• $27.4bn total gross revenue (up 6.6%)
• 2.5% global FY RevPAR (Q4 = 1.9%)
• 4.8% net system growth to 837k rooms
• 99k signings; 271k pipeline rooms

• FY Comparable RevPAR: Americas = 1.9% (US: FY = 1.3%; Q4 = 0.6%); EMEAA = 2.7%, Greater China = 6.9%.
• Strongest net system size growth in a decade of 4.8% (+4.3% organic), including 56k room additions, up 17% YoY. 18k rooms removed leaving 837k rooms across the global estate.
• Highest signings in a decade (+18% YoY) with nearly half of total signings from the Holiday Inn Brand Family.
• Continued to strengthen and grow existing brands with increased pace of openings and innovations to enhance guest experience and owner returns including:
  • Holiday Inn Express new guest room designs now open or committed to in >50% estate globally.
  • Holiday Inn “Open Lobby” public space design now open or committed to in 80% of Europe estate.
  • Crowne Plaza renovation completed or on-going across one-third of the US estate.
  • Kimpton: continued global expansion, presence secured in 14 countries, with 18 deals signed in the year.
• Rapid progress augmenting portfolio with new brands targeted at strategically identified opportunities:
  • avid hotels: >170 signed since launch, including in Canada and Mexico, and brand launched in Germany.
  • voco: our new upscale brand, successfully brought to market with 16 hotels (3k rooms) signed.
  • Regent Hotels & Resorts: acquired and brand re-positioned, with three further signings.
  • Six Senses: acquired brand in the top tier of luxury; expect to grow to over 60 hotels in the next 10 years.
  • New brand launch: Building on existing mainstream strength, 2019 planned launch of all-suites upper midscale brand targeted at an $18bn industry segment where strong guest and owner demand has driven a ~70% increase in room supply in the last 4 years.

Update on strategic initiatives

• Build and leverage scale – Building a leading position in the world’s most attractive markets and highest opportunity segments, where our scale and resources matter most
  • Net system size up 4.8% to 837k rooms (5,603 hotels), up 4.3% excluding the acquisition of Regent Hotels & Resorts and a UK portfolio deal.
  • Continued to strengthen leading position in US Mainstream segment with 26% share of signings in the year.
  • Further strengthened our penetration in Greater China with 77 hotel openings and 142 hotel signings, taking the combined system and pipeline to over 730 hotels, almost 200k rooms. Our share of the branded pipeline stands at almost 3x our share of existing branded supply.
  • Successfully embedded new organisational structure, which redeploys our resources into our largest markets to leverage our scale and into new brand initiatives to accelerate our growth.
  • On track to deliver ~$125m in annual savings by 2020, with savings fully re-invested in growth initiatives.
• Strengthen loyalty programme – Continuing to innovate IHG Rewards Club to build stronger and deeper relationships with our guests to drive high value revenue across our hotel estate
  • Loyalty room revenue contribution up 4%pts in 4 years to 43%, including ~50% in the Americas.
  • Loyalty members 7x more likely to book direct, and deliver a 25% stay premium.
  • Testing new features for 2019 roll-out, designed to increase member engagement with variable point pricing.
• Enhance revenue delivery – Driving a higher share of revenues through IHG’s low cost booking channels to deliver better returns for our owners
  • IHG revenue delivery enterprise delivered 78% of room revenues (up 6%pts in 3 years).
  • Digital (web and mobile) revenue, our lowest cost booking channel, up 13% in 2018 to $5.3bn.
  • Roll-out of IHG Concerto, including our new Guest Reservation System (GRS), successfully completed. This gives IHG the most sophisticated, cloud-based platform in the industry, and provides a foundation to build out our technology architecture over the coming years. Ongoing development of enhanced GRS functionality to give guests the opportunity to customise their stay based on features they find important – made possible by new ways of classifying and selling room inventory.
• Evolve owner proposition – Outstanding operational support and optimised owner returns to unlock growth
  • Investment in development resources has enabled 18% YoY growth in signings in 2018.
  • Continued strong traction for our innovative Franchise Plus model in Greater China with 71 hotels signed for Holiday Inn Express in the year, taking the total to 143 signed and 29 opened to date. Building on this success, in 2018, we signed 7 franchise deals for Holiday Inn and Crowne Plaza in the region.
  • Investment in enhanced owner support to facilitate faster hotel openings and deeper owner relationships.
• Optimise our portfolio of brands for owners and guests – Maintaining a strong portfolio of distinct and preferred brands, serving the highest growth segments in the largest markets
  • Mainstream – ($115bn global segment with $65bn growth potential to 2025)
  
  
  • Holiday Inn Express: roll out of new guest room designs gathering pace, with ~1,400 hotels in the US & Canada open or committed to new Formula Blue format. Rapid deployment of new breakfast offering in over 1,500 hotels in the US during 2018, driving 3pt increase in guest breakfast satisfaction.
  • Holiday Inn: continued roll out of new “Open Lobby” public space design with 80% of the Europe estate open or committed, and 50 hotels committed in the Americas.
  • avid hotels: Over 170 hotels (16k rooms) signed since launch (129 hotels (12k rooms) signed in 2018), with the first hotel open in Oklahoma City and 27 more under construction or with planning approved. Signed 10 hotels in Canada and Mexico and launched the brand in Germany through a Multiple Development Agreement with one owner to open 15 hotels over the next 5 years.
  • Planned launch of new all-suites upper midscale brand in 2019 targeted at an $18bn industry segment where strong guest and owner demand has driven a ~70% increase in room supply in the last 4 years.
  
