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Where we operate

We operate in nearly 100 countries globally.

Holiday Inn^® Hotels & Resorts: The joy of travel

The joy of travel is for everyone. We threw open the doors of our first hotel in 1952. Since then, we’ve been making travel a more enjoyable experience for all sorts of people, all over the world. Delivering that experience is what we do every day.

Holiday Inn Express^® Hotels: Simple, smart travel

At Holiday Inn Express, we keep it simple and we keep it smart. We’ve made travel simple so that the basics are done brilliantly. Our mantra is ‘everything you need, nothing you don’t’. That’s what we do. We make travel smarter.

Staybridge Suites^® Hotels: Feels like home

We love our guests to feel comfortable in a home-like environment. Staybridge Suites is ideal for upscale business and leisure travellers who want to move in for longer stays and enjoy the best of home and hotel.

Holiday Inn Club Vacations^®: The joy of lifetime vacations

From the moment we welcome our Holiday Inn Club Vacations owners, we want them to feel proud to be part of a community of people who understand the importance of family. Holiday Inn Club Vacations is an investment in a lifetime of invaluable family memories.

Holiday Inn Resort^®: The joy of family holidays

We want families to experience the joy of holidays because spending quality time together is one of life’s great pleasures. We pride ourselves on having something for everyone in the family, from kids’ clubs and signature swimming pools to informal restaurants and quiet, fireside lounges.

Candlewood Suites^® Hotels: Your home base

We believe in the freedom to live, work and relax on your own schedule. All of our 300-plus locations across the US are easily accessible, and we’re always opening new hotels so guests can book a spacious suite whenever and wherever it works for them.

IHG’s ‘5,000 Club’ In 2016, we unveiled Hotel Indigo Lower East Side New York as our 5,000th hotel globally (top). InterContinental London – The O2 (centre) and Hotel Van Zandt, a Kimpton Hotel in Austin (TX) (bottom) formed part of our ‘5,000 Club’, a series of landmark hotel openings that contributed to IHG surpassing the 5,000-hotel milestone.

Loyalty was a key theme in the latest IHG Trends Report, which we published in January 2016. The report challenges brands to engage in a way that builds membership communities in ‘The Age of I’ – that is, to encourage consumers to share opinions and insights as they connect around their experience of a brand, while at the same time allowing them to maintain their individuality (see page 22).

Responsible business agenda

Doing business responsibly is integral to life at IHG and is a principle that guides how all of our colleagues around the world behave from day to day. It helps us build trust and preference for our brands, operate more effectively and create long-term value for our shareholders and stakeholders. Our global scale also means that our influence extends across thousands of communities around the world and sees us interact with millions of people on a daily basis. Our view is that growth is not just about short-term financial and operational performance; it is about nurturing the health of the organisation into the future and staying true to our values. I am very proud of our achievements in 2015, all of which are a result of the efforts of each and every one of the 350,000 colleagues who work in IHG-branded hotels and corporate offices worldwide.

We completed the global roll-out of our successful group-wide sustainability programme, the IHG Green Engage™ system; we celebrated the 10th year of the pioneering IHG^® Academy programme, a global collaboration between IHG hotels, local education providers and community organisations, which now has more than 1,200 programmes in 68 countries; and, finally, IHG^® Shelter in a Storm responded to 27 disasters in 17 countries in 2015, including supporting the relief work in Nepal following the devastating earthquakes.

In addition, we developed and launched a human rights e-learning module, which is available to all colleagues worldwide, and we led the roll-out of IHG Marketplace, a hotel procurement platform, which incorporates our Vendor Code of Conduct as well as responsible business criteria.

In February 2016, we launched the IHG^® Foundation, which will build on the hugely positive impact we have driven through our corporate responsibility initiatives over a number of years. IHG Academy and the IHG Green Engage system will continue to be delivered in IHG’s hotels. Disaster-relief activity, previously activated through IHG Shelter in a Storm, will be incorporated into the IHG Foundation.

Our awards

Independent recognition is an important endorsement of our success, and we are proud of the many awards we won in 2015. Fortune Magazine ranked IHG as a world’s ‘Most Admired Company 2015’; Forbes named us one of the world’s most reputable companies for 2015; and we were accredited as a ‘Top Employer’ in 2015 for both the UK and Greater China by the Top Employers Institute.

