True Hospitality
for Good
Annual Report and Form 20-F
2021
Hotel Indigo® Adelaide Markets, Australia
Our purpose
is to provide
True Hospitality
for Good.
It shapes our culture, brings
our brands to life and represents
a commitment to make a
difference to our people, guests
and communities, and protect
the world around us.
Listening and engaging with our
stakeholders, together we work
towards common goals that
help ensure we create shared
value for all.
Front cover middle image:
Holiday Inn Express® & Suites Queenstown, New Zealand
C
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t
e
n
t
s
Our presence
IHG® Hotels & Resorts is a global hospitality
company, with 17 hotel brands and one
of the industry’s largest loyalty programmes.
We have nearly 6,000 open hotels in more
than 100 countries and a further 1,800 hotels
in our development pipeline.
See pages 17 and 18
Our focus
We focus on offering guests great choice, rewards
and experiences, while continuously developing
and investing in our people, operations, sustainability,
technology and design, in order to drive demand,
performance and return for our hotel owners.
See pages 19 to 35
Our business model
We mainly franchise and manage hotels, which
allows us to focus on increasing fee revenues and
fee margins, with limited requirements for capital.
Led by our strategic priorities, we grow our business
by ensuring our brands meet consumer demand
and generate strong returns for hotel owners.
See pages 10 to 13
Our key stakeholders
Shareholders
and investors
Hotel owners
Hotel guests
Task Force on climate-related financial disclosures (TCFD)
Trends shaping our industry
2021 in review
Chair’s statement
Chief Executive Officer’s review
Industry overview
Strategic Report
2
4
6
8
10 Our business model
14
16 Our strategy
32
36 How IHG does business
40 Our risk management
48 Viability statement
50 Key performance indicators (KPIs)
54
54 Chief Financial Officer’s review
55 Group
63 Americas
66
69 Greater China
72 Central
73
Performance
Europe, Middle East, Asia & Africa (EMEAA)
Key performance measures (including Non-GAAP)
Governance
80 Chair’s overview
82 Our Board of Directors
86 Our Executive Committee
88 Governance structure
89 Board activities
89 Matters discussed in 2021 and Section 172 Statement
92 Our shareholders and investors
93 Director appointments and induction
94 Board development and effectiveness evaluation
95 Audit Committee Report
100 Responsible Business Committee Report
102 Nomination Committee Report
104 Directors’ Remuneration Report
126 Statement of compliance
Group Financial Statements
130 Statement of Directors’ Responsibilities
Independent Auditor’s UK Report
131
138
Independent Auditor’s US Report
142 Group Financial Statements
149 Accounting policies
157 New accounting standards
158
Notes to the Group Financial Statements
Parent Company Financial Statements
208 Parent Company Financial Statements
208 Parent Company statement of financial position
209 Parent Company statement of changes in equity
210
Notes to the Parent Company Financial Statements
Additional Information
218 Other financial information
226 Directors’ Report
231 Group information
243 Shareholder information
250 Exhibits
251 Forward-looking statements
252 Form 20-F cross-reference guide
255 Glossary
257 Useful information
Our people
Community
Suppliers
See pages 20 to 28, 39, 92, 101, 107, 108, 112 to 114 for information about how
we have engaged with our stakeholders during 2021.
The Strategic Report on pages 2 to 77 was approved
by the Board on 21 February 2022.
Nicolette Henfrey, Company Secretary
IHG | Annual Report and Form 20-F 2021
1
2021 in review
Building a stronger business
Though the pandemic again tested our industry,
our resilient business model and people’s desire
for travel have shone strongly. Alongside a focus
on offering great guest experiences and expert
owner support, we are building a stronger, more
agile company, investing in our brands, sustainable
operations and business, and looking to future
growth with confidence.
Financial performance
Global RevPAR
Net system size growth
Signings (rooms)
+46.0%
2020: (52.5)%
-0.6%
2020: +0.3%
68,870
2020: 56,146
Total gross revenue
in IHG’s Systema
$19.4bn
2020: $13.5bn
Operating profit/(loss)
$494m
2020: $(153)m
Total revenue
Revenue from
reportable segmentsa
$2,907m
2020: $2,394m
$1,390m
2020: $992m
Operating profit from
reportable segmentsa
$534m
2020: $219m
Basic EPSb
145.4�
2020: (142.9)�
a Use of Non-GAAP measures: in addition to performance measures directly observable in the Group Financial
Statements (IFRS measures), other 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 defined
under IFRS or are adjusted IFRS figures. Further explanation in relation to these measures can be found on
pages 73 to 77 and reconciliations to IFRS figures, where they have been adjusted, are on pages 218 to 223.
b Adjusted EPSa 147.0¢ (+370%); 2020: 31.3¢
Regional growth (number of rooms)
Americas
Openings
15,739
2020: 16,746
Signings
17,647
2020: 14,039
EMEAA
Openings
10,162
2020: 11,288
Greater China
Openings
18,057
2020: 11,358
Signings
Signings
20,376
2020: 13,903
30,847
2020: 28,204
See page 63
See page 66
See page 69
2
IHG | Annual Report and Form 20-F 2021
Shareholders
and investors
Our resilient business model and
focus on owners, coupled with
increasing travel demand, led to
improved trading in 2021. We have focused
on operating efficiently and sustainably,
while investing in future growth.
• Global RevPAR recovered to 70% of
2019 levels
• 5.0% gross system growth; net (0.6%) after
higher removals in part due to Holiday Inn
and Crowne Plaza review
• Signings up 23% year-on-year with
development activity improving
• Delivered $75m sustainable costs savings,
while investing for future growth
• Fee margin of 49.6%, recovered to 4.5%pts
below 2019
• Net cash from operating activities of
$636m, adjusted free cash flowa of $571m
(2020: $29m)
• Leverage ratio substantially reduced, with net
debt: adjusted EBITDA at 3.0x (2020: 7.7x)
• Final dividend of 85.9¢ proposed for 2021
See information about our shareholders and
investors on page 92 and our KPIs on pages
50 to 53.
Our guests
We are focused on ensuring
the services, technology and
experiences we provide meet
evolving expectations, increase consumer
preference and loyalty, and drive bookings.
• Delivered targeted stay campaigns, loyalty
promotions and programme improvements
• Improvement in Guest Satisfaction Index
(GSI), achieving scores of 100 or better
for each brand and outperforming peers
• Continued execution of IHG Way of Clean
and IHG Clean Promise in our hotels
• Enhanced Meet with Confidence offer
to support increasing business demand
• AI technology introduced to answer and
route customer calls, raising satisfaction
scores and average daily rates on bookings
• Room inventory assessments completed in
5,300 hotels in support of attribute pricing
and a more tailored booking experience
• Updates to guest room and public space
designs to enhance stay experience
See information about our guests on pages 19
to 22 and guest love KPI on page 52.
Strategic Report Our people
Hotel owners
Planet
InterContinental® Maldives Maamunagau Resort –
Manta Trust and Ocean Conservation Programme
As our industry recovers and daily
life evolves from the pandemic,
we have focused on how we can
effectively support our people and
provide the right resources and working
environment to keep everyone feeling
engaged and at their best.
• Overall employee engagement at 85%,
placing IHG as a Kincentric Global
Best Employer
• Inclusion Index launched to track diversity,
equity & inclusion (DE&I) progress
• Corporate employees completed 10,000
hours of conscious inclusion training
• Evolved health, safety and wellbeing
guidance at hotel and corporate levels
• Supported employees with shift to
hybrid working through guidance, office
enhancements and feedback forums
• Recharge days for corporate employees
• Resumed employee annual salary increase
and bonus
• Employee Resource Groups (ERGs)
expanded to help foster our diverse and
inclusive culture
• Increased focus on colleague development
and retention, and talent attraction
See information about our people on pages
23 to 26, and our employee engagement KPI
on page 53.
Our owners choose to work with
IHG based on the trust they
have in our brands and our track
record in delivering returns. We continue
to enhance our offer across the hotel
lifecycle, alongside exploring new growth
opportunities and collaborating with the
industry and governments to support
a strong recovery for the sector.
As the world becomes increasingly
aware of the threat of climate
change, it’s critical that we operate
responsibly and sustainably. We are working
to clear plans and targets alongside our
owners to ensure we grow in a way that
minimises our impact on the world
around us.
• Joined UN’s Race to Zero and upgraded
• Continued review and evolution of brand
standards to improve operational efficiency
our science-based target (SBT) to help limit
global warming to 1.5°C
• Expanded hotel procurement solutions
to combat supply chain challenges and
rising costs; launched new hiring tools
and support to recruit and retain talent
• Increased commercial support through
promotions, tools and revenue
management, alongside increased
marketing as part of masterbrand approach
• Lowering of build costs to enhance owner
returns on investment
• Completed review of Holiday Inn and
Crowne Plaza estate to protect quality
and brand perception
• Collaboration with governments and
industry to support recovery
• Expanded portfolio with launch
of Luxury & Lifestyle brand Vignette
Collection; six hotels already secured
• Began global rollout of automated capture
of hotel utility data
• Bathroom bulk amenities solutions secured
for all brands and markets, reducing
plastic usage
• Developed Hotel Energy Reduction
Opportunities (HERO) tool to help hotels
target energy, carbon and water reductions
• Continued collaboration with Water.org,
Alliance for Water Stewardship and Water
Resilience Coalition
• Continued mapping risks and opportunities
in line with guidance of Task Force on
Climate-related Financial Disclosures
See pages 29, 32 to 35, 229 and 230 for our
planet, TCFD and greenhouse gas emissions
disclosures, and our carbon footprint KPI
on page 53.
See information about our hotel owners
on pages 17 to 21, and our net rooms supply,
signings, gross revenue and enterprise
contribution KPIs on pages 50 and 51.
Our communities
and suppliers
We’re proud to be a part of
thousands of communities
and are committed to ensuring
we operate and collaborate in ways that
positively impact others, including working
with suppliers that share our values.
• During Giving for Good month, more
than 40,000 colleagues dedicated over
260,000 hours to making a positive
difference to more than 350,000 people
• Supported charities globally providing aid
to those in need following natural disasters
• Launched new virtual learning platform
IHG Skills Academy to provide people with
free access to skills and training
• Refreshed our responsible procurement
criteria for prospective suppliers to support
our supply chain integrity
See pages 27, 28 and 39 for information
about our communities and suppliers, and
our IHG® Academy KPI on page 53.
2021 in review
IHG | Annual Report and Form 20-F 2021
3
Intercontinental Maldives Maamunagau Resort Intercontinental Maldives Maamunagau Resort – Manta Trust and Ocean Conservation Program– Manta Trust and Ocean Conservation ProgramStrategic Report Chair’s statement
Staying focused on
long-term success
Final dividend
85.9¢
Final dividend proposed for 2021
(2020: no dividend was paid)
Return of funds
$13.6bn
Since March 2003, the Group has
returned $13.6 billion of funds to
shareholders by way of ordinary and
special dividends, capital returns
and share repurchase programmes.
Since 2014:
• $500 million special dividend paid
29 January 2019
• $400 million special dividend paid
22 May 2017
• $1.5 billion special dividend paid
23 May 2016
• $500 million share buyback
completed in 2014
• $750 million special dividend paid
14 July 2014
Having entered 2021 on the back
of the toughest time the hospitality
industry has ever known, this year
has been one of hope, recovery, new
challenges and opportunity. IHG’s global
scale means we have experienced and
learned from the evolving nature of the
pandemic on a daily basis, market by
market, and with clarity and flexibility
we have stayed focused on the strategic
business needs required to deliver
long-term success for all stakeholders.
Central to this is having a meaningful,
relevant purpose and a well-rounded and
effective strategy, and this year refreshed
versions of both have been embedded
into the business, promoting greater
prioritisation and understanding around
what is collectively required to succeed
in a competitive marketplace.
Our purpose of True Hospitality for Good
recognises the importance of using our
business to not only care for those we
interact with, but also to make a positive
difference to our communities and the
world around us. Our strategy, still very
much centred on achieving industry-leading
net rooms growth, places a sharper focus
on our brands and digital investments,
our guest and owner offer, and ensuring
we grow in the right way for our people,
communities and planet. Taking all we have
learnt as a company from the pandemic,
our behaviours support the ways of working
we believe are vital to successful operations,
reputation and culture.
Investing for the long term
These elements – our purpose, strategy
and behaviours – are being applied to an
asset-light, fee-based, largely franchised
business model that has proven its resilience
during the pandemic and allowed for a
relatively strong financial performance
in 2021, albeit with RevPAR and operating
profit yet to fully recover to pre-pandemic
2019 levels. A key factor in this improved
performance has been a heightened
commitment to support our owners, listen
to their needs, and work hand in hand across
teams to respond with agility and expertise
to challenges ranging from restrictions
impacting demand, to the need to evolve
brand standards and meet staffing and
supply chain pressures as demand returns.
Whether operational or commercial, these
actions can strengthen both short and
long-term performance, and as we build
owner relationships and look to accelerate
net rooms growth, we continue to invest
in strategic priorities that will strengthen
aspects of our entire offer. These include
reducing costs to build, open and operate
hotels across our brands, delivering loyalty
and digital enhancements that improve the
guest experience and drive performance,
and investing in the quality, depth and
breadth of our portfolio, such as the launch
of the Vignette™ Collection brand in August.
Accelerated by the pandemic, recognising
that our stakeholders increasingly measure
profit, growth and success in relation to how
companies operate responsibly across the
environmental, social and governance (ESG)
agenda, the commitments set out in our
Journey to Tomorrow plan create a roadmap
for positive change over the next decade.
During the year, important progress was made
on several fronts, including investments in
new training and programmes that support
a diverse and inclusive culture, thoughtful
guidance around a shift to hybrid working,
close collaboration with charities responding
to natural disasters, and the formulation of a
strategy to meet an upgraded science-based
carbon reduction target across our
hotel estate.
4
IHG | Annual Report and Form 20-F 2021
Strategic Report Patrick Cescau Chair
Role of the Board
To navigate an industry recovery, react to
evolving trends and at the same time push
to strengthen IHG on so many fronts has
required great dedication from our leadership
and teams. The role of the Board has been
to support and constructively challenge
the Executive Committee around how we
prioritise, manage risk, grow and generate
future value. The ESG agenda and technology
landscape, including investments in our
enterprise and managing cybersecurity risks,
were also regularly considered in the year,
alongside listening to employee sentiment
via engagement sessions and feedback.
Part of my role as Chair has been to
encourage Board development and
oversee changes that build and add new
expertise and insights in recognition of
the evolving nature of our business and
stakeholder expectations. To this end,
succession planning was also of significant
focus in 2021, with both Anne Busquet and
Dale Morrison retiring after tremendous
service, and Richard Anderson unfortunately
resigning after three months due to personal
reasons. We were delighted to welcome
Daniela Barone Soares as Non-Executive
Director and Graham Allan was appointed
as Senior Independent Non-Executive
Director from 1 January 2022.
In my ninth year as Chair, succession planning
for my own role was also carried out, with
a thorough and independent recruitment
process leading to the appointment of
Deanna Oppenheimer as Chair Designate
from 1 June 2022, becoming Non-Executive
Chair from 1 September 2022 upon my
retirement. I look forward to working with
Deanna on a comprehensive handover and I
would like to take the opportunity to wish her
the best in what I am sure will be a very
successful tenure.
With the strong financial improvements
delivered in 2021, including profitability
rebounding and a substantial reduction
in net debt, the Board is proposing a final
dividend of 85.9¢ in respect of 2021, an
amount equivalent to the withdrawn final
payment in respect of 2019. No interim
dividend was paid in respect of 2021.
Going forward, dividend payments will
be reflective of IHG’s prior approach to
sustainably grow the ordinary dividend
whilst targeting a level of leverage that
maintains an investment grade credit rating,
and ensuring careful consideration of our
responsibilities to all stakeholders. The Board
will also continue to actively assess the
opportunity for any surplus capital to be
additionally returned through special
dividends or share buybacks.
A final perspective
The IHG I will depart on 31 August 2022
is much changed from the one I joined in
January 2013 – not least having grown from
4,600 to almost 6,000 hotels, and from
nine to 17 brands. Having first gone on a
crucial journey to establish our brands in
more attractive markets, the past almost
five years under Keith Barr’s leadership have
seen the company transform and ready for
a new chapter of growth. IHG has invested in
its entire enterprise, including the quality of
the estate and breadth of its brand portfolio,
and as an organisation it has become more
sophisticated and customer-centric, with a
commitment to ESG now woven into the
fabric of the business.
The values of integrity and transparency
that I have advocated at Board level run
deep through the business and its
leadership, as illustrated by the care and
thought with which these past two years have
been handled for IHG’s different stakeholders.
Keith has also set the tone from the top
on the importance of diversity, equity and
inclusion, and progress continues to be made
against the changes required to be a truly
successful company in this regard, with IHG
recognised for a seventh year running as
a ‘Best Place to Work for LGBTQ+ Equality’,
with a 100% rating in the Corporate Equality
Index, and being Highly Commended in
the Company of the Year category at the
European Diversity Awards.
While the pandemic may herald some
structural change for our industry, such as
technology replacing certain elements of
business travel, there will be opportunities
too, including facilitating a global shift to
flexible working. What remains unchanged
though, are the industry’s long-term
fundamental growth drivers, such as a
growing population, rising wealth in emerging
markets and increasing conversions from
unbranded players. The strength of IHG’s
business model, strategic investments,
pipeline, leadership and passionate teams
gives me great confidence in a strong future.
It has been a privilege to be a part of IHG’s
story for almost a decade and I would like to
offer my sincere respect and gratitude to all
those in our hotels, offices and reservation
centres who have been a part of it. I would
also like to thank our owners for choosing
IHG and for their continued long-term
confidence in our brands and business.
Patrick Cescau
Chair
Chair’s statement
IHG | Annual Report and Form 20-F 2021
5
Strategic Report Chief Executive Officer’s review
Emerging as
a stronger IHG
Key highlights in 2021
291
Hotels opened
(285 in 2020)
437
Hotels signed
(360 in 2020)
47%
Of full-year signings were for
our Holiday Inn Brand Family
42%
Of our pipeline now represented
by upscale and luxury brands
In the past year, the resilience of our
business model and enduring importance
of travel and hospitality for millions
globally has shone through strongly.
Crucially, while demonstrating our ability
to effectively manage the impact of an
evolving pandemic, we have not wavered in
our focus to build an even stronger IHG, by
growing our brands, enhancing our guest
and owner offer, supporting our people and
communities, and protecting our planet.
While 2021 global RevPAR was at 70% of
pre-pandemic 2019 levels and operating
profit has yet to fully recover, both improved
significantly during the year as vaccinations
increased, restrictions lifted and guests
travelled again. Encouragingly, in Q4, almost
half of our hotels were back to pre-pandemic
RevPAR levels, and our Guest Satisfaction
Index continued to improve during 2021,
outperforming competitors as we worked
thoughtfully to evolve the stay experience
and manage demand.
As owners look to future growth with us,
development activity was also well ahead
of 2020, with some fantastic openings and
signings, alongside continued investment
in the quality of our existing estate.
Growing sense of recovery
Looking back to the height of the pandemic
in 2020, with many hotels closed and
occupancy at historic lows, reaching this
much-improved point has required such hard
work and collaboration among our teams,
owners and partners. We’ve met challenges
in thoughtful and innovative ways, quickly
seized opportunities to grow and improve,
and while we know our industry is not yet
back to normal, we take confidence from
a growing sense of recovery.
We do still have markets where restrictions
are creating challenges, and the pandemic’s
impact on labour and supply chains
remains tough for our hotels, but travel
is consistently returning quickly as
restrictions lift. Our approach has been to
stay focused on organising operations and
investments around what matters most to
guests and owners, and ensuring IHG can
grow at pace, in the right way.
For colleagues, we have improved processes
and introduced new tools to both attract and
retain talent in what is a competitive jobs
market, and we’ve placed a greater emphasis
on mental health and wellbeing. Corporate
and reservation teams have been supported
with shifts to hybrid working, interactive
sessions have brought employees closer to
our strategy, and hotel teams have received
training and support needed to adapt to
evolving operations and brand standards.
For guests, we have used AI technology in
our reservation centres to improve customer
service, enhanced our award-winning Meet
with Confidence programme, and offered
loyalty members point expiry extensions
and new promotions. We saw Reward Night
bookings largely recover to pre-pandemic
levels during the year and welcomed another
nine million members to IHG® Rewards.
Working closely with the IHG Owners
Association and operators, we have strived
to anticipate owners’ needs, carefully
focusing on costs, and delivering training
and action plans to address performance
opportunities and guest feedback.
Staffing and supply chain challenges have
been met with new recruitment solutions
and increased procurement options that
have delivered key products at lower cost,
despite inflationary pressures. Commercially,
we have increased marketing and introduced
new tools to identify and capture demand,
and we continued our work with trade
bodies and governments to advocate for
industry support in recognition of the vital
economic role hospitality plays globally.
6
IHG | Annual Report and Form 20-F 2021
Strategic Report Keith Barr Chief Executive Officer
Strengthened performance
Our actions, alongside our business being
principally domestic focused in key markets
such as the US, led to improved trading
throughout 2021. On top of good essential
business demand, domestic leisure bookings
at times hit 2019 occupancy and rate levels
in several markets, with signs of more
discretionary business travel, group bookings
and international trips beginning to return.
Operating profit of $494m improved from
a loss of $153m in 2020. Our ability to
capture demand through our strong brands,
enterprise and scale, coupled with careful
cost control, led to operating profit from
reportable segments more than doubling
to $534m versus 2020, with sustainable
savings successfully achieved alongside
continued investment to support growth.
Strong cash generation led to a reduction
in net debt of almost $650m year-on-year.
While a higher-than-average removals
rate, linked in part to our Holiday Inn® and
Crowne Plaza® Hotel & Resorts quality review,
meant our net system size declined slightly,
the opening of 291 hotels, including our
3,000th for Holiday Inn Express®, represented
5.0% gross growth and underlines the
long-term confidence owners have in IHG
and our brands. We also added 437 hotels to
our pipeline, with the almost 24,000 rooms
signed in Q4 much closer to the levels seen
in 2019. In total, our global pipeline of almost
1,800 hotels represents more than 30% of
our current system size, with more than 40%
under construction.
Focus on growth
Our focus in recent years has been to
improve the quality of our existing hotels for
guests and the returns our brands generate
for owners, and in parallel increase the scale
of those brands, the breadth of our portfolio,
and the value of our technology and loyalty
offer. In spite of a pandemic, I am proud of
the progress against our strategic priorities
in 2021 and the impact this will have on how
we operate and grow with owners as the
industry strengthens.
Key highlights include the Holiday Inn and
Crowne Plaza quality review, which has
driven significant owner investment in
83 properties and the removal of 151 hotels.
With excellent future growth prospects,
this work is not just critical to protecting the
performance and reputation of these brands,
but also to our ability to reduce our future
group average removals rate and help
achieve our ambition of industry-leading
net rooms growth.
The importance of our established brands
was reflected in our Holiday Inn® Brand
Family representing almost half of all signings
in 2021, while the addition of new brands
across more segments increases our
attractiveness to owners and opens up further
growth opportunities. Within Essentials,
avid® hotels is now our second largest
contributor to system size and outperforming
peers in guest satisfaction, and voco™ hotels
has already expanded to 25 countries within
Premium. In Luxury & Lifestyle, progress
included Six Senses® now having grown
its open and pipeline estate by more than
half since acquisition in 2019, and our new
Vignette Collection brand already at six
signings and a first opening since launch
in August.
As we use our IHG® Hotels & Resorts
masterbrand to showcase the breadth of
our portfolio, we continue to enhance the
enterprise that supports it. This includes
developing our next-generation mobile
app, and preparing thousands of hotels
to allow guests to choose specific room
characteristics and add stay enhancements
when booking with us, and in parallel enable
our owners to generate maximum value
from their hotel’s unique features.
Transformational work also took place in loyalty
ahead of a relaunch in 2022 that will offer
members more rewarding tiers and points
value, provide richer benefits and exceptional
choice, and attract more next-generation
travellers. In the first year of our 2030
Journey to Tomorrow responsible business
plan, key progress included upgrading our
science-based target to help limit global
warming to 1.5°C, launching our virtual IHG
Skills Academy platform, corporate employees
completing more than 10,000 hours of
conscious inclusion training, and supporting
charities responding to natural disasters.
Thank you
I would like to thank the Board for their
guidance, and ahead of his retirement as
Chair, recognise the invaluable contribution
Patrick Cescau has made in his nine years
with IHG. He is a hugely respected figure
and on a personal note I am grateful for his
counsel and support. Though he will be
missed, we look forward to welcoming
Deanna Oppenheimer.
On behalf of the Executive Committee,
I would also like to thank our owners for
their partnership and commitment, and our
inspiring colleagues for bringing our brands
and purpose of True Hospitality for Good
to life, and making IHG a stronger business.
To see IHG again named a Kincentric Global
Best Employer in 2021 was a proud moment
and it has meant a lot to reconnect with
colleagues in person this year, as well as
our owners, knowing that together we look
to the future with confidence.
Keith Barr
Chief Executive Officer
Chief Executive Officer’s review
IHG | Annual Report and Form 20-F 2021
7
Strategic Report Industry overview
We operate in an industry with high growth potential,
underpinned by strong long-term fundamentals
that remained resilient during the pandemic.
The $360 billion hotel industry
has compelling structural growth
drivers, underpinned by factors
including consumers’ inherent desire
to travel, population growth, and an
expanding middle class in emerging
markets with increasing disposable
incomes. While the pandemic suppressed
demand during 2020 and 2021, demand
has returned rapidly in domestic markets
as government restrictions have lifted and
vaccination rates increased. This demand
has predominantly been in markets not
exposed to cross-border trips and
across essential business travel, though
discretionary corporate travel and group
events have begun to return.
Cost remains a significant barrier to building
a scale position in the industry, whether
that’s due to the investment required to
build and maintain hotels, establish a strong
loyalty programme or to market brands in
a competitive marketplace. As such, the
industry remains fragmented, with 54%
of rooms affiliated with a global or
regional chain.
Branded hotel penetration has steadily
increased as a long-term trend and is
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 to provide more
sustainable stays. Owners affiliated with
a brand tend to generate higher returns.
For the industry as a whole, it is not yet clear
what impact there will be on demand from
structural changes brought about by the
pandemic, such as technology replacing
elements of business travel. However, this
may be offset by a greater use of hotels to
facilitate a global shift to increasingly flexible
working arrangements. In addition, there is
scope for ‘bleisure’ demand, where flexible
working creates potential for leisure demand
to be combined with business stays.
It is likely that fluctuating Covid-19
restrictions will continue to create a volatile
demand environment in the short term.
However, we anticipate the attractive industry
fundamentals to be fully restored in the
longer term. For example, STR forecast that
US industry RevPAR will return to 2019 levels
by the end of 2023.
The hotel industry has attractive tailwinds…
Disposable personal income in the US from 2000 to 2020
(in billion US dollars)
17,500
15,000
12,500
10,000
7,500
5,000
2,500
0
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Source: Statista
A growing middle class in emerging markets with a desire to travel
Wealth share in emerging economies (%)
30
25
20
15
10
5
0
0
0
0
2
2
0
0
2
4
0
0
2
6
0
0
2
8
0
0
2
0
1
0
2
2
1
0
2
4
1
0
2
6
1
0
2
8
1
0
2
0
2
0
2
E
2
2
0
2
E
4
2
0
2
Low and lower middle income
Upper middle income
Forecast
Forecast
Source: Credit Suisse
Resilience in room night stays, with further growth expected
Global hotel room night stays
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0,000
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
E
1
2
0
2
E
2
2
0
2
E
3
2
0
2
E
4
2
0
2
E
5
2
0
2
Source: Oxford Economics
8
IHG | Annual Report and Form 20-F 2021
Strategic Report with significant barriers
to entry…
and a track record of growth
The top five hotel groupsa have
increased their market share
Share of top five branded hotel groups
as % of global rooms supply
2021
2020
2019
2018
2017
2016
24.3%
23.9%
23.9%
23.4%
22.5%
21.9%
a Includes IHG, Marriott International, Inc.,
Hilton Worldwide Holdings Inc.,
Wyndham Hotels & Resorts Inc., Accor S.A.
Source: STR
With share expected to further expand
Branded share of global industry
supply and share of global industry
active pipeline
Industry RevPAR has seen a long-term track record of growth;
the most recent recovery has been driven by domestic leisure demand
US Industry RevPAR growth, monthly year-on-year
70%
0%
-75%
0
9
9
1
2
9
9
1
4
9
9
1
6
9
9
1
8
9
9
1
0
0
0
2
2
0
0
2
4
0
0
2
6
0
0
2
8
0
0
2
0
1
0
2
2
1
0
2
4
1
0
2
6
1
0
2
8
1
0
2
0
2
0
2
1
2
0
2
Luxury and upper upscale
Upscale
Total Midscale
Economy
Source: STR
66%
55%
55%
35%
77%
Global industry RevPAR ($)
RevPAR movements are illustrative
of lodging demand
Global rooms supply (m rooms)
Supply growth reflects the attractiveness
of the hotel industry
1.4x
54%
2021
2020
2019
2018
2017
2016
53.7
37.0
2021
2020
2019
2018
2017
2016
80.6
80.8
78.9
76.2
Source: STR
Source: STR
20.1
19.7
19.5
19.0
18.5
18.1
Branded hotel business models
There are two principal business models:
• A fee-based, asset-light model:
• An owner-operated, asset-heavy 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.
– 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 enables faster growth and generate higher
returns. This model tends to present lower risk to fluctuations in the economy.
Branded share
of global
room supply
Branded share
of global
active pipeline
Source: STR
Consumers value loyalty membership
which requires a large scale enterprise
to deliver
57%
Of consumers spend more on brands
to which they are loyal
Source: Accenture
84%
Of loyalty programme members have made
a redemption from the programme
Source: Bond, in partnership with Visa
Industry overview
IHG | Annual Report and Form 20-F 2021
9
Strategic Report Strategic Report
Our business model
We predominantly franchise our brands and manage hotels
on behalf of third-party hotel owners and have a weighting
to more resilient domestic non-urban markets.
Total system size
Total development pipeline
880,327 rooms
270,960 rooms
Composition of rooms
Composition of rooms
1%
28%
71%
Franchised
Managed
Owned, leased
and managed
lease
42%
Franchised
Managed
58%
18%
Americas
EMEAA
Greater China
34%
36%
Americas
EMEAA
Greater China
25%
57%
30%
9%
13%
15%
Luxury & Lifestyle
Premium
Essentials
Suites
10%
19%
Luxury & Lifestyle
Premium
Essentials
Suites
17%
63%
54%
The growth of our business relies
on two fundamental growth
drivers: revenue per available room
(RevPAR) and increasing the number of
rooms across our estate. 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 reflects how attractive the
hotel industry is as an investment from
an owner’s perspective.
To drive growth, we have a portfolio of
17 brands across more than 100 countries
in the Suites, Essentials, Premium and
Luxury & Lifestyle 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 estate.
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 travel has driven resilience
relative to the wider industry during the
pandemic. We are weighted towards
non-urban markets which are less reliant
on international inbound travel and less
exposed to large group meetings and
events. A combination of these factors,
along with our enterprise capability, has
allowed IHG to outperform the wider
industry in RevPAR growth.
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.
Holiday Inn Express® & Suites Johor Bahru, Malaysia
10
IHG | Annual Report and Form 20-F 2021
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
How we generate revenue
Franchised hotels
We receive a fixed percentage of rooms
revenue when a guest stays at one
of our hotels. This is our fee revenue.
Managed hotels
From our managed hotels, we generate
revenue through a fixed percentage of
the total hotel revenue and a proportion
of hotel profit.
Guests
Hotel
IHG fee revenue
System Fund
Hotel owner
Franchised
RevPAR
X
Rooms
X
Royalty rate
Managed
Fixed % of total hotel
revenue as a management
fee and typically a share
of hotel gross operating
profit after deduction
of management fees
Owned, leased and managed lease hotels
For hotels which we own or lease, we record the entire revenue and profit of the
hotel in our financial statements. Our owned, leased and managed lease hotels
have reduced from over 180 hotels 20 years ago, to 19 hotels at 31 December 2021.
System Fund
IHG manages a System Fund for the
benefit of 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® Rewards
points under third-party co-branding
arrangements.
Given the significant scale of 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.
Fees to IHG in relation to the licensing of our brands and,
if applicable, hotel management services.
Assessments and contributions which are collected by IHG
for specific use within the System Fund.
Third-party hotel owners pay:
IHG revenue from reportable segmentsª
System Fund revenues
2021: $1,390 million
2021: $928 million
Revenue attributable to IHG comprises:
• Fee business revenue from reportable segments:
– Franchise fees
– Management fees
– Central revenue (principally technology fee income)
• All revenue from owned, leased and managed lease hotels.
The System Fund is not managed to a profit or loss for IHG
over the longer term, but for the benefit of hotels in the
IHG system, and comprises:
• Assessments and contributions paid by hotels
• Revenue recognised on consumption of IHG Rewards
loyalty points
See page 56 for more information.
See page 72 for more information.
a Excludes System Fund and hotel cost reimbursements.
Our business model
IHG | Annual Report and Form 20-F 2021
11
Our business model continued
How we drive operating profit
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 of operational efficiencies,
along with brands and markets becoming
more mature, has supported fee margin
expansion on average by over 100bps
a year between 2009-2019.
For franchised hotels, the flow through of
revenue to operating profit is higher than it
is at managed hotels, given 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 around
90% of our hotels operating under our
franchised model.
Across our managed hotels, the flow
through of revenue to profit can be lower,
given higher operating expenditure on
operations teams supporting the
hotel network.
Fee margina by region
Americas
EMEAA
Greater China
Total IHG
FY 2021
FY 2020
FY 2019
FY 2018
82.2%
FY 2021 21.5%
70.7%
-17.9%
FY 2020
77.7%
74.8%
FY 2019
FY 2018
FY 2021
FY 2020
47.3%
45.5%
FY 2021
FY 2020
49.6%
34.1%
58.6%
FY 2019
54.1%
FY 2019
62.3%
FY 2018
46.7%
FY 2018
54.1%
53.3%
a Fee margin excludes owned, leased and managed lease hotels, significant liquidated damages and the results of the Group’s captive insurance company and is stated at AER.
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.
Disciplined approach to capital allocation and managing liquidity
Our asset-light business model is
highly cash generative through the cycle
and enables us to invest in our brands
and strengthen our enterprise. We have
a disciplined approach to capital
allocation, which ensures that the
business is appropriately invested in,
whilst maintaining an efficient and
conservative balance sheet.
Beyond this, we look to return surplus
cash to shareholders through ordinary
and special dividends and share
buybacks, with our objective to maintain
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.
Liquidity through the recovery
As occupancies have recovered, the
strength of our cash generation became
evident with adjusted free cash flowa
generation of $571m in 2021.
Recovering demand during 2021 and strong
cost control resulted in rapid deleveraging.
As such, our net debt: adjusted EBITDA ratio
was 3.0x at 31 December 2021 (7.7x as at
31 December 2020).
During the year, we repaid £600m of
commercial paper issued under the UK
Government’s Covid Corporate Financing
Facility (CCFF). Following the issuance
and repayment of bonds in 2020, our next
bond maturity is £173m in November 2022,
with no further bond maturities until
October 2024. As at 31 December 2021,
IHG had available liquidity of $2.7bn.
Our $1.35bn syndicated and bilateral
revolving credit facilities (RCF) have
covenant relaxations in place for 2022
(see page 59). Our covenant leverage was
3.0x at 31 December 2021 (2020: 8.7x).
Looking forward, our approach to capital
allocation remains unchanged. As the
business recovers, our priorities for
the uses of cash are consistent: ensure
the business is appropriately invested
in to drive growth; target sustainable
growth in the ordinary dividend; and
return surplus funds to shareholders,
while at the same time considering our
stated aim of a leverage ratio of 2.5-3.0x,
and our objective of maintaining an
investment-grade credit rating.
Bond maturity profile ($m)
565
570
537
473
408
233
0
2022 2023 2024 2025 2026 2027 2028
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 defined under
IFRS or are adjusted IFRS figures. Further explanation in relation to these measures can be found on page 73 to 77 and reconciliations to IFRS figures, where they have been
adjusted, are on pages 218 to 223.
12
IHG | Annual Report and Form 20-F 2021
Strategic Report Consistent uses of cash
Our priorities for the uses of cash are
consistent with previous years and
comprise three pillars:
Shareholder returns (2003-19) ($bn)
Source of returns
5.8
13.6
7.8
Asset
disposals
Operational
cash flows
Total
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 funds
to shareholders
The Group has a
strong track record of
returning surplus cash to
shareholders. Since 2003,
including the ordinary
dividend, the Group
has returned $13.6bn.
Capital expenditure
Spend incurred by IHG can be summarised as follows:
Type
What is it?
Recent examples
Maintenance capital expenditure
and key money
Recyclable investments to drive the
growth of our brands and our expansion
in priority markets
System Fund capital investments for
strategic investment to drive growth
at hotel level
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
maintenance of our offices, such as
reformatting in light of the pandemic.
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 are capital used to
acquire real estate or investment through joint
ventures or equity capital. 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 brand. These hotels
have now been sold and operate under
a franchise agreement.
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 develop our cloud-based
Guest Reservation System (GRS) and
IHG Concerto™. Other examples include
redevelopment of the IHG mobile app
ahead of launch in 2022.
Dividend policy
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.
When reviewing dividend recommendations,
the Directors take into account the long-term
consequences. 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.
The Board is therefore proposing a final
dividend of 85.9¢ in respect of 2021, an
amount equivalent to the withdrawn final
payment in respect of 2019.
See pages 92, 107, 113 and 114 for
information about how we have engaged
with shareholders and investors during 2021.
Our business model
IHG | Annual Report and Form 20-F 2021
13
Strategic Report Trends shaping our industry
The pandemic has
accelerated a number of
pre-existing trends within
the hotel industry, including
digitalisation and customer
centricity, along with greater
demand for sustainable
branded experiences. In the
near term, new factors have
also emerged, including
managing labour and
supply shortages.
During the pandemic, the nature of hotel
stays changed significantly. As guests
returned to travel following the lifting of
restrictions and reopening of hotels, there was a
significant focus on cleanliness, with the industry
collaborating with leading experts in this field.
The volatile nature of infection rates also saw
guests welcome flexible cancellation policies
and the extension of loyalty programme status.
As vaccines have rolled out and restrictions eased
or lifted, what’s become clear is that the pandemic
was a ‘demand suppression’ event for the industry,
with travel subsequently bouncing back
significantly. This has been quickest in domestic
leisure, whilst essential business demand has
proven relatively resilient, particularly in extended
stay chains and in the economy and midscale
categories. Discretionary business travel, group
bookings and international trips have also shown
encouraging signs of recovery.
Technology and digitalisation continue to play a key
role across the entire guest journey. This includes
digital booking, greater levels of personalisation and
the ability to choose room attributes, and service
delivery during a guest stay.
14
IHG | Annual Report and Form 20-F 2021
1
Labour and supply
chain pressures
Government-mandated hotel closures in 2020 saw many people
in hospitality switch careers, and as demand returns, vacancies are
at record highs in some markets, with the World Travel & Tourism
Council predicting employment in the sector will rise 18% in 2022
to 324 million available jobs. The industry must work together with
governments to address these staff shortages, including through
facilitating greater labour mobility across borders, shifting to remote
working, upskilling the workforce, promoting education and
apprenticeships, and creating fair, safe roles.
As markets pivot towards growth, supply chains have also been
disrupted. With the lack of available products largely due to input
shortages, businesses with complex supply chains are finding things
particularly challenging. For hotels, this has led to shortages in key
areas, from linen for guest stays to timber for construction projects.
Our response
• Optimising operating models at hotels to improve efficiency
and create savings to help offset higher staff costs
• Working with recruitment agencies to provide trained staff
on demand when required
• Provided new hiring resources, deepened relationships with
job platforms, and increased awareness of vacancies through
social media
• In Australia, our myFlex initiative has given hotel colleagues
the flexibility to work across any of our hotels in the country’s
managed estate, supporting both staffing levels and
work-life balance
• Using our IHG® Academy to prepare young people for a career
in hospitality, supported by a new virtual learning platform
• Enhancing our global procurement offer, with our teams
finding more ways to leverage central purchasing and seek
cost-effective solutions for owners. During 2021, IHG
procurement delivered a greater than 10% cost reduction
on $1.3bn of spend across IHG’s hotel and corporate supply
chains spanning 15 countries
See pages 19 to 28, and 39 for more information.
Strategic Report 2
3
Six Senses Zighy Bay, Oman
Sustainability
considerations
Demand for branded
hotel experiences
Guests are paying closer attention to a company’s commitment to
look after the world around us. A global study commissioned by IHG
indicated that more than 80% of consumers noted the importance
of choosing a hotel brand that operates responsibly, with guests
willing to spend on average 31% more on accommodation that meets
this need. Business customers are also increasingly requesting
information about sustainable accommodation and meeting options
to help make progress against their own targets.
With stakeholders now expecting businesses to operate and grow
responsibly, a rapidly growing number of organisations are making
external commitments to drive environmental and social change,
including joining the UN’s Race to Zero by upgrading their carbon
emissions targets.
Guests are increasingly seeking the reassurance of a high-quality,
safe branded stay as the industry recovers from the pandemic.
At the same time, independent hotels are recognising the advantages
of being attached to a branded system, including lower distribution
costs, marketing at scale and a powerful loyalty offer that can drive
repeat guest stays.
While many independent hotels remained closed during the
pandemic and experienced numerous fixed costs, many branded
properties were more able to meet demand from quarantine stays,
key workers and a global sales network adept at capturing the return
of travel. As such, owners are increasingly looking at conversions
to join a branded system with limited changes to their properties,
particularly in the upscale and luxury segments.
Our response
• Launching an automated utility data collection tool across
all our hotels globally to inform steps to operate sustainably
• Developing our Hotel Energy Reduction Opportunities (HERO)
tool, which will be key to helping our hotels target energy and
carbon reductions
• Committing to a 1.5°C science-based target (SBT), which puts
IHG on a trajectory to achieve net zero by 2050. In addition,
we have joined Race to Zero – the UN-endorsed campaign
to rally leadership and support from cities, businesses and
investors for a greener, more resilient, net zero carbon future
• On track to eliminate single-use miniature bathroom amenities
from our hotels during 2022
• Establishing an Environmental Sustainability Committee with
the IHG Owners Association, which will collaborate with IHG
on energy reduction in hotel operations
Our response
• Continued to strengthen our enterprise with enhancements
to our revenue delivery systems, technology offer and
operational expertise
• Enriched our loyalty offer with dynamic pricing for Reward
nights, with further enhancements in 2022 expected to
strengthen member engagement
• Engaging with owners of independent hotels on potential
conversions while maintaining brand standards
• Successful launch of upscale conversion brand voco, which
has fewer brand requirements, but all the hallmarks of a
high-quality and safe guest experience
• Launch of Vignette Collection, which allows owners of
high-quality upscale and luxury hotels to maintain the distinct
identity of their properties while enjoying the benefits of
a branded system
• Partnering with suppliers to help ensure they share the same
• Giving guests assurance throughout their stays with our
responsible business commitments as we do
• Working with a large number of government and industry
stakeholders to help provide support for our owners through
policies and incentives, such as green financing
See pages 29 to 35 and 229 to 230 for more information.
IHG® Clean Promise, where high standards of hygiene have
been developed with Cleveland Clinic, Ecolab and Diversey
See pages 17 to 22 for more information.
Trends shaping our industry
IHG | Annual Report and Form 20-F 2021
15
Six Senses Zighy Bay, OmanSix Senses Zighy Bay, OmanStrategic Report Our strategy
Our ambition to deliver high-quality,
industry-leading net rooms
growth in the coming years is
underpinned by strategic investment in our
brands, people, systems and scale to drive
growth across our portfolio in high-value
markets and segments.
Over the long term, with disciplined
execution, this approach supports sustained
growth in cash flows and profits, which can
be reinvested in our business and returned
to shareholders. In the shorter term, with
volatility remaining a factor as markets
respond to and recover from the pandemic,
we continue to focus on rebuilding revenue
and profit back to prior levels, while still
investing in growth.
Our four strategic priorities have been
designed to put the expanded brand portfolio
we have built in recent years at the heart of
our business, and our owners and guests at
the heart of our thinking. They recognise the
crucial role of a sophisticated, well-invested
digital approach, and ensure we meet our
growing responsibility to care for and invest
in our people, and to make a positive
difference to our communities and planet.
Combined, the projects and programmes
that support these four pillars each year
are designed to improve performance and
stimulate growth by helping us create
competitive advantage, build richer guest
and owner relationships, operate sustainably
and responsibly, and enhance a culture that
brings the best out of our teams.
Our plans and their execution are shaped
by what we have learnt throughout the
pandemic, as well as the current economic
and social environment, and industry trends
and challenges as markets recover.
Our success and reputation are dependent
on our commitment to our purpose of
True Hospitality for Good, underpinned by
our workplace culture and commitment to
operating in a responsible and ethical manner.
Together, these elements ensure we build
trust with all our stakeholders and work
within a culture of respect, responsibility and
inclusivity, alongside clear engagement with
our strategy and the ways in which we aim
to create a stronger business for everyone.
See how the Board considered strategic and
operational matters on pages 90 to 91.
See how IHG does business on pages 36 to 39.
OUR PURPOSE
PRIORITIES
BEHAVIOURS
True Hospitality
for Good
OUR AMBITION
To deliver
industry-leading
net rooms growth
OUR STRATEGY
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.
16
IHG | Annual Report and Form 20-F 2021
Build loved and
trusted brands
Move
fast
Customer
centric in
all we do
Solutions
focused
Create digital
advantage
Think
return
Care for
our people,
communities
and planet
Build
one team
Strategic Report PRIORITY:
Build loved and trusted brands
Grand Hotel Wien, Austria –
signed as a Vignette™ Collection hotel
Central to our success is the love
and trust our guests and owners
feel for our brands. We focus on
investing in a portfolio that offers guests
exceptional quality and experiences, and
one that represents a leading choice for
owners, built on a commitment to industry
outperformance, effective hotel lifecycle
management and strong returns.
Key to our strategy is having a family of
diverse and attractive brands capable
of meeting the needs of a range of guests
and owners. In the past decade, we have
transformed our portfolio, adding six
new brands in the past four years alone.
This includes significantly strengthening
our Luxury & Lifestyle offer for guests and
owners, and our ability to take advantage
of an increasing number of conversion
opportunities in what is a fragmented
market. Alongside this, we have continued
to invest significantly in the quality, design,
service and technology that underpins
our existing well-established brands.
Supported by IHG Rewards, one of the
industry’s biggest loyalty programmes, we
now have a total of 17 brands – some of them
world-famous and industry-leading, others
gaining greater attention, and newer ones
starting out with exciting growth
prospects ahead.
As the industry recovers and development
activity increases, we are focused on
expanding all of them at pace.
A decade of progress
34%
Increase in open hotels
(2011-2021)
40%+
Proportion of our global pipeline
under construction
34%
Increase in open rooms
(2011-2021)
9
Brands launched or acquired
in the past decade
2011
2021
Luxury
& Lifestyle
Premium
Essentials
Suites
Our strategy
IHG | Annual Report and Form 20-F 2021
17
Strategic Report Our strategy continued
Build loved and trusted brands continued
What we achieved in 2021
We celebrated the opening of 291 hotels
during 2021, including our 3,000th for
Holiday Inn Express and more impressive
hotels for our InterContinental® Hotels &
Resorts brand in its 75th anniversary year.
A further 437 hotels were added to our
global pipeline, with almost half belonging
to our powerhouse Holiday Inn and Holiday
Inn Express brands.
In order to drive future growth, we continue
to balance investing in our existing established
brands to further enhance performance
and perception, alongside accelerating the
expansion of newer brands in key markets.
To underpin this, we have invested in our
hotel development teams to accelerate
signings and put more emphasis on
supporting functions to facilitate growth,
such as investment analysis and legal.
Critical work this year has included a review
of our Holiday Inn and Crowne Plaza estates,
focused on quality of service and property
condition. These powerful brands are key
to future growth, which relies on ensuring
consistency and quality levels meet the
expectations of our owners and guests.
Reflecting significant investment by our
owners, 83 hotels have committed to
improvement plans or scopes of work
that will support improved performance
and raise guest satisfaction scores.
In addition, 151 hotels were removed from
the estate. Through the outcomes of the
HUALUXE® Nanjing Yangtze River, China
review, together with other property
improvements and new openings over the
past four years, in the Americas two-thirds
of the Holiday Inn estate and three-quarters of
the Crowne Plaza estate have been updated.
Excellent progress with newer brands
continued, with avid already the second
largest contributor to system growth, voco
now globally established with a presence in
25 countries, and Six Senses having increased
its system size and pipeline by more than
half since acquisition in 2019. Following
its launch in August, our Luxury & Lifestyle
collection brand, Vignette Collection, has
already secured six properties, with the first
open by the end of the year. This new brand
provides high-quality independent hotels
access to the benefits of IHG’s enterprise,
while allowing us to offer guests more
distinctive and unique properties that would
otherwise not fit within our existing brands.
There are around 1.5 million independently
run rooms in the market segments we are
targeting, and we expect to attract more
than 100 hotels within 10 years.
To increase consumer perception and
awareness of our full family of brands across
Luxury & Lifestyle, Premium, Essentials and
Suites, we adopted a new IHG Hotels & Resorts
masterbrand marketing approach, which drove
improved brand awareness and preference
during the year. Loyalty promotions in key
markets and travel hubs were also increased,
underpinned by travel flow data.
18
IHG | Annual Report and Form 20-F 2021
voco Bonnington Dubai, UAE
In December, we were proud to win four
awards at the 28th World Travel Awards,
including World’s Leading Business Hotel
Brand 2021 and World’s Leading Hotel Brand
2021 (InterContinental); World’s Leading
Premium Hotel Brand 2021 (voco); and
World’s Leading Budget Hotel Brand 2021
(Holiday Inn Express).
What’s to come
Following the conclusion of our Holiday Inn
and Crowne Plaza review in 2021, we expect
our average group removals rate to reduce and
for net system size growth to subsequently
accelerate, reflecting hundreds of planned
openings and increasing development
activity as markets continue to recover.
With a pipeline of almost 1,800 hotels,
representing more than 30% of our current
estate, and a more rounded portfolio of
attractive brands, we are confident in our
ability to deliver industry-leading net system
size growth in the coming years through
the continued expansion of our established
brands and scaling of newer additions.
Notable openings in 2022 include our first
Atwell Suites™ properties, Kimpton® Hotels
& Restaurants making its debut in mainland
China, and a flagship Regent® hotel in
Hong Kong.
Key factors in delivering our expected growth
include capitalising on more conversion
opportunities within the Luxury & Lifestyle
space. Together, the upscale and luxury
segments now represent 32% of our system
size and 42% of our pipeline.
25%
Of openings in 2021 were conversions
Strategic Report PRIORITY:
Customer centric in all we do
We know that to stay successful
we need to put ourselves in
the shoes of our leisure guests,
business customers and owners in all we
do. This is how we create unrivalled service
and tailored experiences in our hotels, and
attractive investment opportunities with
strong returns for our owners.
Our response to the pandemic has illustrated
more than ever our desire to go the extra
mile through fast, thoughtful and effective
solutions, built on listening to what’s needed.
Whether it’s food and beverage, cleanliness,
hybrid meetings or loyalty enhancements
for guests, or more efficient operations,
recruitment support or procurement
solutions for our owners, we’re working with
a customer-centric mindset to ensure IHG
and our brands stand out as a preferred
choice in the market.
What we achieved in 2021
Many of our hotel owners represent small,
individual businesses and as the recovery
strengthens, we’re providing the operational
and commercial support they need to drive
performance, alongside seeking opportunities
to grow further with them.
One of the big challenges of the pandemic
for our industry is recruiting and retaining
talent to meet returning guest demand.
IHG has provided a number of tools and
solutions for hotels, including new hiring
resources, deeper relationships with job
platforms, and targeted social media
campaigns. In Australia, our myFlex initiative
has given hotel colleagues the flexibility to
work across any of our hotels in the country’s
To ensure our corporate teams are thinking
like our owners, we also invited owners and
General Managers (GMs) to speak at regional
townhalls and share their perspectives
during 2021.
For our guests, as more people return to travel,
we are focused on ensuring the services,
technology and experiences we create meet
evolving expectations.
Cleanliness and safety standards have
remained very important, underpinned
by our IHG Way of Clean programme and
IHG Clean Promise. The stay experience
has continued to evolve, including the
reintroduction of buffet breakfasts and social
hours for brands in certain markets, and we
offer clear guest communication on what
to expect during their hotel stay at this time.
During 2021, we introduced more loyalty
offers for IHG Rewards members, extended
the pause on points expiration and integrated
select Six Senses resorts into the programme.
managed estate, supporting both staffing
levels and work-life balance.
We also launched our Journey to GM talent
acceleration programme to support those
making the transition into General Manager
roles, and strengthened how we identify and
develop future talent as our estate expands.
As demand increases in our hotels, we are
providing our owners and teams with clear
action plans, training and support for evolving
brand standards and procedures to meet
changing guest expectations. Rising costs
due to inflation in some markets have been
met with operational efficiency changes and
an expanded procurement offer, with our
scale and expertise helping deliver new
solutions that resulted in net year-on-year
savings of more than 10% for owners across
the $1.3bn of spend managed by IHG.
Thousands of owners and operators also
joined our webinars during the year on
topics including virtual sales calls, evolving
food and beverage, and the IHG® Way
of Clean programme. In late 2021, we
collaborated with the Professional Convention
Management Association to offer hotel
teams a new Hybrid Events for Hotels &
Venues Intro Certificate Course, to help
them successfully partner with planners
to host corporate and social hybrid events.
We have captured demand through tailored
marketing campaigns and promotions,
supported by resources such as PR toolkits
and new services within IHG’s Revenue
Management for Hire programme, which
helps hotels identify and act on revenue
opportunities using business intelligence
and data.
Our strategy
IHG | Annual Report and Form 20-F 2021
19
Strategic Report Our strategy continued
Customer centric in all we do continued
Such steps have deepened guest
relationships, with Reward Night bookings
largely recovering to pre-pandemic levels
and participation rates of our higher tiered
members exceeding 2019 levels. A further
nine million members also joined the
programme, with record enrolments
on our web and mobile channels.
For corporate guests, ‘Welcome Back to
Business’ campaigns were launched, with
our SME programme, IHG Business Edge,
increasing its accounts by 44% in the year.
Our Meet with Confidence programme
for business customers was also expanded
to include new rapid on-site testing for
large events at our US hotels, while a new
Points + Perks offer makes bookings even
more rewarding. In November, IHG received
the Stella Award gold medal for Best Hotel
Chain for the exceptional meeting
experience provided through the programme.
Reflecting our ongoing customer-centric
approach, our Guest Satisfaction Index
continued to improve, achieving scores
of 100 or better for each brand and
outperforming peers.
To continue improving guest satisfaction
scores and drive revenue for our owners,
updated guest room and public space
design programmes are ongoing across
many of our brands, including our Formula
Blue concept at Holiday Inn Express and
next-generation designs for Holiday Inn,
Candlewood Suites® and Staybridge Suites®.
What’s to come
Our IHG Rewards loyalty programme is
critical to our business and our future growth.
Our members drive around half of all room
nights globally each year and spend 20%
more in our hotels than non-members.
They are also nine times more likely to
book direct, which is more profitable
to our owners.
To deepen relationships with new and
existing members, and drive more repeat
business for our owners, we will transform
our loyalty offering in 2022. In January 2022,
we announced a first phase of new tiers and
bonus-point earning structure that will allow
our members to earn more points, more
quickly than ever before. Later in the year,
details of the full programme will commence,
including new and enhanced benefits, more
experiences and more redemption options,
all powered by our new IHG mobile app,
which goes live in 2022.
As the new programme rolls out, we’re
taking steps to ease the pressure and
disruption on our busy hotel teams by
providing training and resources, alongside
carefully managing costs for owners.
Helping our owners manage costs to build,
open and operate is a top priority, so we
continue to work closely with them on
solutions to increase revenue alongside
delivering more efficient and sustainable
operations. Key elements to this include a
continued focus on our central procurement
services and reducing energy costs.
As we focus on accelerating growth, we
will also proactively manage our global
development pipeline and help support our
owners to ensure they can progress projects
as quickly as possible.
Guest engagement
Our ability to offer a range of differentiated and attractive brands with rich stay experiences, great value, flexibility and strong
loyalty rewards are key to attracting guests to IHG branded hotels and driving commercial performance and revenue.
What impacted them in 2021
• Booking, cancellation and loyalty flexibility as
a result of local pandemic travel restrictions
• Covid-19 related health and safety protocols
• Evolving corporate meeting requirements
blended with hybrid working and leisure
• Quality of the guest stay and booking
experience, including increased digitalisation
• Location of hotels and facilities offered
• Preference for hotels with trusted societal
and green credentials
Engagement
• Guest surveys
• Nine contact centres supporting guests in
seven countries, with 2,700 sales and service
agents speaking 12 languages
• Social media engagement
• Programme of targeted stay campaigns,
loyalty promotions and awareness of stay
experience improvements
• Board and Executive Committee reviews
of guest proposition and loyalty offer as part
of the Board’s consideration of strategic
and operational matters
• Consumer surveys focused on attitudes
to being more environmentally and socially
conscious when travelling, and the
pandemic’s impact on appetite to travel
Outcomes
• Extended points expiry for loyalty members,
and increased masterbrand marketing and
stay promotions, leading to uplift in brand
awareness
• Continuation of IHG Way of Clean programme
and evolution of Meet with Confidence
programme for corporate clients
• Enhanced customer service support,
including automation to speed up response
time and direction to the right team
• Guest experience enhancements, including
renovations, new designs and simpler
room rates
• Opening of 291 hotels and launch of our
17th brand, Vignette Collection
• Continued improvement in Guest Satisfaction
Index, with scores of 100 or better for each
brand and outperforming peers
• Launch of Journey to Tomorrow 10-year
responsible business plan
See our guest love KPI on page 52 and how the Board had regard for guests as part of their consideration of strategic and operational matters
on pages 90 to 91.
20
IHG | Annual Report and Form 20-F 2021
Strategic Report Why hotel owners choose to work
with IHG
Hotel owners choose to work with IHG because of the trust they have in our brands
and our track record in delivering strong returns.
Strength of brands
The breadth and depth of our brand
portfolio delivers strong owner ROIs
Global sales organisation
We have developed a leading
global sales enterprise to
drive higher quality, lower
cost revenue to our hotels
Sustainability tools & 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
Strong loyalty programme
and enterprise contribution
74% of revenues delivered
to hotels by IHG’s enterprise
Digital advantage
Our cloud-based IHG Concerto
platform, including a new Guest
Reservation System, provides
a strong interface for guests
and owners
Procurement
We use our scale to reduce costs
for owners with procurement
programmes for hotel goods,
services and construction
Investment in hotel lifecycle
management and operations
We have invested in extensive technology,
systems and processes to support
performance, increase efficiencies and
drive returns for our owners
Hotel owner engagement
IHG’s success relies on hotel owners investing in our brands. To remain attractive, we focus on the breadth of our brand
portfolio and effectiveness of our loyalty programme, enterprise contribution, technology, procurement and sales offering.
What impacted them in 2021
Engagement
Outcomes
• Ability to capture and drive demand
• Direct meetings with CEO and regional CEOs
to their hotels
• Evolving brand standards
• Labour shortages, supply chain and
continued budgeting constraints caused
by the pandemic
• Expanded brand portfolio with launch
of Vignette Collection
• IHG Owners Association collaboration
• Portfolio and individual hotel reviews
covering operational, strategic and industry
trend updates
• Webinars, regular newsletters and bulletins
• Hotel lifecycle and finance team support
• Collaboration with governments and industry
to support recovery
• Tailored marketing and promotions, supported
by new data-driven resources and services
that help hotels quickly identify and act on
revenue opportunities
• Brand standards evolved or removed to
create more efficient and effective operations
• Net year-on-year procurement savings of over
10% for owners across $1.3bn spend managed
by IHG
• Increased training, guidance and recruitment
support for hotel teams
• Next-gen formats and refurbishments being
applied to hotels under brands including
Holiday Inn Express, Holiday Inn, Candlewood
Suites and Staybridge Suites
• 83 hotels committed to improvement plans as
a result of the Holiday Inn and Crowne Plaza
review, and 151 hotels exited the estate
See our net rooms supply, signings, gross revenue and enterprise contribution KPIs on pages 50 and 51 and how the Board had regard for hotel
owners as part of their consideration of strategic and operational matters on pages 90 to 91.
Visit www.owners.org for further information about the IHG Owners Association.
Our strategy
IHG | Annual Report and Form 20-F 2021
21
Strategic Report
Strategic Report
Our strategy continued
PRIORITY:
Create digital advantage
In a world where we all expect seamless
experiences, our digital capabilities form
crucial aspects of our offer for guests and
owners. For guests, our brand proposition
is as much about our booking experience,
marketing and mobile app functionality,
as it is about the hotel destination and our
brand hallmarks. For owners, our offer is
as much about our ability to create revenue
advantages through data and technology,
as it is about our scale and expertise.
We understand this and are investing in
the technology, tools and solutions that
make the biggest difference to our guests,
owners and teams.
Our cloud-based platform, IHG Concerto,
is critical to the work we’re doing in this
space, serving as the foundation for much
of how we’re creating digital advantage by
blending core hotel applications into one
seamless, powerful platform capable of
enhancing the guest, owner and colleague
experience. It gives IHG the ability to add
regular releases with new functionality at
pace and scale, and ensures we continue
to evolve how we enrich the guest stay and
meet new expectations, alongside driving
stronger returns for our owners.
What we achieved in 2021
Working collaboratively with our owners
in recognition of the evolving trading and
operational pressures faced during the
pandemic, we made critical progress on
several fronts in 2021 to enrich the guest
experience and drive performance for
our hotels.
During the year, 5,300 hotels completed
detailed room inventory assessments to
prepare for attribute pricing powered by our
industry-leading Guest Reservation System
(GRS). Combined with other booking flow
improvements, this is the important
groundwork required to allow guests to
seamlessly select room characteristics to
tailor their stays when booking with us, with
prices adjusting based on the attributes
chosen. In parallel, the technology enables
owners to generate maximum value from
their hotel’s unique features.
This work forms a key element of a
multi-year commitment to transform the
booking and stay experience. In 2021, we
made significant progress in streamlining
and clarifying the rate options available
to customers across our brands, in favour
of a simpler and faster booking process
that is capable of accommodating
value-added experiences.
To further enhance the digital experience
for our guests, we are continuing to move
data and applications to the cloud, and
we are using consumer analysis of those
searching for stays and travelling with us to
create highly personal and targeted guest
promotions. Data-driven analysis is also
being applied to guest feedback so that it
informs our decision making and ensures
we’re focused on areas most likely to
improve satisfaction scores.
To enhance our customer service, artificial
intelligence (AI) voice-activated platforms
are answering and routing customer calls
to the most appropriate support area, which
is increasing satisfaction scores and leading
to higher average daily rates on bookings.
A digital concierge chatbot has also been
introduced on ihg.com and the IHG mobile
app to further assist customer bookings
and communication.
In light of the challenges of the pandemic,
IHG has also transformed its technology
to help around 70% of specialists in our
Philippines contact centres work remotely,
and transition all operations at our Mexico
City contact centre to remote working.
What’s to come
We’ve designed a clear roadmap of
investments and enhancements needed
over the coming years to deliver an
effortlessly smooth, exceptional guest
experience at every touchpoint – pre-stay,
during-stay and post-stay – with the aim of
keeping IHG hotels first choice for guests.
Having completed important foundational
work in 2021, we will launch the next
generation of our IHG mobile app in 2022
to further strengthen our mobile presence
and enhance our loyalty offer. Using data
insights and new designs, it will provide a
richer experience and introduce lots of new
features, fast.
For guests, the app keeps the management
of stay requests and features in one place,
creates a space to receive personal and
timely marketing offers and will enable new
benefits as part of a transformed loyalty offer.
For owners, a richer guest user experience is
expected to drive revenue through increased
direct bookings to our hotels, higher loyalty
engagement and incremental spend
during stays.
In 2022, we will also complete room inventory
assessments on the remaining hotels in our
estate in support of rolling out attribute
pricing on our direct channels.
5,300
Hotels completed room inventory assessments
in 2021 ahead of rolling out attribute pricing
on our direct channels
22
IHG | Annual Report and Form 20-F 2021
PRIORITY:
Care for our people,
communities and planet
Caring for our people,
communities and planet has
always been at the heart of how
we work, but the nature of an ever-evolving
social and environmental landscape means
we continually explore how we can make
a positive difference as we operate and
grow our business.
The Board’s Responsible Business
Committee reviews IHG’s responsible
business objectives and strategy and advises
the Board on our approach to diversity,
equity & inclusion (DE&I), our impact on local
communities, responsible procurement in
our supply chain, programmes on human
rights and modern slavery, our
environmental impact, and our engagement
with employees.
To guide our actions and drive progress,
in 2021 we launched our 2030 Journey
to Tomorrow plan, a series of ambitious
commitments to create positive change
for our people, communities and planet,
aligned to our purpose of True Hospitality
for Good and to the UN Sustainable
Development Goals.
We know the actions we take around the
environment, our people and society are
closely followed by our investors and other
stakeholders and are therefore critical to our
reputation and growth, and we have focused
our efforts on the areas where we feel we
can make the greatest impact. Reflecting the
changing world around us, each commitment
is designed to ensure IHG grows responsibly
and in ways that ensure travel has a beautiful
future for everyone.
See key matters discussed by the Board
on page 91 and the Responsible Business
Committee Report on pages 100 and 101.
See our Responsible Business Report at
www.ihgplc.com/responsible-business
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.
Improve the lives
of 30 million
people in our
communities
around the world
Champion a
diverse culture
where everyone
can thrive
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
Our strategy
IHG | Annual Report and Form 20-F 2021
23
Strategic Report
Our strategy continued
Care for our people, communities and planet continued
People
Champion a diverse culture
where everyone can thrive
Our 2030 commitments
• Achieve gender balance and a doubling
of under-represented groups across
our leadership
• Cultivate a culture of inclusion for
colleagues, owners and suppliers
• Support all colleagues to prioritise
their own 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, 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 we do not
employ any individuals in franchised hotels
(nor do we control their day-to-day
operations, policies or procedures).
People engagement
What we achieved in 2021
People engagement
We have a number of forums available for
employees to share their thoughts, including
employee resource groups, a designated
non-executive director for workforce
engagement, and our employee engagement
survey, known as Colleague HeartBeat,
which allows people to express their views
on key aspects of working at IHG.
In our 2021 survey, our overall employee
engagement stood at 85%, which saw IHG
again accredited as a Kincentric Global Best
Employer. The survey highlighted areas that
we can strengthen further, including the
importance of filling job vacancies and
advocating efficient and effective ways of
working. Actions were taken in both these
areas, including new hiring tools and a
continued focus on improving processes,
accountability and integration among teams.
These areas will remain a priority for 2022.
Attracting, developing and retaining talent
To achieve our ambitions, we know we need
to attract, develop and retain a diverse and
talented workforce. This relies on our ability
to develop an open and inclusive culture that
promotes career development and equal
opportunity, and recognises the importance
of wellbeing in the workplace.
To address the challenges in attracting
talent, we have developed new hiring
resources and updated our policies to speed
up the time it takes to process applications,
worked with jobs platforms, schools and
NGOs to unearth fresh talent, and run
recruitment days and fairs. Our Early Careers
and IHG® Academy programmes also provide
work experience, internships and graduate
opportunities to those seeking a career
in hospitality.
We are firmly committed to investing in our
employees and this year at a corporate level
we embedded regular talent planning and
development conversations to ensure we
are building a strong pipeline for the future
to deliver our ambitions. People managers
have continued to hold quarterly check-ins
with their teams to discuss performance
and personal development, supported by
an upskilling of HR partners through bespoke
talent masterclasses. There is also a strong
focus on reward, with our robust governance
approach aimed at having fair and consistent
reward and recognition practices across our
employee population.
In our hotels, actions in 2021 included
enhancements to our learning and
development programme for existing
GMs, the launch of a new Journey to GM
talent acceleration programme, and the
implementation of a new hotel talent
Delivery of our purpose to provide True Hospitality for Good and the strategic priorities that drive future success relies on our
people and our ability to maintain and evolve an engaged, diverse and inclusive culture where careers can grow.
What impacted them in 2021
Engagement
Outcomes
• Attractiveness of working in the hospitality
• Employee engagement survey
industry during the pandemic
• Staffing levels and ability to attract and
retain talent
• IHG’s strategy and approach to growth and
future success
• IHG’s approach to DE&I
• CEO and regional leadership calls with Q&A
• Voice of the Employee feedback sessions
• Employee communications including
intranet stories, newsletters, blogs, videos,
podcasts and interactive sessions on
strategic priorities
• IHG’s approach to hybrid working
and wellbeing
• ERGs representing ethnic minorities, gender,
LGBTQ+, disabilities and other employees
• IHG’s approach to climate change and wider
• Quarterly performance, development and
environmental issues
wellbeing check-ins
• Collaborative sessions including hackathons
• Increased focus on recruitment and talent
development at hotel and corporate levels
• Continuation of employee engagement
in company priorities and culture
• Progress against and continued prioritisation
of DE&I commitments, including conscious
inclusion training and refreshed DE&I policy
• Continued and increased focus on employee
wellbeing, including enhanced parental leave
policies in some markets and updated Global
Flexible Working Guidelines
• Reinstatement of bonus and annual salary
increase for our corporate employees
• IHG named a Kincentric Global Best Employer,
with 85% employee engagement
See our employee engagement KPI on page 53, how the Board had regard for people in their board and remuneration decisions on pages 91, 92,
107, 108, 112 and 114, Voice of the Employee disclosure on page 101, and statement on employee engagement on page 227.
Visit www.ihgplc.com/responsible-business for further information about our people commitments.
24
IHG | Annual Report and Form 20-F 2021
Strategic Report
system in certain markets, which matches
on-property talent to the most relevant
opportunities across our estate.
leave policy. We will continue to evaluate and
review our policies to ensure they support
people to be at their best.
See our GM talent acceleration programme
on page 19, workplace environment on page 37
and workforce remuneration considerations
on pages 107, 108, 112 and 114.
For hotel teams, monthly newsletters
with wellbeing guidance were shared, and
local initiatives were also established in
some markets.
Wellbeing
In recognition of a shift to hybrid working as
a result of the pandemic, we have provided
employees with guidance and resources to
help them adopt a balance of remote and
office working that supports individuals and
the delivery of IHG’s key priorities. Employee
surveys have also been run to understand
expectations and help inform our approach.
In 2021, we updated our Global Flexible
Working Guidelines with hybrid working
principles, refreshed our UK Flexible Working
Policy and highlighted flexible working
opportunities within jobs. We’ve also taken
steps to ensure a best practice approach
to managing talent and performance in
a hybrid environment.
During the year, we provided employees
with access to mental health and wellbeing
guidelines and webinars, and continued
Recharge days and Focus Fridays, where
we try to avoid standing meetings where
possible to create some undisturbed time
for employees. Parental leave policies were
also evaluated across a number of locations
and significant enhancements were made to
our UK paternity leave policy and US parental
Diversity, equity & inclusion (DE&I)
As a global company, it’s important to us that
our business reflects our people, our guests
and the nationalities, cultures, ethnicities,
sexual orientations, backgrounds and beliefs
that they represent. This commitment is
emphasised throughout our global hiring
guidelines and initiatives, such as our
conscious inclusion training, and is backed
up by our Global Diversity, Equity, Inclusion
and Equal Opportunities Policy, which
was refreshed in 2021 and sets forth our
commitment to promoting an inclusive
environment that values and considers
diverse attributes, perspectives, cultures
and experiences.
Recognising that we still have progress to
make as a business, our Global DE&I Board
and regional DE&I councils work together
to monitor progress against commitments,
discuss emerging trends and feedback, and
identify future focus areas. Our work in this
space revolves around a DE&I framework
spanning three core areas: strengthening a
culture of inclusion; increasing the diversity
of our leadership and talent; and putting the
right decision-making processes around
our actions.
Strengthening a culture of inclusion
In 2021, corporate employees completed
more than 10,000 hours of conscious
inclusion training, promoting education
and awareness, and sparking important
team conversations.
As part of our employee engagement
survey, we also implemented an inclusion
index in 2021 to track perceptions of culture
and behaviour. The index showed that
nine out of 10 corporate, reservation and
managed hotel employees feel IHG has an
inclusive culture, although perceptions were
less positive among some ethnic minority
groups. This is something we recognise and
is reflected in our commitment to inclusion
and achieving more diverse representation
at all levels of our business.
Central to the conversation around DE&I
and our progression as a business are
our Employee Resource Groups (ERGs),
which continue to expand and now have
1,300 members globally. These groups
represent ethnic minorities (BERG US,
EMbrace EMEAA), gender (Lean In), LGBTQ+
(Out and Open, US and UK), disabilities
(DAWN US and UK), and Early Careers
(HYPE Greater China, US and UK) and have
been instrumental in driving employee
engagement and celebrating key events,
including International Women’s Day,
Global Inclusion & Wellbeing Week,
and Pride.
Our Diversity, Equity and Inclusion Policy
IHG is committed to promoting a culture
of inclusion where everyone feels safe,
respected and valued. Our policy applies to
anyone who is directly employed by IHG and
colleagues who work in managed hotels.
Below is a summary of our commitments:
• Actively support diversity and inclusion to
ensure that all our employees are valued
and treated with dignity and respect.
• Strive continually to provide people with
a working environment that is free from
racism, harassment and discrimination.
• Foster an environment where our
employees can work together to maintain
an inclusive working environment where
everyone’s unique contribution is valued.
• Ensure that all decisions affecting an
• Provide all employees with the opportunity
to join our Employee Resource Groups.
• Provide employees with disabilities the
appropriate support where reasonable
and practicable to do so and in
accordance with local requirements.
• Ensure our recruitment, development and
reward practices, and our approach to
working arrangements, are designed to
attract, develop, and retain diverse talent.
• Work to educate our employees about
the benefits that diversity and inclusion
brings to our business and support
interventions that improve diversity and
inclusion in our places of work.
• Ensure all employees are aware of this
policy and complete any relevant training
in relation to diversity and inclusion.
employee’s employment are made fairly
and are based on an individual’s ability
and performance.
• Ensure our customers experience an
inclusive welcome and stay provided
by our employees.
IHG’s Global DE&I Board, chaired by our
CEO, and regional DE&I councils feature
representatives from across our Company
who offer a breadth of experience from
different cultures, industries and
organisations. They work with stakeholders
to ensure we continue to honour our DE&I
commitments and strive for best practice.
It is our policy to comply with international,
national and local regulatory requirements
and, where required, any affirmative
action as stipulated by local laws. We set
measurable objectives for achieving
diversity and inclusion for IHG and we review
our progress against them each year.
See our DE&I Policy at
www.ihgplc.com/responsible-business
Our strategy
IHG | Annual Report and Form 20-F 2021
25
Strategic Report Our strategy continued
Care for our people, communities and planet continued
Increasing the diversity of our
leadership talent
We continue to deliver talent initiatives,
such as our successful Rise programme,
which is focused on increasing the number
of women in GM and operations roles.
During 2021, more than 100 women joined
to take advantage of mentoring sessions,
career development workshops, high-impact
learning modules and empowering
conversations designed to further careers.
In the Americas, we launched Ascend,
a bespoke programme to develop Black
leadership talent and build strong relationships
with organisations dedicated to supporting
Black employees, while in the UK, we have
worked with Women in Hospitality and
Leisure (WiHTL) to provide opportunities for
our ethnic minority talent on a dedicated
talent programme. An ethnicity disclosure
campaign was also carried out in the UK
to further understand our population and
help inform future solutions and actions
to support our ethnic minority employees.
IHG proudly continues to be recognised for its
efforts, with CEO Keith Barr ranked first in the
2021 HERoes Advocates list, which celebrates
the top 35 executives or senior leaders who
actively campaign for diversity, inclusion and
gender balance in the workplace. IHG also
received a Highly Commended award in
the Company of the Year category at the
European Diversity Awards, with the efforts
of several employees being acknowledged
across different categories.
Putting the right decision-making
processes around our actions
We understand that a diverse and inclusive
environment creates a sense of belonging
among employees and builds trust in our
culture and values as a company. In 2021, we
made progress on multiple fronts, including
our work to maintain a healthy gender
balance as part of our succession planning
and our work with recruitment partners
to ensure that talent shortlists are as diverse
as possible. We also work with organisations
that encourage female senior leader
development, and internally run in-depth
talent reviews with our CEO and CHRO to
create robust plans and pathways around
developing future leaders.
A new member was also appointed to our
Global DE&I Board to represent the voice
of the Next Generation and help shape how
we build an inclusive culture where all
colleagues can thrive.
In 2021, we furthered our intent to cultivate
inclusion within our supply chain. This work
included IHG joining leading supplier diversity
councils to help broaden our network of
diverse local suppliers. In addition, a new
analysis tool was identified for hotel and
corporate spend that will allow us to create
a more informed global picture and identify
opportunities to increase work with small
and diverse businesses. In support of this,
we have started the process of detailing
and communicating our supplier diversity
programme to help demonstrate our
commitment to the people and communities
that we impact.
As at 31 December 2021
Male
Female
Total
Directors
Executive Committee
Executive Committee
direct reports
Senior managers
(including
subsidiary directors)
All employees
(whose costs were
borne by the Group
or the System Fund)
7
7
5
3
33
22
12
10
55
81
29
110
4,679
6,482
11,161
We do not require employees to
report ethnicity and are dependent
on self-disclosure. We encourage
employees to consider disclosure,
which will provide stronger reporting
in the future.
Human rights and modern slavery
An integral part of our global commitment
to responsible business is respecting human
rights in accordance with internationally
recognised standards.
We understand the importance of human
rights in relation to our colleagues, guests
and communities and we encourage those
with whom we do business – including
our suppliers, owners and franchisees –
to prevent, mitigate and address adverse
impacts on human rights, including modern
slavery. We seek to advance human rights
through our business activities and by
working together with others to identify
challenges and effective solutions.
Key focus areas in 2021 included: the
development and pilot of minimum
requirements relating to migrant worker
risks in our hotels, including responsible
recruitment and onboarding, staff living
accommodation and worker voice; and
a continued risk assessment of our supply
chain, along with analysis of our approach
to due diligence of suppliers.
Findings from our 2019/20 Oman market-level
labour assessment continue to be addressed
and applied to other countries in the IMEA
region, and we have started a similar
assessment in the UK. More broadly, we have
collaborated with the Sustainable Hospitality
Alliance (SHA) and International Organisation
for Migration (IOM) on projects focused on
ethical recruitment in our industry.
IHG is a member of the United Nations
Global Compact (UNGC) and is
committed to alignment of IHG’s
operations, culture and strategies with
the UNGC’s 10 universally accepted
principles in relation to human rights,
environment and anti-corruption.
See our Code of Conduct disclosure on pages
37 to 38, Responsible Business and Nomination
Committee Reports on pages 100 to 103 and
statement on disability on page 227.
See our Modern Slavery Statement at
www.ihgplc.com/modernslavery
26
IHG | Annual Report and Form 20-F 2021
Strategic Report 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
We rely on the communities in which we
operate and are proud to use our global
scale, time, skills and resources to ensure
that our growth contributes positively
to those around us.
As we work towards our targets, it’s
important we understand the impact of our
investments, which makes integrity of data
key to our approach. This year, we joined
Business for Societal Impact (B4SI) – the
global standard in managing corporate
community investment – so that we can
measure our input, output and impact
of our projects.
What we achieved in 2021
Skills training and innovation
We’re passionate about our industry and
inspiring individuals to explore just how
rewarding a career in hospitality can be.
Since 2004, our IHG Academy programme
has been helping young people around the
world gain valuable employment and life
skills through work experience, internships
and apprenticeships alongside some of the
world’s best hoteliers.
In the past eight years, working with local
education providers and community
organisations, more than 80,000 people
have been trained and mentored through
the IHG Academy, offering those from
all backgrounds a rich variety of free
programmes to help them gain a job in
hospitality or other industries, as part of
our promise to provide True Hospitality
for Good on a global scale.
To further its reach, we evolved the IHG
Academy in 2021 with the launch of the
IHG Skills Academy – a best-in-class online
learning platform that provides a space for
IHG and like-minded collaborators to offer
free online education, courses and
opportunities for thousands more people
looking to build their confidence and get
employment-ready. This work has been
undertaken in collaboration with charities
and other IHG suppliers and launched in
October with more than 500 initial pieces
of English content available.
We continue to advance other skills-building
programmes, too, including working with
global NGO Junior Achievement Worldwide
to give young people a headstart in the
world of work, and in 2021 we hosted our
Global Innovation Challenge to help
high-school students learn valuable skills.
We have also set up the Open Source
Curriculum with the Sustainable Hospitality
Alliance, which will provide free online
teaching to help participants to find jobs
in hospitality or other industries.
In Greater China, we formed a strategic
partnership with Wuxi Special Education
School to provide training, internships and
employment for mute and deaf children,
with a number of hotels in different cities
now taking part. We also welcomed 149
Future Leader Aspire participants into our
Future Leaders programme.
Giving for Good month
During September 2021, more than 40,000
colleagues supported community projects
as part of our annual Giving for Good month,
making a positive difference to more than
350,000 people.
Over 260,000 volunteering hours were
collectively dedicated to supporting
communities, causes and charities, with
colleague activities ranging from hosting
free pop-up grocery stores in the US and
charity walks in the UK, to planting trees
in Saudi Arabia.
Supporting our communities
when natural disasters strike
We continue to work with a range of skilled
humanitarian aid organisations to support
critical relief efforts and help our communities
in times of need, whether that involves
dealing with the impact of the pandemic
or the effects of natural disasters.
In 2021, we supported relief efforts around
the globe through donations to charities
including the International Federation
of Red Cross and Red Crescent Societies
following the floods in Western Europe, while
also supporting its response to the pandemic
in countries such as India and Brazil.
Our strategy
IHG | Annual Report and Form 20-F 2021
27
Strategic Report Our strategy continued
Care for our people, communities and planet continued
We donated to the British Red Cross, who
supported the UK vaccination programme,
and worked with CARE International
following typhoons in the Philippines.
IHG has worked with the American Red
Cross (ARC) on disaster relief for a long time,
and we continued supporting its incredible
work in 2021, including helping the many
US communities affected by wildfires,
tornados and Hurricane Ida, along with the
resettlement of Afghan refugees. As well as
many of our hotels providing food, toiletries
and quarantine facilities, IHG was among
one of the first companies to join the Tent
Partnership – a pledge to help Afghan
refugees resettle in the US by providing
training, job opportunities and guidance for
our hotels to support efforts to hire them.
We assist our colleagues using the IHG
Colleague Disaster Relief Assistance Fund.
During 2021, we supported corporate
employees, hotel teams and their families
impacted by hurricanes and severe weather
in the US, and others dealing with a
worsening situation in India as a result
of the pandemic.
Collaborate to aid those facing food poverty
We have supported food bank and
food provision charities in 44 countries.
Our donations have helped these providers
access the funds, training and resources
required to offer basic provisions to society’s
most vulnerable.
Communities engagement
voco Kirkton Park Hunter Valley, Australia – from its solar farm that powers lights, eggs that come from the
Kirkton Park chickens, honeybee farm that pollinates crops and provides fresh honey, and recycled water that
feeds the lush vegetable gardens, they are on track to creating an environmentally friendly hotel. Kids also love
taking the food-scrap buckets to the pig pen, which is one way the hotel limits waste.
We are working with organisations such
as No Kid Hungry in the US and the Trussell
Trust in the UK, while supporting the
European Federation of Food Banks (FEBA)
and The Global FoodBanking Network (GFN).
We also work closely with organisations in
different parts of the world to divert food
from our hotels to those in need.
80,000+
People have been trained and mentored through
our IHG Academy programme since 2013
350,000+
People supported by colleagues participating in
IHG’s annual Giving for Good month in September
The communities we are a part of both support and benefit 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.
What impacted them in 2021
Engagement
Outcomes
• Natural disasters, such as typhoons in the
Philippines, floods in Western Europe and
tornados in the US
• Societal and economic impact of the
pandemic, including unemployment and
food poverty
• Continued close collaboration with
international and local charities and
NGOs, such as Care International
and British Red Cross
• Support for relief efforts around the globe
and for our colleagues and their families
through our Colleague Disaster Relief
Assistance Fund
• Industry collaboration on human rights and
• Support for food bank and food provision
labour conditions in specific markets
charities in 44 countries
• Modern slavery and human rights issues
• Giving for Good month programme of
• Human rights assessments in IMEA and UK
• Access to business skills development and
activities and employee volunteering days
• Launch of new virtual learning platform
local employment
• Collaboration with local education
IHG Skills Academy
• Climate change and other wider
environmental challenges
providers and community organisations,
as part of our focus on offering skills building
and training opportunities
• Set up Open Source Curriculum with SHA
• Over 260,000 hours of employee volunteering
dedicated to supporting communities
See our IHG Academy KPI on page 53, and Responsible Business Committee Report on pages 100 and 101.
Visit www.ihgplc.com/responsible-business for further information on our community commitments.
28
IHG | Annual Report and Form 20-F 2021
Strategic Report
Planet
See Waste for more detail on [page 30]
With hotels in more than 100 countries and
ambitious growth plans for our brands, it is
important to us that we operate sustainably
and help preserve our planet for all
generations to travel and explore.
So that we continue to create more
sustainable guest stays and support our
hotels to reduce carbon emissions, manage
waste, and conserve and preserve natural
resources, we are working with our hotel
owners, suppliers, industry and governments.
Remaining mindful of the challenges owners
face in the current trading environment,
we also set up a Global Environmental
Sustainability Committee with the IHG Owners
Association in 2021 to help us develop
achievable milestones and reach our shared
goals over the next decade.
See our TCFD, Responsible Business
Committee Report and greenhouse gas
emissions disclosures on pages 32 to 35,
100, 101 and 229 to 230.
See our Responsible Business Report at
www.ihgplc.com/responsible-business
Energy
Reduce our energy use and
carbon emissions in line with
climate science
Our 2030 commitments
• Implement a 2030 1.5°C science-based
target that delivers
– 46% absolute reduction in CO2 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
With the hotel sector accounting for around
1% of global carbon emissions, we know it’s
important that we play our part in protecting
our planet for the future. In 2021, we joined
the UN’s Race to Zero and upgraded our
carbon emissions target to align with the most
ambitious goals of the Paris Agreement to
keep global warming within 1.5°C.
As we own less than 1% of our hotels,
everything we do to make a long-term
change must be achieved in collaboration
with our owners, partners and colleagues.
Carbon reduction is a priority we have
been working closely on, including setting
a science-based target (SBT) in 2020 that
was initially aligned with limiting global
warming to below 2°C, and further
strengthened this year to align with 1.5°C.
What we achieved in 2021
To meet our new upgraded SBT, work was
undertaken this year to ensure every IHG
hotel has its own energy reduction target for
2022, and as a business we are focused on
three broad areas: action plans and training
to develop clearly defined pathways that
improve the energy efficiency of our existing
hotel estate; helping owners source renewable
energy; and developing our strategy to ensure
our new-build hotels operate at very low or
zero carbon in the future.
In 2021, key steps included introducing
a new system to allow hotels to have their
energy data automatically captured for
tracking, which in turn allows for more
targeted actions and recommendations to
reduce energy consumption. We have also
switched our UK offices and managed hotels
to a renewable energy tariff and continue
to map renewable energy opportunities
globally, alongside working with a number
of hotels on on-site renewable energy.
Recognising the value of collaboration
in speeding up progress, we became the
first hotel company to sign up to the UK’s
Zero Carbon Forum, which along with our
IHG at COP26
IHG played a leading role for the
hospitality industry at the UN’s 26th
Conference of the Parties (COP26) in
Glasgow in November 2021, which
focused on how governments,
businesses and civil society can work
together to find the urgent solutions
needed to tackle climate change.
Our Chief Sustainability Officer and
EVP, Global Corporate Affairs spoke
at a series of high-profile events over
the course of the two-week summit,
where they discussed the facts the
industry needs to face up to, the
importance of collaboration in bringing
meaningful change and outlined the
innovative strides IHG is making to help
shape the future of responsible travel.
As trustees of the Sustainable
Hospitality Alliance, they also helped
launch the Glasgow Declaration:
A Commitment to a Decade of
Climate Action in Tourism.
