to the risks of hotel industry overcapacity;
the Group’s requirement to have the right people, skills and
capability to manage growth and change; the risk that the Group’s
collective bargaining activity could disrupt operations, increase
labour costs or interfere with the ability of management to focus on
executing business strategies; the Group’s exposure to cybersecurity
and data privacy risks; the Group’s exposure to intellectual property
risks; the risk that the Group’s reputation and the value of its brands
are influenced by the perception o
f various stakeholders of the Group;
the Group’s requirements to comply with existing and changing
regulations and act in accordance with societal expectations across
numerous countries, territories and jurisdictions; the Group’s
exposure to the risk of litigation; the potential for domestic and
international environmental laws and regulations to cause the Group
to incur substantial costs or subject the Group to potential liabilities;
the Group’s financial per
formance being affected by changes in
tax laws; the Group’s dependence on a wide range of external
stakeholders and business partners; the Group’s exposure to a variety
of risks associated with safety, security and crisis management; the
Group’s reliance on the resilience of its reservation system and other
key technology platforms and the exposure to risks that could disrupt
their operation and/or integrity; the Group’s exposure to political
and economic developments; the Group’s exposure to continued
disruption and consequences from the war in Ukraine; the Group’s
exposure to disruption and consequences from the con
flict in the
Middle East; the potential for the Group to face difficulties insuring
its business; the Group’s exposure to risks related to executing and
realising benefits
from strategic transactions, including acquisitions
and restructuring; the Group’s exposure to a variety of risks
associated with its financial stability and ability to borrow and satis
fy
debt covenants; the dependence of the Group’s operations on
maintaining sufficient liquidity to meet all foreseeable medium-term
requirements and provide headroom against unforeseen obligations;
the Group’s exposure to an impairment of the carrying value of its
brands, goodwill or other tangible and intangible assets negatively
affecting its consolidated operating results; the Group’s exposure to
fluctuations in exchange rates, currency devaluations or restructurings
and to interest rate risk in relation to its borrowings; the potential for
the Group to be affected by credit risk on treasury transactions; the
Group’s exposure to inherent risks in relation to changing technology
and systems; the Group’s exposure to competition from online travel
agents and intermediaries; the Group’s exposure to the risk of events
or stakeholder expectations that adversely impact domestic or
international travel, including climate change; and the Group’s
exposure to risks relating to its commitments in relation to
climate change.
The main factors that could affect the business and
financial results
are described in the Strategic Report of the Annual Report and
Form 20-F 2023.
Forward-looking statements
Additional Information
263
IHG
| Annual Report and Form 20-F 2023
Forward-looking statements
The table below references information in this document that will be included in the Company’s Annual Report on Form 20-F for 2023
filed
with the SEC.
Item
Form 20-F caption
Location in this document
Page
1
Identity of Directors, senior management
and advisers
Not applicable
–
2
Offer statistics and expected timetable
Not applicable
–
3
Key information
3A – Selected financial data
Shareholder information: Dividend history
260
3B – Capitalisation and indebtedness
Not applicable
–
3C – Reason for the offer and use of proceeds
Not applicable
–
3D – Risk factors
Group information: Risk factors
242-247
4
Information on the Company
4A – History and development of the Company
Group information: History and developments
242
Shareholder information: Return of funds
259
Useful information: Contacts
271
4B – Business overview
Strategic Report
2-88
Group information: Working Time Regulations 1998
252
Group Information: Risk factors
242-247
4C – Organisational structure
Strategic Report: Our Culture
38-40
Group Financial Statements: Note 33 – Group companies
214-216
Group Information: History and developments
242
4D – Property, plant and equipment
Strategic Report: Key performance indicators
60-63
Directors’ Report: Greenhouse gas (GHG) emissions
238-240
Group Financial Statements: Note 13 – Property, plant and equipment
189-190
4A