Our brands have been in the spotlight too. InterContinental Hotels & Resorts won an impressive 28 awards at the World Travel Awards Asia & Australasia 2015, including the coveted Asia’s Leading Luxury Business Hotel Brand Award; Holiday Inn won Best Mid-Market Hotel Brand in the World at the 2015 Business Traveller Asia-Pacific Awards; and IHG was named World’s Leading Hotel Brand at the World Travel Awards 2015.

Looking ahead to 2016

We go into 2016 with confidence and in a position of strength. We have a compelling and proven strategy that is delivering. We will continue to focus on building scale where it matters, and on executing our strategy at pace.

As ever, I would like to close by thanking the talented and passionate people who bring IHG’s brands to life for our guests each and every day.

Richard Solomons

Chief Executive Officer

pay the manager management fees and, if the hotel is operated under a third-party brand name, brand licensing fees; and

Major underlying drivers supporting growth in our industry

At a local-market level, industry performance is impacted by short-term economic and political factors. However, in the long term, growth in the global hotel industry is driven by the following three major underlying drivers.

Economic

Long-term macroeconomic trends substantially benefit the hotel industry. Global GDP growth of circa 2.6 per cent per annum in the last 10 years has contributed to an increase in disposable income and a rise in middle-class households, making travel affordable for more people. This trend can be observed in China, where the number of households earning above $35,000 per annum (a key income level, at which international travel becomes accessible), rose by 21 million from 2003 to 2013, with an additional 61 million households expected to pass this threshold by 2023.

Demographic

The growth of an ageing population, which has the desire and means to travel, is another favourable driver shaping the industry. The global population over the age of 60 is expected to increase from approximately 800 million in 2013 to 2 billion by 2050, increasing overall demand for travel services.

Social

Increased competition and capacity amongst airlines, lower fares, and the relaxation of travel and immigration restrictions in many regions are making international travel more viable for more people. International tourist travel is expected to increase by 3.3 per cent a year from 2010 to 2030, reaching 1.8 billion arrivals by 2030.

Multi-generational families are a growing guest segment

The Future of Chinese Travel

In 2015, we partnered with global research company Oxford Economics to produce a comprehensive report evaluating the Chinese outbound travel opportunity.

In this report, we examine historical and current trends in Chinese outbound travel and how economic and demographic developments will shape demand for Chinese travel over the next decade.

Our industry-leading research provides a unique insight into which countries, and, for the first time, which cities, will benefit most from significant growth in Chinese outbound travel globally.

Visit www.ihgplc.com/chinesetravel to download the full report.

    Continually evolving consumer needs

The demographic profile of our guests continues to evolve and, in conjunction with the developments in digital technology, these trends are driving different accommodation needs and stay expectations.

This is evident across all age groups, and in particular amongst millennials, who are becoming an increasingly important guest group.

This group is also challenging some of the well-established norms of travel by having more flexible working patterns, seeking more personalised and unique guest experiences, and being more open to using

the sharing economy to meet their accommodation needs.

In addition, there has been a diversification of family travel needs as a result of an ageing population and changes to the traditional family unit. Multi-generational families, for example, are a growing guest segment, with over a third of respondents in a 2014 US AAA survey planning to make at least one multi-generational holiday in the upcoming year.

Another trend we are seeing is the blurring of business and leisure travel, with a growing number of professionals adding leisure days onto business trips.

Furthermore, as a result of these trends, accommodation providers increasingly need to cater for a more diverse set of guest needs and expectations.

    A more dynamic competitive environment

These key trends are changing the competitive landscape within the travel

industry. Hotels compete with each other and with travel intermediaries and companies offering alternative lodging solutions, such as peer-to-peer home rental companies.

While the long-term growth of branded hotels has outpaced that of the home rental market, some peer-to-peer home rental companies have capitalised on the small but fast-growing segment of urban short- to medium-term rentals, offering personalised, home-like stay experiences.