During the fortnight, CEO Keith Barr
also attended the Elysée Palace in
Paris for a reception and working
session with the French President,
Emmanuel Macron, on how we can
accelerate recovery and move towards
a more sustainable travel and
tourism sector.
The team at Crowne Plaza Copenhagen Towers in Denmark is dedicated to running a fully sustainable hotel.
Its facade is lined with solar panels so that a renewable energy source can help power the building and
a state-of-the-art groundwater-based system keeps it cool during summer and warm during winter.
Automatic intelligent light, water, and waste-saving measures are installed throughout the property,
while a stunning atrium (pictured) is filled with air-purifying plants.
Our strategy
IHG | Annual Report and Form 20-F 2021
29
Strategic Report
Our strategy continued
Care for our people, communities and planet continued
membership of other organisations,
including the World Travel and Tourism
Council, the Sustainable Hospitality Alliance
and the American Lodging & Hospitality
Association, saw us work collectively on ways
to decarbonise the industry. Working with
experts Arup, Gleeds and Schneider Electric,
we have explored steps to help our exisiting
hotels operate at net zero carbon.
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
What we achieved in 2021
With only 9% of plastic currently being
recycled and around one third of food
produced being wasted across the globe,
we’re passionate about providing our guests
with a more sustainable stay. We’re working
to eliminate single-use items in our hotels,
adopt more reusable or recyclable
alternatives, and establish a three-part plan
to ‘prevent, donate and divert’ food waste.
While fulfilling our commitment to move all
hotels to bulk-size bathroom amenities has
been hampered by the pandemic, we made
important progress with several suppliers in
2021 to put a range of product solutions in
place for all of our brands across all regions.
Reducing our plastic usage by an estimated
850 tonnes in the Americas region alone,
these bulk products will also provide hotels
with significant cost savings.
We have also engaged with experts from
Travel Without Plastic to produce a bespoke
Single Use Items Toolkit to help guide hotels
on best practice when it comes to reducing,
replacing and recycling common products.
The toolkit promises to be a valuable
educational resource for our hotel teams,
which will have a positive impact on our
operations and the environment.
Food waste is a particularly big problem
globally, with a staggering $1 trillion lost
or wasted every year across the planet –
accounting for roughly one third of the
world’s food. We have spent time this year
developing existing collaborations and
forming new ones with expert organisations
across our regions to tackle the issue.
During 2021, we commenced the
development of a global food waste training
module for all of our hotel food teams to
encourage them to measure and manage
their food waste, ahead of rollout in 2022.
In the US, we are working with Goodr to
deliver leftover food from our hotels to local
charities, and in Europe many of our hotels
use the Too Good To Go app to offer people
the same opportunity.
In Australia, our successful work with food
charity OzHarvest entered its third year, as
we continued to divert food waste to local
communities via a network of charities, and
in the Middle East, we are using AI technology
so our hotels can track and measure food
waste, providing chefs with real-time
information for planning and preparation.
We also collaborated with the World Wildlife
Fund, Greenview and industry peers on the
Hotel Waste Measurement Methodology,
which is designed to provide a common
industry approach to collecting data, and
measuring and reporting waste.
We continue to look for ways to extend the life
of products that leave our hotels and offices.
Our industry has traditionally seen product
consumption at various stages of the guest
experience and so our longer-term aim is
to achieve circularity, where resources
can be recycled or reused on a large scale.
This might include the incorporation of
recycled content in the manufacturing
of new products, or making sure items are
put to good use elsewhere once they leave
our hotels, such as donating computers or
furniture to charity, or offering surplus food
to those who need it. We have committed
to collaborate and work with others to help
us achieve this as part of our Journey to
Tomorrow commitments.
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
Demand for water often exceeds supply
in many parts of the world, with the UN
predicting this demand to increase between
20-30% by 2050. It’s therefore never been
more important for us to find ways to reduce
our usage and work with others towards
sustainable solutions that create water
access for all. We are implementing tools
to reduce water consumption across all our
hotels, paying particular attention to those
in water-scarce areas. In our communities,
we are also working with others to establish
adequate water, sanitation and hygiene
(WASH) conditions and help ensure supply
is managed more sustainably at a local level.
30
IHG | Annual Report and Form 20-F 2021
Strategic Report What we achieved in 2021
Each of our hotels has been given a water
reduction target along with access to
sustainable solutions to improve efficiencies
through the IHG Green EngageTM system,
such as low-flow fixtures and fittings.
Owners are also able to access increasingly
accurate data on usage in their hotels via
an automated data entry tool.
Having identified the risks to water quality
and quantity in our open and pipeline
hotels in 2019, we undertook six water
stewardship projects around the world
as part of our membership of the Alliance
for Water Stewardship (AWS), progressing
on the final two in Shenzhen in China and
on Hayman Island in Australia this year.
Applying the AWS Standard to our projects
has provided a clear pathway to reduce
water usage, while allowing us to share
ideas with other global member
organisations and with hotels across
our estate to maximise efficiency.
Collaboration is vital to meaningful progress
and as a member of the Water Resilience
Coalition, a CEO-led coalition of the UN
Global Compact CEO Water Mandate,
IHG is working with other organisations to
collectively advance water stewardship and
preserve the world’s fresh water. This has
informed our work to identify and manage
risks around water supply, while also reducing
costs for our hotels as they closely monitor
their usage. In 2021, we also collaborated
with Water.org as part of a pilot to help deliver
WASH conditions for 15,000 people in India,
Indonesia and Mexico.
What’s to come
People
It is imperative that we ensure the right
capabilities, tools and resources are there
to support our people if we are to drive
the growth of our business and build an
inclusive and high-performance culture.
Key focus areas in 2022 include
investment in an HR technology platform
that will improve the user experience for
corporate colleagues and hotel teams
through increased automation, mobile
functionality and seamless self-service.
We will also continue the work done in
2021 to strengthen our General Manager
pipeline, with a particular focus on
Luxury & Lifestyle in support of our growth
aspirations in that segment. Our strong
focus on DE&I will be maintained,
including celebrating key events, building
further education with conscious inclusion
training, and establishing new programmes
with prominent organisations that
champion equality within wider society.
We will also invest in building our talent
attraction capabilities, increase our focus
on talent management to build leaders
for the future, and step up a multi-year
investment in a new IHG University
framework designed to support colleague
development at different levels of
the business.
More broadly, we will continue to place
a clear focus on employee engagement
with our strategy and how we continue to
invest in our culture and ways of working.
Communities
For our communities, we will continue to
work with charities to support those in most
need around the world, and the rollout
of our IHG Skills Academy will continue
in local languages across markets globally,
with the addition of new local collaborations.
Planet
Building a sustainable future is not simply
a goal for our industry but imperative
for our planet, and as one of the world’s
leading hotel groups, we recognise our
responsibility to take decisive, practical
action to reduce carbon emissions in
every part of our business.
From 2022, tied to our new science-based
target and Race to Zero pledge, we will
increase the support we provide our
owners in improving the energy efficiency
of their hotels, with each receiving an
energy target tailored to their property,
along with access to solutions and
colleague training to drive energy
conservation. This will be supported by
our new HERO (Hotel Energy Reduction
Opportunities) tool, which will analyse
energy consumption and help hotels find
the measures specific to their property
that represent the most cost-effective
way to reduce energy usage.
More renewable energy contracts will
also be rolled out in different markets,
and work will begin on an update to
our IHG Green Engage system and the
development of our strategy to ensure
our new-build hotels operate at very
low or zero carbon in the future.
Our strategy
IHG | Annual Report and Form 20-F 2021
31
Strategic Report Delivering on the
recommendations of TCFD
With hotels in thousands of communities all over
the world, our business and brands touch the lives
of millions of people every day. We understand that
in our role as a major global hospitality company we have an
important part to play in addressing the impacts of climate
change. The success of IHG over the long-term depends on
the environmental and social sustainability of our operations,
the resilience of our supply chain and our ability to manage
the potential impact of climate change on our business model
and performance.
We have upgraded to a 1.5°C science-based target (SBT), which puts
us on a trajectory to achieve net-zero emissions by 2050. In addition,
we have joined the UN’s Race to Zero – the global campaign to rally
leadership and support from businesses, cities and investors for
a healthy, resilient, zero-carbon future.
While we have an asset-light business model, with the majority
of IHG hotels owned by a third-party, our commitments cover the
operations of all our hotels globally, whether franchised, managed,
owned, leased or managed lease hotels.
Last year, we made a formal commitment to support the
recommendations of the TCFD. The following summary sets out
our alignment, and notes where in this Annual Report we have
made further climate-related financial disclosures consistent with
the recommendations. In the rest of this section, further relevant
disclosures are indicated as applicable. We note that our disclosures
are consistent with the TCFD’s recommendations for 2021 and
have outlined what actions we will take to further strengthen our
climate-related financial disclosures in ‘Future actions’.
Future actions
We’re committed to continued improvement on climate risk
management as we deliver on the strategic intent of the TCFD.
In addition to specific climate risk mitigation actions identified
in the following pages, over the next 12 months we will deliver
the following key actions:
• Continue the integration of climate considerations into our
Group risk management framework. This allows us to consider the
interactions between climate and other strategic risks, as well as
implementing mitigations through business-as-usual processes.
• Continue to monitor trends in potentially material climate-related
risks and opportunities, with improved data capture. This will
include further embedding climate impacts into our risk
assessments and long-term financial plans and Group strategy,
with development of further metrics where needed.
• We will take steps to align to new recommendations and
disclosure requirements under the International Sus tain abil ity
Standards Board (ISSB), TCFD and UK Green Finance Strategy.
• Undertake a carbon price exposure assessment on how changes
to carbon pricing policy could impact our business, and to inform
the business cases for decarbonisation actions.
• Enhance the quality of data capture on those risks that have
been identified as most material and provide further quantification
of the potential impacts.
• Develop a Group-wide climate transition plan to coordinate
decarbonisation initiatives and investments taking place across
our business. This plan will align with our 1.5°C SBT commitment.
TCFD recommendation
Summary of our alignment with TCFD
Governance – Setting out our governance around climate-related risks and opportunities.
a. Describe the Board’s oversight
of climate-related risks and
opportunities.
The IHG Board has collective responsibility for overseeing and ensuring the management of climate-related risks
and opportunities and is advised by the Responsible Business Committee on IHG’s approach in this area. See more
details on page 33.
b. Describe management’s role
in assessing and managing
climate-related risks and
opportunities.
The Executive Committee is responsible for managing climate-related risks and opportunities. The Chief Financial
Officer and Group Head of Strategy (CFO) is the overall sponsor for decarbonisation within the business, and we have
formed a TCFD Steering Group of Senior Leaders from across different functions of the business who have led the
work, supported by the TCFD Working Group, to ensure we assess and manage climate-related risks and opportunities,
embedding the results of the climate scenario analysis into long-range business planning. See more details on
page 33.
Strategy – The actual and potential impacts of climate-related risks and opportunities on our business, strategy and financial planning, where material.
a. Describe the climate-related risks
and opportunities the organisation
has faced over the short, medium
and long-term.
With external expertise, we completed a risk and opportunity review across our value chain and identified the most
material potential impacts associated with our business. See our climate-related risks table on page 34 and
climate-related opportunities table on page 35.
Our impacts are categorised over the following timescales: (a) short: 1-5 years to highlight immediate risks or
opportunities; (b) medium: 10-15 years to align to our Group strategic planning cycles; (c) long-term: 30 years to align
to TCFD requirements.
b. Describe the impact of climate-
related risks and opportunities
on the organisation’s businesses,
strategy, and financial planning.
Climate-related scenarios are being embedded into our long-range planning and future Board strategy discussions.
Work is underway to improve data and modelling around major risks identified and TCFD findings are now
considered as part of the strategic planning process. We have outlined the most material of our impacts in our
climate-related risks table on page 34. See pages 29 to 31 for details of the environmental initiatives already
underway and pages 149, 172 and 176 for the consideration of climate risks in the financial statements to support
conclusions on going concern, deferred tax assets and goodwill respectively.
c. Describe the resilience of the
organisation’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower scenario.
We analysed the resilience of IHG’s strategy under both 2°C and 4°C climate change scenarios. The results showed
that, given IHG’s asset-light business model, transition risks are more likely to have a material impact on our business,
compared with physical risks.
For more detail on how we are mitigating our climate-related risks to ensure business resilience, see our climate-related
risks table on page 34 and see pages 29 to 31 for details of our environmental policies and initiatives.
32
IHG | Annual Report and Form 20-F 2021
Strategic Report TCFD recommendation
Summary of our alignment with TCFD
Risk management – How we identify, assess and manage climate-related risks.
a. Describe the organisation’s
processes for identifying and
assessing climate-related risks.
Our TCFD Steering Group has led a detailed scenario analysis of climate-related impacts across the IHG value chain.
Outcomes of this risk assessment process were presented to Executive Committee members, Senior Leadership and
the Board for review and used to inform our climate change action plans. The monitoring and management of the climate
risks identified by our initial assessment (supported by external expertise) will now be integrated into our existing
risk management processes – including scenario planning, crisis management and analysis of longer-term trends.
For more information on our scenario analysis of climate-related risks, see the Climate-related risk management and
strategy section on page 34.
b. Describe the organisation’s
processes for managing
climate-related risks.
We have historically taken a number of steps to manage climate risk, including activities such as engaging with
customers and the rest of the industry on demand for greener travel and hospitality services. For several years, we have
also had carbon reduction targets at both a Group and hotel level, and in early 2020 announced a SBT to reduce
greenhouse gas emissions, which we upgraded at the end of 2021.
We continue to collect information to support the monitoring of these risks and develop mitigation responses as required.
With oversight from our Risk and Assurance and Corporate Responsibility teams, our assessment of transition risks are
continually reviewed by relevant teams across IHG. Our physical risk assessment will be reviewed every three years,
or more frequently if required.
See the Climate-related risk management and strategy section on page 34.
c. Describe how processes for
identifying, assessing and
managing climate-related risks are
integrated into the organisation’s
overall risk management.
We consider climate change within the context of environmental and social megatrends as one of our principal risks.
As part of our 2021 review of principal risks with the Board, we also described how climate change potentially impacts
other existing principal risks and are embedding climate change resilience into existing ‘business as usual’ processes.
For more information on IHG governance and management of principal risks, see pages 40 to 47.
Metrics and targets – The metrics and targets used to assess and manage relevant climate-related risks and opportunities.
a. Disclose the metrics used by the
organisation to assess climate-
related risks and opportunities
in line with its strategy and risk
management process.
b. Disclose scope 1, scope 2,
and, if appropriate, scope 3
greenhouse gas (GHG)
emissions, and the related risks.
c. Describe the targets used by the
organisation to manage climate-
related risks and opportunities
and performance against targets.
Governance
One of our strategic priorities is to ‘care for our people, communities and planet’ and to guide our actions and drive
progress, in 2021 we launched Journey to Tomorrow, an action plan of commitments we’ve made to create positive change
by 2030. As part of this action plan, we have set ourselves an ambitious SBT, aligned to 1.5°C, which is driving action across
the business. More detail on our SBT is included in the strategic mitigations in our climate-related risks table page 34.
Energy reduction targets are incorporated into hotel-level metrics, as well as at the Executive Committee. ESG
criteria, including annual energy reduction, form part of the Annual Performance Plan (APP) structure for Executive
Directors and eligible employees. This forms part of a range of KPIs and review of performance against IHG’s Global
Metrics. We have continued our work this year to develop ESG metrics with a view to incorporating into our long-term
incentive plan and continue to develop the quality of our environmental data in order to enable this. See more on our
metrics on page 35.
Our 2019-2021 scope 1, 2 and 3 emissions data and methodology can be found on pages 229 and 230. We have
disclosed the categories of scope 3 emissions, which are covered by our 1.5°C aligned SBT.
Our existing targets have been approved by the Science Based Targets initiative (SBTi) as 1.5°C aligned and we are
also aiming for our new-build hotels to operate at very low or zero carbon by 2030. Our scope 1, 2 and 3 emissions
data will provide us with an ongoing understanding of how we are progressing on our decarbonisation journey.
Board consideration of climate risk and opportunities
IHG’s approach to governance has been about addressing
our environmental and societal impacts as well as our financial
performance for many years. Our governance framework is headed
by the Board, which includes collective responsibility for ensuring
the management of climate-related risks and opportunities.
The Board is advised by the Responsible Business Committee
(the Committee) on the Group’s corporate responsibility strategy,
including our approach to climate-related impacts. The Committee
meets three times a year and assesses the Group’s exposure to
potential long-term climate-related risks and opportunities. This year,
the Committee established TCFD reporting procedures and processes
for overseeing the monitoring and management of the climate
change risks identified through the scenario analysis. TCFD is also
considered by both the Audit and Remuneration Committees within
their respective remits.
Management ownership of climate-related risks and opportunities
Operational matters, routine business and information disclosure
procedures are delegated by the Board to Management Committees.
Our internal TCFD Steering Group is responsible for delivering on the
TCFD recommendations and identifying and assessing any potentially
material climate impacts and during 2021 it met four times. The Chief
Sustainability Officer is responsible for monitoring progress against
our carbon reduction target, which is reported externally on an
annual basis.
A TCFD Working Group has overseen an integrated climate scenario
analysis for IHG’s global business. This Group, with oversight from
the Steering Group, will continue to operate through 2022 to drive
adoption of TCFD-related action plans across the business. The TCFD
Working Group regularly reports into the TCFD Steering Group and
also provides periodic updates on its key findings from the scenario
analysis and climate-risk identification process. See the following
section for more details of our scenario analysis process.
Board training on ESG considerations is provided as needed. In 2021,
our updates focused on our decarbonisation strategy, as well as
specific priorities for TCFD work in 2022.
See further information about Director development on page 94, and
Audit, Responsible Business and Remuneration Committee Reports
on pages 95 to 101, and 104 to 125.
Delivering on the recommendations of TCFD
IHG | Annual Report and Form 20-F 2021
33
Strategic Report Delivering on the
recommendations of TCFD continued
Climate-related risk management and strategy
We consider climate change within the context of environmental
and social megatrends as one of our principal risks. During 2021,
we undertook scenario analysis work to assess in more detail IHG’s
potential exposure to both physical and transition impact over the
short, medium and long-term. We selected 2°C and 4°C scenarios
to model a high physical impact scenario and one with greater
transition impacts. This was aligned with the 2°C aligned SBT that we
had set. In 2021, we upgraded to a 1.5°C aligned SBT and therefore
intend to refresh our scenario analysis in 2022 to align to this newly
revised target.
Our analysis covered our full value chain and included acute and
chronic physical risks, including droughts or floods, water stress,
wildfires and rising sea levels, as well as transition risks, such as
changes in stakeholder expectations, travel patterns, climate policy
and regulation. Physical risks were assessed using the
Intergovernmental Panel on Climate Change’s (IPCC’s) 2°C-and
4°C-aligned Representative Concentration Pathways (RCPs) 4.5
and 8.5 respectively. We integrated IHG’s business plan assumptions
on regional growth into the scenario analysis process, to ensure
risk and opportunity quantifications reflected IHG’s growth strategy.
The risks were then assessed using defined materiality thresholds
along with revenue estimates from the business plan across
timeframes. In the climate-related risks table (below) we outline our
mitigation and strategy resilience, based on the scenario analysis.
We have begun to quantify these climate-related impacts, based on
global emissions and climate modelling data, as well as inputs from
IHG’s business planning and risk management processes. In 2022,
we will be advancing this work by enhancing the quality of data
capture on those risks that have been identified as most material
and provide further quantification of the potential impacts.
The most potentially material climate-related risks and opportunities we identified through scenario analysis, as well as the mitigations set
out in our action plan, are described in the table below. As we continue to gather more data to enable us to understand the impact on IHG,
we will also assess the aggregate impact of these on our wider stakeholders, including our hotel owners.
Climate-related risks
Summary of risk
Impact
Ability to meet
stakeholder
expectations around
IHG’s role in the
energy transition
With climate change being the biggest threat facing
humanity, we all have a significant and immediate
role to play in curbing global carbon emissions and
keeping temperature rise within 1.5°C above
pre-industrial levels.
Medium-term
(10-15 years)
Potentially
material impact
Key stakeholders – including guests, investors
and governments – are increasingly looking for
businesses to not only set the right goals, but also
demonstrate their commitment in the actions they
take today.
We recognise that not delivering on increased
stakeholder expectations could result in a
reputational risk for the Group, especially in a
scenario where our peers meet or exceed our own
decarbonisation plans. Continuous progress against
our targets can create significant operational and
commercial opportunities.
We have not quantified this impact, but we are
monitoring it alongside wider reputational risks.
Reduction in aviation
passenger numbers
expected to impact
hotel demand
medium to long-term
(10-30 years)
Potentially
material impact
Today’s aviation travel, in particular international
travel, has a significant carbon footprint. Under a 2°C
scenario, aviation travel could reduce significantly
as travel patterns align to a low-carbon economy.
This could potentially reduce the ability of guests
to visit our hotels.
Mitigation and strategy resilience
Being a responsible business is at the heart of IHG’s strategy and
includes a strong focus on reducing the carbon footprint of operations,
as well as those of our franchisees.
We have upgraded our emissions reduction target to align to 1.5°C,
and are progressing decarbonisation plans across the estate
Our target is to reduce emissions from our managed, owned, leased
and managed lease hotels by 46% by 2030, from a 2019 baseline, and
to do the same with emissions from our franchised hotels, which puts
us on a trajectory to achieve net-zero emissions by 2050. In 2022, we
will update our transition risk assessment to align with this new target.
These are challenging targets given IHG’s predominantly franchised
business model and ambitious growth strategies.
We are developing a Group-wide climate transition plan
This will help us ensure we meet stakeholder expectations around the
transition and deliver on our own ambitious targets on carbon reduction.
Over the next 12 months, we will be developing a detailed climate
transition plan, in line with recent supplementary guidance announced
by the TCFD. This plan will coordinate a range of decarbonisation
initiatives ongoing across our business and focuses on three key levers:
driving energy efficiency in our existing estate; facilitating a shift to
renewable energy wherever possible; and targeting 100% of new-build
hotels to operate at very low or zero carbon by 2030.
See our planet section on pages 29 to 31 to learn more about our
work on decarbonisation.
Given our diverse portfolio of hotels catering to both domestic and
international travellers, such a shift in travel patterns could provide
both downsides and upsides to our business, if for example, more
guests opt to travel domestically utilising greener transport modes
such as high-speed trains in China.
We are improving data collection to understand our customers’
travel patterns
The impact on travel is being closely monitored post Covid-19.
To enable us to calculate the potential impact of this shift in travel on
our different regions and brands, we are planning changes to our guest
survey to collate further data on the modes of transport used.
34
IHG | Annual Report and Form 20-F 2021
Strategic Report Summary of risk
Impact
Mitigation and strategy resilience
Increased desire for
‘green hotels’ could
have a material impact
on IHG revenues
Medium to long-term
(10-30 years)
Potentially
material impact
Green hotels will play an important part of our future
under all scenarios. Attitudes and beliefs around
climate change have changed significantly, with 60%
of 9,000 adults surveyed by IHG across the US, UK,
Germany, Greater China, the UAE and Australia
agreeing that they want to be more environmentally
and socially conscious on their travels.
The changes in these attitudes and beliefs have started
to now impact consumer behaviour, both for business
and leisure travel, as green credentials are factoring
into customers’ buying decisions. We recognise that
these changing consumer behaviours offer both an
opportunity and a risk for IHG, depending on how
fast the green hotel market expands and how much
of this new market we capture share of. Under a 2°C
scenario, we do expect a significant impact over time
– either a risk or opportunity depending on our ability
to demonstrate our green credentials.
We have developed a bespoke tool to help our hotels identify and
prioritise energy efficiency solutions based on key building characteristics,
including return on investment information and procurement support
as feasible. Called the Hotel Energy Reduction Opportunities Tool
(HERO Tool), it will help enhance the hotel’s environmental credentials.
In the UK, all our managed lease hotels are now on renewable energy
contracts, and we have started actively promoting renewable energy
solutions to owners in key markets.
We are improving data collection to understand consumer
sentiment towards greener travel
Given the potential materiality of this exposure, we are working to
leverage existing consumer sentiment data in this area, such as a
social monitoring platform to gather data from guests’ social posts
(social media, review sites) and developing a methodology to gather,
track and measure the impact of actual (rather than claimed)
guest behaviour.
Loss of franchise
royalty fees following
natural disasters
Under both a 2°C and 4°C scenario, the frequency of
natural disasters is expected to continue to increase
up to 2050 and beyond.
Long term
(15-30 years)
Potentially minor impact
The resulting business interruption reduces the
amount of franchise royalty fees we will receive from
the specific hotels impacted, however this does not
take into account the potential for increased demand
from any ongoing recovery efforts.
We are tracking physical climate impacts across our portfolio
We have previously assessed the physical risks of climate events on
our hotels, and we are now upgrading systems to track the physical
impacts of climate change across our portfolio and how much additional
business is driven into our hotels from recovery efforts. This will allow
us to adapt to these hazards more effectively and assess the impact
on our business and owners.
Some of the potentially material climate-related risks we have identified could also present opportunities to IHG, which are shown in the
table below. Our continued progress against our decarbonisation targets and strategic response planning will strengthen our ability to
realise these potential opportunities.
Climate-related opportunities
Summary of opportunity
Actions being taken
Supporting hotel
owners to meet new
customer demand for
sustainable travel
We have committed to deliver new-build hotels that operate at very low or zero carbon by 2030
We recognise our customers are increasingly expecting high standards of sustainability in their leisure and travel purchases.
Our commitment to deliver new-build hotels that operate at very low or zero carbon signals our intent to further help our hotel
owners meet potential future demand for green travel, and to improve our competitive position overall. This will be supported
by enhanced engagement with customers and data regarding customer demand to help us deliver on customer priorities for
sustainability and climate.
Supporting hotel owners
to decarbonise their
assets could increase
commercial attractiveness
Increased domestic
tourism driven by
changes in long-haul
travel patterns
We are continuing to invest in ways to support hotels become more energy efficient and decarbonise assets
While reducing emissions can require investment, we are leveraging our Green Engage system to ensure we invest in energy
efficiency improvements that have the greatest potential to reduce costs over the long-term. This will be supported by our
HERO tool, further details of which are available in our 2021 Responsible Business Report (see link below).
We are improving data collection to understand our customers’ preferences on sustainability
Changing travel patterns represent both a potential risk and opportunity to our business. We have a large domestic customer
base, and there may be a further positive impact to this market driven by future changes to travel patterns, as some customers
move to shorter-haul and less carbon intensive modes of travel. Gathering further data will help us understand this trend further
and ensure we can meet the needs of any changing customer base.
Metrics and targets
Our metrics and targets allow us to monitor the delivery of our strategy
and long-term success. To ensure our transition is based on the best
available science, we have now upgraded our science-based target
(SBT) to align to the most ambitious target of the Paris Agreement to
limit global warming to 1.5°C. This target has been approved by SBTi
and commits us to reducing our absolute carbon footprint by 46%
from our franchised, managed, owned, leased and managed lease
hotels by 2030 (based on our 2019 carbon footprint).
See our carbon footprint KPI on page 53.
A core part of delivering further emissions reductions against this
target will be decarbonising our hotel operations across our portfolio.
To help drive this, we are also targeting 100% of new-build hotels to
operate at very low or zero carbon by 2030 onwards.
We continue to track global environmental impacts through our
IHG Green Engage system. All IHG hotels are required to use this
system to track their environmental impact, with data collected
on benchmarking information, green building solutions and
opportunities to improve efficiency across carbon, energy, water
and waste metrics. Data from this system will continue to underpin
our ESG and climate metrics and will help us identify opportunities
for investment as part of our wider climate transition plan. We will
work with our internal audit team and external specialists to provide
assurance over this data.
As we further develop our financial impact assessment of climate-
related risks and opportunities, this will inform the development
of any additional metrics and targets around the management and
mitigation of risks and the strengthening of IHG’s business resilience
against climate-related impacts.
Our Responsible Business Report and ESG Databook are available at
www.ihgplc.com/responsible-business
Delivering on the recommendations of TCFD
IHG | Annual Report and Form 20-F 2021
35
Strategic Report How IHG does business
Our purpose of providing True Hospitality
for Good is underpinned by our commitment
to a culture of operating in a responsible and
ethical manner. Our culture sets the tone for
how we do business.
Our
structure and
governance
Approach to
community
and the
planet
Risk appetite,
controls and
systems
Stakeholder
engagement
How we
do business
Workplace
environment
Values
Behaviours
Code of
Conduct
and related
policies
Stakeholder engagement
IHG engages with its stakeholders at all levels of the business, from the Board,
through the Executive Committee, Senior Leadership and corporate functions,
to front-line operations. A variety of methods 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 both our stakeholders
and IHG. For example, adopting global CEO video calls with Q&A has ensured
employees are kept informed and have an opportunity to raise topics that
matter to them.
The effectiveness of our engagement methods is measured 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.
See information on our engagement with key stakeholders, approach to the planet on
pages 20 to 39, 92, 101, 107, 108, 112-114, and Section 172 statement on pages 90 and 91.
36
IHG | Annual Report and Form 20-F 2021
A number of linked factors impact
IHG’s long-term success, including
the resilience of our business model,
our purpose, and the effectiveness of
our strategy. Underpinning all of these is
our workplace culture, which is driven by
our reputation as a well-governed, trusted
and ethical company.
Key factors that drive our over-arching
culture and approach to business include
our structure and governance, risk appetite,
controls and systems, workplace environment,
behaviours, Code of Conduct, including our
values and related policies, all of which should
be read in conjunction with our strategy, risk
management, KPIs and Governance sections
in this Report.
Our structure and governance
IHG’s Board has overall responsibility for
ensuring that the way we work and our culture
are aligned with our purpose and drive our
strategy. At each meeting, the Board and
its Committees review metrics, reports and
scorecards, and receive presentations on
key business factors, including in relation to
culture and governance. They challenge and
support Senior Leaders, particularly where
there is a need to adapt policies and initiatives,
ensuring 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, leads from
the front and role models 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,
such as during the CEO’s quarterly, global
all-employee calls. The Executive Committee
is responsible for executing the Group’s
strategy, and keeping the Board informed
of the operation of the business 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 on 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.
Strategic Report The Group operates a Global Delegation
of Authority Policy, which sets out financial
commitment and expenditure approval
controls. Commitments over certain
thresholds or type of proposal require
approval from the Group’s Capital
Committee, which reports into the
Executive Committee.
The Group’s legal ownership structure
comprises around 390 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 91.
Risk appetite, controls and systems
Our risk appetite and tolerance is
continually reviewed by the Board in its
pursuit of strategic and business objectives.
While our strategy does not consciously
expose any of our assets to significantly
heightened risk, the choices we make aim
to balance priorities and resources to either
actively exploit current advantages or
address current disadvantages versus a
range of competitors, and meet stakeholder
expectations. The Board considers the
portfolio of risks we face and whether
our allocation of resources and pace of
initiatives to build enterprise capability,
creates any imbalance or exposes other
risk areas as the industry emerges from
the pandemic. Our risk appetite is cascaded
through our values and behaviours, our
goals and targets, our Code of Conduct,
Delegation of Authority and other global
policies, and is further reinforced by
frequent leadership communications
to guide behaviours and set priorities.
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 where 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 adapted
where required.
See Our risk management on pages 40 to 47
and Governance pages 89 and 96 to 97.
Workplace environment
The pandemic has ushered in fundamental
changes to the workplace, including hybrid
and remote working. We continually review
our ways of working as new practises
emerge in line with local restrictions and
working cultures. Although each region
has embraced this differently, with offices
at different stages of re-opening, what
has emerged is a new type of connectivity
between employees, in particular with the
adoption of video meetings, a focus on
work-life balance and wellbeing, and a less
formal approach. As an example, the Denham
head office in the UK has embraced a flexible,
hot-desking environment, with Executive
Committee members working alongside
team members in an open-plan workspace.
We are mindful that as a result of changes
in the workplace and increased digitalisation,
we need to be vigilant regarding the security
of Company information and data. In 2021,
we ran a series of global cybersecurity
teaching sessions that included topics such
as phishing, keeping information safe and
secure whilst working remotely, social
engineering, and securing and safely
transferring data. We also increased controls
around IHG-approved tools and systems,
and refreshed and relaunched our security
policies at the beginning of 2022.
See our people disclosures on pages 23 to 26,
and key matters discussed by the Board
on page 91.
Our behaviours
Our Move fast, Solutions focused, Think return
and Build one team behaviours empower
and inspire our employees to work in a way
that supports our purpose and strategic
priorities. These are underpinned by our
Code of Conduct and responsible business
approach, and together influence how
we interact with our stakeholders. By role
modelling our behaviours, IHG’s leaders
create an environment that encourages
rapid decision making that supports our
growth aspirations, within a framework
of due diligence and assurance processes.
Employees have shown continued
adaptability and resilience in the face of
the pandemic, while demonstrating our
behaviours. During the year, a series of Next
Talk events were led by Executive Committee
members across the organisation, to deepen
understanding of the link between our
behaviours and strategy. More than 2,000
employees joined the sessions, with positive
feedback from them.
Code of Conduct and related policies
IHG’s Code of Conduct (Code) is the
framework for how we do business at IHG,
and underpins our strategy and commitment
to providing True Hospitality for Good.
Our key principles and policies are included
in the Code, which enables employees and
colleagues working in IHG corporate offices,
reservation centres, managed, owned,
leased, and managed lease hotels to make
the right decisions, in compliance with the
law and IHG’s ethical standards.
Included in the Code is an overview of
our values, reporting concerns framework
and Group policies, including human rights,
respect in the workplace, diversity, equity,
inclusion and equal opportunities, accurate
reporting, information security, anti-bribery
and corruption, and the environment. It also
provides guidance on where to go if colleagues
have a concern and need further help.
The Board, Executive Committee 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. In 2022,
we will continue to evolve our Code training,
engagement and measurement approaches,
including developing and launching a new
How IHG does business
IHG | Annual Report and Form 20-F 2021
37
Strategic Report How IHG does business continued
Code e-learning module to support and
provide additional guidance. In addition to
our Code e-learnings, we monitor and assess
other aspects of our culture through a variety
of methods, including direct engagement,
employee engagement surveys, tracking of
e-learning completion and our confidential
reporting hotline.
The following policies and principles
form some of the key areas of the Code.
Other areas of the Code, such as our DE&I
policy, and human rights and modern
slavery commitments, are outlined on
pages 25 and 26. Initiatives to respond to
legal, regulatory and ethical compliance
risks are on page 46.
IHG’s Code of Conduct is available in
10 languages on the Company’s intranet and
www.ihgplc.com/responsible-business
Our values
Led by the Board and Executive Committee
and our values underpin our behaviours and
business ethics, 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
Speaking up
Central to our people culture is respect
in the workplace, whether it be relating to
a colleague, guest or anyone else. IHG has
zero-tolerance to any form of discrimination,
harassment or bullying in line with our
Respect in the Workplace Policy. Whilst we
uphold our responsibility to behave ethically
and protect IHG’s reputation, it is possible
that a few colleagues may act in a way which
conflicts with the principles set out in the
Code. Guidance is given to report concerns
directly to line managers, supervisors or
local Human Resources representatives.
For instances where it is more appropriate,
a confidential reporting hotline and online
reporting facility is available and globally
advertised. The Head of Risk and Assurance
and General Counsel and Company
Secretary are also available to be contacted.
Reports are routinely reviewed by the Board,
who ensure arrangements are in place for
investigations and follow-up actions.
Safety and security
IHG is committed to providing a safe,
secure and healthy environment for all our
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 we manage safety
and security risk 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 47.
Bribery and corruption
IHG is committed to operating with integrity.
Bribery and any form of financial crime,
including improper payments, money
laundering and tax evasion or the facilitation
of tax evasion, are not permitted under any
circumstances. This also applies to any
agents, consultants and other service
providers who do work on our behalf.
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
learnings mentioned on the previous page,
we held tabletop exercises to practise our
ability to detect and respond to potential
security events, such as ransomware and
supply chain 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.
See initiatives to respond to cybersecurity
and information governance risks on page 44.
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 a mandatory
Anti-Bribery e-learning module. Our Gifts
and Entertainment Policy and guidance
further supports our approach in this area.
To continue to enhance our anti-bribery
programme and in line with best practice,
in 2021 we undertook a Group-wide bribery
and corruption risk assessment with the
assistance of specialist external counsel.
The objective was to ensure that IHG’s
key bribery risks continue to be addressed
and areas of improvement are identified.
The assessment has recently concluded,
and the findings will be incorporated and
addressed throughout the business
under the leadership of the Ethics and
Compliance team. Initiatives to respond
to legal, regulatory and ethical compliance
risks are on page 46.
IHG is a member of Transparency
International UK’s Business Integrity
Forum and participates in its annual
Corporate Anti-Corruption Benchmark.
Each year, 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,
members of our loyalty programmes,
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 protected.
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 90 to 91.
Further details can be found throughout
the Strategic and Governance Reports,
including in our key stakeholder
engagement disclosures on pages 20
to 28, 39, 92, 101, 107, 108, 112 to 114,
227 and 228.
Non-financial information statement
Non-financial information, 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 the
information covered in these areas.
• Impact of the Company’s activities
on the environment on pages 29 to 35,
and 229 and 230
• Social matters on pages 27 and 28
• Anti-corruption and anti-bribery
matters on page 38
• Employee matters on pages 24 to 26,
101, 107, 108, 112, 114 and 227
• Respect for human rights on page 26
• A description of the Group’s business
model on pages 10 to 13
• The Group’s principal risks on pages
42 to 47
• The Group’s KPIs on pages 50 to 53
See our relevant policies at
www.ihgplc.com/responsible-business
38
IHG | Annual Report and Form 20-F 2021
Strategic Report Responsible procurement
Growing our business in an
innovative and sustainable way,
whilst working to the highest
standards of business conduct, plays
a key role both in our supplier selection
process and how we continue to work
with our existing suppliers. We are
committed to working with suppliers
who meet our minimum ethical standards
and share the values of our responsible
business plan – Journey to Tomorrow.
What we do already
Our supply chain activities are split
between corporate and hotel supply chains.
Hotel purchasing predominantly occurs at
a local hotel level, as our hotels are largely
owned by independent third-party owners
who are responsible for managing their
own supply chains. In some key markets,
IHG has purchasing programmes in place
for essential goods and services required
for opening, renovating and operating a
hotel, which hotels have the opportunity
to buy. Our corporate supply chain
covers marketing, technology and
professional services.
To help manage and monitor our corporate
supply chain, an automated procurement
system is used across many of our large
offices. Several strategic suppliers also
receive hands-on support in the form of
business performance reviews to mitigate
risk and promote value realisation.
To ensure that suppliers act with the
same integrity and respect as we do, new
corporate suppliers are required to confirm
their acceptance of the IHG Supplier Code
of Conduct (or demonstrate they have
equivalent policies in place), when they
are onboarded, in addition to it being a
contractual requirement. Recommended
guidance is also provided to our
managed hotels.
What we achieved in 2021
In 2021, we focused on our supply chain risk
assurance programme, IHG’s Green Supplier
programme, ongoing collaboration with
diverse suppliers and improving employee
awareness of responsible procurement.
Some procurement activities were
reduced due to supply chain disruption,
including longer shipping times, which
impacted our ability to source products.
However, other activities did continue and
the Board reviewed initiatives to leverage
our system-wide buying power and
simplify the procurement programme to
lower costs for owners. See page 91 for
more information.
We refreshed our responsible procurement
criteria for prospective suppliers.
The pre-contract assessment is part of
IHG’s tendering process and includes
due diligence questions about suppliers’
governance, labour and environmental
practices relevant to suppliers’ own
operations and supply chains.
IHG complies with its statutory reporting
duties on payment practices and
performance and is a voluntary signatory
of the UK Prompt Payment Code. In 2021,
we updated our processes to ensure that
suppliers with less than 50 employees
were paid within 30 days where centrally
accounted for across our UK corporate and
managed, owned, leased, and managed
lease hotel supply chains.
With our hotels and resorts at the heart
of local communities, we supported many
programmes around the world during 2021,
including in the UK, where we donated
unused PPE to St John Ambulance.
Recognising the environmental impact
textiles have across the entire value chain,
we continued to collaborate with Exeter
University (UK) to carry out a research
assessment of the environmental and
financial considerations when sourcing
textiles. We also continued working with
CARE International UK and carried out
a workplace gender analysis in factories
using interviews and focus groups, which
will inform our work in 2022.
What’s to come
We will continue our goal to increase the
consideration of sustainable, diverse and
risk resilient suppliers. This enables the
right conversations to be had across
the business and increase the amount
of business awarded to them. To that end,
we are in the process of evolving the digital
systems that support our responsible
procurement processes, including the
evaluation of suppliers’ risk, diversity
and sustainability attributes.
Corporate and hotel supply activities
are driven by our Procurement
function and guided by our
responsible business agenda, with
oversight from the Board’s Responsible
Business Committee.
See our supply chain disclosure on page 26,
and commitment to minimise waste on
page 30.
Supplier engagement
Responsible supplier relationships are vital for IHG in driving efficiency and effectiveness throughout both hotel and
corporate office lifecycles.
What impacted them in 2021
Engagement
Outcomes
• Payment practices and performance
• Communications with suppliers about
• Supply chain integrity
• Environmental concerns, including waste
payment terms
• Revised payment processes for small
companies that supply IHG in the UK
• Working with suppliers as part of our
tendering processes, to understand their
responsible business activities
• Increased collaboration with sustainable
suppliers and alignment with our Journey
to Tomorrow ambitions
• Collaboration with suppliers regarding bulk
• Sustainable bulk amenities solutions are
amenity solutions
being deployed across our estate globally
Further information about how the Board considered supply chain and procurement is on pages 91 and 101, and our business relationships,
including our statement of business relationships with suppliers, customers and others, is on page 228.
Visit www.ihgplc.com/responsible-business for further information about our responsible procurement approach.
How IHG does business
IHG | Annual Report and Form 20-F 2021
39
Strategic Report
Our risk management
The Board’s role in risk management
– focused on IHG’s resilience
The Board is ultimately accountable for
establishing a framework of prudent and
effective controls, which enable risk to be
assessed and managed, and is supported by
the Audit Committee, Executive Committee
and delegated committees. Our governance
framework and Committee agendas establish
procedures for Board members to receive
information on risk from the Executive
Committee and Senior Leaders and a range
of other internal and external sources.
Our Board and management, supported by
the Risk and Assurance team, continue to
focus on the levels of risk in the business
(either individually or in total), including the
appropriate balancing of opportunities for
strategic advantage or efficiency with the
need to build in resilience in the short
and longer term. Delivering at pace across
our strategic pillars places demands on
our capabilities and capacities and the
complexities of the hospitality industry
require us to consider emerging trends
(see pages 14 and 15) across a wide range
of subjects given the often long lead times
to effect change with our estate of hotels.
Attitudes to risk within key decisions
We have assessed risks and considered
risk appetite across our strategic choices
and, while we are not exposed to greater
risk overall across the strategy, we
continue to monitor risks to executing
against our plan and inherent risks from
the trade-offs we have made. There are
also several emerging risks which are likely
to be dynamic throughout the delivery of
our strategy, including consumer demand
shifts; digital disruption; people and
workforce changes; environmental, social
and governance (ESG) expectations; and
a complex geopolitical and regulatory
environment. We describe the Board’s
approach to risk appetite on page 37 and
our attitude is often less about downside
risk mitigation and more about positioning
ourselves to respond to uncertainty in an
agile way.
Board and Committee discussions during
2021 have allowed for consideration of
emerging and evolving risks across a wide
range of topics and timeframes, including:
• competitor and macroeconomic risk
factors within the Board’s discussion
of strategy and presentations from
management (e.g. brand and loyalty
strategies, commercial and technology
developments, industry cybersecurity
risks, supply chain and procurement
strategies, long-term financial strategy,
regulatory developments and the
imperative to drive owner returns);
• workforce-related risks at the Remuneration
and Nomination Committees, including
preparation for the integration of an ESG
element into targets for future longer-term
incentive cycle, retention and succession
arrangements; and risks relating to the
competitiveness of remuneration;
• regulatory and financial governance risks
at the Audit Committee (e.g. tax risks
relating to digital businesses, treasury
and liquidity risks linked to volatility and
sentiment in the capital markets,
corporate governance reform, potential
risks from litigation and financial control
risks in a cost-constrained environment);
• wider cultural risks at the Responsible
Business Committee, including
employee wellbeing and the impact of
flexible working arrangements; gender
and ethnicity reporting; community
impact; sustainability; human rights;
and evolving supply chain risks; and
• risks relating to the impact of climate
change on IHG have continued to
receive close attention in Board and
Responsible Business Committees,
including our commitments to the TCFD
recommendations and an external
briefing on COP26 focus areas.
Procedures for identifying, discussing
and escalating emerging risks
We recognise that we are targeting
industry-leading growth with an already
dynamic risk profile; with competitive
challenges in key markets; and with some
areas of IHG challenged by emerging risks
as we have evolved to the new operating
norms resulting from Covid-19. Some of
these emerging risk areas – including
constraints on owner finances or availability
of talent – may not be quick to overcome.
The management team is aware of the
challenges this context creates and our
strategic priorities are reviewed regularly at
Executive Committee meetings, considering
emerging risks through open roundtable
discussion within the agenda, and certain
emerging themes are considered through deep
dives with a smaller audience. Our financial
planning also includes identifying levers
which could be pulled to enable flexibility
and adaptability to changes to our financial
assumptions and circumstances and overall
viability and sustainability. More detail
on the topics covered by the Board and
Committees is available in the Governance
Report, pages 80 to 127.
Ongoing escalation of emerging risks, defined 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
• Factors with an increasing impact and probability over a longer time horizon (i.e. beyond five years)
Risks identified within first-line decisions
Management teams have day-to-day responsibility
for identifying and managing risk within key decisions,
programmes and transactions and escalating
where appropriate.
Risks identified and monitored by second-line
management functions
Specialist functions provide expertise, support, monitoring
and challenge to decision makers on risk-related matters.
Risks considered at
Executive Committee
Ongoing dynamic review
of risks as part of decision-
making and strategy setting,
including consideration of
longer-term trends which
could impact future growth,
competitiveness
or reputation.
Oversight by Board and Committees
The Board is responsible for carrying out a robust
assessment of the Company’s emerging risks and
oversees the culture across the Group through which
employees are encouraged to learn and work at pace,
focus on solutions and take the right risks to get ahead
of the market.
The Board and Committees receive presentations from
management teams, second-line functions, Risk and
Assurance and external parties throughout the year.
Supported by the Risk and Assurance team
The Risk and Assurance team works with Group Strategy and other first- and second-line teams to maintain and evolve their risk profiles, provide
intelligence, track early warning indicators and any potential changes to risk tolerance and appetite. They update the Board on any changes to the
principal risks but also explore opportunities to consider risk continuously throughout the year and to influence and inform key decisions.
The third-line Internal Audit team works throughout the year with the Audit Committee to consider where additional confidence may be needed in
relation to strategic programme and operational delivery, including the escalation of emerging risks by management, the resilience of key processes
and controls (including third-party relationships and technology innovation) and the integrity and governance of data. The team also monitor the
confidential disclosure channel to identify any emerging trends requiring management and/or Board intervention.
40
IHG | Annual Report and Form 20-F 2021
Strategic Report Continued evolution of our risk
management, internal control and
assurance arrangements
The Board have received regular updates
on the ongoing evolution of our risk
management and internal control system.
These arrangements are designed and
operated to support our resilience and
our ability to take advantage of upside
opportunities and remain fully integrated
with the way we run the business, including:
• how the Executive Committee has
reinforced key principles of culture and
leadership (see pages 24 to 26), including
our Delegation of Authority policy;
sessions with all colleagues to reinforce
strategy and leadership behaviours;
refreshing several corporate policies to
ensure they remain appropriate (including
Code of Conduct and Information
Security); reviewing decision-making
protocols (for example to further enhance
governance over System Fund expenditure
and Commercial and Technology delivery);
and considering risk appetite and strategic
programme delivery risk within the Board
Strategy meetings;
• how we have adapted key processes and
controls as we recover from pandemic
disruptions and adapt to remote working
such as regular reviews of risk profiles; a
review of incident and crisis management
procedures; and cross-function
collaboration on key risks (including
third-party due diligence, personal data,
fraud prevention, responsible business); and
• how we have adapted monitoring and
reporting of risks following necessary
adjustments during the pandemic,
including the formation in 2021 of new
governance committees for key risk topics,
specific external benchmarking such as
anti-bribery and corruption, privacy and
TCFD modelling, and the development of
medium-term strategic metrics to monitor
strategic execution, which are anchored
competitively where possible.
The Risk and Assurance team have reported
to the Audit Committee on developments
in executive and senior leadership oversight
of risk management and also those of key
functions within IHG (information security,
procurement, ethics and compliance,
privacy), including trade-offs and choices
made to maintain an appropriate balance
across the portfolio of risks and active
consideration of acceptable risk tolerances.
This is contributing to an ongoing evaluation
of the sources of assurance available to the
Board, complemented by the independent
internal audit plan. This has included focus
on assurance on data integrity in relation to
key non-financial metrics which will continue
in 2022.
IHG’s resilience remains an ongoing,
cross-functional, focus to identify
opportunities to improve efficiency,
effectiveness and confidence. We are
applying resilience principles as we embed
preparedness for climate change into
existing processes following the TCFD
project. This includes translating the key
climate-related scenarios into assumptions
that can be embedded in our long-range
planning; considering climate sentiment
indicators relating to guests, owners and
investors and other strategic initiatives
over time; and considering scenarios as
an integrated part of future Board Strategy
sessions and horizon-scanning discussions.
We describe the Board’s approach to risk
appetite on page 37 and more detail on
formal risk appetite and tolerance is provided
elsewhere in this report. For example, our
appetite for financial risk is described in
note 24 to the Group Financial Statements
(see pages 188 to 192), and our approach
to taxation on page 57.
This section should be read together with the
rest of the Strategic Report, Governance on
pages 80 to 127, the going concern statement
on page 230, and Risk Factors on pages 231
to 236.
Practical risk management lessons learned from our Covid-19 response
Reflecting on the challenges we have faced during our response to the pandemic, we have held ‘lessons learned’ discussions
across the business around a range of topics including process, decision-making, communication and future proofing, among others.
Our goal is to ensure we grow from our experience to date, reinforce and continue good practices which were already in place and that
we implement continuous improvements to our ways of working going forward.
Our practices in place that worked well
Opportunities identified for future resilience planning
Implementing opportunities in practice
While recognising what worked well, we
also identified opportunities to evolve and
strengthen our crisis management and
business continuity programme launched
prior to the pandemic, including:
Each key opportunity identified in our
lessons learned review was assigned
a dedicated working group to identify
practical and achievable solutions for
implementation in 2022 and beyond.
• where possible, automation of processes
that allow for real time data to be easily
captured, tracked, and monitored; and
• enhanced structures for streamlining
efficiency in our communication processes
up and downstream in the business.
These new ways of working will be
embedded into our common practices
and culture, ensuring greater resilience
and readiness for future incidents or crises
across a wide range of potential individual
and connected risk topics.
We identified successful practices
adopted by many IHG teams in our
pandemic response to capture and
reinforce for the future including:
• global alignment on terminology and
response procedures, highlighting
key accountabilities and
escalation protocols;
• protocols to engage diverse expertise
and best practice across our functions
and regions, using a global ‘hub and
spoke’ model. This ensured we remained
agile and adaptable in the fast-changing
and uncertain global environment; and
• living our values, behaviours and
priorities, empowering teams to be
solutions-focused and move at pace
to support hotels and owners as well
as care for our employees and guests.
Our risk management
IHG | Annual Report and Form 20-F 2021
41
Strategic Report Our risk management continued
IHG’s principal risks and uncertainties
The Covid-19 crisis did not fundamentally
change the principal risks to our business
and strategy; however it heightened the
uncertainty we faced in the short term and
also created the potential for longer-term
impacts based on trade-offs that were
required to protect liquidity in 2020.
Covid-19 was therefore not managed as
a separate risk, rather as part of how we
evaluated many of our existing principal
risks, and this approach continued into 2021,
as specific factors relating to the safety and
security of our colleagues and guests or
constraints on domestic and international
travel eased, but other uncertainties – for
example relating to hotel-level talent and
supply chains – may have a more rapid
impact in an uncertain and low
visibility environment.
While our principal risk grid is deliberately
broad in scope and includes factors which
may become increasingly important over
time, the complexities involved in the
execution of our initiatives mean there
is merit in more proactive consideration
of emerging scenarios across multiple risk
topics. These can act as lenses for us to look
at the nature or potential speed of impact
of many of our identified risks (as we have
experienced with Covid-19) and to provide
increased articulation to the Board of
potential sensitivities to, and stress-testing
of, strategy execution.
All the risks on the grid below meet the
definition of ‘principal’, however we have
reviewed the trends carefully to more
accurately reflect the current behaviour of
risks relative to each other and the portfolio
overall. This includes close consideration
of risks with a more gradual, longer-term
impact beyond the period considered for
financial planning, including the potential
impacts of climate change which have been
evaluated in our TCFD project (see pages 32
to 35) and also integrated into other risks
on the grid.
The Board and Executive Committee have
not noted any major movements on the grid
compared to last year. In relative terms,
some risks remain dynamic as we move into
2022 while others are more stable on 2021
levels. We will continue to monitor potential
shifts in 2022 as a result of the external
environment, our business model or a
complex and highly interdependent portfolio
of internal initiatives.
By distributing the risks across the grid in this
way, it allows us to consider the different
responses which may be required to individual
factors (for example, rapid factors which may
require continuity planning), or the overall level
of risk we are facing and what it means for
governance of the whole portfolio and future
resilience. The principal risks are considered
in the development of specific viability
scenarios (see pages 48 and 49). Our actions
resulting from our TCFD project will also be
used as a model for other scenarios which
can be integrated into ongoing management
monitoring and dynamic financial planning,
and which can also feed into the modelling
and stress-testing of strategic resilience
recommended by the UK Government report
on corporate governance reform.
Risk trend and speed of impact
We assess whether the risk area is
stable or dynamic in its impact and/or
likelihood (inherent risk trend), and the
rate at which there could be a material
impact on IHG. The trend and speed of
impact are summarised in the diagram
with further detail on activities to
manage each of these risks in the
following pages.
Principal risk – assessment of trend and speed of impact
Speed of potential impact
More Gradual
Rapid
• Channel management
• Macro external factors
and technology
• Preferred brands
• Investment effectiveness
and loyalty
and efficiency
• Leadership and talent
• Cybersecurity and
information governance
• Environmental and
social megatrends
• Legal, regulatory and
ethical compliance
• Financial management
and control systems
• Safety and security
d
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t
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n
e
r
e
h
n
I
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m
a
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D
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S
Principal risks descriptions
Inherent risk trend
Risk impact – link to our strategic priorities
Dynamic/Rapid
Build loved and trusted brands
Dynamic/Gradual
Customer centric in all we do
Stable/Rapid
Create digital advantage
Stable/Gradual
Care for our people, communities and planet
42
IHG | Annual Report and Form 20-F 2021
Strategic Report
Risk & trend
Macro external factors
Preferred brands and loyalty
Description
Link to
strategy
Trends
observed
in 2021
Initiatives
to respond
Macro external factors such as political and economic
disruption, the emerging risk of infectious diseases,
actual or threatened acts of terrorism or war, natural or
man-made disasters, and inflationary pressures could
have an impact on our ability to perform and grow,
including disrupting hotel supply chains and increasing
costs for our owners.
Failure to deliver preferred brands and loyalty could impact
our competitive positioning, our growth ambitions and our
reputation with guests and owners.
Competition from other hotel brands and third-party
intermediaries create inherent risks and opportunities to the
longer-term value and attractiveness of IHG’s franchised
and managed proposition for our brands.
Secondary impacts and continuing uncertainty in
relation to the recovery trajectory from the pandemic
will continue to exacerbate these factors across several
markets. Inflationary forces on labour and energy could
create significant pressures to hotel and owner financial
positions and IHG operating costs.
In addition to epidemics and pandemics, the risk of
natural disasters and extreme weather events may pose
an increasing threat to IHG operations in the future. Local
and international political tensions also continue to create
uncertainty for operations in key markets.
IHG’s resilience remains an ongoing, cross-functional,
focus. The launch of a refreshed incident and crisis
management programme and engagement of key
leadership teams in scenario training prior to the
pandemic has proved very valuable in establishing a
common language and headline roles and responsibilities.
We have continued to monitor intelligence from a range
of external and internal sources (e.g. government health
and travel advice), to evolve guidance for the safe
operation of hotel and corporate offices.
Leadership teams across IHG have also reviewed lessons
learned from the pandemic and how they can be applied
to future crises. As an example the EMEAA leadership
team regularly review global, regional, and business
unit risks, working with Business Reputation and
Responsibility experts to train teams on resilience,
continuity, and crisis planning. Crisis management teams
have refreshed business continuity arrangements for
the reopening of corporate offices (e.g. business service
centres, reservation offices and corporate locations) and
continued to monitor continuity approaches for key
supplier relationships.
We maintain a range of intelligence sources to horizon-
scan for emerging threats, provide insight to leadership
on incidents that impact operations, and analyse future
scenarios to inform the business planning cycle,
including at the Board and Executive Committee level.
Our initiatives to focus on owner returns are described
within the ‘Preferred brands and loyalty’ and ‘Investment
effectiveness and efficiency’ risks and within our priority
to be customer centric in all we do (see pages 19 to 21).
In an uncertain demand environment, and with constraints
on labour, supply chain and investment capacity in many
markets, our hotels and owners continue to face dynamic
risks to delivery of guest expectations of experience.
Covid-19 increased short-term pressures on availability of
financing for development, and there may also be slowing
of the pace of construction and openings due to labour and
supply chain constraints and wider inflationary pressures.
In recent years, we have focused on strengthening
our brands, addressing quality, building our masterbrand
and enhancing our data and technology capabilities.
These investments have been essential to our multi-year
journey towards customer centricity and have helped
establish a strong foundation from which to build customer
loyalty (see pages 19 to 21). We have added the capabilities
to launch and manage new brands, including standardised
design, mandated specifications, new procurement
capabilities, continuous product innovation, and
strengthened franchise licences.
It will be critical to use our loyalty programme to drive
business to our hotels and take share from our competitors.
We are also investing in individual hotel-level marketing to
drive revenue performance of new brand hotel openings
and implementing actions to enhance returns for our
owners by decreasing costs to build and operate hotels,
for example by evolving our brand standards. We are
coordinating the operational impact on hotels in the near
term as ongoing disruptions mean there will be constraints
on our ability to train hotel colleagues. Our regional teams
also use data to prioritise attention and resources to
drive performance.
We track hotel-level data in relation to the sustainability
of our brands in order to respond to an increasing trend
of requests from corporate clients for this information.
Several IHG teams have also progressed an agreed set of
bathroom bulk product offerings for all our brands in all our
regions, not only to build on our sustainability credentials
but to improve guest experience through the products
that will become available in our hotels.
Our risk management
IHG | Annual Report and Form 20-F 2021
43
Strategic Report
Our risk management continued
Risk & trend
Leadership and talent
Cybersecurity and information governance
Description
Failure to attract, develop and retain leadership and talent
could impact our ability to achieve growth ambitions and
execute effectively.
Risks relating to people underpin the majority of
processes and controls across IHG, and our ability to
develop talent is critical to delivering value to our brands
and hotels in the global markets where we operate and
compete. See pages 24 to 26 for further detail on the
importance of our people to our purpose and
strategic goals.
Inherent threats to cybersecurity and information
governance remain significant and we are responsible for
a range of high-value assets (critical systems and employee,
guest and other sensitive data) which may be targeted by
various ‘threat actors’ (including organised criminals,
third-parties and colleagues).
Our plans to transform how we use our commercial and
marketing data to improve the customer experience, grow
market share and revenue, and empower our owners to
make better decisions also present inherent risks to how
we manage information across IHG.
Link to
strategy
Trends
observed
in 2021
Initiatives
to respond
Our ability to attract and retain talent remains a challenge
in an uncertain economic and highly competitive
environment. Furthermore, our growth ambitions increase
the need for hotel talent, particularly for General Managers
in our Luxury & Lifestyle estate.
Dynamic and external attacks against the hospitality
industry have continued in 2021, with ransomware attacks
in particular trending against technology providers,
national infrastructure and supply chain. This has the
potential to impact both IHG and our third-party providers.
We face dynamic trends in our ability to retain and attract
key and diverse talent, to deliver learning at pace and to
transition to hybrid ways of working while maintaining
productivity and collaboration.
The Executive Committee regularly discusses talent
attraction and retention risks, and each functional
and regional leadership team has a clear talent plan.
We have expanded programmes to support the
development of diverse talent, increased our conscious
inclusion education and continuously review and adapt
our practices to be more inclusive. Our employee
resource groups, who are key in helping us build a culture
of inclusion, have grown across all our global markets.
We are providing active support to our colleagues as they
transition to hybrid working and are taking opportunities
to re-energise the workforce. 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 Human Resources organisation have developed
a series of leadership tools and learning to ensure our
leaders are equipped to lead in a hybrid world and can
foster a performance-driven culture based on trust.
We are creating office spaces that are designed for
collaboration and connection.
We have established a Global Learning Steering
Committee with a focus on supporting our owner needs,
reviewing our learning offering and utilising technology
to provide a virtual and sustainable learning environment.
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 own businesses. Our Procurement, Legal and Risk
teams also consider more indirect workforce risks relating
to our third-party relationships.
The Remuneration Committee is responsible for
determining Executive Board and Executive Committee
remuneration and reviews wider workforce remuneration,
aligned with the interests of shareholders and the UK
corporate governance environment.
Rapid societal, legal and regulatory and media scrutiny
of privacy arrangements, the transition to more permanent
hybrid working conditions for our employees and suppliers,
and advances in attack sophistication also heighten
inherent information security risks.
Our Information Security team continues to implement new
solutions and controls to address potential vulnerabilities,
and to focus resources on those operational tasks that best
protect our sensitive data sets and systems and detect and
respond to potentially malicious events in an appropriate
way. In 2021 we built a ransomware response programme,
conducted tabletop exercises and clarified decision rights
to enhance incident preparedness. We also matured our
oversight of third-party providers through use of security
questionnaires and an independent cybersecurity
ratings platform.
We work with our specialist technology providers to
continuously improve key operational security processes
and capabilities such as Identity and Access Management,
Security Monitoring, Incident Response, and the support
and maintenance of technical solutions architecture.
As finances remain at a premium for hotel owners, our
Information Security and Technology teams continue to
collaborate to provide reliable, scalable and cost-effective
solutions, targeted at areas of greatest opportunity for
future attacks.
Our information security strategy and programme is
overseen by an Executive Security Compliance Committee
and supported and reviewed by internal and external
assurance activities, including PCI assessments.
An extensive security metrics pack is produced monthly
to track risk trends, operational effectiveness and
mitigation activities.
To mitigate specific risks in relation to our Greater China
region, our local team has conducted internal assessments
of security compliance and remediated gaps, supported
by IHG’s Global Information Security team.
See also page 38 for detail of our approach to handling
information responsibly in accordance with our policies
and privacy commitments, including working with vendors.
44
IHG | Annual Report and Form 20-F 2021
Strategic Report
Risk & trend
Channel management and technology
Investment effectiveness and efficiency
Description
Link to
strategy
Trends
observed
in 2021
Initiatives
to respond
Failure to capitalise on innovation in booking technology
and 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 changing
guest and owner needs remains a principal risk to IHG’s
revenues and growth ambitions.
The importance of our investment effectiveness and
efficiency will be critical to balance short- and longer-term
strategic needs (e.g. developing infrastructure, increasing
growth of our system, enhancing digital capabilities).
Failure to manage risks associated with investments may
impact commercial performance, lead to financial loss and
undermine stakeholder confidence.
Uncertain demand as the industry recovers creates
dynamic and rapid trends to how we service demand
through various channels and meet increasing guest and
owner expectations, including how we use data to
personalise experiences and build loyalty.
The pace of innovation in digital behaviours in the
hospitality industry and wider society continues to
accelerate, with fast-moving global and local competitors,
and technology replacing certain elements of business
travel, and IHG must evolve to effectively grow and
compete in the marketplace.
Additional risk comes from the current context, including
financial and inflationary pressures on owners who rely
on us for their scale, capabilities and enterprise strength,
and constraints and risks in the hiring and retention of
top talent in the hospitality industry.
While the pandemic has been limiting due to decreased
availability of capital, capacity and capabilities, we
benefited from prior progress we had made in our
organisations to manage risks, by simplifying our work,
sequencing it more effectively and removing obstacles
and limitations within each core area. As such, we are
able to respond rapidly to shifts and opportunities in
the marketplace and can drive incremental revenue
by focusing on the basics of pricing, inventory and
booking-flow optimisation.
Our Marketing and Commercial and Technology teams
work in partnership to prioritise efforts and associated
investments in driving enhanced customer-centricity,
by developing and iterating a roadmap for key initiatives,
their pace, sequence and intended focus for technology-
enabled transformation over the next three years and
beyond (see page 22 for more details). We have also
established a central programme oversight function
designed to support and monitor progress, challenge
approaches and resolve issues relating to execution.
We will also continue to focus on developing our
capabilities and ensuring that we have the talent needed.
While we have seen the addition of top senior leadership
talent to our teams, it will be key to prioritise digital
capabilities to drive our channels, actively expanding the
breadth and depth of our digital relationships with current
and new guests.
To mitigate specific risks for local markets, we have
developed a China Digital roadmap and investment to
strengthen our locally relevant digital and loyalty offering.
We are highly dependent on significant capital investment
to renovate our existing estate, sign new hotels and build
IHG’s pipeline and the current operating environment
has created additional challenges for owners, including
financing constraints, commodity and raw material price
inflation, supply chain constraints, labour and general
product shortages, shifting guest expectations and volatile
demand patterns. As such, it is particularly important that
our enterprise capability is strong to allow owners to deliver
consistently superior returns that can attract this capital.
We are also increasing our interdependencies with
third-parties to deliver our Commercial and Technology
strategy, placing emphasis on risk ownership within
ongoing management of contract relationships and the
resilience of, and due diligence in relation to, key suppliers.
Our Finance teams regularly review and evolve our
governance and control frameworks, including delegated
approval authorities and processes, to enable decisions
on investments to be made quickly and efficiently with
consideration of the risks involved. The Executive Committee
discusses our strategic priorities and capabilities to
deliver them.
Our global and regional Operations teams maintain a global
project tracker which allows us to have visibility and review
any risks and opportunities to any in-flight or pending
project with impact on hotels.
With learnings from the pandemic and considering the new
operating context, we established a new strategic priority
in being customer centric in all we do to further strengthen
owner return on investment and to accelerate our net
system size growth in the recovery.
We are instilling specific return on investment disciplines
through our ‘Think return’ behaviour and are applying
enhanced design and procurement processes to reduce
the cost, alleviate labour pressures and maintain the quality
of our brands in new brand prototypes. We have also
simplified governance with a senior executive steering
committee providing oversight of key global workstreams.
We are strategically planning our sourcing activities around
known or anticipated cost and supply challenges for our
owners. Many goods and services in these areas are also
intrinsically linked to our responsible procurement plan
to deliver sustainable, diverse and risk-managed supplies
to our hotels. See page 39 for more detail.
Our risk management
IHG | Annual Report and Form 20-F 2021
45
Strategic Report
Strategic Report
Our risk management continued
Risk & trend
Legal, regulatory and ethical compliance
Financial management and control systems
Description
Link to
strategy
Trends
observed
in 2021
Initiatives
to respond
As we operate in more than 100 countries we are exposed
to many different compliance, regulatory and litigation
and reputation risks. Significant fines can be imposed
for regulatory non-compliance, IHG may be exposed to
litigation risk and stakeholders (including corporate sales
clients) and investors focus on IHG’s performance in
upholding ethical and social expectations.
A material breakdown in financial management and control
systems would lead to increased public scrutiny, regulatory
investigation and litigation. Material weaknesses may also
impact confidence in IHG from our shareholders and wider
stakeholders including suppliers, debt holders, hotel
owners and employees.
The global business regulatory and contractual
environment and societal expectations have continued
to evolve throughout 2021, with legislative changes in
many locations we operate in on topics such as data
privacy. Many countries are introducing legislation
or legislative proposals related to ESG agendas and
a focus on sanctions as a foreign policy tool continues
to increase.
Expectations are also increasing for IHG to manage and
drive responsible business through our supply chains and
across our wider business including with our franchisees.
We expect monitoring and scrutiny of corporate human
rights performance to continue to increase as a direct
result of the Covid-19 crisis and with high profile upcoming
events including the FIFA World Cup Qatar 2022.
Our Ethics and Compliance team focuses on ensuring
IHG has a globally coordinated approach to material
ethical and compliance risks. The overarching framework
is the IHG Code of Conduct (see pages 37 and 38) and
e-learning is provided to corporate and reservation
employees and managed hotels on an annual basis.
Our Ethics and Compliance team monitor e-learning
training completion, gifts and entertainment reporting
and the owner due diligence process. The team also
receive informal queries and/or escalation of issues
directly from colleagues and via an Ethics and
Compliance email channel which is publicised in training
and awareness materials. The Board receives regular
reports on the Confidential Reporting Channel. We also
continue to participate in Transparency International UK’s
Corporate Anti-Corruption Benchmark.
We monitor and advise internal stakeholders on risks
across a range of regulatory issues, including safety,
employment, contract, privacy, anti-bribery and anti-trust,
as well as continuing to identify and address legal and
regulatory issues that have emerged in relation
to Covid-19.
We also monitor and assess developments in relation to
regulations, potential sanctions or directives imposed by
governments, and our owner legal due diligence process
includes screening against sanctions lists. Ethics and
compliance country-level due diligence is undertaken
for new country entry assessments and we continue
to develop our supplier due diligence process.
We are committed to ongoing assessment and work on
human rights risks as an integral part of our Journey to
Tomorrow commitments (see page 26).
Risk levels have remained relatively stable, with continuing
monitoring required in relation to owner credit risks and
potential commercial disputes while the pandemic
recovery progresses. We have made some revisions to our
control testing which align with the approach of our new
auditors, PwC, and there were no major new accounting
standards with a material impact effective this year. We are
monitoring the UK Government consultation on corporate
governance reform.
The impact of Covid-19 on our financial reporting and
control environment has been significant and presented
several challenges. There have however also been
opportunities to evolve our approach in certain areas,
and the Finance leadership team has continued to review
controls and implement enhancements including increased
use of remote testing, robotic process automation and
data analytics. We have also established a committee with
responsibility for central co-ordination of control activity
which brings together Senior Leaders in the organisation
responsible for assurance activities to review status and
scope, evaluate control findings, and consider emerging
regulatory developments.
We continue to review our business continuity
arrangements, including for our India-based Global
Business Service Centre, given the operational importance
of processes located there such as accounts payable,
billing and cash collection, and financial reporting for both
corporate and hotels.
We have continued to operate an established financial
control system, which is verified through testing relating to
our Sarbanes-Oxley compliance responsibilities. See pages
57, 156, 169 to 173 for details of our approach to taxation,
pages 96 to 97 for details of our approach to internal
financial control, and pages 188 to 192 for specific details
on financial risk management policies.
IHG’s management of fraud risk is an integral part of our
broader risk management system, including inherent risks
to travel industry loyalty programmes. The management
of fraud is the responsibility of management teams within
regions and functions and is supported by expertise from
Risk and Assurance and Global Finance who also track a
range of indicators and report periodically to the Audit
Committee on fraud risk management procedures,
including financial and non-financial factors.
Our Group insurance programmes are also maintained
to support financial stability.
46
IHG | Annual Report and Form 20-F 2021
Risk & trend
Safety and security
Environmental and social megatrends
Description
Link to
strategy
Trends
observed
in 2021
Initiatives
to respond
The manner in which IHG responds to operational risk
and the steps taken to safeguard the safety and security
of colleagues and guests will continue to receive scrutiny,
particularly in light of the pandemic, and could result in
avoidable harm to IHG’s reputation for high standards
of business conduct, result in financial damage, claims
against IHG and undermine confidence in our brands.
As a global business, IHG faces uncertainties relating to
evolving environmental and social megatrends and our
response to these has the potential to impact performance
and growth in key markets and is subject to scrutiny from
a wide range of stakeholders, including regulators and
investor groups, corporate clients, guests and colleagues.
The scrutiny of our operations in relation to our Covid-19
response continued in 2021 across all markets. The risks
above relate both to our direct operations in hotels and
other locations where we have management responsibility,
and also to outsourced activities and others with whom
we collaborate and trade, including the owners of our
franchised hotels which operate as independent businesses.
Our Business Reputation and Responsibility team
coordinates and monitors IHG’s global safety management
system, which is designed to anticipate and identify safety
and security risks in an evolving landscape and provide
appropriate levels of control necessary to mitigate against
significant incidents, whether in hotels or corporate
offices. Regional and global subject matter specialists in
safety and security work regularly with hotels, operations
leaders, and operations support teams such as Design and
Engineering, Food and Beverage and Human Resources, to
review and set operational safety and security policies and
procedures. This working relationship has been particularly
important during the pandemic while guest and colleague
safety has been IHG’s core priority.
Subject matter specialists have also continued to monitor
local law and public health guidance and external trends
that may impact the safe operation of hotels, customer
expectations, and development opportunities (e.g. fire
safety, food allergens, operational security threats and
natural catastrophes), and we continue to review our
relevant standards and guidance as these issues evolve
and new regulatory requirements and best practices
are published. Our specialists regularly advise regional
Development and Operations teams about potential
security and threat risks in relation to new country entries
and new hotel projects.
Our specialists also monitor a range of internal indicators
relating to safety and security to confirm that our approach
to mitigating safety risks across our business is being
actively adopted in all regions, and produces expected
outcomes. Despite our best efforts, incidents will occur
across our global hotel operations and corporate offices;
we use these incidents as an opportunity to learn, escalating
the most serious for senior management attention.
The Board receives and reviews regular safety reports and
monitors safety performance. Through this monitoring,
IHG can determine where additional standards or guidance
may be necessary or whether existing controls may need
to be adjusted.
The focus on companies acting responsibly and being
true to their purpose has been heightened by the pandemic
and will continue into the future. This includes investor
focus, which is reflected by the increasing requirements for
targets and detailed data from ratings and research providers.
The detail of our TCFD risk assessment is included on
pages 32 to 35, highlighting four most potentially material
medium- to longer-term risks, and we will continue to
assess the aggregate impact of climate change on our
wider stakeholders including our third-party hotel owners.
Short-term climate-related factors are also increasingly
being considered within other risks, including guest
expectations of the sustainability of our brands and macro
external factors including extreme weather events.
Our Corporate Responsibility team have refined our
approach and enhanced our disclosures to meet the
expectations of our investors and the requirements of this
evolving regulatory environment. We also work together
with governments and industry associations to ensure our
voice is heard among key stakeholders, as well as being
able to advocate for our industry and our owners.
Our preparedness and resilience to climate change is
being embedded into existing ‘business as usual’ processes
following our project to support the TCFD recommendations.
To reduce our carbon footprint overall we have upgraded
our science-based target and created a roadmap with
internal targets to track and report progress against this
commitment. Key elements of our roadmap include
supporting our hotels to decarbonise through improved
energy efficiency and switching to renewable energy.
See pages 29 to 35 for details of our environmental policies
and initiatives and the measures we will use to track and
report progress against our new commitments.
During 2021 several IHG teams worked towards an agreed
set of bathroom bulk product offerings, as part of our
strategy to reduce single use plastics. We are also further
investing to provide training and tools to increase
procurement capabilities in sourcing and implementing
supplier diversity, sustainability and risk management.
Our long-standing commitment to operating our business
responsibly has underpinned the actions we are taking in
our local communities (see pages 27 and 28), for example
through job creation, upskilling and our support for
vulnerable people during the pandemic. We also maintained
our focus on working and living conditions for migrant
workers as well as topics such as responsible recruitment
and continue to engage on industry collaboration initiatives
which are addressing these risks.
Our values and behaviours, promoted by our Code
of Conduct, inform our decision-making at all levels.
Our Procurement, Legal and Risk teams also monitor supply
chain and labour practices risks (see pages 26 and 39).
Our risk management
IHG | Annual Report and Form 20-F 2021
47
Strategic Report
Viability statement
During 2021 the hospitality industry continued to be
impacted by the ongoing pandemic. Trading did however
recover significantly during the year, with RevPAR up
46% on 2020 and returning to 70% of 2019’s pre-pandemic levels.
The resilience of the Group’s fee-based model and wide geographic
spread resulted in Group adjusted free cash flowa of $571 million
during 2021 and net debt reduced by $648 million. Our weighting
towards upper midscale hotels in non-urban locations with lower
reliance on discretionary corporate and international travel has
supported IHG’s performance. 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 2024 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
Viability scenarios and assumptions
In performing the viability analysis, the Directors have considered
a ‘Base Case’ which is based on a continued improvement in
demand with RevPAR expected to reach 100% of 2019 levels
by 2024. 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 149).
The Directors have also considered a ‘Downside Case’, which
assumes that RevPAR growth is reduced by 8% compared to
the Base Case in 2022, followed by similar growth rates to the
Base Case in 2023 and 2024. This has been built using external
market forecasts for a possible downside scenario.
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 47.
The discussion on those pages includes a description of the trends
observed during 2021 and how the Group creates resilience to and
manages the risks.
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 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.
There continues to be an ongoing level of market volatility and risks
of further travel restrictions in certain markets. There are a wide
range of possible planning scenarios over the three-year period
considered in this review. 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.
The Directors have also considered a ‘Severe Downside Case’,
which assumes no recovery in RevPAR during 2022, with the
recovery profile delayed by one year. This would assume that
the volatility and divergence of market approaches to managing
Covid-19 continues during 2022.
The key assumptions included in the three-year plan relate
to RevPAR growth as explained above.
Percentage point decrease in
RevPAR compared to Base Case
Downside Case
Severe Downside Case
Index (to 2019)
2022
2023
2024
5
15
5
8
5
7
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. The impact
of climate risks and costs to address them have also been assessed
but are not considered material over the period of assessment.
Scenarios modelled
Related to principal risks
Changes in RevPAR
Downside Case and Severe Downside Case
These scenarios model a prolonged decrease in RevPAR, which may
be driven by external or internal factors.
One-off events
This scenario models the impact of a specific material incident, which
could relate to cyber security or an alternative material impact on the
cash flow statement.
Macro external factors
Preferred brands and loyalty
Leadership and talent
Safety and security
Financial management and control systems
Cybersecurity and information governance
Legal, regulatory and ethical compliance
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 defined under IFRS
or are adjusted IFRS figures. Further explanation in relation to these measures can be found on pages 73 to 77 and reconciliations to IFRS figures, where they have been adjusted,
are on pages 218 to 223.
48
IHG | Annual Report and Form 20-F 2021
Strategic Report We have also considered the principal risks that may impact
the viability of the Group over a longer-term period, for example,
environmental and social megatrends. The physical and transition
climate risks to which IHG is most exposed are discussed in the
TCFD statement on pages 32 to 35. Physical risks are not considered
material to the long-term viability of the Group, and transition risks
present both opportunities and risks.
Funding
The existing covenants on the Group’s syndicated and bilateral
revolving credit facilities (‘the bank facilities’) have been amended
until December 2022. See note 24 for further details. The other
assumptions relating to debt maturities are as follows:
• The $1.35 billion bank facilities mature in September 2023. It has
been assumed that these facilities are renewed as they mature.
• £173 million of bonds due in November 2022 are repaid on
maturity.
• €500 million of bonds due in October 2024 are repaid on maturity.
No other new or additional financing has been assumed in the
analysis performed.
Viability assessment
At 31 December 2021 the Group had cash and cash equivalents
of $1,305 million plus undrawn facilities of $1,350 million.
This means that in the event the covenant test was failed, the bank
facilities could be cancelled by the lenders but would not trigger
a repayment demand which threatened the viability of the Group.
Under the Base Case, Downside Case and Severe Downside
Case, the Group is forecast to generate positive cash flows over
the 2022-2024 period and the bank facilities remain undrawn.
The principal risks which could be applicable have been considered
and are able to be absorbed within the covenant requirements.
If there were additional trading downsides to the assumptions
used, then additional actions could be taken in order to mitigate
this risk such as reductions in discretionary spend.
In the Severe Downside Case, the Group still has substantial levels
of existing cash reserves available and is not expected to draw
on the bank facilities. The Directors reviewed a reverse stress test
scenario to determine how much additional RevPAR downside
could be absorbed before utilisation of the bank facilities would
be required. The Directors concluded that the outcome of the
reverse stress test showed it was very unlikely the bank facilities
would need to be drawn and therefore the Group does not need
to rely on the additional liquidity provided by the bank facilities.
In the event that a further covenant amendment was required,
the Directors believe it is reasonable to expect that such an
amendment could be obtained based on their prior experience
in relation to negotiating the 2020 amendments. As noted
above it has been assumed that the bank facilities are renewed
as they mature. However, as explained above the viability of the
group is not dependent on the bank facilities and therefore not
reliant on these assumptions. 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.
In the event of additional or multiple principal risks occurring
during the period of review e.g. continued depressed RevPAR
and a widespread cybersecurity incident, it is expected that these
risks could be absorbed within the liquidity headroom available
without relying on the additional liquidity provided by the
bank facilities.
Conclusion
The Directors have assessed the viability of the Group over a
three-year period to 31 December 2024 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 2024.
See also our business model on pages 10 to 13, the going concern
assessment on page 149, and the impact of the principal risks on
pages 42 to 47.
Viability statement
IHG | Annual Report and Form 20-F 2021
49
Strategic Report Key performance indicators (KPIs)
Our 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 16).
Senior management review our KPIs annually 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 specific
relevant topics are noted against each KPI.
A guide to this KPI section
Link between KPIs and Director remuneration
Whilst performance continued to be impacted
by Covid-19 in 2021, our long-term focus
remained to deliver high-quality growth and,
as in prior years, Directors’ remuneration for
2021 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 104 to 125.
Link to our strategy
Our strategic priorities, refreshed in 2020, are
core to our success. Our four strategic priorities
are represented as follows:
A
The Annual Performance Plan
LT
The Long Term Incentive Plan
• 70% was linked to operating profit from
• 40% was linked to Total Shareholder Return
reportable segments
• 20% was linked to absolute net system
• 15% was linked to strategic focus on net system
size growth
size growth through openings
• 15% was linked to strategic focus on future net
system size growth through signings
• 20% was linked to total gross revenue growth
• 20% was linked to cash flow generation
Build loved and
trusted brands
Customer centric
in all we do
Create digital
advantage
Care for our people,
communities and planet
KPIs
2021 status and 2022 priorities
Net rooms supply
Net total number of rooms in the
IHG System.
A
LT
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 16).
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 16).
2021
2020
2019
2018
2017
A
2021
2020
2019
2018
2017
880,327
886,036
883,563
836,541
798,075
2021 status
Gross system growth of 5.0%; net system size decline of 0.6% after 49,667
rooms removed, included 34,345 rooms from Holiday Inn and Crowne Plaza,
as we concluded our quality review, taking total supply to 880,327 rooms.
Signings of 68,870 rooms (437 hotels) represented 23% growth on the prior
year, but was below pre-pandemic levels, as Covid-19 related challenges
remained in place in a number of markets. Total pipeline of 270,960 rooms,
with more than 40% under construction, declined 0.4% compared to 2020 as
signings were offset by 43,958 room openings and a normal level of attrition.
Overall performance was driven by:
• Continued strength of the Holiday Inn Brand Family with 25,766 rooms
opened and 31,169 rooms signed, representing almost half of all signings.
• Conversions, representing 25% of openings and 22% of all signings.
68,870
• Luxury & Lifestyle brands gaining momentum with 28 hotels opened and
56,146
a further 75 properties signed.
97,754
98,814
83,481
• Further growth of our recently launched brands with:
– avid hotels, our second largest contributor to system growth, doubling
the number of open properties, taking the total estate to 48 hotels, and
a further 164 in the pipeline.
– the further global expansion of voco hotels to 69 open and signed hotels
since launch in 2018, across 25 countries.
– continued signings pace for Atwell Suites resulting in 23 pipeline hotels.
– the launch of Vignette Collection, with six properties secured in the year
and our first hotel already open.
2022 priorities
• Focus on our ambition to deliver sustainable industry-leading net system
size growth, with leading brands in the largest markets and segments.
• Continued focus on the quality of our estate, with lower anticipated future
overall removal rate than historic levels.
• Further rollout of avid hotels and Atwell Suites in the US, and
voco hotels globally.
• Expand our Luxury & Lifestyle offer through acquired brands Regent,
Six Senses and Kimpton, and our recently launched Vignette Collection.
50
IHG | Annual Report and Form 20-F 2021
Strategic Report
KPIs
2021 status and 2022 priorities
Global RevPARb 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).
Growth in underlying
fee revenuesa
Group revenue from reportable
segments excluding 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 Systema
Total rooms revenue from
franchised hotels and total hotel
revenue from managed, 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).
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 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 11).
A
LT
2021
2020
2019
2018
2017
2021
2020
2019
2018
2017
2021
46.0%
-52.5%
2020
-0.3%
2019
2018 2.5%
2017 2.7%
2021 status
• RevPAR improved in 2021 following an unprecedented decline in 2020,
and recovered to 70% of 2019 levels. The improvement was largely driven
by domestic leisure demand, particularly during holiday periods, once
vaccination rates allowed for restrictions to be lifted in markets including
the US and UK.
• Through the continued challenges of the pandemic we have remained
committed to supporting our owners to maximise revenues through:
– 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
award-winning centralised RFP processes (CRFP), with 2,200 hotels
now using the service.
2021
37.7%
– Real-time targeted campaigns and promotions aimed at key
demographics of returning leisure and business demand.
-45.0%
2020
2019 2.0%
2018 6.4%
$19.4bn
$13.5bn
$27.9bn
$27.4bn
$25.7bn
– Continued implementation of mobile-enabled improvements including
the development and piloting of a next generation IHG mobile app,
enabling a richer customer experience which is expected to increase
direct bookings and incremental spend during stays.
– Conducted detailed room inventory assessments across 5,300 hotels by
end of 2021, in preparation for attribute pricing which will enable owners
to generate maximum value from their hotel’s unique attributes.
• Enterprise contribution improved to 74% in 2021, driven by digital and
online travel agent (OTA) growth from strong leisure demand in the summer
months, especially in the US. This was partly offset by continued weakness
in Global Distribution Services (GDS) as corporate demand remained weak.
Reward night bookings largely recovered to pre-pandemic levels, with
participation rates of our higher tiered members, and particularly leisure
customers, exceeding 2019 levels.
• Launched our ‘Welcome Back to Business’ campaign, and IHG Business Edge,
our award-winning dedicated SME programme, which increased its accounts
by 44% to over 57,000, gaining share.
• Further development of IHG Rewards proposition through growth in Reward
Night Dynamic Pricing and the extension of the pause on points expiration
and membership tiers.
• New marketing campaigns to strengthen our IHG Hotels & Resorts
masterbrand to better promote our brands.
2022 priorities
• Continue to apply targeted data analytics and marketing to identify and
yield revenue enhancing opportunities.
74%
72%
76%
78%
76%
• Continue to develop our digital-first approach by leveraging our cloud-based
IHG ConcertoTM platform.
• Complete inventory work on the remaining hotels in our estate, in support
of the rollout of attribute pricing via our direct channels.
• Full roll-out of the next generation IHG mobile app, offering upgraded
analytics and personal marketing as part of our transformed loyalty offer.
• Further enhance our loyalty offer through the relaunch of IHG Rewards,
to provide members with richer benefits and increase enrolment.
• Maintain our focus on increasing contribution from IHG Rewards members
and through direct bookings via our website or call centres.
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 defined under IFRS or are adjusted
IFRS figures. Further explanation in relation to these measures can be found on pages 73 to 77 and reconciliations to IFRS figures, where they have been adjusted, are on pages 218 to 223.
A reconciliation of total gross revenue to owned, leased and managed lease revenue as recorded in the Group Financial Statements can be found on page 60.
b Comparable RevPAR includes the impact of hotels temporarily closed as a result of Covid-19.
Key performance indicators (KPIs)
IHG | Annual Report and Form 20-F 2021
51
Strategic Report
Key performance indicators (KPIs) continued
KPIs
Guest Love
IHG’s guest satisfaction
measurement indicator.
Guest satisfaction is fundamental to
our continued success and is a key
measure to monitor the risk of failing
to deliver preferred brands that meet
guests’ expectations (see page 43
for details).