Unresolved staff comments
None
–
5
Operating and financial review and prospects
5A – Operating results
Strategic Report: Key performance indicators
60-63
Strategic Report: Performance
65-88
Group Financial Statements: Accounting policies
161-172
Group Financial Statements: New accounting standards
172
Viability statement
50-51
5B – Liquidity and capital resources
Strategic Report: Our Business Model – Capital allocation and
dividend policy
12-13
Viability statement
50-51
Strategic Report: Performance – Sources of liquidity
70
Group Financial Statements: Note 18 – Cash and cash equivalents
195
Group Financial Statements: Note 22 – Loans and other borrowings
197-198
Group Financial Statements: Note 24 – Financial risk management
and derivative financial instruments
199-203
Group Financial Statements: Note 25 – Classification and
measurement of
financial instruments
204-205
Group Financial Statements: Note 26 – Reconciliation of (loss)/pro
fit
for the year to cash
flow
from operations before contract
acquisition costs
206
5C – Research and development;
intellectual property
Not applicable
–
5D – Trend information
Strategic Report: Performance
65-88
Strategic Report: Trends shaping our industry
14-15
5E – Off-balance sheet arrangements
Strategic Report: Performance – Off-balance sheet arrangements
70
5G – Safe harbour
Additional Information: Forward-looking statements
263
Non-GAAP financial measures
Strategic Report: Performance
65-88
Other financial in
formation
226-234
Group Financial Statements: Note 6 – Exceptional items
179-180
Group Financial Statements: Note 10 – (Loss)/earnings per ordinary share
186
Group Financial Statements: Note 23 – Net debt
198-199
Form 20-F cross-reference guide
Additional Information
264
IHG
| Annual Report and Form 20-F 2023
Item
Form 20-F caption
Location in this document
Page
6
Directors, senior management and employees
6A – Directors and senior management
Governance: Our Board of Directors and Our Executive Committee
92-99
6B – Compensation
Directors’ Remuneration Report
116-140
Group Financial Statements: Note 27 – Retirement benefits
207-209
Group Financial Statements: Note 31 – Related party disclosures
213
Group Financial Statements: Note 28 – Share-based payments
209-210
6C – Board practices
Governance structure and Board activities
100-104
Executive Directors’ benefits upon termination o
f office
249
6D – Employees
Group Financial Statements: Note 4 – Staff costs and
Directors’ remuneration
178
Group information: Working Time Regulations 1998
252
Directors’ Report: Employees and Code of Conduct
236-237
6E – Share ownership
Directors’ Remuneration Report: Annual Report on Directors’
remuneration – Scheme interests awarded during 2022 and 2023
131
Directors’ Remuneration Report: Annual Report on Directors’
remuneration – Shares and awards held by Executive Directors at
31 December 2023: number of shares
133
Group Financial Statements: Note 28 – Share-based payments
209-210
Group information: Directors’ and Executive Committee
members’ shareholdings
249
6F – Disclosure of a registrant’s action to recover
erroneously awarded compensation
Not applicable
–
7
Major shareholders and related
party transactions
7A – Major shareholders
Directors’ Report: Major institutional shareholders
235
Shareholder information: Shareholder pro
files
261
7B – Related party transactions
Group Financial Statements: Note 15 – Investment in associates
192-193
Group Financial Statements: Note 31 – Related party disclosures
213
7C – Interests of experts and counsel
Not applicable
–
8
Financial Information
8A – Consolidated statements and other
financial in
formation
Directors’ Report: Dividends
235
Group Financial Statements
143-216
Group information: Legal proceedings
254
Other financial in
formation
226-234
8B – Significant changes
None
–
9
The offer and listing
9A – Offer and listing details
Useful information: Trading markets
269
9B – Plan of distribution
Not applicable
–
9C – Markets
Useful information: Trading markets
269
9D – Selling shareholders
Not applicable
–
9E – Dilution
Not applicable
–
9F – Expenses of the issue
Not applicable
–
10
Additional information
10A – Share capital
Not applicable
–
10B – Memorandum and articles of association
Group information: Articles of Association
251-252
Group information: Rights attaching to shares
251-252
10C – Material contracts
Group information: Material contracts
253
10D – Exchange controls
Group information: Exchange controls and restrictions
on payment of dividends
253
10E – Taxation
Shareholder information: Taxation
255-257
10F – Dividends and paying agents
Not applicable
–
10G – Statement by experts
Not applicable
–