At IHG, we cater for these guest demands through our extended-stay hotel brands, boutique brand portfolio and branded residences offer. We are also investing heavily in our people to ensure they deliver unique and personalised stay experiences. Meanwhile, our proactive approach to building preferred brands, targeted at guest occasion segments, is enabling us to enhance our competitive position.

increasingly asset-light.

•  Deployment of key money, which is used to access strategic opportunities, particularly in

high-quality and sought-after locations when returns are financially and/or strategically

attractive.

or via equity capital.

reinvest elsewhere in the business and across our portfolio, as we are currently doing

for our EVEN and Hotel Indigo brands.

hotels use to drive performance.

Scale and efficiency of operations

Driving efficient operational processes and managing our costs allows us to contribute to hotel performance through efficient working practices, tools and systems. It also helps us strengthen our revenue delivery systems – for example, our reservations website and offices – which means an increase in System contribution to hotel revenue, supporting our owner proposition and maximising our investment in building preferred brands. Careful cost management, leveraging our scale and focusing on productivity improvements also allow us to drive continued improvement in our margin.

To maximise the scale and efficiency of our operations, we:

•  focus investment on initiatives which support strategic priorities – for example, in 2015 we launched Procure to Pay, a comprehensive and fully automated online procurement system, allowing us to monitor and control spend, and use our scale to deliver buying advantage;

•  have made further improvements to our ‘Hotel Ready’ processes, to ensure that General Managers and other colleagues in our hotels are focused on embedding the most critical initiatives, such as our ‘IHG Frontline’ training platform and enhancements to IHG Rewards Club, in our 5,032 hotels; and

•  use analytics and data to help enhance our human resources processes – for example, in 2015 we launched an analytics dashboard for all line managers, providing greater insight into people data, helping our people make faster and smarter decisions in relation to recruitment, diversity, career progression and performance management.

Investment in developing strong technology platforms

Technology is playing an increasingly important role in shaping the travel industry and underpins everything that we do for guests, owners and colleagues around the world. We believe that keeping abreast of trends as they evolve and investing in technology systems will assist us in building brand preference, strengthening our loyalty programme and delivering compelling and engaging digital content across the ‘Guest Journey’, enabling us to build lifetime relationships with our guests.

To deliver the highest-quality digital content for our guests, we are ensuring that we have the right technology foundations and infrastructure in place. In 2015, we:

•  announced in April the second phase of our strategic relationship with Amadeus to develop a next-generation Guest Reservation System;

•  deployed an enhanced customer relationship management system in hotels;

•  continued to standardise on property hardware for all IHG hotels in the US, providing a consistent platform that allows us to develop solutions such as mobile check-in and check-out; and

•  piloted new connectivity infrastructure, such as IHG Connect, an enhanced Wi-Fi solution for our hotels.

Improving our technology infrastructure gives us the foundation to transform the guest experience and make it more interactive through digital content. In 2015, we:

•  introduced compelling digital content across the ‘Guest Journey’, allowing users to explore destinations and create personalised travel guides for more than 50 locations;

•  made numerous improvements to our award-winning mobile app, with downloads of the app growing by 27 per cent, thereby increasing mobile bookings by 40 per cent to over $1.2 billion;

•  launched an Apple Watch version of our highly-rated IHG Translator app;

•  rolled out single-login guest Wi-Fi for IHG Rewards Club members, allowing guests to seamlessly access hotel internet with their IHG Rewards Club profile; and

•  piloted the ‘Guest Request’ tool in the US, giving our guests the ability to make in-hotel requests through the IHG mobile app, which has driven a five percentage point increase in guest satisfaction.

Investment in developing great talent

Our people are fundamental to achieving our ambition – they bring our brands to life on a daily basis, delivering on each individual brand promise to enhance the guest experience. They are also, therefore, a critical part of our success. Accordingly, we recognise the importance of attracting, retaining and developing the very best talent in the industry. To achieve this, our people strategy focuses on a number of key areas.

1. Attracting and retaining the best talent

Building a strong employer brand assists us in attracting the best possible talent to meet our strategic objectives. We ask our people to live our Winning Ways (set out below) and act in a responsible way (see page 24 for how acting responsibly is part of our culture). In turn, we offer our people our ‘Room to be yourself’ commitment, which is brought to life by four promises.