A
2021
2020
2019
2018
2017
78.9%
81.6%
82.4%
81.7%
80.9%
2021 status and 2022 priorities
2021 status
• Guest satisfaction of 78.9% dropped slightly compared to 2020 reflecting
labour shortages as we emerge from the pandemic. Externally measured
Guest Satisfaction Index (GSI) achieved scores of 100 or better for each
brand in 2021, outperforming our peers, a successful outcome given the
evolving guest requirements resulting from Covid-19.
• Reviewed our Holiday Inn and Crowne Plaza estate, removing 34,345 rooms
to focus on protecting the quality and consistency of the brand. A further
83 hotels in the Americas and EMEAA regions have committed to
improvement plans or scopes of work.
• Continued to commit to cleanliness-specific procedures, with our IHG Way
of Clean programme and IHG Clean Promise, to provide confidence and
protection to our frontline hotel colleagues and enable them in turn to
deliver clean and safe hotels for all our guests.
• Further technology enhancements including the pilot of a next generation
IHG mobile app and the expansion of digital arrivals, offering guests the
ability to socially distance.
• Provided further training and support for evolving brand standards and
procedures, to meet changing guest expectations.
• Continued to update guest room and public space designs to further
enhance the guest experience.
2022 priorities
• Continue to invest in brand innovation, including room design and food
& beverage enhancements to meet evolving guest needs.
• Maintain a high level of guest satisfaction across our entire portfolio
and focus on quality and cleanliness standards.
• Continue to invest behind digitalisation of the guest journey and improve
on-property processes to improve guest satisfaction and streamline
hotel operations.
2021 status
• Growth in fee revenue of over 40%, coupled with disciplined cost
management taken across the business, resulted in a fee margin of 49.6%,
4.5ppts below 2019 levels.
• Achieved sustainable fee business cost savings of $75m compared to 2019,
whilst continuing to invest for growth.
2022 priorities
• Continue to invest in growth initiatives, whilst maintaining our strong
cost focus.
• Continue to look for further operational efficiencies through greater
application of technology.
2021 status
• Adjusted free cash flow of $571m was up $542m year-on-year driven by
an improvement in operating profit from reportable segmentsa and working
capital and other adjustments. Closing liquidity was $2,655m.
2022 priorities
• Prioritise investment behind growth with further cost focus, maintaining
challenge around all areas of discretionary spend.
• Control capital deployment in line with business priorities.
$571m
$509m
$611m
$516m
49.6%
34.1%
54.1%
53.3%
53.4%
Fee margina
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, the results of the
Group’s captive insurance company
and exceptional items.
Our fee margin progression indicates
the profitability of our fee revenue
growth and benefit of our asset-light
business model (see page 10).
Adjusted free cash flowa
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 13). It is a key component
in measuring the ongoing viability
of our business (see page 48).
A
2021
2020
2019
2018
2017
LT
2021
2020 $29m
2019
2018
2017
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 defined under IFRS or are adjusted
IFRS figures. Further explanation in relation to these measures can be found on pages 73 to 77 and reconciliations to IFRS figures, where they have been adjusted, are on pages 218 to 223.
52
IHG | Annual Report and Form 20-F 2021
Strategic Report
KPIs
2021 status and 2022 priorities
Employee engagement
survey scoresa
Colleague HeartBeat survey,
completed by IHG employees or
those colleagues who are employed
at managed or managed leased
hotels (excluding our joint ventures).
We measure employee engagement
to monitor risks relating to talent
(see page 44) and to help us
understand the issues that are
relevant to our people as we build
a diverse and inclusive culture
(see page 24).
A
2021
2020
2019
2018
2017
2021 status
• The 2021 score of 85% was 8% higher than external benchmarks.
85.0%
79.0%
• Rolled out a hybrid working model across corporate offices to encourage
flexibility and work-life balance, providing resources and guidelines to
support evolving ways of working.
87.0%
86.0%
85.0%
• Prioritised support for employee health and wellbeing including:
– Published guidelines and learning series to facilitate wellbeing
conversations.
– Elevated Employee Resource Groups (ERGs) to champion and drive
our diverse and inclusive culture.
– Promoted local initiatives, such as mental health first aid.
– Introduced Recharge Days and Focus Fridays for corporate employees.
• Delivered conscious inclusion training to corporate employees.
• Launched talent programmes such as Ascend and WiHTL (Women in
Hospitality Travel & Leisure) to support Black and Ethnic Minority Talent.
• Refreshed our GM development and onboarding programmes, including
the launch of new assessments to develop talent.
2022 priorities
• Maintain our focus on talent management and purposefully develop
our Corporate Senior Leaders and General Managers to enable our
future growth.
• Build our talent attraction capabilities via a compelling employer value
proposition, that enables us to retain and re-attract talent to the industry.
• Build our future learning offer to remain a leading employer within the
industry and help support our recovery strategy and hotel performance.
• Continue to build an inclusive culture and maintain a strong focus
on increasing the diversity of our leadership and talent pipelines.
2021 status
• Increased the number of internships and work experiences through
IHG Academy compared to 2020.
• Global roll out of IHG Skills Academy, a virtual learning platform, with a
phased release of both the learning system and content available in multiple
languages. This ensures we can make a tangible impact on a broader scale
for people of all backgrounds, with a view to convert participants into
IHG employees.
2022 priorities
• Further roll-out of IHG Skills Academy with phased worldwide release
of the platform, offering both the learning system and content in
multiple languages.
• Continue to increase the number of internships and work experience
placements across hotels and corporate functions, utilising both in-house
experiences and virtual solutions.
2021 status
• At the end of 2021, our absolute carbon footprint reduced by 12%
against our 2019 baseline, driven by targeted efforts to minimise energy
consumption during hotel closures, maximise energy efficiency at
re-opening and the ongoing efforts to implement energy efficiency
measures across our hotel estate.
2022 priorities
• Continue to roll out our decarbonisation roadmap focusing on energy
efficiency measures in the existing estate, transitioning to renewable
energy and operating very low/zero carbon new-build hotels.
• Enhance our environmental reporting systems, to continue building more
robust and complete datasets, and provide more detailed performance
insights and guidance for our hotels to support continuous improvement.
2021
5,815
2020 3,277
2019
2018
2017
A
2021
2020
2019
15,081
13,531
13,633
5.1m tCO2e
4.4m tCO2e
5.8m tCO2e
IHG® Academy
Number of people participating
in IHG Academy programmes.
Sustained participation in the
IHG Academy indicates the strength
of our progress in creating career
building opportunities and
engagement with the communities
in which we operate (see page 27).
Absolute carbon footprint
We work with our hotels to drive
energy efficiency and carbon
reductions across our estate. In 2021,
we upgraded our science-based
target to be in line with the Paris
Agreement to limit warming to 1.5°C.
This will involve reducing our
absolute carbon footprint by 46%
in energy used by our franchised,
managed, owned, leased and
managed lease hotels by 2030,
based on our 2019 carbon footprint
(see page 29). We have updated
our KPI to reflect the change from
an intensity metric to an absolute
carbon target.
a In 2020, due to the complexity of survey administration in hotels during the pandemic, only employees in corporate offices and reservation centres, and managed hotel general
managers (excluding our joint ventures), were invited to participate. Results for 2017 to 2019 are based on aggregate results from the two surveys conducted among the entire
IHG employee population each year.
Key performance indicators (KPIs)
IHG | Annual Report and Form 20-F 2021
53
Strategic Report
Chief Financial Officer’s review
“ Strong trading
recovery in 2021
demonstrating
attractive industry
fundamentals.”
Paul Edgecliffe-Johnson Chief Financial Officer & Group Head of Strategy
Trading recovered significantly in
2021, with RevPAR ahead of 2020,
and trending closer to pre-pandemic
levels by the fourth quarter. We saw
demand return at pace in markets where
Covid-19 restrictions were lifted, driven
primarily by domestic leisure and essential
business travel. The strong recovery
in trading demonstrates the attractive
long-term fundamentals that underpin
our industry, including the inherent desire
for travel and new experiences.
Trading performance
Through the challenges of the pandemic,
we remained committed to take actions
to drive demand to our hotels and support
our owners by maximising their revenues.
This, combined with our weighting towards
essential business and domestic leisure
demand, particularly in the midscale
segments, resulted in RevPAR recovering
to 70% of 2019 levels.
Encouragingly in the fourth quarter, rate
was almost in line with 2019 and occupancy
around 85% of 2019 levels. There were also
signs of more discretionary business travel,
and group bookings and international trips
starting to return.
Regional performance was subject to local
Covid-19 related restrictions. The recovery
was strongest in the Americas, driven by
our weighting towards non-urban markets
that are less reliant on international
inbound travel and large groups and events.
The recovery in the US was boosted by strong
domestic leisure demand and resilient
essential business demand.
Trading in EMEAA was led by Europe, which
is less reliant on international travel, and the
Middle East, with both markets benefitting
from the lifting of restrictions.
Greater China recovered in the second
quarter although the second half of the year
saw restrictions reimposed and increased
trading volatility.
System growth
Gross system growth of 5.0% was ahead
of 2020, although remained below
pre-pandemic levels.
Net system size declined by 0.6% as our focus
on the long-term health and quality of our
established brands resulted in the removal
of 49,667 rooms, 70% of which related to our
review of the Holiday Inn and Crowne Plaza
estate. We anticipate a lower overall removal
rate going forwards, supporting our ambition
to achieve industry-leading net rooms growth.
Focused cost management
We delivered sustainable fee business cost
savings of $75m compared to 2019. At the
same time, we maintained our investment in
growth opportunities, such as the launch of
our newest brand, the Vignette Collection.
Operating profit of $494m improved from
an operating loss of $(153)m in 2020.
Operating profit from reportable segmentsa
recovered to $534m. The recovery in
revenue combined with our sustainable cost
management and a decrease in corporate
trade receivables, resulted in fee margina
improving to 49.6%, 4.5ppts below 2019.
Cash generation and liquidity
The resilience of our business model was
demonstrated throughout the year. Our strong
cash conversion, combined with our ongoing
focus on cost savings, has helped generate
net cash from operating activities of $636m
and $571m of adjusted free cash flowa.
This has contributed to substantial progress
in returning leverage levels measured as a
ratio of net debt: adjusted EBITDA to 3.0x and
within the 2.5-3.0x range we aim to maintain,
supporting the Board’s decision to propose
a final dividend of 85.9¢ in respect of 2021.
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 2022 priorities
Looking to the future, we are encouraged by
the signs of recovery, although trading in some
markets remains volatile. The acceleration
in development activity through 2021
contributed to a pipeline that is over 30% of
our existing system size, and will support our
ambition to return to industry-leading levels
of net system size growth.
Importantly, we have continued to
prioritise investment to support long-term
sustainable growth. Many of these are
multi-year in nature with further investments
planned for 2022 behind our brand portfolio,
loyalty programme and digital channels.
We remain focused on improving returns
for owners through investments in revenue
management, operational efficiencies
and procurement programmes.
Our asset-light business model is proven
to be highly cash generative. As we look
to future growth, with attractive industry
RevPAR characteristics and a substantial
pipeline of hotels to open, we will focus on
growing our fee revenues and fee margins.
With limited requirements for capital, this
will enable us to grow the business whilst
generating high returns on invested capital.
Paul Edgecliffe-Johnson
Chief Financial Officer
& Group Head of Strategy
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 defined under IFRS or are adjusted
IFRS figures. Further explanation in relation to these measures can be found on pages 73 to 77 and reconciliations to IFRS figures, where they have been adjusted, are on pages 218 to 223.
54
IHG | Annual Report and Form 20-F 2021
Strategic Report Performance
Group
Group Income Statement summary
Revenuea
Americas
EMEAA
Greater China
Central
Revenue from reportable segmentsb
System Fund revenues
Reimbursement of costs
Total revenue
Operating profita
Americas
EMEAA
Greater China
Central
Operating profit from reportable segmentsb
Analysed as:
Fee Business excluding central
Owned, leased and managed lease
Central
System Fund result
Operating profit before exceptional items
Operating exceptional items
Operating profit/(loss)
Net financial expenses
Analysed as:
Adjusted interest expenseb
System Fund interest
Exceptional financial expenses
Fair value gains on contingent
purchase consideration
Profit/(loss) before tax
Tax
Analysed as:
Tax before exceptional items and System Fundb
Tax on exceptional items
Exceptional tax
Profit/(loss)
Adjusted earningsd
Basic weighted average number of ordinary
shares (millions)
Earnings/(loss) per ordinary share
Basic
Adjustedb
Dividend per share
2020
$m
2021 vs 2020
% change
12 months ended 31 December
2019
$m
2020 vs 2019
% change
2021
$m
774
303
116
197
1,390
928
589
2,907
559
5
58
(88)
534
658
(36)
(88)
(11)
523
(29)
494
(139)
(142)
3
–
6
361
(96)
(125)
3
26
265
269
183
512
221
77
182
992
765
637
2,394
296
(50)
35
(62)
219
340
(59)
(62)
(102)
117
(270)
(153)
(140)
(130)
4
(14)
13
(280)
20
(32)
52
–
(260)
57
182
51.2
37.1
50.6
8.2
40.1
21.3
(7.5)
21.4
88.9
NMc
65.7
41.9
143.8
93.5
(39.0)
41.9
(89.2)
347.0
(89.3)
NMc
(0.7)
9.2
(25.0)
–
(53.8)
NMc
NMc
290.6
(94.2)
–
NMc
371.9
0.5
NMc
369.6
NMc
(6.4)
1,040
723
135
185
2,083
1,373
1,171
4,627
700
217
73
(125)
865
938
52
(125)
(49)
816
(186)
630
(115)
(133)
18
–
27
542
(156)
(176)
20
–
386
555
183
210.4¢
303.3¢
296.2¢
$1: £0.78
(50.8)
(69.4)
(43.0)
(1.6)
(52.4)
(44.3)
(45.6)
(48.3)
(57.7)
NMc
(52.1)
(50.4)
(74.7)
(63.8)
NMc
(50.4)
108.2
(85.7)
45.2
NMc
21.7
(2.3)
(77.8)
–
(51.9)
NMc
NMc
(81.8)
160.0
–
NMc
(89.7)
(0.5)
NMc
(89.7)
NMc
–
145.4¢
147.0¢
85.9¢
(142.9)¢
31.3¢
–
Average US dollar to sterling exchange rate
$1: £0.73
$1: £0.78
a Americas and EMEAA include revenue and operating profit before exceptional items from both fee business and owned, leased and managed lease hotels. Greater China includes
revenue and operating profit before exceptional items from fee business.
b Definitions for Non-GAAP measures can be found on pages 73 to 77. Reconciliations of these measures to the most directly comparable line items within the Group Financial
Statements can be found on pages 218 to 223.
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.
d Adjusted earnings as used with adjusted earnings per share, a non-GAAP measure.
IHG | Annual Report and Form 20-F 2021
55
Strategic ReportPerformance
Operating profit from reportable segmentsb
increased by $315m (143.8%) to $534m,
driven by improved demand and the delivery
of sustainable fee business cost savings.
Underlying operating profitb increased
$308m to $531m.
In the year to 31 December 2021,
reimbursable revenue decreased by $48m
(7.5%) to $589m. The reduction reflects the
impact of the prior year termination of the
SVC portfolio in the Americas estate, meaning
the overall scale of reimbursements fell.
Performance continued
Group continued
Highlights for the year ended
31 December 2021
Trading improved significantly during
the year, with Group comparable RevPARa
getting closer to pre-pandemic levels.
More travel demand returned as vaccines
rolled out, government-mandated
restrictions eased and economic activity
started to rebuild. Through the summer
months, many markets, including the US
and UK, saw significant improvements,
driven by domestic leisure travel. Whilst the
ability of travellers to freely move between
and within countries continued to vary
significantly, the second half of the year
saw a gradual further improvement in
overall trading conditions.
Revenue
Overall, when comparing to 2020, Group
comparable RevPARa declined 34% in the
first quarter, then grew 151% in the second
quarter, 66% in the third quarter, 71% in
the fourth quarter and 46% in the full year.
When compared to the pre-pandemic
levels of 2019, Group comparable RevPARa
declined 51% in the first quarter, 36% in
the second quarter, 21% in the third quarter,
17% in the fourth quarter and 30% in the
full year.
Fee marginb increased by 15.5ppts to 49.6%,
benefitting from the improvement in trading
and focused cost management.
System Fund
The Group operates a System Fund to collect
and administer cash assessments from hotel
owners for the specific purpose of use in
marketing, reservations, and the hotel loyalty
programme, IHG 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 profit or loss for IHG over the
longer term, although an in-year surplus or
deficit can arise, but is managed for the
benefit of hotels in the IHG System with the
objective of driving revenues for the hotels.
In the year to 31 December 2021, System
Fund revenues increased $163m (21%) to
$928m, primarily driven by the recovery
in travel demand yielding higher
assessment revenues.
Our other key driver of revenue, net system
size, decreased by 0.6% year-on-year
to 880,327 rooms, impacted by 34.3k
Holiday Inn and Crowne Plaza removals
as we concluded our quality review of
these brands.
The System Fund income statement
deficit reduced by $91m to $11m, primarily
due to the rebound in travel demand and
associated assessment income, partially
offset by the reversal of temporary savings
realised in 2020.
During the year ended 31 December 2021,
total revenue increased by $513m (21.4%)
to $2,907m including a $48m reduction in
cost reimbursement revenue. Revenue from
reportable segmentsb increased by $398m
(40.1%) to $1,390m, driven by improved
trading conditions. Underlying revenueb
increased by $387m to $1,373m, with
underlying fee revenueb increasing by $314m.
Owned, leased and managed lease revenue
increased by $68m.
Reimbursement of costs
Cost reimbursement 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 we record cost
reimbursements based upon costs incurred
with no added mark up, this revenue and
related expenses have no impact on either
our operating profit or net profit for the year.
Operating profit and margin
Operating profit improved by $647m
from a loss of $153m to a profit of $494m,
including a $241m net reduction in operating
exceptional items, a $91m improvement in
the System Fund result, from a $102m deficit
to an $11m deficit, and a $36m decrease in
the charge for expected credit losses on
corporate trade receivables.
56
IHG | Annual Report and Form 20-F 2021
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 as well as other
Non-GAAP measures (see Use of Non-GAAP
measures, pages 218 to 223) in order
to provide a more meaningful comparison
of performance and 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 $29m,
comprising the $25m provisionally agreed
costs to settle two commercial disputes in
the Americas and EMEAA, and the reversal
of a $4m fair value gain recorded in 2020
on the put option over part of the Group’s
investment in the InterContinental Barclay
hotel. Further information on exceptional
items can be found in note 6 to the Group
Financial Statements.
Net financial expenses
Net financial expenses decreased by $1m to
$139m. Adjusted interestb, as reconciled on
page 223, and which excludes exceptional
finance expenses, and adds back interest
relating to the System Fund, increased by
$12m to an expense of $142m. The increase
in adjusted interestb was primarily driven
by increased average bond debt.
Financial expenses include $91m (2020: $69m
excluding exceptional financial expenses)
of total interest costs on public bonds, which
are fixed rate debt. Interest expense on lease
liabilities was $29m (2020: $37m).
a Comparable RevPAR includes the impact of hotels
temporarily closed as a result of Covid-19.
b Definitions for Non-GAAP revenue and operating
profit measures can be found on pages 73 to 77.
Reconciliations of these measures to the most directly
comparable line items within the Group Financial
Statements can be found on pages 218 to 223.
Strategic Report Accounting principles
The Group results are prepared
under International Financial Reporting
Standards (IFRS). 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 150 of the Group
Financial Statements.
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 on page 165 of the
Group Financial Statements.
Earnings per ordinary share
The Group’s basic earnings per ordinary
share is 145.4¢ (2020: basic loss per
ordinary share: 142.9¢). Adjusted earnings
per ordinary sharea increased by 115.7¢
to 147.0¢.
Dividends
The Board is proposing a final dividend
of 85.9¢ in respect of 2021, an amount
equivalent to the withdrawn final payment
in respect of 2019. No interim dividend
was paid in respect of 2021. Going forward,
dividend payments will be reflective of
IHG’s prior approach to sustainably grow
the ordinary dividend, whilst targeting a level
of leverage that maintains an investment
grade credit rating and ensuring careful
consideration of our responsibilities to all
stakeholders. The Board will also continue
to actively assess the opportunity for
any surplus capital to be additionally
returned through special dividends
or share buybacks.
Share price and market capitalisation
The IHG share price closed at £47.81 on
31 December 2021, up from £46.90 on
31 December 2020. The market capitalisation
of the Group at the year-end was £8.8bn.
For discussion of 2020 results, and the
changes compared to 2019, refer to the
2020 Annual Report and Form 20-F.
www.ihgplc.com/investors under
Annual Report
a Definitions for Non-GAAP revenue and operating profit
measures can be found on pages 73 to 77.
Reconciliations of these measures to the most directly
comparable line items within the Group Financial
Statements can be found on pages 218 to 223.
Fair value gains on contingent
purchase consideration
Contingent purchase consideration arose
on the acquisitions of Regent, the UK
portfolio and Six Senses (see note 25 to the
Group Financial Statements). The net gain
of $6m (2020: $13m) primarily arises from
the conditions related to the Six Senses
contingent purchase consideration no
longer being met. The total contingent
purchase consideration liability at
31 December 2021 is $73m (2020: $79m).
Taxation
The effective rate of tax on profit before
exceptional items and System Funda was
31% (2020: 38%); this was lower than 2020
largely due to the improved profit base.
In May 2021, a change to the UK rate of
Corporation Tax was enacted which led
to a $30m credit; $26m was recoded as
an exceptional credit within the Income
Statement and $4m within the Statement
of Other Comprehensive Income. A net
credit of $3m arose on other accounting
exceptional items (2020: $52m). Further
information on tax within exceptional items
can be found in note 6 to the Group Financial
Statements. Net tax paid in 2021 totalled
$86m (2020: $41m), and included refunds
in the US of $15m (2020: $24m). No more
significant refunds are expected.
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 information on
tax can be found in note 8 to the Group
Financial Statements.
IHG’s Approach to Tax policy is available at
www.ihgplc.com/responsible-business
under policies
IHG | Annual Report and Form 20-F 2021
57
Strategic ReportPerformance Performance continued
Group continued
Group Cash Flow summary
GAAP cash flow summary
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Net movement in cash and cash equivalents
in the year
Summary of cash flow and net debt
Operating profit from reportable segments
Depreciation and amortisation
Adjusted EBITDAa
Working capital and other adjustments
Impairment loss on financial assets
Other non-cash adjustments to operating
profit/lossb
System Fund result
System Fund depreciation and amortisation
Other non-cash adjustments to System Fund result
Capital expenditure: contract acquisition costs
(key money) net of repayments
Capital expenditure: maintenance
Cash flows relating to exceptional items
Net interest paid
Tax paid
Principal element of lease payments
Purchase of shares
Adjusted free cash flowa
Capital expenditure: gross recyclable investments
Capital expenditure: gross System
Fund capital investments
Acquisitions of businesses, net of cash acquired
Deferred and contingent purchase
consideration paid
Disposals and repayments, including other
financial assets
Distributions from associates and joint ventures
Other items
Dividends and shareholder returns
Net cash flow before other net debt movements
Add back principal element of lease repayments
Exchange and other non-cash adjustments
Decrease in net debt
2021
$m
636
(12)
(860)
(236)
2021
$m
534
98
632
110
–
71
(11)
94
6
(42)
(33)
(12)
(126)
(86)
(32)
–
571
(5)
(19)
–
(13)
58
–
–
–
592
32
24
648
Net debt at the beginning of the year
Net debt at the end of the year
(2,529)
(1,881)
2020
$m
2021 vs 2020
$m change
137
(61)
1,354
1,430
499
49
(2,214)
(1,666)
2020
$m
2021 vs 2020
$m change
219
110
329
(27)
40
60
(102)
62
97
(64)
(43)
(87)
(130)
(41)
(65)
–
29
(6)
(35)
–
–
18
5
3
–
14
65
57
136
(2,665)
(2,529)
303
542
578
512
648
12 months ended 31 December
2019
$m
653
(493)
(660)
(500)
2020 vs 2019
$m change
(516)
432
2,014
1,930
12 months ended 31 December
2019
$m
865
116
981
(77)
8
54
(49)
54
52
(61)
(86)
(55)
(107)
(141)
(59)
(5)
509
(19)
(98)
(292)
(8)
4
–
–
(723)
(627)
59
(132)
(700)
(1,965)
(2,665)
2020 vs 2019
$m change
(652)
(480)
641
836
136
a Definitions for Non-GAAP measures can be found on pages 73 to 77. Reconciliations of these measures to the most directly comparable line items within the Group Financial
Statements can be found on pages 218 to 223.
b 2020 Excludes $48m related to trade deposits and loans which were recognised as exceptional items.
58
IHG | Annual Report and Form 20-F 2021
Strategic Report
Cash from operating activities
For the year ended 31 December 2021 net
cash from operating activities totalled $636m,
an increase of $499m on the previous year,
primarily reflecting the increase in operating
profit and improvement in working capital
and other adjustments.
Cash flow from operations is the principal
source of cash used to fund the ongoing
operating expenses, interest payments,
maintenance capital expenditure and normal
dividend payments of the Group.
The Group believes that the requirements
of its existing business and future investment
can be met from cash generated internally,
disposition of assets, and external finance
expected to be available to it.
Cash from investing activities
Net cash outflows from investing activities
decreased by $49m to $12m, driven by
$44m net proceeds from the sale of three
hotels in the Americas region. There was
an overall decrease in purchases of property,
plant and equipment and intangible assets
of $24m. Deferred consideration paid of
$13m related to the acquisition of the Regent
brand (2020: $nil). The Group had committed
contractual capital expenditure of $17m
at 31 December 2021 (2020: $19m).
Cash used in financing activities
Net cash outflows from financing activities
totalled $860m (2020: $1,354m inflow).
This was primarily due to the repayment of
the £600m commercial paper under the UK
Covid Corporate Financing Facility (CCFF).
Adjusted free cash flow
Adjusted free cash flowa was an inflow
of $571m, an increase of $542m on 2020,
driven by an improvement in operating
profit from reportable segmentsa partially
offset by related tax payments, coupled with
a $137m improvement in working capital
as explained below. Exceptional cash costs
of $12m decreased by $75m due to lower
restructuring expenses and the timing of
litigation payments.
Working capital
On the Group statement of financial position,
trade and other receivables increased by
$60m, from $514m to $574m, primarily due
to the significant increase in RevPAR in the
fourth quarter compared to 2020. Trade
and other payables increased by $108m,
from $560m to $668m, primarily due to
an increase in bonus accruals compared to
prior year. Deferred revenue increased by
$44m, from $1,569m to $1,613m, reflecting
an increase in the future redeemable points
balance related to the loyalty programme.
a Definitions for Non-GAAP measures can be found on
pages 73 to 77. Reconciliations of these measures to the
most directly comparable line items within the Group
Financial Statements can be found on pages 218 to 223.
Sources of liquidity
As at 31 December 2021 the Group had total
liquidity of $2,655m (31 December 2020:
$2,925m), comprising $1,350m of undrawn
bank facilities and $1,305m of cash and cash
equivalents (net of overdrafts and restricted
cash). The reduction in total liquidity from
December 2020 is due to the repayment
of the £600m CCFF in March 2021, largely
offset by the net cash flow before other net
debt movements of $592m.
The Group currently has $2,786m of sterling
and euro bonds outstanding. The current
bonds mature in November 2022 (£173m),
October 2024 (€500m), August 2025
(£300m), August 2026 (£350m), May 2027
(€500m) and October 2028 (£400m).
There are currency swaps in place on both
the euro bonds, fixing the October 2024
bond at £454m and the May 2027 bond
at £436m.
The Group currently has a senior unsecured
long-term credit rating of BBB- from
Standard and Poor’s. In the event this rating
was downgraded below BBB- there would
be an additional step-up of 125bps payable
on the bonds which would result in an
additional interest cost of approximately
$35m per year.
The $1,275m revolving syndicated bank
facility (the Syndicated Facility) and the $75m
revolving bilateral facility (the Bilateral Facility)
mature in September 2023. The facilities
were undrawn at 31 December 2021.
The Syndicated and Bilateral Facilities
contain the same terms and two financial
covenants: interest cover and a leverage
ratio. Covenants are monitored on a ‘frozen
GAAP’ basis excluding the impact of IFRS 16
and 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 of
below 3.5:1. Covenant EBITDA is calculated
(on a frozen GAAP basis) as operating profit
before exceptional items, depreciation and
amortisation and System Fund revenues
and expenses. See note 24 to the Group
Financial Statements for further information.
These covenants have been amended for
test dates in 2022. A minimum liquidity
covenant of $400m has been introduced
which will be tested at each test date
up to and including 31 December 2022.
The amended leverage ratio and interest
cover covenant test levels for the facilities
are as follows:
Leverage
ratio
Interest
cover
June 2022
December 2022
Less than 7.5x
Less than 6.5x
Greater than 1.5x
Greater than 2.0x
At 31 December 2021 the leverage ratio was
3.0x and the interest cover ratio was 4.5x.
See note 24 to the Group Financial
Statements for further information.
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.
In the Group’s opinion, the available facilities
are sufficient for the Group’s present liquidity
requirements. However, the Group continues
to assess its liquidity position and financing
options and will take further actions
as necessary.
The Group has taken certain actions during
2021 regarding the discontinuation of LIBOR.
The Group’s main exposure to LIBOR is the
underlying reference rate in the Syndicated
and Bilateral Facilities. The terms of these
agreements will need to be renegotiated
to address the discontinuation of LIBOR.
The replacement of LIBOR with alternative
reference rates is not expected to have a
material impact on the Group at this stage.
The Group had net liabilities of $1,474m
at 31 December 2021 ($1,849m at
31 December 2020).
Net debt
Net debt of $1,881m (2020: $2,529m) is
analysed by currency as follows:
2021
$m
2020
$m
Borrowings
Sterling*
US dollar
Euros
Other
Cash and cash
equivalents
Sterling
US dollar
Euros
Canadian dollar
Chinese renminbi
Other
Net debt
Average net debt level
2,860
3,716
431
5
35
(532)
(756)
(18)
(7)
(105)
(32)
1,881
2,334
416
20
52
(1,305)
(261)
(12)
(8)
(60)
(29)
2,529
2,554
* Including the impact of currency swaps.
Cash and cash equivalents includes $77m
(2020: $44m) that is not available for use
by the Group due to local exchange controls
and $9m (2020: $5m) which is restricted
for use on capital expenditure under hotel
lease agreements.
Information on the maturity profile
and interest structure of borrowings is
included in notes 22 and 24 to the Group
Financial Statements.
IHG | Annual Report and Form 20-F 2021
59
Strategic ReportPerformance Performance continued
Group continued
Borrowings included bank overdrafts of
$59m (2020: $51m), 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. The cash pools
are used for day-to-day cash management
purposes and are managed daily 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 most significant balances in the US,
and the matching overdrafts are held by the
Group’s central treasury company in the UK.
Total gross revenuea in IHG’s System
Analysed by brand
InterContinental
Kimpton
HUALUXE
Crowne Plaza
Hotel Indigo
EVEN Hotels
Holiday Inn
Holiday Inn Express
Staybridge Suites
Candlewood Suites
Information on the Group’s approach to
allocation of capital resources can be found
on pages 12 and 13.
Other
Total
Analysed by ownership type
Fee business
Owned, leased and managed lease
Total
2021
$bn
2.7
0.7
0.1
2.3
0.4
0.1
4.0
6.5
1.0
0.7
0.9
19.4
19.2
0.2
19.4
12 months ended 31 December
2020
$bn
%
changeb
2.0
0.4
0.1
1.8
0.3
0.0
2.8
4.2
0.7
0.7
0.5
13.5
13.3
0.2
13.5
31.6
83.9
36.5
25.7
73.9
127.0
42.7
54.2
38.2
11.5
51.9
42.8
42.8
40.3
42.8
a Definitions for Non-GAAP measures can be found on pages 73 to 77. Reconciliations of these measures to the most
directly comparable line items within the Group Financial Statements can be found on pages 218 to 223.
b Year-on-year percentage movement calculated from source figures, to provide better illustration of relative impact
of Covid-19 on brands and on fee business and owned, leased and managed lease hotels.
Total gross revenue in IHG’s System increased by 42.8% (40.5% increase at constant
currency) to $19.4bn (70% of 2019 levels), driven by the improvement in trading conditions
in many markets, particularly through the second half of 2021.
Off-balance sheet arrangements
At 31 December 2021, 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 $69m and
outstanding letters of credit of $45m.
The Group may also be exposed to additional
liabilities resulting from litigation and
security incidents. See note 31 to the Group
Financial Statements for further details.
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.
60
IHG | Annual Report and Form 20-F 2021
Strategic Report Group hotel and room count
At 31 December
Analysed by brand
Six Senses
Regent
InterContinental
Vignette Collection
Kimpton
HUALUXE
Crowne Plaza
Hotel Indigo
EVEN Hotels
voco
Holiday Inna
Holiday Inn Express
avid hotels
Staybridge Suites
Candlewood Suites
Otherb
Total
Analysed by ownership type
Franchised
Managed
Owned, leased and managed lease
Total
During 2021, the global IHG System
(the number of hotels and rooms which
are franchised, managed, owned, leased
or managed lease) increased by 27 hotels
(decreased by 5,709 rooms) to 5,991 hotels
(880,327 rooms).
Openings of 291 hotels (43,958 rooms)
was 11.6% higher than in 2020. 151 hotels
(15,739 rooms) were opened in the
Americas, including 85 hotels (9,016 rooms)
in the Holiday Inn Brand Family. 52 hotels
(10,162 rooms) were opened in EMEAA,
with the Greater China region contributing
openings of 88 hotels (18,057 rooms).
264 hotels (49,667 rooms) left the IHG
System in 2021, including 151 Holiday Inn
and Crowne Plaza hotels (34,345 rooms)
as we concluded our review of these brands.
In 2020, 224 hotels (36,919 rooms) left
the IHG System, of which 102 hotels
(16,655 rooms) related to the termination
of the SVC portfolio in the Americas estate.
Hotels
Change
over 2020
5
–
(1)
1
2
4
(25)
5
5
13
(58)
50
24
12
(5)
(5)
27
28
3
(4)
27
2021
1,412
2,190
69,402
146
13,283
4,603
111,178
16,343
2,994
7,445
224,684
317,329
4,280
34,306
32,025
38,707
880,327
626,115
249,591
4,621
880,327
Rooms
Change
over 2020
283
–
(539)
146
198
1,170
(7,701)
739
584
2,368
(11,870)
7,842
2,124
1,411
(410)
(2,054)
(5,709)
(1,233)
(3,697)
(779)
(5,709)
2021
21
7
204
1
75
16
404
130
21
31
1,218
3,016
48
315
361
123
5,991
5,033
939
19
5,991
a Includes 41 Holiday Inn Resort properties (10,454 rooms)
and 28 Holiday Inn Club Vacations properties
(8,679 rooms) (2020: 47 Holiday Inn Resort properties
(11,446 rooms) and 28 Holiday Inn Club Vacations
properties (8,679 rooms)).
b Includes three open hotels that will be re-branded
to voco and one hotel that will be re-branded to
Vignette Collection.
Total number of hotels
5,991
Total number of rooms
880,327
IHG | Annual Report and Form 20-F 2021
61
Strategic ReportPerformance Performance continued
Group continued
Group pipeline
At 31 December
Analysed by brand
Six Senses
Regent
InterContinental
Kimpton
HUALUXE
Crowne Plaza
Hotel Indigo
EVEN Hotels
voco
Holiday Inna
Holiday Inn Express
avid hotels
Staybridge Suites
Candlewood Suites
Atwell Suites
Otherb
Total
Analysed by ownership type
Franchised
Managed
Owned, leased and managed lease
Total
At the end of 2021, the global pipeline
totalled 1,797 hotels (270,960 rooms), a
decrease of 18 hotels (1,097 rooms), as the
increase in signings to 68,870 rooms was
more than offset by strong openings pace
out of the pipeline and a normal level of
terminations from the pipeline.
The IHG pipeline represents hotels where
a contract has been signed and the
appropriate fees paid.
Group signings increased from 360 hotels
in 2020 to 437 hotels, and rooms increased
from 56,146 in 2020 to 68,870 rooms.
Signings in 2021 included 205 hotels
(31,169 rooms) signed for the Holiday Inn
Brand Family, almost half of which were
contributed by Greater China (89 hotels,
16,260 rooms). Conversions represented
22% of Group signings in 2021, including six
for our newest brand, Vignette Collection.
Hotels
Change
over 2020
2
2
10
3
(2)
7
10
(2)
9
(18)
(38)
(28)
1
20
4
2
(18)
(20)
2
–
Rooms
Change
over 2020
185
403
1,905
587
(862)
1,033
2,748
(139)
1,911
(3,085)
(4,126)
(3,031)
(647)
1,396
426
199
2021
2,424
1,938
19,679
6,852
6,045
25,261
18,452
4,907
10,090
48,078
83,026
14,495
16,843
7,765
2,275
2,830
270,960
(1,097)
157,832
112,973
155
(1,236)
139
–
(18)
270,960
(1,097)
2021
33
8
79
35
23
96
114
29
38
244
645
164
156
93
23
17
1,797
1,290
506
1
1,797
Active management of the pipeline to
remove deals that have become dormant
or no longer viable reduced the pipeline
by 164 hotels (26,009 rooms), compared
to 178 hotels (27,740 rooms) in 2020.
a Includes 35 Holiday Inn Resort properties (8,219 rooms)
(2020: 34 Holiday Inn Resort properties (7,251 rooms)).
b Includes four Vignette Collection pipeline hotels.
Total number of hotels in the pipeline
1,797
Total number of rooms in the pipeline
270,960
62
IHG | Annual Report and Form 20-F 2021
Strategic Report “ In 2021 as we welcomed guests back, we met their
evolving needs, supported our owners as the pace of
recovery increased and executed our strategy to drive
growth for the years to come. We’ve continued to see
confidence in our established brands and reached new
growth milestones for our newest brands: avid® hotels,
Atwell Suites™, and voco™.”
Elie Maalouf Chief Executive Officer, Americas
IHG’s regional performance in 2021
IHG’s comparable RevPARa in the Americas
increased by 54.0% compared to 2020
(declined by 19.8% against 2019), driven
by a 15.9ppt increase in occupancy
coupled with a 12.2% increase in average
daily rate. The region is predominantly
represented by the US, where comparable
RevPARa increased by 54.4% compared
to 2020 (declined by 17.0% against 2019),
and where we are most represented by
our upper midscale brands Holiday Inn
and Holiday Inn Express. US RevPARa for
the Holiday Inn brand increased by 58.2%
whilst the Holiday Inn Express brand
increased by 53.5%.
RevPARa in Canada increased by 46.0%,
whilst Mexico increased by 55.2%.
a Comparable RevPAR and occupancy include the
impact of hotels temporarily closed as a result
of Covid-19.
Industry performance in 2021
Industry RevPAR in the Americas increased
by 63.4% compared to 2020 (declined by
20.7% against 2019), driven by a 19.5%
increase in average daily rate and a 14.6ppt
increase in occupancy. Many markets across
the Americas started to recover during 2021,
led by improving occupancy levels, although
remained behind pre-pandemic levels.
Overall demand for hotel rooms increased
by 38.4% and supply increased by 1.2%.
The US lodging industry showed the
earliest and strongest recovery in the region,
compared against pre-pandemic levels.
US industry RevPAR increased by 63.9%
compared to 2020 (declined by 18.2%
against 2019), driven by increases in both
occupancy and average daily rate. RevPAR
in the US upper midscale chain scale, where
the Holiday Inn and Holiday Inn Express
brands operate, increased by 59.3%.
Industry RevPAR increased by 46.9% in
Canada and 81.3% in Mexico, driven by
increases in both occupancy and average
daily rate.
voco™ St. James Hotel, New Orleans, US
Americas
Americas revenue 2021 ($774m)
56%
Americas number of rooms (499,089)
57%
Comparable RevPARa movement
on previous year
(12 months ended 31 December 2021)
Fee business
InterContinental
Kimpton
Crowne Plaza
Hotel Indigo
EVEN Hotels
Holiday Inn
Holiday Inn Express
avid hotels
Staybridge Suites
Candlewood Suites
All brands
Owned, leased and managed lease
All brands
73.0%
90.1%
54.4%
82.4%
112.4%
56.8%
53.3%
115.4%
40.4%
30.5%
53.8%
91.6%
IHG | Annual Report and Form 20-F 2021
63
Strategic ReportPerformance Performance continued
Americas continued
Americas results
2021
$m
2020
$m
12 months ended 31 December
2021 vs
2020
% change
2019
$m
2020 vs
2019
% change
691
83
774
568
(9)
559
(22)
537
457
55
512
323
(27)
296
(118)
178
51.2
50.9
51.2
75.9
(66.7)
88.9
(81.4)
201.7
853
187
1,040
663
37
700
(62)
638
(46.4)
(70.6)
(50.8)
(51.3)
NMc
(57.7)
90.3
(72.1)
Excluding the results of three owned EVEN
hotels which were disposed and retained
under franchise contracts in November 2021,
and the impact of one leased hotel that
exited in December 2020, revenue increased
by $34m and operating profit improved
by $14m.
For discussion of 2020 results, and the
changes compared to 2019, refer to
the 2020 Annual Report and Form 20-F.
www.ihgplc.com/investors under
Annual Report
a Definitions for Non-GAAP revenue and operating
profit measures can be found on pages 73 to 77.
Reconciliations of these measures to the most directly
comparable line items within the Group Financial
Statements can be found on pages 218 to 223.
b Comparable RevPAR and occupancy include the impact
of hotels temporarily closed as a result of Covid-19.
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.
Americas comparable RevPARb declined
28% in the first quarter, then grew 154% in
the second quarter, 76% in the third quarter,
80% in the fourth quarter and 54% in the
full year, all when compared to 2020.
When comparing to 2019, prior to the
pandemic, Americas comparable RevPARb
declined 43% in the first quarter, 26% in the
second quarter, 10% in the third quarter, 6%
in the fourth quarter and 20% in the full year.
Revenue from the reportable segmenta
increased by $262m (51%) to $774m,
(a decrease of $266m compared to 2019).
Operating profit increased by $359m to
$537m driven by the increase in revenue
and a $96m decrease in operating
exceptional charges. Operating profit
from the reportable segmenta increased
by $263m (89%) to $559m (a decrease of
$141m compared to 2019). On an underlyinga
basis, revenue increased by $268m (54%),
whilst underlyinga profit increased by
$257m (84%).
Revenue and operating profit from the
reportable segmenta are further analysed
by fee business and owned, leased and
managed lease hotels.
Fee business revenuea increased by $234m
(51%) to $691m. Fee business operating
profita increased by $245m (76%) to $568m,
benefitting from the improvement in demand,
along with the delivery of sustainable fee
business cost savings. Operating profit from
the reportable segmenta also included the
benefit of $11m payroll tax credits, which
relates to the Group corporate office
presence in certain countries.
Owned, leased and managed lease
revenue increased by $28m to $83m, with
comparable RevPARb up 92% compared
to 2020, (down 41% compared to 2019),
leading to an owned, leased and managed
lease operating loss of $9m compared to
a $27m loss in the prior year.
Revenue from the reportable segmenta
Fee business
Owned, leased and managed lease
Total
Operating profit from the reportable segmenta
Fee business
Owned, leased and managed lease
Operating exceptional items
Operating profit
Review of the year ended
31 December 2021
With 4,268 hotels (499,089 rooms), the
Americas represents 57% of the Group’s
room count. The key profit-generating region
is the US, and the Group is also represented
in Latin America, Canada, Mexico and the
Caribbean. 92% of rooms in the region are
operated under the franchise business
model, primarily under our brands in the
midscale segments (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, whilst Kimpton
is predominantly managed. 14 of the
Group’s 17 hotel brands are represented
in the Americas.
The impact of travel restrictions continued
to impact the first two months of 2021,
before we saw a notable pick-up in demand
in March, benefitting from domestic leisure
trips around the spring break period.
As the second quarter progressed, demand
continued to grow particularly in non-urban
and resort destinations. Over the summer
months, leisure demand recovered rapidly.
Demand from essential business travellers
remained resilient and we saw signs of
corporate demand and group meetings start
to return. By the end of the second quarter,
13 states in the US saw RevPARb ahead of
2019 levels and a further 17 were at least
90% of 2019 RevPARb.
The recovery continued into the third quarter,
led by the US franchised estate, which
benefits from a weighting towards hotels
in the midscale segments. Leisure demand
remained strong, driving rate. We also saw
an increase in discretionary business travel
demand and group demand.
The recovery continued into the fourth
quarter, with occupancy of 60% (down
5ppts compared to 2019 with rate 1% higher
than 2019).
64
IHG | Annual Report and Form 20-F 2021
Strategic Report Americas hotel and room count
At 31 December
Analysed by brand
Six Senses
InterContinental
Kimpton
Crowne Plaza
Hotel Indigo
EVEN Hotels
voco
Holiday Inna
Holiday Inn Express
avid hotels
Staybridge Suites
Candlewood Suites
Otherb
Total
Analysed by ownership type
Franchised
Managed
Owned, leased and
managed lease
Total
Hotels
Change
over 2020
1
(3)
–
(24)
(1)
4
4
(50)
11
24
11
(5)
(2)
2021
20
15,651
11,008
27,930
8,745
2,743
469
120,850
221,727
4,280
31,097
32,025
22,544
2021
1
43
64
112
66
19
5
716
2,436
48
296
361
101
4,268
(30)
499,089
(14,923)
4,087
178
3
4,268
(18)
(9)
(3)
(30)
460,257
37,505
1,327
499,089
(11,545)
(2,886)
(492)
(14,923)
Total number of hotels
4,268
Rooms
Change
over 2020
20
(1,138)
(89)
(7,475)
(48)
504
420
(10,092)
1,385
2,124
1,040
(410)
(1,164)
Total number of rooms
499,089
Americas system size decreased by 30 hotels
(14,923 rooms) to 4,268 hotels, a reduction
of 2.9% year-on-year. 151 hotels (15,739 rooms)
opened in the year, compared to 167 hotels
(16,746 rooms) in 2020. Openings included
85 hotels (9,016 rooms) in the Holiday Inn
Brand Family, a further 24 avid hotels and
the voco Times Square South in New York.
181 hotels (30,662 rooms) were removed
from the Americas system in 2021, including
92 Holiday Inn and Crowne Plaza hotels
(20,127 rooms), driven by the conclusion
of our quality review. This compares to
176 hotels (27,381 rooms) that left the
Americas system in 2020, of which 102 hotels
(16,655 rooms) related to the termination
of the SVC portfolio in the Americas estate.
a Includes 19 Holiday Inn Resort properties (5,334 rooms) and 28 Holiday Inn Club Vacations properties (8,679 rooms)
(2020: 22 Holiday Inn Resort properties (6,003 rooms) and 28 Holiday Inn Club Vacations properties (8,679 rooms)).
b Includes one open hotel that will be re-branded to voco.
Americas pipeline
Total number of hotels in the pipeline
At 31 December
Analysed by brand
Six Senses
InterContinental
Kimpton
Crowne Plaza
Hotel Indigo
EVEN Hotels
voco
Holiday Innc
Holiday Inn Express
avid hotels
Staybridge Suites
Candlewood Suites
Atwell Suites
Other
Total
Analysed by ownership type
Franchised
Managed
Total
Hotels
Change
over 2020
(1)
2
(1)
2
(2)
(6)
3
(6)
(48)
(27)
2
20
4
(2)
(60)
(55)
(5)
(60)
2021
6
9
19
8
29
10
5
74
338
164
137
93
23
11
926
889
37
926
2021
471
2,252
3,431
1,643
4,070
1,166
1,045
9,468
32,701
14,495
14,050
7,765
2,275
1,771
96,603
90,732
5,871
96,603
Rooms
Change
over 2020
926
(48)
528
(52)
393
(85)
(809)
771
(978)
(4,654)
(2,816)
(11)
1,396
426
(215)
(6,154)
(5,796)
(358)
(6,154)
Total number of rooms in the pipeline
96,603
At 31 December 2021, the Americas
pipeline totalled 926 hotels (96,603 rooms),
representing a decrease of 60 hotels
(6,154 rooms) over the prior year.
Signings of 175 hotels (17,647 rooms)
were ahead of last year by 38 hotels
(3,608 rooms). The majority of 2021
signings were within our midscale and upper
midscale brands including the Holiday Inn
Brand Family (75 hotels, 7,493 rooms)
and avid hotels (13 hotels, 892 rooms).
Signings in our Suites brands (Staybridge
Suites, Candlewood Suites and Atwell Suites)
amounted to 64 hotels (5,669 rooms).
84 hotels (8,062 rooms) were removed from
the pipeline in 2021 compared to 105 hotels
(11,398 rooms) in 2020.
c Includes one Holiday Inn Resort property (165 rooms) (2020: three Holiday Inn Resort properties (490 rooms)).
IHG | Annual Report and Form 20-F 2021
65
Strategic ReportPerformance
Performance continued
EMEAA
“ Although Covid-19 continued to impact travel, our focus
remained on supporting our colleagues, guests and owners, while
leveraging our model to support sustainable long-term growth.
We launched and signed deals for our new Luxury & Lifestyle
brand, VignetteTM Collection, sustained strong interest in our
established brands and made meaningful progress to improve
the quality of our estate.”
Kenneth Macpherson Chief Executive Officer, EMEAA
IHG’s regional performance in 2021
EMEAA comparable RevPARa increased by
35.0% compared to 2020 (declined 51.8%
against 2019), driven by a 9.1ppt increase
in occupancy coupled with a 5.3% increase
in average daily rate. In the UK, where IHG
has the largest regional presence, RevPARa
increased by 70.4% compared to 2020
(declined by 41.0% against 2019), led by
the Provinces (76.4%), reflecting lower
weighting to inbound international travel.
Germany saw a RevPARa increase of 1.2%
and France increased by 55.2%.
RevPARa in the Middle East increased by
34.9%, with the fourth quarter up 109.7%
reflecting the Expo 2020 demand in Dubai.
India RevPARa increased by 38.6%.
Elsewhere in EMEAA, RevPARa increased in
Australia by 17.6%, whilst travel restrictions
resulted in occupancy led declines in
Japan (9.1%) and Thailand (44.7%).
a Comparable RevPAR and occupancy include the
impact of hotels temporarily closed as a result
of Covid-19.
Industry performance in 2021
Industry RevPAR in EMEAA increased
by 44.0% compared to 2020 (declined by
49.9% against 2019). An occupancy increase
of 8.9ppts was coupled with a 10.5%
increase in average daily rate. In Europe,
RevPAR increased by 64.7% compared to
2020 (declined by 49.2% against 2019)
driven by both occupancy and average
daily rate. In the UK, industry RevPAR
increased by 90.3% compared to 2020
(declined by 40.4% against 2019). UK room
demand increased by 54.4% whilst supply
growth remained suppressed at 0.8% partly
due to construction delays from supply
chain issues. In Germany RevPAR increased
by 9.3%, whilst RevPAR in France increased
by 68.7%.
RevPAR increased by 61.5% in the Middle
East, driven by both occupancy and average
daily rates, as restrictions eased, and demand
started to return. India saw RevPAR increase
by 30.4%.
Elsewhere in EMEAA, RevPAR in Australia
increased by 33.6%, whilst Japan and Thailand
declined by 11.5% and 41.2% respectively,
driven primarily by large reductions in
average daily rate.
Holiday Inn Dublin Airport, Ireland
EMEAA revenue 2021 ($303m)
22%
EMEAA number of rooms (224,200)
25%
Comparable RevPARa movement
on previous year
(12 months ended 31 December 2021)
Fee business
Six Senses
InterContinental
Kimpton
Crowne Plaza
Hotel Indigo
voco
Holiday Inn
Holiday Inn Express
Staybridge Suites
All brands
Owned, leased and managed lease
InterContinental
Kimpton
voco
All brands
32.7%
26.9%
(8.4)%
34.3%
62.6%
24.1%
34.4%
46.2%
46.2%
34.8%
0.1%
111.1%
136.6%
46.6%
66
IHG | Annual Report and Form 20-F 2021
Strategic Report
EMEAA results
Revenue from the reportable segmenta
Fee business
Owned, leased and managed lease
Total
Operating profit/(loss) from the reportable segmenta
Fee business
Owned, leased and managed lease
Operating exceptional items
Operating (loss)/profit
12 months ended 31 December
2021
$m
149
154
303
32
(27)
5
(7)
(2)
2020
$m
2021 vs
2020
% change
107
114
221
(18)
(32)
(50)
(128)
(178)
39.3
35.1
37.1
NMc
(15.6)
NMc
(94.5)
(98.9)
2019
$m
337
386
723
202
15
217
(109)
108
2020 vs
2019
% change
(68.2)
(70.5)
(69.4)
NMc
NMc
NMc
17.4
NMc
Review of the year ended
31 December 2021
Comprising 1,137 hotels (224,200 rooms)
at the end of 2021, EMEAA represented 25%
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 franchise 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 of Europe are
operated under the managed business model.
Performance in the region continued to
reflect the differing levels of government-
mandated closures and restrictions.
Performance in the first quarter was
impacted by travel restrictions in a number
of markets. The second quarter saw modest
improvements in trading as the UK permitted
leisure travel towards the end of May, whilst
government mandated restrictions remained
in much of continental Europe, and South
East Asia continued to be impacted by lower
levels of international demand.
Through the second half of the year, RevPAR
continued to improve before restrictions
were reinstated in certain markets following
increased cases from the Omicron variant
in December.
Hotels continued to reopen, with only
21 hotels remaining temporarily closed at the
end of the year, compared to 215 at the start
of the year; all 16 of the owned, leased and
managed lease hotels were open.
EMEAA comparable RevPARb declined 62%
in the first quarter, then grew 179% in the
second quarter, 86% in the third quarter, 118%
in the fourth quarter and 35% in the full year
when comparing to 2020. When comparing
to 2019, prior to the pandemic, EMEAA
comparable RevPARb declined 71% in the first
quarter, 65% in the second quarter, 43% in
the third quarter, 33% in the fourth quarter
and 52% in the full year.
Owned, leased and managed lease revenue
increased by $40m to $154m, with RevPARb
up 47% compared to 2020 (down 69%
compared to 2019), leading to an owned,
leased and managed lease operating loss
of $27m compared to a $32m loss in the
prior year, as the lifting of travel restrictions,
predominantly in the UK, began to ease
the trading challenges on this largely
urban-centred portfolio.
For discussion of 2020 results, and the
changes compared to 2019, refer to
the 2020 Annual Report and Form 20-F.
www.ihgplc.com/investors under
Annual Report
a Definitions for Non-GAAP revenue and operating
profit measures can be found on pages 73 to 77.
Reconciliations of these measures to the most directly
comparable line items within the Group Financial
Statements can be found on pages 218 to 223.
b Comparable RevPAR and occupancy include the impact
of hotels temporarily closed as a result of Covid-19.
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.
Revenue from the reportable segmenta
increased by $82m (37%) to $303m
(a decrease of 58% compared to 2019).
The operating loss decreased by $176m
to a loss of $2m, driven by an increase in
revenue and a $121m decrease in operating
exceptional charges. Operating profit from
the reportable segmenta increased by $55m
to $5m (a decline of $212m compared to
2019). On an underlyinga basis, revenue
increased by $79m (35%), whilst underlyinga
profit increased by $59m, from a $54m loss
to a $5m profit.
Revenue and operating profit from the
reportable segmenta are further analysed
by fee business and owned, leased and
managed lease hotels.
Fee business revenuea increased by $42m
(39%) to $149m. Fee business operating
profita improved by $50m to $32m,
benefiting from the improvement in trading
and the delivery of sustainable fee business
cost savings. Results included $29m of
incentive management fees recorded
(2020: $14m; 2019: $90m), driven by an
improvement in trading, particularly in
the Middle East.
IHG | Annual Report and Form 20-F 2021
67
Strategic ReportPerformance
Performance continued
EMEAA continued
EMEAA hotel and room count
At 31 December
Analysed by brand
Six Senses
Regent
InterContinental
Vignette Collection
Kimpton
Crowne Plaza
Hotel Indigo
voco
Holiday Inna
Holiday Inn Express
Staybridge Suites
Otherb
Total
Analysed by ownership type
Franchised
Managed
Owned, leased and
managed lease
Total
Hotels
Change
over 2020
4
–
–
1
2
(6)
2
5
(21)
4
1
(4)
(12)
(7)
(4)
(1)
(12)
2021
1,270
771
32,561
146
2,146
44,828
5,183
5,882
70,824
48,548
3,209
8,832
224,200
125,707
95,199
3,294
224,200
2021
19
3
108
1
10
182
48
21
380
333
19
13
1,137
767
354
16
1,137
Total number of hotels
Rooms
Change
over 2020
1,137
263
–
87
146
287
(1,696)
117
1,002
(4,160)
1,192
371
(1,258)
(3,649)
(13)
(3,349)
(287)
(3,649)
Total number of rooms
224,200
EMEAA system size decreased by 12 hotels
(3,649 rooms) to 1,137 hotels (224,200
rooms) during 2021, a reduction of 1.6%
year-on-year. 52 hotels (10,162 rooms)
opened in the year, compared to 61 hotels
(11,288 rooms) in 2020, including Hotel X
Brisbane Fortitude Valley, Australia, as part
of the Vignette Collection.
64 hotels (13,811 rooms) were removed
from the EMEAA system in 2021, including
48 Holiday Inn and Crowne Plaza hotels
(10,741 rooms), driven by the completion
of the quality review. This compared to
38 hotels (6,809 rooms) that left the
EMEAA system in 2020.
a Includes 14 Holiday Inn Resort properties (3,229 rooms) (2020: 17 Holiday Inn Resort properties (3,330 rooms)).
b Includes two open hotels that will be re-branded to voco and Vignette Collection.
EMEAA pipeline
At 31 December
Analysed by brand
Six Senses
Regent
InterContinental
Kimpton
Crowne Plaza
Hotel Indigo
voco
Holiday Inna
Holiday Inn Express
avid hotels
Staybridge Suites
Otherb
Total
Analysed by ownership type
Franchised
Managed
Owned, leased and
managed lease
Total
Hotels
Change
over 2020
2
1
10
3
5
3
5
(10)
7
(1)
(1)
5
29
20
9
–
29
2021
23
6
43
9
40
44
31
98
99
–
19
6
418
175
242
1
418
2021
1,720
1,341
9,520
1,674
10,461
7,004
8,753
21,014
15,593
–
2,793
1,059
80,932
27,045
53,732
155
80,932
Total number of hotels in the pipeline
Rooms
Change
over 2020
418
Total number of rooms in the pipeline
80,932
At 31 December 2021, the EMEAA
pipeline totalled 418 hotels (80,932 rooms),
representing an increase of 29 hotels
(4,812 rooms) over the prior year. Signings of
109 hotels (20,376 rooms) were ahead of last
year by 27 hotels (6,473 rooms), including a
multi-property deal which encompassed a
new property for voco in Algarve, Portugal and
three hotels signed to the Vignette Collection
in Austria and Portugal.
28 hotels (5,402 rooms) were removed from
the pipeline in 2021 compared to 36 hotels
(7,601 rooms) in 2020.
169
86
2,035
546
1,360
957
979
(1,540)
360
(215)
(636)
711
4,812
1,393
3,419
–
4,812
a Includes 20 Holiday Inn Resort properties (4,849 rooms) (2020: 18 Holiday Inn Resort properties (3,553 rooms)).
b Includes four hotels that will be re-branded to Vignette Collection.
68
IHG | Annual Report and Form 20-F 2021
Strategic Report
“ Domestic travel demand showed steady recovery
amidst sporadic Covid-19 outbreaks and travel restrictions.
We deployed an agile business recovery plan to capture
our share of demand, drive owner returns and ensure
the safety of our guests, colleagues and communities.
In line with the growth strategy, our new deal signings
and hotel openings exceeded 2019 levels.”
Jolyon Bulley Chief Executive Officer, Greater China
Industry performance in 2021
The industry performance across Greater
China fluctuated in 2021, impacted by the
reintroduction of temporary localised
lockdowns. Industry RevPAR in Greater
China increased by 27.8% compared to 2020
(decreased by 26.9% against 2019). Supply
grew by 3.8% and demand by 16.9%.
Increases in RevPAR were achieved across
all of Mainland China against 2020, however,
cities in the upper tiers remained further
behind 2019. RevPAR In Tier 1 cities
increased by 31.3%, driven by an occupancy
increase of 8.3ppts and average daily rate
growth of 12.5%. Tier 2 cities saw a similar
recovery profile with RevPAR increasing by
27.3%, again driven by both occupancy and
rate, whilst growth in Tier 3 cities was more
limited at 12.6%. Tier 4 continued to benefit
from strong domestic demand with RevPAR
increasing by 23.5%.
Hong Kong SAR increased by 56.6%
compared to 2020 (decrease of 55.0%
against 2019), with a 17.4ppt improvement
in occupancy and a 7.5% increase in
average daily rate. Macau SAR improved
against 2020 by 26.6% (decrease of 76.7%
against 2019), driven by occupancy, but
remains significantly behind 2019 due
to its reliance towards travel from
Mainland China.
IHG’s regional performance in 2021
IHG’s regional comparable RevPARa in
Greater China increased by 20.6%
compared to 2020 (decreased by 28.7%
against 2019), driven by a 6.9ppt increase
in occupancy and a 3.6% increase in
average daily rate.
In Mainland China, RevPARa increased by
19.7%, with the greatest increase in Tier 1
cities, up 25.6%, whilst Tier 2-4 cities
increased by 17.3%.
RevPARa in Hong Kong SAR increased
by 81.0% whilst RevPARa in Macau SAR
increased by 3.2%.
a Comparable RevPAR and occupancy include the
impact of hotels temporarily closed as a result
of Covid-19.
InterContinental® Kaohsiung, China
Greater China
Greater China revenue 2021 ($116m)
8%
Greater China number of rooms (157,038)
18%
Comparable RevPARa movement
on previous year
(12 months ended 31 December 2021)
Fee business
Regent
InterContinental
HUALUXE
Crowne Plaza
Hotel Indigo
Holiday Inn
Holiday Inn Express
All brands
9.6%
20.8%
13.1%
20.4%
33.4%
21.8%
20.9%
20.6%
IHG | Annual Report and Form 20-F 2021
69
Strategic ReportPerformance Performance continued
Greater China continued
Greater China results
2021
$m
2020
$m
12 months ended 31 December
2021 vs
2020
% change
2019
$m
2020 vs
2019
% change
116
116
58
–
58
77
77
35
(5)
30
50.6
50.6
65.7
–
93.3
135
135
73
–
73
(43.0)
(43.0)
(52.1)
–
(58.9)
Revenue from the reportable segmenta
increased by $39m (51%) to $116m
(a decrease of 14% compared to 2019).
Operating profit improved by $28m, driven
by the increase in revenue and a $5m
decrease in operating exceptional charges.
Operating profit from the reportable segmenta
increased by $23m to $58m (a decline of
21% compared to 2019). The improvement in
demand at our managed hotels led to $25m
recognition of incentive management fees
compared to $16m in 2020 (2019: $48m).
Revenue and operating profit from the
reportable segmenta also included the
benefit of a $6m individually significant
liquidated damages settlement.
For discussion of 2020 results, and the
changes compared to 2019, refer to
the 2020 Annual Report and Form 20-F.
www.ihgplc.com/investors under
Annual Report
a Definitions for Non-GAAP revenue and operating
profit measures can be found on pages 73 to 77.
Reconciliations of these measures to the most directly
comparable line items within the Group Financial
Statements can be found on pages 218 to 223.
b Comparable RevPAR and occupancy include the impact
of hotels temporarily closed as a result of Covid-19.
Revenue from the reportable segmenta
Fee business
Total
Operating profit from the reportable segmenta
Fee business
Operating exceptional items
Operating profit
Review of the year ended
31 December 2021
Comprising 586 hotels (157,038 rooms)
at 31 December 2021, Greater China
represented approximately 18% of the
Group’s room count. The majority of rooms
in Greater China operate under the managed
business model.
Increases in Covid-19 cases and the
reintroduction of temporary restrictions
impacted trading in January and February,
though the recovery resumed in March
with demand returning at pace as
restrictions eased.
The recovery continued into April and May
before local restrictions were reinstated
across south, east and west cities in June.
In July, RevPARb was just 6% lower than 2019
levels, driven by strong domestic leisure
demand. The reintroduction of temporary
restrictions meant that August weakened
to more than 50% lower than 2019.
The fourth quarter saw volatile trading,
impacted by the reintroduction of
temporary restrictions.
Greater China comparable RevPARb grew
78% in the first quarter and 107% in the
second quarter, then declined 8% in the
third quarter and 17% in the fourth quarter.
Full year growth was 21% when compared
to 2020. When comparing to 2019, prior to
the pandemic, Greater China comparable
RevPARb declined 38% in the first quarter,
16% in the second quarter, 30% in the third
quarter, 33% in the fourth quarter and 29%
in the full year.
70
IHG | Annual Report and Form 20-F 2021
Strategic Report Greater China hotel and room count
At 31 December
Analysed by brand
Six Senses
Regent
InterContinental
Kimpton
HUALUXE
Crowne Plaza
Hotel Indigo
EVEN Hotels
voco
Holiday Inna
Holiday Inn Express
Otherb
Total
Analysed by ownership type
Franchised
Managed
Total
Hotels
Change
over 2020
–
–
2
–
4
5
4
1
4
13
35
1
69
53
16
69
2021
1
4
53
1
16
110
16
2
5
122
247
9
586
179
407
586
2021
122
1,419
21,190
129
4,603
38,420
2,415
251
1,094
33,010
47,054
7,331
157,038
40,151
116,887
157,038
Total number of hotels
Rooms
Change
over 2020
586
Total number of rooms
157,038
The Greater China system size increased
by 69 hotels (12,863 rooms) in 2021 to
586 hotels (157,038 rooms), an increase of
8.9% year-on-year. 88 hotels (18,057 rooms)
opened, including the first InterContinental
hotel in Taiwan, voco Wuhan Xinhua and the
Crowne Plaza Chongli resort, compared to
57 hotels (11,358 rooms) in 2020.
19 hotels (5,194 rooms) were removed in
2021 compared to 10 hotels (2,729 rooms)
in 2020.
–
–
512
–
1,170
1,470
670
80
946
2,382
5,265
368
12,863
10,325
2,538
12,863
a Includes eight Holiday Inn Resort properties (1,891 rooms) (2020: eight Holiday Inn Resort properties (2,113 rooms)).
b Includes one open hotel that will be re-branded to voco.
Greater China pipeline
Total number of hotels in the pipeline
At 31 December
Analysed by brand
Six Senses
Regent
InterContinental
Kimpton
HUALUXE
Crowne Plaza
Hotel Indigo
EVEN Hotels
voco
Holiday Inna
Holiday Inn Express
Other
Total
Analysed by ownership type
Franchised
Managed
Total
Hotels
Change
over 2020
1
1
(2)
1
(2)
–
9
4
1
(2)
3
(1)
13
15
(2)
13
2021
4
2
27
7
23
48
41
19
2
72
208
–
453
226
227
453
2021
233
597
7,907
1,747
6,045
13,157
7,378
3,741
292
17,596
34,732
–
93,425
40,055
53,370
93,425
a Includes 14 Holiday Inn Resort properties (3,205 rooms) (2020: 12 Holiday Inn Resort properties (3,208 rooms)).
Rooms
Change
over 2020
453
64
317
(658)
93
(862)
(720)
1,876
670
161
(567)
168
(297)
245
3,167
(2,922)
245
Total number of rooms in the pipeline
93,425
At 31 December 2021, the Greater China
pipeline totalled 453 hotels (93,425 rooms),
compared to 440 hotels (93,180 rooms) at
31 December 2020. Signings of 153 hotels
(30,847 rooms) were ahead of last year
by 12 hotels (2,643 rooms). 89 hotels
(16,260 rooms) were signed for the
Holiday Inn Brand Family. Other notable
signings included Regent Sanya Haitang Bay
and Hotel Indigo Sanya Haitang Bay as part
of a combined complex, and the
InterContinental Taipei.
52 hotels (12,545 rooms) were removed from
the pipeline in 2021 compared to 37 hotels
(8,741 rooms) in 2020.
IHG | Annual Report and Form 20-F 2021
71
Strategic ReportPerformance
12 months ended 31 December
2021
$m
197
(285)
(88)
–
(88)
2020
$m
182
(244)
(62)
(19)
(81)
2021 vs
2020
% change
8.2
16.8
41.9
–
8.6
2019
$m
185
(310)
(125)
(15)
(140)
2020 vs
2019
% change
(1.6)
(21.3)
(50.4)
26.7
(42.1)
Performance continued
Central
Central results
Revenue
Gross costs
Operating exceptional items
Operating loss
Review of the year ended
31 December 2021
Central revenue, which mainly comprises
technology fee income, increased by $15m
(8.2%) to $197m, driven by the temporary
discounts on technology fees in 2020
no longer being applicable.
Gross costs increased by $41m (16.8%)
year-on-year, as temporary cost saving
measures were introduced from the second
quarter of 2020, which were not repeated
in 2021. When comparing to 2019, gross
costs decreased by 8.1%, which includes
sustainable cost savings achieved in 2021.
The operating loss before exceptional items
increased by $26m, a decrease of $37m
compared to 2019.
Holiday Inn Queenstown Remarkables Park, New Zealand
72
IHG | Annual Report and Form 20-F 2021
Strategic Report Key performance measures
Key performance measures (including Non-GAAP measures) used by management
The Annual Report and Form 20-F presents certain financial measures when discussing the Group’s performance which are not measures
of financial performance 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, profitability, 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 significant legal cases or
commercial disputes) these financial measures 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 142 to 148).
Linkage of performance measures to Directors’ remuneration and KPIs
A The Annual Performance Plan
LT The Long Term Incentive Plan KPI Key Performance Indicators
See pages 104 to 125 for
more information on Directors’
remuneration and pages 50
to 53 for more information
on KPIs.
Measure
Commentary
Global revenue per available room
(RevPAR) growth
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.
KPI
RevPAR, average daily rate and
occupancy statistics are disclosed
on pages 224 and 225.
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 60.
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
218 to 223.
RevPAR comprises IHG’s System (see Glossary, page 256) rooms revenue divided by the number
of room nights available and can be derived from occupancy rate multiplied by 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 prior 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 two years. These measures include the
impact of hotels temporarily closed as a result of Covid-19.
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.
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 hotels including food and beverage, meetings and other
revenues and reflects the value IHG drives to managed hotel owners by optimising the
performance of their hotels; 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 hotel
revenue is not revenue attributable to IHG as these managed and franchised hotels are owned
by third parties.
Revenue and operating profit from (1) fee business and (2) owned, leased and managed lease
hotels, are described as ‘revenue from reportable segments’ and ‘operating profit from reportable
segments’, respectively, within note 2 to the Group Financial Statements. These measures are
presented for each of the Group’s regions.
Management believes revenue and operating profit from reportable segments is meaningful
to investors and other stakeholders as it excludes the following elements and reflects how
management monitors the business:
• System Fund – the Fund is not managed to generate a profit or loss for IHG over the longer term,
but is managed for the benefit of the hotels within the IHG System. As described within the
Group’s accounting policies (page 149), the System Fund is operated to collect and administer
cash assessments from hotel owners for the specific purpose of use in marketing, the Guest
Reservation System and hotel loyalty programme.
Performance
IHG | Annual Report and Form 20-F 2021
73
Strategic ReportPerformance
Performance continued
Key performance measures continued
Measure
Commentary
Revenue and operating
profit measures continued
Underlying revenue and underlying
operating profit
• Revenues related to the reimbursement of costs – as described within the Group’s accounting
policies (page 149), there is a cost equal to these revenues so there is no profit impact.
Cost reimbursements are not applicable to all hotels and growth in these revenues is not
reflective of growth in the performance of the Group. As such, management do not include
these revenues in their analysis of results.
• Exceptional items – these are identified by virtue of either their size, nature, or incidence and
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. 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 152 and 165 to 167).
In further discussing the Group’s performance in respect of revenue and operating profit,
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, before interest and tax. 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
benefits and because of 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 performance and provide improved comparability
between periods, there are limitations in their use as compared to measures of financial
performance 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.
These measures adjust revenue from reportable segments and operating profit 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
profitability. The revenue and operating profit of 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 performance.
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.
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.
74
IHG | Annual Report and Form 20-F 2021
Strategic Report Measure
Fee margin
A
KPI
Adjusted interest
Financial income and financial
expenses as recorded in the Group
Financial Statements is reconciled
to adjusted interest on page 223.
Tax excluding the impact
of exceptional items and System Fund
A reconciliation of the tax charge
as recorded in the Group Financial
Statements to tax excluding the impact
of exceptional items and System Fund
can be found in note 8 to the Group
Financial Statements on page 169.
Adjusted earnings per ordinary share
Basic earnings per ordinary share
as recorded in the Group Financial
Statements is reconciled to adjusted
earnings per ordinary share in note 10
to the Group Financial Statements on
page 174.
Net debt
Net debt is included in note 23 to the
Group Financial Statements.
Commentary
Fee margin is presented at actual exchange rates and is a measure of the profit arising from fee
revenue. Fee margin is calculated by dividing ‘fee operating profit’ by ‘fee revenue’. Fee revenue
and fee operating profit are calculated from revenue from reportable segments and operating
profit from reportable segments, as defined above, adjusted to exclude revenue and
operating profit from the Group’s owned, leased and managed lease hotels and significant
liquidated damages.
In addition, fee margin is adjusted for the results of the Group’s captive insurance company,
where premiums are intended to match the expected claims over the longer term (see page 186
in the Group Financial Statements), and as such these amounts are adjusted from the fee margin
to better depict the profitability of the fee business.
Management believes fee margin is meaningful to investors and other stakeholders as an indicator
of the sustainable long-term growth in the profitability of IHG’s core fee-based business, as the
scale of IHG’s operations increases with growth in IHG’s System size.
Adjusted interest is presented before exceptional items and excludes the following items
of interest which are recorded within the System Fund:
• IHG records an interest charge on the outstanding cash balance relating to the IHG Rewards
programme. These interest payments are recognised as interest income for the Fund and
interest expense for IHG.
• The System Fund also benefits from the capitalisation of interest related to the development
of the next-generation Guest Reservation System.
• Other components of System Fund interest income and expense, including lease interest
expense and interest income on overdue receivables.
As the Fund is included on the Group income statement, these amounts are included in the
reported net Group financial expenses, reducing the Group’s effective interest cost. 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).
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.
As outlined above, exceptional items can vary year-on-year and, where subject to tax at a different
rate than the Group as a whole, they can impact the current year’s tax charge. The System Fund
is not managed to a profit or loss for IHG over the longer term and is, in general, not subject to
tax either.
Management believes removing these provides a better view of 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.
Adjusted earnings per ordinary share adjusts the profit available for equity holders used in the
calculation of basic earnings per share to remove System Fund revenue and expenses, the items
of interest related to the System Fund as excluded in adjusted interest (above), change in fair
value of contingent purchase consideration, exceptional items, and the related tax impacts
of such adjustments.
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 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 (see page 12 for further
discussion). Net debt is used by investors and other stakeholders to evaluate the financial
strength of the business.
Net debt comprises loans and other borrowings, lease liabilities, the exchange element of the
fair value of derivatives hedging debt values, less cash and cash equivalents.
IHG | Annual Report and Form 20-F 2021
75
Strategic ReportPerformance
Performance continued
Key performance measures continued
Measure
Commentary
Adjusted EBITDA
Operating profit recorded in the Group
Financial Statements is reconciled to
adjusted EBITDA on page 223.
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 maintaining this ratio at 2.5-3.0x.
Adjusted EBITDA is defined as operating profit, excluding System Fund revenues and expenses,
exceptional items and depreciation and amortisation.
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 are included on
page 222.
Gross capital expenditure
Adjusted EBITDA is useful to investors and other stakeholders for comparing the performance of
different companies as depreciation, amortisation and exceptional items are eliminated. It can also
be used as an approximation of operational cash flow generation. This measure is relevant to the
Group’s banking covenants, which have been amended for test dates in 2022. Details of covenant
levels and performance against these is provided in note 24 to the Group Financial Statements.
The leverage ratio uses a Covenant EBITDA measure which is calculated on a ‘frozen GAAP’
basis, excluding the effect of IFRS 16.
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 usefulness 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 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 of 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), 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.
76
IHG | Annual Report and Form 20-F 2021
Strategic Report Measure
Commentary
Net capital expenditure
Adjusted free cash flow
LT
KPI
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 represent ongoing payments for
acquisitions. Net capital expenditure includes the inflows arising from any disposal 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 recharged to 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.
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 reflecting
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 useful 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.
The performance review should be read in conjunction with the Non-GAAP reconciliations on pages 218 to 223 and the Glossary on pages 255 to 256.
IHG | Annual Report and Form 20-F 2021
77
Strategic ReportPerformance
Governance
Kimpton® St Honoré, Paris, France
80 Chair’s overview
81
Board and Committee membership
and attendance in 2021
82 Our Board of Directors
86 Our Executive Committee
88 Governance structure
89
Board activities
89 Matters discussed in 2021
90
Key matters discussed in 2021 and
Section 172 statement
Director appointments and induction
Board development and effectiveness evaluation
Audit Committee Report
92 Our shareholders and investors
93
94
95
100 Responsible Business Committee Report
102 Nomination Committee Report
104 Directors’ Remuneration Report
126 Statement of compliance
78
IHG | Annual Report and Form 20-F 2021
Governance
IHG | Annual Report and Form 20-F 2021
79
Governance Chair’s overview
IHG faced ongoing pandemic-related challenges in 2021
despite some areas of recovery. The appearance of new
Covid-19 variants led to further waves of infection, creating
an uncertain environment, with travel and operating
restrictions continuing to impact the industry. Stretched
supply chains, labour shortages and resurgent inflation put
pressure on growth, while the pandemic accelerated the
adoption of new technology and highlighted the need for
businesses to operate sustainably.
Against this background, the Board has continued with the
adapted governance, oversight practices and new ways of
working established at the start of the pandemic. Board
meetings have continued to be virtual, but there has been
more frequent interaction and collaboration. The Board has
provided both support and challenge to management within
a clear framework of delegated responsibility. In addition,
uncertain conditions required an increased attention on risk
and value at risk. The focus on long-term strategy has been
maintained, with actions taken regarding the impact of new
technology, succession planning and business growth.
Looking back over my tenure as Chair, the notion of what
constitutes good governance has evolved substantially. It is
now as much about addressing our environmental and societal
impacts as reporting on our financial performance – and
shareholders frequently use their influential roles to exercise
stewardship on behalf of other stakeholders and the wider
environment. I am proud to say that this broader appreciation
of the role of business within society has been central to IHG’s
approach to governance for many years and doing business
responsibly remains at the heart of our commitment to True
Hospitality for Good and our Journey to Tomorrow.
Focus areas and activities
The Board had an active year in 2021 and a fuller description of its
activities is given on pages 89 to 91.
A key theme of the year was the focus on the Group’s longer-term
strategy and growth opportunities, given the continuing
improvement of the Group’s financial position. This can be seen
in the decision to approve the launch of the Vignette Collection,
a new conversion brand in the Luxury & Lifestyle segment.
Another opportunity arose from the new ways of working
accelerated by the pandemic. The Board took the decision to adopt
flexible working where possible for corporate employees. It tasked
management to implement this while sustaining organisational
resilience and operational efficiency. The Board sought to ensure that
IHG’s values and culture were maintained and that talent attraction
and progression, as well as diversity and inclusion, were enhanced.
The Board’s deliberations were supported by its continuing
dialogue and engagement with the Group’s workforce through
our Voice of the Employee programme.
80
IHG | Annual Report and Form 20-F 2021
The Group’s relations with hotel owners was a notable feature of
Board activity. The Board sought to understand the position of hotel
owners throughout the pandemic, recognising the trading difficulties
they experienced, the availability of capital and the impact of labour
shortages within the hospitality industry. It was also aware of the
commitment needed to maintain high standards and keep
brands fresh.
Technology continued to be a regular area of focus, both because
of the increased cybersecurity threats and risks associated with
an increase in remote working but also in the way that technology
can be harnessed to drive revenue, growth and guest satisfaction.
Board composition
Succession planning was a major consideration during the year
as the Board is currently going through a period of change in its
composition. A key part of the refreshment process is to ensure
that we continue to have the right mix of skills, experience and
knowledge around the table as well as the gender and geographical
representation that adds value as the Company pursues its
strategic objectives.
Information on the process relating to Deanna Oppenheimer’s
appointment to succeed me as Chair from 1 September 2022
is set out on page 93.
As part of Non-Executive Director succession planning, we
determined that the Board would benefit from further expertise
in technology and innovation, including in relation to ESG issues.
We also sought to further drive diversity on the Board and prepare
for the retirements of Anne Busquet and Dale Morrison in May and
December 2021 respectively. These objectives were successfully
furthered when Daniela Barone Soares joined the Board in
March 2021 and Graham Allan was appointed as Senior Independent
Non-Executive Director from 1 January 2022. Details of Daniela’s
biography, including her skills and experience, are included
on page 84.
The Board also approved the appointment of Duriya Farooqui to
assume responsibility for its Voice of the Employee engagement
plan. Further details of Board succession planning are included
in the Nomination Committee Report on pages 102 and 103.
Committee activities
The Board delegates certain responsibilities to its Committees to
assist in ensuring that effective corporate governance pervades
the business:
• The Audit Committee focused on the Group’s material accounting
judgements and estimates, risks, internal controls and business
continuity, and going concern and viability (see its report on pages
95 to 99);
• The Remuneration Committee focused on incentive plan targets
and performance and review of workforce remuneration
considerations (see its report on pages 104 to 125);
• The Responsible Business Committee focused on the delivery
of the Group’s 2030 responsible business commitments as well
as the annual operational targets (see its report on pages 100
and 101); and
• The Nomination Committee progressed the implementation
of Board refreshment plans (see its report on pages 102 and 103).
A description of the Group’s governance structure is given on page 88.
Governance Board performance review
During the year, we implemented the agreed actions arising from
the 2020 internal Board and Committee effectiveness evaluation
and conducted a further internal evaluation process. I am pleased
to report that the 2021 internal evaluation concluded that the Board
and its Committees continue to operate effectively. Further details
of the evaluation can be found on page 94. We also conducted
individual Director feedback assessments, details of which can
be found on page 94.
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. 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) and 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 126 and 127.
A summary outlining the differences between the Group’s UK corporate
governance practices and those followed by US companies can be
found on page 246.
Looking forward
In 2022, the Board will continue to ensure that a robust governance
framework operates throughout the Group, enabling IHG to focus
on the achievement of the Group’s long-term strategic objectives
while doing business responsibly and remaining mindful of
stakeholder interests.
Patrick Cescau
Chair of the Board
21 February 2022
Board and Committee membership and attendance in 2021
Appointment
date
Committee
appointments
Total meetings held
Chair
Patrick Cescaua
01/01/13
N
Chief Executive Officer
Keith Barr
Executive Directors
Paul Edgecliffe-Johnson
Elie Maalouf
01/07/17
01/01/14
01/01/18
Senior Independent Non-Executive Directorb
Dale Morrisonb, c
Non-Executive Directors
Graham Allanb, d
Richard Andersone
Daniela Barone Soaresf
Anne Busquetg
Arthur de Haast
Ian Dysonh
Duriya Farooqui
Jo Harlowi
Jill McDonald
Sharon Rothstein
01/06/11
A N R
01/09/20
01/03/21
01/03/21
01/03/15
01/01/20
01/09/13
07/12/20
01/09/14
01/06/13
01/06/20
A N R
A R
R RB
A RB
R RB
A N R
A RB
N R
A N RB
A RB
Board
8
8/8
8/8
8/8
8/8
7/8
8/8
1/2
7/7
3/3
8/8
7/8
8/8
7/8
8/8
8/8
Audit
Committee
Responsible
Business
Committee
Nomination
Committee
Remuneration
Committee
5
–
–
–
–
3/5
5/5
0/1
–
2/2
–
5/5
5/5
–
5/5
5/5
3
–
–
–
–
–
–
–
2/2
1/1
3/3
–
3/3
–
3/3
3/3
5
5/5
–
–
–
4/5
–
–
–
–
–
5/5
–
5/5
5/5
–
5
–
–
–
–
3/5
4/5
1/2
3/4
–
5/5
5/5
–
5/5
–
–
a In principle the Chair attends all Committee meetings, and the full Board attends the relevant sections of the Audit Committee meetings when financial results are considered.
b Dale Morrison retired from the Board from 31 December 2021 and Graham Allan was appointed as Senior Non-Executive Director from 1 January 2022.
c Dale Morrison was unable to attend a Board meeting, an Audit Committee meeting, a Nomination Committee meeting and a Remuneration Committee meeting due to illness.
He was also unable to attend an Audit Committee meeting and a Remuneration Committee meeting due to a prior engagement.
d Graham Allan was unable to attend a Remuneration Committee meeting due to a prior engagement.
e Richard Anderson was appointed to the Board on 1 March 2021 and resigned on 26 May 2021. Richard was unable to attend a Board meeting, an Audit Committee meeting
and a Remuneration Committee meeting due to a prior engagement.
f Daniela Barone Soares was appointed to the Board from 1 March 2021. Daniela was unable to attend a Remuneration Committee meeting due to a prior engagement.
g Anne Busquet retired from the Board from 7 May 2021.
h Ian Dyson was unable to attend a Board meeting due to a prior engagement.
i Jo Harlow was unable to attend a Board meeting due to a prior engagement.
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
Chair’s overview
IHG | Annual Report and Form 20-F 2021
81
Governance Our Board of Directors
Patrick Cescau
Non-Executive Chair
N
Appointed to the Board:
1 January 2013
Keith Barr
Chief Executive Officer (CEO)
Appointed to the Board:
1 July 2017
Paul Edgecliffe-Johnson
Chief Financial Officer (CFO)
and Group Head of Strategy
Appointed to the Board:
1 January 2014
Elie Maalouf
Chief Executive Officer, Americas
Appointed to the Board:
1 January 2018
Skills and experience: From 2005 to 2008,
Patrick was Group Chief Executive of Unilever
Group, having previously been Chair of Unilever
PLC, Vice-Chair of Unilever NV and Foods Director,
following a progressive career with the company,
which began in France in 1973. Prior to being
appointed to the board of Unilever PLC and
Unilever NV in 1999, as Finance Director, he
was Chair of a number of the company’s major
operating companies and divisions, including in
the US, Indonesia and Portugal. He was formerly
a Senior Independent Director and Non-Executive
Director of Pearson plc, Tesco PLC and
International Consolidated Airlines Group S.A.,
and a Director at INSEAD.
Board contribution: Patrick has held board
positions for more than 20 years in leading global
businesses and brings extensive international
experience in strategy, brands, consumer products
and finance. As Chair, Patrick is responsible for
leading the Board and ensuring it operates in an
effective manner, and promoting constructive
relations with shareholders and wider stakeholders.
As Chair of the Nomination Committee, he is
responsible for reviewing and making
recommendations on the Group’s leadership needs.
Other appointments: Patrick is a Patron of the
St Jude India Children’s Charity and a Member
of the Temasek European Advisory Panel.
Skills and experience: Keith has spent more
than 25 years working in the hospitality industry
across a wide range of roles. He started his
career in hotel operations and joined IHG in 2000.
Since April 2011 he has been a member of IHG’s
Executive Committee. Directly before being
appointed CEO, Keith served as Chief Commercial
Officer for four years. In this role, he led IHG’s
global brand, loyalty, sales and marketing
functions, and oversaw IHG’s loyalty programme,
IHG® Rewards. Prior to this, Keith was CEO of
IHG’s Greater China business for four years, setting
the foundations for growth in a key market and
overseeing the launch of the HUALUXE® Hotels
and Resorts brand.
Skills and experience: Paul is a fellow of the
Institute of Chartered Accountants and is a
graduate of the Harvard Business School
Advanced Management Programme. He was
previously CFO of IHG’s Europe and Asia, Middle
East and Africa regions, a position he held since
September 2011. He joined IHG in August 2004
and has held a number of senior-level finance
positions, including Head of Investor Relations,
Head of Global Corporate Finance and Financial
Planning & Tax, and Head of Hotel Development,
Europe. Paul also acted as Interim CEO of the
Europe, Middle East and Africa region (prior to
the reconfiguration of our operating regions).
Skills and experience: Elie was appointed CEO,
Americas at IHG in February 2015 and has more
than 20 years’ experience working in major global
franchise businesses. He joined the Group having
spent six years as President and CEO of HMSHost
Corporation, where he was also a member of the
board of directors. Elie brings broad experience
spanning hotel development, branding, finance,
real estate and operations management as well
as food and beverage expertise. Elie was Senior
Adviser with McKinsey & Company from 2012
to 2014.