10H – Documents on display
Useful information: Investor information – Documents on display
269
10I – Subsidiary information
Not applicable
–
Additional Information
265
IHG
| Annual Report and Form 20-F 2023
Form 20-F cross
-reference guide
Form 20-F cross-reference guide
continued
Item
Form 20-F caption
Location in this document
Page
11
Quantitative and qualitative disclosures
about market risk
Group Financial Statements: Note 24 – Financial risk management
and derivative financial instruments
199-203
12
Description of securities other than
equity securities
12A – Debt securities
Not applicable
–
12B – Warrants and rights
Not applicable
–
12C – Other securities
Not applicable
–
12D – American depositary shares
Group information: Description of securities other than equity securities
250
Additional Information: Investor Information
269-270
Additional Information: Contacts
271
13
Defaults, dividend arrearages
and delinquencies
Not applicable
–
14
Material modifications to the rights
of security holders and use of proceeds
Not applicable
–
15
Controls and Procedures
Shareholder information: Disclosure controls and procedures
257
Statement of Directors’ Responsibilities: Management’s report
on internal control over financial reporting
144
Independent Auditor’s US Report
151-153
16
16A – Audit committee financial expert
Governance: Audit Committee Report
107-111
Shareholder information: Summary of signi
ficant corporate
governance differences from NYSE listing standards – Committees
258
16B – Code of ethics
Directors’ Report: Employees and Code of Conduct
236-237
Strategic Report: Our culture
38-40
Shareholder information: Summary of signi
ficant corporate
governance differences from NYSE listing standards
258
16C – Principal accountant fees and services
Governance: Audit Committee Report – External auditor
109
Governance: Audit Committee Report – Non-audit services
109
Group Financial Statements: Note 5 – Auditor’s remuneration
178
16D – Exemptions from the listing standards
for audit committees
Not applicable
–
16E – Purchase of equity securities by the issuer
and affiliated purchasers
Shareholder information: Purchases of equity securities
by the Company and affiliated purchasers
260
16F – Change in registrant’s certifying accountant
Not applicable
–
16G – Corporate Governance
Shareholder information: Summary of signi
ficant corporate
governance differences from NYSE listing standards
258
16H – Mine safety disclosure
Not applicable
–
16I – Disclosure regarding foreign jurisdictions
that prevent inspections
Not applicable
–
16J – Insider trading policies
Not applicable
–
16K – Cybersecurity
Additional Information: Cybersecurity
248
17
Financial statements
Not applicable
–
18
Financial statements
Group Financial Statements
143-216
19
Exhibits
Additional Information: Exhibits
262
Additional Information
266
IHG
| Annual Report and Form 20-F 2023
ADR
an American Depositary Receipt, being
a receipt evidencing title to an ADS.
ADR Depositary
J.P. Morgan Chase Bank N.A.
ADS
an American Depositary Share as evidenced
by an ADR, being a registered negotiable
security, listed on the New York Stock
Exchange, representing one ordinary share
of 20 340⁄399 pence each of the Company.
AGM
Annual General Meeting.
APP
Annual Performance Plan.
Average daily rate
rooms revenue divided by the number
of room nights sold.
Capital expenditure
purchases of property, plant and equipment,
intangible assets, associate and joint venture
investments, and other financial assets, plus
contract acquisition costs (key money).
Captive
the Group’s captive insurance company,
SCH Insurance Company.
Code
IHG’s Code of Conduct.
Colleague
individuals who work at IHG corporate
offices, reservation centres, managed,
owned, leased, managed lease and
franchised hotels collectively.
Companies Act
the UK Companies Act 2006, as amended
from time to time.
Company or Parent Company
InterContinental Hotels Group PLC.
Comparable RevPAR
a comparison for a grouping of hotels that
have traded in all months in financial years
being compared. Principally excludes new
hotels, hotels closed for major refurbishment
and hotels sold in either of the two years.
Compound Annual Growth Rate (CAGR)
growth over a period of years expressed
as the constant rate of growth that would
produce the same growth if
compounded annually.
Constant currency
a prior-year value translated using the
current year’s average exchange rates.
FERA
Fuel and energy related emissions.
Franchised hotels
hotels operated under an IHG brand license
by a franchisee. IHG receives a
fixed
percentage of rooms revenue and neither
owns, leases nor operates the property.