  
  • Upscale – ($40bn global segment with $20bn growth potential to 2025)
  
  
  • Crowne Plaza: $200m Accelerate programme delivering improvements in guest satisfaction and strong owner engagement behind strengthening the brand. ~6k rooms renovated across the Americas estate, with a further 9k committed. Growing momentum behind Plaza Workspaces with 16 installed and 12 more expected in Q1 2019. In 2019, our new modern design and dynamic meeting space will be launched in Paris, London, Hamburg and Atlanta flagship hotels.
  • Hotel Indigo: Opened our 100th Hotel Indigo, in Berlin, in 2018, with 33 signings in 2018 taking the total pipeline to 92 hotels (13k) rooms.
  • voco: Launched brand in June, primarily for conversion opportunities. Three hotels now open across the UK and Australia. A further 13 hotels across 8 countries have been signed to date (3k rooms in total) including flagship locations in Dubai and in Egypt.
  
  
  • Luxury – ($60bn global segment with $35bn growth potential to 2025)
  
  
  • InterContinental Hotels & Resorts: Further cemented position as largest global luxury hotel brand with the opening of its 200th hotel – the InterContinental Shanghai Wonderland. Awarded World’s Leading Hotel Brand for the 12th time at the World Travel Awards.
  • Kimpton Hotels & Restaurants: Global expansion gathering strong momentum with doubling of signings and presence secured in 14 countries worldwide. Opened UK flagship, the Kimpton Fitzroy London, with numerous other signings including Frankfurt, Shanghai, Bangkok, Tokyo and Mexico City.
  • Regent Hotels & Resorts: Acquisition completed in July bringing 6 opened hotels to our system. Updated brand positioning, with further signings in Kuala Lumpur, Chengdu and Bali, and several new sites under discussion in key gateway cities around the world. On track to grow to over 40 hotels over the long term.
  • Six Senses Hotels Resorts Spas: February 2019 acquisition of 16 hotels and resorts, with 18 management contracts signed into its pipeline, and more than 50 further deals under discussion. Expect to grow Six Senses to more than 60 hotels over the next 10 years.

Americas – Good US RevPAR performance; avid hotels’ momentum continues

EMEAA – New operating model embedded; highest signings and openings in 10 years

Greater China – Continued industry outperformance; record room signings and openings

Highly cash generative business with disciplined approach to cost control and capital allocation

• Remain on track to deliver ~$125m in annual savings, including System Fund, by 2020 for reinvestment in growth.
• As planned, ~40% of annual savings were realised in 2018 and were fully reinvested in growth initiatives.
• 2018 fee margin was flat (up 10bps at CER), held back by investment in growth initiatives being $5m above realised savings, and $9m of one-off on P&L marketing assessments (and equivalent cost of investment). Excluding these impacts, fee margin increased 70bps (up 80bps at CER).
• Reported central overheads were up $15m, ($14m CER); an increase in central revenues was offset by investments in growth initiatives and $3m higher healthcare costs. Central overheads now include the reinvestment of a substantial proportion of growth investment funded by savings elsewhere in the business.
• Growth initiatives, and a continuation of our disciplined cost management and strong efficiency focus, expected to maintain future fee margin progression broadly in line with the long-term average.

• Free cash flow³ of $609m was up $93m year on year, with $81m lower cash tax offset by $106m of exceptional cash costs incurred in relation to the group wide efficiency programme.
• Net capital expenditure³ of $158m (FY 2017: $202m) with $245m gross (FY 2017: $342m). This comprised: $108m maintenance capex and key money; $38m gross recyclable investments; and $99m system funded capital investments; offset by $42m net proceeds from asset recycling and $45m System Fund depreciation and amortisation. Capex guidance unchanged at up to $350m gross, and $150m net, per annum into the medium term.
• Exceptional cash costs of $137m during the year, including $106m relating to the group wide efficiency programme ($47m in relation to the System Fund).

• Financial position remains robust, with an on-going commitment to an investment grade credit rating.
• Successfully raised €500m, 2.125% notes due May 2027.
• Net debt of $1,530m (including $235m finance lease on InterContinental Boston), down $321m on the 2017 close.
• Since the year-end, a $500m special dividend was paid in January 2019 and ~$300m was paid on the acquisition of Six Senses.

• $500m special dividend with share consolidation announced in October 2018, paid January 2019.
• Proposed 10.0% increase in the final dividend to 78.1¢, taking the total dividend for the year up 10.0%, reflecting IHG’s confident outlook.

Other

• IFRS 16 will be adopted with effect from 1st Jan 2019 using the retrospective method of application.
• This results in $431m of lease liabilities being added to 2018 net debt under the new standard.
• We remain committed to maintaining an investment grade credit rating; the best proxy for which is now 2.5-3.0x net debt/EBITDA under IFRS 16; equivalent to 2.0-2.5x net debt/EBITDA under the previous accounting standard.
• No impact on cash, financial capacity or banking covenants. Strategy for use of cash remains unchanged.
• If our 2018 results were restated under IFRS 16, operating profit would have been $17m higher, which is offset by a $19m increase in net financial expenses. For 2019, we estimate adoption of IFRS 16 will increase operating profit in the region of ~$12m and reduce net income in the region of ~$5-7m after a full year impact of the UK portfolio deal.

2019 items

• $4m benefit from payroll tax credit received in 2018 will not repeat in 2019.
• $5m of joint venture income will not repeat in 2019.

About IHG

Presentation for Analysts and Shareholders