Board contribution: Keith is responsible for the
executive management of the Group and ensuring
the implementation of Board strategy and policy.
Other appointments: Keith is a Non-Executive
Director of Yum! Brands. He also sits on the Board
of WiHTL (Women in Hospitality Travel & Leisure),
the World Travel & Tourism Council Executive
Committee and the International Advisory Board
of EHL. Keith is a graduate of Cornell University’s
School of Hotel Administration and is currently
a member of the Dean’s Advisory Board for
The School of Hotel Administration, Cornell SC
Johnson College of Business.
Board contribution: Paul is responsible, together
with the Board, for overseeing the financial
operations of the Group and for leading
Group strategy.
Board contribution: Elie brings a deep
understanding of the global hospitality sector to the
Board. He is responsible for business development
and performance of all hotel and resort brands and
properties in the Americas region and has global
responsibility for customer development, providing
oversight of the Global Sales organisation, as well
as our owner management and services strategy.
Other appointments: Elie is a member of the
American Hotel & Lodging Association Executive
Committee of the Board, and member and chairman
of the U.S. Travel Association CEO Roundtable.
In addition, Elie serves as a board member of
the Atlanta Committee for Progress and is on the
CEO Council of the Global Business Alliance.
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
82
IHG | Annual Report and Form 20-F 2021
Governance Graham Allan
Senior Independent
Non-Executive Director (SID)
A
N R
Appointed to the Board:
1 September 2020*
Ian Dyson
Independent
Non-Executive Director
A
N R
Appointed to the Board:
1 September 2013
Jo Harlow
Independent
Non-Executive Director
N R
Appointed to the Board:
1 September 2014
Jill McDonald
Independent
Non-Executive Director
A N RB
Appointed to the Board:
1 June 2013
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, assuming the role of
President 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.
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.
Other appointments: Graham is Senior
Independent Non-Executive Director at Intertek
plc and Independent Non-Executive Director of
Associated British Foods plc. He also serves as
a director of private companies as Chairman of
Bata Footwear and Director of Americana Foods.
Skills and experience: Ian has held a number
of senior executive and finance roles, including
Group Finance and Operations Director for Marks
and Spencer Group plc for five years from 2005
to 2010, where he oversaw significant changes in
the business. In addition, Ian was CEO of Punch
Taverns plc, Finance Director for the Rank Group
Plc, and Group Financial Controller and Finance
Director for the hotels division of Hilton Group plc.
More recently, Ian was a Non-Executive Director
of SSP Group plc and Senior Independent Non-
Executive Director of Flutter Entertainment plc.
Skills and experience: Jo most recently held the
position of Corporate Vice President of the Phones
Business Unit at Microsoft Corporation. She was
previously Executive Vice President of Smart
Devices at Nokia Corporation, following a number
of senior management roles at Nokia from 2003.
Prior to that, she held marketing, sales and
management roles at Reebok International Limited
from 1992 to 2003 and at Procter & Gamble
Company from 1984 to 1992.
Skills and experience: Jill is currently CEO
of Costa Coffee. She started her career at
Colgate-Palmolive Company, spent 16 years with
British Airways Plc and has held a number of senior
marketing positions in the UK and overseas. Jill was
CEO UK and President for the North West Europe
division of McDonald’s, and held a number of
other senior roles in the company from 2006.
From May 2015 until September 2017, Jill served
as CEO of the Halfords Group plc. From 2017
to 2019, Jill served as Managing Director of
Marks and Spencer Clothing and Home.
Board contribution: Ian has gained significant
experience from working in various senior finance
roles, predominantly in the retail, leisure and
hospitality sectors. Ian became Chair of the
Audit Committee on 1 April 2014, and, as such,
is responsible for leading the Committee to ensure
effective internal controls and risk management
systems are in place.
Other appointments: Ian is Chair of the Board
of ASOS plc.
Board contribution: Jo has more than 25 years’
experience working in various senior roles,
predominantly in the branded and technology
sectors. Jo became Chair of the Remuneration
Committee on 1 October 2017 and, as such, she
leads the Committee responsible for setting our
remuneration policy.
Other appointments: Jo is a Non-Executive
Director and Chair of the Remuneration Committee
of Halma plc, and Non-Executive Director and Chair
of the Corporate Responsibility and Sustainability
Committee of J Sainsbury plc. She is also a member
of the Board of Chapter Zero, the Directors’
Climate Forum.
Board contribution: Jill has over 30 years’
experience working with high-profile international
consumer-facing brands at both marketing and
operational level. As Chair of the Responsible
Business Committee, she leads the Committee
responsible for responsible business objectives
and strategy and reviewing our approach to
sustainable development.
Other appointments: Jill is CEO of Costa Coffee.
* 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
Our Board of Directors
IHG | Annual Report and Form 20-F 2021
83
Governance Our Board of Directors continued
Daniela Barone Soares
Independent
Non-Executive Director
RBR
Appointed to the Board:
1 March 2021
Arthur de Haast
Independent
Non-Executive Director
RBR
Appointed to the Board:
1 January 2020
Duriya Farooqui
Independent
Non-Executive Director
RBA
Appointed to the Board:
7 December 2020
Sharon Rothstein
Independent
Non-Executive Director
RBA
Appointed to the Board:
1 June 2020
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.
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.
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. Duriya was
previously President of Supply Chain Innovation
at Georgia-Pacific, leading an organisation
responsible for solving supply chain challenges
through digital technology and collaboration.
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.
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: Daniela brings to the IHG
Board a clear commitment to 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.
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.
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 a member of
the Board of Tribe Capital Growth Corp I and an
Independent Director at 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 of CEOs. Duriya is
also a Trustee of Agnes Scott College, a Governing
Board member of the Woodruff Arts Center, a
member of the Board of Councilors of The Carter
Center and a mentor for the ExCo Group, LLC.
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 True Food Kitchen, Inc., Califia Farms,
LLC and Levain Bakery, Inc.
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
84
IHG | Annual Report and Form 20-F 2021
Governance Changes to the Board and its Committees, and Executive Committee
Graham Allan
Graham was appointed as Senior Non-Executive Director and member of the Nomination Committee
from 1 January 2022
Richard Anderson
Richard was appointed to the Board from 1 March 2021 and resigned on 26 May 2021
Daniela Barone Soares
Daniela was appointed to the Board from 1 March 2021
Anne Busquet
Dale Morrison
Anne retired from the Board from 7 May 2021
Dale retired from the Board from 31 December 2021
In addition to the above changes, in January 2022 the Company announced that Patrick Cescau will retire as Non-Executive Chair of the
Board with effect from 31 August 2022, with Deanna Oppenheimer to be appointed to the Board as Non-Executive Director and Chair
Designate effective 1 June 2022, to succeed Patrick Cescau as Non-Executive Chair from 1 September 2022 following his retirement.
Board composition
Gender split of Directors
Male, 7
Female, 5
Tenure of Non-Executive Directors
0–3 years, 4
3–6 years, 1
6–9 years, 3
9+ years, 1a
a Patrick Cescau has served on the Board for
nine years. As noted above, Patrick will retire
from the Board from 1 September 2022 after
handing over to Deanna Oppenheimer, who
joins the Board from 1 June 2022 to succeed
Patrick as Chair.
Our Board of Directors
IHG | Annual Report and Form 20-F 2021
85
Governance Our Executive Committee
In addition to Keith Barr, Paul Edgecliffe-Johnson and Elie Maalouf, the Executive Committee comprises:
Claire Bennett
Global Chief Customer Officer
Appointed to the
Executive Committee:
October 2017
(joined the Group: 2017)
Jolyon Bulley
Chief Executive Officer, Greater China and
Group Transformation Lead, Luxury & Lifestyle
Appointed to the
Executive Committee:
November 2017
(joined the Group: 2001)
Yasmin Diamond, CB
Executive Vice President,
Global Corporate Affairs
Appointed to the
Executive Committee:
April 2016
(joined the Group: 2012)
Nicolette Henfrey
Executive Vice President,
General Counsel and
Company Secretary
Appointed to the
Executive Committee:
February 2019
(joined the Group: 2001)
Claire has been an Executive Board Member of the
World Travel and Tourism Council (WTTC), served
as a Board Member of Tumi Inc. and participated
on multiple industry advisory boards. Claire is
a Certified Public Accountant and holds an MBA
from the J.L. Kellogg Graduate School of
Management at Northwestern University.
Key responsibilities: These include all aspects
of brand design and commercial delivery, loyalty,
partnerships, marketing execution and
data analytics.
Jolyon joined IHG in 2001, as Director of
Operations in New South Wales, Australia, and
then held roles of increasing responsibility across
IHG’s Asia-Pacific region. He became Regional
Director Sales and Marketing for Australia,
New Zealand and South Pacific in 2003, relocated
to Singapore in 2005 and held positions of Vice
President Operations South East Asia and India,
Vice President Resorts, and Vice President
Operations, South East and South West Asia.
Jolyon graduated from William Angliss Institute
in Melbourne with a concentration on Tourism
and Hospitality.
Key responsibilities: These include the
management, growth and profitability of IHG’s
fastest-growing region, Greater China, and
working to develop and define a clear strategy
for our Luxury & Lifestyle brands.
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 sits on the
Board of Trustees for the British Council, the UK’s
international organisation for cultural relations and
educational opportunities, 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 and internal
communications, covering both corporate and
consumer brand PR; global government affairs
work; and leading IHG’s Corporate
Responsibility strategy.
Key responsibilities: Nicolette has global
responsibility for all areas of corporate governance,
legal, risk management, insurance, regulatory
compliance, internal audit, and hotel standards.
Skills and experience: Claire has an in-depth
knowledge of the hospitality industry having spent
11 years at American Express in a range of senior
leadership roles across marketing, consumer travel
and loyalty. In her tenure there, Claire was General
Manager (GM), Global Travel and Lifestyle, where
she led a team responsible for delivering luxury
lifestyle services, and she held additional roles
including GM for Consumer Loyalty, GM for US
Consumer Travel, and Senior Vice President,
Global Marketing and Brand Management. Claire
has also held senior marketing positions at Dell,
as well as finance and general management
roles at PepsiCo/Quaker Oats Company, building
significant expertise across technology, retail
e-commerce, financial services, and travel and
hospitality sectors.
Skills and experience: Prior to his appointment as
CEO for Greater China, Jolyon was Chief Operating
Officer (COO) for the Americas, 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, food and
beverage brand solutions, new hotel openings
and owner relations. In 2021, he was appointed to
lead the Luxury & Lifestyle Transformation Team.
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.
Skills and experience: Nicolette joined IHG in
2001, and prior to leading the Business Reputation
and Responsibility function, held a number of
senior legal roles, including Deputy Company
Secretary, during which 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 worked as a
corporate lawyer at Linklaters in London and
Findlay & Tait (now Bowmans) in South Africa.
Nicolette was appointed as Company Secretary
on 1 March 2019.
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Governance 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
on enabling a performance culture focused
on growth.
Key responsibilities: These include global 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.
Key responsibilities: Kenneth is responsible for
the management, growth and profitability 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.
Key responsibilities: These include distribution;
channels; revenue management; property, owner,
guest and enterprise solutions; guest reservations
and customer care; digital; information security;
technology and global sales.
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 RCL FOODS’ 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 both mature and developing markets across
Europe, North America, Asia, Africa and the
Middle East.
Skills and experience: Kenneth became CEO,
EMEAA in January 2018. Kenneth was previously
IHG’s CEO for Greater China, a role he held from
2013 to 2017. Kenneth 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, Kenneth 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.
Skills and experience: In February 2019,
George was appointed as Chief Commercial and
Technology Officer. Prior to this, George 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.
Wayne Hoare
Chief Human Resources Officer
Appointed to the
Executive Committee:
September 2020
(joined the Group: 2020)
Kenneth Macpherson
Chief Executive Officer, EMEAA
Appointed to the
Executive Committee:
April 2013
(joined the Group: 2013)
George Turner
Chief Commercial
and Technology Officer
Appointed to the
Executive Committee:
January 2009
(joined the Group: 2008)
Executive Committee composition
Gender split of Executive Committee
Male, 7
Female, 3
Our Executive Committee
IHG | Annual Report and Form 20-F 2021
87
Governance 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
are responsible for the implementation of strategy which is delivered
by the Group’s workforce.
The Board and its Principal Committees
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 at the December 2021 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 the oversight of the delivery
of the strategic objectives it sets for management.
Committee Reports, including information on their activities during 2021,
can be found on pages 95 to 125.
Pursuant to Section 172 of the Companies Act 2006, the Board has a
duty to act in a way most likely to promote the success of the Company
for the benefit of its members, while having regard to six additional
factors, including the interests of key stakeholders. The Board’s
Section 172 statement describing how stakeholder considerations
are taken into account is incorporated in the description of the
activities of the Board on pages 90 and 91.
Further details of key stakeholders and engagement during 2021 can be
found on pages 20 to 28, 36, 39, 92, 101, 107, 108, 112 to 114, 227 and 228.
The Board is also responsible for reviewing the means for the
workforce to raise concerns in confidence and the reports arising
from its operation (commonly known as whistleblowing) and it
reviewed confidential disclosure channel reports throughout 2021.
In addition, a Non-Executive Director is nominated to represent the
Voice of the Employee in Board discussions. See our Voice of the
Employee disclosure on page 101.
More information on our Board and Committees is available at
www.ihgplc.com/investors under Corporate governance.
Management Committees
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.
The Executive Committee is chaired by the CEO and considers and
manages the day-to-day strategic and operational issues facing the
Group. Its remit includes executing the strategic plan once agreed
by the Board, monitoring the Group’s performance and providing
assurance to the Board in relation to overall performance and
risk management.
The General Purposes Committee is chaired by an Executive
Committee member and 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.
The Disclosure Committee is chaired by the Group’s Financial
Controller and 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.
Conduct of Board and Committee Meetings
The Chair and Company Secretary operate a collaborative process
for setting the Board agenda to ensure that the focus and discussion
strikes the appropriate balance between the short-term needs of the
business and the longer term. The Chair or Committee Chairs, CEO
and Company Secretary also liaise in advance of each Board and
Committee meeting to finalise the agendas, set the order in which
items are considered and ensure that each matter is allocated
sufficient time. The Company Secretary maintains an annual agenda
schedule for Board meetings that sets out strategic and operational
matters to be considered.
The Board held eight scheduled meetings during the year and
individual attendance is set out on page 81. All Directors are
expected to attend all Board meetings and relevant Committee
meetings unless they are prevented from doing so by prior
commitments, illness or a conflict of interest. If Directors are unable
to attend Board or Committee meetings, they are sent the relevant
papers and asked to provide comments to the Chair of the Board
or Committee in advance of the meeting so that their comments
can be duly considered.
Time is set aside at the start and end of each Board meeting for the
CEO to meet with the Chair and Non-Executive Directors, and for the
Chair to meet privately with the Senior Independent Non-Executive
Director (SID) and Non-Executive Directors to discuss any matters
arising. The SID continues to be available to discuss concerns
with shareholders, in addition to the normal channels of
shareholder communication.
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IHG | Annual Report and Form 20-F 2021
Governance Board activities
Matters the Board discussed in 2021
Board Meetings
The Board met for eight scheduled meetings during the year.
Due to the ongoing impact of the pandemic, Board meetings
were conducted by video conference. The following table gives an
overview of the regular and standing items discussed and decisions
made. The table overleaf details the key matters discussed by the
Board in 2021 and our Section 172 statement, including information
about how stakeholders were considered. In both tables,
commercially sensitive information has been excluded. 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.
Regular and standing items
In addition to key focus areas outlined on the following pages, the Board considers a number of regular and standing items at each meeting:
Area of discussion
Chair's matters
Discussion topic and decisions made
The Chair provided an update on Board developments and meeting plans and his current areas
of focus and engagement.
Chief Executive Officer's matters
The Chief Executive Officer provided an update of developments within the business.
Updates from each of the
Board Committees
The Committee Chairs reported back to the Board on matters covered during their meetings.
Details of Committee activities during 2021 can be found on pages 95 to 125.
Financial performance
Corporate governance
Cybersecurity
Principal risks, internal controls
and risk management systems
Investor relations
The Board received regular updates from the Chief Financial Officer on recent and current trading,
including RevPAR, operating profit, net system size growth and cashflow, and these were compared
to competitors’ results. Internal projections were compared with the consensus of analysts’ forecasts
to ensure that the Company’s prospects were appropriately reflected in market expectations.
The Board received regulatory development updates from the Company Secretary and General
Counsel, covering regulatory changes in areas such as corporate reporting, executive remuneration,
climate change, diversity, workforce engagement, human rights, data protection and shareholder body
voting guidelines.
The Board received regular updates on cyber activity and information security, including a detailed
presentation from the Chief Commercial and Technology Officer and the Chief Information
Security Officer. These covered threats and trends in the hospitality industry, the Group’s key systems
and risk appetite as well as managing cyber risks in a remote environment. The Board also reviewed
the policies and actions taken to address threats and mitigate risks.
The Board received regular updates on principal and emerging risks, internal controls, risk management
systems, the Group’s risk appetite, business continuity 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 regards the management of risks in business as fundamental to its role and does this by
ensuring that appropriate controls and processes are in place. The regular monitoring of the Group’s risk
management systems allows the Board to ensure that issues that might otherwise impact the Group’s
reputation for high standards of business conduct are avoided or mitigated as appropriate and that the
Group is positioned to respond to uncertainty in an agile manner.
The Board receives a regular report outlining share register movement, 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.
Board activities
IHG | Annual Report and Form 20-F 2021
89
Governance Board activities continued
Key matters discussed in 2021 and Section 172 statement
Section 172 of the Companies Act 2006 requires a director of a company to act in a way most likely to promote the success of that
company for the benefit of its members, while having regard to six additional 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 identified in the key at the bottom of the page.
Finance and performance
Three-year financial plan and
competitor performance
The Board approved the Group’s three-year financial
plan and monitored performance in light of changes
to economic and industry growth forecasts during
the year.
In approving the Group’s three-year financial plan, the Board considered the assumptions and risks
inherent in the plan including the outlook for signings and bad debt risk, expected cashflows and
prospects for the System Fund. The three-year plan for the business puts its medium-term targets
into a quantifiable form, and monitoring progress against the plan provides a mechanism for the
Board to balance the interests of stakeholders such as hotel owners, employees and lenders with
those of shareholders. It also forms the basis on which targets for executive remuneration are set.
A F
Financial statements
The Board considered the full and half year
results statements, the going concern and viability
statements made in the Annual Report and
whether the Annual Report was fair, balanced
and understandable.
E F
Dividend
The Board considered dividend payments and
concluded that it would not be appropriate to pay
a dividend during 2021.
A B C E F
Strategic and operational matters
Brand integrity
The Board considered the progress of its strategic
initiative to improve the quality and consistency
of the Holiday Inn and Crowne Plaza estates in the
Americas and EMEAA.
The Board further endorsed ongoing efforts to
enhance the positioning of the Holiday Inn brand
in the US.
A C
Brand portfolio
The Board considered the opportunity to add a
collection brand to the Group’s Luxury & Lifestyle
portfolio and it approved the launch of the Vignette
Collection brand.
A C D
Loyalty Strategy
The Board considered and approved the relaunch
of IHG Rewards.
A C
The Board also received presentations on the Group’s main competitors and their performance.
By examining the performance of the Group’s competitors, the Board can assess the Group’s
performance in context and draw out areas where longer-term improvements can be made.
Through the timely publication of accurate and balanced financial statements, the Board ensures
that shareholders and other stakeholders have equal access to important information and the
business maintains its reputation for high reporting standards.
The Board weighed various stakeholder interests when considering dividend payments as well as the
need to exhibit high standards of business conduct. It considered the Group’s financial performance,
market expectations, the interests of shareholders and lenders as well as the position of broader
stakeholders, including employees, suppliers and hotel owners. It concluded that it would not be
appropriate for the Company to pay a dividend during the year, noting that it would consider future
dividends once visibility of the pace and scale of market recovery improves.
Subsequently, the Board is proposing a final dividend of 85.9¢ per ordinary share in respect of 2021,
payable in May 2022 subject to shareholder approval at the 2022 AGM.
The Board focused on maintaining the integrity of the Group’s brands to ensure that guests can be
confident in their expectations when staying in an IHG hotel. In assessing the initiative to engage with
the owners of certain Crowne Plaza and Holiday Inn hotels that required improvements to quality of
service and property condition, the Board weighed the short-term impact on system size against the
positive longer-term benefits of maintaining brand standards in the broader estate for hotel owners
and guests.
As part of the Board’s oversight of brand strategy and recognising the need to keep guest
experiences and hotel owner returns relevant and attractive, the Board considered and endorsed
ongoing efforts for continuous improvement in relation to various aspects of the Holiday Inn brand,
taking into consideration the impact on guests from an improved experience and the improved
economics that would flow through to hotel owners. See pages 10 to 13 for a description of the
business model and pages 19 to 22 for how the Group engages with its hotel owners and guests.
In approving the new brand launch, the Board had regard for various stakeholders and considerations.
The Board recognised hotel owners’ desire for a collection brand that would give them access to
IHG’s distribution and loyalty programmes, while allowing light-touch branding that would retain
the individuality of their properties with relatively low capital requirements and attractive economics.
The Board also had regard for shareholders in relation to the long-term impact on system size and the
lower environmental impact of conversion properties. The Board also considered the appeal of having
more diverse styles of property, which would increase guests’ options when booking with IHG and
enhance the IHG Rewards programme’s value. For more information on the Group’s priority to ‘build
loved and trusted brands’, see pages 17 and 18 and further information on its environmental footprint
is available on pages 29 to 35.
In approving material changes to the IHG Rewards programme, the Board considered the competitive
position of the programme, its ability to drive revenue for owners and accelerate system size growth,
the enhanced value proposition for members and guests, and the impact of the changes on owners’
cost base and operations.
Key to considerations
A Long term
C Suppliers and customers
E High standards
B Employees
D Community and environment
F Act fairly between members
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IHG | Annual Report and Form 20-F 2021
Governance Strategic and operational matters continued
Technology
The Board considered and approved evolving the
Group’s relationship with the main supplier in respect
of the Group’s Guest Reservation System (GRS).
C
Supply chain and procurement
The Board received an overview of the strategy
and approach to corporate and hotel procurement
and endorsed the strategy and approach.
C D E
Growth Strategy in Regions –
Greater China, EMEAA and Americas
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 over both the short and long term.
A C
Board governance
Director succession
The Board progressed succession planning in relation
to the Chair of the Board and appointed a new Senior
Independent Non-Executive Director (SID) and
Non-Executive Director for workforce engagement.
A B E
People & Planet
The Board considered and approved evolving the Group’s relationship with its supplier from a joint
project development model to a product development and support model. In making its decision,
the Board carefully considered the risks associated with these changes and their impact on the
supplier, the competitive advantages of revised functionality, and the cost implications of the change.
Details of the technology-related risks to the business are given on page 45.
In considering the procurement strategy and approach, the Board paid particular attention to the
initiatives that leverage our system-wide buying power and simplify the procurement programme
to lower costs for owners while maintaining a high-quality guest experience, supporting sustainability
within the supply chain, and ensuring that suppliers operate in a responsible manner. Further
information on the Group’s responsible procurement programme is included on page 39.
The Board received regular updates from the Group’s operating regions, covering the Group’s
positioning and performance in relevant markets, 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 growth, such as
financing and cost and supply constraints.
When progressing Board succession plans, the Board balanced the desire to maintain high standards
by complying with the UK Corporate Governance Code with the short-term need to keep Non-Executive
Directors in position for longer than preferred in order to maintain expertise and continuity. The Board
also had consideration for the importance of employee feedback and considered and approved the
transition of responsibilities in relation to the Non-Executive Director with responsibility for workforce
engagement, taking into account Non-Executive Director time commitments and broader Board
succession plans.
Office relocation and new ways of working
The Board reviewed the lease arrangements for the
Group’s main corporate office locations in the US
and the UK and decided to relocate its UK corporate
office to a new location in 2022.
The Board further considered and endorsed new
hybrid ways of working.
A B D E
The Board considered various relocation options for the Group’s global head office in the UK.
In making the decision to lease a new office in Windsor, the Board had regard for the impact of the
move on employees, the community and the environment. A description of the Board’s activity and
consideration of Section 172 factors is included in the case study on page 92.
In considering and endorsing a reshaped, flexible approach to working for the Group’s corporate
offices as Covid-19-related restrictions eased, the Board had consideration for the impact on
employees and their wellness as well as efficiency, culture and teamwork. The Board weighed these
against the cost savings from a smaller real estate footprint, the efficiency available from utilising
more modern communications technology, and the ability to attract new and more diverse employees
attracted by flexible working.
Staff shortages and talent retention
The Board considered reports of staff shortages in
the hospitality industry in various regions following
the easing of lockdown. The CEO outlined the impact
this could have on hotel owners and levels of guest
satisfaction if prolonged and the need to focus
activity on talent retention in a competitive market.
B C
The Board considered staff shortages in the broader hospitality industry and the impact that this
could have on employees in owned and managed lease hotels, as well as the wider managed and
franchised estate.
In terms of talent retention amongst the Group’s corporate employees, the Board noted the increased
competition in the job market and reviewed its measures of staff engagement and wellbeing and levels
of staff turnover. In considering the employment market, the Board took into account the need to
balance appropriately rewarding and motivating its employees while driving profitability, growth and
efficiency through the business on behalf of shareholders. See page 53 for details of the employee
engagement score KPI and page 44 for how risks associated with talent retention are managed.
Our people and culture
The Board regularly considered workplace culture,
taking into account the feedback provided from the
Voice of the Employee engagement plan and actions
taken to support employees. The Board reviewed
employee communications and wellbeing measures
and further had oversight of the Group’s DE&I initiatives.
B D
Decarbonisation strategy
The Board approved the Group’s upgraded
science-based target (SBT) from a 2.0°C to 1.5°C
aligned target and further approved the Group’s
commitment to the ‘UN Race to Zero’.
A C D F
The Board assessed and monitored culture throughout the year, receiving regular updates from the
CEO and from the Voice of the Employee engagement plan. The Voice of the Employee engagement
plan has played a key role in informing the Board regarding employees’ interests and supplying insights
for the Board to understand the impact of its decisions on employees. The Board further considered
strategic updates from management in relation to talent and leadership development and learning,
championing a diverse, equitable and inclusive culture, and future ways of working. Information
on the Voice of the Employee engagement plan during the year is set out on page 101 and further
information in relation to employee and workplace culture is included on pages 24, 25 and 37.
In approving the enhanced SBT, the Board took into consideration the latest in climate science and
the long-term impact of climate change on the environment and the Group’s business, the expectations
of investors and other stakeholders, levers available to the Group to achieve the SBT, and the impact
to owners in achieving hotel-level targets.
See pages 20 to 28, 39, 92, 101, 107, 108, 112 to 114, 227 and 228 for information about how we have engaged with our stakeholders in 2021. Further details
of our regard for the environment are on pages 15, 29 to 35 and 100 to 101.
Board activities
IHG | Annual Report and Form 20-F 2021
91
Governance Board activities continued
Our shareholders and investors
During 2021, 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 89. In addition, our Registrar and American Despositary
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. An outline
of the engagement with shareholders in relation to Executive
Remuneration during 2021 can be found on pages 107, 113 and 114.
Shareholders and investors engagement
Annual General Meeting (AGM)
The 2021 AGM was again held in constrained circumstances in
compliance with UK Covid-19 measures. We were encouraged
that our retail shareholders engaged with the AGM, listened in and
submitted questions, which we were able to address. We continue
to evaluate how our AGM on Friday 6 May 2022 will be held given the
evolving nature of the pandemic. The notice of meeting will be sent
to shareholders and be available on our website in due course.
Visit www.ihgplc.com/investors under Shareholder centre.
Fundamental to IHG’s ability to access capital markets, and sustain its trusted reputation and long-term success, is its ability
to maintain strong relationships with its shareholders and institutional investors.
Discussion points in 2021
Engagement
Outcomes
• The continued impact of the pandemic
on the hospitality sector and IHG which
influence IHG’s trading performance,
financial results and capital
allocation strategy
• Executive remuneration policies including
the potential use of discretion; alignment
with workforce pay and talent retention
• Concerns about climate change and wider
sustainability issues
• DE&I, staffing shortages and labour practices
• Regular roadshow investor meetings and
participation at investor conferences by
Executive Directors, Senior Leadership and
the Investor Relations team
• Strong investor confidence in IHG’s
performance, long-term viability and
leadership as demonstrated through
feedback received and across AGM results
• Consultations between the Chair of the
Remuneration Committee and institutional
investors and proxy vote advisors
• Meetings with the Chair, Investor Relations,
IHG’s Chief Sustainability Officer and
institutional investors to discuss governance,
sustainability and workforce practices
• Participation in COP26, joining Race to Zero
and deeper understanding of shareholder
and investor focus areas related to ESG and
stakeholder engagement
• Deepened commitment to DE&I, including
a refresh of IHG’s policy and further
appointments to the Board
• Written and electronic correspondence,
including questions received at the AGM,
on a range of topics related to ESG
See also a description of our dividend policy on page 13, our KPIs on page 50 to 53, key matters discussed by the Board on pages 90 and 91 and
engagement with shareholders relating to Executive Director remuneration on pages 107, 113 and 114.
Visit www.ihgplc.com/investors for further information.
Board oversight of IHG’s
Global Head office relocation
Even before Covid-19 and the enforced changes to working
remotely, the Executive Committee, with oversight from the
Board, had been looking at evolving working practices and the
suitability of the Group’s offices to support collaborative working,
our strategic priorities and culture. The impending expiry of the
lease for the Company’s global head office also prompted the search
for a new location. The Board was closely engaged in the project
and it was a regular Board meeting agenda item in conjunction
with discussions on employees and culture.
As part of the search process, a postcode analysis was undertaken to
ensure there would be minimal differences in commuting times for
most employees. Consideration was also given to public transport
links, local amenities and access for disabled and wheelchair users.
An engagement programme has kept employees informed and
involved through electronic newsletters, a dedicated intranet site
(including FAQs) and employee feedback surveys looking at
workplace culture and hybrid working.
The Board considered various options for alternative office
arrangements. As well as its focus on the impact on employees,
the Board took into account the environmental implications of the
move, noting the opportunity for the new premises to be designed
and configured in a sustainable and energy-efficient manner.
The Board also scrutinised the financial impact of the move.
In June 2021, following the Board’s consideration and approval of
management’s recommendation, the Group announced that its
global head office would move to Windsor during 2022.
In addition, as part of the preparation for the move, the existing
office space at Denham was reconfigured to give a taste of the
future with the introduction of hot desking ‘neighbourhoods’,
more collaborative spaces and the removal of executive offices,
including that of the CEO.
The Board will continue to monitor and oversee the move as it
progresses during 2022, with a particular focus on the impact
on employees and company culture.
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IHG | Annual Report and Form 20-F 2021
Governance
Director appointments and induction
Director appointments
Details of the appointments to the Board made during 2021, as well
as the appointments of a new Senior Independent Non-Executive
Director and a Non-Executive Director responsible for the Board’s
Voice of the Employee engagement plan, are described in the
Nomination Committee Report on pages 102 to 103.
In addition, a description of the Chair succession appointment
process is set out below.
New Director inductions
Upon appointment, all new Directors undergo a comprehensive
and formal induction programme which is tailored to meet their
individual needs. We believe this is crucial to ensure our Directors
have the full understanding of all aspects of our business and
familiarity with the Group’s purpose, culture and values, to ensure
they are able to contribute effectively to the Board.
For Daniela Barone Soares, a tailored induction plan was
prepared in advance of her appointment to the Board in March.
Daniela’s plan included:
• information on the Group’s purpose, culture, values and strategy,
including its business model, brands and the markets in which
it operates;
• our approach to internal controls and our risk management strategy;
• information on the Board, its Committees and IHG’s governance
processes, with a particular focus on the Remuneration and
Responsible Business Committees;
• a reminder of the rules relating to maintaining the confidentiality
of 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.
Daniela’s induction plan also included visits to IHG corporate offices
and hotels across our brands, to meet colleagues and spend time
with our General Managers. In light of the impact of the pandemic,
such visits have not yet taken place, however they will be arranged
as appropriate when circumstances permit.
Inductions were also conducted in respect of the appointments
of Graham Allan as Senior Independent Non-Executive Director
and Duriya Farooqui as Non-Executive Director responsible for
the Voice of the Employee engagement plan.
Chair succession
Appointment process
In anticipation of Patrick Cescau’s retirement during 2022, on
attainment of nine years on the Board, the Board initiated a full,
rigorous and transparent search process at the end of 2020, led
by Dale Morrison, as the Senior Independent Director (SID) and
a Search Committee comprising Dale and the Committee Chairs.
Following a competitive tender process, Russell Reynolds was
appointed to assist the Search Committee and Board in identifying
a diverse list of potential candidates with the experience and
personal qualities to become Chair.
The Search Committee prepared a candidate profile identifying
the key competencies, characteristics and experience required
for the role of Chair. Russell Reynolds also had detailed discussions
with all Board members to seek their views on Board dynamics
and culture and the key strategic challenges facing the Group.
A full Chair specification was then prepared by Russell Reynolds
and shared with the full Board for comment and input.
Key competencies included: experience as a Chair, strategic
orientation and vision, bringing a global perspective, a collaborative
and inclusive personal style as well as a good understanding of
the corporate governance environment.
The Search Committee and the Board were concerned to ensure
that diversity in its broadest sense was taken into consideration
in the role profile and the candidates presented for consideration.
A long list of candidates which had been compiled by
Russell Reynolds was reviewed and discussed by the Search
Committee, and a shorter list of candidates was then interviewed
by Russell Reynolds, the SID and the General Counsel and
Company Secretary together, and the CEO. Reflections from these
meetings were shared with the Search Committee and a short-list
of four candidates was then interviewed by the remaining
members of the Search Committee.
Two of the candidates were selected to meet with the Chair and
for further meetings with the CEO and SID, before the preferred
candidate met with the remaining Executive and Non-Executive
members of the Board. The preferred candidate also met with
the Company’s external Auditor, PwC.
Search Committee meetings were attended by the CEO, the General
Counsel and Company Secretary, the Chief Human Resources
Officer and Russell Reynolds and Dale Morrison kept the Board
informed on the progress and the status of the process throughout.
Following detailed consideration, including assessment against the
competencies identified in the candidate profile and the feedback
from the meetings with members of the Board, the Search
Committee recommended to the Board that Deanna Oppenheimer
be appointed as a Non-Executive Director and Chair Designate
from 1 June 2022 and that she assume the role of Chair from
1 September 2022, following Patrick Cescau’s retirement on
31 August 2022. The Board approved and confirmed
the appointment.
Patrick Cescau was not involved in the selection or appointment
of his successor and Russell Reynolds has no further connection
with the Group or any of the Directors, beyond undertaking search
and recruitment activity. Deanna Oppenheimer did not have
a service contract with the Company in 2021.
Additional appointments
During 2021, the Board considered the proposed appointments of
Duriya Farooqui as non-executive director of Tribe Capital Growth
Corp I and to the Board of Councillors of the Carter Center, which
operates as an advisory board; Dale Morrison as Chairman of Twin
Ridge Capital Acquisition Company Limited; and Jo Harlow as a
non-executive director of Chapter Zero. The Board also considered
and endorsed the appointment of Ian Dyson as Chair of ASOS plc.
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.
Board activities
IHG | Annual Report and Form 20-F 2021
93
Governance Board activities continued
Board development and effectiveness evaluation
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 continues to review
the training and development needs with each Director on a regular
basis and the Board is made aware of training opportunities.
• the Board’s involvement in the Group’s strategic process, in
particular in relation to recovery and post-Covid-19 strategies;
• Board work processes, including quality of information provided to
the Board, and Board dynamics and the effectiveness of meetings;
• Board engagement with shareholders and employees; and
• the progression of Board refreshment and succession plans.
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 2021, these sessions included cyber risk management;
environmental, social and governance (ESG) considerations; and
audit and corporate governance reform proposals.
The responses of Board members to the questionnaire were
largely favourable in relation to all areas of the Board’s operation.
The feedback highlighted that the Board equally and effectively
supported and challenged management’s response to the pandemic,
while ensuring ongoing and appropriate governance to safeguard
the Group’s reputation, financial viability and stakeholder value.
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.
Internal evaluation
Following the full external evaluation carried out by Christopher Saul
of Christopher Saul Associates in 2019 and an internal evaluation
in 2020, during the year the Board once again undertook an
internal evaluation.
Board members were asked to consider the Board’s overall
effectiveness by completing an internal effectiveness questionnaire,
which focused on the following areas:
• progress in implementing agreed action items from the 2020
effectiveness review;
• the role the Board continues to play in relation to the pandemic
and recovery;
• information flow to the Board, and Board engagement with
management and each of its Committees;
Board members commented positively on the Board’s involvement
in the strategic process, noting that the Board strategy days and the
shift in Board agenda and discussion in the second half of the year
allowed for a greater focus on the Group’s long-term strategy versus
short-term considerations. Board members were satisfied with the
timing, amount and quality of engagement with management.
Feedback noted strong engagement with shareholders, highlighted
the enhanced Voice of the Employee programme, and indicated
strong engagement and follow up by the Board with its Committees.
Board members generally agreed that the implementation of the
actions arising from the 2020 Board effectiveness evaluation had
progressed well, particularly in relation to an increased focus on
long-term strategy and implementation as well as Board succession
planning. It was widely noted that a return to in-person Board
meetings would be welcome and drive progress in relation to
enhanced Board discussion and debate.
The Board’s positive feedback in relation to the overall
performance of the Board concluded as to the effectiveness
of the Board’s performance.
The following areas of continued focus and recommended actions for 2022 were noted:
Area for focus
Long-term strategy
Board materials and agenda
Action items
Board members positively noted the longer-term strategic discussion throughout the year, but felt that this could
be further enhanced in 2022 with additional focus on the implementation of the long-term strategy and competitive
positioning in relation to delivering on the Group’s objectives.
Feedback noted that Board materials, particularly the materials prepared for its strategy meeting, were informative
and high quality. It was also noted that, although there had been some progress on making the regular Board
information pack materials more forward-looking, this should remain a focus in 2022.
Board meeting dynamics
Board members also noted the continued constraints of virtual meetings and the need for increased discussion time,
both formal and informal, and the need to revert to full ‘in-person’ meetings as soon as possible.
The CEO evaluation was led by the Chair, who collected feedback
from the Non-Executive Directors. Key areas of focus included:
• the Group’s financial performance and the impact of the CEO;
• leadership effectiveness through the pandemic;
• positioning IHG for the long term;
• regard for community and the environment; and
• the relationship and ability to work collaboratively and transparently
with the Board.
Directors’ performance evaluation
In addition to the internal Board evaluation process outlined
above, the Chair conducted an individual evaluation of each of
the Non-Executive Directors, taking feedback from the CEO, and
focusing on their contribution and engagement in the context of
a more virtual environment. Particular points of note were shared
with the individual Directors and overall, the Chair concluded that
the Directors perform their duties effectively and dedicate sufficient
time to discharge their Board responsibilities.
The performance assessment of the Chair was led by the SID.
The Chair’s evaluation consisted of gathering feedback from the
Directors, covering:
• Board leadership, strategy evolution and performance monitoring
in the context of a pandemic-affected year;
• overall Board culture, engagement and participation; and
• maintenance of high standards of corporate governance.
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IHG | Annual Report and Form 20-F 2021
Governance Audit Committee Report
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, as well as
reviewing 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 www.ihgplc.com/investors under
Corporate governance.
The Committee’s key areas of focus over the year have been:
• reviewing the Group’s approach to the management of risk
including considering the continued evolution of the impact
of Covid-19 on the business;
• assessing and obtaining assurance on the effectiveness and
resilience of the Group’s internal control environment and its
appropriateness given the changing environment in which the
Group operates;
• reviewing and challenging financial reporting throughout the year
to ensure the Financial Statements provide a true and fair view of
the Group’s performance and that latest guidance and reporting
regulations by regulators were appropriately applied;
• reviewing the Group’s Internal Audit plan and budget;
• reviewing and evaluating going concern and viability assessments,
the need for impairment testing and provisioning for material
litigation and commercial disputes; and
• overseeing the transition of the external Auditor and PwC’s first
year as Auditor of the Group.
Membership and attendance at meetings
Details of the Committee’s membership and attendance at meetings
are set out on page 81. The CEO, CFO, General Counsel and
Company Secretary, Group Financial Controller, Head of Risk
and Assurance and our external Auditor (EY February only; PwC
all meetings), attended all meetings in 2021. The Chair of the Board
also aims to attend all meetings and in 2021 attended four 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 of 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 82 to 84.
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.
I am pleased to present the Committee’s report for the
year ended 31 December 2021. These pages outline how the
Committee discharged the responsibilities delegated to it
by the Board over the course of the year, and the key areas
of focus for the Committee in doing so.
The Committee fulfils a vital role in the Company’s governance
framework, providing valuable independent oversight across the
Company’s financial reporting and internal control procedures.
It provides the expert scrutiny to ensure that the necessary
internal controls to run the business are in place, that risks are
appropriately managed, that the Company’s performance is
correctly verified by the external Auditors and that the reporting
of this to our shareholders and stakeholders is fair, balanced
and understandable.
The ongoing impact of the pandemic and the risks that
accompanied it continued to be a major focus given the
changeable nature of the operating environment. Assessing the
Group’s risk management and internal control arrangements
during the pandemic and their appropriateness as conditions
started to normalise continued throughout the year. In early
2021, the transition of external Auditor from Ernst & Young LLP
(EY) to PricewaterhouseCoopers LLP (PwC) was completed
and the Committee’s attention shifted to PwC’s first year audit.
Throughout the period, PwC has provided insights into the
Group’s processes and controls and the Audit Committee has
reviewed and discussed management’s responses.
In addition, the Committee has received regular reports on
internal audits and steps being taken to address findings;
controls assurance work and remediation activity; and other
deep-dive reviews including a post-completion review of
spending on large projects and a review of the Americas
managed hotel financial control environment.
The ongoing focus on the approach to financial reporting
through the year ensured the Committee was comfortable that
all latest guidance from regulatory bodies such as the Financial
Reporting Council (FRC) had been considered. The Committee
also challenged management to ensure climate risk had been
appropriately and consistently reflected through the Annual
Report and Form 20-F, particularly with regard to impacts on
forward-looking assumptions supporting the Financial Statements.
Looking further out, the Committee evaluated the potential
impact of the Department for Business, Energy and Industrial
Strategy (BEIS) consultation document on audit and corporate
governance reform, approved a response to the consultation
and considered preparatory actions particularly in relation to the
proposed Resilience Statement and Audit & Assurance Policy.
I would like to thank all those who have assisted the Committee
in fulfilling its duties during the year, which I am confident have
been carried out effectively and to a high standard, providing
independent oversight with the support of assurance from the
external Auditor.
Ian Dyson
Chair of the Audit Committee
21 February 2022
Audit Committee Report
IHG | Annual Report and Form 20-F 2021
95
Governance Audit Committee Report continued
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.
In 2021, the Committee members were also asked to consider the
Committee’s effectiveness by reviewing an effectiveness
questionnaire and the responses to it. The evaluation responses
positively highlighted the oversight of the external Auditor transition,
noted the need for continued review of the training and knowledge
development needs of Committee members in the context of the
changing regulatory environment and concluded that the
Committee remains effective.
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 of litigation and commercial disputes 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 2021 (Annual Report), and when providing comments
considered: (i) the process for preparing and verifying the Annual
Report, which included review by members of the Executive
Committee and input from senior employees in the Company
Secretariat, Operations, Strategy, Human Resources, Finance,
Risk and Assurance and Legal teams; (ii) a report from the Chair
of the Disclosure Committee; and (iii) the 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 of 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. This review also considered the use
of Non-GAAP measures and considered their continued suitability,
presentation and relative prominence taking into account guidance
from both the FRC and the Securities and Exchange Commission
(SEC). The Committee specifically reconsidered the continued
impact of the pandemic on performance, strategy and business
resilience and where it impacted the nature of the judgements
and estimation uncertainty. The Committee also considered the
proportionate and consistent consideration of climate matters
across the Annual Report, including the TCFD statement, and in
particular the potential impact on forward-looking assumptions
supporting impairment testing, deferred tax assets, going concern
and viability assessments.
Alongside this review, the Committee considered the guidance
updates provided by the FRC throughout the year including on
Non-GAAP measures, Provisions, Contingent Liabilities and
Contingent Assets, Going Concern and Viability and concluded
that appropriate enhancements had been made to ensure alignment
with the latest guidance.
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.
The Committee has been monitoring developments in the UK’s
audit and corporate governance environment, including the reforms
proposed by BEIS following its consultation ‘Restoring Trust in
Audit and Corporate Governance’. The Committee considered
the potential impact of the proposed reforms and reviewed and
approved a submission summarising the Group’s position in
response to the questions in the consultation. The Committee also
requested a number of presentations from PwC to provide further
insight on the key proposals and discussed papers from senior
management on the potential implications of key proposals to
ensure that the Company is compliant with any new regulations
when they come into force, including some of the detailed proposals
behind the Resilience Statement and Audit and Assurance Policy.
Significant matters in the 2021 Financial Statements
Throughout 2021, the Committee provided ongoing challenge
to management’s accounting, reporting and internal controls
to ensure the continuing implications of the pandemic had
been duly considered. As always, the Committee discussed with
management and the external Auditor the significant areas of
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
itself that management had adequately identified and considered
all potentially significant accounting and disclosure matters.
The key items discussed are outlined on page 99.
Correspondence with UK regulator
The Group received a letter dated 15 July 2021 from the FRC
following its review of the Annual Report and Accounts for the
financial year ended 31 December 2020 as part of the FRC’s routine
periodic review of listed company annual reports. The letter raised
no questions requiring a response. The appendix to the letter set out
a number of observations on certain disclosures, which have been
taken into account in the preparation of the 2021 Annual Report
and Accounts.
The FRC’s review is based on the published Annual Report and
Accounts and does not benefit from detailed knowledge of the
business or an understanding of the underlying transactions.
It provides no assurance that the Annual Report and Accounts is
correct in all material respects. The FRC’s role is not to verify the
information provided, but to consider compliance with reporting
requirements. The FRC accepts no liability for reliance on the FRC’s
review by the Company or any third party, including but not limited
to investors and shareholders.
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.
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IHG | Annual Report and Form 20-F 2021
Governance 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 control, 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 and presentations on the Company’s
overall internal control, risk management system and principal
risks; and
• receives additional reports throughout the year relevant to
internal control and risk management, 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 40 to 47 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 2021, the Committee received an update on hotel financial
controls in the Americas region and a post-completion review of
spending on large projects. The Committee considers the Group’s
treasury and tax strategy policies annually and during 2021 approved
minor changes to the Group Treasury Policy and the Group’s
published ‘Approach to Tax’.
Our Approach to Tax document is available at
www.ihgplc.com/en/responsible-business/policies
Having reviewed the internal control 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 and no other significant failings or weaknesses.
Principal risk areas
During the year, particular attention was paid to the review and
assessment of principal and emerging risks following the challenges
created by the pandemic and in light of the Group’s strategic growth
ambitions. The Committee observed that risks to the execution of
the Group’s strategy remained heightened and impacted by
constrained resources (including financial and management time).
The Committee considered the following areas:
• the potential for additional stress on risk management and internal
control arrangements from continued Covid-19-related disruption;
• the impact on the Group’s business of further waves of the
pandemic or a more prolonged period of recovery for the industry,
including on our supply chain arrangements;
• the impact of organisational changes and flexible working
arrangements for corporate employees;
• the impact of staff shortages and wage inflation within the
hospitality industry; and
• cybersecurity and information governance in the context of
a rapidly evolving external threat and regulatory environment.
Further details of our principal risks, uncertainties and review
process can be found on pages 40 to 47.
Financial Reporting Council Audit Quality Review
The FRC Audit Quality Review (AQR) selected the external audit
by EY of the Group’s Financial Statements for the year ended
31 December 2020 for review as part of its annual inspection of
audit firms. As part of this process, the Committee’s Chair shared his
and the Board’s view of the quality of the EY audit. The Committee
considered the final inspection report which highlighted good practice
in respect of certain aspects of the Group audit work. The report
included one observation, requiring limited improvement which
was not considered significant by the Committee. The Committee
discussed the results and agreed actions with the lead audit partner
and agreed with the overall assessment which was consistent with
its own view of the quality and effectiveness of the external audit.
In considering the audit plan, the Committee considered the
observation would not impact PwC’s approach.
Non-audit services
The independence and objectivity of the non-audit services
provided by the external Auditor to the Group are safeguarded by
IHG’s Audit and Non-Audit Services Pre-Approval Policy. 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, in line with US SEC requirements without
any de minimis threshold 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 is cognisant of investor advisory bodies’ guidelines
on non-audit fees. During 2021, 11% of services provided to the
Group were non-audit services (2020: 18% provided by EY),
primarily related to System and Organisation Controls (SOC)
Reports. Details of the fees paid to PwC for non-audit and statutory
audit work during 2021 can be found on page 164. 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 2021, the Committee reviewed the allocation of
internal audit resources to a dynamic inherent risk profile, including
organisational and process changes which have resulted from
Covid-19 disruption. Organisational culture has been a defined part
of our risk management system for several years and therefore is
subject to regular focus as an integral part of internal audit work.
The 2022 plan presented to the Committee in December 2021 will
maintain focus on the integrity of the risk management and internal
control system and will assess the adoption and operation of evolved
governance frameworks (for example, compliance with new policies,
talent frameworks, procurement processes, hotel initiative delivery,
business continuity plans and supply chain resilience arrangements).
The plan also aims to identify and consider other sources of assurance
available to the Board and senior management in relation to overall
objectives and external disclosures and the level of reliance which
can be placed on these sources in the short to medium term.
Audit Committee Report
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97
Governance Audit Committee Report continued
Following consideration, the Committee confirmed its agreement
to the 2022 Internal Audit plan, including the assurance objectives
identified. The Committee reviews the results of 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 2021, this has involved discussions between the Committee
Chair and partners from third-party partner firms, feedback from
auditees and senior leadership and assessment of execution against
methodology. This has highlighted positive feedback on the balance
between challenge and support provided to management and the
agile development of the audit plan and identified opportunities
for continuous enhancement of assurance reporting and use of
technology to support execution.
Governance and compliance
The Committee is responsible for reviewing the Group’s Code of
Conduct (a revised version of which was approved in December 2021)
and related policies.
Looking forward
During 2022, the Committee will remain focused on the key areas of
responsibility delegated to it by the Board, ensuring that standards
of good governance are maintained and that appropriate assurance
is obtained across all areas of the business, with a particular focus
on the Group’s principal risks, control environment and approach
to financial reporting taking into account developments in reporting
responsibilities including those recommended by the TCFD, the
consideration of climate risk in preparation of the financial statements
and changes in the governance environment, particularly those
related to changes in the audit regime.
External Auditor
In August 2019, the Company announced the Board’s intention to
propose to shareholders that PwC be appointed as the Company’s
statutory Auditor for the financial year ending 31 December 2021.
The audit tender process undertaken was explained in detail in
the 2019 Annual Report and Form 20-F and the appointment was
confirmed by shareholders at the 2021 AGM.
A detailed audit plan was received from PwC at the beginning of
the audit cycle for the 2021 financial year, which gave an overview
of its approach to the audit, outlining the significant risk areas and
in particular the approach to materiality and scoping of the audit.
The Committee regularly reviewed the significant audit risks and
assessed the progress of the audit throughout the year.
The Committee assessed PwC’s performance, including its
independence, effectiveness and objectivity. As part of its review,
the Committee determines the independence of the external
Auditor, considering, among other things, its challenge to
management and level of professional scepticism, the amount
of time passed since a rotation of audit partner and the level of
non-audit work that it undertakes (details of which can be found
on page 164). Giles Hannam took on the role of lead audit partner
for the first time in 2021 and will be required to rotate after five
years to safeguard PwC’s independence.
The effectiveness of the external auditor is evaluated by the Audit
Committee through a feedback questionnaire sent to Committee
members and a number of senior IHG employees. The 2020
evaluation was the last of EY as outgoing auditor; the survey
identified the areas that worked well in the EY audit process and
assessed if adequate plans were in place for PwC’s first year.
There were no areas identified which required PwC’s specific focus.
An evaluation was also completed prior to the 2021 year-end; the
Committee concluded that the PwC audit team was providing
the required quality in relation to the provision of the services.
The audit team had shown the necessary commitment and ability
to provide the services together with a demonstrable depth of
knowledge, robustness, independence and objectivity as well
as an appreciation of complex issues. The team had posed
constructive challenge to management where appropriate.
In addition, qualitative considerations were taken into account.
These focused on the depth of knowledge of the external auditor
which was evidenced by:
• continued meetings with senior management and executives
across the business;
• frequent governance sessions with management, including
a focus on the planning and status of work by key workstream
as well as the status of the deployment of PwC’s tools and
technology across the audit. The governance sessions focused
on key milestones and provided a way for any matters to be
escalated and dealt with on a timely basis;
• various private meetings with the Chair of the Board, the Audit
Committee Chair and the head of Internal Audit;
• the provision of a ‘first impressions’ report and insights into
the Group’s processes and controls; and
• the audit plan, including significant risks, and how PwC’s
approach evolved as the profile of risks changed.
Overall, no significant issues were raised in the review of Auditor
performance and effectiveness and, as a result, the Committee
concluded that PwC provides an effective audit and maintains
independence and objectivity.
The Group has complied with the requirements of 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.
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Governance Significant matters in the 2021 Financial Statements
Area for focus
Issue/Role of the Committee
Conclusions/Actions taken
Accounting for
IHG Rewards
Accounting for IHG Rewards requires
significant use of estimation techniques
and represents a material deferred revenue
balance. The Committee reviews the
controls, judgements and estimates related
to accounting for IHG Rewards.
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.
Expected
credit losses
Estimating expected credit losses on trade
receivables continues to be subject to
an increased level of uncertainty. The
Committee reviews the provision and
considers the adequacy of the disclosure.
Impairment
testing
Impairment reviews require significant
judgement in estimating recoverable
values of assets or cash-generating units
and the Committee therefore scrutinises
the methodologies applied and the inherent
sensitivities in determining any potential
asset impairment or impairment reversal
and the adequacy of related disclosures.
Litigation and
contingencies
Exceptional
items
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.
The Group exercises judgement in presenting
exceptional items. The Committee reviews
and challenges the classification of items
as exceptional based on their materiality
or nature.
The Committee reviewed the deferred revenue balance and questioned the valuation
approach, the results of the external actuarial review and procedures completed, to
determine the breakage assumption for outstanding IHG Rewards points. The Committee
reviewed a paper from management outlining current loyalty trends (both member
behaviour, which remains distorted due to the pandemic, and planned changes to
programme benefits). A modified approach was adopted using pre-Covid behaviour
patterns as a base but giving some weight to activity during the pandemic and incorporating
estimated impacts on member engagement of future known programme changes.
The Committee concluded that the deferred revenue balance is appropriately stated.
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
were appropriate.
The Committee reviewed management’s papers setting out the approach to calculating
the provision for expected credit losses, including updates made to the provision matrix
to reflect the Group’s most recent cash collection experience. Expected credit losses are
still subject to increased uncertainty as, although cash collection has improved, the
proportion of older debt remains high and owner liquidity risk continues. Factors
considered included the overall improvement in cash collection, the ageing of receivables,
owners known to be in financial distress and the expected mitigating impact of payment
plans. The Committee concluded it agreed with the basis of calculation and that the related
disclosures were appropriate.
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, including testing for impairment reversals, and the
assumptions applied in estimating the recoverable values with a focus on the underlying
cash projections. In conjunction with software impairment testing, the Committee reviewed
management's conclusions in relation to costs previously incurred to implement cloud
computing arrangements following the International Financial Reporting Interpretation
Committee (IFRIC) guidance issued in March 2021 in relation to accounting for configuration
or customisation costs in a cloud computing arrangement. The Committee concluded
that it agreed with the decision to derecognise a net $12m of assets which are no longer
considered capitalisable. The Committee agreed with the other determinations reached
on impairment and that the related disclosures were appropriate.
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, and the associated disclosures, where relevant, based
on underlying factors.
The Committee reviewed papers by management and considered the consistency of
treatment and nature of items classified as exceptional. The Committee reviewed and
challenged the significance, timing and nature of the exceptional items (see pages 165 to 167)
which comprise $4m fair value loss related to an associate, $25m expected settlement of
commercial disputes, and $26m exceptional tax credit on the change to the UK corporate
tax rate. The Committee concluded that the disclosures and the treatment of the items
shown as exceptional were appropriate.
Going concern
and viability
Covid-19 continues to impact the
profitability and cash generation of the
Group and the level of uncertainty in
planning scenarios. 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 2023 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 149) and the viability statement (pages 48 to 49) and is satisfied
these are appropriate.
Climate risk
UK deferred
tax asset
In preparing the financial statements,
assumptions in respect of the financial
impact of climate related matters have
been made.
The Committee considered the proportionate and consistent consideration of climate-related
matters across the Annual Report and in particular the potential impact on forward-looking
assumptions in the financial statements that support conclusions in areas such as impairment,
deferred tax assets, going concern and viability assessments, and the associated disclosures.
Given the size of the Group’s UK deferred tax
asset ($127m), 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 reviewed papers by management which 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
profitability assumed in these estimates, the Committee concluded that it agreed with the
recognition of the deferred tax asset, that this was not a significant estimate, as a material
change in estimate is not expected in the next 12 months, and that the disclosures
were appropriate.
Audit Committee Report
IHG | Annual Report and Form 20-F 2021
99
Governance Responsible Business Committee Report
In addition to the areas outlined above, the Committee’s key
responsibilities and focus areas over the year have been:
• monitoring the progress against the Group’s 2030 responsible
business commitments;
• monitoring the Group’s carbon and energy reduction strategy
and plan;
• reviewing the Group’s DE&I initiatives and objectives;
• implementing the recommendations of the TCFD;
• assessing the Group’s responsible procurement agenda; and
• overseeing the Group’s Human Rights programme.
Membership and attendance at meetings
The Committee’s membership and attendance at meetings are set
out on page 81. The Chair of the Board, CEO, General Counsel and
Company Secretary, Executive Vice President, Global Corporate
Affairs and the Chief Sustainability Officer attended all meetings
held during the year.
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
The Committee’s effectiveness continues to be monitored and
assessed regularly by the Committee’s Chair and the Chair of the
Board. In 2021, the Committee was also reviewed as part of the
internal Board evaluation process, where it was concluded that
the Committee remains effective.
Focus areas and activities
Responsible business commitments
In a year that saw the launch of the Group’s Journey to Tomorrow
responsible business plan, the Committee reviewed the 2021
strategic priorities that support the overall 2030 responsible
business commitments, and discussed the approach to hotel owner
engagement on the commitments and impact of the commitments
on employees. The Committee further considered how the
commitments align to the Group’s purpose to provide True Hospitality
for Good and how they compare to those of the Group’s competitors,
and endorsed the approach to the 2021 responsible business
strategic priorities.
Further information on our 10-year responsible business plan can be
found on pages 23 to 31.
Carbon and energy reduction
The Committee reviewed the Group’s decarbonisation and energy
reduction strategy and pathway, noting the proposed actions across
three main areas: energy efficiency in the Group’s existing hotel
estate; sourcing renewable energy; and developing zero-carbon
new-build hotels. The Committee also approved the Group’s
upgraded science-based target to reduce carbon emissions to align
with the most ambitious goals of the Paris Agreement to keep global
warming within 1.5°C.
Diversity, equity and inclusion
As part of its assessment of the Group’s DE&I agenda, during the year
the Committee endorsed the roll-out of conscious inclusion training
for all corporate employees with a commitment to improving DE&I
data collection and measurement. As at 31 December 2021, 38% of
our Senior Leaders were women, in addition to women comprising
41% of the Company’s Board.
I am pleased to present the Responsible Business
Committee’s report for the year, including an update
on the Voice of the Employee engagement plan.
The impact of Covid-19, the return of corporate employees
to the office and the introduction of hybrid working were
high on the Committee’s agenda, alongside the launch of
the Group’s Journey to Tomorrow responsible business plan,
the establishment of TCFD reporting procedures and the
incorporation of climate-related issues into the broader
strategic and risk processes.
The Committee has continued to shape and track the roadmap
to support the Group’s 2030 responsible business commitments,
endorsing the strategic priorities to be addressed which
underpin the bold, long-term ambitions and are designed to
help shape the future of responsible travel together with those
who stay, work and partner with IHG.
I would like to thank all those across the business who have
assisted the Committee in fulfilling its role over the year,
especially those who have worked so hard to drive the Group’s
environmental and social agenda forward as well as supporting
the wellbeing of its employees during the pandemic.
Jill McDonald
Chair of the Responsible Business Committee
21 February 2022
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 www.ihgplc.com/investors under
Corporate governance.
100
IHG | Annual Report and Form 20-F 2021
Governance
TCFD
The Committee assessed key TCFD workstreams, including an
analysis of the potential impact to the Group of the most material
climate-related risks and opportunities. It also considered plans
to embed climate risk considerations into its strategic and risk
management processes and the appropriate governance framework
to achieve this. Further information on TCFD is included on pages 32
to 35.
Responsible procurement
The Committee considered reports from management on the
Responsible Procurement programme, focusing on supply chain risk,
supplier diversity and the selection of suppliers that will support the
Group’s plans for carbon emission and waste reduction. For more
information on the responsible procurement programme, see
page 39.
Human Rights programme
The Committee received updates on the Group’s Human Rights
programme, noting the progress made in key workstreams relating
to responsible labour practices, ethical recruitment and anti-human
trafficking. The Committee also reviewed the 2021 Modern
Slavery Statement.
Looking forward
During 2022, the Committee will continue to focus on embedding
the 2030 responsible business commitments and TCFD reporting.
Our Responsible Business Report is available at
www.ihgplc.com/responsible-business
Voice of the Employee
At the start of 2021, Jill McDonald was IHG’s designated
Non-Executive Director (NED) with responsibility for workforce
engagement (Voice of the Employee), with additional support
provided by Duriya Farooqui, Daniela Barone Soares and
Jo Harlow. Jill has also been supported by the Group’s Human
Resources (HR) team, which assisted with developing the
Board’s workforce engagement plan and provided data on
various metrics relating to employees, such as employee
engagement survey results.
Role and responsibilities
Their role and responsibilities 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 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.
2021 engagement
In 2021, the team acted on the recommendation to obtain more
direct input and feedback from employees in key markets outside
the US and UK and from hotel-based employees.
Accordingly during the year, Jill, with the assistance of Duriya,
Daniela and Jo, undertook a programme of activities to engage
with a cross-section of employees and received detailed feedback
both in person and through the Group’s employee feedback
mechanisms. They attended a number of virtual meetings with
employee forums, including leader groups (within US and UK
hotels, reservations and corporate populations) and Employee
Resource Groups (ERGs) in the UK, US, India, Philippines, China
and various EMEAA countries.
Additionally, Jill was briefed by the Global HR Leadership team
on broader cultural insights and an organisational ‘pulse’ survey
across all employee populations.
Discussion topics included IHG’s response to the pandemic;
employee wellbeing; feedback on executive remuneration;
flexible/remote working and return to the office; industry
profitability and the competitive landscape; leader
communications; talent attraction; onboarding and retention;
personal and career development; and agile ways of working.
Meetings with employees continued to be virtual in 2021 due
to the continuation of the pandemic. Additional engagement
and activities undertaken by Jill during the year included:
• monitoring and reviewing the content and feedback from
global ‘all employee’ CEO calls; and
• reviewing employee dashboards and survey results.
Insights and learnings
Jill provided regular feedback to the Responsible Business
Committee and the Board throughout the year, with key Board
discussions taking place around the insights and action planning
arising from employee engagement survey results. Through this
feedback, the Board gained valuable insights into employee
sentiment during the pandemic and throughout the return
to the office.
Plans for 2022
The Board has approved the transition of the Voice of the
Employee responsibilities to Duriya Farooqui with effect from
1 January 2022. It is anticipated that additional NEDs will continue
to assist with and support Voice of the Employee activities.
A schedule of discussions and feedback sessions has been
arranged for 2022. This will continue to encompass a wide group
of employees and leaders from across all regions, including ERGs
and Lean In circles, with further inclusion in 2022 of hotel managers
in additional locations, to ensure a broad range of insights as well
as concerns and issues are conveyed to the Board. Additionally,
the Board intends to review the functioning of the Voice of the
Employee programme to ensure it meets best practice and
complies with changes in regulation.
Responsible Business Committee Report
IHG | Annual Report and Form 20-F 2021
101
Governance Nomination Committee Report
Board composition and succession have featured
prominently on the Committee’s agenda again in 2021, with
the appointment of two new Non-Executive Directors in
March 2021. The Committee also oversaw Board succession
plans with the recommendations to appoint Graham Allan
as Senior Independent Non-Executive Director and
Duriya Farooqui as the Non-Executive Director responsible
for the Group’s Voice of the Employee engagement plan.
The Committee’s overriding concern when recommending
new Directors for appointment to the Board has been to ensure
that the Board and its Committees continue to include the best
range of talent, skills and relevant experience available as well
as reflecting our stakeholders and the communities in which
we operate. We also want to ensure that the Board’s
composition aligns with our strategy.
We value diversity and the advancement of diversity on the
Board and in the Group’s leadership continues to be a governing
factor in our approach to succession.
I am pleased to report that, at 31 December 2021, our
Board composition exceeds the target for the proportion of
women on boards set out in the Hampton-Alexander Review
(which issued its final report in February 2021) as well as the
recommendation on ethnic diversity on boards in the
Parker Review.
Patrick Cescau
Chair of the Nomination Committee
21 February 2022
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 benefits of diversity, including gender, and social,
ethnic and geographic backgrounds.
The ToR are available at www.ihgplc.com/investors under
Corporate governance.
The Committee’s key responsibilities and focus areas during the year
have been:
• assessing Board and the Principal Committees’ composition and
succession planning, including consideration of gender balance
and ethnic and geographical diversity, in accordance with the ToRs
and consistent with the Group’s DE&I Policy (details of which are
on page 25);
• engaging with external search consultancies and making
recommendations on appointments to the Board;
• monitoring the Executive Committee talent and succession
planning; and
• overseeing the performance evaluation of the Board, the Principal
Committees and individual Non-Executive Directors.
Membership and attendance at meetings
The Committee’s membership and attendance at meetings are
available on page 81. All members of the Committee are Non-
Executive Directors. When the Committee considers matters relating
to my position, the Senior Independent Non-Executive Director (SID),
acts as Committee Chair.
Reporting to the Board
The Committee makes recommendations to the Board for all Board
appointments. Minutes are circulated to Board members and I report
back to the Board on the activities of the Committee following
each meeting.
Effectiveness of the Committee and internal evaluation
During the year, the effectiveness of the Committee was reviewed as
part of the internal Board evaluation process. It was concluded that
the Committee remains effective.
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IHG | Annual Report and Form 20-F 2021
Governance Focus areas and activities
Board and Principal Committee composition
and succession planning
The Committee continued to review the current and future
composition of the Board and its Principal Committees.
The Committee considered short and medium term succession
planning in all of its meetings during the year, reflecting on the
skills and experience that would benefit the Board’s current and
future composition, while taking into account gender, ethnicity
and broader diversity considerations.
The Committee noted the Board’s assessment that it would benefit
from additional expertise in the technology and travel sectors,
with a focus on ESG responsibilities. It engaged an external search
consultancy, Spencer Stuart, to assist with searches for suitable
Non-Executive Directors. Spencer Stuart has no other connection
with the Company or individual Directors.
A candidate selection, assessment and interview process was
conducted, including consideration of candidates’ other commitments.
Following the completion of satisfactory background and reference
checks by Spencer Stuart, the Committee recommended to the
Board the appointment of Richard Anderson and Daniela Barone
Soares as Non-Executive Directors with effect from 1 March 2021.
The Committee noted that, at the time, Daniela and Jo Harlow were
both Independent Non-Executive Directors of Halma plc (Halma),
but that Daniela did not intend to stand for re-election as a Director
of Halma and would retire from its board from 22 July 2021.
Accordingly, the Committee’s recommendation to the Board to
appoint Daniela was made on the basis that it did not consider
the independence of either Daniela or Jo to be impaired by this
cross-directorship.
Executive Committee talent and succession
During the year, the Committee also continued to review the talent
and succession plans for the Executive Committee and senior
management positions in order to ensure the development of a
diverse pipeline for succession. The Committee considered the
organisation design in the context of the Group’s strategic priorities
and endorsed the approach to succession planning.
Information on the gender balance of senior management as well
as the Board is included on page 100.
Richard later took the decision to step down from the Board due to
unanticipated personal matters on 26 May 2021. Daniela’s biography
is included on page 84 and details of her induction plan can be
found on page 93.
The Committee also discussed and considered succession planning
for the SID role, in light of Dale Morrison’s tenure and retirement at
the end of the year. It recommended to the Board that Graham Allan
be appointed to replace Dale as the SID, in light of his significant
strategic expertise and his tenure and contribution since his
appointment to the Board in 2020.
In addition, the Committee considered the role of Non-Executive
Director responsible for the Voice of the Employee engagement
plan. It recommended to the Board that Duriya Farooqui assume
responsibility for this role from 1 January 2022, in light of her skills
and capabilities and proximity to the Group’s main US
corporate office.
A separate Search Committee, led by Dale Morrison, was established
to lead the process for the search and appointment recommendation
of a new Chair of the Board. A summary of its activities and the
process it followed is set out on page 93.
The Committee also reviewed and discussed the length of tenure
of Non-Executive Directors. As Ian Dyson and Jill McDonald will
reach nine years’ service in 2022 and Jo Harlow will reach nine years’
service in 2023, they were subject to particular review.
The Committee considered their appointments in the context
of the broader Board composition and tenure and recent Board
appointments. The Committee also took into account their time
commitments and other appointments, and concluded that each of
them continued to be able to devote sufficient time to the Board and
their respective Committees and that they remained independent.
Nomination Committee members did not participate in the
discussion in relation to their own time commitment and tenure.
Performance evaluations
Following the external evaluation carried out in 2019 and an internal
evaluation in 2020, during the year the Committee oversaw an
internal evaluation of the Board and its Principal Committees,
details of which are provided on page 94.
The Committee reviewed and discussed the outcomes of the
Board and the Principal Committees’ evaluations, noting the largely
favourable feedback and the overall conclusions as to the continued
effectiveness of the Board and the Principal Committees.
In addition, the Committee reviewed and endorsed the approach
to individual Director evaluations, involving the Chair undertaking
individual feedback assessments with Directors and the SID gathering
feedback from Directors to assess the performance of the Chair.
Further details are also available on page 94.
Looking forward
In 2022, the Committee will continue to focus on Board refreshment
plans, with particular focus on succession planning in respect of
Non-Executive Directors approaching a nine-year tenure. I will also
transition my responsibilities as Chair of the Committee to
Deanna Oppenheimer.
Nomination Committee Report
IHG | Annual Report and Form 20-F 2021
103
Governance
Directors’ Remuneration Report
Remuneration Committee Chair’s statement
Framework for consideration of discretion
In line with the UK Corporate Governance Code, the Committee
has adopted a formal framework which it will use to determine
whether to exercise discretion. Some of the key factors the
Committee consider are shown below.
“ As we have continued to navigate through
the pandemic, management has kept focus
on the long term and positioned the business
well for recovery and to emerge stronger.”
Table of contents
104 Directors’ Remuneration Report
104 Remuneration Committee Chair’s statement
109 At a glance
110 Our approach to remuneration
115
Annual Report on Directors’ Remuneration
(subject to an advisory vote at the 2022 AGM)
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 & guests
Historic use of discretion
Possible use
of discretion
As Chair of the Remuneration Committee and on behalf of the
Board, I am pleased to present the Directors’ Remuneration Report
for the year ended 31 December 2021.
We continued to be impacted by the pandemic through 2021
but, whilst volatility remains, we have moved from crisis to recovery
and growth. In-year financial performance was strong and, in addition,
we have remained focused on post-pandemic, long-term strategy.
Management has undertaken bold steps, such as the review of the
Holiday Inn and Crowne Plaza estate and digital, brand and loyalty
initiatives to take advantage of post-Covid-19 trends and
opportunities for future growth.
Financial performance has recovered strongly from 2020, with
significant improvements in global RevPAR, fee margins and cash
flow, and a final dividend of 85.9¢ is proposed in respect of 2021.
Our people have responded incredibly to the challenges faced
and it is encouraging to see that the health, safety and wellbeing
support at both hotel and corporate levels, including the shift to
hybrid working arrangements for the latter, has been so well received.
Our overall employee engagement score of 85% is a significant
achievement during a difficult period and places IHG as a Kincentric
Global Best Employer. In early 2022, around 2,200 employees
benefited from the first vesting of matching shares from our
employee share plan and participation continues to increase,
with 53% of eligible employees enrolled for the 2022 plan.
Our owners choose to work with IHG based on the trust they have
in our brands and our track record in delivering returns. The review
of our Holiday Inn and Crowne Plaza estate was therefore important
to get right and it was very pleasing to see 83 hotels commit to
improvements, protecting quality and brand perception. In addition,
we continued to expand the strength and depth of our brand portfolio
with the launch of Luxury & Lifestyle brand Vignette Collection and
this is another important step in positioning the business for future
growth opportunities.
The profound impact of Covid-19 over the past two years has,
however, presented challenges not only for the business but also
for the Committee in recognising and rewarding performance,
whilst also considering stakeholder experience and the already
challenging talent management context. This is particularly evident
in respect of long-term incentives, for which targets were set in
a very different commercial and market context to the one in which
we found ourselves. In considering how to reward performance in
the context of the pandemic, the Committee has sought to take into
account the experience of all of our stakeholders as well as the
results that have been delivered by management.
Overview of 2021 remuneration outcomes
The key highlights of Executive Director incentive plan awards for
2021 are presented below and a detailed explanation and rationale
for the Committee’s decisions are set out in this report:
• The formulaic achievement on Annual Performance Plan (APP)
metrics (operating profit from reportable segments, openings and
signings) was 187.3% of target, resulting in awards for Executive
Directors which were capped at the maximum payout of 200%
of salary.
• Formulaic achievement under the 2019/21 Long Term Incentive
Plan (LTIP) was below the payout threshold across all measures.
Targets were set in February 2019 and full year 2019 performance
in isolation was at 57% of maximum (19% if pro-rated across the full
cycle), reflecting strong performance on absolute net system size
growth (NSSG), cash flow and relative Total Shareholder Return
(TSR), and was initially forecast to improve further over the cycle
as noted on the next page. 2020-21 performance was significantly
affected by the subsequent unforeseen impact of Covid-19 on
the business.
• The Committee has evaluated the formulaic outcomes against
the factors listed under its formal framework for considering the
exercise of discretion (see top of page) and:
– is satisfied that the APP outcome reflects both management
performance and the experience of other key stakeholders,
including shareholders and the wider workforce, as summarised
over the following pages; but
– has chosen to apply discretion to vest 20% of the shares awarded
to Executive Directors under the 2019/21 LTIP. Further detail on
the rationale for the Committee’s decision is set out over the
following pages.
• The total average of short- and long-term incentive plan awards
for the period ending 2021 was therefore 59.5% of maximum.
This compares to 15.5% for 2020 and 68.8% in 2019.
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IHG | Annual Report and Form 20-F 2021
Governance 2019/21 LTIP award
On a formulaic basis, in line with the concerns we noted in last year’s report, the performance of the 2019/21 cycle is below the threshold
for vesting on each of its measures. When the Committee reviewed performance towards the end of the first year of the performance
period, the forecast vesting level was ~78%. However, the three absolute targets (cash flow, Total Gross Revenue (TGR), NSSG) were set
pre-Covid-19, and the severe travel industry impacts of the pandemic in the final two years of the cycle have rendered these targets
unachievable; and an important factor in the relative TSR outcome is the strong performance of peer group companies with an operating
footprint with a significantly higher weighting to the faster-recovering US economy market segment.
Taking the framework for discretion factors into account, the Committee’s view is that the formulaic outcome does not reflect the performance
of the business in the crisis and has exercised its discretion to determine an overall vesting level of 20%, based on cash flow performance.
The Committee took a qualitative and quantitative view of absolute and relative performance and management actions to address the
exceptional circumstances resulting from the pandemic as well as considering the experience of our key stakeholders, including our people,
shareholders, owners and guests. The detailed rationale of the Committee is as follows:
Committee determination
Measure and
weighting
Formulaic
outcome
Weighted
discretionary
outcome Rationale
Cash flow
(CF)
(20%)
0%
20%
• The Committee has reviewed performance on this measure from a number of different perspectives, particularly
from a wider company financial and strategic performance basis.
• For 2019 in isolation, performance was strong, being at maximum level on a pro-rated basis as follows:
Performance range $bn
Actual $bn
Component
achievement
Weighted LTIP
outcome
For full cycle
Pro-rated for 2019 only
1.87
0.524
2.49
0.698
1.78
0.700
0%
100%
0%
20%
Mathematically, on a pro-rated basis this 2019 performance contributes 6.67% vesting to the whole cycle.
• For 2020 and 2021, the original target became irrelevant, and instead the Committee has looked at the Executive
Directors’ performance in the key area of cash flow and liquidity management, balancing the need to protect the
business while continuing to invest in future growth including:
• managing through the impact of Covid-19 without the need to raise new equity;
• securing interest cover and leverage ratio covenant waivers on existing debt agreements;
• accessing increased liquidity through:
– £600 million of CCFF drawn down, which was repaid in March 2021;
– issue of two new bonds in October 2020 and a tender on 2022 bonds, raising around net £600 million
to provide longer term liquidity to the business;
• protecting cash flow by prudent use of capital and reducing costs by $150 million ($75 million of which
is sustainable for future years);
• strong performance on working capital, targeted approaches to cash collections and management
of expenditure; and
• actions to mitigate potential IHG exposure in cash flows and manage cash outflows, leading to strong cash
conversion and a reduction in net debt in both 2020 and 2021.
• As a result:
• positive adjusted free cash flowa of $29 million was generated in 2020, with the impact of Covid-19 related
revenue reductions partly offset by cost saving measures:
– 2021: $571 million; and
• closing 2020 liquidity of $2.9 billion (comprised of $1.35 billion undrawn bank facilities and $1.575 billion
of cash/cash equivalents):
– 2021: $2.7 billion.
• The Committee believes that management has done all it could to preserve IHG’s resilience and strategic
capability for strong future growth, justifying full vesting for these years in the cash flow element of the LTIP cycle.
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 defined under IFRS or are adjusted IFRS figures.
Further explanation in relation to these measures can be found on page 73 to 77 and reconciliations to IFRS figures, where they
have been adjusted, are on pages 218 to 223.
Net system
size growth
(NSSG)
(20%)
Total Gross
Revenue
(TGR)
(20%)
0%
0%
• This absolute target was set pre-Covid-19, at a time that we would have expected the industry supply growth
to continue at least at the same pace as the preceding three years; in fact, there was a drop of 25% over 2020-21
compared to 2017-19, making the absolute target unachievable.
• The Committee reviewed NSSG performance in detail from a number of different perspectives and ultimately
concluded that, based on analysis of the data and context, it did not consider it appropriate to adjust the
formulaic outcome of this absolute measure.
0%
0%
• This absolute target was set pre-pandemic and rendered unachievable due to the severe market-wide decline
in RevPAR and other revenues.
• Based on analysis of the data and context, the Committee did not consider it appropriate to adjust the formulaic
outcome of this absolute measure.
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
105
Governance Directors’ Remuneration Report continued
Remuneration Committee Chair’s statement continued
Committee determination
Measure and
weighting
Formulaic
outcome
Weighted
discretionary
outcome Rationale
Total
Shareholder
Return
(TSR)
(40%)
0%
0%
• The IHG share price has remained resilient through the latter part of 2020 and 2021 after recovering from an initial
reduction in the first half of 2020.
• IHG delivered 17.9% TSR for the cycle; ahead of all European peers in the comparator group.
• However, the share price performance of some comparator group companies based primarily in the fast-recovering
US market, with a weighting towards the economy segment, and with their shares listed on US stock markets
which have performed better than the FTSE over this period, has resulted in IHG being below the threshold level
for vesting on this relative measure.
• Based on analysis of the data and context, the Committee did not consider it appropriate to adjust the formulaic
outcome of this measure.
Total
0%
20%
In summary, the Committee believes a 20% outcome acknowledges the strong performance of 2019 as well as the outstanding performance
of management during the Covid-19 crisis.
2021 APP award
Alongside operating profit from reportable segments, the 2021 strategic openings and signings measures were designed to provide
in-year focus on rooms growth in a severely constrained market, to complement the longer term three-year LTIP focus on overall net
system size growth. The formulaic achievement against the APP measures would result in an award of 187.3% of target, or 215.4% of salary.
However, awards for Executive Directors under the Directors’ Remuneration Policy are capped at a maximum payout of 200% of salary.
The Committee feels the capped maximum APP award is justified given its view on the strong performance of the business in 2021 on both
an absolute and relative basis:
Measure and
weighting
Weighted
outcome
Consideration of discretion
140%
Operating
profit from
reportable
segments
(70%)
• The targets were appropriately set, with a much wider and asymmetric range around the target outcome than in previous years,
resulting in significantly greater stretch required on the upside and reflecting the context at the time; just as management had
no visibility to the onset of Covid-19 in 2020, there was little visibility of the shape and pace of recovery through 2021 and,
in practice, there were variations in performance in regions and markets driven by different approaches to travel restrictions
and vaccine roll-outs.
• Management delivered strong results against the key financial metrics which contribute to operating profit, including sustainable
cost savings of $75 million (following on from 2020 cost savings of $150 million), whilst continuing to invest in growth
opportunities, such as the launch of the Vignette Collection, and to focus on the quality of growth through the review of the
Holiday Inn and Crowne Plaza estate.
• The Committee has reviewed the quality of underlying performance, including whether adjustments should be made to take
account of this and concluded this was not necessary.
• On this basis, the Committee found no basis for applying negative discretion.
Signings
(15%)
Openings
(15%)
30%
• Targets were set appropriately, reflecting the typical nature of the pace at which the drivers of signings and openings respond
during periods of recovery, and containing significant stretch to achieve outperformance.
• Absolute performance represented an impressive 23% improvement on the prior year.
• The Committee also assessed performance against our largest competitors, with IHG maintaining its share of signings
throughout the pandemic. The Committee is satisfied that performance relative to our peers was competitive.
• See under ‘Openings’ below regarding the Committee’s assessment against Global Metrics performance.
• On this basis, the Committee found no basis for applying negative discretion.
17.3%
• Performance was ahead of target on this measure and represents 5% of prior year closing system size on a rolling
year-on-year basis.
• Despite supply chain issues and other delays due to the pandemic, which has made openings very challenging, we delivered
year-on-year growth and sequentially improved through the year.
• The Committee assessed performance relative to competitors and is satisfied that performance relative to our peers
was competitive.
• The signings and openings measures are subject to the Committee assessing performance against the Company’s Global Metrics.
The majority of metrics, six of 10, tracked above target or prior year performance. Of those with formal targets, five of six
exceeded target.
• On this basis, the Committee found no basis for applying negative discretion.
Overall, having also considered broader stakeholder perspectives (see next page), the Committee found no basis for applying
negative discretion to the formulaic outcome of the 2021 APP.
Total
187.3%
Total 2021 variable incentive outcome
In addition to reviewing the individual LTIP and APP components as outlined above, and the wider stakeholder position as outlined below,
the Committee took a holistic view of variable incentive outcomes and considered the overall outcome for 2021. In total, the 2021 APP
and LTIP awards for Executive Directors represent 59.5% of the maximum potential value. This is consistent with historic overall reward
outcomes, as outlined on page 120 in respect of the CEO, which have varied between 56.6% and 84.2% of maximum and averaged 67.1%
in the previous 10 years excluding 2020. The 2019/21 LTIP cycle is also the first under which Executive Directors are subject to a two-year
post-vesting holding period. The Committee considers the combined 2021 LTIP and APP awards appropriate in this context.
106
IHG | Annual Report and Form 20-F 2021
Governance Broader stakeholder perspectives
In considering the use of discretion, the Committee has taken into account the experience and views of wider stakeholders:
Wider
workforce
• The APP measures of operating profit from reportable segments, openings and signings apply to the whole corporate employee population,
along with a personal performance element below the Executive Committee (EC), with target bonus amounts determined by grade.
The strong formulaic performance under the corporate measures will apply to and benefit this whole population. In addition, in view of the
strong performance in 2021, an extra 20% is being added to the amount budgeted for the personal performance element to increase awards
for those employees who performed the strongest during 2021.
• In the context of continuing retention and succession concerns below Board:
• LTIP award-holders received an additional award in 2021, topping the 2018/20 cycle award up to 40%, and will receive an award in 2022
on the same basis in respect of the 2019/21 cycle in recognition of the significant additional work and effort required during these cycles
as a result of the pandemic impact; and
• in addition, separate one-off retention awards in the form of cash and deferred shares were made to core skill and succession talent
individuals across the corporate population.
• In contrast, Executive Directors received only the formulaic outcome of the 2018/20 LTIP (30.6% of maximum) and no 2020 APP award.
• In January 2022, the first matched share vesting took place under our employee share plan, as a result of which around 2,200 employees
received free shares matched on a 1:1 basis.
• The overall employee engagement score of 85% exceeded that of external benchmarks by 8%.
• As explained on page 112, the employing entities for a number of UK leased hotels are part of the IHG group. All roles at all these hotels are
paid above the living wage and zero-hour contracts have been eliminated across this estate. From April 2022, all employees in these hotels
will be paid above the real living wage. However, as a result of continued travel restrictions and hotel closures during 2021, some UK government
support was obtained in respect of this workforce for the benefit of the hotel owner. The Committee has taken into account that, in respect
of pay for these employees, IHG does not have decision rights and must be sensitive to the commercial circumstances of these leased hotels,
the owner and equities across the owner’s wider business, and the employees of other owners of IHG hotels.
• In respect of the directly-employed corporate workforce, no UK government support for staff costs was obtained in either 2020 or 2021 and,
following the reversal of the actions taken in 2020 outlined in last year’s report, no employees across the global corporate population were
furloughed in 2021.
• Further considerations included under ‘Remuneration at IHG – the wider context’ on page 112.
Owners
• Favourable credit terms provided to assist with the impact of the pandemic.
• Agreement with owners to manage cash flow through utilisation of maintenance reserves.
• Expanded hotel procurement solutions to combat supply chain challenges and rising costs.
• Launched new hiring tools and support to recruit and retain talent.
• Continued review and evolution of brand standards to improve operational efficiency.
• Government advocacy carried out on behalf of owners.
Guests
• Flexible cancellation policy operated, and waiver of cancellation fees.
• Continued execution of IHG Way of Clean and IHG Clean Promise in our hotels.
• IHG Rewards membership status protection provided.
Shareholders
• IHG share price has remained resilient, ending 2021 1.9% up on the end of 2020 and 100% up on the lows of March 2020.
• The Board is proposing a final dividend of 85.9¢ in respect of 2021, and there is continued momentum in future growth, with our global
pipeline equivalent to over 30% of the current system size and more than 40% under construction.
• Having listened to shareholder feedback at the time and refrained from using discretion for the 2018/20 LTIP cycle, we received positive
and constructive feedback in consultations with shareholders on the potential use of discretion for the 2019/21 LTIP cycle.
2020/22 LTIP cycle
The Committee has continued to consider the impact of the pandemic on in-flight LTIP awards and, whilst there is no intention to adjust
incentive plan targets mid-cycle, as noted in the 2020 Directors’ Remuneration Report in respect of the 2020/22 LTIP, the Committee:
• continues to monitor a shadow target for cash flow, agreed at its October 2020 meeting after the initial impact of the pandemic became
evident; and
• remains minded not to reduce the relative NSSG vesting outcome based on the Return on Capital Employed (ROCE) underpin if this is not
met for this cycle solely due to the impact of the pandemic on earnings.
The cash flow target for the 2020/22 LTIP cycle was set and prospectively disclosed in February 2020, before the fundamental global impact of
the pandemic had become apparent. Within months, it was clear that it was very unlikely to be achievable for the three LTIP cycles including 2020
(2018/20, 2019/21 and 2020/22). The shadow target was based on assumptions of a full recovery over time and management focus on maintaining
sustainable savings and disciplined cash management and was intended to provide a reference point to consider at the time of vesting.