Franchisee
an owner who uses a brand under licence
from IHG.
FRC
UK Financial Reporting Council.
Group or IHG
the Company and its subsidiaries.
Guest Love
IHG’s guest satisfaction measurement tool
used to measure brand preference and
guest satisfaction.
Guest Reservation System or GRS
our global electronic guest
reservation system.
Hedging
the reduction of risk, normally in relation to
foreign currency or interest rate movements,
by making offsetting commitments.
Hotel revenue
revenue from all revenue-generating activity
undertaken by managed, owned, leased and
managed lease hotels, including room
nights, food and beverage sales.
IASB
International Accounting Standards Board.
IFRS
International Financial Reporting Standards
as issued by the IASB and adopted under
UK law.
IHG PLC
InterContinental Hotels Group PLC.
International Sustainability Standards
Board (ISSB)
formed by the IFRS to create sustainability-
related disclosure standards that provide
investors with consistent and comparable
information about companies’ sustainability-
related risks and opportunities.
Journey to Tomorrow
IHG’s responsible business plan to create
positive change by 2030.
Liquidated damages
payments received in respect of the
early termination of franchise and
management agreements.
Currency swap
an exchange of a deposit and a borrowing,
each denominated in a different currency,
for an agreed period of time.
DAP
Deferred Award Plan.
Deferred Compensation Plan or DCP
a US plan that allows for the additional
provision for retirement within a dedicated
trust, either through employee deferral of
salary with matching company contributions,
deferral of APP earnings or through direct
company contribution.
Derivatives
financial instruments used to reduce risk,
the price of which is derived from an
underlying asset, index or rate.
DE&I
Diversity, equity & inclusion.
EMEAA
Europe, Middle East, Asia and Africa
(excludes Greater China).
Employee engagement survey
our employee engagement survey, known
as the Colleague HeartBeat, completed by
IHG employees or those colleagues who
are employed at managed or managed
lease hotels.
Enterprise contribution to revenue
the percentage of room revenue booked
through IHG managed channels and
sources: direct via our websites, apps and
call centres; through our interfaces with
Global Distribution Systems (GDS) and
agreements with Online Travel Agencies
(OTAs); other distribution partners directly
connected to our reservation system; and
Global Sales Office business or IHG One
Rewards members that book directly at
a hotel.
ERG
employee resource group.
ESG
Environmental, social and governance.
Executive officers
defined by the SEC as the president, any vice
president in charge of a principal business
unit, division or function (such as sales,
administration or finance), any officer who
performs a policy making function, or any
other person who performs similar policy
making functions.
Fee business
IHG’s franchised and managed
businesses combined.
Glossary
Additional Information
267
IHG
| Annual Report and Form 20-F 2023
Glossary
Listing Rules
regulations subject to the oversight of the
Financial Conduct Authority, which set out
the obligations of UK listed companies.
LTIP
Long Term Incentive Plan.
Managed hotels
hotels operated by IHG under a
management agreement on behalf of the
hotel owner. IHG generates revenue through
a fixed percentage o
f the total hotel revenue
and a proportion of hotel pro
fit, and neither
leases nor owns the property.
Managed lease
properties which are held through a lease
but with the same characteristics as
management agreements.
Management agreement
a contract to operate a hotel on behalf of the
hotel owner.
Market capitalisation
the value attributed to a listed company
by multiplying its share price by the number
of shares in issue.
Net rooms supply
net total number of IHG System hotel rooms.
NYSE
New York Stock Exchange.
Occupancy rate
rooms occupied by hotel guests, expressed
as a percentage of rooms that are available.
Ordinary share
ordinary shares of 20 340⁄399 pence each
in the Company.
Owned, leased and managed lease hotels
hotels operated by IHG where IHG is,
or effectively acts as, the owner, with
responsibility for assets, employees and
running costs. The entire revenue and profit
of the hotels are recorded in IHG’s
financial statements.
Owner
the owner of a hotel property.
Pipeline
hotels/rooms due to enter the IHG System
at a future date. A hotel enters the pipeline
once a contract has been signed and
appropriate fees paid.
% pts
a percentage point is the unit for the
arithmetic difference of two percentages.