Room to have a great start

We know how important it is to make sure that all our colleagues have a great start to their career with IHG. We ensure that all colleagues have access to the tools and information they need to hit the ground running, and be productive and integrated into their role as quickly as possible.

‘Lowest Price Promise’ Our innovative campaign to increase direct bookings.

“Our pilot ‘Lowest Price Promise’ campaign for Holiday Inn Express in the UK means the lowest rates on our brand.com website for IHG Rewards Club members.”

Risk and culture

Tone, attitudes, ethical values and policies

IHG’s culture is supportive of considered and conscious risk-taking in pursuit of business objectives, and is embedded through, for example, our Winning Ways (see page 17) and our Code of Conduct, which consolidates and clarifies our ethical values and expected standards of behaviour.

The Code of Conduct, available at www.ihgplc.com/investors under corporate governance, is applicable to all Directors, officers and employees. It is supported by an e-learning programme and key policies in areas such as bribery, gifts and entertainment, and handling personal data. We also have a confidential disclosure channel to provide employees with a means to report any ethical concerns they may have.

Governance and committee structures

IHG has an operational committee structure in place, which includes regional operating and expenditure committees, franchise and management deal approval committees, and compliance committees, to ensure effective oversight and review of the Group’s activities. These committees oversee, manage and mitigate risk in relation to their activities.

We continue to review and adjust management committees in light of changing business needs and to ensure they support effective and efficient decision-making, including appropriate consideration of risk.

In 2015, we have confirmed and reinforced committee accountabilities in relation to our brand and marketing activities, our programme portfolio management, and our owner strategy.

Risk and control management

Three lines of defence

As well as continued reinforcement of ‘first line’ accountability for risk management, we have continued to enhance our capability in ‘second line’ subject matter expertise. In 2015, this has included enhancements to procurement and HR processes, and continuing focus on regulatory compliance. ‘Third line’ independent assurance is primarily provided by Global Internal Audit, whose audit plan is aligned with the Group’s principal risks.

Risk and strategy

In developing our strategy, we seek to mitigate or exploit a number of strategic risks to our business. Our strategic planning process involves the Executive Committee and relevant regions and functions, who develop plans that consider and address strategic risks, business-as-usual operational risks and financial control and compliance considerations within the framework of our broader risk appetite.

i

Risk monitoring and reporting

Risk and performance monitoring

Risk and performance information is crucial to effective management of known risks. Through regular review of key risk indicators and progress against our KPIs (see pages 28 to 31), and our internal performance measures monitored in connection with delivering our ‘winning culture’ (see page 18), we are able to monitor risk trends and emerging risks effectively.

IHG’s principal risk review process engages management to identify, assess, manage and monitor the principal risks and uncertainties affecting the Group, considering risks related to our strategy, operations and to our financial reporting and compliance responsibilities, reporting to the Board and Audit Committee on a biannual basis. Our principal risk review is described overleaf.

Risk description

Trend

Impact

How do we manage these risks?

Safety and security

Safety and security risks are inherent to all hotel operations, complicated by continuing geopolitical instability threats in markets where IHG operates. Failure to operate an appropriate risk management system which safeguards our guests and employees could impact IHG’s reputation.

•  Safety and security is of paramount importance to IHG and an extensive safety and security risk management system is in place.

•  The safety and security risk management system includes risk and threat assessment, policies and standards, training programmes, performance and risk monitoring, and reporting and analysis.

•  Our operational safety and security teams comprise team members with extensive subject matter expertise and experience, who provide support to line management to equip them to plan for, and respond to, incidents when they occur.

Cybersecurity and information governance

Threats to the security of guest and other sensitive information held and used by IHG are increasing and failure to manage these could impact our operations, result in fines and undermine stakeholder trust in our business.

•  We take cybersecurity and information governance very seriously and have applied risk-based methods to build capability and resilience into our systems and processes. We manage information security to contain the risk and reduce the Group’s exposure, tightly controlling sensitive information through limited and monitored access.