The Committee’s current view is that the shadow target, as we look at it in early 2022 and given the range of unexpected developments
since October 2020, remains a stretching and appropriate target. In the Committee’s view, the Delta variant, the 2021 second-wave
lockdowns and global travel restrictions, and the subsequent impact of Omicron have all added headwinds that counter the stronger than
expected recovery pace in the US. The Committee has therefore concluded that this shadow target will be highly relevant when considering
the vesting of this cycle in early 2023. Following consultation with shareholders, the shadow target is disclosed on page 124 of this report.
In any event, the Committee will continue to assess the appropriateness of using discretion to adjust the formulaic outcomes upwards or
downwards based on all relevant factors at the time of vesting of the award and in line with its formal framework for considering the exercise
of discretion.
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
107
Governance Directors’ Remuneration Report continued
Remuneration Committee Chair’s statement continued
Implementation of Directors’ Remuneration Policy (DR Policy) in 2022
As covered in more detail on pages 124 to 125:
• Salary increases for Executive Directors for 2022 will be in line with the budget for increases for the wider UK and US corporate populations
and are made following an assessment of 2021 performance.
• The non-financial measures for the 2022 Annual Performance Plan will remain as openings and signings, as in 2021, aligned to our key
strategic objectives for recovery and our future growth priorities.
• LTIP 2022/24 cycle measures will also remain as relative TSR (30%), relative NSSG (40%) and absolute cash flow (30%), with Total Gross
Revenue having been replaced by increased weightings for cash flow and relative NSSG. Retaining the same balance of measures for
the 2022/24 cycle keeps an overall relative performance focus, appropriate in a context of some continued uncertainty. It also retains
the increased focus on NSSG, which is strategically key and, being relative, factors in the economic and market context and any related
volatility that occurs.
Retirement benefits for incumbent UK Executive Directors will align with the maximum company contribution available to all other participants
in the UK pension plan at the end of this year. As stated in last year’s report, and in line with our approved DR Policy, US retirement benefit
arrangements, in which the CEO, Americas, participates, differ in a number of respects from UK pension arrangements, as explained on
page 112. They are comprised of a 401(k) plan under which all corporate employees benefit from maximum employer contributions of a
consistent 6% of salary, and a Deferred Compensation Plan for around 100 eligible senior employees under which all participants including
the CEO, Americas can receive supplementary contributions of up to 16% of salary. These are common retirement benefit plans in the US
market and, given the parity of treatment for all participants in each of these plans, as well as the importance of the CEO, Americas role to
the business and the market competitiveness concerns over Executive Director pay, the Committee intends to maintain the arrangements
as they relate to the CEO, Americas.
ESG considerations
Our Journey to Tomorrow Responsible Business plan was released early in the year, including new and updated commitments relating to
our communities, people and planet and evolving the Company’s strategy in this area. The Responsible Business Committee report on page
100 and the Strategic Report on page 16 contain more information on our initiatives, reporting commitments and science-based targets.
The Committee takes a holistic approach to reviewing and implementing new remuneration targets, ensuring that they are aligned to
Company strategy (see page 110), and has continued to work closely with the Responsible Business Committee and Company management
team on a discrete ESG metric for Executive Director remuneration. During the year, the Committee reviewed options to align a remuneration
metric with the new and wider Journey to Tomorrow commitments.
On environmental metrics, we continue to improve our data integrity and, in 2021, launched an automated data collection project across
our hotels globally as part of our ongoing improvements to IHG’s Green Engage, our online environmental management platform. We have
also launched the Hotel Energy Reduction Opportunities (HERO) tool, which will be key to helping our hotels target energy, carbon and
water reductions. This work to support our hotels to decarbonise and measure our performance is important as it will enable us to reach
the targets we have set across our franchise properties (scope 3). On other potential ESG metrics, including those with a people focus,
further work will be undertaken in 2022 to assess baselines and performance as initiatives relating to new commitments roll-out throughout
the business. This approach is being taken to help ensure that truly stretching but achievable targets, based on robust systems and data,
can be set for incentive plan purposes.
In the meantime, as outlined on page 124, ESG criteria, such as annual energy reduction, employee engagement and guest satisfaction
performance, will continue to form a key element of the Committee’s overall assessment of performance against IHG’s Global Metrics
in considering the potential application of discretion to the formulaic outcomes of the 2022 APP strategic measures.
Wider workforce remuneration and employee engagement
As outlined on page 112, the approach to remuneration is aligned throughout the organisation and, during the year, the Committee reviewed
a number of aspects of the Company’s wider workforce remuneration policy, including the approach to fairness in reward, retention
arrangements, and arrangements for UK hotel employees.
Concluding thoughts
The Committee, including myself as the Committee Chair, are fully aware that the use of discretion in relation to the 2019/21 LTIP outcome
may not be considered to be in line with best practice or with the normal expectations of some investors and proxy agencies. The Committee
has considered and debated these matters at length, with a strong focus on achieving an outcome which is fair and equitable for all of our
key stakeholders, as outlined above, which rewards management in regards to performance in an unforeseen crisis, and which recognises
the highly competitive global talent market that we operate in.
About this report
As always, we strive to make this report as easy to read as possible. Following this statement, the ‘At a glance’ section provides an illustration
of 2021 remuneration outcomes and, over the following pages, there is a summary of how executive remuneration aligns to company strategy;
an overview of our approved DR Policy and its alignment with the UK Corporate Governance Code principles; a summary of remuneration
across the wider workforce; and, on pages 113 to 114, further background on the Remuneration Committee. The Annual Report on Directors’
Remuneration on pages 115 to 125 will be put to an advisory vote by shareholders at the May 2022 Annual General Meeting.
Jo Harlow
Chair of the Remuneration Committee
21 February 2022
108
IHG | Annual Report and Form 20-F 2021
Governance At a glance
Executive Director remuneration
2021 actual remuneration vs potential remuneration
The charts below show the 2021 potential remuneration opportunity and actual achievement compared to the 2020 actual achievement.
The relevant figures for each of the elements that make up the single total figure of remuneration, as shown below for the Executive Directors,
can be found in the table on page 115. See page 110 for the key to individual elements of actual remuneration for 2020 and 2021.
2020 salaries were reduced for part of the year as explained in the 2020 Annual Report.
Keith Barr,
Chief Executive Officer
Value (£000)
Paul Edgecliffe-Johnson,
Chief Financial Officer
Value (£000)
Elie Maalouf,
Chief Executive Officer, Americas
Value (£000)
2021
potential
2021
actual
2020
actual
4,524
2021
potential
3,176
1,484
2021
actual
2020
actual
1,067
3,316
2,325
2021
potential
2021
actual
2020
actual
3,251
2,249
1,005
0
1,000 2,000 3,000 4,000 5,000
0
1,000 2,000 3,000 4,000 5,000
0
1,000 2,000 3,000 4,000 5,000
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
under APP and LTIP
How we performed in 2021
Very strong performance against target for operating profit from reportable segments and signings, together with strong opening results,
meant that the formulaic 2021 APP achievement was 187.3% of target, resulting in awards for Executive Directors which were capped at
the maximum payout of 200% of salary. Under the LTIP, the impact of Covid-19 meant the formulaic outcomes were below threshold on
all measures. On the basis of the excellent start to the cycle in 2019 and the subsequent exceptional performance on the management
of cash flow in the context of the pandemic, as outlined on pages 105 to 106, the Committee exercised discretion to vest 20% of the
maximum award.
Measures used for APPa
Operating profit from
reportable segments ($m)
Room signings (k rooms)
15%
15%
70%
Operating profit
from reportable
segments
Room signings
Room openings
Threshold
222.0
Maximum
443.0
Threshold
52.4
Maximum
64.0
Target
296.0
Actual
535.1
Target
58.2
Actual
68.9
Room openings (k rooms)
Threshold
39.0
Actual
44.0
Target
43.3
Maximum
47.6
Measures used for LTIPa
Before discretion
Cash flow ($bn)
20%
20%
20%
40%
Total Shareholder
Return
Total Gross
Revenue
Net system
size growth
Cash flow
Threshold
1.87
Maximum
2.49
Actual
1.78
After discretion
Cash flow (vesting percentage)
a Further details of APP and LTIP outcomes
can be found on pages 116 to 117.
Threshold
20
Maximum
100
Actual
100
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
109
Governance Directors’ Remuneration Report continued
Our approach to remuneration
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
Audited information
Content contained within a tinted
panel highlighted with an ‘Audited’
tab indicates that all the information
within the panel is audited.
Table of contents
110 Our approach to remuneration
110
111
112
113 Remuneration Committee details
Link to strategy
Summary of our approved Directors’ Remuneration Policy
Remuneration at IHG – the wider context
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 111, 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. Alignment of pay
structures throughout the organisation and the implementation of remuneration policy across the wider workforce is covered on page 112.
Pages 113 to 114 contain a summary of Committee actions during the year.
Aligning variable elements of remuneration to strategy
Variable elements of remuneration are linked to our strategy through our four strategic priorities, our purpose and ambition.
Our purpose
Our ambition
Our strategic priorities
True Hospitality
for Good
To deliver
industry-leading
net rooms growth
Build loved and
trusted brands
Customer centric
in all we do
Create digital
advantage
Care for our people,
communities and planet
Element
Measures
Link to strategy
Explanation
Annual Performance
Plan (APP)
Operating profit
Room signings
Room openings
Global Metrics
Long Term Incentive
Plan (LTIP)
Relative Total Shareholder Return
Relative net system size growth
Cash flow
• The strength and breadth of our portfolio, tailored services
and solutions, and 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 ambition to deliver industry-leading
rooms growth.
• Aligned to our people, communities and planet strategy, the
Remuneration Committee will review performance on Global
Metrics, including key ESG measures (Employee engagement,
Guest Love, Responsible Business) in considering the potential
application of discretion to formulaic outcomes on APP
strategic objective measures.
• Our ambition is to deliver high-quality, industry-leading net
rooms growth 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 developing our
brands at scale 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.
110
IHG | Annual Report and Form 20-F 2021
Governance
Summary of approved Directors’ Remuneration Policy
2022
2023
2024
2025
2026
Framework
Purpose
Element
Fixed
Base salary
Benefits
Pension/
Retirement
benefit
Variable
Annual
Performance
Plan (cash)
Annual
Performance
Plan (deferred
shares)
Long Term
Incentive Plan
(LTIP)
Increases generally in line with the range
applying to the corporate population.
Reviewed annually and fixed for 12 months
from 1 April.
To recognise the value and impact
of the role and the individual’s skills,
performance and experience.
Relevant benefits are aligned to the
typical level for the role/location.
To be competitive and consistent with
role/location; to help recruit and retain.
A Defined Contribution or cash in lieu
amount for UK Directors. Employee
contributions with matching company
contributions. Salary is the only part
of pay that is pensionable. See further
details regarding UK and US pension
benefit on page 112.
To be competitive and consistent with
role/location; to help recruit and retain.
Maximum opportunity is 200% of salary;
70% based on operating profit measure
and 30% on key strategic objectives;
50% of the award is deferred into shares
for three years.
To reward the achievement of stretching
targets that support the Company’s
annual financial and strategic goals.
For 2022, the key strategic
objectives are:
• room signings (15% weighting); and
• room openings (15% weighting).
A focus on industry-leading net rooms
growth is at the heart of our strategy,
balanced by a Return on Capital
Employed (ROCE) underpin to reflect our
commitment to deliver quality growth
whilst maintaining returns. Together with
TSR and cash flow, there is a strong
alignment between Executive Director
remuneration and shareholder interests.
Cash
Deferral
Performance
Deferral
The maximum potential LTIP quantum
is 350% of salary for the CEO and 275%
of salary for other Executive Directors;
a two-year post-vest holding
period applies.
The Committee has considered the remuneration policy and practices in the context of Provision 40 of the UK Corporate Governance Code,
as follows:
Principle
Clarity
IHG’s approach
We always seek to set and report our performance-related measures, targets and outcomes in a clear, transparent and balanced
way, with relevant and timely communication with all of our stakeholders. Our reward policies drive engagement throughout the
workforce with an aligned approach to performance-related reward. 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 which deliver
shareholder returns and long-term value creation. Further alignment with shareholder interests is driven by the significant
proportion of share-based incentives and Executive Director shareholding requirements.
Simplicity
Our remuneration structure comprises straightforward, conventional and well-understood components. The purpose, structure
and strategic alignment of each element is clearly laid out in the remuneration policy summary table:
Predictability
Risk
• fixed pay: base salary, pension and benefits that are consistent with role and location;
• short-term incentive: annual performance-related bonus which incentivises and rewards the delivery of financial and non-financial
strategic objectives;
• long-term incentive: a share-based award which incentivises performance over a three-year period and is based on measures
which drive long-term sustainable growth.
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.
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.
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 high-quality growth, and the KPIs which underpin the delivery of our strategy, is outlined on page 110. 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 which demonstrate our values and behaviours.
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
111
Governance Directors’ Remuneration Report continued
Our approach to remuneration continued
Remuneration at IHG – the wider context
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 (see below) and is designed to attract and
retain the best talent, with a focus on championing a diverse and inclusive culture where employees can thrive. The reward philosophy
is supported by a robust governance approach aimed at having fair and consistent reward and recognition practices across our employee
population, regardless of gender and other aspects of diversity, and that there is an alignment between the wider direct workforce and
executive remuneration. We regularly review our approach externally, ensuring we meet the needs of employees by offering market-driven
reward packages.
Examples of alignment and implementation of wider workforce reward strategy in 2021
Elements of reward
Commentary
Participants
Fixed
Salary
Benefits
Pension benefit
All
All
All
Variable
Annual Performance
Plan (APP)
All
In the 2021 base salary review process, we continued to build on our simplified performance management process to
include the use of manager discretion to make one-off adjustments within the overall merit budget in order to address
equity and talent recognition, particularly in the context of the pay actions taken in 2020 in response to the impact of
Covid-19 on the business. This allowed the merit budget to be targeted on areas where it would have the most impact.
For 2021, we aligned the levels of healthcare cover offered in the UK across all UK corporate employees. Globally, we
continued to roll-out our wellness offer to support our employees’ health and wellbeing and to adapt to a changing
and flexible working environment, including an enhanced parental leave policy in the US for corporate employees.
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 with a 2:1
matching ratio up to a maximum of 6% of salary from employees and 12% from the Company. During 2021, following
a review by the plan trustee and consultation with an employee member forum, the investment options for
participants were updated to include funds with an ESG focus.
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) which 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 from
1 January 2017).
All corporate employees share common corporate performance metrics with the Executive Committee and
Executive Directors. For senior management (generally at Executive Committee level and their direct reports),
a proportion of bonus is deferred into shares for a three-year period. In 2021, we aligned the weightings of metrics
for all corporate employees below Executive Committee level and increased the focus on rewarding performance
by rebalancing the APP measures so that a greater portion of an award can be achieved through an employee’s
individual performance and contribution.
Long Term Incentive
Plan (LTIP)
All
Senior/mid-management and certain specialist roles are eligible for a Long Term Incentive Plan (LTIP).
Performance-based LTIP largely applies at the level of Executive Committee and their direct reports; RSUs typically
apply for eligible employees below this level (see below).
Restricted Stock
Units (RSUs)
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 the Executive Committee down.
Colleague Share Plan Wider
workforce
only
IHG matches the number of shares purchased on a 1-for-1 basis. Our employee share plan is available to around 98%
of our corporate employees below the senior/mid-management level (who receive LTIP and RSU awards).
Participation increased from 49% in 2020 to 50% in 2021 and to 53% in 2022; matching shares from the 2020 plan
vested in January 2022.
This includes making recommendations to the UK leased estate
owner on matters including pay. Such recommendations are made
in line with the corresponding process for other directly-employed
employees, based on market insight and experience. Decisions on
implementing changes to pay are ultimately determined by the hotel
estate owner in the context of their own commercial position and
equities across their wider portfolio. All roles at all hotels are paid
above the living wage and zero-hour contracts are not utilised in any
part of the UK leased estate.
Employee engagement on pay
The 2021 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. See page 114 for details.
Our reward philosophy
Our reward arrangements are competitive, drive creation of value
for stakeholders and make us think and act as one team.
Learning and support
To assist employees and managers in implementing the
discretionary performance-related elements of merit and APP,
we introduced a diversity, equity & inclusion statement on making
fair reward decisions consistent with our Code of Conduct, which
managers were familiarised with as part of the process. Furthermore,
during 2021, corporate employees completed more than 10,000
hours of conscious inclusion training.
UK hotel employees
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, have
largely remained in place on their pre-acquisition basis to date.
In common with the model for managed hotels generally, IHG
provides hotel management support to the owner of these UK
leased hotels.
112
IHG | Annual Report and Form 20-F 2021
Governance Remuneration Committee details
2021 focus areas
• Review and approval of 2020 remuneration outcomes and 2021 structures and targets
• In-year performance and relative performance tracking
• Wider workforce remuneration matters
• ESG in incentives and Green Engage progress
• Consideration of discretion relating to 2021 remuneration outcomes
• 2022+ structures and targets
Key objectives and summary of responsibilities
The Remuneration Committee agrees, on behalf of the Board,
all aspects of remuneration of the Executive Directors and the
Executive Committee, and 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 www.ihgplc.com/investors
under Corporate governance.
Membership and attendance at meetings
Details of the Committee membership and attendance at meetings
are set out on page 81.
During 2021, 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.
Patrick Cescau, 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
In 2019, the Committee undertook a competitive tender process
and IHG appointed Deloitte LLP to act as independent adviser to the
Committee and they commenced work in October 2019. 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. The Committee is satisfied that
the advice received is objective and independent. Fees of £143,850
were paid to Deloitte in respect of advice provided to the Committee
in 2021. This was in the form of an agreed fee for support in
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.
Board changes
During the year, Anne Busquet stepped down from the Board
and Daniela Barone Soares was appointed to the Board as a
Non-Executive Director; Richard Anderson was also appointed
to the Board as a Non-Executive Director, however, he had to step
down a few months later. Dale Morrison retired from the Board
from 31 December 2021 and Graham Allan was appointed as Senior
Non-Executive Director from 1 January 2022. The remuneration
arrangements in respect of all changes were in line with the
approved DR Policy and are covered on page 123.
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, with the aim of setting stretching achievement targets
for senior executives which will reflect successful 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 as well as 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 industry-leading
growth ambition.
Shareholder engagement
The Committee recognises that there exists a range of views across
the shareholder base in relation to the pay of Executive Directors and
therefore engages in regular shareholder consultation. We consulted
with shareholders and proxy agencies in early 2021 and prior to the
AGM on the implementation of remuneration policies for the year
ahead and matters relating to in-flight LTIPs. At the 2021 AGM, we
were pleased to receive a vote of 92.43% in favour of the 2020
Directors’ Remuneration Report.
Shareholder experience and the views of shareholders are
fundamental aspects of the Committee’s framework for the
consideration of the use of discretion in relation to incentive plan
outcomes. As such, we carried out consultations with leading
shareholders and a proxy agency again in early 2022. We discussed
the performance of management which, in the Committee’s view,
had delivered strong results and a more resilient company coming
out of the pandemic. This performance is sustainable and has not
been at the expense of stakeholders, as outlined on page 107.
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
113
Governance Directors’ Remuneration Report continued
Our approach to remuneration continued
However, forecast results showed that the formulaic outcomes of
LTIP targets would likely not reflect this extraordinary effort and, if
left unaddressed, would risk further aggravation to existing retention
and talent challenges.
Valuable and constructive feedback was provided by shareholders
and a proxy agency and, overall, shareholders were generally
receptive to the potential use of discretion to increase the LTIP
outcome, so long as there was sufficient and robust justification.
The Committee’s decision and detailed rationale is outlined on
pages 105 to 107.
The most recent round of consultations also covered matters
relating to in-flight LTIPs and progress on the inclusion of ESG in
executive remuneration. Views expressed by shareholders will also
be taken into consideration as the Remuneration Committee reviews
the DR Policy in 2022 ahead of putting the policy to shareholder
vote in 2023. We will engage in further consultation as the DR
Policy develops.
Wider workforce remuneration and employee engagement
As outlined on page 112, 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 their regular meeting agenda,
including the approach to fairness in reward, retention
arrangements, and arrangements for UK hotel employees.
The Company engaged with the workforce through its employee
engagement survey which covers a number of areas, including pay
and benefits competitiveness, and was updated for 2021 to provide
greater insights on areas such as wellness and inclusion.
As part of 2021 Board engagement with the workforce, the
Committee Chair met with representative employee groups from
our US and Philippines populations to discuss Executive Director
remuneration and how IHG’s remuneration principles apply to
employees throughout the organisation. Neither group shared
any concerns with Executive Director remuneration.
In the Philippines, employees gave feedback on pay and benefits
competitiveness and recent developments in the context of
home working. Discussions on Executive Director remuneration with
the US employee group led to constructive feedback on development
and career progression opportunities and aspects of diversity
and inclusion.
As noted on page 112, perceptions of reward and recognition
gained strong results across our hotel, reservations and general
manager populations:
Paid fairly
Benefit plan meet needs
80%
73%
79%
83%
76%
82%
64%
68%
Appropriate recognition
Performance impacts pay
85%
80%
88%
82%
81%
83%
71%
64%
Hotels
Reservations
GMs
Top quartile scores
The Company’s approach to wider workforce engagement under the
UK Corporate Governance Code is set out on page 112.
Voting at the Company’s AGMs
The current DR Policy was subject to a vote at the 2020 AGM. The outcome of the votes in respect of the DR Policy and Report for 2019 to 2021
are shown below:
AGM
2021
2020
2019
Jo Harlow
Chair of the Remuneration Committee
21 February 2022
Directors’ Remuneration Policy (binding vote)
Directors’ Remuneration Report (advisory vote)
Votes for
Votes against
Abstentions
Votes for
Votes against
Abstentions
–
–
–
112,098,213
(77.14%)
33,210,269
(22.86%)
3,308,499
–
–
–
137,628,120
(92.43%)
143,279,761
(96.49%)
120,939,401
(83.95%)
11,277,368
(7.57%)
5,212,375
(3.51%)
23,116,948
(16.05%)
106,271
124,844
3,867,287
114
IHG | Annual Report and Form 20-F 2021
Governance Annual Report on Directors’ Remuneration
The Annual Report on Directors’ Remuneration explains how
the Directors’ Remuneration Policy (DR Policy) was implemented
in 2021 and the resulting payments each of the Executive
Directors received.
This report is subject to an advisory vote by shareholders at the
2022 AGM. The notes to the single figure table provide further detail,
where relevant, for each of the elements that make up the total
single figure of remuneration for each of the Executive Directors.
AUDITED
Single total figure of remuneration – Executive Directors
Executive Directors
Keith Barr
Paul Edgecliffe-Johnson
Elie Maaloufb
Salary
£000
Benefits
£000
Pension
benefit
£000
Fixed pay
Subtotal
£000
857
712
630
524
606
531
41
45
19
21
53
30
214
178
158
131
118
65
1,112
935
807
676
777
626
Year
2021
2020
2021
2020
2021
2020
APP
£000
1,727
0
1,270
0
1,221
0
Variable pay
Subtotal
£000
2,064
549
1,518
391
1,472
379
LTIP
£000a
337
549
248
391
251
379
Total
£000
3,176
1,484
2,325
1,067
2,249
1,005
a LTIP figures for 2020 relate to the 2018/20 LTIP cycle and have been restated using actual share price on date of vesting. Figures for 2021 relate to the value of shares for the
2019/21 cycle.
b Elie Maalouf is paid in USD and the sterling equivalent is calculated using an exchange rate of $1 = £0.73 in 2021 and $1 = £0.78 in 2020 (page 158).
Notes to single figure table
Fixed pay
Salary: salary paid for the year. Salary increases in 2021 were in
line with the budget for the wider UK and US corporate workforce.
2020 salaries were reduced for part of the year as explained in
the 2020 Annual Report.
Benefits: for Executive Directors, this includes, but is not
limited to, taxable benefits such as company car or allowance
and healthcare. Under HM Revenue and Custom rules, the 2021
figure for the non-UK based Director, Elie Maalouf, includes
some travel and food expenses that were not previously
reported.
Pension benefit: for current Executive Directors, in line with
DR Policy, the value of IHG contributions and any cash
allowances paid in lieu of pension contributions.
Keith Barr and Paul Edgecliffe-Johnson did not participate in any
IHG pension plan in 2021 and instead received cash allowances of
25% of base salary; this will reduce to the maximum level available
to all other participants in the UK pension plan at the end of 2022.
Life assurance cover is provided for both Keith and Paul at four
times base salary.
Elie Maalouf participated in the US 401(k) Plan and the US
Deferred Compensation Plan (DCP). 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 2021 were:
As outlined in last year’s report, Elie’s retirement benefit is in line
with other senior US employees and comprises 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.
Variable pay
APP (cash and deferred shares)
Operation
Award levels are determined based on salary at 31 December 2021
and are based on achievement vs target under each measure.
For operating profit from reportable segments, the 2021 award
was set on the basis of a payout range of +/-10% of target payout
for performance of +/-$25m of target performance. Outside of this
range, payout would be on a straight-line basis between threshold
and -$25m and between +$25m and maximum. For room
openings and room signings, the award was set on a straight-line
basis between threshold and target, and target and maximum:
• 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.
• 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.
Director’s contributions to US Deferred
Compensation Plan
Director’s contributions to US 401(k) Plan
Company contributions to US Deferred
Compensation Plan
Company contributions to US 401(k) Plan
Age of Director at 31 December 2021
£a
168,917
18,980
109,829
8,468
57
a Sterling values have been calculated using an exchange rate of $1 = £0.73.
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
115
Governance Directors’ Remuneration Report continued
Annual Report on Directors’ Remuneration continued
AUDITED
APP outcome for 2021
The performance measures for the 2021 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 tables below show threshold, target
and maximum opportunity, as well as weighting and actual
2021 achievement.
APP measures – % of total award
Threshold
35
7.57.5
50
Target
70
15 15
100
Actual
Maximum
140
140
30
17.3
187.3
30
30
200
0
50
100
150
200
Operating profit from reportable segments
Room signings
Room openings
APP
Performance
Achievement
Weighting
Weighted
achievement
Operating profit from reportable segments: performance relative to target
LTIP 2019/21 (granted in 2019)
Awards are made annually and eligible executives will receive
shares at the end of that cycle, subject to achievement of the
performance conditions. Conditions and weighting are described
on page 117.
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
Thomson Reuters Datastream.
Following the acquisition and delisting of Millennium & Copthorne
Hotels PLC by City Developments Limited in October 2019,
a Singapore-based real estate company, it was removed from
the comparator group for the 2019/21 cycle.
The share price in respect of the 2018/20 LTIP cycle has been
restated using the volume weighted average price of 5,072p for
Keith Barr and Elie Maalouf and 5,143p for Paul Edgecliffe-Johnson
on the date of actual vesting on 24 February 2021. There is a slight
difference in the share price at the date of vesting for Keith Barr
and Elie Maalouf as our share administration portal holds shares
for participants who are US citizens in a separate entity to non-US
participants. Final vesting transactions are therefore carried out
separately, resulting in a slight share price variation based on the
timing that the two transactions take place. The corresponding
values shown in the 2020 report (prior to the actual vesting) were
an estimate calculated using an average share price over the final
quarter of 2020 of 4,460p.
70%
140.0%
LTIP outcome for 2019/21 cycle
The performance measures for the 2019/21 three-year LTIP cycle
were determined in accordance with the DR Policy and were:
• Total Shareholder Return (40%);
• Total Gross Revenue (20%);
• net system size growth (20%); and
15%
30.0%
• cash flow (20%).
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 2019,
and following the application of Committee discretion, for each
performance measure.
15%
17.3%
LTIP measures – % of maximum opportunity
Threshold
8 4 4 4
20
Actual
20
20
Maximum
0
40
20
20
20
20
100
40
60
80
100
Total Shareholder Return
Net system size growth
Total Gross Revenue
Cash flow
Threshold
Target
Maximum
Actual
$222m
$296m
$443m
$535.1m
Room signings (k rooms)
Threshold
Target
Maximum
Actual
52.4
58.2
64.0
68.9
Room openings (k rooms)
Threshold
Target
Actual
Maximum
39.0
43.3
44.0
47.6
50%
100%
200%
200%
50%
100%
200%
200%
50%
100%
139.2%
200%
Operating profit from reportable segments is a Non-GAAP measure
and excludes certain items from operating profit. 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 158)
Difference due to exchange rates
Operating profit from reportable segments
(at 2021 budget exchange rates)
$533.6m
$1.5m
$535.1m
116
IHG | Annual Report and Form 20-F 2021
Governance AUDITED
Performance measure and weighting
Total Shareholder Return:
Three-year growth relative to average
of competitors
40%
Total Gross Revenue:
based on IHG’s performance against
an absolute Total Gross Revenue target
20%
Net system size growth:
based on IHG’s performance against
an absolute NSSG target
20%
Cash flow:
based on IHG’s performance against
an absolute cash flow target
20%
Performance targets
Target
Maximum
83.4%
Threshold
26.0%
Maximum
$5.63bn
Threshold
$3.94bn
Maximum
159.0k rooms
Threshold
111.3k rooms
Maximum
2.49bn USD
Threshold
1.87bn USD
% Vesting
Maximum
100%
Threshold
20%
Maximum
100%
Threshold
20%
Maximum
100%
Threshold
20%
Maximum
100%
Threshold
20%
Result
Outcome
17.9%
Outcome
$-7.92bn
Formulaic achievement
Below threshold
Discretionary
outcome
0%
Below threshold
0%
0%
Outcome
84.6k rooms
Below threshold
Below threshold
20%
Reported Outcome
1.49bn USD
Adjusted Outcome
1.78bn USD
Adjustments to cash flow outcome
Over the performance period of the 2019/21 LTIP award there
have been events that have impacted IHG’s cash flow that were
unquantified or unforeseen when the original targets were set.
In line with the adjustments reported in the 2019 and 2020 Annual
Reports, the table below shows the reconciliation between
reported cash flow and the outcome for the 2019/21 LTIP.
Reconciliation
Reported cash flow from operations
Net cash from investing activities
Reported outcome per definition
Six Senses acquisition
Adjusted outcome
Cash flow
$bn
2.06
(0.57)
1.49
0.29
1.78
Adjustment to net system size growth outcome
The formulaic NSSG LTIP outcome above includes the same
adjustment reported for the 2018/20 cycle last year to exclude
the removal from IHG brands of rooms associated with the SVC
portfolio towards the end of 2020 due to the SVC management
agreement termination. The formulaic 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
2019/21 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.
LTIP
As outlined in the Chair’s Statement on pages 104 to 108, the Remuneration Committee has exercised its discretion to adjust the
formulaic outcome of the 2019/21 LTIP. This cycle will vest on 23 February 2022 and is the first under which 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 4,858p used to calculate the 2019/21 LTIP cycle value shown in the single figure table is the average over the final
quarter of 2021.
Executive Director
Keith Barr
Paul Edgecliffe-Johnson
Elie Maalouf
Award cycle
LTIP 2019/21
LTIP 2019/21
LTIP 2019/21
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
34,693
25,509
25,802
20%
20%
20%
6,938
5,101
5,160
337
248
251
-7
-5
-5
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
117
Governance Directors’ Remuneration Report continued
Annual Report on Directors’ Remuneration continued
AUDITED
Other outstanding awards
Scheme interests awarded during 2020 and 2021
During 2020 and 2021, awards were granted under the LTIP cycle and made to each Executive Director over shares with a maximum
value of 205% of salary in 2020 and a maximum value of 350% in 2021 for the CEO and 275% for all other Executive Directors using an
average of the closing mid-market share price for the five days prior to grant, as 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 2020/22 LTIP award is the day after the announcement of our financial year 2022 Preliminary Results in
February 2023. 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 2025.
The vesting date for the 2021/23 LTIP award is the day after the announcement of our financial year 2023 Preliminary Results in
February 2024. 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 2026.
Although the approved DR Policy permitted award levels of 350% and 275% of salary respectively for the CEO and other Executive
Directors for the 2020/22 cycle, the actual awards granted for this cycle were made at the previous maximum award level of 205%
for all Executive Directors. Prior to making the awards, the Committee noted the views of some investors in relation to the size of share
awards where the share price had fallen substantially relative to the prior year’s grant and the potential windfall gains which could occur
if and when share prices recovered. The grant price for the 2020/22 cycle was £34.96, representing a reduction of ~29% from the grant
price for the 2019/21 cycle awards. The use of lower maximum opportunity levels resulted in fewer shares being awarded to the
Executive Directors than would have been the case if awards were granted at the levels permitted under the DR Policy (~41% fewer
shares in the case of the CEO and ~25% fewer for the other Executive Directors). The Committee will consider whether it is appropriate
to adjust the formulaic outcome at the time of vesting, including taking into account the movement in share price between grant and
vesting dates, in the context of any potential windfall gains.
Executive Director
2021/23 cycle
Keith Barr
Paul Edgecliffe-Johnson
Elie Maalouf
2020/22 cycle
Keith Barr
Paul Edgecliffe-Johnson
Elie Maalouf
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
10 May 2021
10 May 2021
10 May 2021
12 May 2020
12 May 2020
12 May 2020
59,385
34,310
32,525
49,153
36,140
38,463
50.88
50.88
50.88
34.96
34.96
34.96
3,022
1,746
1,655
1,718
1,263
1,345
11,877
6,862
6,505
9,830
7,228
7,692
Performance measures and consideration of discretion
The performance measures for the 2020/22 cycle are as agreed in the 2020 DR Policy: Relative TSR, Total Gross Revenue (TGR),
net system size growth and cash flow for the three years ending 31 December 2022. NSSG is a relative measure and is measured to
30 September rather than 31 December due to the timing of publication of competitor data. Minimum performance is equal to 20%
of the maximum award.
As noted in the 2020 Directors’ Remuneration Report, TGR was removed from the LTIP measures for the 2021/23 cycle, which covers
the three years ending 31 December 2023, and the weightings for relative NSSG and absolute cash flow were both increased, maintaining
a similar balance between absolute and relative measures as for the previous cycle. TGR is heavily impacted by the pace and shape
of market RevPAR recovery, which is outside of management’s control and remained very unpredictable at the time of setting targets.
Relative NSSG for both cycles is subject to the achievement of a ROCE underpin of 20%, below which the Committee has the discretion
to reduce the outcome for the measure. The underpin was introduced to ensure IHG’s high returns on capital were prioritised in strategic
decision-making (e.g. M&A activity) as opposed to simply reflecting trading performance. As noted in last year’s report and the Chair’s
letter to this year’s report, the Committee is minded not to reduce the NSSG vesting outcome for the 2020/22 cycle if the underpin is
not met by reason only of the impact on earnings of the pandemic.
As noted in the Chair’s Statement on pages 104 to 108, the Committee is tracking a shadow cash flow target in respect of the 2020/22
LTIP cycle and has indicated that this shadow target will be highly relevant when considering the vesting of this cycle in early 2023.
The shadow target is disclosed on page 124 of this report.
Any use of discretion, including the factors influencing the decision, will be clearly communicated in the Directors’ Remuneration
Report for the year in which the decision is made.
118
IHG | Annual Report and Form 20-F 2021
Governance AUDITED
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 300% for any other
Executive Director. Executive Directors are expected to hold all
net shares earned until the previous guideline shareholding
requirement is achieved (300% for the CEO 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 31 December 2021 share
price of 4,781p.
The full guideline minimum shareholding requirement continues
for six months after cessation of employment and 50% of the
requirement continues for an additional six months. As a 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.
Shares and awards held by Executive Directors
at 31 December 2021: % of salary
Keith Barr
532
Paul Edgecliffe-Johnson
519
Elie Maalouf
1,394
1,309
669
1,496
0
200
400
600
800
1,000
1,200
1,400
1,600
Shares held outright and net value of shares
subject to holding/deferral period
Total number of shares and awards as a % of salary
Guideline shareholding
Percentages have been calculated using a combined tax and social security rate
of 47% for Keith Barr and Paul Edgecliffe-Johnson and a rate of 45.1% for Elie Maalouf.
Current Directors’ shareholdings
The APP deferred share awards are not subject to performance conditions. Details on the performance conditions to which the unvested
LTIP awards are still subject can be found on page 118. 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 of this report.
Shares and awards held by Executive Directors at 31 December 2021: number of shares
Number of shares held outright
APP deferred share awards
LTIP share awards (unvested)
Keith Barr
Paul Edgecliffe-Johnson
Elie Maalouf
2021
81,830
58,723
74,698
2020
70,279
53,376
67,428
2021
26,696
19,137
19,625
2020
37,705
26,751
25,417
2021
143,231
95,959
96,790
2020
119,227
86,479
88,691
Total number of
shares and awards held
2021
251,757
173,819
191,113
2020
227,211
166,606
181,536
Other information relating to Directors’ remuneration
Consideration of discretion
The Committee’s consideration of discretion in respect of 2021
remuneration outcomes is covered in detail on pages 104 to 107.
During the year, the Committee also continued to track the forecast
vesting outcome for the 2020/22 LTIP cycle. No decisions will be
made until the end of the cycle’s performance period, however, the
Committee’s approach for the cash flow target and ROCE underpin
for the 2020/22 cycle is described on pages 124 and 125.
Dividends paid to Executive Directors
No dividends were paid out by IHG in 2021.
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
119
Governance 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 Total Shareholder
Return (TSR) performance from 31 December 2011 to 31 December 2021, assuming dividends are reinvested, compared with the TSR
performance achieved by the FTSE 100.
600
500
400
300
200
100
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
IHG PLC
FTSE 100 Index
Chief Executive Officer’s remuneration
The table below shows the Chief Executive Officer’s single figure of total remuneration for the 10 years to 31 December 2021.
Single figure
CEO
2012
2013
2014
2015
2016
Keith Barr
2017
2,161
2018
3,143a
2019
3,376
2020
1,484
2021
3,176
Richard Solomons
4,881
3,131
6,611b
3,197
3,662
2,207c
Keith Barr
Richard Solomons
68.0
74.0
74.0
75.0
63.9
Keith Barr
Richard Solomons
100.0
59.0
56.1
50.0
49.4
69.7
66.8
46.1
46.1
84.1
58.7
0
200.0
45.4
78.9
30.6
20.0
Single figure
of remuneration
(£000)
Annual incentive
received
(% of maximum)
Shares received
under the LTIP
(% of maximum)
a For Keith Barr, the 2018 figure includes a one-off cash payment for relocation costs in lieu of benefits received whilst on international assignment prior to CEO position, fully explained
in the 2017 report.
b For Richard Solomons, the 2014 figure includes a one-off cash payment in respect of pension entitlements which was fully explained in the 2014 report.
c In respect of period 1 January to 30 June 2017.
Growth of company vs growth of CEO pay
As an additional point of reference, the chart below shows CEO single figure table remuneration over the past 10 years as disclosed above,
excluding the 2014 one-off cash payment to Richard Solomons in respect of pension entitlements, and the Company’s net system size growth,
a key metric in our Long Term Incentive Plan, and in our Annual Performance Plan in recent years, and aligned to our ambition. Subject to
performance achievements, increased LTIP grant levels made since 2021 under the approved 2020 Directors’ Remuneration Policy should
in due course contribute towards bridging the gap between the growth in pay of the CEO and the growth of the Company.
40
20
0
-20
-40
-60
-80
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
NSSG
CEO
120
IHG | Annual Report and Form 20-F 2021
Governance Calculation methodology and supporting information
Option C has been selected for the identification of 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 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 2021 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 2021
company performance metrics and budgeted target personal
performance so that it reflects the same input as for the CEO data.
Option C requires three UK employees to be identified as the
equivalent of the 25th, 50th and 75th percentile. Having identified
these employees, the 2021 remuneration is calculated on the same
basis as the CEO single total figure of remuneration.
The 2021 salary and total pay for the individuals identified at the
lower, median and upper quartiles are set out below.
Year
Financial year ended
31 December 2021
– Full population
Financial year ended
31 December 2021
– Excluding hotel
employing entities
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
Salary £
18,285
44,281
59,597
Total
remuneration £
19,540
49,020
Salary £
44,027
61,125
77,832
81,239
Total
remuneration £
55,732
75,055
115,377
Relative importance of spend on pay
The chart below sets out the actual expenditure of the Group in
2021 and 2020, showing the differences between those years.
Further information, including where 2020 figures have been restated,
can be found in the Group Financial Statements starting on page 128
and the accompanying notes.
$m
1,500
1,000
500
0
143.8%
0.0%
6.3%
1,444
1,358
534
219
0
0
2021
2020
2021
2020
2021
2020
Reportable segments
operating profit
Dividends paid
to shareholders
Staff costs
CEO pay ratio
As we have noted in previous Annual Reports, 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 which
include a large proportion of part-time and flexible-working support
and service roles. As per last year’s report, we show below the ratio
both including and excluding the new UK employing entities.
On a like-for-like population basis with our original disclosure in
the 2018 Annual Report, the median ratio has increased from 26:1 in
2020 to 42:1 in 2021 but is down on the pre-pandemic years of 2018
and 2019. 2020 was impacted by actions taken on pay as outlined
in the 2020 Annual Report and lower variable incentive pay. In 2021,
the strong performance in the APP has benefited both the CEO and
the wider corporate population. LTIP awards below the Executive
Committee in the form of restricted stock and top-up awards below
the Board meant that the 2019/21 LTIP award values were lower as a
percentage of maximum for the CEO than other eligible employees.
On this basis, the Company believes the median pay ratio for the
relevant financial year is consistent with the pay, reward and
progression policies for the Company’s UK employees taken
as a whole, and as outlined on page 112.
Year
Method
25th Median
75th
25th Median
75th
Full population
Population excluding hotel
employing entities
Financial
year ended
31 December
2021
Financial
year ended
31 December
2020
Financial
year ended
31 December
2019
Financial
year ended
31 December
2018
Option
C 163:1
65:1
41:1
57:1
42:1
28:1
Option
C
Option
C
Option
C
89:1
44:1
25:1
35:1
26:1
18:1
180:1
122:1
59:1
71:1
49:1
32:1
–
–
–
72:1
48:1
29:1
The 2018, 2019 and 2020 figures have been restated to reflect the value of the CEO’s LTIP
awards on the date of actual vesting rather than the estimated vesting levels used in the
respective years’ Annual Reports.
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:
• 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 performance 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.
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
121
Governance Directors’ Remuneration Report continued
Annual Report on Directors’ Remuneration continued
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 2021.
The remuneration figures for the Directors were taken from the data used to compile the single figure tables of remuneration shown on
pages 115 and 123 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.
Salaries were reduced for part of the year in 2020, accounting for the year-on-year variations for both 2020 vs 2019 and 2021 vs 2020.
Elie Maalouf’s salary is paid in USD but reported in the single figure table in GBP and, as such, his year-on-year change is also impacted
by changes in exchange rates between years.
No bonus was paid to Executive Directors or other corporate employees for 2020, which is reflected in the bonus percentage changes for
both 2019-20 and 2020-21. Non-Executive Directors are not eligible for a bonus.
Taxable benefits for Non-Executive Directors are largely constituted of travel expenses, which were significantly impacted by travel restrictions
during 2020 and 2021, whereas Executive Director and average employee taxable benefits typically comprise elements of their reward
package such as company car or allowance and healthcare benefits.
Executive Directors
Keith Barr
Paul Edgecliffe-Johnson
Elie Maalouf
Non-Executive Directors
Patrick Cescau
Graham Allan
Daniela Barone Soares
Arthur de Haast
Ian Dyson
Duriya Farooqui
Jo Harlow
Jill McDonald
Sharon Rothstein
Average employee
Year-on-year change 2021 vs 2020
Year-on-year change 2020 vs 2019
Salary
Bonus
Taxable benefit
Salary
Bonus
Taxable benefit
20%
20%
14%
18%
–
–
18%
18%
–
18%
18%
–
3%
100%
100%
100%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
100%
-9%
-8%
79%
-80%
–
–
-1%
-100%
–
100%
-1%
–
-11%
-14%
-13%
-15%
-13%
–
–
–
-13%
–
-13%
-13%
–
-6%
-100%
-100%
-100%
N/A
N/A
–
N/A
N/A
N/A
N/A
N/A
N/A
-100%
25%
-14%
-10%
-53%
–
–
–
-90%
–
-94%
-87%
–
-9%
No data has been reported for Graham Allan, Duriya Farooqui and Sharon Rothstein as they joined the Board in 2020 therefore only part-year
data is available which does not enable a comparison with 2021. Similarly, Daniela Barone Soares joined the Board during 2021 so there will
be no full year data comparisons for her in 2021 and 2022.
As stated in the notes to the single figure table on page 115, under HM Revenue and Custom rules, the 2021 taxable benefits figure for the
non-UK based Executive Director, Elie Maalouf, includes some travel and food expenses that were not previously reported, accounting for
the year-on-year change figure for taxable benefits in 2021 vs 2020. Ian Dyson did not incur any expenses in 2021 but incurred expenses of
£229.55 in 2020 relating to attending the February 2020 Board meeting, hence the percentage change for 2021 vs 2020 is -100%. Jo Harlow
incurred expenses of £128.65 in 2020, also relating to the February 2020 Board meeting, and £257.21 in 2021 relating to the December 2021
Board dinner, hence the percentage change for 2021 vs 2020 is 100%. These expenses for Ian and Jo are below £500 so round down to £nil
for the respective years in the single figure table on page 123.
AUDITED
Payments for loss of office
There were no payments for loss of office in 2021.
Pension entitlements
No Executive Director is entitled to any Defined Benefit pension
or related benefit from IHG.
Payments to past Directors – benefits
Sir Ian Prosser
Sir Ian Prosser, who retired as Director on 31 December 2003,
had an ongoing healthcare benefit of £1,408.90 during the year.
122
IHG | Annual Report and Form 20-F 2021
Governance AUDITED
Single total figure of remuneration: Non-Executive Directors
Non-Executive Director
Patrick Cescau
Graham Allan
Richard Anderson
Daniela Barone Soares
Anne Busquet
Arthur de Haast
Ian Dyson
Duriya Farooqui
Jo Harlow
Jill McDonald
Dale Morrison
Sharon Rothstein
Committee
appointments
Date of
original
appointment
N
A R
A R
R RB
A RB
R RB
A N R
A RB
N R
A RB N
A N R
A RB
01/01/13
01/09/20
01/03/21
01/03/21
01/03/15
01/01/20
01/09/13
07/12/20
01/09/14
01/06/13
01/06/11
01/06/20
Fees
£000
2020
377
24
–
–
66
66
88
5
88
78
95
38
2021
444
78
20
65
28
78
104
78
104
92
112
78
Taxable benefits
£000
2021
2020
1
0
0
0
1
0
0
0
0
0
1
0
7
0
–
–
1
0
0
0
0
0
2
0
Total
£000
2020
384
24
–
–
67
66
88
5
88
78
97
38
2021
445
78
20
65
29
78
104
78
104
92
113
78
See page 81 for Board and Committee membership key and attendance.
Fees: Fees are paid in line with the DR Policy. Anne Busquet stepped down from the Board on 7 May 2021, Richard Anderson stepped
down on 26 May 2021 and Dale Morrison stepped down on 31 December 2021 so all fees and taxable benefits for these Directors
ceased on those dates.
Benefits: For Non-Executive Directors, benefits include taxable travel and accommodation expenses to attend Board meetings away
from the designated home location. Under concessionary HM Revenue and Custom rules, non-UK based Non-Executive Directors are
not subject to tax on travel expenses for the first five years; this is reflected in the taxable benefits for Anne Busquet, Duriya Farooqui,
Dale Morrison and Sharon Rothstein. Due to global restrictions on travel during 2020 and 2021 as a result of the pandemic, only the
February 2020 Board meeting was held in person so taxable travel and accommodation expenses are lower again this year.
Other: Non-Executive Directors are not eligible for any incentive awards or for any pension contributions or benefit.
Shares held by Non-Executive Directors at 31 December 2021:
The Non-Executive Directors who held shares are listed in the table below:
Non-Executive Director
Patrick Cescau
Daniela Barone Soares
Ian Dyson
Arthur de Haast
Jo Harlowa
a Shares held in the form of American Depositary Receipts.
2021
11,135
316
1,500
1,000
950
2020
11,135
–
1,500
1,000
950
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
of this report.
Fees: Non-Executive Directors
The fees for Non-Executive Directors are reviewed and agreed annually in line with the DR Policy; 2022 increases are in line with the
budget for the wider UK and US corporate workforce and an increase was waived in 2021. Graham Allan was appointed as Senior
Non-Executive Director from 1 January 2022. The fee levels for 2022 will be as follows:
Non-Executive Director
Role
Patrick Cescau
Graham Allan
Chair of the Board
Senior Independent Director
Daniela Barone Soares
Non-Executive Director
Arthur de Haast
Non-Executive Director
Ian Dyson
Chair of Audit Committee
Duriya Farooqui
Non-Executive Director
Jo Harlow
Jill McDonald
Chair of Remuneration Committee
Chair of Responsible Business Committee
Sharon Rothstein
Non-Executive Director
2022
£000
461
116
81
81
108
81
108
95
81
2021
£000
444
78
78
78
104
78
104
92
78
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
123
Governance Directors’ Remuneration Report continued
Annual Report on Directors’ Remuneration continued
Implementation of Directors’ Remuneration Policy in 2022
This section explains how the DR Policy will be applied in 2022.
Salary: Executive Directors
Directors’ salaries are agreed annually in line with the DR Policy.
The following salaries will apply from 1 April 2022.
Executive Director
Keith Barr
Paul Edgecliffe-Johnson
Elie Maaloufa
Increase
%
4
4
4
2022
£
897,900
660,200
2022
$
2021
£
863,300
634,800
2021
$
870,100
836,600
a Elie Maalouf is paid in USD and his annual base salary for 2020 and 2021 is shown in USD. The sterling equivalent values calculated using an exchange rate of $1 = £0.78 in 2021
and $1 = £0.73 in 2022 are: 2021 – £652,548 and 2022 – £635,173.
The increases above are in line with the budget for the wider UK and US corporate workforce.
2020/22 LTIP cycle cash flow target
As explained on page 118, the Committee has determined that the shadow cash flow target it set as a point of reference in October 2020 will
be highly relevant when considering the vesting of this cycle in early 2023. Following consultation with shareholders, the shadow target is
disclosed below.
Measure
Definition
Weighting
Original performance objective
Shadow performance objective
Absolute
cash flow
Cumulative annual cash
generation over three-year
performance period
20
Threshold – US 1.91bn (20% of cash flow
element vests);
Threshold – US 0.82bn (20% of cash flow
element vests);
Maximum – US 2.54bn (100% of cash flow
element vests); and
Maximum – US 1.09bn (100% of cash flow
element vests); and
Vesting will be on a straight-line basis
in between the two points above.
Vesting will be on a straight-line basis
in between the two points above.
Measures for 2022 APP
The 2022 APP structure is in line with the approved DR Policy and will be based on a 70% weighting for a measure of operating profit from
reportable segments and a 30% weighting for other key strategic measures that are reviewed annually and set in line with business priorities.
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 2022, 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 performance measure across the industry, while 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 profit and
revenue growth. The two strategic measures will be equally weighted, with each worth 15% of the overall APP. The targets are commercially
sensitive and will be disclosed in the 2022 Annual Report.
Measure
Operating profit from
reportable segments
Room signings
Room openings
Definition
Weighting (%)
Performance objective
A measure of IHG’s operating profit from
reportable segments for the year
Absolute number of new room signings
Absolute number of new room openings
70
15
15
Achievement against target
Achievement against target
Achievement against target
As part of the APP structure, the Committee considers whether to apply discretion to adjust outcomes on the strategic measures following
a review of performance against IHG’s Global Metrics. These are based on a range of KPIs including several ESG measures such as energy
reduction, employee engagement and guest satisfaction. As per the 2021 plan, 2022 performance against the Global Metrics, together with
data on relative performance against peers, will be tracked and used by the Committee as reference points in considering whether to use
discretion to adjust the formulaic outcome of the strategic measures.
2022/24 LTIP cycle performance measures and targets
For 2022/24, we propose to retain the same measures and weightings as the 2021/23 cycle, again excluding Total Gross Revenue (TGR).
TGR is driven mainly by RevPAR and NSSG but also includes other forms of revenue, such as food and beverage and spas. Setting a TGR
target remains challenging in the context of limited visibility over the short-to-medium term, given factors including:
• the potential volatility caused by future new variants of Covid-19;
• the performance volatility resulting in countries following a zero Covid-19 strategy;
• unpredictability around the trajectory of international travel recovery; and
• while leisure travel demand is strong, continuing uncertainty around the shape of international business travel re-emergence.
124
IHG | Annual Report and Form 20-F 2021
Governance The measures for the 2022/24 LTIP cycle are as follows:
Measure
Definition
Weighting (%)
Performance objective
Relative Total
Shareholder Return
(TSR)
Relative net system
size growth with
ROCE underpin
30
40
IHG’s performance against a comparator group of
global hotel companies: 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. TSR is
the aggregate of share price growth and dividends
paid, assuming reinvestment of dividends in the
Company’s shares during the three-year
performance period.
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., 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.
Absolute cash flow
Cumulative annual cash generation over three-year
performance period.
30
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.
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.
This measure is subject to the achievement of a Return on
Capital Employed underpin. See below for further details.
Threshold – US 1.58bn (20% of cash flow element vests);
Maximum – US 2.11bn (100% of cash flow element
vests); and
Vesting will be on a straight-line basis in between the
two points above.
Operation of Return on Capital Employed (ROCE) underpin
The Committee has the discretion to reduce the amount of the award vesting under the net system size growth measure by any amount,
including to zero, in the event that a Return on Capital Employed (ROCE) falls below a predetermined level over the period of an LTIP cycle.
The extent of reduction would be determined taking into consideration criteria including:
• the reason the ROCE underpin has not been met;
• the impact on other metrics, including cash flow and Total Gross Revenue; and
• the materiality of the circumstances under which the underpin has not been met.
ROCE is defined as operating profit from reportable segments divided by Capital Employed. For Capital Employed, we expect to define this
as Total Assets less Current Liabilities, adjusted for deferred revenue and deferred tax assets/liabilities. At the end of each cycle, the Committee
will agree the appropriate capital base of the Company taking into account any short-term impacts that are not part of the long-term capital
of the business.
For the 2022/24 LTIP cycle, the underpin will remain at the 20% level set for the previous two cycles. Under normal circumstances, the
Committee considers this an appropriate level to protect shareholder interests without disincentivising the pursuit of long-term strategically
advantageous return-enhancing opportunities, which could have a short-term impact on ROCE. However, it should be noted that, as outlined
on page 107, the Committee is minded not to reduce the NSSG outcome if the ROCE underpin is not met for the 2020/22 cycle solely due to
the impact on earnings of the pandemic. Performance and vesting outcomes and any use of discretion will be fully disclosed and explained
in the relevant Directors’ Remuneration Report.
Directors’ Remuneration Report
IHG | Annual Report and Form 20-F 2021
125
Governance Statement of compliance
Our statement of compliance summarises how the Group has
applied the principles of the 2018 UK Corporate Governance Code
(available at www.frc.org.uk/directors 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 77, and Governance, including the Directors’ Remuneration
Report, on pages 80 to 125, 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 2021, save as noted below in respect of provision 38.
1. Board Leadership and Company Purpose
2. Division of Responsibilities
A. The role of the Board
F. The Chair
The Board continues to lead the Group’s strategic direction and
long-term objectives. Further responsibilities of the Board are set
out on page 88.
The Board met eight times during 2021 and all Directors continue to
act in what they consider to be in the best interests of the Company,
consistent with their statutory duties. Further details of 2021 Board
meetings, including information on matters discussed and decisions
taken by the Board are set out on pages 89 to 91, attendance
information is on page 81, skills and experience and biographical
information is on pages 82 to 84.
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 40 to 47.
Potential conflicts of 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 how IHG does business, including an overview of our culture and
values, is included on pages 36 to 38. Culture and people were
particularly prominent on the Board’s agenda as the Group recovered
from the pandemic. A summary of the Board’s activities in relation to
the Voice of the Employee is included on page 101. An outline of the
Group’s approach to rewarding its workforce is contained on pages
24 to 25, 108 and 112.
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 50 to 53.
A summary of the procedures for identifying and discussing
emerging risks is set out on page 40.
D. Shareholders and stakeholders
The Board engaged actively throughout 2021 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. Further
details are on page 92.
Information on the Board’s consideration of and engagement with
other stakeholders, including employees, suppliers, hotel owners
and guests, is included on pages 20 to 28, 39, 90 and 91, 101, 107,
108, 112 and 114.
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 confidentially 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.
Patrick Cescau leads the operation and governance of the Board
and its Committees. The Chair has been in post for nine years and
was independent on appointment. Provision 19 of the Code states
that a chair should not remain in post beyond nine years from
the date of their first appointment to the Board but this period
can be extended for a limited time to facilitate effective
succession planning.
In January 2022, the Company announced that Patrick will retire
from the Board effective 31 August 2022, to be succeeded by
Deanna Oppenheimer. The duration of Patrick’s tenure beyond
nine years is considered appropriate to facilitate an orderly
transition to Deanna.
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 81 to 84.
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 and cross-directorships. Dale Morrison served on the
Board for over 10 years and was the Senior Independent Director
until his retirement on 31 December 2021. In this role, he acted as
the lead on the recruitment of a new Chair. The appointment of a
new Chair was a key priority during 2021, accordingly the Board
judged it appropriate for Dale to remain as a Director while the
process continued. In light of his extended tenure, the Board
carefully considered Dale’s commitments and contribution and
concluded that he had remained an Independent Non-Executive
Director during his tenure.
Daniela Barone Soares was appointed to the Board from
1 March 2021 and at that time both she and Jo Harlow were
Independent Non-Executive Directors of Halma plc. As Daniela
did not stand for re-election as a Director of Halma plc and retired
from its Board on 22 July 2021, the Board did not consider either
of their independence as Non-Executive Directors of the Company
to be impaired.
Regarding the Chair succession referred to above, while
Patrick Cescau was not part of the Search Committee that led the
search process, it was noted that Patrick and Deanna Oppenheimer
held a cross-directorship at Tesco PLC from March 2012 to April 2015.
As the cross-directorship was over six years prior to Deanna’s
appointment to the Board, the Board did not consider either of
their independence as Non-Executive Directors of the Company
to be impaired.
H. Non-Executives
Non-Executive Director terms of appointment outline IHG’s
time commitment expectations required to fulfil their role.
The commitments of each Director are included in the Directors’
biographical details on pages 82 to 84. Details of Non-Executive
Director appointment terms are set out on page 113.
The Chair annually reviews the time each Non-Executive Director
dedicates to IHG as part of the internal performance evaluation of
Directors (see page 94) and is satisfied that their other duties and
time commitments do not conflict with those as Directors.
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IHG | Annual Report and Form 20-F 2021
Governance Dale Morrison was Senior Independent Non-Executive Director
(SID) from 31 May 2014 to 31 December 2021 and was succeeded
by Graham Allan from 1 January 2022. 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 94).
After each Board meeting, Non-Executive Directors and the Chair
meet without Executive Directors being present (see page 88).
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 administrative and logistical support of
a full-time executive assistant. See page 88 for more details.
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 www.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 2021
are in the Nomination Committee Report on pages 102 to 103.
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 82 to 84.
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 fulfil their role (see page 93).
The length of service of Non-Executive Directors is reviewed regularly,
details of the review in 2021 are included on page 103.
L. Annual evaluation
The Board undertakes either an internal or external annual Board
effectiveness evaluation. The last external evaluation was carried
out in 2019, so in 2021 an internal Board evaluation was conducted.
A summary of the evaluation is set out on page 94.
Performance evaluations of Directors, including the Chair, are also
carried out on an annual basis. Directors’ biographies are set out
on pages 82 to 84 and details of performance evaluations carried
out in 2021 are on page 94.
4. Audit, Risk and Internal Control
M. Audit functions
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 130.
The status of IHG as a going concern is set out in the Directors’
Report on page 230. 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 77.
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.
An assessment of the principal and emerging risks facing the Group
was carried out during the year, including those risks that would
threaten the Group’s business model, future performance, solvency
or liquidity and reputation (see pages 40 to 47 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 40 to 47, and 95 to 99.
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 104 to 125. Details of the Remuneration
Committee’s focus areas during 2021 are set out on page 113 and its
membership details are on page 81.
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 20-F 2019, this is
already the case for new UK appointments and will be the case for
existing UK Executive Directors from January 2023. US retirement
benefit 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 relate to the CEO, Americas are to be
maintained. Further details can be found on page 108.
Q. Procedure for developing policy on executive remuneration
Details of how the Directors’ Remuneration Policy (DR Policy)
was implemented in 2021 and the implementation of the DR Policy
in 2022, are set out on pages 115 to 125.
During 2021, no individual Director was involved in deciding his
or her own remuneration outcome.
The Audit Committee is comprised entirely of Independent
Non-Executive Directors (see page 81 for membership details).
Ian Dyson, the Chair of the Committee, 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 95 to 99.
R.
The Audit Committee reviewed the effectiveness of the Group’s
internal audit function and also assessed PricewaterhouseCoopers
LLP’s performance during 2021, including its independence,
effectiveness and objectivity. Details of these reviews are set out
in the Audit Committee Report on pages 95 to 99.
Independent judgement and discretion
The Remuneration Committee has formal discretions in place in
relation to outcomes under the APP and LTIP, and these are disclosed
as part of the DR Policy, which is set out on pages 110 to 117 of the
Company’s Annual Report and Form 20-F 2019. When determining
outcomes under these 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 2021 is set out on pages 104 to 108.
Statement of compliance
IHG | Annual Report and Form 20-F 2021
127
Governance Group Financial Statements
Statement of Directors’ Responsibilities
Independent Auditor’s UK Report
Independent Auditors’ US Reportsa
130
131
138
142 Group Financial Statements
149 Accounting policies
158
Notes to the Group Financial Statements
a Independent Auditors’ Reports comprise reports from PricewaterhouseCoopers
LLP (PCAOB ID: 876) and Ernst & Young LLP (PCAOB ID: 1438)
128
IHG | Annual Report and Form 20-F 2021
Group Financial Statements
IHG | Annual Report and Form 20-F 2021
129
Group Financial Statements Statement of Directors’ Responsibilities
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 of the Group for that period. The Directors
have prepared the Consolidated Financial Statements in accordance
with UK-adopted international accounting standards and the
Company Financial Statements in accordance with UK accounting
standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and
applicable law. In preparing the Consolidated Financial Statements,
the Directors have also elected to comply with International Financial
Reporting Standards (‘IFRSs’) issued by the International Accounting
Standards Board (‘IASB’).
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 of 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 of 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 of 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.
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IHG | Annual Report and Form 20-F 2021
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 defined by Section 418(3) of the
Companies Act 2006). None of the Directors are aware of any
relevant audit information which 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
defined 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 of
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 reflect 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
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 2021 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 2021 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 2021, 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 138.
For and on behalf of the Board
Keith Barr
Chief Executive Officer
21 February 2022
Paul Edgecliffe-Johnson
Chief Financial Officer
21 February 2022
Group Financial Statements
Independent Auditor’s UK Report
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 2021 and
of the Group’s profit and cash flows for the year then ended;
• the Group Financial Statements have been properly prepared in
accordance with UK-adopted international accounting standards;
• 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 2021; 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 audit approach
Context
2021 is our first year as independent auditors of the Group. As part
of our audit transition, we carried out procedures over opening
balances at 1 January 2021 by shadowing the prior year audit
undertaken by the predecessor auditor, reviewing the predecessor
auditor’s working papers in the UK, US and India and re-evaluating
the predecessor auditor’s conclusions in respect of key judgements
included in the opening Group statement of financial position.
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: 91% of the Group’s
revenue; 88% of the Group’s statutory profit before tax; and 82%
of the Group’s adjusted profit before tax, 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 Rewards loyalty
programme deferred revenue (Group)
• Allocation of expenses to the System Fund (Group)
• Expected credit losses (Group and Parent Company)
Our opinion is consistent with our reporting to the Audit Committee.
• Recognition of the UK deferred tax asset (Group)
Materiality
• Overall Group materiality: $25.0 million based on approximately
5% of four-year average adjusted profit before tax, exceptional
items and the System Fund.
• Overall Parent Company materiality: £13.3 million based on
approximately 1% of net assets.
• Performance materiality: $18.7 million (Group) and £9.9 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.
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 fulfilled 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.
Independent Auditor’s UK Report
IHG | Annual Report and Form 20-F 2021
131
Group Financial Statements Independent Auditor’s UK Report continued
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the Financial
Statements of the current period and include the most significant assessed risks of 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 of 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.
We considered the key audit matters included in the prior year audit report. Deferred revenue relating to the IHG Rewards loyalty programme
and allocation of expenses to the System Fund remain key audit matters in the current year. Expected credit losses and recognition of the
UK deferred tax asset are new key audit matters for 2021 given the level of estimation uncertainty associated with expected credit losses
and the level of judgement involved in forecasting the recoverability of the UK deferred tax asset. Impairment of non-current assets was a
key audit matter in the prior year. During 2021, there has been a general improvement in economic conditions and in the market expectation
of the Covid-19 recovery period. As such, we did not identify significant risk of further impairments. We also considered the possibility
of significant reversal of any previous impairments, but we did not identify an enhanced level of risk in this regard. As a result, impairment
of non-current assets was not considered to be a key audit matter for 2021.
This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Breakage assumption used to estimate IHG Rewards
deferred revenue (Group)
At 31 December 2021, the deferred revenue balance relating to the IHG
Rewards loyalty programme was $1,292m (2020: $1,245m).
The hotel loyalty programme, IHG Rewards, enables members to earn points,
funded through hotel assessments, during each qualifying stay at an IHG
branded hotel and to consume points at a later date in exchange for
accommodation or other benefits. The Group recognises deferred revenue
in an amount that reflects the Group’s unsatisfied performance obligations,
valued at the stand-alone selling price of the future benefit to the member.
The amount of revenue recognised and deferred is impacted by the estimate
of breakage which is the estimate of the number of points that will never
be consumed. The Group engages an external actuary who uses statistical
formulae to assist in determining this breakage estimate.
Significant estimation uncertainty exists in projecting members’ future
consumption activity and how this may be impacted by Covid-19. A small
change in the breakage assumption would result in a material difference in the
deferred revenue balance at 31 December 2021 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.
Allocation of expenses to the System Fund (Group)
The Group operates a System Fund to collect and administer cash assessments
from hotel owners. Expenses incurred are allocated to the System Fund in
accordance with the principles agreed with the IHG Owners Association.
For the year ended 31 December 2021, the Group recorded System Fund
expenses of $939m (2020: $867m).
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 internal policies that the Group
has put in place in order to apply the principles set out in the IHG Owners
Association letter 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 33 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 actuary in deriving the
breakage assumption to underlying records. We assessed the competence
and objectivity of management’s actuary. We deployed our own actuarial
experts to assess the reasonableness of the methods and assumptions used
by management’s actuary in determining breakage. Our actuarial experts
calculated an independent expectation of a reasonably possible range for
deferred revenue based on independently determined breakage assumptions.
We compared the deferred revenue balance, which reflected management’s
assumptions about the ongoing impact of Covid-19 on future activity of
programme members, 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.
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 set out in the
IHG Owners Association letter to expenses incurred. We tested a sample of
expenses that had been allocated to the System Fund to assess whether they
were in compliance with these policies and consistent with historical practice.
We checked whether there were any manual journal entries that transferred
expenses to or from the System Fund to evaluate whether there was an
appropriate rationale for any such journals and we assessed whether the
resulting classification of 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.
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IHG | Annual Report and Form 20-F 2021
Group Financial Statements Key audit matter
How our audit addressed the key audit matter
Expected credit losses (Group and Parent Company)
At 31 December 2021, the Group recorded a provision for expected credit
losses of $133m (2020: $78m) against a gross trade receivables balance of
$532m (2020: $387m). In the Parent Company Financial Statements, amounts
due from Group undertakings of £912m were recorded (2020: £926m) with
no expected credit losses (2020: £nil) recognised on these balances.
A provision for impairment is made for lifetime expected credit losses.
Management has established a provision matrix for the Group’s trade
receivables that is based on historical credit loss experience by region
and number of days past due. Where historical experience is not relevant
to defined owner groups, for example owners with payment plans, the
expected lifetime losses are calculated by reference to other sources of data.
The calculation of expected credit losses is subject to estimation uncertainty,
which is increased due to continued uncertainty about the pace and scale
of market recovery from Covid-19 and the related risk of owner liquidity.
Refer to the Estimates section of the Accounting policies, to note 18 to the
Group Financial Statements and to note 4 to the Parent Company Financial
Statements for management’s disclosures.
Recognition of the UK deferred tax asset (Group)
At 31 December 2021, the Group recognised a deferred tax asset of $127m
(2020: $103m) related to the UK tax group. The asset largely represents
brought forward revenue tax losses and 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 therefore recognised to the extent that it is regarded as probable that
there will be sufficient and suitable taxable profits in the relevant legal entity
or tax group against which such assets can be utilised in the future. For this
purpose, forecasts of future taxable profits are considered by assessing
the Group’s forecast revenue and profit models, taking into account future
growth predictions and operating cost assumptions. The recoverability of
the UK deferred tax asset has been assessed by starting with management’s
forecasts, overlaying tax principles to those forecasts and following the
methodology required by IAS 12. This has demonstrated that the UK deferred
tax asset should reverse over a seven- to ten-year period. Under UK law, tax
losses do not expire but they can only be offset against 50% of annual UK
taxable profits.
We focused on this area given the size of the asset, the length of the period
over which it is forecast to be recovered and the inherent judgement in
management’s forecasts of future profitability within the UK tax group.
Further UK tax losses incurred in 2021 present an additional risk that the asset
recognised may not be recoverable. In addition, the asset increased by $30m
during the year as a result of changes to the UK rate of corporate income tax
effective from 1 April 2023.
Refer to note 8 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 expected credit loss calculations.
We obtained management’s expected credit loss model for the Group at
31 December 2021 and we tested its mathematical integrity. We agreed a
sample of the historical aged receivables analysis and collections experience
underpinning the model to underlying records. We challenged management
to demonstrate that the assumptions used in the model were consistent with
recent historical experience of regional collections. Where inconsistencies
were identified, we checked whether management had made appropriate
updates to historical assumptions to reflect the most recent collections
experience, including in response to Covid-19.
We separately challenged the appropriateness of expected lifetime losses
for those owner groups where management determined historical experience
not to be relevant. We obtained evidence to determine whether these
provisions were required to state trade receivables at their net realisable
value. We read internal management reporting to identify any
contradictory evidence.
For the Parent Company amounts due from Group undertakings, we
understood the payment terms associated with the only material receivable
to determine whether a provision for expected credit losses was required at
31 December 2021, identifying that the receivable was repayable within one
month of year-end. We evaluated whether the counterparty had the ability
to settle the amount due at 31 December 2021.
For both the Group and the Parent Company, we evaluated whether the
overall provisions recorded were supportable and in compliance with the
requirements of IFRS 9.
We assessed the appropriateness of the related disclosures in the Estimates
section of the Accounting policies, in note 18 to the Group Financial
Statements and in note 4 to the Parent Company Financial Statements.
Based on the procedures performed, we noted no material issues arising
from our work.
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 compared forecast UK cash flows to Board approved forecasts and we
assessed the historical accuracy of management’s forecasting. We evaluated
the appropriateness of the assumptions reflected 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 estimate of the Covid-19 forecast recovery
period to third-party sources.
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
profits, and to determine whether the UK deferred tax asset met the
recognition criteria of IAS 12.
We challenged the appropriateness of the recovery period of seven to ten years.
With input from our tax specialists, we validated that there is no expiry period
applicable to brought forward UK losses. We performed independent
sensitivity analysis to understand the impact of reasonably possible changes
to key assumptions on this forecast recovery period.
We assessed the appropriateness of the related disclosures in note 8 to the
Group Financial Statements.
Based on the procedures performed, we noted no material issues arising
from our work.
IHG | Annual Report and Form 20-F 2021
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Independent Auditor’s UK ReportGroup Financial Statements 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 approximately
600 reporting units. The Group operates a Global Business Service
Centre (‘BSC’) in India which processes transactions for the majority
of reporting units. We identified one aggregation of components in
the US which required a full scope audit due to its size and because
this aggregated component holds the IHG 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. Due to Covid-19,
most of these meetings took place remotely but we were able to
make one site visit to the US in person. We also had 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
expected credit losses on trade receivables. Taken together, the
audit procedures carried out by the Group and component audit
teams provided coverage of 91% of the Group’s revenue, 88% of
the Group’s statutory profit before tax and 82% of the Group’s
adjusted profit before tax, 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 Group has set out a target to reduce emissions from its owned,
leased, managed and franchised hotels by 46% by 2030 from a 2019
baseline. Management considers that the impact of climate change
does not give rise to a material impact on the Financial Statements.
However, management’s climate change initiatives and commitments
will impact the Group in a variety of ways. Disclosure of the impact
of climate change risk is incorporated in the Task Force on climate-
related financial disclosures (‘TCFD’) section of the Annual Report.
As part of our audit, we made enquiries of management to
understand the extent of the potential impact of climate change on
the Group’s business and Financial Statements, including reviewing
management’s climate change risk assessment which was prepared
with support from an external expert. We used our knowledge of the
Group and we engaged with our climate change experts to evaluate
the risk assessment performed by management. We assessed that
the key areas in the Financial Statements which are more likely to
be materially impacted by climate change are those areas that are
based on future cash flows. As a result, we particularly considered
how climate change risks and the impact of climate commitments
made by the Group would impact the assumptions made in the
forecasts prepared by management that are used in the Company’s
impairment analysis, for going concern purposes and for assessing
the recognition of deferred tax assets. Our procedures did not
identify any material impact on our key audit matters for the year
ended 31 December 2021. We also checked the consistency of the
disclosures in the TCFD section of the Annual Report with the relevant
financial statement disclosures, including notes 8 and 13 and the
Going concern section of the Accounting policies, and with our
understanding of the business.
Materiality
The scope of our audit was influenced by our application of
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:
Overall materiality
$25.0 million
£13.3 million
Group Financial Statements
Parent Company Financial Statements
How we determined it
Approximately 5% of four-year average adjusted profit before tax, exceptional items
and the System Fund
Approximately 1% of net assets
Rationale for
benchmark applied
The Group’s principal measure of performance is operating profit 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 profit 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 finance costs and fair value gains
on contingent purchase consideration to arrive at adjusted profit before tax.
Given the volatility in profitability in 2020 and 2021 as a result of Covid-19, we based
our materiality calculation on a four-year average of the Group’s adjusted profit
before 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.
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IHG | Annual Report and Form 20-F 2021
Group Financial Statements 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 $11.0 million to
$22.5 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% of overall materiality,
amounting to $18.7 million for the Group Financial Statements and
£9.9 million for the Parent Company Financial Statements.
In determining the 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 $1.2 million
(Group audit) and £0.6 million (Parent Company audit) 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, Downside Case and
Severe Downside Case scenarios and reverse stress testing
calculations, understanding and evaluating the key assumptions,
including assumptions related to the Covid-19 recovery period;
• 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;
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,
which includes reporting based on the Task Force on Climate-
related Financial Disclosures (TCFD) recommendations. 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.
• Identification of RevPAR as the key assumption inherent in
management’s cash flow forecasts and validation of this
assumption to industry sources;
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.
• Consideration of the Group’s available financing and debt maturity
profile and evaluation of 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 whether climate change is expected to have any
significant impact during the period of the going concern
assessment; and
• Review of the related disclosures in the Annual Report.
Based on the work we have performed, we have not identified 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.
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 2021 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.
IHG | Annual Report and Form 20-F 2021
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Independent Auditor’s UK ReportGroup Financial Statements 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.
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.
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 identification of 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 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 specified under the Listing
Rules for review by the auditors.
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 of non-compliance
with laws and regulations related to the failure to comply with the
Listing Rules, UK and overseas tax legislation, employment laws
and regulations and health and safety legislation, 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 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,
including IHG Rewards deferred revenue. 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 from regulators and
consideration of the impact, if any, 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;
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IHG | Annual Report and Form 20-F 2021
Group Financial Statements • Identification and testing of significant manual journal entries,
in particular any journal entries posted with unusual account
combinations which resulted in an impact on revenue or the
System Fund; and
• Challenging assumptions and judgements made by management
in making significant accounting estimates, in particular in relation
to IHG Rewards loyalty programme deferred revenue and expected
credit losses.
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:
www.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 specified 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. This is
therefore our first year of uninterrupted engagement.
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 of 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 specified in the ESEF RTS.
Giles Hannam (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
21 February 2022
IHG | Annual Report and Form 20-F 2021
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Independent Auditor’s UK ReportGroup Financial Statements Independent Auditor’s US Report
Definition and Limitations of 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 of 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 reflect the transactions and dispositions of 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 authorizations of management and directors
of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized 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 judgments. 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.
Breakage assumption used to estimate IHG 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 Rewards loyalty programme was $1,292m as
of 31 December 2021. The hotel loyalty programme, IHG Rewards,
enables members to earn points, funded through hotel assessments,
during each qualifying stay at an IHG branded hotel and to consume
points at a later date in exchange for accommodation or other benefits.
The Group recognises deferred revenue in an amount that reflects
the Group’s unsatisfied performance obligations, valued at the
stand-alone selling price of the future benefit to the member.
The amount of revenue recognised and deferred is impacted by the
estimate of breakage which is the estimate of the number of points
that will never be consumed. The Group engages an external actuary
who uses statistical formulae to assist in determining this breakage
estimate. Significant estimation uncertainty exists in projecting
members’ future consumption activity and how this may be
impacted by Covid-19.
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 statement of financial
position of InterContinental Hotels Group PLC and its subsidiaries
(the ‘Group’) as of 31 December 2021 and the related Group
income statement and Group statements of comprehensive income,
changes in equity and cash flows for the year then ended, 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 of 31 December
2021, 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 of the
Group as of 31 December 2021 and the results of its operations
and its cash flows for the year then ended in accordance 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 2021, based on criteria
established in Internal Control — Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Group’s management is responsible for the 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 130.
Our responsibility is to express opinions on the Group Financial
Statements and on the Group’s internal control over financial
reporting based on our audit. 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 US federal securities
laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
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 audit 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 audit 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 audit also included performing such other procedures as
we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.
138
IHG | Annual Report and Form 20-F 2021
Group Financial Statements The principal consideration for our determination that performing
procedures relating to the breakage assumption used to estimate
IHG Rewards loyalty programme deferred revenue is a critical audit
matter is that there is significant estimation uncertainty in projecting
members’ future consumption activity and how this may be
impacted by Covid-19. This in turn led to a high degree of auditor
judgment, subjectivity and effort in performing procedures to
evaluate the breakage assumption and the related audit evidence.
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 actuary in
deriving the breakage assumption to underlying records; (ii) assessing
the competence and objectivity of management’s expert; (iii) assessing
the reasonableness of the methods and assumptions used by
management’s actuary in determining breakage; (iv) developing an
independent expectation of a reasonably possible range for deferred
revenue based on independently determined breakage assumptions;
(v) comparing the deferred revenue balance, which reflected
management’s assumptions about the ongoing impact of Covid-19
on future activity of programme members, with our independently
calculated range; and (vi) 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 33 to the Group Financial
Statements, the Group recorded System Fund expenses of $939m
for the year ended 31 December 2021. The Group operates a System
Fund to collect and administer cash assessments from hotel owners.
Expenses incurred are allocated to the System Fund in accordance
with the principles agreed with the IHG Owners Association.
The principal consideration for our determination that performing
procedures relating to the allocation of expenses to the System
Fund is a critical audit matter is that there is judgement involved
in developing the 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. This in turn led to a high degree of auditor
judgment, subjectivity and effort in performing procedures
to evaluate management’s classification of expenses.
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) testing a sample of expenses that had been allocated to the
System Fund to assess whether they were in compliance with these
policies and consistent with historical practice; and (iii) checking
whether there were any manual journal entries that transferred
expenses to or from the System Fund to evaluate whether there
was an appropriate rationale for any such journals and to determine
whether the resulting classification of the expenses was in line with
the principles agreed with the IHG Owners Association.
Expected credit losses on trade receivables
As described in the Estimates section of the Accounting policies
and in note 18 to the Group Financial Statements, the Group
recorded a provision for expected credit losses of $133m as of
31 December 2021 against a gross trade receivables balance
of $532m. A provision for impairment is made for lifetime expected
credit losses. Management has established a provision matrix that
is based on 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 owners with payment plans,
the expected lifetime losses are calculated by reference to other
sources of data. Although cash collection from owners has
improved since 2020, the proportion of older debt is higher than in
periods prior to the pandemic. There also remains a risk of reduced
owner liquidity. These factors, taken together with the continued
uncertainties about the pace and scale of market recovery, result
in expected credit losses continuing to be a significant estimate.
The principal consideration for our determination that performing
procedures relating to expected credit losses on trade receivables
is a critical audit matter is the significant estimation uncertainty
involved in determining the level of expected credit losses. This in
turn led to a high degree of auditor judgment, subjectivity and effort
in performing procedures to evaluate management’s estimates.
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 expected
credit losses. These procedures also included, among others,
(i) testing the mathematical integrity of management’s expected
credit loss matrix; (ii) testing a sample of the historical aged
receivables analysis and collections experience underpinning the
model to underlying records; (iii) assessing assumptions used in the
model against recent historical experience of regional collections;
(iv) assessing the appropriateness of expected lifetime losses for
those owner groups where management determined historical
experience not to be relevant and obtaining evidence to determine
whether these provisions were required to state trade receivables at
their net realisable value; (v) evaluating whether the overall provision
recorded is supportable and in compliance with the requirements of
IFRS 9; (vi) reviewing internal management reporting to identify any
contradictory evidence; and (vii) assessing the appropriateness of
the related disclosures in the Group Financial Statements.
IHG | Annual Report and Form 20-F 2021
139
Independent Auditor’s US ReportGroup Financial Statements 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 $127m was recognised related to the UK tax group as of
31 December 2021. 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 therefore recognised
to the extent that it is regarded as probable that there will be
sufficient and suitable taxable profits in the relevant legal entity
or tax group against which such assets can be utilised in the future.
For this purpose, forecasts of future taxable profits are considered
by assessing the Group’s forecast revenue and profit models,
taking into account future growth predictions and operating cost
assumptions. The recoverability of the UK deferred tax asset has
been assessed by starting with the management’s forecasts,
overlaying tax principles to those forecasts and following the
methodology required by IAS 12. This has demonstrated that the UK
deferred tax asset should reverse over a seven- to ten-year period.
Under UK law, tax losses do not expire but they can only be offset
against 50% of annual UK taxable profits.
The principal consideration for our determination that performing
procedures relating to recognition of the UK deferred tax asset is a
critical audit matter is the significant estimation uncertainty involved
in determining the future taxable profits of the UK tax group. This in
turn led to a high degree of auditor judgment, subjectivity and effort
in evaluating audit evidence and in determining the reasonableness
of the forecast seven- to ten-year period to recover this asset.
In addition, the audit effort involved the use of professionals with
specialized 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) performing a retrospective comparison of UK forecast taxable
profits to actual past performance to determine the historical
accuracy of management’s forecasting; (ii) evaluating the
appropriateness of the assumptions reflected in the UK forecasts,
including assessing the reasonableness of growth predictions
compared to historical experience and industry data and
benchmarking management’s estimate to third-party sources;
(iii) 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, and determining whether the UK deferred 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, England
21 February 2022
We have served as the Company’s auditor since 2021.
140
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 2020 Independent Auditor’s US Report
Report of Independent Registered Public
Accounting Firm
To the Shareholders and the Board of Directors of InterContinental
Hotels Group PLC
Opinion on the Financial Statements
We have audited the accompanying Group statement of financial
position of InterContinental Hotels Group PLC (the ‘Group’) as
of 31 December 2020, the related Group statements of income,
comprehensive income, changes in equity and cash flows for each
of the two years in the period ended 31 December 2020, and the
related notes (collectively referred to as the ‘Group Financial
Statements’). In our opinion, the Group Financial Statements
present fairly, in all material respects, the financial position of the
Group at 31 December 2020, and the results of its operations
and its cash flows for each of the two years in the period ended
31 December 2020, in conformity with International Financial
Reporting Standards as issued by the International Accounting
Standards Board, adopted pursuant to Regulation (EC) No.
1606/2002 as it applies in the European Union.
Basis for Opinion
These Group Financial Statements are the responsibility of the
Group’s management. Our responsibility is to express an opinion
on the Group’s Financial Statements based on our audits. We are a
public accounting firm registered with the 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 audit
to obtain reasonable assurance about whether the Group Financial
Statements are free of material misstatement, whether due to error
or fraud. Our audits 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. We believe that our audits provide
a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We served as auditors from the Group’s listing in 2003 to 2021
and of the Group’s predecessor businesses from 1988.
London, England
22 February 2021
Note that the report set out above is included for the purposes of
InterContinental Hotels Group PLC’s Annual Report on Form 20-F
for 2021 only and does not form part of InterContinental Hotels
Group PLC’s Annual Report and Accounts for 2021.
IHG | Annual Report and Form 20-F 2021
141
Independent Auditor’s US ReportGroup Financial Statements Group Financial Statements
Group income statement
For the year ended 31 December 2021
Revenue from fee business
Revenue from owned, leased and managed lease hotels
System Fund revenues
Reimbursement of costs
Total revenue
Cost of sales
System Fund expenses
Reimbursed costs
Administrative expenses
Share of losses of associates and joint ventures
Other operating income
Depreciation and amortisation
Impairment loss on financial assets
Other impairment charges
Operating profit/(loss)
Operating profit/(loss) analysed as:
Operating profit before System Fund and exceptional items
System Fund
Operating exceptional items
Financial income
Financial expenses
Fair value gains on contingent purchase consideration
Profit/(loss) before tax
Tax
Profit/(loss) for the year from continuing operations
Attributable to:
Equity holders of the parent
Non-controlling interest
Earnings/(loss) per ordinary share:
Basic
Diluted
Notes on pages 149 to 205 form an integral part of these Group Financial Statements.
Note
3
3
2021
$m
1,153
237
928
589
2020
$m
823
169
765
637
2
2,907
2,394
(486)
(939)
(589)
(300)
(8)
11
(98)
–
(4)
494
534
(11)
(29)
494
8
(147)
6
361
(96)
265
266
(1)
265
(354)
(867)
(637)
(267)
(14)
16
(110)
(88)
(226)
(153)
219
(102)
(270)
(153)
4
(144)
13
(280)
20
(260)
(260)
–
(260)
2
2
6
2
6
7
7
25
8
10
2019
$m
1,510
573
1,373
1,171
4,627
(782)
(1,422)
(1,171)
(385)
(3)
21
(116)
(8)
(131)
630
865
(49)
(186)
630
6
(121)
27
542
(156)
386
385
1
386
145.4¢
144.6¢
(142.9)¢
(142.9)¢
210.4¢
209.2¢
142
IHG | Annual Report and Form 20-F 2021
Group Financial Statements Group statement of comprehensive income
For the year ended 31 December 2021
Profit/(loss) for the year
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Losses on cash flow hedges, including related tax charge of $7m (2020: $4m credit, 2019: $nil)
Costs of hedging
Hedging losses/(gains) reclassified to financial expenses
Exchange gains/(losses) on retranslation of foreign operations, net of related tax charge of $4m
(2020: $4m credit, 2019: $3m credit)
Items that will not be reclassified to profit or loss:
Gains/(losses) on equity instruments classified as fair value through other comprehensive income,
net of related tax charge of $1m (2020: $4m credit, 2019: $2m charge)
Re-measurement gains/(losses) on defined benefit plans, including related tax credit of $nil
(2020: $1m credit, 2019: $1m credit)
Tax related to pension contributions
Total other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
Notes on pages 149 to 205 form an integral part of these Group Financial Statements.
2021
$m
265
(69)
2
96
18
47
14
7
1
22
69
334
335
(1)
334
2020
$m
(260)
2019
$m
386
3
(6)
(13)
(85)
(101)
(43)
(7)
1
(49)
(150)
(410)
(410)
–
(410)
(34)
(6)
38
(39)
(41)
10
(6)
–
4
(37)
349
348
1
349
IHG | Annual Report and Form 20-F 2021
143
Group Financial StatementsGroup Financial Statements 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
156
–
10
–
(1)
–
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
(24)
–
298
–
568
266
(1,857)
266
8
(1)
At 1 January 2021
Profit for the year
Other comprehensive income
Items that may be subsequently
reclassified to profit or loss:
Losses on cash flow hedges
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
Transfer of treasury shares
to employee share trusts
Release of own shares by
employee share trusts
Equity-settled share-based cost
Tax related to share schemes
Exchange adjustments
At 31 December 2021
(2,875)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
11
–
–
–
–
–
–
14
–
–
14
14
14
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(34)
13
–
–
–
(69)
2
96
–
29
–
–
–
–
29
29
–
–
–
–
–
5
–
–
–
18
18
–
–
–
–
18
18
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
154
Total
equity
$m
(1,849)
265
(69)
2
96
18
47
14
7
1
22
69
–
–
–
–
–
–
7
1
8
8
(69)
2
96
18
47
14
7
1
22
69
–
–
–
–
–
–
–
–
–
–
274
335
(1)
334
34
(13)
39
2
–
–
–
39
2
–
–
–
–
–
–
7
–
–
39
2
–
(1,474)
10
(22)
(2,873)
25
316
904
(1,481)
All items within total comprehensive income are shown net of tax.