Reimbursable revenues
reimbursements from managed and
franchised hotels for costs incurred by IHG,
for example the cost of IHG employees
working in managed hotels. The related
revenues and costs are presented gross
in the Group income statement and there
is no impact to profit.
Revenue management
the employment of pricing and segment
strategies to optimise the revenue generated
from the sale of room nights.
RevPAR or Revenue per available room
rooms revenue divided by the number
of room nights that are available (can be
mathematically derived from occupancy
rate multiplied by average daily rate).
Revolving Credit Facility or RCF
the Group’s syndicated bank revolving
credit facility.
Room count
number of rooms franchised, managed,
owned, leased or managed lease by IHG.
Rooms revenue
revenue generated from the sale
of room nights.
Royalties
fees, based on rooms revenue, that
a franchisee pays to the Group.
Science-based targets (SBTs)
measurable, actionable and time-bound
carbon reduction targets, based on the best
available science and in line with the scale of
reductions required to keep global warming
below 2°C or 1.5°C from pre-industrial levels.
Science Based Targets initiative (SBTi)
helps businesses commit to and meet SBTs
by independently assessing and approving
any targets that are set.
SEC
US Securities and Exchange Commission.
Subsidiary
a company over which the Group
exercises control.
System
hotels/rooms operating under franchise and
management agreements together with IHG
owned, leased and managed lease hotels/
rooms, globally (the IHG System) or on a
regional basis, as the context requires.
System Fund or Fund
assessment fees and contributions collected
from hotels within the IHG System which
fund activities that drive revenue to our
hotels including marketing, the IHG One
Rewards loyalty programme and our
distribution channels.
Task Force on Climate-related
Financial Disclosures (TCFD)
created by the Financial Stability Board
to improve and increase reporting of
climate-related financial in
formation and to
help inform investors and others about the
risks they face related to climate change.
Total Shareholder Return or TSR
the theoretical growth in value of a
shareholding over a period, by reference to
the beginning and ending share price, and
assuming that dividends, including special
dividends, are reinvested to purchase
additional units of the equity.
UK Corporate Governance Code
a Code issued in 2018 by the Financial
Reporting Council in the UK, which guides
best practice for the governance of
listed companies.
Working capital
the sum of inventories, receivables and
payables of a trading nature, excluding
financing and taxation items.
For the definitions o
f our Key performance
measures (including Non-GAAP measures)
see pages 84 to 88.
Glossary
continued
Additional Information
268
IHG
| Annual Report and Form 20-F 2023
Website and electronic communication
As part of IHG’s commitment to reduce the cost and environmental
impact of producing and distributing printed documents in large
quantities, this Annual Report and Form 20-F 2023 has been made
available to shareholders through our website at
ihgplc.com/investors
under Annual Report. Shareholders may electronically appoint a
proxy to vote on their behalf at the 2024 AGM. Shareholders who
hold their shares through CREST may appoint proxies through the
CREST electronic proxy appointment service, by using the
procedures described in the CREST Manual.
Shareholder hotel discount
IHG offers discounted hotel stays (subject to availability) for
registered shareholders only, through a controlled-access website.
This is not available to shareholders who hold shares through nominee
companies, ISAs or ADRs. For further details please contact the
Company Secretary’s office (see page 271).
Responsible Business Report
In line with our commitment to responsible business practices, this
year we have produced a Responsible Business Report showcasing
our approach to responsible business and progress against our
Responsible Business Targets.
Visit
ihgplc.com/responsible-business
for further information.
Modern Slavery Statement
In accordance with the UK Modern Slavery Act 2015, we have
produced a Modern Slavery Statement.
Visit
ihgplc.com/reporting
for further information.
Registrar
For information on a range of shareholder services, including
enquiries concerning individual shareholdings, notification o
f a
shareholder’s change of address and amalgamation of shareholder
accounts (in order to avoid duplicate mailing of shareholder
communications), shareholders should contact the Company’s
Registrar, Equiniti, on +44 (0) 371 384 2030
a
.
Dividend services
Dividend Reinvestment Plan (DRIP)
The Company offers a DRIP for shareholders to purchase
additional IHG shares with their cash dividends. For further
information about the DRIP, please contact our Registrar helpline
on +44 (0) 371 384 2030
a
.
