Intercontinental Hotels Group - Report Example

Inter continental Hotels Group Table of Contents Business Bit 3 Journalistic Article 4 Overview of the global hospitality industry 4 Growth of the company in the recent times 6 Growth prospect of the company in markets around the world 6 Brief Conclusion 8 Bibliography 9 Business Bit InterContinental Hotel Group Plc is a multinational hotel company which is headquartered in the region of United Kingdom. The group as of the current times has presence in around 100 countries. The vision of the company is to become a leading company in the globe by creating great hotels that guests love. To achieve this vision, the global company relies heavily on a mix of preferred brands, human talent as well as high class delivery mechanisms. The global company follows the theme of committing itself to act in a highly responsible manner. Discussing about the business model of the company, it can be staid that the company runs its hotels in either franchised, managed or in an owned manner. Vital information about the company is given below in a summarised format: Currently the group has around 4,643 hotels with a total room capacity of around 678,000. The group owns nine very popular hotel brands like InterContinental, Crowne Plaza, Hotel Indigo, Staybridge Suites, Holiday Inn, Holiday Inn Express, Candlewood Suites, Hualuxe Hotels and Resorts as well as Even Hotels Around 1000 hotels are in pipeline for the group. Interestingly, less than 1% of the hotels are either owned or leased by the company. Currently the group has only 10 owned and leased hotels all over the world. The group has a total of around 3,934 franchised hotels as well as 658 managed hotels as of the year 2012. The total operating profit for the group as of the year 2012 stood at around 614 million USD. Journalistic Article While performing a strategic performance analysis for the InterContinental Hotel Group from the investors’ point of view, it is important to focus on conducting an overview of the global hospitality industry along with estimating the growth of the company in the recent times. Focus also needs to be given on the prospects of growth for the company in markets around the world. Overview of the global hospitality industry In discussing about the global hospitality industry, it is important to highlight that the global macro factors are bound to have a strong influence in this particular industry. Talking on this note, it needs to be stated that in the current years, the global hospitality industry has been affected in a significant manner by the political and economic factors around the world. In the year 2012, the global hospitality industry suffered the impacts that generated from US presidential election, sovereign debt crisis of the Euro zone, political disturbances and tension in various regions of the Middle East along with slowing down of Asian economies. Talking on this note, it can be stated that in the year 2012, the hospitality sector of the US, especially in the locations of New York, Los Angeles, San Francisco as well as Chicago displayed indications of growth and expansion. A report by the globally popular consulting firm Ernst and Young revealed that the average revenue per available room as of the year 2012 touched the levels of 2007. A deeper analysis revealed that the growth in the average revenue per room happened mainly because of the increase in occupancy levels as well as average daily rate (ADR). It was also found that the influence of the factors like high barriers to entry, longer and extended periods of development of hotel property as well as reduced dependence on wholesalers has greatly helped the upscale, upper upscale as well as luxury segment players of the hospitality industry of the region to attain an increase the revenue per available room (RevPAR) in the recent times. The RevPAR for the Asia Pacific region, barring countries like India and New Zealand also recorded an increase in the year 2012. The prolonged political disturbances in some of the major markets of Middle East regions resulted in generation of mixed performance for this particular market. However, in the current year, the macro factors that continued to make its influence on the global hospitality sector are shutdown of the US government, continued crisis of the Middle East, high fluctuations in the currencies of the emerging markets as well as fluctuating economic as well as growth based performance of the developed markets of the West. Despite the presence of these macro issues around the globe, it is being expected that the predicted rise in global tourism in the year 2013 will continue to create an upward demand curve for the overall hospitality sector around the globe. It is important to mention in these regards that the consulting firm Ernst and Young had already forecasted in the beginning of the year that the renewed surge in tourism marketing along with more pronounced usage of technology and rising interest of travel among the middle class population of the emerging economies will act as trends for triggering global tourism. In discussing the growth forecasts for the global hospitality sector over the long term, it can be stated that the globally renowned consulting firm Deloitte has forecasted that a majority of the demand will arise from the emerging markets of India and China. The report by Deloitte also highlighted that by the year 2015, both of these new markets will have absolute year on year growth in the sector of tourism which will be greater than the markets of UK, Japan and France. This surge in tourism will be the main factors that will contribute to the surging demand for the hospitality sector in these regions. Growth of the company in the recent times While discussing about the growth of the company in the recent times, it is important to focus on performance of the company in the current year. A report in the reputed news daily, The Telegraph, in the August of this year revealed that the greatest hotel in regards to room capacity has proved a special dividend of around 350 million USD to the investors. The reward for the investors totalled around 9.4 billion USD over the decade, since the company demerged from the Mitchells & Butlers. The company’s pre-tax profits also surged to 462 million USD in the first six months of 2013 despite a slow growth in the emerging market of China where the hospitality company intends to roll out more rooms to the global as well as domestic tourists and travellers. Talking more on the performance of the company in the recent times, the selling of the InterContinental Park Lane hotel property of the company to Constellation