Notes on pages 149 to 205 form an integral part of these Group Financial Statements.
144
IHG | Annual Report and Form 20-F 2021
Group Financial Statements
At 1 January 2020
Loss for the year
Other comprehensive income
Items that may be subsequently
reclassified to profit or loss:
Losses on cash flow hedges
Costs of hedging
Hedging gains reclassified
to financial expenses
Exchange losses on retranslation
of foreign operations
Items that will not be reclassified
to profit or loss:
Losses on equity instruments
classified as fair value through
other comprehensive income
Gains on equity instruments
transferred to retained earnings
on disposal
Re-measurement losses
on defined benefit plans
Tax related to pension
contributions
Total other comprehensive loss
for the year
Total comprehensive loss
for the year
Transfer of treasury shares
to employee share trusts
Release of own shares by
employee share trusts
Equity-settled share-based cost,
net of $3m reclassification to
cash-settled awards
Tax related to share schemes
Exchange adjustments
At 31 December 2020
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
151
–
10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5)
(2,870)
–
–
–
–
–
–
–
–
–
–
–
–
–
(14)
18
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5)
57
–
(6)
–
381
–
809
(260)
(1,473)
(260)
–
–
–
–
–
(43)
(3)
–
–
(46)
(46)
(46)
–
–
–
–
–
3
(6)
(13)
(2)
(18)
–
–
–
–
–
(18)
(18)
–
–
–
–
–
–
–
–
(83)
(83)
–
–
–
–
–
(83)
–
–
–
–
–
–
3
(7)
1
(3)
(3)
3
(6)
(13)
(85)
(101)
(43)
–
(7)
1
(49)
(150)
(83)
(263)
(410)
–
–
–
–
–
14
(18)
27
(1)
–
–
–
27
(1)
–
156
10
(1)
(2,875)
11
(24)
298
568
(1,857)
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8
Total
equity
$m
(1,465)
(260)
3
(6)
(13)
(85)
(101)
(43)
–
(7)
1
(49)
(150)
(410)
–
–
27
(1)
–
(1,849)
All items within total comprehensive loss are shown net of tax.
Notes on pages 149 to 205 form an integral part of these Group Financial Statements.
IHG | Annual Report and Form 20-F 2021
145
Group Financial StatementsGroup Financial Statements
Group Financial Statements continued
Group statement of changes in equity continued
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
At 1 January 2019
Profit for the year
Other comprehensive income
Items that may be subsequently
reclassified to profit or loss:
Losses on cash flow hedges
Costs of hedging
Hedging losses reclassified
to financial expenses
Exchange losses 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 losses on
defined benefit plans
Total other comprehensive
income/(loss) for the year
Total comprehensive income
for the year
Transfer of treasury shares
to employee share trusts
Purchase of own shares by
employee share trusts
Release of own shares by
employee share trusts
Equity-settled share-based cost
Tax related to share schemes
Equity dividends paid
Transaction costs relating
to shareholder returns
Exchange adjustments
At 31 December 2019
146
–
10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4)
(2,865)
–
–
–
–
–
–
–
–
–
–
–
(19)
(5)
23
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5)
47
–
(4)
–
420
–
1,111
385
(1,139)
385
–
–
–
–
–
10
–
10
10
10
–
–
–
–
–
–
–
–
(34)
(6)
38
–
(2)
–
–
–
(2)
(2)
–
–
–
–
–
–
–
–
–
–
–
(39)
(39)
–
–
–
(39)
–
–
–
–
–
–
(6)
(6)
(6)
(34)
(6)
38
(39)
(41)
10
(6)
4
(37)
(39)
379
348
–
–
–
–
–
–
–
–
19
–
(23)
41
4
–
(5)
–
41
4
(1)
–
(1)
–
151
10
(5)
(2,870)
57
(6)
381
809
(1,473)
Total
equity
$m
(1,131)
386
(34)
(6)
38
(39)
(41)
10
(6)
4
(37)
349
–
(5)
–
41
4
8
1
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
(721)
(721)
(1)
(722)
–
–
8
(1)
–
(1,465)
All items within total comprehensive income are shown net of tax.
Notes on pages 149 to 205 form an integral part of these Group Financial Statements.
146
IHG | Annual Report and Form 20-F 2021
Group Financial Statements
Group statement of financial position
31 December 2021
ASSETS
Goodwill and other intangible assets
Property, plant and equipment
Right-of-use assets
Investment in associates and joint ventures
Retirement benefit assets
Other financial assets
Derivative financial instruments
Deferred compensation plan investments
Non-current tax receivable
Deferred tax assets
Contract costs
Contract assets
Total non-current assets
Inventories
Trade and other receivables
Current tax receivable
Other financial assets
Cash and cash equivalents
Contract costs
Contract assets
Total current assets
Total assets
LIABILITIES
Loans and other borrowings
Lease liabilities
Trade and other payables
Deferred revenue
Provisions
Current tax payable
Total current liabilities
Loans and other borrowings
Lease liabilities
Derivative financial instruments
Retirement benefit obligations
Deferred compensation plan liabilities
Trade and other payables
Deferred revenue
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net liabilities
EQUITY
IHG shareholders’ equity
Non-controlling interest
Total equity
Signed on behalf of the Board,
Paul Edgecliffe-Johnson
21 February 2022
Note
13
14
15
16
27
17
24
8
3
3
18
17
19
3
3
22
15
20
3
21
22
15
24
27
20
3
21
8
2021
$m
1,195
137
274
77
2
173
–
256
1
147
72
316
2020
$m
1,293
201
303
81
–
168
5
236
15
113
70
311
2,650
2,796
4
574
1
2
5
514
18
1
1,450
1,675
5
30
2,066
4,716
(292)
(35)
(579)
(617)
(49)
(52)
(1,624)
(2,553)
(384)
(62)
(92)
(256)
(89)
(996)
(41)
(93)
(4,566)
(6,190)
(1,474)
5
25
2,243
5,039
(869)
(34)
(466)
(452)
(16)
(30)
(1,867)
(2,898)
(416)
(18)
(103)
(236)
(94)
(1,117)
(44)
(95)
(5,021)
(6,888)
(1,849)
(1,481)
(1,857)
7
8
(1,474)
(1,849)
Notes on pages 149 to 205 form an integral part of these Group Financial Statements.
IHG | Annual Report and Form 20-F 2021
147
Group Financial StatementsGroup Financial Statements Group Financial Statements continued
Group statement of cash flows
For the year ended 31 December 2021
Profit/(loss) for the year
Adjustments reconciling profit/(loss) for the year to cash flow from operations
Cash flow from operations
Interest paid
Interest received
Contingent purchase consideration paid
Tax paid
Net cash from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Investment in associates
Investment in other financial assets
Acquisition of businesses, net of cash acquired
Deferred and contingent purchase consideration paid
Capitalised interest paid
Distributions from associates and joint ventures
Disposal of hotel assets, net of costs and cash disposed
Repayments of other financial assets
Disposal of equity securities
Net cash from investing activities
Cash flow from financing activities
Purchase of own shares by employee share trusts
Dividends paid to shareholders
Dividend paid to non-controlling interest
Transaction costs relating to shareholder returns
Issue of long-term bonds, including effect of currency swaps
(Repayment)/issue of commercial paper
Repayment of long-term bonds
Principal element of lease payments
(Decrease)/increase in other borrowings
Proceeds from currency swaps
Net cash from financing activities
Net movement in cash and cash equivalents in the year
Cash and cash equivalents at beginning of the year
Exchange rate effects
Cash and cash equivalents at end of the year
Notes on pages 149 to 205 form an integral part of these Group Financial Statements.
Note
26
8
11
25
7
12
9
23
23
23
23
23
23
19
19
2021
$m
265
583
848
(134)
8
–
(86)
636
(17)
(35)
–
(5)
–
(13)
–
–
44
14
–
(12)
–
–
–
–
–
(828)
–
(32)
–
–
2020
$m
(260)
568
308
(132)
2
–
(41)
137
(26)
(50)
(2)
(5)
–
–
(1)
5
1
13
4
2019
$m
386
521
907
(110)
3
(6)
(141)
653
(75)
(104)
(10)
(9)
(292)
(2)
(5)
–
–
4
–
(61)
(493)
–
–
–
–
1,093
738
(290)
(65)
(125)
3
(5)
(721)
(1)
(1)
–
–
–
(59)
127
–
(860)
1,354
(660)
(236)
1,624
3
1,391
1,430
108
86
1,624
(500)
600
8
108
148
IHG | Annual Report and Form 20-F 2021
Group Financial Statements Accounting policies
General information
This document constitutes the Annual Report and Financial
Statements in accordance with UK Listing Rules requirements
and the Annual Report on Form 20-F in accordance with the
US Securities Exchange Act of 1934.
The Consolidated Financial Statements of InterContinental Hotels
Group PLC (the ‘Group’ or ‘IHG’) for the year ended 31 December 2021
were authorised for issue in accordance with a resolution of the
Directors on 21 February 2022. InterContinental Hotels Group PLC
(the ‘Company’) is incorporated and registered in England and Wales.
Basis of preparation
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 and with International Financial Reporting Standards
(‘IFRSs’) as issued by the IASB. On 31 December 2020, IFRSs as
adopted by the European Union at that date were brought into UK
law and became UK-adopted international accounting standards,
with future changes being subject to endorsement by the UK
Endorsement Board. The Group transitioned to UK-adopted
international accounting standards in its consolidated financial
statements on 1 January 2021. There was no impact or change in
accounting policies from the transition. UK-adopted international
accounting standards differ in certain respects from IFRSs as issued
by the IASB. However, the differences have no impact on the
Consolidated Financial Statements for the years presented.
Going concern
The resilience of the Group’s fee-based model, wide geographic
spread and strong cash management means that the Group has
been able to generate $636m of net cash from operating activities
in a year when trading has still been substantially impacted by the
global pandemic. Trading has recovered significantly during 2021,
with RevPAR up 46% on 2020 and returning to 70% of 2019’s
pre-pandemic levels.
As at 31 December 2021 the Group had total liquidity of $2,655m,
comprising $1,350m of undrawn bank facilities and $1,305m of
cash and cash equivalents (net of overdrafts and restricted cash).
In March 2021 the Group used cash reserves to repay £600m
commercial paper under the UK’s Covid Corporate Financing
Facility (‘CCFF’).
In 2020, the Group agreed amendments of existing covenants on its
syndicated and bilateral revolving credit facilities (the ‘bank facilities’)
until December 2022 as set out in note 24.
A period of 18 months has been used, from 1 January 2022 to
30 June 2023, to complete the going concern assessment. There are
a wide range of possible planning scenarios over the going concern
period. In adopting the going concern basis for preparing these
financial statements the Directors have considered a scenario (the
‘Base Case’) which is based on continued improvement in demand
as travel restrictions are reduced, with RevPAR assumed to reach
greater than 90% of 2019 levels in 2023. The only debt maturity in
the period under consideration is the £173m 3.875% November 2022
bond which is assumed to be repaid with cash on maturity.
Under this scenario, the bank facilities remain undrawn.
The principal risks and uncertainties which could be applicable have
been considered and are able to be absorbed within the $400m
liquidity covenant and amended covenant requirements. A large
number of the Group’s principal risks, for example macro external
factors or preferred brands and loyalty, would result in an impact
on RevPAR which is one of the sensitivities assessed against the
headroom available in the Base Case.
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.
The assumptions applied in the Base Case scenario are consistent
with those used for Group planning purposes, for impairment testing
and for assessing recoverability of deferred tax assets.
The Directors have also reviewed a ‘Downside Case’ which is based
on current external market downside forecasts with RevPAR growth
reduced by 8% in 2022 in comparison to the Base Case followed by
similar growth rates to the Base Case in 2023. The Directors have
also reviewed a ‘Severe Downside Case’ which is based on a severe
but plausible scenario. This assumes that the performance during
2022 continues without further recovery on 2021 levels with RevPAR
remaining at 70% of 2019 levels, and then with recovery in 2023.
The assumptions used in the going concern assessment are
consistent with those used in the viability assessment. Under the
Downside Case and Severe Downside Case, the bank facilities
remain undrawn.
Under the Severe Downside scenario, there is limited headroom
to the covenants at 30 June 2023 to absorb additional risks.
However, based on experience in 2020, the Directors reviewed
a number of actions, such as reductions in bonuses and other
discretionary spend, creating substantial additional headroom.
After these actions are taken, the principal risks and uncertainties
which could be applicable can be absorbed within the amended
covenant requirements.
In the Severe Downside Case, the Group has substantial levels of
existing cash reserves available (approximately $1bn at 30 June 2023)
and is not expected to draw on the bank facilities. These cash reserves
would increase after the additional actions are taken as described
above. The Directors reviewed a reverse stress test scenario to
determine how much additional RevPAR downside could be
absorbed before utilisation of the bank facilities would be required.
The Directors concluded that the outcome of this reverse stress test
showed that it was very unlikely the bank facilities would need to
be drawn.
The leverage and interest cover covenant tests at 30 June 2022,
31 December 2022 and 30 June 2023 (the last day of the assessment
period), have been considered as part of the Base Case, Downside
Case and Severe Downside Case scenarios. However, as the bank
facilities are unlikely to be drawn even in a scenario significantly
worse than the Severe Downside scenario, the Group does not
need to rely on the additional liquidity provided by the bank facilities
to remain a going concern. In the event that a further covenant
amendment was required, the Directors believe it is reasonable to
expect that such an amendment could be obtained based on prior
experience in negotiating the 2020 amendments, however the
going concern conclusion is not dependent on this expectation.
The bank facilities mature in September 2023, outside the period
considered by the going concern assessment and it has been
assumed that these bank facilities are renewed as they mature.
However, as explained above, the going concern conclusion is not
dependent on the bank facilities. 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 2023 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.
IHG | Annual Report and Form 20-F 2021
149
Accounting policiesGroup Financial Statements Accounting policies continued
Presentational currency
The Consolidated Financial Statements are presented in millions
of US dollars reflecting the profile of 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
are recorded in other reserves.
The functional currency of the Parent Company is sterling since
this is a 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 sterling denominated external borrowings and
intercompany balances.
Critical accounting policies and the use of judgements,
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 the specific
purpose of use in marketing, the Guest Reservation System and
hotel loyalty programme. Assessments are generally levied as
a percentage of hotel revenues.
The Fund is not managed to generate a profit or loss for IHG over the
longer term, but is managed for the benefit of 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 in the areas described below. Estimates and assumptions
are evaluated by management using historical experience and other
factors believed to be reasonable based on current circumstances.
In prior years, impairment of non-current assets was disclosed as
a significant estimate. In the current year no estimates were applied
which are considered to result in significant risk of a material
adjustment to the carrying amounts of those assets in the next
financial year.
150
IHG | Annual Report and Form 20-F 2021
Loyalty programme
The hotel loyalty programme, IHG Rewards, enables members to earn
points, funded through hotel assessments, during each qualifying
stay at an IHG branded hotel and consume points at a later date
for free or reduced accommodation or other benefits. The Group
recognises deferred revenue in an amount that reflects IHG’s
unsatisfied performance obligations, valued at the stand-alone
selling price of the future benefit to the member. The amount of
revenue recognised and deferred is impacted by ‘breakage’. On an
annual basis the Group engages an external actuary who uses
statistical formulae to assist in the estimate of the number of points
that will never be consumed (‘breakage’).
Significant estimation uncertainty exists in projecting members’
future consumption activity and how this may be impacted by
Covid-19. The Group has extended its policies for points expiration
and elite status in response to Covid-19 which is expected to limit
breakage increases in the short term. Management’s expectation
is that member behaviour will return to pre-pandemic levels over
the longer term. In 2021, the breakage estimate was formed using
pre-Covid behaviour patterns as a base, but giving some weight
to activity during the pandemic and incorporating the impact of
planned programme changes. However, if member behaviour
deviates significantly from expectations during the recovery
period, future breakage estimates could increase or decrease.
At 31 December 2021, deferred revenue relating to the loyalty
programme was $1,292m (2020: $1,245m, 2019: $1,233m). 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 $55m.
Actuarial gains and losses would correspondingly adjust the amount
of System Fund revenues recognised and deferred revenue in the
Group statement of financial position.
Expected credit losses
Although cash collection from owners has improved since 2020,
the proportion of older debt is higher than in periods prior to the
pandemic. There also remains a risk of reduced owner liquidity.
These factors, taken together with the continued uncertainties on
the pace and scale of market recovery, result in expected credit
losses continuing to be a significant estimate.
The provision equates to 25% of gross debt, with each one
percentage point change resulting in a $5m change to the provision.
If historical evidence was applied to all owner groups (rather than
by reference to other sources of data, see page 155), the provision
would reduce by $16m; alternatively a 10% collection rate of
amounts over 270 days would reduce the provision by $9m.
Significant accounting policies
Basis of consolidation
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
under the Group’s control.
Group Financial Statements Foreign currencies
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, including goodwill,
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 the period. 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.
The Group treats specific intercompany loan balances, which are
not intended to be repaid in the foreseeable future, as part of its
net investment. On disposal of a foreign operation, the cumulative
amount recognised in the currency translation reserve relating to
that particular foreign operation is recycled against the gain or
loss on disposal.
Revenue recognition
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 profitability 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 contract.
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.
IHG’s global insurance programme provides coverage to
managed hotels for risks such as US workers’ compensation,
employee and general liability. Premiums are payable by the hotels
to the third-party insurance provider. As some of the risk is reinsured
by the Group’s captive insurance company (the ‘Captive’), SCH
Insurance Company, premiums paid from the third-party insurance
provider to the Captive are recognised within Central revenue as
earned. This insurance revenue is outside the scope of IFRS 15.
Deferred revenue
Deferred revenue is recognised when payment is received before
the related performance obligation is satisfied.
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 contract. Where loans
are provided to an owner the difference, if any, between the face and
market value of the loan on inception is recognised as a contract asset.
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.
In limited cases, the Group may provide performance guarantees
to third-party hotel owners to secure management agreements.
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 contract.
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 contract.
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. 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
costs are written down to the recoverable amount.
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 on the
balance sheet. 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.
Technical service fees are received in relation to design and
engineering support provided prior to 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.
Cost reimbursements
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. Reimbursements for these services are shown as revenue
with an equal matching employee cost, with no profit impact.
IHG | Annual Report and Form 20-F 2021
151
Accounting policiesGroup Financial Statements Accounting policies continued
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 revenue and cost are shown on a gross basis.
System Fund and other co-brand revenues
The Group operates a System Fund (the ‘Fund’) to collect and
administer cash assessments from hotel owners for the specific
purpose of use in marketing, the Guest Reservation System and
hotel loyalty programme. 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 profit or loss
for IHG over the longer term, but is managed for the benefit of the
IHG System with the objective of driving revenues for the hotels in
the System.
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 the loyalty programme, IHG Rewards, the related
performance obligation is to arrange for the provision of future
benefits to members on consumption of previously earned reward
points. Members have a choice of benefits: reward nights at an IHG
hotel or other goods or services provided by third parties. Under its
franchise and management agreements, IHG receives assessment
fees based on total qualifying hotel revenue from IHG Rewards
members’ hotel stays.
The Group’s performance obligation is not satisfied in full until the
member has consumed the points at a participating hotel or selected
a reward from a third-party. Accordingly, loyalty assessments are
deferred in an amount that reflects the stand-alone selling price
of the future benefit to the member. Revenue is impacted by a
‘breakage’ estimate of the number of points 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 points 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 benefits to members who
have earned points or free night certificates;
b) Marketing services; and
c) Providing the co-brand partner with the right to access the
loyalty programme.
152
IHG | Annual Report and Form 20-F 2021
Revenue from a) and b) are reported within System Fund revenues.
Prior to 1 January 2020, revenue from co-brand credit card
agreements relating to the right to access the loyalty programme
was recorded within the Fund. From 1 January 2020, this revenue
is recorded within fee business revenue (see note 3).
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 certificates 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
obligation is 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 of revenue
recognised and the deferred revenue balance at the end of the year
is not materially sensitive to changes in these assumptions.
Government grants
Government grants are recognised where there is reasonable
assurance that the grant will be received and all attached conditions
will be complied with. Government grants relating to costs are
recognised on a systematic basis within the Group income
statement as an offset to the costs which the grants are intended
to compensate. Government grants which are unrelated to costs
are presented within other operating income.
Financial income and expenses
Financial income and expenses comprise income and charges
on the Group’s financial assets and liabilities and related
hedging instruments.
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.
In the 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.
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.
Capitalised interest paid is presented within investing activities
in the Group statement of cash flows.
Exceptional items
The Group discloses certain financial information both including
and excluding exceptional items. The presentation of information
excluding exceptional items allows a better understanding of the
underlying trading performance of the Group and provides
consistency with the Group’s internal management reporting.
Exceptional items are identified by virtue of their size, nature, or
incidence so as to facilitate comparison with prior periods and to
assess underlying trends in the financial performance of the Group
and its reportable segments; the tax effect of exceptional items is
also presented as exceptional. In determining whether an event or
transaction is exceptional, management considers quantitative as
well as qualitative factors. All exceptional items are subject to review
by the Audit Committee.
Group Financial Statements Examples of exceptional items that meet this definition and which
have been presented as exceptional items in prior years 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.
Earnings per share
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.
Business combinations and goodwill
On the acquisition of a business, identifiable 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 156 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. Deferred purchase consideration is
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 balance sheet liability. 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
of acquisition.
Intangible assets
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 recorded at the fair value attributed to those contracts
on acquisition.
The value of management agreements is amortised on a straight-line
basis over the contract lives, including any extension periods at the
Group’s option.
Software
Acquired and internally developed software are capitalised on the
basis of the costs incurred to acquire and bring to use the specific
software. Following initial recognition, the asset is carried at cost
less any accumulated amortisation and accumulated 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 eight
to 10 years (see page 176).
Internally generated development costs are capitalised and amortised
over the estimated useful life of the asset 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.
Substantially all software is internally generated; amounts capitalised
include internal and third-party labour and consultancy costs.
Costs incurred in the research phase before the above criteria are
met are expensed.
Configuration and customisation costs relating to cloud computing
arrangements that do not result in recognition of an intangible asset
are expensed.
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation
and any 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.
Leases
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 identified 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-of-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.
IHG | Annual Report and Form 20-F 2021
153
Accounting policiesGroup Financial Statements Accounting policies continued
The lease liability 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.
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 profits 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.
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 of interest and reduced for lease
payments made. In addition, the carrying amount of lease liabilities
is re-measured if there is a modification, a change in the lease term,
a change in the ‘in-substance fixed’ lease payments or as a result
of a rent review or change in the relevant index or rate.
Variable 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.
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.
Lease payments 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.
Subleases of the Group’s assets are classified as operating leases
when the risks and rewards of ownership are not substantially
transferred to the sub-lessee. Rental income arising is accounted
for on a straight-line basis in the Group income statement. All of the
Group’s sublease arrangements are classified as operating leases.
Associates and joint ventures
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 of 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 significant influence,
consideration is given to other agreements between the Group,
the investee entity, and the investing partners, including any related
management or franchise agreements and the existence of any
performance guarantees.
154
IHG | Annual Report and Form 20-F 2021
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 significant 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
income statement.
Impairment of non-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 flows are allocated to the cash-generating unit
(‘CGU’), or group of CGUs, to which they belong. 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 discounted to
their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset. Impairment losses, and any subsequent
reversals, are recognised in the Group income statement.
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 significant 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.
Financial assets
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 profit
or loss (‘FVTPL’).
Financial assets which are held to collect contractual cash flows
and give rise to cash flows that are solely payments of 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. 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, provision is made for credit losses expected over the
remaining life of the asset.
Group Financial Statements 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 the value of
equity investments classified as FVOCI are recognised within gains
or losses on equity instruments classified as fair value through other
comprehensive income in the Group statement of comprehensive
income and are never recycled to the Group income statement.
On disposal of equity investments, 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
classified as FVOCI are not subject to impairment assessment.
Financial assets measured at FVTPL include money market funds and
other financial assets which do not have a fixed date of repayment.
Trade receivables
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 satisfied, as
described on page 151. Trade receivables are non-interest-bearing
and are generally on payment terms of up to 30 days.
Trade receivables are recognised initially 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 with payment
plans, the expected lifetime losses are calculated by reference to
other sources of data.
Trade receivables are written off once determined to be uncollectable.
Cash and cash equivalents
Cash comprises cash in 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 insignificant risk of
changes in value. They generally have an original maturity of three
months or less.
Cash and cash equivalents may include amounts which are subject
to regulatory or other contractual restrictions and not available for
general use by the Group.
Cash balances are classified as other financial assets when subject
to a specific charge or contractually ring-fenced for a specific
purpose, such that the Group does not control the circumstances
or timing of its release.
Money market funds
Money market funds are held at FVTPL, with distributions recognised
in financial income.
Bank and other borrowings
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
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 within financial
income or expenses 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.
Interest paid as presented within the Group statement of cash flows
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 sold, at which point they
are reclassified to the Group income statement as part of the gain
or loss on disposal.
Deferred compensation plan
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 on the balance sheet. 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 same
amount, with no net impact on profit or loss.
Fair value measurement
The Group measures each of the following at fair value on
a recurring basis:
• Financial assets and liabilities 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.
IHG | Annual Report and Form 20-F 2021
155
Accounting policiesGroup Financial Statements Accounting policies continued
The Group uses valuation techniques that maximise the use of
relevant observable inputs using the following valuation hierarchy:
offset on the Group statement of financial position. Otherwise, the
assets and liabilities are not offset.
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 reference
to fair value less costs of disposal, an external valuation will normally
be obtained using professional valuers who have appropriate market
knowledge, reputation and independence.
Offsetting of 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 if 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 or bankruptcy of the Group and all of the counterparties.
Taxes
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.
Deferred tax
Deferred tax assets and liabilities are recognised in respect of
temporary differences between the tax base and carrying value
of assets and liabilities including property, plant and equipment,
intangible assets, application fees, contract costs, unrelieved
tax losses, associates, gains rolled over into replacement assets,
deferred compensation and other short-term temporary differences.
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 therefore recognised to the extent that it
is regarded as probable that there will be sufficient and suitable
taxable profits (including the future release of deferred 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
taxable profits are considered by assessing the Group’s forecast
revenue and profit models, taking into account future growth
predictions and operating cost assumptions.
Deferred tax is calculated at the tax rates that are expected to apply
in the periods in which the asset or liability will be settled, based
on rates enacted or substantively enacted at the end of the
reporting period.
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
Retirement benefits
Defined contribution plans
Payments to defined contribution schemes 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
deficit recorded in the Group statement of 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 benefits 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, after any asset restriction.
Past service costs and gains, which are the change in the present
value of the defined benefit obligation for employee service in prior
periods resulting from plan amendments, are recognised
immediately when the plan amendment occurs. Settlement gains
and losses, being the difference between the settlement cost and
the present value of the defined benefit obligations being settled,
are recognised when the settlement occurs.
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.
Provisions
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.
In respect of litigation, 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.
Assets and liabilities held for sale
Assets and liabilities are classified as held for sale when their
carrying amount will be recovered principally through a sale
transaction rather than continuing use and a sale is highly probable
and expected to complete within one year. For a sale to be highly
probable, management need to be committed to a plan to sell the
asset and the asset must be actively marketed for sale at a price that
is reasonable in relation to its current fair value.
Assets designated as held for sale are held at the lower of carrying
amount at designation and fair value less costs of disposal.
Depreciation and amortisation is not charged against assets
classified as held for sale.
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IHG | Annual Report and Form 20-F 2021
Group Financial Statements Disposal of non-current assets
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
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 fulfilled, ending on the date on which the relevant employees
become fully entitled to the award (vesting date).
with asset ownership;
• Has transferred the significant risks and rewards associated with
asset ownership; and
• Can reliably measure and will actually receive the proceeds.
Equity share capital and reserves
Equity share capital
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
for shares in excess of their nominal value.
Capital redemption reserve
The capital redemption reserve maintains the nominal value of the
equity share capital of the Company when shares are repurchased
or 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 of 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 a 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
attributable, directly or indirectly, to the Group.
Share-based payments
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 income statement charge for a period represents the movement
in cumulative expense recognised at the beginning and end of that
period. 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 satisfied,
provided that all other performance and/or service conditions
are satisfied.
New accounting standards
Adoption of new accounting standards
The Group has applied the requirements of Interest Rate Benchmark
Reform – Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16. The amendments provide additional guidance on the impact
of new interest rate benchmarks on certain hedge relationships
and on the measurement of certain financial assets and financial
liabilities. The contractual cash flows of the Group’s derivatives are
unchanged and there is no change in the Group’s risk management
strategy or defined hedge accounting relationships. Valuing the
Group’s derivatives within hedge relationships (see note 24) using
overnight index swap (‘OIS’) rates instead of interbank rates does not
have a material impact on the carrying amount of derivative financial
liabilities or amounts recognised in the cash flow hedge reserve at
31 December 2021.
In addition, the Group has applied the amendments to IFRS 16 –
Covid-19 Related Rent Concessions beyond 30 June 2021. There was
no material impact on the Group’s reported financial performance
or position.
New standards issued but not yet effective
From 1 January 2022, the Group will apply the amendments to:
• IAS 37 – Onerous Contracts: Cost of Fulfilling a Contract;
• IAS 16 – Property, Plant and Equipment: Proceeds before Intended
Use; and
• Other existing standards arising from the Annual Improvements
to IFRSs 2018 – 2020 cycle.
From 1 January 2023, the Group will apply the amendments to:
• IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting
Policies;
• IAS 8 – Definition of Accounting Estimates; and
• IAS 12 – Deferred Tax related to Assets and Liabilities arising from
a Single Transaction.
There is no anticipated material impact from these amendments
on the Group’s reported financial performance or position.
The effective date for the amendment to IAS 1 – Classification
of Liabilities as Current or Non-Current has been deferred to
1 January 2023. There is no anticipated material impact from these
amendments on the Group’s reported financial performance
or position.
The effective date for IFRS 17 ‘Insurance Contracts’ has been
deferred to 1 January 2023. The Group has not yet determined the
impact of this standard on the Group’s reported financial
performance or position.
IHG | Annual Report and Form 20-F 2021
157
Accounting policiesGroup Financial Statements Notes to the Group Financial Statements
1. Exchange rates
The results of operations have been translated into US dollars at the average rates of exchange for the year. In the case of sterling, the
translation rate is $1=£0.73 (2020: $1=£0.78, 2019: $1=£0.78). In the case of the euro, the translation rate is $1=€0.85 (2020: $1=€0.88,
2019: $1=€0.89).
Assets and liabilities have been translated into US dollars at the rates of exchange on the last day of the year. In the case of sterling, the
translation rate is $1=£0.74 (2020: $1=£0.73, 2019: $1=£0.76). In the case of the euro, the translation rate is $1=€0.88 (2020: $1=€0.81,
2019: $1=€0.89).
2. Segmental information
The Group has four reportable segments reflecting its geographical regions (Americas, EMEAA, Greater China) and its Central functions.
Central functions include technology, sales and marketing, finance, human resources and corporate services; Central revenue arises
principally from technology fee income.
No operating segments have been 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 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. As such, its results are not regularly reviewed
by the Chief Operating Decision Maker (‘CODM’) and it does not constitute an operating segment under IFRS 8 ‘Operating Segments’.
Similarly, reimbursements of costs are not reported to the CODM and so are not included within the reportable segments.
Segmental performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the Group
Financial Statements, excluding System Fund and exceptional items. Group financing activities, fair value gains or losses on contingent
purchase consideration and income taxes are managed on a Group basis and are not allocated to reportable segments.
2021
$m
774
303
116
197
1,390
928
589
2020
$m
512
221
77
182
992
765
637
2,907
2,394
2021
$m
559
5
58
(88)
534
(11)
(29)
494
(139)
6
361
(96)
265
2020
$m
296
(50)
35
(62)
219
(102)
(270)
(153)
(140)
13
(280)
20
(260)
2019
$m
1,040
723
135
185
2,083
1,373
1,171
4,627
2019
$m
700
217
73
(125)
865
(49)
(186)
630
(115)
27
542
(156)
386
Revenue
Year ended 31 December
Americas
EMEAA
Greater China
Central
Revenue from reportable segments
System Fund revenues
Reimbursement of costs
Total revenue
Profit/(loss)
Year ended 31 December
Americas
EMEAA
Greater China
Central
Operating profit from reportable segments
System Fund
Operating exceptional items (note 6)
Operating profit/(loss)
Net financial expenses
Fair value gains on contingent purchase consideration
Profit/(loss) before tax
Tax
Profit/(loss) for the year
158
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 2. Segmental information continued
Operating profit from reportable segments includes the following, which are included in other operating income in the Group
income statement:
• In 2021, $5m government grant income relating to the EMEAA region;
• In 2020, $4m business interruption insurance proceeds and $4m favourable litigation settlement, both in the Americas region,
and $3m gain on disposal of hotel assets in the EMEAA region; and
• In 2019, $10m business interruption insurance proceeds relating to the Americas region.
Non-cash items included within operating profit from reportable segments
Year ended 31 December 2021
Depreciation and amortisationa
Equity-settled share-based payments cost
Share of losses of associates
Year ended 31 December 2020
Depreciation and amortisationa
Equity-settled share-based payments cost
Share of losses of associates and joint ventures
Year ended 31 December 2019
Depreciation and amortisationa
Equity-settled share-based payments cost
Share of losses/(gains) of associates and joint ventures
Americas
$m
EMEAA
$m
30
8
7
18
4
1
Americas
$m
EMEAA
$m
41
7
14
21
3
–
Americas
$m
EMEAA
$m
44
9
9
25
4
(6)
Greater
China
$m
6
3
–
Greater
China
$m
6
2
–
Greater
China
$m
5
2
–
Central
$m
Group
$m
44
11
–
Central
$m
42
7
–
98
26
8
Group
$m
110
19
14
Central
$m
Group
$m
42
13
–
116
28
3
a Included in the $98m (2020: $110m, 2019: $116m) of depreciation and amortisation is $20m (2020: $29m, 2019: $32m) relating to cost of sales in owned, leased and managed
lease hotels, and $78m (2020: $81m, 2019: $84m) relating to other assets. A further $94m (2020: $62m, 2019: $54m) of depreciation and amortisation was recorded within System
Fund expenses.
Capital expenditure
Year ended 31 December 2021
Capital expenditure per management reporting
Contract acquisition costs
Timing differences and other adjustments
Additions per the Group Financial Statements
Comprising additions to:
Goodwill and other intangible assets
Property, plant and equipment
Investment in associates and joint ventures
Other financial assets
Year ended 31 December 2020
Capital expenditure per management reporting
Contract acquisition costs
Timing differences and other adjustments
Additions per the Group Financial Statements
Comprising additions to:
Goodwill and other intangible assets
Property, plant and equipment
Investment in associates and joint ventures
Other financial assets
Americas
$m
EMEAA
$m
Greater
China
$m
Central
$m
Group
$m
35
(32)
3
6
1
1
4
–
6
25
(10)
(5)
10
–
5
–
5
10
Americas
$m
EMEAA
$m
46
(33)
17
30
1
12
17
–
30
44
(29)
4
19
1
13
–
5
19
1
(1)
–
–
–
–
–
–
–
Greater
China
$m
2
(2)
–
–
–
–
–
–
–
39
–
4
43
32
11
–
–
43
100
(43)
2
59
33
17
4
5
59
Central
$m
Group
$m
56
–
(1)
55
50
5
–
–
55
148
(64)
20
104
52
30
17
5
104
IHG | Annual Report and Form 20-F 2021
159
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
2. Segmental information continued
Geographical information
Year ended 31 December
Revenue
United Kingdom
United States
Rest of World
System Fund (note 33)
2021
$m
2020
$m
142
1,263
574
1,979
928
2,907
77
1,067
485
1,629
765
2,394
2019
$m
265
1,957
1,032
3,254
1,373
4,627
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.
31 December
Non-current assets
United Kingdom
United States
Rest of World
2021
$m
64
1,346
661
2,071
2020
$m
72
1,487
700
2,259
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 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 defined above.
3. Revenue
Disaggregation of revenue
Year ended 31 December 2021
Franchise and base management fees
Incentive management fees
Central revenue
Revenue from fee business
Revenue from owned, leased and managed lease hotels
System Fund revenues (note 33)
Reimbursement of costs
Total revenue
Year ended 31 December 2020
Franchise and base management fees
Incentive management fees
Central revenue
Revenue from fee business
Revenue from owned, leased and managed lease hotels
System Fund revenues (note 33)
Reimbursement of costs
Total revenue
160
IHG | Annual Report and Form 20-F 2021
Americas
$m
EMEAA
$m
Greater
China
$m
Central
$m
683
8
–
691
83
774
120
29
–
149
154
303
91
25
–
116
–
116
–
–
197
197
–
197
Americas
$m
452
5
–
457
55
512
EMEAA
$m
Greater
China
$m
Central
$m
93
14
–
107
114
221
61
16
–
77
–
77
–
–
182
182
–
182
Group
$m
894
62
197
1,153
237
1,390
928
589
2,907
Group
$m
606
35
182
823
169
992
765
637
2,394
Group Financial Statements 3. Revenue continued
Year ended 31 December 2019
Franchise and base management fees
Incentive management fees
Central revenue
Revenue from fee business
Revenue from owned, leased and managed lease hotels
System Fund revenues (note 33)
Reimbursement of costs
Total revenue
Americas
$m
EMEAA
$m
Greater
China
$m
Central
$m
840
13
–
853
187
1,040
247
90
–
337
386
723
87
48
–
135
–
135
–
–
185
185
–
185
Group
$m
1,174
151
185
1,510
573
2,083
1,373
1,171
4,627
In 2020, following communication with the IHG Owners Association, fees and expenses associated with the InterContinental Ambassador
programme (the InterContinental Hotels & Resorts paid-for loyalty programme) previously reported within Central revenue were moved
into the System Fund to align with the treatment of IHG’s other brand loyalty programmes. Revenue arising from the licence of intellectual
property under co-brand credit card agreements previously recorded within the System Fund was moved into Central revenue. This change
was effective from 1 January 2020. For the year ended 31 December 2020, this change resulted in an increase of $20m to Central revenue
and $21m to operating profit from reportable segments, and an equivalent reduction to System Fund revenues and increase to System Fund
operating loss. Had this arrangement existed in 2019, Central revenue and operating profit in 2019 would have been $18m and $22m higher
respectively; System Fund revenues would have reduced and System Fund operating loss would have increased by the same amounts.
Contract balances
Trade receivables (note 18)
Contract assets
Deferred revenue
Contract assets
At 1 January
Additions
Recognised as a deduction to revenue
Impairment charges
Repayments
Exchange and other adjustments
At 31 December
Analysed as:
Current
Non-current
2021
$m
399
346
2020
$m
309
336
(1,613)
(1,569)
2021
$m
336
45
(35)
–
(1)
1
346
30
316
346
2020
$m
334
74
(25)
(53)
–
6
336
25
311
336
The Group also has future commitments for key money payments which are contingent upon future events and may reverse.
At 31 December 2021, the maximum exposure remaining under performance guarantees was $85m (2020: $72m).
In 2020, impairment of contract assets related primarily to deposits made to Service Properties Trust (‘SVC’) of $33m. The remaining
impairment of $20m related to key money and performance guarantee payments on individual properties which were tested with reference
to future franchise and management fees. Of the total impairment including SVC balances, $42m related to the Americas region and $11m
to the EMEAA region.
IHG | Annual Report and Form 20-F 2021
161
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
3. Revenue continued
Deferred revenue
At 1 January 2020
Increase in deferred revenue
Recognised as revenue
Exchange and other adjustments
At 31 December 2020
Increase in deferred revenue
Recognised as revenue
Exchange and other adjustments
At 31 December 2021
Analysed as:
Current
Non-current
At 31 December 2020:
Current
Non-current
Loyalty
programme
$m
Other
co-brand
fees
$m
Application &
re-licensing
fees
$m
Other
$m
1,233
344
(332)
–
1,245
384
(337)
–
1,292
535
757
1,292
376
869
1,245
66
–
(11)
–
55
–
(11)
–
44
11
33
44
11
44
55
172
14
(20)
–
166
19
(22)
–
163
21
142
163
22
144
166
93
45
(39)
4
103
45
(35)
1
114
50
64
114
43
60
103
Total
$m
1,564
403
(402)
4
1,569
448
(405)
1
1,613
617
996
1,613
452
1,117
1,569
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.
Other deferred revenue includes technical service fees and guest deposits received by owned, leased and managed lease hotels.
Transaction price allocated to remaining performance obligations
The Group has applied the practical expedient in IFRS 15 not to disclose the aggregate amount of the transaction price allocated to the
performance obligations that are unsatisfied 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).
Amounts received and not yet recognised relating to performance obligations that were unsatisfied at the year end are as follows:
Expected timing of recognition
Less than one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
More than five years
Loyalty and
co-brand
$m
Other
$m
546
406
155
98
53
78
71
45
33
25
22
81
2021
Total
$m
617
451
188
123
75
159
Loyalty and
co-brand
$m
Other
$m
387
313
249
176
73
102
65
40
29
24
22
89
2020
Total
$m
452
353
278
200
95
191
1,336
277
1,613
1,300
269
1,569
162
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 3. Revenue continued
Contract costs
At 1 January
Costs incurred
Amortisation
Exchange and other adjustments
At 31 December
Analysed as:
Current
Non-current
4. Staff costs and Directors’ remuneration
Staff costs
Wages and salaries
Social security costs
Pension and other post-retirement benefits:
Defined benefit plans (note 27)
Defined contribution plans
Analysed as:
Costs borne by IHGa
Costs borne by the System Fundb
Costs reimbursed
2021
$m
2020
$m
75
11
(9)
–
77
5
72
77
2020
$m
1,233
86
3
36
72
11
(9)
1
75
5
70
75
2019
$m
1,982
131
3
64
2021
$m
1,315
86
2
41
1,444
1,358
2,180
569
304
571
500
242
616
1,444
1,358
735
313
1,132
2,180
a Included $27m in 2020 classified as exceptional relating to reorganisation programmes and $9m in 2019 classified as exceptional relating to the comprehensive efficiency
programme completed in 2019.
b Included $20m in 2020 relating to the 2020 corporate reorganisation programme and $8m in 2019 relating to the comprehensive efficiency programme completed in 2019.
Staff costs are presented net of government support income of $23m (2020: $36m). $12m (2020: $28m) relates principally to employee
costs at certain of the Group’s leased hotels and $11m (2020: $8m) relates to ongoing support received in the form of tax credits which
relate to the Group’s corporate office presence in certain countries. The income has been recognised as a reduction to the payroll costs
that the grants and credits are intended to compensate. There are no unfulfilled conditions or other contingencies attached to these grants.
Monthly average number of employees, including part-time employees
Employees whose costs are borne by IHG:
Americas
EMEAA
Greater China
Central
Employees whose costs are borne by the System Fund
Employees whose costs are reimbursed
2021
2020
2019
1,481
2,808
299
1,425
6,013
4,508
11,807
22,328
1,931
4,088
314
1,813
8,146
4,686
15,980
28,812
2,170
5,227
339
1,900
9,636
4,800
22,207
36,643
IHG | Annual Report and Form 20-F 2021
163
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
4. Staff costs and Directors’ remuneration continued
Directors’ remuneration
2021
$m
2020
$m
2019
$m
Base salaries, fees, annual performance payments and benefits
8.4
4.2
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 115 and 123. In addition, amounts received or receivable under long-term incentive schemes are shown on page 115.
5. Auditor’s remuneration
Audit of the Financial Statements
Audit of subsidiaries
Audit-related assurance services
Other assurance servicesa
Other non-audit services not covered by the above
2021
$m
3.7
3.4
0.2
0.7
–
8.0
2020
$m
3.0
3.3
0.2
1.1
0.1
7.7
2019
$m
3.0
3.2
0.2
1.3
0.1
7.8
a In 2020, excluded fees of $0.2m which had not been incurred as at 31 December 2020.
In 2021, auditor’s remuneration was paid to PricewaterhouseCoopers LLP; in 2020 and 2019 auditor’s remuneration was paid to Ernst & Young LLP.
Audit fees in respect of the pension scheme were not material.
Under SEC regulations, the auditor’s remuneration of $8.0m (2020: $7.7m, 2019: $7.8m) is required to be presented as follows: audit $7.3m
(2020: $6.5m, 2019: $6.4m); other audit-related $0.7m (2020: $1.1m, 2019: $1.3m); and all other fees $nil (2020: $0.1m, 2019: $0.1m).
164
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 6. Exceptional items
Cost of sales:
Derecognition of right-of-use assets and lease liabilities
Gain on lease termination
Provision for onerous contractual expenditure
Reorganisation costs
Administrative expenses:
Reorganisation costs
Acquisition and integration costs
Litigation and commercial disputes
Impairment loss on financial assets
Other impairment charges:
Goodwill
Management agreements
Property, plant and equipment
Right-of-use assets
Associates
Contract assets
Operating exceptional items
Financial expenses
Fair value gains on contingent purchase consideration
Exceptional items before tax
Tax on exceptional items
Exceptional tax
Tax
Operating exceptional items analysed as:
Americas
EMEAA
Greater China
Central
Note
(a)(h)
(b)
(h)
(c)(h)
(c)
(d)
(e)
(f)
(h)
13
14, (h)
15, (h)
16
3
(g)
(h)
(i)
(j)
2021
$m
2020
$m
2019
$m
–
–
–
–
–
–
–
(25)
(25)
–
–
–
–
–
(4)
–
(4)
22
30
(10)
(8)
34
(19)
(6)
(5)
(30)
(48)
–
(48)
(90)
(16)
(19)
(53)
–
–
–
–
–
(20)
(7)
(28)
(55)
–
(49)
(50)
–
(32)
–
–
(226)
(131)
(29)
(270)
(186)
–
–
(14)
21
–
38
(29)
(263)
(148)
3
26
29
(22)
(7)
–
–
(29)
52
–
52
(118)
(128)
(5)
(19)
(270)
20
–
20
(62)
(109)
–
(15)
(186)
The above items are treated as exceptional (as defined by management) by reason of their size, nature, or incidence as further described on page 152.
(a) Derecognition of right-of-use assets and lease liabilities
In 2020, related to right-of-use assets ($49m) and lease liabilities ($71m) associated with the UK portfolio and German leases which were
derecognised following a reassessment of the leases as fully variable. The net gain of $22m was presented as exceptional due to the size
of the derecognised assets and liabilities.
(b) Gain on lease termination
In 2020, related to the termination of the InterContinental San Juan lease, which was part of the SVC portfolio. The right-of-use assets
($60m) and lease liabilities ($90m) associated with this hotel were derecognised, resulting in a net gain of $30m, which was presented as
exceptional due to the value of the assets and liabilities derecognised and for consistency with the impairments of other assets related to
the SVC portfolio.
IHG | Annual Report and Form 20-F 2021
165
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
6. Exceptional items continued
(c) Reorganisation costs
In 2020, reorganisation costs related to the UK portfolio (see below), other owned and leased hotels and a corporate reorganisation
completed in the year reflecting the reassessment of near-term priorities and the resources needed to support reduced levels of demand.
An additional $20m relating to the corporate restructuring was charged to the System Fund.
In 2019, related to a comprehensive efficiency programme to fund a series of new strategic initiatives to drive an acceleration in IHG’s future
growth. The programme commenced in 2018 and was completed in 2019; no further restructuring costs related to this programme were
incurred in 2020. The 2019 cost included consultancy fees of $6m and severance costs of $8m. An additional $28m was charged to the
System Fund.
These charges were classified as exceptional as they related to a significant programme carried out in response to the impacts of Covid-19
and previously to a comprehensive programme to reorganise Group operations, which do not reflect normal, ongoing costs of the business.
(d) Acquisition and integration costs
In 2019, primarily related to the acquisition of Six Senses and in 2020, related to the integration of that business into the operations
of the Group. Costs were presented as exceptional reflecting the fact that the acquisition of Six Senses is not a recurring event.
(e) Litigation and commercial disputes
In 2021, relates to the provisionally agreed costs to settle two commercial disputes, $18m in the Americas region and $7m relating to a leased
property in the EMEAA region.
In 2020, related to the agreed cost of settlement of $14m in respect of a lawsuit in the EMEAA region, offset primarily by the partial release
of the 2019 provision related to a lawsuit in the Americas region which was settled in 2020.
In 2019, primarily represented management’s best estimate of the settlement in respect of the Americas lawsuit, together with the cost
of an arbitration award made against the Group in the EMEAA region.
These costs are presented as exceptional reflecting (i) the nature of the 2021 disputes which arose as a direct result of trading performance
during Covid-19; (ii) the quantum of the settlements; and (iii) in respect of releases, consistency with the treatment applied in prior years.
(f) Impairment loss on financial assets
In 2020, comprised $33m and $15m related to SVC and other trade deposits and loans respectively (see note 17). The impairment losses
were presented as exceptional as they related to the termination of a significant portfolio of over 100 management agreements and to
significant changes in credit risk on other trade deposits and loans as a result of the pandemic.
(g) Financial expenses
In 2020, management undertook actions to strengthen liquidity and extend the maturity profile of the Group’s debt. The Group issued a
tender offer for its £400m 3.875% 2022 bonds resulting in a repayment of £227m and concurrently issued €500m 1.625% 2024 bonds and
£400m 3.375% 2028 bonds. The exceptional charge included the premium on repayment and associated write-off of fees and discount.
The charge was presented as exceptional primarily due to the size of the charge as well as the nature of the refinancing which was driven
by increased liquidity requirements resulting from the pandemic.
(h) Exceptional items relating to the UK portfolio
Included within exceptional items are the following items relating to the UK portfolio:
Cost of sales:
Derecognition of right-of-use assets and lease liabilities
Provision for onerous contractual expenditure
Reorganisation costs
Other impairment charges:
Goodwill
Property, plant and equipment
Right-of-use assets
Operating exceptional items
Fair value gains on contingent purchase consideration (note 25)
Exceptional items before tax
2021
$m
2020
$m
2019
$m
–
–
–
–
–
–
–
–
–
–
–
18
(10)
(4)
4
–
(50)
–
(50)
(46)
21
(25)
–
–
–
–
(49)
–
(32)
(81)
(81)
38
(43)
The UK portfolio experienced hugely challenging trading conditions as a result of Covid-19, with all 12 hotels closing for extended periods
during 2020 and experiencing historically low occupancies during periods of temporary reopenings.
In 2020, the right-of-use asset ($22m) and lease liability ($40m) relating to the UK portfolio were derecognised as a result of the re-estimation
of the ‘in-substance fixed’ rent payable under the leases, resulting in a gain of $18m; from 2020 the leases were considered to be fully variable.
In 2020, a $10m provision was recognised to the extent the costs of contractual expenditure committed under the hotel leases exceeded
the future economic benefits expected to be received under the leases.
166
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 6. Exceptional items continued
In 2020, hotels incurred a total cost of $4m to restructure hotel operations in response to the impact of Covid-19 on hotel occupancy
and revenues.
Assumptions used in 2020 impairment testing of property, plant and equipment are detailed in note 14.
In 2019, goodwill ($49m) and the right-of-use asset ($32m) (prior to derecognition) were impaired as a result of trading disruption arising
from hotel renovations and rebranding.
A fair value gain on contingent purchase consideration of $21m was recognised in 2020 (2019: $38m), arising from a reduction in expected
future rentals payable such that there is no remaining above-market element. Information on the fair value calculation is provided in note 25.
As a result of the adjustments outlined above, non-current assets, lease liabilities and contingent purchase consideration relating to the UK
portfolio were all measured at $nil at 31 December 2020 and 31 December 2021.
(i) Tax on exceptional items
The tax impacts of the exceptional items are shown in the table below:
Derecognition of right-of-use assets and lease liabilities
Provision for onerous contractual expenditure
Reorganisation costs
Acquisition and integration costs
Litigation and commercial disputes
Impairment loss on financial assets
Other impairment charges
Financial expenses
Fair value gains on contingent purchase consideration
Adjustments in respect of prior yearsa
Total current and deferred tax
2021
2020
2019
Current tax
$m
Deferred tax
$m
Current tax
$m
Deferred tax
$m
Current tax
$m
Deferred tax
$m
–
–
–
–
–
–
–
–
–
(2)
(2)
–
–
–
–
4
–
1
–
–
–
5
3
–
–
3
1
–
4
6
–
–
–
14
(4)
2
2
–
–
2
37
3
(4)
–
38
52
–
–
4
–
–
–
–
–
–
–
4
–
–
–
–
6
–
18
–
(6)
(2)
16
20
a In 2021, relates to exceptional items recorded in 2014 which are undergoing tax audit (see page 171). In 2019, related to a 2014 disposal.
(j) Exceptional tax
An exceptional tax credit of $26m has been recorded as a result of the enactment of a change to the UK rate of corporate income tax from
19% to 25%, effective 1 April 2023. The change has resulted in the re-measurement of those UK deferred tax assets and liabilities which are
forecast to be utilised or to crystallise after this effective date, using the higher tax rate. A further credit of $4m has been 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 has increased by $34m as a result of the rate change. This has no impact on
the reported tax charge.
IHG | Annual Report and Form 20-F 2021
167
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
7. Financial income and expenses
Financial income
Financial income on deposits and money market funds
Interest income on loans and other assets
Financial expenses
Interest expense on external borrowings
Interest expense on lease liabilities
Capitalised interest
Unwind of discount on deferred purchase consideration
Other charges
Analysed as:
Financial expenses before exceptional items
Exceptional financial expenses (note 6)
2021
$m
2020
$m
2019
$m
2
6
8
109
29
–
1
8
2
2
4
102
37
(1)
1
5
147
144
147
–
147
130
14
144
3
3
6
78
41
(5)
1
6
121
121
–
121
All financial income relates to financial assets held at amortised cost.
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 2021, $1m (2020: $3m, 2019: $13m) was payable to the IHG Rewards loyalty programme relating to interest on the accumulated balance
of cash received in advance of the consumption of points awarded. The expense and corresponding System Fund interest income are
eliminated within financial expenses. Financial income includes $2m (2020: $nil, 2019: $nil) of other interest which is also attributable
to the System Fund.
Capitalised interest relates to the System Fund. There was no interest capitalised during the year (rate used for capitalisation of interest
in 2020: 2.9%, 2019: 3.1%).
Net interest payable on a frozen GAAP basis as calculated for bank covenants was $133m (2020: $111m, 2019: $99m). Further details are
provided on page 190.
168
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 8. Tax
Tax on profit/(loss)
Current tax
UK tax at 19.00%:
Current period
Adjustments in respect of prior periods
Foreign tax:
Current period
Benefit of tax reliefs on which no deferred tax previously recognised
Adjustments in respect of prior periods
Deferred tax
Origination and reversal of temporary differences
Changes in tax rates and tax laws
Adjustments to estimated recoverable deferred tax assetsa
Reduction in deferred tax expense by previously unrecognised deferred tax assets
Adjustments in respect of prior periods
Income tax charge/(credit) for the year
Analysed as tax relating to:
Profit before exceptional itemsb
Exceptional items:
Tax on exceptional items (note 6)
Exceptional tax (note 6)
a Represents a reassessment of the recovery of deferred taxes in line with the Group’s profit forecasts.
b Includes $115m (2020: $41m, 2019: $113m) in respect of US taxes.
2021
$m
2020
$m
2019
$m
1
–
1
138
–
4
142
143
(21)
(25)
2
–
(3)
(47)
96
–
(2)
(2)
43
(2)
(5)
36
34
(35)
(8)
(14)
(1)
4
(54)
(20)
5
13
18
154
(2)
(11)
141
159
11
2
(2)
–
(14)
(3)
156
125
32
176
(3)
(26)
96
(52)
–
(20)
(20)
–
156
IHG | Annual Report and Form 20-F 2021
169
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
8. Tax continued
Reconciliation of tax charge
UK tax at standard rate
Tax credits
System Fundc
Impairment charges
Other permanent differences
Non-recoverable foreign taxesd
Net effect of different rates of tax in overseas businessese
Effect of changes in tax rates and tax lawsf
Reduction in current tax expense by previously unrecognised deferred
tax assets
Items on which deferred tax arose but where no deferred tax is recognisedg
Effect of adjustments to estimated recoverable deferred tax assetsh
Reduction in deferred tax expense by previously unrecognised deferred
tax assets
Adjustment to tax charge in respect of prior periods
a Calculated in relation to total profits including exceptional items and System Fund.
b Calculated in relation to profits excluding exceptional items and System Fund earnings.
c The System Fund is, in general, not subject to taxation.
2021
%
19.0
(0.1)
0.4
–
1.4
3.5
6.8
(7.0)
(0.1)
2.0
0.5
–
0.2
26.6
2020
%
19.0
0.5
(6.6)
–
(4.2)
(5.1)
(4.5)
2.9
0.7
(1.9)
5.1
0.3
0.9
7.1
Totala
2019
%
19.0
(0.8)
1.1
1.7
1.3
3.2
6.7
(0.4)
(0.4)
–
(0.4)
–
(2.2)
28.8
Before exceptional items
and System Fundb
2021
%
19.0
(0.1)
(0.1)
–
1.2
3.1
6.9
–
(0.1)
1.3
0.4
–
(0.4)
31.2
2020
%
19.0
(1.7)
(1.1)
–
12.1
16.9
18.9
(9.6)
(2.4)
5.1
(16.9)
–
(2.7)
37.6
2019
%
19.0
(0.6)
(0.5)
–
0.8
2.4
5.5
(0.3)
(0.3)
–
(0.3)
–
(1.9)
23.8
d The large increase in 2020 when compared to 2019 is a result of the material decrease in Group profitability. This meant that the Group was no longer able to obtain effective relief
for withholding taxes incurred on its revenues and in respect of other taxes, primarily in the US and Singapore.
e Before exceptional items and System Fund includes 6.7 percentage points (2020: 18.9 percentage points, 2019: 4.9 percentage points) driven by the relatively high blended US rate,
which includes US Federal and State taxes as well as Base Erosion and Anti-Avoidance Tax ('BEAT'). In 2020, the lower profitability resulted in a large impact of BEAT, and the trading
results in the year led to a higher proportion of the Group’s profit being taxed in the US.
f In 2021, the UK Government enacted an increase to the UK rate of Corporation Tax from 19% to 25%. This has led to an increase in value to the Group’s existing deferred tax assets
in the UK, contributing to a benefit to the Group’s total effective rate of 7.1 percentage points. In 2020, the UK Government reversed a previously enacted drop to the UK rate
of Corporation Tax, contributing to a benefit to the Group effective tax rate, before exceptional items and System Fund, of 7.9 percentage points.
g Predominantly in respect of losses arising in the year.
h In 2020, the Group simplified its Group structure which led to an increase to existing deferred tax assets within the UK.
A reconciliation between total tax rate and tax rate before exceptional items and System Fund is shown below:
Group income statement
Adjust for:
Exceptional items (note 6)
System Fund
Profit
before tax
$m
361
29
11
401
Tax
$m
96
29
–
125
2021
Rate
%
26.6
31.2
(Loss)/
profit
before tax
$m
(280)
263
102
85
2020
Rate
%
7.1
37.6
Profit
before tax
$m
542
148
49
739
Tax
$m
(20)
52
–
32
2019
Rate
%
28.8
23.8
Tax
$m
156
20
–
176
Information concerning Non-GAAP measures can be found in the Strategic Report on pages 73 to 77.
Tax paid
Total net tax paid during the year of $86m (2020: $41m, 2019: $141m) is all in respect of operating activities.
The total tax paid includes, in respect of the US:
• payments of $88m (2020: $29m, 2019: $80m); and
• refunds arising from earlier periods of $15m (2020: $24m, 2019: $nil);
and in respect of the UK:
• payments of $1m (2020: $2m, 2019: $13m); and
• refunds arising from earlier periods of $3m (2020: $nil, 2019: $nil).
170
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 8. Tax continued
A reconciliation of tax paid to the total tax charge in the Group income statement is as follows:
Current tax charge in the Group income statement
Current tax (charge)/credit in the Group statement of comprehensive income
Current tax credit taken directly to equity
Total current tax charge
Movements to tax contingenciesa
Timing differences of cash tax paid and foreign exchange differencesb
Tax paid per cash flow
2021
$m
(143)
–
–
(143)
4
53
(86)
2020
$m
(34)
(1)
–
(35)
(8)
2
(41)
2019
$m
(159)
2
4
(153)
3
9
(141)
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 includes $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.
Current tax
Within current tax payable is $24m (2020: $25m) in respect of uncertain tax positions, with the largest single item not exceeding $10m
(2020: $8m).
The calculation of the Group’s total 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 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’s most material territories for tax are the USA and the UK.
In the USA, the Internal Revenue Service (‘IRS’) has a right to commence a routine audit of the federal income tax returns for up to three years
following the filing of the federal return. The Group has agreed all federal income tax returns up to and including those filed for the 2017
year except for the 2014 year, and no audits have so far been initiated for periods from 2018 onwards. There are two issues under discussion
in respect of the 2014 year for which total federal tax assessed by the IRS is $28m. Should the IRS’s views be sustained, state taxes of $4m
and interest of up to $9m would also be payable. The Group is contesting certain elements of the IRS assessment but has recorded federal
tax provisions of $8m (2020: $6m), state tax provisions of $1m (2020: $1m) and interest of $3m (2020: $2m), which the Group considers the
most likely outflow. It is the Group’s expectation that this audit will be resolved in 2022, however there are possible scenarios which would
lead to a longer period of time to ultimate resolution, including litigation. The issues involved are isolated to the 2014 year.
In the UK, HM Revenue and Customs (‘HMRC’) has a right to commence a routine audit of UK Corporation Tax returns for up to 12 months
following the filing of the return. The Group has agreed all UK tax returns up to and including 2015. The Group received a single question
from HMRC in respect of a 2016 return in 2019, to which a response was provided also in 2019. Although formal agreement of the return
has not yet been received from HMRC, the Group considers there to be minimal risk of any adjustment. A transfer pricing audit was initiated
in September 2019 in respect of the 2017 period but is still at the data gathering stage with no issues having so far been identified and
communicated to the Group; HMRC have reserved the right to consider similar points in later periods if any adjustments were to be
ultimately agreed. The Group has provisions of $2m (2020: $2m) in respect of UK Corporation Tax uncertainties.
IHG | Annual Report and Form 20-F 2021
171
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
8. Tax continued
Deferred tax
Property,
plant,
equipment
and
software
$m
Other
intangible
assets
$m
Application
fees
$m
Deferred
gains on
loan notes
$m
Associates
$m
Losses
$m
At 1 January 2020
(119)
(14)
43
(34)
(58)
23
14
(2)
Group income
statement
Group statement
of comprehensive
income
Group statement
of changes in equity
Exchange and
other adjustments
At 31 December 2020
Group income
statement
Group statement
of comprehensive
income
Group statement
of changes in equity
Exchange and
other adjustments
At 31 December 2021
–
–
–
–
–
–
–
1
(34)
(57)
–
–
–
–
2
–
–
–
–
–
1
42
(2)
–
–
–
40
(34)
(55)
–
–
1
(95)
15
–
–
(1)
(81)
–
–
–
–
–
–
–
–
–
Employee
benefits
$m
Deferred
compen-
sation
$m
33
41
–
1
(1)
1
34
4
–
2
(1)
39
1
–
–
–
42
6
–
–
–
48
27
28
6
–
–
61
21
4
–
(2)
84
12
10
–
–
–
22
(1)
–
–
(1)
20
Credit
losses
$m
Contract
costs
$m
Other
short-term
temporary
differences
$m
(16)
33
Total
$m
(52)
(1)
(19)
54
–
–
–
(17)
4
–
–
(1)
(14)
8
–
(2)
20
(2)
15
(1)
2
18
47
(15)
(11)
–
4
7
2
(2)
54
The deferred tax on the loan notes represents tax that is expected to become due in 2025. The deferred tax in respect of losses of $84m
(2020: $61m) comprises $84m in respect of revenue losses (2020: $60m) and $nil in respect of capital losses (2020: $1m). There are no
amounts recognised in relation to uncertain tax positions within deferred tax in either the current or prior year.
A deferred tax asset of $120m (2020: $95m) has been recognised in legal entities which have made a loss in the current or the previous year.
Of the 2021 amount, $114m (2020: $89m) is within the UK tax group and predominantly represents revenue tax losses and future tax
deductions for amortisation.
Additional UK deferred tax assets of $13m (2020: $14m) are recognised in legal entities which were profitable in both the current and
previous years.
The recoverability of the UK deferred tax assets has been assessed by:
• starting with the Base Case forecasts (see page 149 within ‘Going concern’);
• overlaying tax principles to those forecasts; and
• following the methodology required by IAS 12 ‘Income Taxes’.
This has demonstrated that the UK deferred tax asset, including $73m in respect of losses, should reverse over a seven- to ten-year period.
Under UK law, tax losses do not expire, although they can only be offset against 50% of annual UK taxable profits. If the anticipated recovery
of RevPAR to 2019 levels for the European and UK markets were to be one year later than is forecast within the Base Case, or if actual future
UK taxable profits were to be 20% lower than those currently forecast, then the recovery period for the deferred tax asset would be
extended by approximately one further year.
The Group’s TCFD disclosures on pages 32 to 35 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.
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 analysis of the most material territories as follows:
Deferred tax assets
Deferred tax liabilities
Analysed as:
United Kingdom
United States
Other
172
IHG | Annual Report and Form 20-F 2021
2021
$m
147
(93)
54
127
(87)
14
54
2020
$m
113
(95)
18
103
(89)
4
18
Group Financial Statements
8. Tax continued
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 profits or gains.
The total unrecognised deferred tax position is as follows:
Revenue losses
Capital losses
Tax credits
Othera
Gross
Unrecognised deferred tax
2021
$m
458
551
2020
$m
467
562
1,009
1,029
10
16
12
19
1,035
1,060
2021
$m
87
138
225
10
3
238
2020
$m
76
109
185
12
3
200
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:
Expiry date
2021
2022
2023
2024
2025
2026
2027
2028
After 2028
Gross
Unrecognised deferred tax
2021
$m
2020
$m
2021
$m
2020
$m
–
10
2
4
100
13
–
6
12
33
11
2
5
110
1
3
7
17
–
3
–
1
25
2
–
2
11
8
3
–
1
26
–
1
2
15
No deferred tax liability has been provided in respect of $0.4bn (2020: $0.5bn) of taxable temporary differences relating to subsidiaries
(comprising undistributed earnings and net inherent gains) because the Group is in a position to control the timing of the reversal of these
temporary differences and it is probable that such differences will not reverse in the foreseeable future.
Tax risks, policies and governance
The Group’s Chief Financial Officer & Group Head of Strategy 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, where appropriate, material tax
uncertainties are discussed and resolved with tax authorities in advance. IHG’s Approach to Tax document is available on IHG’s website at
www.ihgplc.com/en/responsible-business/policies. In addition, as a result of its business profile as a hotel manager and also as a residual
legacy from prior acquisitions, IHG has a small number of subsidiaries in jurisdictions commonly portrayed as tax havens. IHG manages
such subsidiaries on a basis consistent with its business principles (for example, by making some foreign incorporated companies UK tax
resident or by operating others so that local profits are commensurate with local activity).
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 profitability of underlying
subsidiaries and tax uncertainties.
The impact of Covid-19 has resulted in changes to the Group’s current geographic profit mix which is likely to continue to result in a slightly
higher than usual tax rate for the Group in the short term.
Worldwide tax reform continues, notably with the OECD’s proposals in connection with its review into “Tax Challenges Arising from
Digitalisation”, and this could impact the Group over the longer term. The Group continues to monitor activity in this area.
IHG | Annual Report and Form 20-F 2021
173
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
9. Dividends
Paid during the year
Final (declared for previous year)
Interim
Special (note 29)
cents
per share
–
–
–
–
2021
$m
–
–
–
–
cents
per share
2020
$m
cents
per share
–
–
–
–
–
–
–
–
78.1
39.9
262.1
380.1
2019
$m
139
72
510
721
The final dividend of 85.9¢ per ordinary share (amounting to $157m) is proposed for approval at the AGM on 6 May 2022. No dividends were
paid in 2021 or 2020.
10. Earnings/(loss) per ordinary share
Basic earnings/(loss) per ordinary share
Profit/(loss) available for equity holders ($m)
Basic weighted average number of ordinary shares (millions)
Basic earnings/(loss) per ordinary share (cents)
Diluted earnings/(loss) per ordinary share
Profit/(loss) available for equity holders ($m)
Diluted weighted average number of ordinary shares (millions)
Diluted earnings/(loss) per ordinary share (cents)
Diluted weighted average number of ordinary shares is calculated as:
Basic weighted average number of ordinary shares (millions)
Dilutive potential ordinary shares (millions)
2021
2020
2019
266
183
(260)
182
385
183
145.4
(142.9)
210.4
266
184
(260)
182
385
184
144.6
(142.9)
209.2
183
1
184
182
–
182
183
1
184
The effect of the notional exercise of outstanding ordinary share awards was anti-dilutive in 2020 and therefore was not included in the
diluted earnings per share calculation.
11. Acquisition of businesses
Six Senses
On 12 February 2019, the Group acquired a 100% ownership interest in Six Senses Hotels Resorts Spas (‘Six Senses’), a leading operator
of top-tier luxury hotels, resorts and spas with a world-renowned reputation for wellness and sustainability. The total purchase consideration
was $304m, comprising $299m paid on acquisition, including the settlement of working capital and $5m of contingent purchase consideration.
The fair value of net assets acquired was $246m, including brands of $189m, management agreements of $45m, and a right-of-use asset
of $19m offset by an equal lease liability. Goodwill recognised was $58m.
The value of the contingent purchase consideration was reassessed at 31 December 2021 (see note 25).
The value of management agreements and right-of-use assets recognised on acquisition were impaired by $41m and $5m respectively
in 2020 (see notes 13 and 15).
UK portfolio
Following a 2018 deal with Covivio to operate 10 UK hotels under long-term leases, in 2019 the Group added a further two hotels to the
portfolio bringing the total hotels in the UK portfolio to 12.
The total purchase consideration for the 12 hotels was $73m, comprising $10m paid on acquisition, a working capital refund of $3m and
$66m of contingent purchase consideration. The fair value of the net assets acquired was $14m and goodwill of $64m was recognised,
of which $12m was recognised in 2019.
Goodwill and non-current assets allocated to the UK portfolio were impaired in full during 2019 and 2020 such that the remaining value
is $nil (see note 6).
The contingent purchase consideration was valued at $nil as at 31 December 2021 (see note 25).
Cash flows relating to acquisitions
Cash paid on acquisition, including working capital settlement
Settlement of stamp duty liability
Less: cash and cash equivalents acquired
Less: working capital settlement received in year following acquisition
Net cash outflow arising on acquisitions
174
IHG | Annual Report and Form 20-F 2021
2021
$m
2020
$m
–
–
–
–
–
–
–
–
–
–
2019
$m
299
3
(7)
(3)
292
Group Financial Statements 12. Assets and liabilities sold
Three hotels in the Americas region have been sold in 2021. 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,
less $3m lease liabilities. The net cash inflow arising was $44m.
In 2020, the Group sold one hotel in EMEAA, the Holiday Inn Melbourne Airport. Total consideration of $2m was received with a total gain,
net of disposal costs, of $3m. The gain was included in other operating income in the Group income statement.
13. Goodwill and other intangible assets
Goodwill
$m
Brands
$m
Software
$m
Management
agreements
$m
Other
intangibles
$m
Cost
At 1 January 2020
Additions
Disposals
Exchange and other adjustments
At 31 December 2020
Additions
Disposals
Exchange and other adjustments
At 31 December 2021
Amortisation and impairment
At 1 January 2020
Provided
System Fund expense
Impairment charge
System Fund impairment charge
Disposals
Exchange and other adjustments
At 31 December 2020
Provided
System Fund expense
Disposals
Exchange and other adjustments
At 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
At 1 January 2020
Total
$m
1,977
52
(29)
9
122
–
–
–
23
2
–
–
122
25
2,009
–
–
–
1
–
–
33
(40)
(5)
122
26
1,997
(63)
(1)
–
(48)
–
–
–
(112)
(1)
–
–
–
(8)
(1)
(2)
–
–
–
–
(11)
(1)
(1)
–
–
(601)
(38)
(53)
(48)
(4)
29
(1)
(716)
(32)
(83)
28
1
864
50
(29)
1
886
32
(40)
–
878
(340)
(36)
(51)
–
(4)
29
–
(402)
(30)
(82)
28
1
(485)
(113)
(13)
(802)
439
439
439
393
484
524
9
10
59
13
14
15
1,195
1,293
1,376
529
439
–
–
8
–
–
–
537
439
–
–
–
439
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5)
532
(190)
–
–
–
–
–
(1)
(191)
–
–
–
–
(191)
341
346
339
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
life 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
Americas (group of CGUs)
EMEAA (group of CGUs)
Greater China
At
1 January
2020
$m
Exchange
adjustments
$m
At
31 December
2020
$m
Exchange
adjustments
$m
At
31 December
2021
$m
421
332
25
778
–
7
–
7
421
339
25
785
(2)
(2)
(1)
(5)
419
337
24
780
Analysed as:
Brands
$m
287
136
16
439
Goodwill
$m
132
201
8
341
IHG | Annual Report and Form 20-F 2021
175
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
13. 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 and the expected recovery period (detailed on page 149 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 of capital and incorporate adjustments reflecting risks specific to the territory of the CGU.
The weighted average terminal growth rates and pre-tax discount rates are as follows:
Americas
EMEAA
Greater China
Terminal
growth
rate
%
2.0
2.2
2.5
2021
Pre-tax
discount
rate
%
10.2
12.8
12.6
Terminal
growth
rate
%
1.7
1.9
2.5
2020
Pre-tax
discount
rate
%
8.5
12.1
13.3
The increase in discount rates in 2021 in Americas and EMEAA was primarily driven by increased long-term risk-free rates.
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 Downside Case scenario (detailed on page 149 within ‘Going concern’) with no
impairment arising.
The Group’s TCFD disclosures on pages 32 to 35 describe how physical and transitional climate risks present both risks and opportunities
for IHG. The potential downside risk has been considered when testing goodwill and brands and could be absorbed within existing
headroom, without taking account of opportunities or mitigating actions.
Software
Software includes $233m relating to the development of the next-generation Guest Reservation System with Amadeus. Internally developed
software with a value of $155m developed within the two phases of the project is being amortised over 10 years and eight years respectively,
with seven years remaining at 31 December 2021, 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 2021, no impairment was charged. In 2020, $4m impairment was charged to the System Fund relating to projects which are no longer
expected to complete.
A loss on disposal of software assets of $12m was recorded in 2021, relating to amounts previously capitalised in respect of costs incurred
to implement cloud computing arrangements. These losses are recorded within depreciation and amortisation ($8m) and System Fund
depreciation and amortisation ($4m) in the Group income statement.
Management agreements
Management agreements relate to contracts recognised at fair value on acquisition. The weighted average remaining amortisation period
for all management agreements is 17 years (2020: 18 years).
In 2021, there were no indicators of further impairment relating to management agreements and no indicators that impairment losses
recognised in prior years may have reversed.
2020 impairment of management agreements
The 2020 impairment charge of $48m related to the Kimpton ($5m), Regent ($2m) and Six Senses ($41m) management agreement
portfolios acquired in 2015, 2018 and 2019 respectively. The key assumption was RevPAR growth which assumed a recovery to 2019 levels
over a five-year period from 2021.
Contracts were valued at the higher of value in use and fair value less costs of disposal, using discounted cash flow techniques. Where the
recoverable amount was measured at fair value, this was categorised as a Level 3 fair value measurement.
Management agreement portfolios
Kimpton
Regent
Six Senses (open hotels)
Six Senses (pipeline)
Region
Americas
Greater China
EMEAA
Basis of recoverable amount
Value in use
Value in use
Fair value less costs of disposal
Greater China
Fair value less costs of disposal
Americas
EMEAA
Greater China
Value in use
Value in use
Value in use
Recoverable
amount
$m
Long-term
growth rate
%
Pre-tax
discount
rate
%
8.4
1.7
2.0-4.6
7.0-15.9
2.0
2.0
2.0
2.0
2.0
8.9-14.7
9.9
9.8
8.9
8.5
4
3
–
–
1
2
–
2019 impairment of management agreements
The 2019 impairment charge of $50m related to the Kimpton management agreement portfolio acquired in 2015 and arose from revised
expectations regarding future trading, the rate of hotel exits and the cost of retaining hotels in the portfolio. The recoverable amount was
based on value in use calculations using management fee projections based on near-term industry projected growth rates for the sector
and discounted at a rate of 8.0%.
176
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 14. Property, plant and equipment
Cost
At 1 January 2020
Additions
Fully depreciated assets written off
Disposals
Exchange and other adjustments
At 31 December 2020
Additions
Fully depreciated assets written off
Disposals
Exchange and other adjustments
At 31 December 2021
Depreciation and impairment
At 1 January 2020
Provided
System Fund expense
Impairment charge
System Fund impairment charge
Fully depreciated assets written off
Disposals
Exchange and other adjustments
At 31 December 2020
Provided
System Fund expense
Fully depreciated assets written off
Disposals
Exchange and other adjustments
At 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
At 1 January 2020
Fixtures,
fittings
and
equipment
$m
Land and
buildings
$m
207
307
Total
$m
514
30
(17)
(3)
6
530
17
(7)
(132)
(4)
404
(205)
(37)
(5)
(90)
(5)
17
2
(6)
(329)
(31)
(4)
7
87
3
28
(17)
(2)
6
322
17
(7)
(29)
(4)
299
(132)
(33)
(5)
(51)
(5)
17
1
(6)
(214)
(27)
(4)
7
21
3
(214)
(267)
85
108
175
137
201
309
2
–
(1)
–
208
–
–
(103)
–
105
(73)
(4)
–
(39)
–
–
1
–
(115)
(4)
–
–
66
–
(53)
52
93
134
The Group’s property, plant and equipment mainly comprises buildings and leasehold improvements on 19 hotels (2020: 23 hotels), but also
offices and computer hardware, throughout the world.
In 2021, there were no impairments relating to property, plant and equipment and no indicators that impairment losses recognised in prior
years may have reversed.
2020 impairment of property, plant and equipment
Total impairment charges of $90m were recognised in relation to property, plant and equipment in 2020, in addition $5m was recognised
in the System Fund.
The recoverable amount of property, plant and equipment in the UK portfolio was measured at value in use, using a discounted cash flow
approach. The key assumptions were 2021 revenues and profits, based on hotel budgets. For the purposes of impairment testing it was
assumed that the landlord would exercise a termination right such that the current leases would end in 2022 and that the hotels would
remain loss-making over this period. The recoverable amount of the property, plant and equipment tested for impairment was assessed
as $nil resulting in an impairment charge of $50m. Estimated future cash flows were discounted at a pre-tax rate of 10.1%.
An impairment charge of $35m was also recognised on property, plant and equipment relating to three premium-branded hotels in
North America. The recoverable amount was measured at value in use, using a discounted cash flow approach that measures the present
value of projected income flows (over a 10-year period) and the income from the property sale. The key assumptions were RevPAR growth
assuming a five-year period of recovery to 2019 levels, discount rates and terminal capitalisation rates. Cash flows beyond the five-year period
were extrapolated using a US long-term growth rate of 1.7%. Estimated future cash flows were discounted at pre-tax rates of 11.0%-12.0%
and capitalisation rates of 7.5%-9.0% were used to calculate the eventual sales values of the hotels. The hotels were sold in 2021 (see note 12).
IHG | Annual Report and Form 20-F 2021
177
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
14. Property, plant and equipment continued
Impairment charges of $3m were also recognised in relation to three land sites held by the Group in the US which were measured at fair value.
The sites were appraised by a professional external valuer using comparable sales data. Within the fair value hierarchy, this is categorised
as a Level 3 measurement.
Impairment charges of $7m were recognised in relation to property, plant and equipment in the US corporate headquarters. The key
assumptions and sensitivities are detailed in note 15. $5m of this impairment charge was borne by the System Fund in line with the principles
for cost allocation relating to this facility. The remaining $2m was recognised in the Americas region ($1m) and Central ($1m).
Net book value by operating segment
Land and buildings
Fixtures, fittings and equipment
15. Leases
Right-of-use assets
Cost
At 1 January 2020
Additions and other re-measurements
Derecognition
Terminations
Exchange and other adjustments
At 31 December 2020
Additions and other re-measurements
Terminations
Disposals
Exchange and other adjustments
At 31 December 2021
Depreciation and impairment
At 1 January 2020
Provided
System Fund expense
Impairment charge
System Fund impairment charge
Derecognition
Terminations
Exchange and other adjustments
At 31 December 2020
Provided
System Fund expense
System Fund impairment reversal
Terminations
Disposals
Exchange and other adjustments
At 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
At 1 January 2020
Americas
$m
EMEAA
$m
41
31
72
1
11
12
Greater
China
$m
–
–
–
Central
$m
10
43
53
Property
$m
Other
$m
822
12
(93)
(125)
1
617
4
(6)
(3)
(5)
607
(335)
(34)
(4)
(16)
(32)
44
64
(3)
(316)
(26)
(3)
3
4
1
3
5
1
–
(2)
–
4
–
(1)
–
–
3
(2)
(1)
–
–
–
–
1
–
(2)
(1)
–
–
1
–
–
Total
$m
52
85
137
Total
$m
827
13
(93)
(127)
1
621
4
(7)
(3)
(5)
610
(337)
(35)
(4)
(16)
(32)
44
65
(3)
(318)
(27)
(3)
3
5
1
3
(334)
(2)
(336)
273
301
487
1
2
3
274
303
490
The Group’s leased assets mainly comprise hotels and offices. Leases contain a wide range of different 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%
of the right-of-use asset net book value) is 56 years. The InterContinental Boston lease, expiring in 2105, has a significant impact on this
weighted average lease term. Undiscounted cash flows on the Boston lease of $3,252m (2020: $3,268m) represent 94% of the total
undiscounted cash flows relating to lease liabilities disclosed in note 24.
178
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 15. Leases continued
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 $283m.
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.
2021 impairment reversal of right-of-use assets
There were no impairments relating to leases held by the Group in 2021.
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.
2020 impairment of right-of-use assets
For impairment testing of hotel properties, each hotel is deemed to be a CGU. In 2020, the impact of Covid-19 and the recovery period
on trading was considered as a trigger for impairment testing for all hotel assets and an impairment charge of $5m was recognised relating
to one hotel in the EMEAA region, based on value in use calculations. Trading projections reflected a five-year RevPAR recovery period to
2019 levels and estimated future cash flows were discounted at a pre-tax rate of 8.8%.
Additionally, impairment charges of $43m were recognised in relation to the US corporate headquarters following management approval
of a decision to sublet approximately half of the space in the Group’s US corporate headquarters. The area to be sublet was vacated in
early 2021. Future sublease rentals are expected to be lower than the head lease rentals which, together with the impact of the expected
time taken and costs incurred to sublet the space, resulted in an impairment charge of $50m at 31 December 2020, $7m of which related
to property, plant and equipment.
The recoverable amount was measured at fair value less costs of disposal. This was equivalent to value in use given subletting the floors
was considered to represent the highest and best use of the asset and so the cash flows were the same in both scenarios.
The key assumptions were the time taken to successfully sublet the whole space (over 2021-2023) and sublease rentals per square foot.
A pre-tax discount rate of 8.5% was applied. Within the fair value hierarchy, this was categorised as a Level 3 fair value measurement.
$32m of this impairment charge was borne by the System Fund in line with the principles for cost allocation relating to this facility.
The remaining $11m was recognised in the Americas region ($5m) and Central ($6m).
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.
Currency
US dollars
Sterling
Euros
Other
Analysed as:
Current
Non-current
2021
$m
2020
$m
374
6
5
34
419
35
384
419
385
10
7
48
450
34
416
450
IHG | Annual Report and Form 20-F 2021
179
Notes to the Group Financial StatementsGroup Financial Statements Group Financial Statements
Notes to the Group Financial Statements continued
15. Leases continued
Amounts recognised in the Group income statement
Depreciation of right-of-use assets
System Fund depreciation of right-of-use assets
Impairment charge
System Fund impairment (reversal)/charge
Derecognition of right-of-use assets and lease liabilities
Gain on lease termination
Expense relating to variable lease payments
Expense relating to short-term leases and low-value assets
Income from subleasing right-of-use assets
Recognised in operating profit/(loss)
Interest on lease liabilities
Total recognised in the Group income statement
2021
$m
27
3
–
(3)
–
–
31
1
(1)
58
29
87
2020
$m
35
4
16
32
(22)
(30)
7
2
(1)
43
37
80
2019
$m
38
5
32
–
–
–
58
3
(2)
134
41
175
Variable lease payments
Variable lease payments are payable under certain of the Group’s hotel leases and arise where the Group is committed to making additional
lease payments that are contingent on the performance of the hotels.
The UK portfolio leases and two German hotel leases contain guarantees that the Group will fund any shortfalls in lease payments up to
an annual and cumulative cap. Since there is no floor to the rent reductions applicable under these leases, they are treated as fully variable.
One of the German leases terminated in early 2022, following settlement of a commercial dispute.
Subleases
At 31 December 2021, the Group is party to certain operating sublease arrangements with the largest relating to the Group’s US corporate
headquarters. Sublease income relating to the US headquarters is principally recognised in the System Fund. The net book value of the
related right-of-use assets is $1m. The depreciation charge for the year on these assets was $nil and sublease income recognised in the year
on these and other leased assets was $1m (2020: $1m, 2019: $2m).
Operating sublease payments receivable
31 December 2021
Less than
1 year
$m
Between
1 and 2 years
$m
Between
2 and 5 years
$m
2
2
5
Total
$m
9
The undiscounted future cash flows receivable from subleased properties amounted to $2m in 2020 and $3m in 2019.
Amounts recognised in the Group statement of cash flows
Total cash paid during the year relating to leases of $87m (2020: $104m, 2019: $159m) comprises $55m (2020: $39m, 2019: $100m) paid
in respect of operating activities and $32m (2020: $65m, 2019: $59m) paid in respect of financing activities.
Exposure to future cash outflows
A lease liability is recorded when the leased assets are available for use by the Group.
In 2021, the Group signed an agreement to lease a new global head office in the UK for a period of 15 years at an average annual rental
of approximately $3m. The lease was signed and commenced in January 2022.
At 31 December 2021 and 31 December 2020, the Group was not committed to future cash outflows in relation to any other leases that have
not yet commenced.
The maturity analysis of lease liabilities is disclosed in note 24.
180
IHG | Annual Report and Form 20-F 2021
16. Investment in associates and joint ventures
Cost
At 1 January
Additions
Share of losses
System Fund share of losses
Dividends and distributions
Exchange and other adjustments
At 31 December
Impairment
At 1 January
Charge for the yeara
Exchange and other adjustments
At 31 December
Net book value
Analysed as:
Material associates
Other associates
2021
$m
136
4
(8)
(2)
–
2
132
(55)
–
–
(55)
77
42
35
2020
$m
145
17
(14)
(1)
(7)
(4)
136
(35)
(23)
3
(55)
81
43
38
a In 2020, the $23m impairment charge was presented net of $4m gain on related put option (see note 6).
In 2021, there were no indicators of further impairment relating to investments in associates and no indicators that impairment losses
recognised in prior years may have reversed.
Barclay associate
The Group held one material associate investment at 31 December 2021, 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. Whilst 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 specified owner returns. $18m was provided in 2021 in relation to settlement
of a commercial dispute regarding owner returns during the pandemic.
Due to the significant trading impact of Covid-19 and resulting restrictions in New York, the hotel was closed for most of 2020 and Spring 2021.
The closure period and the significant impact on RevPAR during the recovery period resulted in an impairment charge of $13m in 2020.
The recoverable amount of the investment was measured at fair value less costs of disposal, based on the Group’s share of the market value
of the hotel less debt in the associate. The hotel was appraised by a professional external valuer using an income capitalisation approach
which is a discounted cash flow technique that measures the present value of projected income flows (over a 10-year period) and the
property sale. Within the fair value hierarchy, this was categorised as a Level 3 fair value measurement. The external valuer assumed a return
to 2019 RevPAR levels over a three- to four-year period, based on industry data specific to the New York market and supply factors in the
luxury market located close to the InterContinental New York Barclay. The pre-tax discount and capitalisation rates used in the valuation
were 7.5% and 6.0% respectively.