Visit
shareview.co.uk/info/drip
for a DRIP application form
and information booklet.
Bank mandate
We encourage shareholders to have their dividends paid directly
into their UK bank or building society accounts, to ensure efficient
payment and clearance of funds on the payment date. For further
information, please contact our Registrar (see page 271).
Overseas payment service
It is also possible for shareholders to have their dividends paid
directly to their bank accounts in a local currency. Charges are
payable for this service.
Visit
shareview.co.uk/info/ops
for further information.
Out-of-date/unclaimed dividends
If you think that you have out-of-date dividend cheques or
unclaimed dividend payments, please contact our Registrar
(see page 271).
Individual Savings Account (ISA)
Equiniti offers a Stocks and Shares ISA that can invest in IHG shares.
For further information, please contact Equiniti on
+44 (0) 371 384 2030
a
.
Share-dealing services
Equiniti offers the following share-dealing facilities.
Postal dealing
+44 (0) 371 384 2030 from the UK and overseas
a
Telephone dealing
For more information, call +44 (0)371 384 2030
b
Internet dealing
Visit
shareview.co.uk
for more information.
Changes to the base cost of IHG shares
Details of all the changes to the base cost of IHG shares held from
April 2004 to January 2019, for UK Capital Gains Tax purposes,
may be found on our website at
ihgplc.com/investors
under
Shareholder centre in the Tax information section.
‘Gone away’ shareholders
Working with ProSearch (an asset reunification company), we
continue to look for shareholders who have not kept their contact
details up to date. We have funds waiting to be claimed and are
committed to doing what we can to pay these to their rightful
owners. Please contact ProSearch on +44 (0) 371 384 2735
c
or visit
prosearchassets.com
for further details.
a
Lines are open from 08:30 to 17:30 Monday to Friday, excluding UK public holidays.
b
Lines are open from 08:00 to 18:00 Monday to Friday, excluding UK public holidays.
c
Lines are open from 09:00 to 17:00 Monday to Friday, excluding UK public holidays.
Shareholder security
Many companies have become aware that their shareholders have
received unsolicited telephone calls or correspondence concerning
investment matters. These are typically from ‘brokers’ who target UK
shareholders, offering to sell them what often turn out to be worthless
or high-risk shares in US or UK investments. These operations are
commonly known as ‘boiler rooms’. More detailed information on this
or similar activity can be found at
fca.org.uk/consumers
on the
Financial Conduct Authority website.
Details of any share dealing facilities that the Company endorses will
be included in Company mailings.
Trading markets
The principal trading market for the Company’s ordinary shares
is the London Stock Exchange (LSE). The ordinary shares are also
listed on the NYSE, trading in the form of ADSs evidenced by ADRs.
Each ADS represents one ordinary share. The Company has
a sponsored ADR facility with J.P. Morgan Chase Bank, N.A.,
as ADR Depositary.
American Depositary Receipts (ADRs)
The Company’s shares are listed on the NYSE in the form of
American Depositary Shares, evidenced by ADRs and traded
under the symbol ‘IHG’. Each ADR represents one ordinary share.
All enquiries regarding ADR holder accounts and payment of
dividends should be directed to J.P. Morgan Chase Bank, N.A.,
our ADR Depositary bank (contact details shown on page 271).
Documents on display
Documents referred to in this Annual Report and Form 20-F that
are filed with the SEC can be
found at the SEC’s public reference
room located at 100 F Street, NE Washington, DC 20549. For further
information and copy charges please call the SEC at 1-800-SEC-0330.
The SEC maintains a website that contains reports, proxy and
information statements, and other information regarding issuers that
file electronically and the Company’s SEC filings since 22 May 2002
are also publicly available through the SEC’s website at
sec.gov
Copies of the Company’s Articles of Association can be obtained via
the website at
ihgplc.com/investors
under Corporate governance
or from the Company’s registered office on request.