Holdings which is a Qatar based investment group for a deal of around 301.5 million pounds needs to be mentioned. The deal of 301.5 million pounds which is valued at a premium of around 62 percent will let the company to continue its operations on the property for a period of minimum of 30 years. The sale of the property of the company is a part of its ‘asset light’ strategy and the company officials has stated that the funds from the deal will be utilized for general corporate purposes. It is interesting to state that the sale of the company property is expected to provide a significant amount of return to the shareholders. Growth prospect of the company in markets around the world A report in The Telegraph has revealed that the rising number of global tourists will continue to create a huge demand for the hospitality services provided by the hotel company in the immediate future. Describing in a more elaborate manner, it can be stated that as a result of the rise in global population, there will be an increase in the number of tourists. The growth will be more skewed in the market of China because of its comparatively fast pace of development as compared to other emerging markets. The newly devised strategy of the InterContinental Hotels Group to focus on the most attractive markets around the world will lead to the process of increase in business for the company from the market of China. Currently to capitalize on the business prospects from the high growth market of China, the company has focused on entering the market at an early stage, develop long term relationship with various important local third party owners and thereby expanding its growth in a very aggressive fashion. Apart from focusing on the Chinese market, the company has also made significant amount of investments in different markets around the world. Discussing on these lines, it is important to bring into focus that the company has made some significant strategic investment in the Indian market. In the October of this year, the InterContinental Hotel Group (IHG) has flashed the opening of Crowne Plaza Greater Noida in the Delhi NCR region, which is a very important commercial hub with tremendous future potential. The opening of the new property is an addition to the previous five properties in the Indian market. The hotel group has also expanded its property portfolio in the Russian market, which is being increasingly counted as an upcoming global market in the recent times. Recently, the company has signed three hotels in the Russian region. The signings are part of the market specific strategy of the company to establish 15 new hotels in Russia by the end of 2019. It is important to highlight that the signings of the new hotels is done with the main intention to capitalize on the business opportunity that are expected to evolve in connection to the hosting of 2018 Fifa World Cup in the region. Apart from expanding into the emerging markets, the company has also focused on the developed and matured markets of the West. For the London market, the company has signed a third property in September of this year. The new 400+ bedroom hotel will be opened in the year 2015 and will be operated under a franchise natured agreement with Meridian Hotel Operations Limited. In the German market as well, the company has significantly expanded its operations by concluding a multi development franchise based agreement with Bierwirth & Kluth Hotel Management for the development of five hotels in various locations of strategic importance. Brief Conclusion On a concluding note, it can be said that because of strong returns provided to the company in the recent times along with significant strategic investments in various markets around the world, the company makes a very good choice for investment in the recent times. Bibliography IHG, 2012. Annual Report and Financial Statements 2012. [Online] Available at: http://www.ihgplc.com/index.asp?pageid=55 [Accessed 24 Oct 2013] ihgplc.com -1, 2013. Our Strategy. [Online] Available at: http://www.ihgplc.com/index.asp?pageid=43 [Accessed 24 Oct 2013] ihgplc.com -2, 2013. Overview of IHG. [Online] Available at: http://www.ihgplc.com/index.asp?pageid=40 [Accessed 24 Oct 2013] ey.com -1, 2013. Top Thoughts for 2013. [Pdf] Available at: http://www.ey.com/Publication/vwLUAssets/Top_thoughts_for_2013/$FILE/Top_thoughts_for_2013.pdf [Accessed 24 Oct 2013] ey.com -2 , 2013. Global Hospitality Insights: Top Thoughts for 2013. [Online] Available at: http://www.ey.com/GL/en/Industries/Real-Estate/Global-Hospitality-Insights---Top-Thoughts-for-2013 [Accessed 24 Oct 2013] Deloitte LLP, 2010. Hospitality 2015: Game Changers or spectators? [Pdf] Available at: http://www.deloitte.com/assets/Dcom-Tanzania/Local%20Assets/Documents/Deloitte%20Reports%20-%20Hospitality%202015.pdf [Accessed 24 Oct 2013] Thomas, N. -1 , 2013. IHG announces $350m special dividend. [Online] Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/10224937/IHG-announces-350m-special-dividend.html [Accessed 24 Oct 2013] Thomas, N. - 2, 2013. Sale of InterContinental Park Lane lifts hopes of second shareholder return. [Online] Available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/9960550/Sale-of-InterContinental-Park-Lane-lifts-hopes-of-second-shareholder-return.html [Accessed 24 Oct 2013] White, G., 2013. Questor share tip: InterContinental Hotels a buy on growth prospects. [Online] Available at: http://www.telegraph.co.uk/finance/markets/questor/10226368/Questor-share-tip-InterContinental-Hotels-a-buy-on-growth-prospects.html [Accessed 24 Oct 2013] Hospitalitynet.org, 2013. InterContinental Hotels Group opens Crowne Plaza Greater Noida [Online] Available at: http://www.hospitalitynet.org/news/4062613.html [Accessed 24 Oct 2013] Breakingtravelnews.com -1, 2013. InterContinental expands Russian presence with new properties [Online] Available at:http://www.breakingtravelnews.com/news/article/intercontinental-expands-russian-presence-with-new-properties/ [Accessed 24 Oct 2013] Breakingtravelnews.com -2, 2013. InterContinental Hotels Group expands German portfolio. [Online] Available at: http://www.breakingtravelnews.com/news/article/intercontinental-signs-sixth-multiple-development-agreement-in-germany/ [Accessed 24 Oct 2013] Lampe, S.J., 2013. IHG Announces the Latest Addition to its Property Portfolio. [Online] Available at: http://www.breakingtravelnews.com/news/article/intercontinental-signs-sixth-multiple-development-agreement-in-germany/ [Accessed 24 Oct 2013] Bibliography Hoskisson, R.E and et.al., 2008. Competing For Advantage. USA: Cengage Learning. McDaniel, and et.al., 2008. Marketing. USA: Cengage Learning. Read More