The 2020 impairment charge was presented net of a $4m fair value gain on a put option over part of the Group’s investment in the associate
given there is an interdependency between the value of the option and the fair value of the associate investment. This fair value gain
reversed in 2021.
IHG | Annual Report and Form 20-F 2021
181
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
16. Investment in associates and joint ventures continued
Summarised financial information in respect of the Barclay associate is set out below:
31 December
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Group share of reported net assets at 19.9%
Adjustments to reflect impairment, capitalised costs, and additional rights and obligations
under the shareholder agreement
Carrying amount
Year ended 31 December
Revenue
Loss from continuing operations and total comprehensive loss for the year
Group’s share of loss for the year, including the cost of funding owner returns
In 2019, the Group’s share of losses from the Barclay associate was $10m.
Other associates and joint ventures
2021
$m
485
38
(32)
(246)
245
49
(7)
42
2021
$m
42
(24)
(5)
2020
$m
497
32
(19)
(247)
263
52
(9)
43
2020
$m
16
(52)
(13)
(Losses)/profits from continuing operations and total comprehensive
(loss)/income for the year
Associates
Joint ventures
2021
$m
2020
$m
(3)
(3)
2019
$m
7
2021
$m
–
2020
$m
2
2019
$m
–
In 2020, impairment charges of $8m were recognised in relation to two associates, both in the Americas region. Cash flows were based on
management forecasts covering a five-year period, and discounted at pre-tax rates of 12.0% and 8.4%, resulting in recoverable amounts of
$1m and $4m respectively.
A further associate with a value of $5m at 31 December 2019 was liquidated in 2020. A final dividend of $3m was received and the remaining
investment of $2m was impaired to $nil in 2020; the charge was recognised within Central costs.
$2m was received in 2020 on liquidation of a joint venture.
17. Other financial assets
Equity securities
Restricted funds:
Shortfall reserve deposit
Ring-fenced amounts to satisfy insurance claims:
Cash
Money market funds
Bank accounts pledged as security
Other
Trade deposits and loans
Analysed as:
Current
Non-current
182
IHG | Annual Report and Form 20-F 2021
2021
$m
106
2020
$m
88
6
4
8
42
1
61
8
175
2
173
175
9
3
15
43
3
73
8
169
1
168
169
Group Financial Statements 17. Other financial assets continued
Equity securities
The methodology to calculate fair value and the sensitivities to the relevant significant unobservable inputs are detailed in note 25.
The significant investments are as follows:
Investment in entity which owns:
InterContinental The Willard Washington DC
InterContinental San Francisco
InterContinental Grand Stanford Hong Kong
a Reported within other operating income in the Group income statement.
2021
Dividend
income
$m
Fair value
$m
2020
Dividend
incomea
$m
Fair value
$m
25
17
35
–
–
–
22
15
27
–
1
–
Restricted funds
The shortfall reserve deposit is held for the specific purpose of funding shortfalls in owner returns relating to the Barclay associate.
Any shortfalls funded are subject to potential clawback in future years. The maximum length of time for which the restricted funds will be
held is the life of the hotel management agreement. $3m was withdrawn from the deposit during the year to fund working capital requirements.
In 2020, $16m was withdrawn both in connection with the refinancing of the hotel’s senior bank loan and to fund working capital requirements.
Amounts ring-fenced to satisfy insurance claims are principally held in the Group’s Captive, which is a regulated entity (see note 21).
The bank accounts pledged as security (£31m) are subject to a charge in favour of the members of the UK unfunded pension arrangement
(see note 27). The amounts pledged as security may change in future years subject to the trustees’ agreement and 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.
Expected credit losses
Other financial assets with a total value of $61m (2020: $66m) are subject to the expected credit loss model requirements of IFRS 9
‘Financial Instruments’. Equity securities, money market funds and other amounts measured at fair value are excluded. With the exception
of the expected credit loss arising on trade deposits and loans (see below), expected credit losses are considered to be immaterial.
Included within trade deposits and loans is an owner loan with a principal value of $6m where repayments due in 2021 and 2020 have
not been received; and an owner loan with a principal value of $4m which became past due in 2021. These loans are impaired in full.
Other trade deposits and loans are not past due. In 2021, $4m was collected in respect of an asset which was measured at $nil at initial
recognition as part of a business acquisition.
Trade deposits and loans:
Gross and net balance with no significant increase in credit risk since initial recognition
Gross balance with a significant increase in credit risk since initial recognition
Provision for lifetime expected credit lossesa
a Comprises $6m and $9m (2020: $6m and $9m) relating to the Americas and EMEAA regions respectively.
2021
$m
2020
$m
6
17
(15)
4
19
(15)
Credit risk
Restricted funds are held with bank counterparties which are rated at least A+ based on Standard and Poor’s ratings.
The maximum exposure to credit risk of other financial assets at the end of the reporting period by geographic region is as follows:
Americas
EMEAA
Greater China
2021
$m
66
67
42
175
2020
$m
72
64
33
169
IHG | Annual Report and Form 20-F 2021
183
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
18. Trade and other receivables
Trade receivablesa
Other receivables
Prepayments
a Including cost reimbursements of $23m (2020: $26m).
2021
$m
399
102
73
574
2020
$m
309
129
76
514
Other receivables includes $53m (2020: $77m) relating to the UK portfolio rent. The Group has deferred certain rent payments due since
1 April 2020 with consideration given to the UK Government and other commercial tenant protection measures which are in place up to
31 March 2022. A rent reconciliation was finalised in 2021 which resulted in credit notes being received against unpaid 2020 rentals. A further
reconciliation will be performed in 2022, at which point amounts due at the end of 2021 will be eliminated. $29m (2020: $65m) has been
recognised within trade and other payables in relation to the rents due under the leases at 31 December 2021, with the receivable balance
reflecting the recovery of both amounts due and amounts paid in the year.
Expected credit losses
The ageing of trade receivables shown below reflects 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 if they are
ultimately found to be uncollectable. Expected credit losses relating to other receivables are immaterial.
Not past due
Past due 1 to 30 days
Past due 31 to 90 days
Past due 91 to 180 days
Past due 181 to 360 days
Past due more than 361 days
Gross
$m
249
66
52
36
38
91
532
Credit loss
allowance
$m
(2)
(5)
(7)
(9)
(21)
(89)
(133)
2021
Net
$m
247
61
45
27
17
2
399
Gross
$m
153
59
61
40
74
n/a
387
Credit loss
allowance
$m
(1)
(2)
(6)
(7)
(62)
n/a
(78)
2020
Net
$m
152
57
55
33
12
n/a
309
As a result of the increased credit risk faced from customers due to the pandemic the Group has increased its focus on older receivables.
In 2021, this has resulted in both an increase in cash collections relating to older receivables and a reassessment of those receivables
previously considered to be irrecoverable. $60m of fully provided receivables have been reinstated leading to an increase in both gross
receivables and the expected credit loss provision. In addition, debts older than 180 days have been disclosed into further ageing categories.
These changes have no impact on total amounts receivable, total credit loss provisions or the impairment loss recorded in the Group
income statement.
Movement in the allowance for expected lifetime credit losses
At 1 January
Fully provided receivables reinstated
Impairment lossa
System Fund impairment reversal/(loss)
Amounts written off
Exchange and other adjustments
At 31 December
2021
$m
(78)
(60)
(4)
6
8
(5)
(133)
2020
$m
(18)
–
(40)
(24)
7
(3)
(78)
a The impairment loss on financial assets disclosed on the face of the Group income statement also includes a gain of $4m (2020: loss of $48m) related to trade deposits and loans.
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:
Americas
EMEAA
Greater China
184
IHG | Annual Report and Form 20-F 2021
2021
$m
275
172
54
501
2020
$m
212
183
43
438
Group Financial Statements 19. Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Money market funds
Repurchase agreements
Cash and cash equivalents as recorded in the Group statement of financial position
Bank overdrafts (note 22)
Cash and cash equivalents as recorded in the Group statement of cash flows
2021
$m
124
301
1,025
–
1,450
(59)
1,391
2020
$m
104
358
892
321
1,675
(51)
1,624
Cash at bank and in hand includes bank balances of $67m (2020: $55m) which are matched by bank overdrafts of $59m (2020: $51m) 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.
At 31 December 2021, $9m (2020: $5m) is restricted for use on capital expenditure under hotel lease agreements and therefore not available
for wider use by the Group. An additional $77m (2020: $44m) is held within countries from which funds are not currently able to be
repatriated to the Group’s central treasury company.
Details of the credit risk on cash and cash equivalents is included in note 24.
20. Trade and other payables
Current
Trade payables
Other tax and social security payable
Other payables
Deferred purchase consideration (note 25)
Accruals
Non-current
Other payables
Deferred purchase consideration (note 25)
Contingent purchase consideration (note 25)
Other payables includes $29m (2020: $65m) relating to the UK portfolio rent (see note 18).
21. Provisions
2021
$m
109
29
119
–
322
579
4
12
73
89
2020
$m
80
37
146
13
190
466
4
11
79
94
At 31 December 2020
Provided, of which $25m is recorded within exceptional items
Utilised
Released
Reclassification from trade and other payables
At 31 December 2021
Analysed as:
Current
Non-current
Litigation
and
commercial
disputes
$m
Insurance
reserves
$m
Onerous
contractual
expenditure
$m
Other
$m
Total
$m
12
25
(1)
(2)
3
37
36
1
37
36
13
(10)
–
–
39
10
29
39
8
–
–
–
–
8
2
6
8
4
2
–
–
–
6
1
5
6
60
40
(11)
(2)
3
90
49
41
90
IHG | Annual Report and Form 20-F 2021
185
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
21. Provisions continued
Litigation and commercial disputes
The increase in the provision in the year relates to the provisionally agreed cost of settling commercial disputes in the Americas and
EMEAA regions. During the year the Group settled matters which alleged violations of anti-trust regulations; these matters were previously
disclosed as a contingent liability.
The provision at 31 December 2020 principally related to management’s best estimate of settlements required in respect of lawsuits filed
against the Group in the Americas region. Settlement terms have been agreed and payments are expected to be made in 2022. There are
certain amounts that the Group will pursue in relation to these matters, up to the full cost of settlement; as these amounts are not virtually
certain as at 31 December 2021 they have not been recognised.
Insurance reserves
The Group holds insurance policies with third-party insurers against certain risks relating to its corporate operations and owned and leased
properties, and also acts as third-party insurer for certain risks of its managed hotels. An element of these risks are reinsured through the
Group’s Captive insurance company, which reduces the cost of the Group’s insurance policies.
The insurance reserves mainly relate to general third-party liability, US workers’ compensation, global employee benefits and employment
practices liability insurances. The amounts are based on reserves held principally in the Group’s Captive insurance company, and are
established using independent actuarial assessments wherever possible, or a reasonable assessment based on past claims experience
provided primarily by third-party claims handlers and the third-party insurers.
Of the total reserves, $28m relates to incurred but not reported claims. The utilisation of these 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 for a majority of
the claims.
Amounts utilised within the reserves are paid to a third-party insurer or a dedicated claims handler 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 of credit (see note 31).
Over and above the actuarially determined reserves, the Group is potentially exposed to claims with individual caps which do not exceed
$4m for periods prior to 2011 and up to $62m (of which $53m is in respect of the last five policy years) in aggregate for periods since 2011,
noting that actual claims did not differ significantly to estimates in 2021 or 2020.
In respect of the managed hotels, the Group received insurance premiums of $17m (2020: $19m, 2019: $19m) and incurred claims expense
of $14m (2020: $16m, 2019: $18m). Insurance premiums earned are included in Central revenue.
Other
Includes dilapidations provisions.
22. Loans and other borrowings
Current
Bank overdrafts (note 19)
Commercial paper
£173m 3.875% bonds 2022
Non‑current
£173m 3.875% bonds 2022
€500m 1.625% bonds 2024
£300m 3.75% bonds 2025
£350m 2.125% bonds 2026
€500m 2.125% bonds 2027
£400m 3.375% bonds 2028
Total loans and other borrowings
Denominated in the following currencies:
Sterling
US dollars
Euros
Other
Bonds
Interest is payable annually on the dates in the table above, at the rates stated above.
186
IHG | Annual Report and Form 20-F 2021
Maturity
date
Discount
at issue
%
n/a
16 March 2021
28 November 2022
28 November 2022
8 October 2024
14 August 2025
24 August 2026
15 May 2027
8 October 2028
n/a
0.444
1.213
1.213
0.437
0.986
0.550
0.470
1.034
2021
$m
59
–
233
292
–
565
408
473
570
537
2020
$m
51
818
–
869
235
611
413
479
618
542
2,553
2,845
2,898
3,767
1,652
57
1,135
1
2,490
31
1,242
4
2,845
3,767
Group Financial Statements 22. Loans and other borrowings continued
Commercial paper
In 2020, the Group issued £600m under the UK Government’s Covid Corporate Financing Facility (‘CCFF’) which matured on 16 March 2021.
Syndicated and Bilateral Facilities
There were no amounts drawn as at 31 December 2021 or 31 December 2020.
The Syndicated Facility comprises a $1,275m revolving credit facility and the Bilateral Facility comprises a $75m revolving credit facility.
Each is unsecured and contains the same terms and covenants (see note 24). A variable rate of interest is payable on amounts drawn under
both facilities, which were undrawn throughout 2021. The maximum amount drawn in 2020 was $690m.
Facilities provided by banks
Unutilised facilities
Committed
Uncommitted
23. Net debt
Cash and cash equivalents
Loans and other borrowings – current
Lease liabilities
– current
– non-current
– non-current
Derivative financial instruments hedging debt values (note 24)
Net debt
Movement in net debt
Net (decrease)/increase in cash and cash equivalents, net of overdrafts
Add back financing cash flows in respect of other components of net debt:
Principal element of lease payments
Issue of long-term bonds, including effect of currency swaps
Repayment/(issue) of commercial paper
Repayment of long-term bonds
Decrease in other borrowings
Decrease in net debt arising from cash flows
Other movements:
Lease liabilities
Increase in accrued interest
Disposals
Exchange and other adjustments
Decrease in net debt
Net debt at beginning of the year
Net debt at end of the year
2021
2020
Within
1 year
$m
Between 1
and 2 years
$m
Within
1 year
$m
Between 2
and 5 years
$m
–
50
1,350
–
–
50
1,350
–
2021
$m
1,450
(292)
2020
$m
1,675
(869)
(2,553)
(2,898)
(35)
(384)
(67)
(34)
(416)
13
(1,881)
(2,529)
2021
$m
(236)
2020
$m
1,430
32
–
828
–
–
860
624
(7)
(1)
3
29
24
648
(2,529)
(1,881)
65
(1,093)
(738)
290
125
(1,351)
79
144
(5)
19
(101)
57
136
(2,665)
(2,529)
Information concerning Non-GAAP measures can be found in the Strategic Report on pages 73 to 77.
Net debt on a frozen GAAP basis as calculated for bank covenants was $1,801m (2020: $2,375m). Further details are provided on page 190.
IHG | Annual Report and Form 20-F 2021
187
Notes to the Group Financial StatementsGroup Financial Statements
Notes to the Group Financial Statements continued
23. Net debt continued
Loans and other borrowings (excluding bank overdrafts), lease liabilities and currency swaps comprise the liabilities included in the financing
activities section of the Group statement of cash flows and their movements are analysed as follows:
Lease liabilities
£173m 3.875% bonds 2022
€500m 1.625% bonds 2024
£300m 3.75% bonds 2025
£350m 2.125% bonds 2026
€500m 2.125% bonds 2027
£400m 3.375% bonds 2028
Commercial paper
Currency swaps
Unsecured bank loans
Lease liabilities
£173m 3.875% bonds 2022
€500m 1.625% bonds 2024
£300m 3.75% bonds 2025
£350m 2.125% bonds 2026
€500m 2.125% bonds 2027
£400m 3.375% bonds 2028
Commercial paper
Currency swaps (exchange of principal)
Currency swaps (initial fee received)
At 1 January
2021
$m
450
235
611
413
479
618
542
818
4,166
17
4,183
Financing
cash flows
$m
(32)
–
–
–
–
–
–
(828)
(860)
–
(860)
Exchange
adjustments
$m
(3)
(3)
(48)
(5)
(6)
(48)
(7)
13
(107)
–
(107)
At 1 January
2020
$m
Financing
cash flows
$m
Exchange
adjustments
$m
125
680
528
–
399
462
564
–
–
2,758
20
–
2,778
(125)
(65)
(290)
585
–
–
–
511
738
1,354
(3)
3
1,354
–
(2)
–
26
13
16
53
29
78
213
–
–
213
Disposal
$m
(3)
–
–
–
–
–
–
–
(3)
–
(3)
Disposal
$m
–
(19)
–
–
–
–
–
–
–
(19)
–
–
(19)
Othera
$m
At 31 December
2021
$m
7
1
2
–
–
–
2
(3)
9
45
54
Othera,b
$m
–
(144)
(3)
–
1
1
1
2
2
(140)
–
(3)
(143)
419
233
565
408
473
570
537
–
3,205
62
3,267
At 31 December
2020
$m
–
450
235
611
413
479
618
542
818
4,166
17
–
4,183
a The change in value of currency swaps represents fair value movements.
b Included $90m lease termination relating to InterContinental San Juan (see note 6).
24. Financial risk management and derivative financial instruments
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
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of 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
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 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. US dollars are also borrowed when required
to reflect the predominant trading currency and act as a net investment hedge of US dollar denominated assets.
The Group transacted currency swaps at the same time as the €500m 2.125% 2027 and €500m 1.625% 2024 bonds were issued in
November 2018 and October 2020 respectively in order to swap the bonds’ proceeds and interest flows into sterling (see page 189).
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 of 50%
fixed rate debt over the next 12 months. With the exception of overdrafts, 100% of borrowings were fixed rate debt at 31 December 2021
(2020: 100%).
188
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 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:
Description
Put option
Currency swaps
Hedge relationship
None
Cash flow hedge
Analysed as:
Non-current assets
Non-current liabilities
2021
$m
–
(62)
(62)
–
(62)
(62)
2020
$m
4
(17)
(13)
5
(18)
(13)
The carrying amount of currency swaps of $62m liability (2020: $17m liability) comprises $67m loss (2020: $13m gain) relating to exchange
movements on the underlying principal, included within net debt (see note 23), and $5m gain (2020: $30m loss) relating to other fair
value movements.
Details of the credit risk on derivative financial instruments are included on page 191.
Cash flow hedges
Currency swaps have been transacted to swap the proceeds from the euro bonds to sterling as follows:
Date of designation
Pay leg
Interest rate Receive leg
Interest rate Maturity
Risk
Hedge type
Hedged item
November 2018
£436m 3.5%
October 2020
£454m 2.7%
€500m
€500m
2.125%
1.625%
May 2027
Foreign exchange
Cash flow
€500m 2.125% bonds 2027
October 2024 Foreign exchange
Cash flow
€500m 1.625% bonds 2024
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 $40m loss (2020: $7m 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 of 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 ineffectiveness in 2021 or 2020.
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 Syndicated and Bilateral Facilities; and
• Short-dated foreign exchange swaps.
The designated risk is the spot foreign exchange risk and interest on these financial instruments is taken through financial income or expense.
Short-dated foreign exchange swaps are used when needed to manage sterling surplus cash and reduce US dollar borrowings whilst
maintaining operational flexibility. No short-dated foreign exchange swaps have been held since the first quarter of 2020.
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 borrowing. The Group has established a hedge ratio of 1:1 as the underlying
risk of the hedging instrument is identical to the hedged risk component.
The change in value of hedging instruments recognised in the currency translation reserve through other comprehensive income was
$nil (2020: $1m loss). There was no ineffectiveness recognised in the Group income statement during the current or prior year.
IHG | Annual Report and Form 20-F 2021
189
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
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 profit or loss before
tax and net liabilities, and the impact of a rise in US dollar, euro and sterling interest rates on the Group’s profit or loss before 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.
Increase/(decrease) in profit before tax
Sterling: US dollar exchange rate
Euro: US dollar exchange rate
US dollar interest rates
Sterling interest rates
Decrease in net liabilities
Sterling: US dollar exchange rate
Euro: US dollar exchange rate
Sterling: euro exchange rate
5¢ fall
5¢ fall
1% increase
1% increase
5¢ fall
5¢ fall
5¢ fall
2021
$m
7.0
0.2
7.1
5.2
29.1
49.7
67.4
2020
$m
5.9
0.3
2.2
12.9
30.2
50.6
68.2
2019
$m
4.0
(2.6)
(1.6)
0.6
39.9
24.1
33.0
In 2021 and 2020, interest rate sensitivity relates to cash balances and would only be realised to the extent deposit rates increase by 1%.
Interest rate sensitivities include the impact of hedging and are calculated based on the year-end net debt position.
Liquidity risk
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 $77m (2020: $44m) is held in countries where repatriation is restricted
(see note 19).
Medium and long-term borrowing requirements are met through committed bank facilities and bonds as detailed in note 22. Short-term
borrowing requirements may be met from drawings under uncommitted overdrafts and facilities.
The Syndicated and Bilateral Facilities contain two financial covenants: interest cover and a leverage ratio. Covenants are monitored
on a ‘frozen GAAP’ basis excluding the impact of IFRS 16 ‘Leases’ and are tested at half year and full year on a trailing 12-month basis.
The interest cover covenant requires a ratio of Covenant EBITDA:Covenant interest payable above 3.5:1 and the leverage ratio requires
Covenant net debt: Covenant EBITDA of below 3.5:1. Covenant EBITDA is calculated (on a frozen GAAP basis) as operating profit before
exceptional items, depreciation and amortisation and System Fund revenues and expenses.
These covenants were waived from 30 June 2020 through 31 December 2021 and have been relaxed for test dates in 2022. A temporary
minimum liquidity covenant of $400m is tested at each test date up to and including 31 December 2022. For covenant purposes, liquidity
is defined as unrestricted cash and cash equivalents (net of bank overdrafts) plus undrawn facilities with a remaining term of at least
six months.
Amended covenant test levels for Syndicated and Bilateral Facilities
Leverage
Interest cover
Liquidity
30 June
2020 to 31
December
2021
2019
and prior
30 June
2022
31
December
2022
<3.5x
>3.5x
n/a
waived
waived
<7.5x
>1.5x
<6.5x
>2.0x
$400m
$400m
$400m
30 June
2023
<3.5x
>3.5x
n/a
The measures used in the covenant tests are calculated on a frozen GAAP basis and do not align to the values reported by the Group as
Non-GAAP measures:
Covenant EBITDA ($m)
Covenant net debt ($m)
Covenant interest payable ($m)
Leverage
Interest cover
Liquidity ($m)
2021
601
1,801
133
3.00
4.52
2020
272
2,375
111
8.73
2.45
2,655
2,925
2019
897
2,241
99
2.50
9.06
n/a
The interest margin payable on the Syndicated and Bilateral Facilities is linked to the leverage ratio and can vary between USD LIBOR +
0.90% and USD LIBOR + 2.75%.
190
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 24. Financial risk management and derivative financial instruments continued
The following are the undiscounted contractual cash flows of 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.
31 December 2021
Non-derivative financial liabilities:
Bank overdrafts
£173m 3.875% bonds 2022
€500m 1.625% bonds 2024
£300m 3.75% bonds 2025
£350m 2.125% bonds 2026
€500m 2.125% bonds 2027
£400m 3.375% bonds 2028
Lease liabilities
Trade and other payables (excluding deferred and contingent purchase consideration)
Deferred and contingent purchase consideration
Derivative financial liabilities:
Currency swaps hedging €500m 1.625% bonds 2024 outflows
Currency swaps hedging €500m 1.625% bonds 2024 inflows
Currency swaps hedging €500m 2.125% bonds 2027 outflows
Currency swaps hedging €500m 2.125% bonds 2027 inflows
31 December 2020
Non-derivative financial liabilities:
Bank overdrafts
£173m 3.875% bonds 2022
€500m 1.625% bonds 2024
£300m 3.75% bonds 2025
£350m 2.125% bonds 2026
€500m 2.125% bonds 2027
£400m 3.375% bonds 2028
Commercial paper
Lease liabilities
Trade and other payables (excluding deferred and contingent purchase consideration)
Deferred and contingent purchase consideration
Derivative financial liabilities:
Currency swaps hedging €500m 1.625% bonds 2024 outflows
Currency swaps hedging €500m 1.625% bonds 2024 inflows
Currency swaps hedging €500m 2.125% bonds 2027 outflows
Currency swaps hedging €500m 2.125% bonds 2027 inflows
Total
$m
59
241
593
465
522
638
666
3,442
555
94
660
(593)
702
(638)
Total
$m
51
254
654
486
539
705
693
819
Less than
1 year
$m
Between
1 and 2
years
$m
Between
2 and 5
years
$m
More than
5 years
$m
59
241
9
15
10
12
18
58
550
–
16
(9)
21
(12)
–
–
9
15
10
12
18
49
2
–
16
(9)
21
(12)
–
–
575
435
502
36
55
123
1
52
628
(575)
62
(36)
–
–
–
–
–
578
575
3,212
2
42
–
–
598
(578)
Less than
1 year
$m
Between
1 and 2
years
$m
Between
2 and 5
years
$m
More than
5 years
$m
51
9
10
15
10
13
19
819
57
416
13
16
(10)
21
(13)
–
245
10
15
10
13
18
–
55
2
5
16
(10)
21
(13)
–
–
634
456
31
39
55
–
136
1
13
652
(634)
63
(39)
–
–
–
–
488
640
601
–
3,257
3,505
1
81
–
–
627
(640)
420
112
684
(654)
732
(705)
Credit risk
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 Standard and Poor’s, 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.
IHG | Annual Report and Form 20-F 2021
191
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
24. Financial risk management and derivative financial instruments continued
The table below analyses the Group’s short-term deposits, money market funds and repurchase agreement collateral classified as cash and
cash equivalents by counterparty credit rating:
31 December 2021
Short-term deposits
Money market funds
31 December 2020
Short-term deposits
Money market funds
Repurchase agreement collateral
AAA
$m
–
1,025
AAA
$m
–
892
238
AA
$m
–
–
AA
$m
–
–
65
AA‑
$m
87
–
AA-
$m
98
–
18
A+
$m
45
–
A+
$m
165
–
–
A
$m
169
–
A
$m
94
–
–
A‑
$m
–
–
A-
$m
1
–
–
Total
$m
301
1,025
Total
$m
358
892
321
Capital risk management
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, whilst maintaining maximum operational flexibility. A key characteristic of 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 2021 (which differs from the ratio as calculated on a frozen GAAP basis
for covenant tests) was 2.98 (2020: 7.69).
The Group currently has a senior unsecured long-term credit rating of BBB- from Standard and Poor’s. In the event this rating was downgraded
below BBB- there would be an additional step-up coupon of 1.25% payable on the bonds which would result in additional interest of
approximately $35m per year.
25. Classification and measurement of financial instruments
Accounting classification and fair value hierarchy
Hierarchy of
fair value
measurement
Fair valuea
$m
Amortised
cost
$m
Not
categorised
as a financial
instrument
$m
Total
$m
Fair valuea
$m
Amortised
cost
$m
Not
categorised
as a financial
instrument
$m
2021
1,3b
1
2,3c
1
–
2
1
–
3
114
1,025
–
256
–
(62)
(256)
–
(73)
61
425
–
–
501
–
–
(2,845)
(566)
–
–
–
–
73
–
–
–
(29)
175
1,450
–
256
574
103
892
5
236
–
66
783
–
–
–
–
–
–
438
76
(62)
(18)
(256)
(236)
–
–
(2,845)
(668)
–
(79)
(3,767)
(444)
–
–
–
(37)
2020
Total
$m
169
1,675
5
236
514
(18)
(236)
(3,767)
(560)
Financial assets
Other financial assets
Cash and cash equivalents
Derivative financial instruments
Deferred compensation
plan investments
Trade and other receivables
Financial liabilities
Derivative financial instruments
Deferred compensation
plan liabilities
Loans and other borrowings
Trade and other payables
a With the exception of equity securities, which are measured at fair value through other comprehensive income, all are measured at fair value through profit or loss. Of those, the
financial assets related to the deferred compensation plan investments were designated as such upon initial recognition.
b Of those measured at fair value, $8m (2020: $15m) are Level 1 and $106m (2020: $88m) are Level 3.
c In 2020, $1m were Level 2 and $4m were Level 3.
192
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 25. Classification and measurement of financial instruments continued
Financial assets and liabilities measured at amortised cost whose carrying amount is not a reasonable approximation of fair value are
as follows:
Deferred purchase consideration
£173m 3.875% bonds 2022
€500m 1.625% bonds 2024
£300m 3.75% bonds 2025
£350m 2.125% bonds 2026
€500m 2.125% bonds 2027
£400m 3.375% bonds 2028
Hierarchy of
fair value
measurement
Carrying value
$m
2021
Fair value
$m
Carrying value
$m
2020
Fair value
$m
2
1
1
1
1
1
1
(12)
(233)
(565)
(408)
(473)
(570)
(537)
(13)
(239)
(585)
(428)
(471)
(601)
(566)
(24)
(235)
(611)
(413)
(479)
(618)
(542)
(26)
(248)
(630)
(448)
(489)
(650)
(603)
Right of offset
Other than in relation to cash pooling arrangements (see note 19), 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 professional 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 6.3% to 9.3% (2020: 6.4% to 10.0%),
and a non-marketability factor which ranged from 20.0% to 30.0% (2020: 20.0% to 30.0%).
Applying a one-year slower/faster RevPAR recovery period would result in a $7m (2020: $6m/$8m) (decrease)/increase in fair value
respectively. A one percentage point increase/decrease in the discount rate would result in a $9m (2020: $12m/$16m) (decrease)/increase
in fair value respectively. A five percentage point increase/decrease in the non-marketability factor would result in a $6m (2020: $5m)
(decrease)/increase in fair value respectively.
Derivative financial instruments
Currency swaps 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 has been valued as the excess of the amount receivable under
the option (which is based on the Group’s capital invested to date) over fair value. In 2021, the fair value of the hotel was derived from a
limited update to the 2020 appraisals, provided by a professional external valuer. In 2020, the fair value of the hotel was based on the value
as calculated for impairment testing using discounted future cash flows as described in note 16.
Deferred purchase consideration
Deferred purchase consideration arose in respect of the acquisition of Regent, and comprises the present value of $13m payable in 2024.
The first instalment of $13m was paid in 2021. The discount rate applied is based on observable US corporate bond rates of similar term
to the expected payment date.
Contingent purchase consideration
Regent $73m (2020: $74m)
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 2021, 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 (2020: $7m). If the date
for exercising the options is assumed to be 2033, the amount of the undiscounted contingent purchase consideration would be $86m
(2020: $86m).
IHG | Annual Report and Form 20-F 2021
193
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
25. Classification and measurement of financial instruments continued
UK portfolio $nil (2020: $nil)
The contingent purchase consideration comprises the present value of the above-market element of the expected lease payments to
the lessor. The above-market assessment is determined by comparing the expected lease payments as a percentage of forecast hotel
operating profit (before depreciation and rent) with market metrics, on a hotel by hotel basis. There is no floor to the amount payable and
no maximum amount. Market rents were initially determined with assistance of professional third-party advisers. The fair value is subject
to periodic reassessment as interest rates and expected lease payments change.
A fair value adjustment of $21m was recognised in 2020, resulting in a reduction to the value of the liability arising mainly from a reduction
in expected future rentals payable such that there is no above-market element (see note 6). No further adjustment has been made in 2021.
The fair value is not sensitive to reasonably possible changes in assumptions.
Six Senses $nil (2020: $5m)
The conditions related to a pipeline property have not been met such that no amounts will be paid.
Level 3 reconciliation
At 1 January 2020
Additions
Transfers into Level 3
Repayments and disposals
Valuation losses recognised in other comprehensive income
Unrealised changes in fair valuea
Exchange and other adjustments
At 31 December 2020
Additions
Valuation gains recognised in other comprehensive income
Unrealised changes in fair valueb
At 31 December 2021
Other financial
assets
$m
Derivative financial
instruments
$m
Contingent purchase
consideration
$m
128
5
8
(5)
(47)
–
(1)
88
3
15
–
106
–
–
–
–
–
4
–
4
–
–
(4)
–
(91)
–
–
–
–
13
(1)
(79)
–
–
6
(73)
a $21m fair value gain on contingent purchase consideration and $4m gain on derivative financial instruments were presented as exceptional items in the Group income statement.
The remaining $8m fair value loss on contingent purchase consideration related to Regent.
b The change in the fair value of derivative financial instruments is recognised within other impairment charges in the Group income statement and is presented as an exceptional item.
194
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 26. Reconciliation of profit/(loss) for the year to cash flow from operations
Profit/(loss) for the year
Adjustments for:
Net financial expenses
Fair value gains on contingent purchase consideration
Income tax charge/(credit)
Operating profit adjustments:
Impairment loss on financial assets
Other impairment charges
Other operating exceptional items
Depreciation and amortisation
Contract assets deduction in revenue
Share-based payments cost
Share of losses of associates and joint ventures
System Fund adjustments:
Depreciation and amortisation
Impairment (reversal)/loss on financial assets
Other impairment (reversals)/charges
Other operating exceptional items
Share-based payments cost
Share of losses of associates
Working capital and other adjustments:
Increase in deferred revenue
Decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Other adjustments
Cash flows relating to exceptional items
Contract acquisition costs, net of repayments
Total adjustments
Cash flow from operations
2021
$m
265
139
(6)
96
–
4
25
98
127
35
28
8
71
94
(6)
(3)
–
13
2
2020
$m
(260)
140
(13)
(20)
88
226
(4)
110
420
25
21
14
60
62
24
41
20
11
1
2019
$m
386
115
(27)
156
8
131
55
116
310
21
30
3
54
54
12
–
28
12
–
100
159
106
39
1
(75)
153
(8)
110
(12)
(42)
583
848
1
1
38
(69)
2
(27)
(87)
(64)
568
308
57
–
(70)
(63)
(1)
(77)
(55)
(61)
521
907
27. Retirement benefits
UK
Since 6 August 2014, UK retirement and death in service benefits are provided for eligible employees by the IHG UK Defined Contribution
Pension Plan. Members, including those who have been auto-enrolled since 1 September 2013, 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 defined benefit plan, the InterContinental Hotels UK Pension Plan, was wound up on 21 July 2015 following the completion of the
buy-out and transfer of the defined benefit obligations to Rothesay Life on 31 October 2014.
Residual defined benefit obligations remain in respect of additional benefits provided to members of an unfunded pension arrangement
(‘UK plan’) who were affected by lifetime or annual allowances under the former defined 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 benefit payment obligations of the remaining members as they fall due. A charge over
certain ring-fenced bank accounts totalling $42m (£31m) at 31 December 2021 (see note 17) is currently held as security on behalf of the
remaining members.
IHG | Annual Report and Form 20-F 2021
195
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
27. Retirement benefits continued
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-qualified Pension Plans (‘US plans’) and unfunded Inter-Continental
Hotels Corporation Postretirement Medical, Dental, Vision and Death Benefit Plan (‘US post-retirement plan’), both of which are defined
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
Defined benefit obligation
Fair value of plan assets
Net defined benefit obligation
At 1 January
Recognised in profit or loss
Interest expense
Recognised in other
comprehensive income
Actuarial (gain)/loss arising from
changes in:
Demographic assumptions
Financial assumptions
Experience adjustments
Re-measurement (gain)/loss
Exchange adjustments
Other
Group contributions
Benefits paid
At 31 December
Comprising:
UK plan
US plans
US post-retirement plan
2021
$m
103
2
2
(3)
(3)
(1)
(7)
(1)
(8)
–
(5)
(5)
92
30
45
17
92
2020
$m
96
3
3
(3)
10
1
8
2
10
–
(6)
(6)
103
31
50
22
103
2019
$m
91
3
3
(1)
9
(1)
7
1
8
–
(6)
(6)
96
26
48
22
96
2021
$m
2020
$m
2019
$m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5)
(6)
(6)
5
–
–
–
–
–
–
6
–
–
–
–
–
–
6
–
–
–
–
–
–
2021
$m
103
2
2
(3)
(3)
(1)
(7)
(1)
(8)
(5)
–
(5)
92
30
45
17
92
2020
$m
96
3
3
(3)
10
1
8
2
10
(6)
–
(6)
103
31
50
22
103
2019
$m
91
3
3
(1)
9
(1)
7
1
8
(6)
–
(6)
96
26
48
22
96
Assumptions
The principal financial assumptions used by the actuaries to determine the defined benefit obligations are:
UK plan only:
Pension increases
Inflation rate
Discount rate:
UK plan
US plans
US post-retirement plan
US healthcare cost trend rate assumed for the next year:
Pre-65 (ultimate rate reached in 2031)
Post-65 (ultimate rate reached in 2031)
Ultimate rate that the cost rate trends to
2021
%
2020
%
2019
%
3.4
3.4
1.8
2.4
2.4
6.2
6.5
4.5
3.0
3.0
1.4
1.9
2.0
6.4
6.8
4.5
2.7
2.7
2.1
2.9
2.9
6.7
7.1
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_2020 model and a 1.25% per annum long-term trend and a smoothing parameter
(‘s-kappa’) of 7.5 with weightings of 95% and 82% for pensioners and 98% and 81% 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.
196
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 27. Retirement benefits continued
The assumptions applied to the UK plan and US plans for life expectancy at retirement age are as follows:
Current pensioners at 65a
– male
Future pensioners at 65b
– male
– female
– female
2021
Years
2020
Years
24
26
25
28
24
26
25
28
UK
2019
Years
24
26
25
28
2021
Years
2020
Years
22
23
23
25
22
23
23
24
US
2019
Years
21
23
22
24
a Relates to assumptions based on longevity (in years) following retirement at the end of the reporting period.
b Relates to assumptions based on longevity (in years) relating to an employee retiring in 2041.
The assumptions allow for expected increases in longevity.
Sensitivities
Changes in assumptions used for determining retirement benefit 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 of inflation, the assumed mortality rate
and the healthcare costs trend rate. The sensitivity analysis below relates to the benefit obligation and is based on extrapolating reasonable
changes in these assumptions, using year-end conditions and assuming no interdependency between the assumptions:
Increase/(decrease) in liabilities
Discount rate
Inflation rate
Mortality rate
Healthcare costs trend rate
Estimated future benefit payments
Within one year
Between one and five years
More than five years
Average duration of pension obligations
UK plan
US plans
US post-retirement plan
0.25% decrease
0.25% increase
0.25% decrease
0.25% increase
One-year increase
1% decrease
1% increase
2021
$m
2020
$m
2.8
(2.8)
(1.2)
1.3
5.1
(1.2)
1.3
2021
$m
5
21
96
122
2021
Years
19.0
9.0
9.4
3.2
(3.2)
(1.4)
1.4
5.7
(1.6)
1.7
2020
$m
6
22
101
129
2020
Years
19.0
9.3
9.9
Other pension plans
Philippines
The Group maintains a further, immaterial, pension plan for employees in the Philippines which is accounted for as a defined benefit plan.
At 31 December 2021, the net retirement benefit asset was $2m comprising plan assets of $9m and a defined benefit obligation of $7m.
Plan assets comprise $7m domestic government securities and $2m domestic equity investments.
Contributions in the year were $1m; the charge to the Group income statement and all other movements were less than $1m.
Key assumptions used in the valuation are the discount rate of 5.0% and the rate of salary increases of 7.0% (after 2022). The weighted
average duration of liabilities is 13 years; estimated future benefit payments are less than $1m in all years.
Defined contribution schemes
The Group also operates a number of smaller pension schemes outside the UK, the most significant of which is a defined contribution
scheme in the US.
IHG | Annual Report and Form 20-F 2021
197
Notes to the Group Financial StatementsGroup Financial Statements
Notes to the Group Financial Statements continued
28. Share‑based payments
Annual Performance Plan
Under the IHG Annual Performance Plan (‘APP’), eligible employees (including Executive Directors) can receive all or part of their bonus in the
form of deferred shares and/or receive one-off awards of shares. Deferred shares are released on the third anniversary of the award date.
Under the terms of awards that are referred to in this note, a fixed percentage of the award is made in the form of shares. Awards under the
APP are conditional on the participants remaining in the employment of a participating company or leaving for a qualifying reason as per
the plan rules. The grant of deferred shares under the APP is at the discretion of the Remuneration Committee.
The number of shares is calculated by dividing a specific percentage of the participant’s annual performance-related 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
The Long Term Incentive Plan (‘LTIP’) allows Executive Directors and eligible employees to receive conditional share awards, which normally
have a vesting period of three years. In addition, certain awards to Executive Directors are subject to a further two-year holding period
after vesting.
Performance-related awards: Executive Directors, and other eligible employees, are granted share awards containing performance-based
vesting conditions set by the Remuneration Committee, which are normally measured over the vesting period.
Restricted stock units: Awards to eligible employees are granted subject to continued employment.
Awards are normally made annually and, except in exceptional circumstances, will not exceed 3.5 times salary for eligible employees.
Colleague Share Plan
The Colleague Share Plan gives eligible corporate employees the opportunity to purchase shares up to an annual limit of $1,000 (or local
currency equivalent limit) or such other amount determined by the Board or its duly authorised committee. 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. During the year, 31,234 (2020: 36,298, 2019: nil) shares were purchased by participating employees. Matching shares were
awarded for the first cycle in 2021 and will vest after 12 months.
The total fair value of the Colleague Share Plan is not significant.
More detailed information on the performance measures for awards to Executive Directors is shown in the Directors’ Remuneration Report
on pages 104 to 125.
Costs relating to share‑based payment transactions
Equity‑settled
Operating profit before System Fund and exceptional items
Operating exceptional items
System Fund
Cash‑settled
Operating profit before System Fund and exceptional items
2021
$m
2020
$m
2019
$m
26
–
13
39
2
41
19
–
11
30
2
32
28
1
12
41
2
43
No consideration was received in respect of ordinary shares issued under option schemes during 2021, 2020 or 2019.
The Group uses separate option pricing models and assumptions depending on the plan.
APP
LTIP
Binomial valuation model
Monte Carlo Simulation and
Binomial valuation model
2021
2020
2019
2021
2020
2019
Weighted average share price (pence)
5,009.0
3,771.0
4,597.0
4,980.0
3,450.0
4,850.0
Expected dividend yield
Risk-free interest rate
Volatilitya
Term (years)
1.5
3.0
3.0
1.11%
0.09%
43%
3.0
1.48%
0.02%
33%
3.0
2.16%
0.72%
19%
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.
198
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 28. Share‑based payments continued
Movements in the awards outstanding under the schemes are as follows:
Outstanding at 1 January 2019
Granted
Vested
Share capital consolidation
Lapsed or cancelled
Outstanding at 31 December 2019
Granted
Vested
Lapsed or cancelled
Outstanding at 31 December 2020
Granted
Vested
Lapsed or cancelled
Outstanding at 31 December 2021
Fair value of awards granted during the year (cents)
2021
2020
2019
Weighted average remaining contract life (years)
At 31 December 2021
At 31 December 2020
At 31 December 2019
APP
Number of shares
thousands
591
217
(276)
(21)
(15)
496
138
(188)
(33)
413
90
(147)
(8)
348
6,888.5
4,965.9
5,888.7
0.5
1.0
1.1
Performance‑related
awards
Number of shares
thousands
1,088
287
(293)
–
(387)
695
383
(179)
(85)
814
281
(70)
(153)
872
4,676.3
2,473.5
4,985.6
1.2
1.4
1.3
LTIP
Restricted
stock units
Number of shares
thousands
1,301
540
(422)
–
(144)
1,275
696
(413)
(137)
1,421
442
(391)
(122)
1,350
6,559.7
4,397.5
5,862.1
1.2
1.3
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 5,081.2p (2020: 4,874.5p). The closing
share price on 31 December 2021 was 4,781.0p and the range during the year was 4,399.0p to 5,336.0p.
29. Equity
Equity share capital
Allotted, called up and fully paid
At 1 January 2019 (ordinary shares of 1917⁄21p each)
Share capital consolidation
Exchange adjustments
At 31 December 2019 (ordinary shares of 20340 ⁄399p each)
Exchange adjustments
At 31 December 2020 (ordinary shares of 20340 ⁄399p each)
Exchange adjustments
At 31 December 2021 (ordinary shares of 20340 ⁄399p each)
Number
of shares
millions
Nominal
value
$m
Share
premium
$m
197
(10)
–
187
–
187
–
187
50
–
2
52
1
53
–
53
96
–
3
99
4
103
(2)
101
Equity
share
capital
$m
146
–
5
151
5
156
(2)
154
The authority given to the Company at the AGM held on 7 May 2021 to purchase its own shares was still valid at 31 December 2021.
A resolution to renew the authority will be put to shareholders at the AGM on 6 May 2022.
The Company no longer has an authorised share capital.
In October 2018, the Group announced a $500m return of funds to shareholders by way of a special dividend and share consolidation.
On 11 January 2019, shareholders approved the share consolidation on the basis of 19 new ordinary shares of 20340 ⁄399p per share for every
20 existing ordinary shares of 1917⁄21p, which became effective on 14 January 2019 and resulted in the consolidation of 10m shares. The special
dividend was paid on 29 January 2019 at a cost of $510m. The dividend and share consolidation had the same economic effect as a share
repurchase at fair value, therefore previously reported earnings per share was not restated.
IHG | Annual Report and Form 20-F 2021
199
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
29. Equity continued
Shares held by employee share trusts
31 December 2021
31 December 2020
31 December 2019
Number of
shares
millions
Carrying
value
$m
0.9
0.1
0.1
21.7
1.4
4.9
Market
value
$m
57.3
3.1
9.6
Treasury shares
During 2021, 1.4m (2020: 0.6m, 2019: 0.8m) treasury shares were transferred to the employee share trusts. At 31 December 2021, 3.7m shares
(2020: 5.1m, 2019: 5.7m) with a nominal value of $1.0m (2020: $1.4m, 2019: $1.6m) were held as treasury shares.
Cash flow hedge reserves
At 1 January 2019
Costs of hedging deferred and recognised in other comprehensive income
Change in fair value of currency swaps recognised in other comprehensive income
Reclassified from other comprehensive income to profit or loss – included in financial expenses
At 31 December 2019
Costs of hedging deferred and recognised in other comprehensive income
Change in fair value of currency swaps recognised in other comprehensive income
Reclassified from other comprehensive income to profit or loss – included in financial expenses
Deferred tax
Exchange adjustments
At 31 December 2020
Costs of hedging deferred and recognised in other comprehensive income
Change in fair value of currency swaps recognised in other comprehensive income
Reclassified from other comprehensive income to profit or loss – included in financial expenses
Deferred tax
At 31 December 2021
Cash flow hedge reserves
Cash flow
hedge
reserve
$m
Cost of
hedging
reserve
$m
(3)
–
(34)
38
1
–
(1)
(13)
4
(2)
(11)
–
(62)
96
(7)
16
(1)
(6)
–
–
(7)
(6)
–
–
–
–
(13)
2
–
–
–
(11)
Total
$m
(4)
(6)
(34)
38
(6)
(6)
(1)
(13)
4
(2)
(24)
2
(62)
96
(7)
5
Amounts reclassified from other comprehensive income to financial expenses comprise $15m (2020: $9m, 2019: $8m) net interest payable
on the currency swaps and an exchange loss of $81m (2020: $22m gain, 2019: $30m loss) which offsets a corresponding gain or loss on the
hedged bonds.
30. Capital and other commitments
Contracts placed for expenditure not provided for in the Group Financial Statements
Property, plant and equipment
Intangible assets
The Group has also committed to invest a further $6m (2020: $6m) in one of its associates.
2021
$m
2020
$m
13
4
17
17
2
19
200
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 31. Contingencies and guarantees
Security incidents
In 2016, the Group was notified of data security incidents. Two lawsuits related to these have been settled in full. A further claim, filed
in 2017, remains open. There continues to be uncertainty around the timing of the legal process; accordingly 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 separate claim was filed in 2019, alleging a breach of the reservation system previously used by Kimpton. There continues to be
uncertainty around the timing of the legal process; accordingly 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.
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 significant effect on the Group’s financial position or profitability. Two such disputes in the EMEAA region are expected to be
resolved in early 2022.
The Group has also given warranties in respect of the disposal of certain of its former subsidiaries. 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 21), it is not possible to quantify any
loss to which these proceedings or claims under these warranties 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.
Third‑party bank loans
In limited cases, the Group may guarantee part of mortgage loans made to facilitate third-party ownership of hotels under IHG management
or franchise agreements. These guarantee arrangements are treated as insurance contracts as IHG is insuring the bank against default by
the hotel, with a liability only being recognised in the event that a payout becomes probable. At 31 December 2021, there were guarantees
of up to $69m in place (2020: $56m). During 2020 and 2021, the underlying mortgage loans were subject to periods of forbearance,
deferring debt service payments; and/or, in the case of several loans, were modified to be interest only through a given time period.
The largest guarantee is $21m and the underlying loan matures in 2029. The underlying managed hotel has been subject to forbearance
agreements and, as at 31 December 2021, the covenant test related to the loan is met. The possibility of a payment under the guarantee is
currently considered to be not probable although uncertainty remains as to the continued impact of the pandemic. Should the Group fund
any amount under the guarantee, there is a cross-indemnity that the Group would seek to pursue for the other parties’ share.
Other
At 31 December 2021, the Group had outstanding letters of credit of $45m (2020: $43m) mainly relating to the Group’s Captive (see note 21).
The letters of credit do not have set expiry dates, but are reviewed and amended as required.
In 2020, the Group made business insurance claims in relation to a small number of owned, leased and managed properties relating to the
impact of Covid-19. These claims are ongoing and it is not currently possible to determine the amounts which may ultimately be recovered.
IHG | Annual Report and Form 20-F 2021
201
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
32. Related party disclosures
Total compensation of key management personnel
Short-term employment benefits
Contributions to defined contribution pension plans
Equity compensation benefitsa
a As measured in accordance with IFRS 2 ‘Share-based Payment’.
2021
$m
19.3
0.5
8.1
27.9
2020
$m
10.5
0.3
2.3
13.1
2019
$m
15.8
0.5
12.1
28.4
There were no other transactions with key management personnel during the years ended 31 December 2021, 2020 or 2019. Key management
personnel comprises the Board and Executive Committee.
Associates
Fee revenue from associates
Amounts owed by associates
Amounts owed to associates
2021
$m
2020
$m
2019
$m
3
11
–
1
11
(4)
10
3
(4)
The Group has given a guarantee of $12m (2020: $12m) against the bank loan of one associate (see note 31) and has a performance guarantee
with a maximum exposure remaining of $10m (2020: $10m) for another associate.
The Group funds shortfalls in owner returns relating to the Barclay associate (see note 17). In addition, loans both to and from the Barclay
associate of $237m (2020: $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 (average interest rate of 0.9%
in 2021 (2020: 0.8%)) and presented net in the Group income statement. $18m was provided in 2021 in relation to settlement of a commercial
dispute regarding owner returns during the pandemic (see note 6).
33. System Fund
System Fund revenues comprise:
Assessment fees and contributions received from hotels
Loyalty programme revenues, net of the cost of point redemptions
System Fund expenses include:
Marketing
Payroll costs (note 4)
Depreciation and amortisation
Impairment (reversal)/loss on financial assets (note 18)
Other impairment (reversals)/charges
2021
$m
727
201
928
2021
$m
147
304
94
(6)
(3)
2020
$m
490
275
765
2020
$m
109
242
62
24
41
2019
$m
1,036
337
1,373
2019
$m
461
313
54
12
–
202
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 34. Group companies
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 effective percentage of equity owned as at 31 December 2021 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
24th Street Operator Sub, LLC (k)
36th Street IHG Sub, LLC (k)
426 Main Ave, LLC (k)
46 Nevins Street Associates, LLC (k)
2250 Blake Street Hotel, LLC (k)
Alpha Kimball Hotel, LLC (k)
Asia Pacific Holdings Limited (n)
Barclay Operating Corp. (cj)
BHMC Canada Inc. (o)
BHR Holdings B.V. (p)
BHR Pacific Holdings, Inc. (k)
BHTC Canada Inc. (o)
Blythswood Square Glasgow Hotel OpCo Ltd. (n)
BOC Barclay Sub, LLC (cj)
Bristol Oakbrook Tenant Company (k)
Cambridge Lodging, LLC (k)
Capital Lodging, LLC (k)
CF Irving Owner, LLC (k)
CF McKinney Owner, LLC (k)
CF Waco Owner, LLC (k)
Compañia Inter-Continental De Hoteles El Salvador
SA (n)
Crowne Plaza, LLC (k)
Cumberland Akers Hotel, LLC (k)
Dunwoody Operations, LLC (k)
Edinburgh George Street Hotel OpCo Ltd. (n)
Edinburgh IC Limited (cr)
EVEN Real Estate Holding, LLC (k)
General Innkeeping Acceptance Corporation (b) (l)
Grand Central Glasgow Hotel OpCo Limited (n)
Guangzhou SC Hotels Services Ltd. (t)
H.I. Soaltee Management Company Ltd. (ac)
HI Sugarloaf, LLC (ci)
Hale International Ltd. (v)
HC International Holdings, Inc. (w)
HH France Holdings SAS (x)
HH Hotels (EMEA) B.V. (p)
HH Hotels (Romania) SRL (y)
HIM (Aruba) NV (z)
Hoft Properties, LLC (k)
Holiday Hospitality Franchising, LLC (k)
Holiday Inn Mexicana S.A. de C.V. (ab)
Holiday Inns (China) Ltd. (ac)
Holiday Inns (Courtalin) Holding SAS (x)
Holiday Inns (Courtalin) SAS (x)
Holiday Inns (England) Limited (cy)
Holiday Inns (Germany), LLC (l)
Holiday Inns (Jamaica) Inc. (l)
Holiday Inns (Middle East) Limited (ac)
Holiday Inns (Philippines), Inc. (l)
Holiday Inns (Saudi Arabia), Inc. (l)
Holiday Inns (Thailand) Limited (ac)
Holiday Inns (UK), Inc. (l)
Holiday Inns Crowne Plaza (Hong Kong), Inc. (l)
Holiday Inns Holdings (Australia) Pty Limited (aa)
Holiday Inns Inc. (k)
Holiday Inns Investment (Nepal) Limited (ac)
Holiday Inns of America (UK) Limited (cb)
Holiday Inns of Belgium N.V. (ad)
Holiday Pacific Equity Corporation (k)
Holiday Pacific, LLC (k)
Holiday Pacific Partners, LP (k)
Hotel InterContinental London (Holdings) Limited (n)
Hotel Inter-Continental London Limited (n)
Hoteles Y Turismo HIH SRL (n)
IC Hotelbetriebsführungs GmbH (ae)
IC Hotels Management (Portugal) Unipessoal,
Lda (af)
IC International Hotels Limited Liability Company (ag)
IHC Arabia for Management, LLC (u)
IHC Buckhead, LLC (ci)
IHC Edinburgh (Holdings) (cy)
IHC Hopkins (Holdings) Corp. (k)
IHC Hotel Limited (n)
IHC Inter-Continental (Holdings) Corp. (k)
IHC London (Holdings) (n)
IHC May Fair (Holdings) Limited (cb)
IHC May Fair Hotel Limited (n)
IHC M-H (Holdings) Corp. (k)
IHC Overseas (U.K.) Limited (n)
IHC UK (Holdings) Limited (cy)
IHC United States (Holdings) Corp. (b) (k)
IHC Willard (Holdings) Corp. (k)
IHG (Marseille) SAS (x)
IHG (Myanmar) Limited (ah)
IHG (Thailand) Limited (bu)
IHG Amsterdam Management BV (p)
IHG Bangkok Ltd. (v)
IHG Brasil Administracao de Hoteis e Servicos
Ltda (ak)
IHG Civ Holding Main Fund, LLC (k)
IHG Commissions Services SRL (co)
IHG Community Development, LLC (ci)
IHG de Argentina SA (al)
IHG ECS (Barbados) SRL (co)
IHG Franchising Brasil Ltda. (bd)
IHG Franchising DR Corporation (k)
IHG Franchising, LLC (k)
IHG Hotels (New Zealand) Limited (an)
IHG Hotels Limited (n)
IHG Hotels Management (Australia) Pty Limited
(b) (aa)
IHG Hotels Nigeria Limited (ao)
IHG Hotels South Africa (Pty) Limited (ap)
IHG International Partnership (n)
IHG Istanbul Otel Yönetim Limited Sirketi (bx)
IHG Japan (Management), LLC (ar)
IHG Japan (Osaka), LLC (ar)
IHG Management (Maryland), LLC (as)
IHG Management (Netherlands) B.V. (p)
IHG Management d.o.o. Beograd (cc)
IHG Management MD Barclay Sub, LLC (cj)
IHG Management SL d.o.o. (bo)
IHG Mexico Operaciones SA de CV (ab)
IHG Orchard Street Member, LLC (k)
IHG Peru SRL (cf)
IHG PS Nominees Limited (n)
IHG Sermex SA de CV (ab)
IHG Systems Pty Ltd. (b) (aa)
IHG Szalloda Budapest Szolgaltato Kft. (at)
IHG Technology Solutions, LLC (k)
IND East Village SD Holdings, LLC (k)
InterContinental Berlin Service Company GmbH (au)
InterContinental (Branston) 1 Limited (c) (cy)
InterContinental (PB) 1 (n)
InterContinental (PB) 3 Limited (n)
InterContinental Brasil Administracao de Hoteis
Ltda (q)
Intercontinental D.C. Operating Corp. (k)
Inter-Continental Florida Investment Corp. (k)
Inter-Continental Florida Partner Corp. (k)
InterContinental Gestion Hotelera SLU (by)
Intercontinental Hospitality Corporation (k)
InterContinental Hotel Berlin GmbH (au)
InterContinental Hotel Düsseldorf GmbH (av)
Inter-Continental Hoteleira Limitada (aw)
Inter-Continental Hotels (Montreal) Operating
Corp. (ax)
Inter-Continental Hotels (Montreal) Owning
Corp. (ax)
InterContinental Hotels (Puerto Rico) Inc. (az)
Inter-Continental Hotels (Singapore) Pte. Ltd. (ai)
Inter-Continental Hotels Corporation (k)
Intercontinental Hotels Corporation de Venezuela
C.A. (ba)
Intercontinental Hotels Corporation Limited (b) (m)
InterContinental Hotels Group (Asia Pacific)
Pte Ltd. (ai)
InterContinental Hotels Group (Australia)
Pty Limited (aa)
InterContinental Hotels Group (Canada) Inc. (o)
InterContinental Hotels Group (España) SAU (by)
InterContinental Hotels Group (Greater China)
Limited (ac)
InterContinental Hotels Group (India) Pvt. Ltd. (aq)
InterContinental Hotels Group (Japan) Inc. (l)
InterContinental Hotels Group (New Zealand)
Limited (an)
InterContinental Hotels Group (Shanghai) Ltd. (bb)
InterContinental Hotels Group Customer Services
Limited (n)
InterContinental Hotels Group do Brasil Limitada (bc)
InterContinental Hotels Group Healthcare Trustee
Limited (n)
InterContinental Hotels Group Operating Corp. (e) (k)
InterContinental Hotels Group Resources, LLC (b) (k)
InterContinental Hotels Group Services Company (n)
InterContinental Hotels Italia, S.r.L. (be)
InterContinental Hotels Limited (a) (n)
InterContinental Hotels Management GmbH (bf)
InterContinental Hotels Management Montenegro
d.o.o. (ce)
InterContinental Hotels Nevada Corporation (ck)
InterContinental Hotels of San Francisco Inc. (k)
Intercontinental IOHC (Mauritius) Limited (bg)
InterContinental Management AM, LLC (cm)
InterContinental Management Bulgaria EOOD (bp)
InterContinental Management France SAS (x)
InterContinental Management Poland sp. Z.o.o (cn)
InterContinental Overseas Holdings, LLC (k)
KG Benefits, LLC (aj)
KG Gift Card Inc. (aj)
KG Liability, LLC (k)
KG Technology, LLC (k)
KHRG 851, LLC (k)
KHRG Aertson, LLC (k)
KHRG Allegro, LLC (k)
KHRG Argyle, LLC (k)
KHRG Atlanta Midtown, LLC (k)
KHRG Austin Beverage Company, LLC (k)
KHRG Baltimore, LLC (k)
KHRG Born, LLC (k)
KHRG Boston Hotel, LLC (k)
KHRG Bozeman, LLC (k)
KHRG Buckhead, LLC (k)
KHRG Canary, LLC (k)
KHRG Cayman, LLC (k)
KHRG Cayman Employer Ltd. (k)
KHRG Dallas, LLC (k)
KHRG Dallas Beverage Company, LLC (k)
KHRG Employer, LLC (k)
KHRG Goleta, LLC (k)
KHRG Gray, LLC (k)
KHRG Gray U2, LLC (k)
KHRG Huntington Beach, LLC (k)
KHRG Key West, LLC (k)
KHRG King Street, LLC (k)
KHRG La Peer, LLC (k)
KHRG Miami Beach, LLC (k)
KHRG Muse, LLC (k)
KHRG New Orleans, LLC (k)
KHRG NPC, LLC (k)
IHG | Annual Report and Form 20-F 2021
203
Notes to the Group Financial StatementsGroup Financial Statements Notes to the Group Financial Statements continued
Key
(a)
Directly owned by InterContinental
Hotels Group PLC
(f)
(h)
(g)
(b) Ordinary shares and preference shares
(c) Ordinary A and ordinary B shares
8% cumulative preference shares
(d)
¼ vote ordinary shares and ordinary
(e)
shares
Ordinary shares, 5% cumulative
preference shares and 7% cumulative
preference shares
The entities do not have share capital
and are governed by an operating
agreement
Accounted for as associates and joint
ventures due to IHG’s decision-making
rights contained in the partnership
agreement
Accounted for as another financial
asset due to IHG being unable to
exercise significant influence over the
financial and operating policy
decisions of the entity
Minority interest relates to one or more
individual shareholders who are
employed or were previously employed
by the entity
(j)
(i)
34. Group companies continued
KHRG Palladian, LLC (k)
KHRG Palomar Phoenix, LLC (k)
KHRG Philly Monaco, LLC (k)
KHRG Pittsburgh, LLC (k)
KHRG Porsche Drive, LLC (k)
KHRG Reynolds, LLC (k)
KHRG Riverplace, LLC (k)
KHRG Sacramento, LLC (k)
KHRG Schofield, LLC (k)
KHRG SFD, LLC (k)
KHRG SF Wharf, LLC (k)
KHRG SF Wharf U2, LLC (k)
KHRG South Beach, LLC (k)
KHRG State Street, LLC (k)
KHRG Sutter, LLC (k)
KHRG Sutter Union, LLC (k)
KHRG Taconic, LLC (k)
KHRG Tariff, LLC (k)
KHRG Texas Hospitality, LLC (k)
KHRG Texas Operations, LLC (k)
KHRG Tryon, LLC (k)
KHRG Vero Beach, LLC (k)
KHRG Vintage Park, LLC (k)
KHRG VZ Austin, LLC (k)
KHRG Wabash, LLC (k)
KHRG Westwood, LLC (k)
KHRG Wilshire, LLC (k)
Kimpton Hollywood Licenses, LLC (k)
Kimpton Hotel & Restaurant Group, LLC (k)
Kimpton Phoenix Licenses Holdings, LLC (k)
Louisiana Acquisitions Corp. (k)
Luxury Resorts and Spas (France) SAS (ct)
Manchester Oxford Street Hotel OpCo Limited (n)
Mercer Fairview Holdings, LLC (k)
Met Leeds Hotel OpCo Limited (n)
MH Lodging, LLC (k)
Oxford Spires Hotel OpCo Limited (n)
Oxford Thames Hotel OpCo Limited (n)
PML Services, LLC (as)
Pollstrong Limited (n)
Powell Pine, Inc. (k)
Priscilla Holiday of Texas, Inc. (cl)
PT Regent Indonesia (bh)
PT SC Hotels & Resorts Indonesia (bh)
Raison d’Etre Holdings (BVI) Limited (v)
Raison d’Etre Services (BVI) Limited (v)
Raison d’Etre Spas, LLC (k)
Raison d’Etre Spas, Sweden AB (db)
Regent Asia Pacific Hotel Management Ltd. (bw)
Regent Asia Pacific Management Ltd. (cp)
Regent Berlin GmbH (cq)
Regent International Hotels Ltd (bw)
Resort Services International (Cayo Largo) L.P. (ci)
Roxburghe Hotel Edinburgh OpCo Limited (n)
Russell London Hotel OpCo Limited (n)
SBS Maryland Beverage Company, LLC (as)
SC Hotels International Services, Inc. (k)
SC Leisure Group Limited (n)
SC NAS 2 Limited (n)
SC Quest Limited (n)
SC Reservations (Philippines) Inc. (l)
SCH Insurance Company (bi)
SCIH Branston 3 (cy)
Semiramis for training of Hotel Personnel and
Hotels Management SAE (ch)
SF MH Acquisition, LLC (k)
Six Continents Holdings Limited (n)
Six Continents Hotels de Colombia SA (bj)
Six Continents Hotels International Limited (n)
Six Continents Hotels, Inc. (k)
Six Continents International Holdings B.V. (p)
Six Continents Investments Limited (f) (n)
Six Continents Limited (n)
Six Continents Overseas Holdings Limited (n)
Six Continents Restaurants Limited (cy)
SixCo North America, Inc (w)
Six Senses Americas IP, LLC (k)
Six Senses Capital Pte. Ltd (ay)
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 Pvt. Ltd (cv)
Sustainable Luxury Maldives Private Limited (cw)
Sustainable Luxury Mauritius Limited (cx)
Sustainable Luxury Services (BVI) Limited (v)
Sustainable Luxury Singapore Private Limited (ai)
Sustainable Luxury UK Limited (n)
Sustainable Luxury USA Limited (cz)
The Grand Central Hotel Glasgow Limited (n)
The Met Hotel Leeds Limited (n)
The Principal Edinburgh George Street Limited (n)
The Principal London Limited (n)
The Principal Manchester Limited (n)
The Principal York Limited (n)
The Roxburghe Hotel Edinburgh Limited (s)
Vista Rockville FF&E, LLC (as)
White Shield Company Limited (bk)
Wotton House Hotel OpCo Limited (n)
WY BLL Owner, LLC (k)
York Station Road Hotel OpCo Limited (n)
Subsidiaries where the effective interest
is less than 100%
IHG ANA Hotels Group Japan LLC (74.66%) (ar)
IHG ANA Hotels Holdings Co., Ltd. (66%) (ar)
Regent Hospitality Worldwide, Inc. (51%) (bt)
Sustainable Luxury Holding (Thailand) Limited
(73.99%) (c) (j) (cu)
Sustainable Luxury Hospitality (Thailand) Limited
(73.99%) (c) (j) (cu)
Sustainable Luxury Management (Thailand)
Limited (49%) (c) (j) (cu)
Sustainable Luxury Operations (Thailand) Ltd.
(99.99%) (j) (cu)
Universal de Hoteles SA (99.99%) (j) (bj)
World Trade Centre Montreal Hotel Corporation
(74.11%) (bl)
Associates, joint ventures and other
111 East 48th Street Holdings LLC (19.9%) (g) (h) (k)
Alkoer, Sociedad de Responsabilidad Limitada de
Capital Variable (50%) (h) (cg)
Beijing Orient Express Hotel Co., Ltd. (16.15%) (bm)
Blue Blood (Tianjin) Equity Investment
Management Co., Limited (30.05%) (bn)
Carr Clark SWW Subventure, LLC (26.67%) (g) (ca)
Carr Waterfront Hotel, LLC (11.46%) (g) (h) (ca)
China Hotel Investment Limited (30.05%) (i) (am)
Desarrollo Alkoer Irapuato S. de R.L. de C.V.
(50%) (cg)
Desarrollo Alkoer Saltillo S. de R.L. de C.V.
(50%) (cg)
Desarrollo Alkoer Silao S. de R.L. de C.V. (50%) (cg)
EDG Alpharetta EH, LLC (0%) (d) (h) (r)
Gestion Hotelera Gestel, C.A. (50%) (c) (h) (ba)
Groups360, LLC (13.05%) (h) (k)
H.I. Soaltee Hotel Company Private Ltd. (26%) (br)
Inter-Continental Hotels Saudi Arabia Limited
(40%) (bs)
NF III Seattle, LLC (25%) (g) (r)
NF III Seattle Op Co, LLC (25%) (g) (r)
Nuevas Fronteras S.A. (23.66%) (cd)
President Hotel & Tower Co Ltd. (30%) (bu)
Shanghai Yuhuan Industrial Development Co., Ltd.
(1%) (da)
Sustainable Luxury Gravity Global Private Limited
(51%) (h) (bz)
SURF-Samui Pte. Ltd. (49%) (ay)
Tianjin ICBCI IHG Equity Investment Fund
Management Co., Limited (21.04%) (bv)
204
IHG | Annual Report and Form 20-F 2021
Group Financial Statements 34. Group companies continued
Registered addresses
(k)
3411 Silverside Road, Tatnall Building #104,
Wilmington, DE 19810, USA
205 Powell Place, 37027 Brentwood,
TN 37027, USA
Clarendon House, 2 Church Street, Hamilton
HM11, Bermuda
Broadwater Park, Denham,
Buckinghamshire, UB9 5RH, UK
333 Bay Street, Suite 400, Toronto M5H 2R2,
Ontario, Canada
Kingsfordweg 151, 1043 GR Amsterdam,
The Netherlands
Alameda Jau 536, Suite 3s-A, 01420-000,
São Paulo, Brazil
The Corporation Trust Centre, 1209 Orange
Street, Wilmington, DE 19801, USA
Caledonian Exchange, 19a Canning Street,
Edinburgh, EH3 8HE, UK
Building 4, No 13 Xiao Gang Zhong Ma Road,
Zhuhai District, Guangzhou, Guangdong,
P.R. China
Level 6, Akaria Plaza, North Wing, Gate D,
Olaya Street, PO Box 93228, Riyahd 1148, KSA
Flemming House, Wickhams Cay, P.O. Box
662, Road Town, Tortola VG1110, British
Virgin Islands
Wilmington Trust SP Services, Inc. 1105
North Market Street, Suite 1300, Wilmington,
DE 19801, USA
31-33 rue Mogador, 75009 Paris, France
Bucharest, 1st District, 50-52 Buzesti St,
83 module, 11 floor, Romania
230 J E Irausquin Boulevard, Palm Beach,
Aruba
Level 11, 20 Bond Street, Sydney NSW 2000,
Australia
Ontario # 1010, Col. Providencia,
Guadalajara, Jalisco CP44630, Mexico
Level 54, Hopewell Centre, 183 Queen’s
Road East, Hong Kong SAR
Rond-Point Robert Schuman 11, 1040
Brussels, Belgium
QBC 4 – Am Belvedere 4, 1100, Vienna, Austria
Avenida da Republica, no 52 – 9, 1069 – 211,
Lisbon, Portugal
24, Rusakovskaya Str., Moscow 107014,
Russian Federation
No. 84, Pan Haliain Street, Unit #1, Level 8,
Uniteam Marine Office Building, Sanchuang
Township, Yangon, Myanmar
230 Victoria Street, #13-00 Bugis Junction
Towers, 188024, Singapore
4640 Admiralty Way, 5th Floor, Marina del
Rey, CA 90292, USA
Alameda Jau 536, Suite 3S-B, 01420-000
São Paulo, Brazil
Avenida Cordoba 1547, piso 8, oficina A,
Buenos Aires, Argentina
The Phoenix Centre, George Street, Belleville
St. Michael, Barbados
Level 10, 55 Shortland Street, Auckland
Central, Auckland 1010, New Zealand
1, Murtala Muhammed Drive, Ikoyi, Lagos,
Nigeria
Central Office Park Unit 4, 257 Jean Avenue,
Centurion 0157, South Africa
11th Floor, Building No. 10, Tower C, DLF
Phase-II, DLF Cyber City, Gurgaon,
Haryana-122002, India
20th Floor, Toranomon Kotoshira Tower, 2-8,
Toranomon 1-chom, Minato-ku, Tokyo, Japan
2 Wisconsin Circle #700, Chevy Chase, MD,
20815, USA
1052 Budapest, Apáczai Csere Jánus u.
12-14A, Hungary
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(u)
(v)
(w)
(x)
(y)
(z)
(aa)
(ab)
(ac)
(ad)
(ae)
(af)
(ag)
(ah)
(ai)
(aj)
(ak)
(al)
(am)
(an)
(ao)
(ap)
(aq)
(ar)
(as)
(at)
(cb)
(cc)
(cd)
(ce)
(cf)
(cg)
(ch)
(ci)
(cj)
(ck)
(cl)
(cm)
(cn)
(co)
(cp)
(cq)
(cr)
(cs)
(ct)
(cu)
(cv)
(cw)
(cx)
(cy)
(cz)
(da)
(db)
Two Snowhill, Snow Hill, Queensway,
Birmingham B4 6GA, UK
Krunska 73, Beograd, 11000, Serbia
Moreno 809 2 Piso, Buenos Aires, Argentina
Bulevar Svetog Petra Cetinjskog 149 – 81000
Podgorica, Montenegro
Bernard Monteagudo 201, 15076, Lima, Peru
Avenida Ejercito Nacional Mexicano No. 769,
Torre B Piso 8, Granada, Miguel Hidalgo,
Ciudad de Mexico, CP 11520, Mexico
Ground Floor, Al Kamel Law Building, Plot
52-b, Banks Area, Six of October City, Egypt
2985 Gordy Parkway, 1st Floor, Marietta, GA
30066, USA
600 Mamaroneck Avenue #400, 10528
Harrison, NY 10528, USA
8275 South Eastern Avenue #200, Las Vegas,
NV 89123, USA
5444 Westheimer #1000, Houston, TX 77056,
USA
23/6 D, Anhaght Str., Yerevan, 0069, Armenia
Generation Park Z – ul. Towarowa 28, 00-839
Warsaw, Poland
Suite 1, Ground Floor, The Financial Services
Centre, Bishops Court Hill, St. Michael,
Barbados, BB14004
Brumby Centre, Lot 42, Jalan Muhibbah,
87000 Labuan F.T., Malaysia
Charlottenstrasse 49, Berlin, Germany
C/O BDO LLP, 4 Atlantic Quay, 70 York
Street, Glasgow, G2 8JX, UK
ATS Services Limited, Capital Center,
9th Floor, 2-4 Arch, Makarios III Ave., 1065
Nicosia, Cyprus
95 Blvd. Berthier, 75017 Paris, France
57, 9th Floor, Park Ventures Ecoplex, Unit
902-904, Wireless Road, Limpini, Pathum
Wan Bangkok 103330, Thailand
Shop No. L3-6, Amity Building, No. 125,
Highlevel Road, Maharagama, Colombo,
Sri Lanka
Premier Chambers, M. Lux Lodge, 1st Floor,
Orchid Magu, Male, Republic of Maldives
Venture Corporate Services (Mauritius) Ltd,
Level 3, Tower 1, Nexteracom Towers,
Cybercity, Ebene, Mauritius
5 Temple Square, Temple Street, Liverpool,
L2 5RH
251 Little Falls Drive, Wilmington, DE19808,
USA
1st Floor, No. 68, Zhupan Road, Zhuqiao
Town, Pudong New Area, Shanghai, China
Grevgatan 13, 11453 Stockholm, Sweden
(bi)
(bj)
(bl)
(az)
(ay)
(ax)
(ba)
(bk)
(bc)
(bh)
(bb)
(bg)
(aw)
(bd)
(au)
(av)
(be)
(bf)
Budapester Str. 2, 10787 Berlin, Germany
Konigsallee 59, D-40215, Dusseldorf,
Germany
Alameda Jau 536, Suite 3S-E, 01420-000
São Paulo, Brazil
1980 Pérodeau Street, Vaudreuil-Dorion,
J7V 8P7, Quebec, Canada
168 Robinson Road, #16-01 SIF Building,
068899, Singapore
361 San Francisco Street Penthouse, San Juan,
PR 00901, Puerto Rico
Hotel Tamanaco Inter-Continental, Final Av.
Ppal, Mercedes, Caracas, Venezuela
22nd Floor, Citigroup Tower, No. 33
Huayanshiqiao Road, Pudong, Shanghai,
P.R. China
Alameda Jau 536, Suite 3S-C, 01420-000
São Paulo, Brazil
Alameda Jau 536, Suite 3S-D, 01420-000
São Paulo, Brazil
Viale Monte Nero n.84, 20135 Milano, Italy
Thurn-und-Taxis-Platz 6 – 60313 Frankfurt
am Main, Germany
Juris Tax Services Ltd. Level 12, NeX Teracom
Tower II, Ebene, Mauritius
Menara Imperium 22nd Floor, Suite D, JI.
HR. Rasuna Said Kav.1, Guntur Sub-district,
Setiabudi District, South Jakarta 12980,
Indonesia
Primmer Piper Eggleston & Cramer PC, 30
Main St., Suite 500, P.O. Box 1489,
Burlington, VT 05402-1489, USA
Calle 49, Sur 45 A 300 of 1102 Envigado
Antioquia, Colombia
21 Engineer Lane, Gibraltar, GX11 1AA,
Gibraltar
Suite 2500, 1000 de La Gauchetiere St.
West, Montreal C H3B OA2, Canada
(bm) Room 311, Building 1, No. 6 East Wen Hua
Yuan Road, Beijing Economy and
Technology Development Zone, Beijing,
P.R. China
Room N306, 3rd Floor, Building 6, Binhai
Financial Street, No. 52 West Xincheng Road,
Tianjin Economy and Technology
Development Zone, Tianjin, P.R. China
Cesta v Mestni log 1, 1000 Ljubljana, Slovenia
37A Professor Fridtjof Nansen Street,
5th Floor, District Sredets, Sofia, 1142, Bulgaria
C/o Holiday Inn & Suites, Cnr Waigani Drive
& Wards Road, Port Moresby, National
Capital District, Papua New Guinea
Tahachal, Kathmandu, Nepal
Madinah Road, Jeddah, P.O Box 9456,
Post Code 21413, Jeddah, Saudi Arabia
Maples Corporate Services Ltd. – PO Box
309, Ugland House, Grand Cayman –
KY-1104, Cayman Islands
971, 973 Ploenchit Road, Lumpini,
Pathumwan, Bangkok 10330, Thailand
Room R316, 3rd Floor, Building 6, Binhai
Financial Street, No. 52 West Xincheng Road,
Tianjin Economy and Technology
Development Zone, Tianjin, P.R. China
14th Floor, South China Building, 1-3
Wyndham Street, Hong Kong, SAR
Eski Büyükdere Cd. Park Plaza No:14 K:4
Maslak – Sarıyer, Istanbul, Turkey
Paseo de Recoletos 37 – 41, 28004 Madrid,
Spain
B-11515 Bhikaj Cama Place, New Delhi, South
Delhi, India 110066
Carr Hospitality, LLC, 1455 Pennsylvania
Avenue, NW, Suite 100, Washington, DC
20004, USA
(bo)
(bp)
(br)
(bs)
(bw)
(bq)
(bn)
(bu)
(bx)
(bv)
(by)
(bz)
(ca)
(bt)
IHG | Annual Report and Form 20-F 2021
205
Notes to the Group Financial StatementsGroup Financial Statements Parent Company
Financial Statements
Crowne Plaza® Budapest, Hungary
208
210
Parent Company Financial Statements
Notes to the Parent Company
Financial Statements
206
IHG | Annual Report and Form 20-F 2021
Six Senses Lisbon, Portugal
IHG | Annual Report and Form 20-F 2021
207
Parent Company Financial StatementsParent Company Financial Statements Parent Company Financial Statements
Parent Company statement of financial position
31 December 2021
Fixed assets
Investments
Current assets
Debtors: due after more than one year
Debtors: due within one year
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Share-based payment reserve
Cash flow hedge reserves
Profit and loss account
Total equity
Signed on behalf of the Board,
Paul Edgecliffe-Johnson
21 February 2022
The loss after tax amounts to £52m (2020: £56m).
Registered number 05134420
Note
2021
£m
2020
£m
3
4
4
7
8
10
6
3,160
3,131
28
922
(832)
118
3,278
(1,941)
1,337
39
75
7
393
3
820
1,337
18
927
(600)
345
3,476
(2,138)
1,338
39
75
7
364
(19)
872
1,338
208
IHG | Annual Report and Form 20-F 2021
Parent Company Financial Statements Parent Company statement of changes in equity
Called up
share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
At 1 January 2020
Loss for the year
Other comprehensive income (items that may be subsequently
reclassified to profit or loss):
Losses on cash flow hedges, net of related tax credit of £3m
Costs of hedging
Hedging gains reclassified to financial expenses
Total other comprehensive loss for the year
Total comprehensive loss for the year
Share-based payments capital contribution
At 31 December 2020
Loss for the year
Other comprehensive income (items that may be
subsequently reclassified to profit or loss):
Losses on cash flow hedges, including related tax charge of £5m
Costs of hedging
Hedging losses reclassified to financial expenses
Total other comprehensive income for the year
Total comprehensive income/(loss) for the year
Share-based payments capital contribution
39
–
–
–
–
–
–
–
39
–
–
–
–
–
–
–
75
–
–
–
–
–
–
–
75
–
–
–
–
–
–
–
At 31 December 2021
39
75
Notes on pages 210 to 215 form an integral part of these Financial Statements.
7
–
–
–
–
–
–
–
7
–
–
–
–
–
–
–
7
Share-
based
payment
reserve
£m
339
–
–
–
–
–
–
25
364
–
–
–
–
–
–
29
393
Cash flow
hedge
reserves
£m
(5)
–
2
(5)
(11)
(14)
(14)
–
(19)
–
(50)
2
70
22
22
–
3
Profit
and loss
account
£m
928
(56)
–
–
–
–
(56)
–
872
(52)
–
–
–
–
(52)
–
820
Total
equity
£m
1,383
(56)
2
(5)
(11)
(14)
(70)
25
1,338
(52)
(50)
2
70
22
(30)
29
1,337
IHG | Annual Report and Form 20-F 2021
209
Parent Company Financial StatementsParent Company Financial Statements Notes to the Parent Company Financial Statements
1. Accounting policies
Authorisation of Financial Statements and statement
of compliance with FRS 101
The Parent Company Financial Statements of InterContinental Hotels
Group PLC (the ‘Company’) for the year ended 31 December 2021
were authorised for issue by the Board of Directors on
21 February 2022 and the statement of financial position was signed
on the Board’s behalf by Paul Edgecliffe-Johnson. 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 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 149) the Directors confirm they have a
reasonable expectation that the Company has sufficient resources
to continue operating until at least 30 June 2023 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.
The Parent Company Financial Statements are presented in sterling
and all values are rounded to the nearest million pounds (£m) except
when otherwise indicated.
These Financial Statements have been prepared in accordance with
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’
(FRS 101).
No income statement is presented for the Company as permitted
by Section 408 of the Companies Act 2006.
The audit fee of £0.02m (2020: £0.02m) was borne by a subsidiary
undertaking in both years.
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 defined 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 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 of a material adjustment to the Parent
Company Financial Statements in the next financial year.
210
IHG | Annual Report and Form 20-F 2021
Parent Company Financial Statements 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 (£8.8bn) on 31 December 2021, 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 and amounts due to 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.
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 after 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 157 of the Group
Financial Statements.
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
fulfilled, ending on the date on which the relevant employees
become fully entitled to the award (vesting date).
The income statement charge for a period represents the movement
in cumulative expense recognised at the beginning and end of that
period. 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 satisfied,
provided that all other performance and/or service conditions
are satisfied.
Where the Company grants awards over its own shares to the
employees of its subsidiaries, it recognises, in the Parent Company
Financial Statements, 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.
Notes to the Parent Company Financial Statements
IHG | Annual Report and Form 20-F 2021
211
Parent Company Financial Statements Notes to the Parent Company Financial Statements continued
2. Directors’ remuneration
The average number of Directors of the Company during the year, analysed by category, was as follows:
Number of Directors
Non-Executive Directors
Executive Directors
Directors’ remuneration
Base salaries, fees, annual performance payments and benefits
2021
2020
10
3
13
9
3
12
2021
£m
2020
£m
6.1
3.3
More detailed information on the remuneration including pensions, share awards and shareholdings for each Director is shown in the Directors’
Remuneration Report on pages 115 and 123. In addition, amounts received or receivable under long-term incentive schemes are shown on page 115.
Number of Directors
Directors in respect of whose qualifying services shares were received or receivable under long-term incentive schemes
3
3
2021
2020
3. Investments
Cost and net book value
At 1 January 2021
Share-based payments capital contribution
At 31 December 2021
£m
3,131
29
3,160
The Company is the beneficial owner of 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 34 of the Group Financial Statements on pages 203 to 205.
4. Debtors
Due after more than one year
Deferred tax (note 5)
Due within one year
Amounts due from Group undertakings
UK Corporation tax
2021
£m
2020
£m
28
28
912
10
922
18
18
926
1
927
212
IHG | Annual Report and Form 20-F 2021
Parent Company Financial Statements
5. Deferred tax
At 1 January 2021
Income statement
Other comprehensive income
At 31 December 2021
Losses
£m
Currency
swaps
£m
14
15
–
29
4
–
(5)
(1)
Total
£m
18
15
(5)
28
Deferred tax is recognised on the basis of an expectation of sufficient future profits within the Group.
More detailed information on the basis for deferred tax recognition is shown in note 8 of the Group Financial Statements on page 172.
6. Derivative financial instruments and hedging
Currency swaps have been transacted to swap the proceeds from the euro bonds to sterling as follows:
Date of designation
Pay leg
Interest rate Receive leg
Interest rate Maturity
Hedged item
November 2018
October 2020
£436m 3.5%
£454m 2.7%
€500m
€500m
2.125%
1.625%
May 2027
€500m 2.125% bonds 2027
October 2024
€500m 1.625% bonds 2024
Fair value
2020
£m
–
(14)
2021
£m
(16)
(31)
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 of the bonds. The change in value of the hedged item used as the basis for recognising hedge ineffectiveness for the period
was a £30m loss (2020: £5m gain).
The cash flow hedge reserves are analysed as follows:
At 1 January 2020
Costs of hedging deferred and recognised in other comprehensive income
Change in fair value of currency swaps recognised in other comprehensive income
Reclassified from other comprehensive income to profit or loss – included in financial expenses
Deferred tax
At 31 December 2020
Costs of hedging deferred and recognised in other comprehensive income
Change in fair value of currency swaps recognised in other comprehensive income
Reclassified from other comprehensive income to profit or loss – included in financial expenses
Deferred tax
At 31 December 2021
Cash flow hedge reserves
Cash flow
hedge
reserve
£m
Cost of
hedging
reserve
£m
–
–
(1)
(11)
3
(9)
–
(45)
70
(5)
11
(5)
(5)
–
–
–
(10)
2
–
–
–
(8)
Total
£m
(5)
(5)
(1)
(11)
3
(19)
2
(45)
70
(5)
3
Notes to the Parent Company Financial Statements
IHG | Annual Report and Form 20-F 2021
213
Parent Company Financial Statements
Notes to the Parent Company Financial Statements continued
7. Creditors: amounts falling due within one year
Amounts due to Group undertakings
Loans and other borrowings:
Commercial paper
£173m 3.875% bonds 2022
More detailed information on loans and other borrowings is shown in note 22 of the Group Financial Statements on pages 186 to 187.
8. Creditors: amounts falling due after one year
Derivative financial liabilities (note 6)
Loans and other borrowings:
£173m 3.875% bonds 2022
€500m 1.625% bonds 2024
£300m 3.75% bonds 2025
£350m 2.125% bonds 2026
€500m 2.125% bonds 2027
£400m 3.375% bonds 2028
2021
£m
659
–
173
832
2021
£m
47
–
419
303
351
423
398
2020
£m
–
600
–
600
2020
£m
14
173
448
302
351
453
397
1,941
2,138
More detailed information on loans and other borrowings is shown in note 22 of the Group Financial Statements on pages 186 to 187.
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 the plans is shown in note 28 of the Group Financial Statements on pages 198 to 199.
The weighted average share price at the date of exercise for share awards vested during the year was 5,081.2p (2020: 4,874.5p).
The share awards outstanding at the year end have a weighted average contractual life of 0.5 years (2020: 1.0 years) for the Annual
Performance Plan, 1.2 years (2020: 1.4 years) for performance-related awards and 1.2 years (2020: 1.3 years) for restricted stock units.