Useful information
Investor information
Additional Information
269
IHG
| Annual Report and Form 20-F 2023
Useful information
Dividends
2023
2023 Interim dividend
Ex-dividend date
31 August
Record date
1 September
Payment date
5 October
2024
2023 Final dividend of 104¢ per ordinary share
a
Ex-dividend date
4 April
Record date
5 April
Payment date
14 May
a
The sterling amount of the
final dividend will be announced on 25 April 2024 using
the average of the daily exchange rates for the three working days commencing
22 April 2024.
Other dates
2023
Financial year end
31 December
2024
Announcement of Preliminary Results for 2023
20 February
Announcement of 2024 First Quarter
Trading Update
3 May
Annual General Meeting
3 May
Announcement of Half-Year Results for 2024
6 August
Announcement of 2024 Third Quarter
Trading Update
22 October
Financial year end
31 December
2025
Announcement of Preliminary Results for 2024
February
Useful information
continued
Financial calendars
Additional Information
270
IHG
| Annual Report and Form 20-F 2023
Registered office
IHG Hotels & Resorts, 1 Windsor Dials, Arthur Road, Windsor,
Telephone:
+44 (0) 1753 972 000
ihgplc.com
For general information about the Group’s business, please contact
the Corporate Affairs department at the above address. For all other
enquiries, please contact the Company Secretary’s office at the
above address.
Registrar
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex,
BN99 6DA, United Kingdom
Telephone:
+44 (0) 345 607 6838
shareview.co.uk
ADR Depositary
Shareowner Services, PO Box 64874, St. Paul, MN 55164-0874,
United States of America
Telephone:
+1 800 401 1957 (US calls) (toll-free)
+1 800 468 9716 (non-US calls)
Enquiries:
shareowneronline.com
under contact us
adr.com
Auditor
PricewaterhouseCoopers LLP
Investment bankers
BofA Securities
Goldman Sachs
Solicitors
Freshfields Bruckhaus Deringer LLP
Stockbrokers
BofA Securities
IHG® One Rewards
If you wish to enquire about, or join, IHG Rewards, visit
ihg.com/onerewards
or telephone:
+800 2222 7172
b
(Austria, Belgium, Denmark, Finland, France,
Germany, Hungary, Ireland, Israel, Italy, Luxembourg, Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland and UK)
+44 1950 499004
c
(all other countries/regions in Europe and Africa)
1 888 211 9874 (US and Canada)
001 800 272 9273
c
(Mexico)
+1 801 975 3013
c
(Spanish) (Central and South America)
+1 801 975 3063
c
(English) (Central and South America)
+973 6 500 9 296
a
(Middle East)
+800 2222 7172
b
(Australia, Japan, Korea, Malaysia, New Zealand,
Philippines, Singapore and Thailand)
800 830 1128
a
or 021 20334848
a
(Mainland China)
800 965 222 (China Hong Kong)
0800 728 (China Macau)
00801 863 366 (China Taiwan)
+632 8857 8788
c
(all other countries/regions in Asia Pacific)
+ Denotes international access code. 00 or 011 in most countries.
a
Toll charges apply.
b
Universal international freephone number.
c
International calling rates may apply.
Contacts
Additional Information
271
IHG
| Annual Report and Form 20-F 2023
Useful information
Designed and produced by
Design Bridge and Partners
, London.
designbridge.com
Printed by Park Communications, a Carbon Neutral
Company, on FSC® certified paper.
Park works to the EMAS standard and its Environmental
Management System is certified to ISO 14001.
This publication has been manufactured using 100%
offshore wind electricity sourced from UK wind.
100% of the inks used are vegetable oil based,
95% of press chemicals are recycled for further
use and, on average 99% of any waste associated
with this production will be recycled and the remaining
1% used to generate energy.
This document is printed on Revive 100 Silk,
a white triple coated sheet that is manufactured
from FSC® Recycled certi
fied fibre derived
from
100% pre- and post-consumer wastepaper containing
100% recycled fibre.
The FSC® label on this product ensures responsible
use of the world’s forest resources.
272
IHG
| Annual Report and Form 20-F 2023
IHG is proud of its people and the care
shown for the communities in which it
operates. We are pleased to feature photos
of some of our people, as well as some of
our community activities throughout this
Annual Report and Form 20-F.
InterContinental Hotels Group PLC
1 Windsor Dials
Arthur Road
Windsor
Berkshire SL4 1RS
Switchboard
+44 (0) 1753 972000
ihgplc.com
Make a booking at
ihg.com