214
IHG | Annual Report and Form 20-F 2021
Parent Company Financial Statements 10. Capital and reserves
Allotted, called up and fully paid
At 31 December 2020 and 31 December 2021 (ordinary shares of 20340/399p each)
Number
of shares
millions
187
Equity
share
capital
£m
39
The authority given to the Company at the AGM held on 7 May 2021 to purchase its own shares was still valid at 31 December 2021.
A resolution to renew the authority will be put to shareholders at the AGM on 6 May 2022.
The Company no longer has an authorised share capital.
At 31 December 2021, 3,701,408 (2020: 5,061,408) shares with a nominal value of £771,822 (2020: £1,055,411) were held as treasury shares.
The share premium account represents the amount of proceeds received for shares in excess of their nominal value.
11. Dividends and shareholder returns
The final dividend of 85.9¢ per ordinary share (amounting to $157m) is proposed for approval at the AGM on 6 May 2022. No dividends were
paid in 2021 or 2020.
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 2021:
Company name
InterContinental (PB) 1
InterContinental (PB) 3 Limited
IHC May Fair Hotel Limited
Asia Pacific Holdings Limited
Six Continents Hotels International Limited
Hotel InterContinental London (Holdings) Limited
Company number
06724223
06947603
02323039
03941780
00722401
06451128
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.
In 2021 and 2020, there were no contingent liabilities to disclose in respect of guarantees of the liabilities of subsidiaries.
Notes to the Parent Company Financial Statements
IHG | Annual Report and Form 20-F 2021
215
Parent Company Financial Statements Additional Information
Holiday Inn Bangkok, Thailand
Hotel Indigo Belgrade, Serbia
218 Other financial information
226 Directors’ Report
231 Group information
231 History and developments
231 Risk factors
237 Directors’ and Executive Committee
members’ shareholdings
237 Executive Directors’ benefits upon
termination of office
238 Description of securities other than
equity securities
239 Articles of Association
240 Working Time Regulations 1998
241 Material contracts
242 Legal proceedings
242 Exchange controls and restrictions
on payment of dividends
243 Shareholder information
243 Taxation
245 Disclosure controls and procedures
246 Summary of significant corporate
governance differences from NYSE
listing standards
247 Return of funds
248 Purchases of equity securities by the
Company and affiliated purchaser
248 Dividend history
249 Shareholder profiles
250 Exhibits
251 Forward-looking statements
252 Form 20-F cross-reference guide
255 Glossary
257 Useful information
257
Investor information
258 Financial calendars
259 Contacts
216
IHG | Annual Report and Form 20-F 2021
A
d
d
i
t
i
o
n
a
l
I
n
f
o
r
m
a
t
i
o
n
Hotel Indigo Bali Seminyak Beach, Indonesia
Additional Information
IHG | Annual Report and Form 20-F 2021
217
Other financial information
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 73 to 77.
Revenue and operating profit Non-GAAP reconciliations
Highlights for the year ended 31 December 2021
Reportable segments
Per Group income statement
System Fund
Reimbursement of costs
Operating exceptional items
Reportable segments
Reportable segments analysed as:
Fee business
Owned, leased and managed lease
2021
$m
2,907
(928)
(589)
–
1,390
1,153
237
1,390
2020
$m
2,394
(765)
(637)
–
992
823
169
992
Change
$m
Revenue
Change
%
513
(163)
48
–
398
330
68
398
21.4
21.3
(7.5)
–
40.1
40.1
40.2
40.1
2021
$m
494
11
–
29
534
570
(36)
534
2020
$m
(153)
102
–
270
219
278
(59)
219
Operating profit
Change
$m
Change
%
NMa
(91)
–
(241)
315
292
23
315
NMa
(89.2)
–
(89.3)
143.8
105.0
39.0
143.8
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.
Underlying revenue and underlying operating profit
Reportable segments (see above)
Significant liquidated damagesa
Owned and leased asset disposalsb
Currency impact
Underlying revenue and underlying
operating profit
2021
$m
1,390
(6)
(11)
–
2020
$m
992
(1)
(21)
16
Change
$m
398
(5)
10
(16)
Revenue
Change
%
40.1
500.0
(47.6)
–
2021
$m
534
(6)
3
–
2020
$m
219
(1)
6
(1)
Operating profit
Change
$m
315
(5)
(3)
1
Change
%
143.8
500.0
(50.0)
–
1,373
986
387
39.2
531
223
308
138.1
a $6m recognised in 2021 reflects the significant liquidated damages related to one hotel in Greater China. The $1m recognised in 2020 reflects the continued recognition of the
significant liquidated damages related to the previously disclosed exit of a portfolio of 2.1k hotels in Germany.
b The results of three EVEN Hotels have been removed in 2021 (being the year of disposal for these hotels) and the prior year to determine underlying growth. The results of hotels
removed in 2020 (being the year of disposal or lease termination for these hotels) have also been removed to determine underlying growth.
Underlying fee revenue and underlying fee operating profit
Reportable segments fee business (see above)
Significant liquidated damagesa
Currency impact
Underlying fee revenue and underlying fee
operating profit
2021
$m
1,153
(6)
–
2020
$m
823
(1)
11
Change
$m
330
(5)
(11)
Revenue
Change
%
40.1
500.0
–
2021
$m
570
(6)
–
Operating profit
2020
$m
278
(1)
–
Change
$m
292
(5)
–
Change
%
105.0
500.0
–
1,147
833
314
37.7
564
277
287
103.6
a $6m recognised in 2021 reflects the significant liquidated damages related to one hotel in Greater China. The $1m recognised in 2020 reflects the continued recognition of the
significant liquidated damages related to the previously disclosed exit of a portfolio of 2.1k hotels in Germany
218
IHG | Annual Report and Form 20-F 2021
Additional Information 2020
$m
512
Change
$m
262
Revenue
Change
%
51.2
Operating profitb
2020
$m
296
Change
$m
263
Change
%
88.9
2021
$m
559
568
(9)
559
323
(27)
296
559
296
3
–
7
2
245
18
263
263
(4)
(2)
75.9
(66.7)
88.9
88.9
(57.1)
–
51.2
50.9
51.2
51.2
(35.3)
–
234
28
262
262
6
–
268
763
495
54.1
562
305
257
84.3
a Revenues as included in the Group Financial Statements, note 3.
b Before exceptional items.
c The results of three EVEN Hotels have been removed in 2021 (being the year of disposal for these hotels) and the prior year to determine underlying growth. The results of hotels
removed in 2020 (being the year of disposal or lease termination for these hotels) have also been removed to determine underlying growth.
d Fee margin calculated as fee business operating profitb less significant liquidated damages, divided by fee business revenue less significant liquidated damages: 2021 ($568m/$691m),
Revenue and operating profit Non-GAAP reconciliations continued
Americas
Per Group financial statements, note 2
Reportable segments analysed asª:
Fee businessd
Owned, leased and managed lease
Reportable segments (see above)
Owned and leased asset disposalsc
Currency impact
Underlying revenue and underlying
operating profit
2020 ($323m/$457m), 2019 ($663m/$853m).
EMEAA
Per Group financial statements, note 2
Reportable segments analysed asª:
Fee businessf
Owned, leased and managed lease
Reportable segments (see above)
Significant liquidated damagesc
Owned asset disposalsd
Currency impact
Underlying revenue and underlying
operating profit
2021
$m
774
691
83
774
774
(11)
–
2021
$m
303
149
154
303
303
–
–
–
457
55
512
512
(17)
–
107
114
221
221
(1)
(4)
8
2020
$m
221
Change
$m
82
Revenue
Change
%
37.1
42
40
82
82
1
4
(8)
79
39.3
35.1
37.1
37.1
–
–
–
35.3
2021
$m
5
32
(27)
5
5
–
–
–
5
Operating profitb
2020
$m
(50)
Change
$m
55
Change
%
NMe
(18)
(32)
(50)
(50)
(1)
(1)
(2)
(54)
50
5
55
55
1
1
2
59
NMe
(15.6)
NMe
NMe
–
–
–
NMe
303
224
a Revenues as included in the Group Financial Statements, note 3.
b Before exceptional items.
c $1m recognised in 2020 reflects the continued recognition of the significant liquidated damages related to the previously disclosed exit of a portfolio of 2.1k hotels in Germany.
d The results of the hotels removed in 2020 (being the year of disposal or lease termination for these hotels) have been removed 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.
f Fee margin calculated as fee business operating profitb less significant liquidated damages, divided by fee business revenue less significant liquidated damages: 2021 ($32m/$149m),
2020 ($(19)m/$106m), 2019 ($191m/$326m).
Other financial information
IHG | Annual Report and Form 20-F 2021
219
Additional Information Other financial information continued
Revenue and operating profit Non-GAAP reconciliations continued
Greater China
Per Group financial statements, note 2
Reportable segments analysed asª:
Fee businessd
Reportable segments (see above)
Significant liquidated damagesc
Currency impact
Underlying revenue and underlying
operating profit
2021
$m
116
2020
$m
77
Change
$m
39
Revenue
Change
%
50.6
Operating profitb
2021
$m
58
2020
$m
35
Change
$m
23
Change
%
65.7
116
116
(6)
–
110
77
77
–
5
82
39
50.6
39
(6)
(5)
28
50.6
–
–
34.1
58
58
(6)
–
52
35
35
–
1
36
23
23
(6)
(1)
16
65.7
65.7
–
–
44.4
a Revenues as included in the Group Financial Statements, note 3.
b Before exceptional items.
c $6m recognised in 2021 reflects the significant liquidated damages related to one property.
d Fee margin calculated as fee business operating profitb less significant liquidated damages, divided by fee business revenue less significant liquidated damages: 2021 ($52m/$110m),
2020 ($35m/$77m), 2019 ($73m/$135m).
Highlights for the year ended 31 December 2020
Reportable segments
Per Group income statement
System Fund
Reimbursement of costs
Operating exceptional items
Reportable segments
Reportable segments analysed as:
Fee business
Owned, leased and managed lease
Underlying fee revenue
Reportable segments fee business (see above)
Significant liquidated damages
Currency impact
Underlying fee revenue
2020
$m
2,394
(765)
(637)
–
992
2019
$m
4,627
(1,373)
(1,171)
–
Change
$m
(2,233)
608
534
–
Revenue
Change
%
(48.3)
(44.3)
(45.6)
–
2,083
(1,091)
(52.4)
823
169
992
1,510
573
2,083
(687)
(404)
(1,091)
(45.5)
(70.5)
(52.4)
2020
$m
(153)
102
–
270
219
278
(59)
219
2020
$m
823
(1)
–
2019
$m
630
49
–
186
865
813
52
865
Operating profit
Change
$m
(783)
53
–
84
(646)
Change
%
NMa
108.2
–
45.2
(74.7)
(535)
(111)
(646)
(65.8)
NMa
(74.7)
2019
$m
1,510
(11)
(4)
Change
$m
(687)
10
4
Revenue
Change
%
(45.5)
(90.9)
–
822
1,495
(673)
(45.0)
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.
220
IHG | Annual Report and Form 20-F 2021
Additional Information Revenue and operating profit Non-GAAP reconciliations continued
Highlights for the year ended 31 December 2019
Reportable segments
Per Group income statement
System Fund
Reimbursement of costs
Operating exceptional items
Reportable segments
Reportable segments analysed as:
Fee business
Owned, leased and managed lease
Underlying fee revenue
Reportable segments fee business (see above)
Significant liquidated damages
Acquisitionsa
Currency impact
Underlying fee revenue
2019
$m
4,627
(1,373)
(1,171)
–
2018
$m
4,337
(1,233)
(1,171)
–
2,083
1,933
Change
$m
290
(140)
–
–
150
1,510
573
2,083
1,486
447
1,933
24
126
150
Revenue
Change
%
6.7
11.4
–
–
7.8
1.6
28.2
7.8
2019
$m
630
49
–
186
865
813
52
865
2019
$m
1,510
(11)
(14)
–
Operating profit
2018
$m
Change
$m
582
146
–
104
832
793
39
832
2018
$m
1,486
(13)
–
(17)
Change
%
8.2
(66.4)
–
78.8
4.0
2.5
33.3
4.0
48
(97)
–
82
33
20
13
33
Change
$m
Revenue
Change
%
24
2
(14)
17
29
1.6
(15.4)
–
–
2.0
1,485
1,456
a The results of acquired businesses (Six Senses and two UK portfolio hotels) are removed only in the year of acquisition when determining underlying growth compared to the
prior year.
Fee margin reconciliation
Revenue
Reportable segments analysed as fee business (page 160)
Significant liquidated damages
Captive insurance company (note 21)
Operating profit
Reportable segments analysed as fee business (pages 218 to 221)
Significant liquidated damages
Captive insurance company (note 21)
Fee margina
a Reported as a KPI on page 52.
2021
$m
2020
$m
2019
$m
2018
$m
2017
$m
1,153
(6)
(17)
1,130
570
(6)
(3)
561
823
(1)
(19)
803
278
(1)
(3)
274
1,510
1,486
1,379
(11)
(19)
(13)
(11)
–
(9)
1,480
1,462
1,370
813
(11)
(1)
801
793
(13)
(1)
779
731
–
–
731
49.6%
34.1%
54.1%
53.3%
53.4%
Other financial information
IHG | Annual Report and Form 20-F 2021
221
Additional Information Other financial information continued
Net capital expenditure reconciliation
$m
Net cash from investing activities
Adjusted for:
Contract acquisition costs net of repayments
System Fund depreciation and amortisationa
Deferred purchase consideration paid
Net capital expenditure
Analysed as:
Capital expenditure: maintenance (including contract acquisition costs, net of repayments of $42m (2020: $64m))
Capital expenditure: recyclable investments
Capital expenditure: System Fund capital investments
Net capital expenditure
a Excludes depreciation on right-of-use assets.
Gross capital expenditure reconciliation
$m
Net capital expenditure
Add back:
Disposal receipts
Repayments of contract acquisition costs
Distributions from associates and joint ventures
System Fund depreciation and amortisationa
Gross capital expenditure
Analysed as:
Capital expenditure: maintenance (including gross contract acquisition costs of $43m (2020: $64m))
Capital expenditure: recyclable investments
Capital expenditure: System Fund capital investments
Gross capital expenditure
a Excludes depreciation on right-of-use assets.
Adjusted free cash flow reconciliation
Net cash from operating activities
Adjusted for:
Payment of contingent purchase consideration
Principal element of lease payments
Purchase of shares by employee share trusts
Capital expenditure: maintenance (excluding contract acquisition costs)
Adjusted free cash flowa
a Reported as a KPI on page 52.
222
IHG | Annual Report and Form 20-F 2021
12 months ended
31 December
2021
$m
(12)
(42)
91
13
50
(75)
53
72
50
2020
$m
(61)
(64)
58
–
(67)
(107)
17
23
(67)
12 months ended
31 December
2021
$m
50
(58)
(1)
–
(91)
(100)
(76)
(5)
(19)
(100)
2020
$m
(67)
(18)
–
(5)
(58)
(148)
(107)
(6)
(35)
(148)
12 months ended 31 December
2021
$m
636
–
(32)
–
(33)
571
2020
$m
137
–
(65)
–
(43)
29
2019
$m
653
6
(59)
(5)
(86)
509
2018
$m
709
–
(35)
(3)
(60)
611
2017
$m
616
–
(25)
(3)
(72)
516
Additional Information Adjusted interest reconciliation
Net financial expenses
Financial income
Financial expenses
Adjusted for:
Interest attributable the System Fund
Capitalised interest relating to System Fund assets
Exceptional financial expenses
Adjusted interest
Adjusted EBITDA reconciliation
Operating profit/(loss)
Add back
System Fund result
Operating exceptional items
Depreciation and amortisation
Adjusted EBITDA
Adjusted earnings per ordinary share reconciliation
Profit/(loss) available for equity holders
Adjusting items:
System Fund revenues and expenses
Interest attributable to the System Fund
Operating exceptional items
Exceptional finance expenses
Fair value gains on contingent purchase consideration
Tax on fair value gains on contingent purchase consideration
Tax on exceptional items
Exceptional tax
Adjusted earnings
Basic weighted average number of ordinary shares (millions)
Adjusted earnings per ordinary share (cents)
2021
$m
494
11
29
98
632
12 months ended
31 December
2021
$m
8
(147)
(139)
(3)
–
–
(3)
(142)
2020
$m
(153)
102
270
110
329
2020
$m
4
(144)
(140)
(3)
(1)
14
10
(130)
2019
$m
630
49
186
116
981
12 months ended
31 December
2021
$m
266
11
(3)
29
–
(6)
1
(3)
(26)
269
183
147.0
2020
$m
(260)
102
(4)
270
14
(13)
–
(52)
–
57
182
31.3
Other financial information
IHG | Annual Report and Form 20-F 2021
223
Additional Information Other financial information continued
Revenue per available room (RevPAR), average daily rate and occupancy
RevPAR is the primary metric used by management to track hotel performance across regions and brands. RevPAR is also a commonly used
performance measure in the hotel industry. RevPAR comprises IHG system rooms revenue divided by the number of room nights available
and can be mathematically derived from occupancy rate multiplied by average daily rate (ADR). Occupancy rate is rooms occupied by hotel
guests expressed as a percentage of rooms that are available. ADR is rooms revenue divided by the number of room nights sold.
References to RevPAR, occupancy and ADR are presented on a comparable basis comprising groupings of hotels that have traded in both
the current and prior year, including the impact of hotels temporarily closed as a result of Covid-19. The principal exclusions in deriving this
measure are new hotels, hotels closed for major refurbishment and hotels sold in either of the two years. RevPAR and ADR are quoted at
a constant US$ 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 2021 and a comparison to 2020. 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 2021
and franchised, managed, owned, leased or managed lease by the Group since 1 January 2020. The comparison with 2020 is at constant
US$ exchange rates.
Fee business
2021
Change vs
2020
Owned, leased and
managed lease
2021
Change vs
2020
Americas
InterContinental
Occupancy
Average daily rate
RevPAR
Kimpton
Occupancy
Average daily rate
RevPAR
Crowne Plaza
Occupancy
Average daily rate
RevPAR
Hotel Indigo
Occupancy
Average daily rate
RevPAR
EVEN Hotels
Occupancy
Average daily rate
RevPAR
Holiday Inn
Occupancy
Average daily rate
RevPAR
Holiday Inn Express
Occupancy
Average daily rate
RevPAR
avid
Occupancy
Average daily rate
RevPAR
Staybridge Suites
Occupancy
Average daily rate
RevPAR
Candlewood Suites
Occupancy
Average daily rate
RevPAR
224
IHG | Annual Report and Form 20-F 2021
40.8%
15.7ppt
$185.22
$75.55
6.4%
73.0%
51.5%
21.5ppt
$233.27
$120.04
10.7%
90.1%
43.1%
13.2ppt
$112.91
$48.72
7.2%
54.4%
55.8%
18.9ppt
$153.25
$85.44
20.7%
82.4%
53.8%
23.5ppt
$122.17
$65.74
19.8%
112.4%
51.4%
14.8ppt
$109.76
$56.42
11.7%
56.8%
62.2%
$112.18
$69.79
16.7ppt
12.1%
53.3%
58.69%
28.6ppt
$81.67
47.93%
10.6%
115.4%
72.7%
16.9ppt
$108.68
$79.02
74.2%
$85.73
$63.61
7.7%
40.4%
12.7ppt
8.2%
30.5%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Additional Information RevPAR, average daily rate and occupancy continued
EMEAA
InterContinental
Occupancy
Average daily rate
RevPAR
Crowne Plaza
Occupancy
Average daily rate
RevPAR
Hotel Indigo
Occupancy
Average daily rate
RevPAR
Holiday Inn
Occupancy
Average daily rate
RevPAR
Holiday Inn Express
Occupancy
Average daily rate
RevPAR
Staybridge Suites
Occupancy
Average daily rate
RevPAR
Greater China
InterContinental
Occupancy
Average daily rate
RevPAR
HUALUXE
Occupancy
Average daily rate
RevPAR
Crowne Plaza
Occupancy
Average daily rate
RevPAR
Hotel Indigo
Occupancy
Average daily rate
RevPAR
Holiday Inn
Occupancy
Average daily rate
RevPAR
Holiday Inn Express
Occupancy
Average daily rate
RevPAR
Fee business
2021
Change vs
2020
Owned, leased and
managed lease
2021
Change vs
2020
38.5%
6.3ppt
18.6%
(0.8)ppt
$180.87
$69.65
6.1%
$252.19
26.9%
$47.01
4.6%
0.1%
40.5%
$109.31
$44.27
9.4ppt
3.1%
34.3%
36.9%
12.0ppt
$128.23
$47.37
42.0%
$85.65
$36.01
9.9%
62.6%
9.6ppt
3.9%
34.4%
47.2%
12.0ppt
$76.22
$36.01
9.0%
46.2%
57.9%
11.0ppt
$135.00
$78.21
18.3%
46.2%
51.1%
$119.19
$60.85
50.7%
$68.77
$34.84
48.0%
$74.90
$35.96
49.1%
$130.82
$64.28
47.7%
$55.64
$26.56
49.3%
$41.73
$20.58
6.2ppt
6.2%
20.8%
5.7ppt
0.4%
13.1%
7.1ppt
2.6%
20.4%
6.3ppt
16.4%
33.4%
7.9ppt
1.6%
21.8%
6.7ppt
4.5%
20.9%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Other financial information
IHG | Annual Report and Form 20-F 2021
225
Additional Information 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 80 to 127 and
incorporated by reference herein.
Subsidiaries, joint ventures and associated undertakings
The Group has around 390 subsidiaries, joint ventures 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 34
of the Group Financial Statements on pages 203 to 205.
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 239.
For biographies of the current Directors see pages 82 to 85.
Directors’ and Officers’ (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 benefit of the Directors
during 2021.
Articles of Association
A summary is provided on pages 239 and 240.
The Company’s Articles of Association may only be amended by
special resolution and are available on the Company’s website at
www.ihgplc.com/investors under Corporate governance.
Shares
Share capital
The Company’s issued share capital at 31 December 2021 consisted
of 187,717,720 ordinary shares of 20 340/399 pence each, including
3,701,408 shares held in treasury, which constituted 1.97% 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 2021, 1,360,000 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 2021, the Company did not issue any new shares, nor did it buy
back any existing shares.
Dividends
While the Board determined that it would not be appropriate to pay
a dividend during 2021, subject to shareholder approval at the 2022
AGM, a final dividend of 85.9¢ in respect of 2021 will be payable on
17 May 2022 to shareholders on the register at the close of business
on 1 April 2022.
Major institutional shareholders
As at 21 February 2022, being the last practicable date, the Company had been notified of the following significant holdings in its
ordinary shares under section 5 of the UK Disclosure Guidance and Transparency Rules (DTRs). IHG did not receive notifications between
31 December 2021 and 21 February 2022.
Shareholder
BlackRock, Inc.
Boron Investments B.V.
Cedar Rock Capital Limited
Fiera Capital Corporation
Fundsmith LLPd
Royal Bank of Canada
As at 21 February 2022
As at 22 February 2021
As at 17 February 2020
Ordinary
shares/ADSsa
11,247,319b
6,890,000
9,076,898
11,037,891
8,989,647
9,189,549
%a
6.12
3.77
4.95
6.06
4.91
5.02
Ordinary
shares/ADSsa
10,429,827c
6,890,000
14,923,417
11,037,891
10,222,246
9,161,021e
%a
5.71
3.77
5.07
6.06
5.18
5.01
Ordinary
shares/ADSsa
9,939,317
11,450,000
14,923,417
11,037,891
10,222,246
n/a
%a
5.46
6.01
5.07
6.06
5.18
n/a
a The number of shares and percentage of voting rights was determined at the time of the relevant disclosures made in accordance with Rule 5 of the DTRs and doesn’t necessarily
reflect the impact of any share consolidation or any changes in shareholding subsequent to the date of notification that are not required to be notified to us under the DTRs.
b Total shown includes 2,080,427 qualifying financial instruments to which voting rights are attached.
c Total shown includes 1,431,074 qualifying financial instruments to which voting rights are attached.
d The Company understands that Fundsmith LLP subsequently disposed of its entire interest in the Company’s ordinary shares.
e Total shown includes 123,160 qualifying financial instruments to which voting rights are attached.
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 profiles see page 249.
226
IHG | Annual Report and Form 20-F 2021
Additional Information The Companies (Miscellaneous Reporting) Regulations 2018
Set out below is our employee engagement statement and on
page 228, our statement summarising how the Directors have had
regard to the need to foster the Company’s business relationships
with suppliers, customers and others.
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.
Details of how the Directors have had regard to the matters set forth
in Section 172(1)(a) to (f) of the Companies Act is provided on pages
90 and 91.
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 24 to 26, 91 and
92, 101, 107, 108, 112 and 114.
During 2021, 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 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 receive LTIP
and restricted stock units awards). Further details are on page 228.
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 24 to 26.
Visit www.ihgplc.com/responsible-business for more information.
2021 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 2021, the Company transferred 1,360,000
treasury shares (0.72% 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 4.0%.
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.
As at 31 December 2021, 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.
The Chair and other Directors have engaged with employees through
a number of means, including direct interactions, Voice of the
Employee 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 91 and 92, 101, 107, 108, 112
and 114.
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. When the Group’s entire
estate is taken into account (including those working in our
franchised and managed hotels), approximately 325,000 people
worked globally across IHG’s brands as at 31 December 2021.
The average number of IHG employees, including part-time
employees, during 2021 were as follows:
• 6,013 people worldwide (including those in our corporate offices,
central reservations offices and owned hotels (excluding those
in a category below)), whose costs were borne by the Group;
• 4,508 people who worked directly on behalf of the System Fund
and whose costs were borne by the System Fund; and
• 11,807 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 hotels.
See note 4 of the Group Financial Statements on pages 163 and 164.
Employee share ownership trust (ESOT)
IHG operates an ESOT for the benefit of 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 2021, the ESOT released 538,777 shares and at
31 December 2021 it held 889,796 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.
In July 2019, shares held in the ESOT that had been allocated to
share plan participants under the Annual Performance Plan were
transferred to Equatex UK Limited (now Computershare Investor
Services Plc) where they are held in a nominee account on behalf of
those participants (Nominee). 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
continue to be 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
IHG | Annual Report and Form 20-F 2021
227
Additional Information Directors’ Report continued
The Nominee holds ordinary shares in the Company, in the form of
unvested share plan awards, allocated to Annual Performance Plan
share plan participants. The number of shares can be found in note
28 to the Group Financial Statements on pages 198 and 199.
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 of 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.
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, and the first Plan Year commenced
in January 2020.
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. Providing 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 2021, 356 shares vested outside of the usual timetable due to
deaths or good leavers, and in January 2022, 35,378 shares vested
as part of the first Plan Year. As at 21 February 2022, the Nominee
held 29,594 Purchased Shares in relation to the second Plan Year,
and 2,548 shares in relation to the third Plan Year.
Code of Conduct
The Code of Conduct (our 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
are set out in the Strategic Report on pages 37 and 38 and the
Board’s oversight of the Code is set out on page 98.
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 90 and 91. These included strategic
and operational matters related to brand integrity, brand portfolio,
loyalty strategy, as well as technology, supply chain and procurement.
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 20,
21 and 39.
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 performance
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 2 to 77.
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. The Group’s wider political donations policy
continues to be kept under review.
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 188 to 192.
Significant agreements and change of 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 of their potential impact on the
business of the Group as a whole:
• The 10-year £400 million bond issued by the Company on
28 November 2012, 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 $1.275 billion syndicated loan facility agreement dated
30 March 2015 and maturing in September 2023, 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 (of which £173 million remains outstanding), 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 241.
Disclosure of information to Auditor
For details, see page 130.
228
IHG | Annual Report and Form 20-F 2021
Additional Information 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 in 2020 we set ambitious 2030
carbon reduction targets, approved by the Science Based Targets
initiative and aligned to a 2°C scenario. Recognising the need to
go further, in 2021 we upgraded our existing science-based target
to align with the most ambitious goals of the Paris Agreement to
keep global warming within 1.5°C. This upgraded target requires
us to reduce emissions by 46% across the energy used across our
franchised, managed, owned, leased and managed lease hotels.
During 2021, due mainly to the impact of Covid-19 on our industry,
our absolute scope 1 and 2 GHG emissions from our managed,
owned, leased and managed lease hotels fell by 6% from base year
2019 and our scope 3 GHG emissions from our franchised hotels
plus FERA fell by 17%. Total scope 1, 2 and 3 GHG emissions from the
whole estate fell by 12% from base year 2019 (towards a 2030 reduction
target of 46%). Covid-19 has continued to impact occupancy levels
across our estate and required intermittent hotel closures in many
locations, which, in addition to the energy efficiency efforts from
our hotels, has significantly lowered our carbon footprint for the
year. As the industry recovers, we will continue to focus on achieving
our carbon reduction goals by driving energy efficiency in our hotels
and increasingly looking at renewable energy solutions.
Reporting boundary
Measure
Global
2021
UK and UK
offshore only
2020
UK and UK
offshore only
Global
2019
UK and UK
offshore only
Global
Emissions from operations
under our direct control
– corporate offices and
IHG owned, leased,
managed and managed
lease hotels
Emissions from operations
outside our direct
operational control
– franchised hotels.
Emissions from operations
outside our direct
operational control
– Fuel- and energy-related
emissions (FERA)
Emissions from all
operations – corporate
offices, IHG owned,
leased, managed hotels
and managed lease,
and franchised hotels
Emissions from all
operations – corporate
offices, IHG owned, leased
and managed hotels, and
franchised hotels AND FERA
Energy – fuel use from hotel
operations and hotel
transport services (kWh)
Energy – purchased
electricity, heat, steam
and cooling (kWh)
Total Energy – fuel use
from hotel operations and
hotel transport services,
purchased electricity, heat,
steam and cooling (kWh)
Scope 1 Direct emissions
(tCO2e from fuel use
and refrigerants)
Scope 2 Indirect emissions,
Location-based (tCO2e from
purchased energy)
Scope 2 Indirect emissions,
Market-based (tCO2e from
purchased energy)
Total scope 1 and 2
emissions, Location-based
(tCO2e)
Scope 1 and 2 intensity,
Location-based (tCO2e per
(£000 revenue))
Scope 3 Indirect emissions
from franchised hotel
operations (tCO2e)
Scope 3 Indirect emissions
from Fuel- and energy-
related emissions (tCO2e)
Total scope 1, 2 and 3
GHG emissions (tCO2e)
Total scope 1, 2 and 3
AND FERA GHG emissions
(tCO2e)
1,941,261,216
12,174,022
1,495,581,991
6,776,945
1,990,594,175
11,739,148
3,417,866,055
9,884,029 2,865,754,370
8,598,040 3,597,266,540
11,417,267
5,359,127,271
22,058,051
4,361,336,361
15,374,985
5,587,860,715
23,156,415
440,719
2,279
335,359
1,281
464,215
2,247
1,790,015
2,052
1,477,557
1,950
1,902,829
2,818
1,794,741
3,129
1,484,256
2,988
1,929,643
4,350
2,230,734
4,331
1,812,916
3,231
2,367,044
5,065
0.33
0.04
0.34
0.05
0.20
0.02
2,072,377
106,665
1,901,097
104,625
2,535,432
148,848
790,717
18,486
686,775
18,290
896,244
25,985
4,303,111
110,996
3,714,013
107,856
4,902,476
153,913
5,093,828
129,482
4,400,788
126,147
5,798,720
179,898
Scope
We report scope 1, scope 2 and scope 3 emissions as defined by
the GHG Protocol Corporate Accounting and Reporting Standard
methodology, under the operational control approach:
• Scope 1 emissions are direct emissions from the burning of fuels
or from refrigerant losses by our managed, owned, leased and
managed lease hotels.
• Scope 2 emissions are indirect emissions generated by the energy
purchased or acquired by our managed, owned, leased and
managed lease hotels.
• Scope 3 emissions are indirect emissions that arise as a result
of energy used in our franchised hotels.
Directors’ Report
IHG | Annual Report and Form 20-F 2021
229
Additional Information Additional Information
Directors’ Report continued
Methodology
We work with external consultants to give us an up-to-date picture
of IHG’s carbon footprint and assess our performance over time.
To calculate our emissions, they use the GHG Protocol Corporate
Accounting and Reporting Standard methodology and refer to other
existing and emerging definitions, methodologies and standards, as
relevant. Our consultants use utility consumption data as reported
by hotels on the IHG Green Engage™ system, complete outlier checks
as necessary, apply sampling and extrapolation methodology to
estimate our global energy use and apply the appropriate emission
factors to calculate our GHG emissions. For 2021, the sample
covered 90% of our UK hotels and 68% of our global hotels.
Any missing datapoints for energy use in 2021 have been filled using
average consumption per room night from the nearest 12-month
period. Region-brand, regional and global average consumption
per room night were calculated for each fuel type and outliers were
identified by comparison to the median of the relevant region-brand
group. Consumption data has been estimated for non-reporting
hotels based on region-brand average consumption per room night,
applied to a hotel’s number of room nights. This ensures that all
hotels have a consumption figure corresponding to their occupied
room nights. As IHG’s System size is continually changing, 2020 and
2019 data have been restated. Our reporting is based on calendar
year reporting, showing annual GHG emissions for the period
1 January to 31 December 2021. This aligns with our financial reporting
period, to enable analysis of both financial and non-financial
indicators for the same period.
Energy reduction initiatives
IHG hotels globally use the IHG Green Engage system,
a comprehensive online environmental management platform that
helps them 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 amongst others to report their monthly
energy consumption and complete key energy saving actions.
In addition, in 2021, hotels were set an annual carbon reduction
target to drive continuous improvement. Performance against this
target was reviewed on a monthly basis and presented to regional
operations teams. To incentivise and facilitate our hotels reporting
into Green Engage, in 2021 we launched and began the rollout of an
automated data entry initiative for hotels. This initiative will streamline
the reporting process for our hotels so that they can spend less time
reporting their data and more time focussing on reducing energy at
their hotels. The initiative will also help to support more accurate and
timely data from our hotels into Green Engage.
In 2021, we saw our global emissions fall by 12% and energy
consumption fall by 11% compared to base year 2019 (scope 1,
2 and 3). This was largely due to the impact of Covid-19 on our
industry, resulting in low occupancy levels and intermittent hotel
closures, but also in part due to targeted energy reduction efforts
in our estate, including for example the implementation of a daily
energy consumption tracker in some locations which informed
shutdowns of parts of our hotels when occupancy was low.
We also provided our hotels with information and resources on
low cost, quick payback measures to reduce energy consumption.
Where possible, we have worked closely with our hotels throughout
the pandemic to help minimise energy consumption and utility costs
during hotel closure and maximise energy efficiency during the
re-opening stage.
Hotel Energy Reduction Opportunities (HERO) tool
To support our hotels to decarbonise, we have identified some
key energy conservation measures that will reduce energy at
our hotels. In order to facilitate implementation at a hotel level,
we have worked with global specialists in the built environment,
to develop a prioritisation tool for our hotels. The tool reviews the
existing infrastructure of the hotel and what initiatives the hotel
has already implemented and then recommends measures to drive
further efficiencies. This tool provides information on the expected
capital cost of measures, as well as indicative energy and cost
saving information. The tool will be launched in 2022 and reinforced
through training of hotel and operations teams. We are also
reviewing financing opportunities that are available to hotels
in different geographies.
See our planet-related activities and TCFD disclosures, as well
as our carbon footprint KPI on pages 29 to 35 and 53.
See our Responsible Business Report and ESG databook at
www.Ihgplc.com/responsible-business
Listing Rules – compliance with LR 9.8.4C
Section
Applicable sub-paragraph within LR 9.8.4C
Location
1
4
Interest capitalised
Group Financial Statements, note 7, page 168
Details of long-term incentive schemes
Directors’ Remuneration Report, pages 104 to 125
The above 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.
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 77 and in the Group information on pages 231
to 242.
The resilience of the Group’s fee-based model, wide geographic
spread and strong cash management means that the Group has
been able to generate $636m of net cash from operating activities
in a year when trading has still been substantially impacted by the
global pandemic. As at 31 December 2021 the Group had total
liquidity of $2,655m, comprising $1,350m of undrawn bank facilities
and $1,305m 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 is included on page 149.
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IHG | Annual Report and Form 20-F 2021
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 2023 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 48 and 49.
By order of the Board,
Nicolette Henfrey
Company Secretary
InterContinental Hotels Group PLC
Registered in England and Wales, Company number 5134420
21 February 2022
Group information
History and developments
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.
Risk factors
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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 in 2021, however deferred purchase
consideration for the previous Regent acquisition resulted in a
$13 million cash outflow during the year (2020: $0, 2019: $300 million).
The 2019 net cash outflow principally related to the acquisition
of Six Senses Hotels Resorts Spas and its management business
(‘Six Senses’) in February 2019.
In 2021 the Group disposed of a portfolio of three EVEN Hotels in the
US resulting in a net cash inflow of $44 million.
Further information is included in notes 11 and 12 to the Group Financial
Statements on pages 174 to 175.
Capital expenditure
• Gross capital expenditure in 2021 totalled $100 million compared
with $148 million in 2020 and $265 million in 2019, see page 222.
• At 31 December 2021, capital committed (being contracts placed
for expenditure on property, plant and equipment and intangible
assets not provided for in the Group Financial Statements) totalled
$17 million, see page 200.
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.
While the pandemic, and related restrictions imposed by
governments and others, has not fundamentally changed our risk
factors, it continues to heighten the uncertainty which we face in
many areas in delivering our short- and longer-term ambitions and
reconfirmed that many of our risks are connected. This includes the
continuing significance of the safety and security of our colleagues
and guests, government interventions impacting domestic, national
and international travel, consumer confidence and appetite to travel
internationally in the longer term, how we operate our hotels and
the overall impact on our business resilience. The response to the
primary safety concerns of Covid-19 also created several secondary
impacts. For example:
• heightened risk of negative reputational impact (and the business
consequences) as a result of any of our pandemic crisis management
actions being negatively perceived by any stakeholder group;
• heightened cyber risks from working remotely;
• closure of key corporate locations putting pressure on our
processes, systems and infrastructure;
• enhanced exposure to key person or workforce availability risks;
• strain on third-party supplier relationships – both in relation to
business and operational continuity and wider risks of supplier
insolvency and/or default;
• changes to global or local laws or requirements; and
• significant cost pressures for owners raising risks of default on
payments due to IHG, employees or suppliers; non-compliance
by owners with standards and other requirements; and owner
insolvency and work-outs; impacting our ability to roll out initiatives
as planned and the wider risk to our business model.
The period of the pandemic has also observed trends in other
risk factors. For example:
• further waves of the pandemic and/or a slower than anticipated
industry recovery for business and leisure travel could create
further volatility and challenging conditions in the capital markets
making it more difficult to obtain additional funding if required and
potential impact to financial performance which could result in
further actions required to manage costs;
• geopolitical and socioeconomic developments (including focus
on climate-related impacts) which may increase the likelihood of
disruption to inbound or outbound travel and trade, the potential
for measures to be taken against businesses or heightened
expectations in corporate performance; and
• inherent risks of burnout, physical and mental health impacts and
challenges to attract and retain staff while uncertainty in the
hospitality industry continues.
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
and considers the assessment of inherent risk trend and speed of
potential impact on IHG objectives.
The principal risks are on pages 42 to 47, the cautionary statements
regarding forward-looking statements are on page 251 and financial
and forward-looking information including note 8 on pages 169 to 173,
and note 24 on pages 188 to 192.
Group information
IHG | Annual Report and Form 20-F 2021
231
Group information continued
Risk factors continued
1. Macro external factors
The Group is exposed to the risks of political
and economic developments
The Group is exposed to political, economic and financial market
developments such as recession, inflation and availability of credit and
currency fluctuations that could lower revenues and reduce income.
The outlook for 2022 may worsen due to continuing disruption from
Covid-19 on domestic and international travel patterns; potential
disruptions in the US economy; the impact of fluctuating commodity
prices (including oil) on economies dependent on such exports;
continued unrest in parts of the Middle East, Africa and Asia;
and barriers to global trade, including unforeseeable changes in
regulations, imposition of tariffs or embargoes, and other trade
restrictions or controls. The interconnected nature of economies
suggests any of these, or other events, could trigger a recession that
reduces leisure and business travel to and from affected countries
and adversely affects room rates and/or occupancy levels and other
income-generating activities. Specifically, the Group is most exposed
to the impact of political and economic risk factors in relation to the
US market 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 of 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 the risks of overcapacity
in the hotel industry
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 the pandemic and associated
restrictions on travel and customer confidence in returning to
business and leisure travel, to the cyclical nature of the hotel
industry, and to other differences between planning assumptions
and actual operating conditions. These conditions could result
in reductions in room rates and occupancy levels, which would
adversely impact the financial performance of the Group.
2. Preferred brands and loyalty
The Group is subject to a competitive and changing industry
The Group operates in a competitive industry and must compete
effectively against traditional competitors such as 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 specific 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
experienced recent consolidation and is likely to see this trend
continue as companies seek to maintain or increase competitive
advantage. Further consolidation by competitors 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
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IHG | Annual Report and Form 20-F 2021
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 of 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
In recent years the Group has launched or acquired a number of
brands, such as EVEN Hotels, HUALUXE Hotels and Resorts, avid
hotels, voco hotels, Kimpton Hotels & Restaurants, Regent, Six Senses,
Atwell Suites, Vignette Collection and entered into co-branded
credit card relationships to support the IHG Rewards programme
and an exclusive loyalty partnership with Mr & Mrs Smith. As the roll
out, integration and growth of these brands (including associated
loyalty programmes) is dependent on market conditions, guest
preference and owner investment, and also 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, operating models and processes,
and may result in failures to improve commercial performance,
leading to financial loss and undermining stakeholder confidence.
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 also 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
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 conflict, or are not aligned, with those of the Group, including,
for example, the unwillingness of franchisees to support individual
or master brand 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 performance.
Additional Information 3. Leadership and talent
The Group requires the right people, skills and capability
to manage growth and change
In order to remain competitive, the Group must employ the right
people. This includes hiring and retaining highly skilled employees
with particular expertise or leadership capability. The implementation
of the Group’s strategic business plans could be undermined by failure
to build and sustain a resilient corporate culture, failure to recruit
or retain key personnel, unexpected loss of key senior employees,
failures in the Group’s 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 qualified 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 in
key roles.
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. Failure to attract and retain
employees and increasing labour costs may threaten the ability
to operate hotels and our corporate support functions, achieve
business growth targets or impact the profitability of our operations.
Additionally, unless skills are supported by a sufficient infrastructure
to enable knowledge and skills to be passed on, the Group risks
losing accumulated knowledge if key employees leave the Group.
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
Approximately 3,800 colleagues at our managed, owned, leased and
managed lease hotels in the US, Canada, Mexico, Grand Cayman
and Dutch 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. Collective bargaining
agreements representing half of our organised colleagues in the
US expired during 2018. These agreements were successfully
renegotiated during 2019. 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 interfere
with the ability of our management to focus on executing our
business strategies.
4. Cybersecurity and information governance
The Group is exposed to the risks related to cybersecurity
and data privacy
The Group is increasingly dependent upon the collection, usage,
retention, availability, integrity and confidentiality of information,
including, but not limited to: guest, employee and owner credit
card, financial and personal data, business performance, 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
facilities managed by third-party service providers, in our Company
managed hotels, and by our franchisees, who are subject to the
same or similar risks.
Cyber breaches increasingly appear to be an unfortunate reality
for most firms and we therefore invest in trying to avoid them where
reasonable and practical to do so – in recognition of the possible
impact of cybersecurity breaches beyond data loss on operational
performance and regulatory actions or fines, as well as the potential
impact on our reputation. 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, amongst others.
The Group experienced cybersecurity incidents including: (a) at a
number of Kimpton hotels that resulted in unauthorised access to
guest payment card data; and (b) an incident that involved malware
being installed on servers that processed payment cards used at
restaurants and bars of 12 IHG managed properties, that the Group
become aware of in 2016. These incidents resulted in the Group
reimbursing the impacted card networks for counterfeit fraud
losses and related expenses and becoming subject to investigations
regarding compliance with applicable State and Federal data security
standards, and legal action from individuals and organisations
impacted by the Security Incidents. To date, four lawsuits have
been filed against IHG entities relating to the Security Incidents.
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 California privacy law). 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 also required to comply with marketing and advertising laws
relating to our direct marketing practices, including email marketing,
online advertising, 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 relating to cybersecurity and data privacy,
see pages 201 and 242.
Group information
IHG | Annual Report and Form 20-F 2021
233
Additional Information Group information continued
Risk factors continued
5. Channel management and technology
The Group is exposed to increasing 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 and
may seek to commoditise hotel brands through price and attribute
comparison. Further, if these companies continue to gain market
share, they may impact the Group’s profitability, undermine the
Group’s own booking channels and value to its hotel owners, and
may be able to increase commission rates and negotiate other
favourable contract terms.
The Group is exposed to inherent risks in relation to changing
technology and systems
As the use of the internet, artificial 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, may put the Group at a competitive
disadvantage. 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, incur substantial costs
or face other losses. This could further impact the Group’s
reputation in regards to innovation. (See also “4. Cybersecurity
and information governance”.)
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 off shore 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.
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IHG | Annual Report and Form 20-F 2021
6. Investment effectiveness and efficiency
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 benefits,
financial losses, lower employee morale and loss of talent.
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 of 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.
7. Legal, regulatory and ethical compliance
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 242.)
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. If 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.
Additional Information The reputation of the Group and the value of its brands are
influenced by a wide variety of 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
influence its business partners to) undertake responsible practices
and engage in ethical behaviour, or fails to comply with relevant
regulatory requirements.
The Group is exposed to risks associated with
its intellectual property
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 which 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. (See also “4. Cybersecurity and
information governance”.)
8. Financial management and control systems
The Group is exposed to a variety of risks associated with its
financial stability and ability to borrow and satisfy debt covenants
While the strategy of the Group is to grow through activities that
do not involve significant amounts of 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 borrowing
facilities to meet these expected capital requirements. The majority
of the Group’s borrowing facilities are only available if the financial
covenants in the facilities 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. If the Group’s financial performance does not meet
market expectations, it may not be able to refinance existing
facilities on terms considered favourable.
The Group’s operations are dependent on maintaining sufficient
liquidity to meet all foreseeable medium-term requirements
and provide headroom against unforeseen obligations
Cash and cash equivalents is held in short-term deposits and
money market with short maturities. Most of the Group’s funds are
held in the UK or US, although $75 million (2020: $44 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 committed bank facilities and bonds.
Short-term borrowing requirements may be met from drawings
under uncommitted overdrafts and facilities.
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 of 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 indefinite-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), or
changes in interest rates, operating cash flows, market capitalisation,
or developments in the legal or regulatory environment.
Because of the significance of 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 or result in reversals of impairments not being
correctly identified and recorded.
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 of 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. Our 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 may use interest rate swaps to
manage the exposure.
The Group could be affected by credit risk on treasury transactions
The Group uses long-term credit ratings from Standard and Poor’s,
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 of
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.
The carrying amount of financial assets represents the maximum
exposure to credit risk.
The Group may be impacted by changes affecting the availability
of the London Interbank Offered Rate (“LIBOR”)
In line with announcements from the U.K. Financial Conduct
Authority, from 1 January 2022 publication ceased of one week
and two month USD LIBOR tenors and all tenors for EUR, CHF, JPY
and GBP LIBOR. Publication of all other USD LIBOR tenors will cease
after 30 June, 2023.
We are party to various agreements where obligations are calculated
based on LIBOR, the most relevant and material being our Syndicated
and Bilateral Facilities, which were undrawn at 31 December 2021.
The discontinuation of LIBOR is not currently anticipated to have
a material impact on the Group, however changes from LIBOR to
an alternative benchmark rate could impact the Group’s future cost
of capital, receipts or payments under agreements that reference
LIBOR, and the future valuation of derivative financial instruments,
any of which could impact our reported results and cash flows.
Group information
IHG | Annual Report and Form 20-F 2021
235
Additional Information 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
real 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 have also become
increasingly stringent, and our costs may increase as a result.
New or revised laws and regulations or new interpretations of
existing laws and regulations, such as those related to climate
change, could affect the operation of our properties or result in
significant additional expense and restrictions on the Group’s
business operations.
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
transformation across IHG, hotel owners and supply chain partners,
including investment in physical assets and operational procedures.
If these changes, many of which are outside of IHG’s control, do not
occur, the Group may have difficulty achieving its target.
Group information continued
Risk factors continued
The Group’s financial performance 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 profitability of 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 clarification of
uncertainties in the application of tax law. The Group continues to
monitor significant tax reform proposals, most notably the OECD’s
review into ‘Tax Challenges Arising from Digitalisation’ as well as
US tax reform proposals.
The Group may face difficulties 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 of 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.
9. Safety and security
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 (including but not
limited to Covid-19), 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 which, if managed poorly, could further expose the Group
and its brands to significant reputational damage.
10. Environmental and social megatrends
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 specific 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.
236
IHG | Annual Report and Form 20-F 2021
Additional Information Directors’ and Executive Committee members’ shareholdings
As at 21 February 2022: (i) Executive Directors had the number of beneficial interests in shares (including Directors’ share awards under
IHG’s share plans) set out in the table on page 119; (ii) Non-Executive Directors had the number of beneficial interests in shares set out in
the table on page 123; and (iii) Executive Committee members had the number of beneficial 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 21 February 2022, no Director or Executive
Committee member held more than 1.0% of the total issued share capital. None of the Directors have a beneficial interest in the shares
of any subsidiary.
Executive
Committee
member
Keith Barr
Paul Edgecliffe-
Johnson
Number of shares held outright
APP deferred share awards
LTIP share awards (unvested)
Total number of shares held
21 Feb
2022
31 Dec
2021
31 Dec
2020
21 Feb
2022
31 Dec
2021
31 Dec
2020
21 Feb
2022
31 Dec
2021
31 Dec
2020
21 Feb
2022
31 Dec
2021
31 Dec
2020
81,830
81,830
70,279
26,696
26,696
37,705
143,231
143,231
119,227
251,757
251,757
227,211
58,723
58,723
53,376
19,137
19,137
26,751
95,959
95,959
86,479
173,819
173,819 166,606
Elie Maalouf
74,698
74,698
67,428
19,625
19,625
25,417
96,790
96,790
88,691
191,113
191,113
181,536
Claire Bennett
22,045
22,045
16,521
Jolyon Bulley
52,164
52,164
57,939
Yasmin Diamond
Nicolette
Henfrey
2,902
1,801
2,902
1,801
7,581
4,528
13,144
10,219
8,557
3,594
13,144
10,219
8,557
3,594
14,379
54,499
54,499
55,340
89,688
89,688
86,240
11,787
11,016
53,683
53,683
51,624
116,066
116,066
121,350
37,836
37,836
36,887
49,295
49,295
55,484
6,621
38,996
38,996
32,939
44,391
44,391
44,088
Wayne Hoare
2,714
2,714
0
1,867
1,867
4,666
38,945
38,945
22,653
43,526
43,526
27,319
Kenneth
Macpherson
24,060
24,060
30,160
13,066
13,066
18,557
54,202
54,202
54,789
91,328
91,328 103,506
George Turner
30,100
30,100
27,951
12,920
12,920
18,151
55,070
55,070
55,848
98,090
98,090 101,950
Executive Directors’ benefits upon termination of office
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 www.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.
Group information
IHG | Annual Report and Form 20-F 2021
237
Additional Information Group information continued
Description of securities other than equity securities
Fees and charges payable to a depositary
Category
(as defined by SEC)
Depositary actions
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
Receiving or
distributing dividends
Distribution of stock dividends
Distribution of cash
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
Associated fee
$5 for each 100 ADSs (or portion thereof)
$5 for each 100 ADSs (or portion thereof)
$0.05 or less per ADS (or portion thereof)
$5 for each 100 ADSs (or portion thereof)
Selling or
exercising rights
Withdrawing an
underlying security
Transferring, splitting
or grouping receipts
General depositary
services, particularly
those charged on an
annual basis
Expenses of
the depositary
Acceptance of ADRs surrendered for withdrawal of deposited securities
$5 for each 100 ADSs (or portion thereof)
Transfers, combining or grouping of depositary receipts
$1.50 per ADS
Other services performed by the depositary in administering the ADRs
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/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
$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 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, 383 Madison Avenue,
Floor 11, New York, NY 10179. 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 2021 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.
Change in certifying accountant
Following the audit tender process completed by the Company in
2019 and described in its 2019 Annual Report and Form 20-F, on
7 May 2021 the Company’s shareholders approved the appointment
of PwC as the Company’s statutory auditor for the financial year
ended 31 December 2021.
As confirmed in the Company’s 2020 Annual Report and Form 20-F,
in connection with the audits of IHG’s financial statements for each
of the two fiscal years ended 31 December 2020 (i) there were no
disagreements with the Company’s previous statutory auditor, EY,
as that term is used in Item 16F(a)(1)(iv) of Form 20-F, over any matters
of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures, which if not resolved to EY’s
satisfaction would have caused EY to make reference to the matter
in their report and (ii) there were no ‘reportable events’ as that term
is described in Item 16F(a)(1)(v) of Form 20-F.
Further, in the two fiscal years prior to 31 December 2020, and in
the subsequent interim period to 7 May 2021, the Company did not
consult with PwC regarding the application of accounting principles
to a specific completed or contemplated transaction or regarding
the type of audit opinion that might be rendered in respect of the
Company’s consolidated financial statements or the effectiveness
of internal control over financial reporting. Further, PwC did not
provide any written or oral advice that was an important factor
considered by the Company in reaching a decision as to any such
accounting, auditing or financial reporting matter or any matter
being the subject of disagreement or defined as a reportable event
or any other matter as defined in Item 16F(a)(1)(v) of Form 20-F.
238
IHG | Annual Report and Form 20-F 2021
Additional Information Articles of Association
The Company’s Articles of Association (the Articles) were first adopted
with effect from 27 June 2005 and were most recently amended at
the AGM held on 7 May 2020 and are available on the Company’s
website at www.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.
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 benefit 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,
unless sanctioned by an ordinary resolution of the Company.
At the Company’s AGM on 7 May 2021, shareholders approved the
amendment of the borrowing limit in the Articles from an amount
equal to three times the share capital and consolidated reserves,
to $5 billion.
In the following description, a ‘shareholder’ is the person registered in
the Company’s register of members as the holder of the relevant share.
Under the Articles, there are no age-limit requirements relating to
a person’s qualification to hold office as a Director of the Company.
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 of
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 of interest
between the Director concerned and the Company, and such conflict
must be authorised by a resolution of 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.
Directors are not required to hold any shares of the Company by way
of qualification.
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 profits 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. If 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
specific 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.
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;
Group information
IHG | Annual Report and Form 20-F 2021
239
Additional Information Group information continued
Articles of Association continued
• 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
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 2021,
the minimum wage for individuals aged 18 to 20 was £6.56 per hour,
aged 21 to 22 was £8.36 per hour and for those aged 23 or over was
£8.91 per hour in each case, excluding apprentices aged under
19 years or, otherwise, in the first year of 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.
240
IHG | Annual Report and Form 20-F 2021
Additional Information Material contracts
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 identified below.
Syndicated Facility
On 30 March 2015, the Company signed a five-year $1.275 billion
bank facility agreement (Syndicated Facility) with Bank of America
Merrill Lynch International Limited, Barclays Bank plc, HSBC Bank
PLC, SunTrust Robinson Humphrey, The Bank of Tokyo-Mitsubishi
UFJ, Ltd and The Royal Bank of Scotland plc, all acting as joint
bookrunners and The Bank of Tokyo-Mitsubishi UFJ, Ltd as facility
agent. The Company has exercised its ability to extend the term
of the Syndicated Facility by two additional periods of 12 months,
and, in April 2020, agreed a further extension of the Syndicated
Facility taking its term to September 2023. The interest margin
payable on borrowings under the Syndicated Facility is linked to
IHG’s consolidated leverage ratio. The margin can vary between
LIBOR + 0.90% and LIBOR + 2.75% depending on the level of the
ratio. The Syndicated Facility was undrawn as at 31 December 2021.
£3 billion Euro Medium Term Note programme
In 2020, the Group updated its Euro Medium Term Note programme
(Programme) and issued a tranche of €500 million 1.625% notes due
8 October 2024 (2020 Euro Issuance) and a tranche of £400 million
3.375% notes due 8 October 2028 (2020 GBP Issuance).
On 14 September 2020, an amended and restated trust deed
(Trust Deed) was executed by InterContinental Hotels Group PLC
as issuer (Issuer), Six Continents Limited and InterContinental Hotels
Limited as guarantors (Guarantors) and HSBC Corporate Trustee
Company (UK) Limited as trustee (Trustee), pursuant to which the
trust deed dated 27 November 2009, as supplemented by four
supplemental trust deeds dated 7 July 2011, 9 November 2012,
16 June 2015 and 11 August 2016 between the same parties relating
to the Programme, were amended and restated. Under the Trust
Deed, the Issuer may issue notes (Notes) unconditionally and
irrevocably guaranteed by the Guarantors, up to a maximum nominal
amount from time to time outstanding of £3 billion (or its equivalent
in other currencies). Notes are to be issued in series (each a Series)
in bearer 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 specific to such Tranche.
Under the Trust Deed, each of the Issuer and the Guarantors has
given certain customary covenants in favour of the Trustee.
The Final Terms issued under each of the 2020 Euro Issuance and
the 2020 GBP 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 14 September 2020, the Issuer and the Guarantors entered into
an amended and restated agency agreement (Agency Agreement)
with HSBC Bank plc as principal paying agent and the Trustee,
pursuant to which the Issuer and the Guarantors appointed paying
agents and calculation agents in connection with the Programme
and the Notes.
Under the Agency Agreement, each of the Issuer and the Guarantors
has given a customary indemnity in favour of the paying agents and
the calculation agents.
On 14 September 2020, the Issuer and the Guarantors entered into
an amended and restated dealer agreement (Dealer Agreement)
with HSBC Bank plc as arranger and Barclays Bank PLC,
Commerzbank Aktiengesellschaft, HSBC Bank plc, 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 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.
£1 billion Euro Commercial Paper Programme
In 2020, the Group established a £1 billion Euro Commercial Paper
Programme (ECP) and issued £600m of commercial paper under
the Joint HM Treasury and Bank of England Covid Corporate
Financing Facility. The issuance was repaid on maturity in
March 2021.
Group information
IHG | Annual Report and Form 20-F 2021
241
Additional Information Group information continued
Legal proceedings
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. Litigation is inherently unpredictable and, as of
21 February 2022, 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
alleges breach of the licence agreement and seeks a declaratory
judgement from the court that it has the right to terminate its licence
with HHF. HHF and InterContinental Hotels Group Resources, Inc.
filed a claim against CPTS Hotel Lessee, LLC also seeking a
declaratory judgement and alleging breach of contract and fraud.
On 1 May 2018, the court granted IHG’s motion for preliminary
injunction and ruled that the license agreement at issue is not
terminable at will by CPTS. As of 21 February 2022, 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 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 of
confidence, intrusion upon seclusion, breach of 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 information
to be compromised. As of 21 February 2022, 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.
Two claims were filed on 19 March 2018 and 6 December 2018
against Six Continents Hotels, Inc. and other hotel companies,
alleging violations of anti-trust regulations. One of the matters is a
class action, and both suits allege that the defendant hotel companies
conspired to eliminate competitive branded keyword search
advertising in the hotel industry, which raised prices for hotel rooms
in violation of applicable law. These matters have now been resolved
and the claims have been dismissed with prejudice.
A claim was filed on 5 April 2019 and amended on 16 December 2019
against Kimpton seeking class action status and alleging harm
related to the compromise of personal information due to a data
security breach. The allegations relate to a breach of the reservation
system previously used by Kimpton. As of 21 February 2022, 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 21 December 2018 alleging that IHG Hotels
Limited and InterContinental Hotels Group PLC misrepresented the
right of a third party to license the Crowne Plaza brand. The claimant
seeks monetary damages for various alleged losses. As of
21 February 2022, 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.
Exchange controls and restrictions on payment of dividends
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.
242
IHG | Annual Report and Form 20-F 2021
Additional Information Shareholder information
Taxation
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 of 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 of 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 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 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
IHG | Annual Report and Form 20-F 2021
243
Additional Information Shareholder information continued
Taxation continued
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 of 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 qualified 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 2021 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 preferential rates for
qualified 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.1
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.
1 Subject to PFIC analysis upon receipt of financial statements.
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 of 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 (in the case of
transfers) 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 issued or 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.
Following litigation on the subject, HMRC has accepted that it will
no longer seek to apply the 1.5% SDRT charge when new shares are
issued to a clearance service or depositary receipt system on the
basis that the charge is not compatible with EU law. HMRC’s published
practice states that the disapplication of the 1.5% charge on the issue
of shares (and transfers integral to the raising of capital) into clearance
services or depositary receipt systems in accordance with the relevant
principles of EU law will remain the position following the UK’s exit
from the EU unless the relevant UK statutory provisions are amended.
In HMRC’s view, the 1.5% SDRT or stamp duty charge will continue
to apply to transfers of shares into a clearance service or depositary
receipt system unless they are an integral part of an issue of share
capital. Specific professional advice should be sought before paying
the 1.5% SDRT or stamp duty charge in any circumstances.
244
IHG | Annual Report and Form 20-F 2021
Additional Information 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 transfer 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.
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 timely furnished 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.
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 identification number
or certification of 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
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.
Disclosure controls and procedures
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 effectiveness of the design
and operation of the Group’s disclosure controls and procedures
(as defined in Rules 13a–15(e) and 15d–15(e) of 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.
Shareholder information
IHG | Annual Report and Form 20-F 2021
245
Additional Information The Chair of the Company is not a member of either the Remuneration
or Audit Committees. As set out on page 95, the Audit Committee is
chaired by an independent Non-Executive Director who, in the Board’s
view, has the experience and qualifications to satisfy 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 of
‘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 37 and 38, IHG’s Code of Conduct is
applicable to all Directors, officers and employees, and is available
on the Company’s website at www.ihgplc.com/responsible-business.
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 notify
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.
Shareholder information continued
Summary of significant 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 126 and 127.
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 significant
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 21 February 2022, the Board consisted of the Chair,
independent at the time of his appointment, three 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 21 February 2022
and throughout 2021, fulfilled 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 defined 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.
246
IHG | Annual Report and Form 20-F 2021
Additional Information Return of funds
Since March 2003, the Group has returned over £6.6 billion of funds to shareholders by way of special dividends, capital returns and share
repurchase programmes.
Return of funds programme
£501m special dividenda
£250m share buyback
£996m capital returna
£250m share buyback
£497m special dividenda
£250m share buyback
£709m special dividenda
£150m share buyback
$500m special dividendac
$500m share buyback
$350m special dividend
$750m special dividenda
$1,500m special dividenda
$400m special dividenda
$500m special dividenda
Total
Timing
Total return
Returned to date
Paid in December 2004
Completed in 2004
Paid in July 2005
Completed in 2006
Paid in June 2006
Completed in 2007
Paid in June 2007
N/Ab
Paid in October 2012
Completed in 2014
Paid in October 2013
Paid in July 2014
Paid in May 2016
Paid in May 2017
Paid in January 2019
£501m
£250m
£996m
£250m
£497m
£250m
£709m
£150m
£315md
($500m)
£315md
($500m)
£229mg
($350m)
£447mi
($750m)
£1,038mk
($1,500m)
£309ml
($400m)
£389mm
($500m)
£6,645m
£501m
£250m
£996m
£250m
£497m
£250m
£709m
£120m
£315me
($505m)
£315m
($500m)f
£228m
($355m)h
£446m
($763m)j
£1,038m
($1,500m)
£310m
($404m)
£388m
($510m)
£6,613m
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 before 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 before 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 before 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 of $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 of $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 of £1 = $1.2860, as announced on 17 January 2019.
Shareholder information
IHG | Annual Report and Form 20-F 2021
247
Additional Information Shareholder information continued
Purchases of equity securities by the
Company and affiliated purchaser
During the financial year ended 31 December 2021, no ordinary shares were purchased by the Company or the Company’s employee share
ownership trust.
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
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
18,265,631a
18,265,631a
18,265,631a
18,265,631a
18,321,631b
18,321,631b
18,321,631b
18,321,631b
18,321,631b
18,321,631b
18,321,631b
18,321,631b
Month 1 (no purchases this month)
Month 2 (no purchases this month)
Month 3 (no purchases this month)
Month 4 (no purchases this month)
Month 5 (no purchases this month)
Month 6 (no purchases this month)
Month 7 (no purchases this month)
Month 8 (no purchases this month)
Month 9 (no purchases this month)
Month 10 (no purchases this month)
Month 11 (no purchases this month)
Month 12 (no purchases this month)
a Reflects the resolution passed at the Company’s AGM held on 7 May 2020.
b Reflects the resolution passed at the Company’s AGM held on 7 May 2021.
Dividend history
The table below sets forth the amounts of ordinary dividends on each ordinary share and special dividends, in respect of each financial
year indicated.
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008c
2007
2006
Interim dividend
Final dividend
Total dividend
Special dividend
pence
cents
–
–
32.0
27.7
24.4
22.6
17.7
14.8
15.1
13.5
9.8
8.0
7.3
6.4
5.7
5.1
–
–
39.9
36.3
33.0
30.0
27.5
25.0
23.0
21.0
16.0
12.8
12.2
12.2
11.5
9.6
pence
N/Aa
–
–b
60.4
50.2
49.4
40.3
33.8
28.1
27.7
24.7
22.0
18.7
20.2
14.9
13.3
cents
85.9
–
–b
78.1
71.0
64.0
57.5
52.0
47.0
43.0
39.0
35.2
29.2
29.2
29.2
25.9
pence
N/Aa
–
32.0
88.1
74.6
72.0
58.0
48.6
43.2
41.2
34.5
30.0
26.0
26.6
20.6
18.4
cents
85.9
–
39.9
114.4
104.0
94.0
85.0
77.0
70.0
64.0
55.0
48.0
41.4
41.4
40.7
35.5
pence
cents
–
–
–
–
–
–
203.8ce
262.1ce
156.4c
438.2c
–
174.9c
87.1
108.4c
–
–
–
–
200c
118c
202.5c
632.9c
–
293.0c
133.0
172.0c
–
–
–
–
–
–
a The sterling amount of the final dividend will be announced on 27 April 2022 using the average of the daily exchange rates from 22 April 2022 to 26 April 2022 inclusive.
b The Board withdrew its recommendation of a final dividend in respect of 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.
248
IHG | Annual Report and Form 20-F 2021
Additional Information Shareholder profiles
Shareholder profile by type as at 31 December 2021
Category of shareholder
Private individuals
Nominee companies
Limited and public limited companies
Other corporate bodies
Pension funds, insurance companies and banks
Total
Shareholder profile by size as at 31 December 2021
Range of shareholdings
1–199
200–499
500–999
1,000–4,999
5,000–9,999
10,000–49,999
50, 000–99,999
100,000–499,999
500,000–999,999
1,000,000 and above
Total
Shareholder profile by geographical location as at 31 December 2021
Country/Jurisdiction
UK
Rest of Europe
US (including ADRs)
Rest of world
Total
Number of
shareholders
30,231
1,123
593
116
11
32,074
Percentage of
total shareholders
Number of
ordinary shares
Percentage of
issued share capital
94.25%
3.50%
1.85%
0.36%
0.03%
100%
7,613,718
149,895,212
17,717,265
10,538,835
1,952,690
187,717,720
4.06%
79.85%
9.44%
5.61%
1.04%
100%
Number of
shareholders
22,086
Percentage of
total shareholders
68.86%
5,510
2,188
1,526
190
278
98
128
37
33
32,074
17.18%
6.82%
4.76%
0.59%
0.87%
0.31%
0.40%
0.12%
0.10%
100%
Number of
ordinary shares
Percentage of
issued share capital
1,313,645
1,724,841
1,517,793
3,003,049
1,322,761
6,277,244
7,235,758
30,828,476
25,542,168
108,951,985
187,717,720
0.70%
0.92%
0.81%
1.60%
0.70%
3.34%
3.85%
16.42%
13.61%
58.04%
100%
Percentage of
issued share capital
48.9%
20.2%
27.7%
3.2%
100%
The geographical profile presented is based on an analysis of shareholders (by manager) of 38,000 shares or above where geographical
ownership is known. This analysis only captures 90% of total issued share capital. Therefore, the known percentage distributions have been
multiplied by 100/90.1 (1.110) to achieve the figures shown in the table above.
As of 21 February 2022, 8,054,722 ADRs equivalent to 8,054,722 ordinary shares, or approximately 4.4% of the total issued share capital,
were outstanding and were held by 418 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 beneficial owners.
As of 21 February 2022, there were a total of 31,976 recorded holders of ordinary shares, of whom 243 had registered addresses in the US
and held a total of 306,151 ordinary shares (0.16% of the total issued share capital).
Shareholder information
IHG | Annual Report and Form 20-F 2021
249
Additional Information Exhibits
The following exhibits are filed as part of this Annual Report on Form 20-F with the SEC, and are publicly available through the SEC’s website.
Visit www.sec.gov and search InterContinental Hotels Group PLC under Company Filings.
Exhibit 1a
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)(a)a
Exhibit 4(a)(ii)a
Exhibit 4(a)(iii)a
Exhibit 4(a)(iv)a
Exhibit 4(a)(v)a
Exhibit 4(a)(vi)
Exhibit 4(c)(i)a
Exhibit 4(c)(ii)a
Exhibit 4(c)(iii)a
Exhibit 4(c)(iv)a
Exhibit 4(c)(v)a
Exhibit 8
Exhibit 12(a)
Exhibit 12(b)
Exhibit 13(a)
Exhibit 15(a)(i)
Exhibit 15(a)(ii)
Exhibit 101.INS
Amended and restated trust deed dated 14 September 2020 relating to a £3 billion Euro Medium Term Note Programme, among
InterContinental Hotels Group PLC, Six Continents Limited, InterContinental Hotels Limited and HSBC Corporate Trustee Company
(UK) Limited (incorporated by reference to Exhibit 4(a)(i)(a) of the InterContinental Hotels Group PLC Annual Report on Form 20-F
(File No. 1-10409) dated 4 March 2021)
$1.275 billion bank facility agreement dated 30 March 2015, among InterContinental Hotels Group PLC and certain of its subsidiaries,
and Bank of America Merrill Lynch International Limited, Barclays Bank PLC, Citibank, N.A. London Branch, Commerzbank
Aktiengesellschaft, London Branch, DBS Bank Ltd., London Branch, HSBC Bank plc, SunTrust Bank, The Bank of Tokyo-Mitsubishi
UFJ, Ltd., The Royal Bank Of Scotland plc, U.S. Bank National Association and Wells Fargo Bank N.A., London Branch (incorporated
by reference to Exhibit 4(a)(iii) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1 – 10409) dated
3 March 2016)
Waiver and amendment letter dated 20 April 2020 relating to the $1.275 billion bank facility agreement dated 30 March 2015
(incorporated by reference to Exhibit 4(a)(iii) of the InterContinental Hotels Group PLC Annual Report on Form 20-F
(File No. 1-10409) dated 4 March 2021)
Extension letter dated 27 April 2020 relating to the $1.275 billion bank facility agreement dated 30 March 2015 (incorporated
by reference to Exhibit 4(a)(iv) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated
4 March 2021)
Waiver and amendment letter dated 4 December 2020 relating to the $1.275 billion bank facility agreement dated 30 March 2015
(incorporated by reference to Exhibit 4(a)(v) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409)
dated 4 March 2021)
Amendment letter dated 16 July 2021 relating to the $1.275 billion bank facility agreement dated 30 March 2015
Paul Edgecliffe-Johnson’s service contract dated 6 December 2013, commencing on 1 January 2014 (incorporated by reference
to Exhibit 4(c)(i) of the InterContinental Hotels Group PLC Annual Report on Form 20-F (File No. 1-10409) dated 26 February 2014)
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)
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)
Keith Barr’s service contract dated 5 May 2017, commencing on 1 July 2017 (incorporated by reference to Exhibit 4(c)(v) of the
InterContinental Hotels Group Annual Report on Form 20-F (File No.1-10409) dated 1 March 2018)
Elie Maalouf’s service contract dated 19 October 2017, commencing on 1 January 2018 (incorporated by reference to Exhibit 4(c)(vi)
of the InterContinental Hotels Group Annual Report on Form 20-F (File No.1-10409) dated 1 March 2018)
List of subsidiaries as at 31 December 2021 (can be found on pages 203 to 205)
Certification of Keith Barr filed pursuant to 17 CFR 240.13a–14(a)
Certification of Paul Edgecliffe-Johnson filed pursuant to 17 CFR 240.13a–14(a)
Certification of Keith Barr and Paul Edgecliffe-Johnson furnished pursuant to 17 CFR 240.13a–14(b) and 18 U.S.C.1350
Consent of independent registered public accounting firm, PricewaterhouseCoopers LLP
Consent of independent registered public accounting firm, Ernst & Young LLP
Inline XBRL Instance Document
Exhibit 101.SCH
Inline XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL
Exhibit 101.DEF
Exhibit 101.LAB
Exhibit 101.PRE
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
a Incorporated by reference.
250
IHG | Annual Report and Form 20-F 2021
Additional Information Forward-looking statements
The Annual Report and Form 20-F 2021 contains certain forward-
looking statements as defined under US legislation (Section 21E of
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 risks of political
and economic developments; the risks of overcapacity in the hotel
industry; the Group being subject 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 requirement for the right people, skills and
capability to manage growth and change; the risks associated with
collective bargaining activity which could disrupt operations, increase
labour costs or interfere with the ability of management to focus
on executing business strategies; the Group’s exposure to the risks
related to cybersecurity and data privacy; the Group’s exposure to
increasing competition from online travel agents and intermediaries;
the Group’s exposure to inherent risks in relation to changing
technology and systems; the Group’s reliance upon the resilience
of its reservation system and other key technology platforms, and
the risks that could disrupt their operation and/or integrity; the
Group’s exposure to risks related to executing and realising benefits
from strategic transactions, including acquisitions and restructuring;
the Group’s dependence upon a wide range of external stakeholders
and business partners; the Group’s exposure to the risk of litigation;
the Group’s requirement 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 risks associated with its intellectual property; the
Group’s exposure to a variety of risks associated with its financial
stability and ability to borrow and satisfy debt covenants; the Group’s
operations being dependent 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 risk that the Group may be
affected by credit risk on treasury transactions; the risk that the
Group might be impacted by changes affecting the availability
of the London Interbank Offered Rate (“LIBOR”); the risk that the
Group’s financial performance may be affected by changes in tax
laws; the risks associated with insuring the Group’s business; the
Group’s exposure to a variety of risks associated with safety, security
and crisis management; the Group’s exposure to the risk of events
or stakeholder expectations that adversely impact domestic or
international travel, including climate change; the risks associated
with domestic and international environmental laws and regulations
that may cause us to incur substantial costs or subject us to potential
liabilities; and the Group’s exposure to risks relating to our
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 2021.
Forward-looking statements
IHG | Annual Report and Form 20-F 2021
251
Additional Information Form 20-F cross-reference guide
The table below references information in this document that will be included in the Company’s Annual Report on Form 20-F for 2021 filed
with the SEC.
1
2
3
Item Form 20-F caption
Identity of Directors, senior management
and advisers
Location in this document
Not applicable
Offer statistics and expected timetable
Not applicable
Key information
3A – Selected financial data
Shareholder information: Dividend history
3B – Capitalisation and indebtedness
Not applicable
3C – Reason for the offer and use of proceeds
Not applicable
3D – Risk factors
Group information: Risk factors
4
Information on the Company
4A – History and development of the Company
Group information: History and developments
4B – Business overview
Strategic Report
Shareholder information: Return of funds
Useful information: Contacts
Group information: Working Time Regulations 1998
Group Information: Risk factors
4C – Organisational structure
Group Financial Statements: Note 34 – Group companies
4D – Property, plant and equipment
Strategic Report: Key performance indicators
Group Information: History and developments
Directors’ Report: Greenhouse gas (GHG) emissions
Page
–
–
248
–
–
231-236
231
247
259
2-77
240
231-236
203-205
231
50-53
229-230
Group Financial Statements: Note 14 – Property, plant and equipment
177-178
4A Unresolved staff comments
None
5
Operating and financial review and prospects
5A – Operating results
Strategic Report: Key performance indicators
Strategic Report: Performance
Group Financial Statements: Accounting policies
Group Financial Statements: New accounting standards
Viability statement
5B – Liquidity and capital resources
Strategic Report: Our Business Model – Disciplined approach to
capital allocation and managing liquidity
Viability statement
Strategic Report: Performance – Sources of liquidity
Group Financial Statements: Note 19 – Cash and cash equivalents
Group Financial Statements: Note 22 – Loans and other borrowings
Group Financial Statements: Note 24 – Financial risk management
and derivative financial instruments
Group Financial Statements: Note 25 – Classification and
measurement of financial instruments
Group Financial Statements: Note 26 – Reconciliation of (loss)/profit
for the year to cash flow from operations before contract
acquisition costs
5C – Research and development;
Not applicable
intellectual property
5D – Trend information
Strategic Report: Performance
5E – Off-balance sheet arrangements
Strategic Report: Performance – Off-balance sheet arrangements
5G – Safe harbour
Additional Information: Forward-looking statements
Non-GAAP financial measures
Strategic Report: Performance
Other financial information
Group Financial Statements: Note 6 – Exceptional items
Group Financial Statements: Note 10 – (Loss)/earnings per
ordinary share
Group Financial Statements: Note 23 – Net debt
252
IHG | Annual Report and Form 20-F 2021
–
50-53
55-77
149-157
157
48-49
12
48-49
59
185
186-187
188-192
192-194
195
–
55-77
60
251
55-77
218-225
165-167
174
187-188
Additional Information 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
82-87
6B – Compensation
Directors’ Remuneration Report
Group Financial Statements: Note 27 – Retirement benefits
104-125
195-197
Group Financial Statements: Note 32 – Related party disclosures
202
6C – Board practices
Governance structure and Board activities
Group Financial Statements: Note 28 – Share-based payments
6D – Employees
6E – Share ownership
Executive Directors’ benefits upon termination of office
Group Financial Statements: Note 4 – Staff costs and
Directors’ remuneration
Group information: Working Time Regulations 1998
Directors’ Report: Employees and Code of Conduct
Directors’ Remuneration Report: Annual Report on Directors’
remuneration – Scheme interests awarded during 2020 and 2021
Directors’ Remuneration Report: Annual Report on Directors’
remuneration – Statement of Executive Directors’ shareholdings
and share interests
Group Financial Statements: Note 28 – Share-based payments
Group information: Directors’ and Executive Committee
members’ shareholdings
7
Major shareholders and related
party transactions
7A – Major shareholders
Directors’ Report: Major institutional shareholders
7B – Related party transactions
Shareholder information: Shareholder profiles
Group Financial Statements: Note 16 – Investment in associates
and joint ventures
Group Financial Statements: Note 32 – Related party disclosures
7C – Interests of experts and counsel
Not applicable
8
Financial Information
8A – Consolidated statements and other
Directors’ Report: Dividends
financial information
Group Financial Statements
Group information: Legal proceedings
Other financial information
8B – Significant changes
None
9
The offer and listing
9A – Offer and listing details
9B – Plan of distribution
9C – Markets
9D – Selling shareholders
9E – Dilution
9F – Expenses of the issue
10
Additional information
10A – Share capital
Useful information: Trading markets
Not applicable
Useful information: Trading markets
Not applicable
Not applicable
Not applicable
Not applicable
10B – Memorandum and articles of association
Group information: Articles of Association
10C – Material contracts
10D – Exchange controls
Group information: Rights attaching to shares
Group information: Material contracts
Group information: Exchange controls and restrictions
on payment of dividends
10E – Taxation
Shareholder information: Taxation
10F – Dividends and paying agents
10G – Statement by experts
10H – Documents on display
10I – Subsidiary information
Not applicable
Not applicable
Useful information: Investor information – Documents on display
Not applicable
198-199
88-92
237
163-164
240
228
118
119
198-199
237
226
249
181-182
202
–
226
128-205
242
218-225
–
258
–
258
–
–
–
–
239-240
239-240
241
242
243-245
–
–
258
–
Form 20-F cross-reference guide
IHG | Annual Report and Form 20-F 2021
253
Additional Information Form 20-F cross-reference guide continued
Item Form 20-F caption
Location in this document
11
12
Quantitative and qualitative disclosures
about market risk
Group Financial Statements: Note 24 – Financial risk management
and derivative financial instruments
Description of securities other than
equity securities
12A – Debt securities
12B – Warrants and rights
12C – Other securities
Not applicable
Not applicable
Not applicable
Page
188-192
–
–
–
12D – American depositary shares
Group information: Description of securities other than equity securities 238
13
Defaults, dividend arrearages
and delinquencies
Not applicable
14 Material modifications to the rights
Not applicable
of security holders and use of proceeds
15
Controls and Procedures
Shareholder information: Disclosure controls and procedures
Statement of Directors’ Responsibilities: Management’s report
on internal control over financial reporting
Independent Auditor’s US Report
16
16A – Audit committee financial expert
Governance: Audit Committee Report
16B – Code of ethics
Directors’ Report: Employees and Code of Conduct
Shareholder information: Summary of significant corporate
governance differences from NYSE listing standards – Committees
Strategic Report: How IHG does business
Shareholder information: Summary of significant corporate
governance differences from NYSE listing standards
16C – Principal accountant fees and services
Governance: Audit Committee Report – External auditor
Governance: Audit Committee Report – Non-audit services
Group Financial Statements: Note 5 – Auditor’s remuneration
16D – Exemptions from the listing standards
Not applicable
for audit committees
16E – Purchase of equity securities by the issuer
and affiliated purchasers
Shareholder information: Purchases of equity securities
by the Company and affiliated purchasers
16F – Change in registrant’s certifying
Governance: Audit Committee Report – External Auditor
accountant
16G – Corporate Governance
Group information: Change in certifying accountant
Shareholder information: Summary of significant corporate
governance differences from NYSE listing standards
16H – Mine safety disclosure
Not applicable
16I – Disclosure regarding foreign jurisdictions
Not applicable
that prevent inspections
17
18
19
Financial statements
Financial statements
Exhibits
Not applicable
Group Financial Statements
Additional Information: Exhibits
–
–
245
130
138-141
95-99
246
228
36-39
246
98
97
164
–
248
98
238
246
–
–
–
128-205
250
254
IHG | Annual Report and Form 20-F 2021
Additional Information Glossary
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.
Annual Report
the Annual Report and Form 20-F in relation
to the years ending 31 December 2020 or
2021 as relevant.
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, or the UK Corporate
Governance Code issued in 2018 by the
Financial Reporting Council in the UK.
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.
Hotels which have been temporarily closed
as a result of Covid-19 are not excluded
from comparable RevPAR.
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.
currency swap
an exchange of a deposit and a borrowing,
each denominated in a different currency,
for an agreed period of time.
Deferred Compensation Plan
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
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.
DR Policy
Directors’ Remuneration Policy.
EMEAA
Europe, Middle East, Asia and Africa
(excludes Greater China).
Employee
individuals directly employed at IHG
corporate offices, reservation centres and
managed, owned, leased and managed
lease hotels.
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
leased 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 Reward
members that book directly at a hotel.
ERG
employee resource group.
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 franchise and managed
businesses combined.
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 and 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.
Glossary
IHG | Annual Report and Form 20-F 2021
255
Additional Information Glossary continued
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.
liquidated damages
payments received in respect of the
early termination of franchise and
management agreements.
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 of the total hotel revenue
and a proportion of hotel profit, 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.
ppt
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.
revenue per available room or RevPAR
rooms revenue divided by the number
of room nights that are available (can be
mathematically derived from occupancy
rate multiplied by average daily rate).
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
avaliable 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
Rewards loyalty programme and our
distribution channels.
Task Force on Climate-related Financial
Disclosure (TCFD)
created by the Financial Stability Board
to improve and increase reporting of
climate-related financial information and to
help inform investors and others about the
risks they face related to climate change.
technology fee income
income received from hotels under franchise
and management agreements for the use
of IHG’s Guest Reservation System.
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.
US 401(k) Plan
the Defined Contribution 401(k) plan.
workforce
IHG employees.
working capital
the sum of inventories, receivables and
payables of a trading nature, excluding
financing and taxation items.
For the definitions of our Key performance
measures (including Non-GAAP measures)
see pages 73 to 77.
256
IHG | Annual Report and Form 20-F 2021
Additional Information Useful information
Investor information
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 2021 has been
made available to shareholders through our website at
www.ihgplc.com/investors under Annual Report.
Shareholders may electronically appoint a proxy to vote on their
behalf at the 2022 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.
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 259).
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 www.shareview.co.uk/info/ops for further information.
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 259).
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 www.ihgplc.com/responsible-business for further information.
Registrar
For information on a range of shareholder services, including
enquiries concerning individual shareholdings, notification of 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 2132a.
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 2132a.
Visit www.shareview.co.uk/info/drip for a DRIP application form
and information booklet.
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 259).
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) 345 300 0430a.
Share-dealing services
Equiniti offers the following share-dealing facilities.
Postal dealing
0371 384 2132 from the UKa
+44 121 415 7034 from overseasa
Telephone dealing
For more information, call +44 (0)345 603 7037b
Internet dealing
Visit www.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 www.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 2735c
or visit www.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.
Useful information
IHG | Annual Report and Form 20-F 2021
257
Additional Information Useful information continued
Investor information
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 www.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 the opposite page).
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 www.sec.gov
Copies of the Company’s Articles of Association can be obtained
via the website at www.ihgplc.com/investors under Corporate
governance or from the Company’s registered office on request.
Financial calendars
Dividends
2021 Interim dividend
Ex-dividend date
Record date
Payment date
2021 Final dividend of 85.9¢ per ordinary sharea
Ex-dividend date
Record date
Payment date
2021
N/A
N/A
N/A
2022
31 March
1 April
17 May
a The sterling amount of the final dividend will be announced on 27 April 2022 using the
average of the daily exchange rates from 22 April 2022 to 26 April 2022 inclusive.
Other dates
Financial year end
2021
31 December
2022
Announcement of Preliminary Results for 2021
22 February
Announcement of 2022 First Quarter
Trading Update
Annual General Meeting
6 May
6 May
Announcement of Half-Year Results for 2022
9 August
Announcement of 2022 Third Quarter
Trading Update
Financial year end
21 October
31 December
2023
Announcement of Preliminary Results for 2022
February
258
IHG | Annual Report and Form 20-F 2021
Additional Information Contacts
Registered office
Broadwater Park, Denham, Buckinghamshire, UB9 5HR,
United Kingdom
Telephone:
+44 (0) 1895 512 000
www.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) 371 384 2132
www.shareview.co.uk
ADR Depositary
Shareowner Services, PO Box 64504, St. Paul, MN 55164-0504,
United States of America
Telephone:
+1 800 990 1135 (US calls) (toll-free)
+1 651 453 2128 (non-US calls)
Solicitors
Freshfields Bruckhaus Deringer LLP
Stockbrokers
BofA Securities
IHG® Rewards
If you wish to enquire about, or join, IHG Rewards, visit
www.ihg.com/ihgrewards or telephone:
+800 2222 7172b (Austria, Belgium, Denmark, Finland, France,
Germany, Hungary, Ireland, Israel, Italy, Luxembourg, Netherlands,
Norway, Portugal, Russia, Spain, Sweden, Switzerland, and UK)
+44 1950 499004c (all other countries/regions in Europe and Africa)
1 888 211 9874 (US and Canada)
001 800 272 9273c (Mexico)
+1 801 975 3013c (Spanish) (Central and South America)
+1 801 975 3063c (English) (Central and South America)
+973 6 500 9 296a (Middle East)
+800 2222 7172b (Australia, Japan, Korea, Malaysia, New Zealand,
Philippines, Singapore and Thailand)
800 830 1128a or 021 20334848a (Mainland China)
800 965 222 (Hong Kong SAR)
Enquiries: www.shareowneronline.com under contact us
0800 728 (Macau SAR)
www.adr.com
Auditor
PricewaterhouseCoopers LLP
Investment bankers
BofA Securities
Goldman Sachs
00801 863 366 (Taiwan, China)
+632 8857 8788c (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.
Useful information
IHG | Annual Report and Form 20-F 2021
259
Additional Information Designed and produced by Superunion, London.
www.superunion.com
Printed by Park Communications 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 certified
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.
260
IHG | Annual Report and Form 20-F 2021
Hotel Indigo® Miami Brickell, US
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.
Back cover middle image:
Kimpton® Fitzroy, London, UK
InterContinental Hotels Group PLC
Broadwater Park, Denham
Buckinghamshire UB9 5HR
United Kingdom
Tel +44 (0) 1895 512 000
www.ihgplc.com
Make a booking at www.ihg.com