•  We continue to aim to be fully compliant with Payment Card Industry – Data Security Standards (PCI – DSS), using tools and services with respect to payment-card processing from leading specialist third-party providers.

Programme and project delivery

IHG is currently delivering a number of large and complex business change programmes and failure to manage these effectively could impact the value realised from our investments.

•  Our programme management capability is overseen by our Strategic Portfolio Management team who ensure strategic alignment and prioritisation of key programmes, develop organisational capability through training and implementation of the Group’s project delivery approaches and tools, and independently monitor the progress of key organisational change programmes.

•  This team is supported by regional and functional project management teams, who manage and monitor specific programmes and projects.

Legal, regulatory and ethical compliance

While the hotel sector is not subject to stringent industry-specific regulations, the global business environment is evolving, with regulators enhancing their enforcement activity.

•  Our regulatory compliance programme works to identify and respond to relevant regulatory requirements. These include, but are not limited to, anti-bribery and corruption, data privacy and antitrust. These programmes consist of policies, communications and training, and are supported by confidential disclosure channels and ongoing monitoring procedures.

•  Additionally, we continue to monitor key legal and ethical developments relevant to our business model, intellectual property and operations.

Financial management and control

Increased public scrutiny, litigation and regulatory investigation have once again highlighted the need for companies to ensure that their financial reporting, controls and management systems are robust.

•  The maintenance of a sound financial reporting and control environment is achieved through an effective policy framework, training programmes, and layered performance and review processes.

•  IHG has a mature, experienced and stable global finance function, encompassing specialist groups including, but not limited to, the following teams: Group Tax, Group Treasury, Procurement and Cost Efficiency; Global BSC Operations; Global and Regional Financial Planning and Analysis; Global Financial Reporting; and Governance and Compliance (including compliance with the Sarbanes-Oxley Act 2002).

Link between KPIs and Directors’ remuneration

KPIs which could have an impact on the performance measures for remuneration plans:

Long Term Incentive Plan

2015

status

2016 specific

priorities

Global RevPAR

growth

69

Holiday Inn Express

•  Accelerate the roll-out and adoption of our IHG Frontline training platform across all IHG hotels, enabling our people to deliver consistently great guest experiences that build brand preference.

•  Focus on driving consistency and quality across our Crowne Plaza portfolio in the US.

•  Continue to invest in brand innovation, such as the Holiday Inn Open Lobby, the Holiday Inn Express next-generation room design, and the Crowne Plaza ‘WorkLife’ room.

•  Embed further improvements to measuring guest satisfaction in our hotels.

Revenue per available room: rooms revenue divided by the number of room nights that are available.

Guest

HeartBeat

200+

external recognitions for our brands and hotels in 2015

IHG’s guest satisfaction measurement indicator.

Link between KPIs and Directors’ remuneration

KPIs which could have an impact on the performance measures for remuneration plans:

Long Term Incentive Plan

2015

status

2016 specific

priorities

Doing business responsibly continued

Value of monetary donations and

in-kind support to communities, including through IHG^® Shelter in a Storm

27

disasters in 17 countries responded to by IHG Shelter in a Storm

•  Continue to enable our hotels to respond quickly and effectively in times of disaster.

Carbon footprint

per occupied room

3.9%

reduction in carbon footprint per occupied room (to 31.53 kgCO₂e) on a 2012 baseline across our entire estate

•  Continue to reduce our carbon footprint across our entire estate.

•  Continue to drive adoption and quality use of the IHG Green Engage system across our entire estate.

Water use per occupied room in water-stressed areas

4.8%^b

reduction in water use per occupied room (by 0.03m³) on a 2012 baseline in water-stressed areas

•  Continue to reduce water use across our entire estate, with a particular focus on hotels in water-stressed areas.

•  Work with the Water Footprint Network to identify actions that hotels can adopt to improve their water stewardship, enabling further reductions in water use.

Americas

Europe

AMEA

Greater China

Central

Americas

Europe

AMEA

Greater China

Central

Operating profit before

exceptional items

Earnings per

ordinary share

£0.65

£0.61

£0.64

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 pages 98 and 99 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. Such indicators are prefixed with ‘adjusted’. An analysis of exceptional items is included in note 5 on page 107 of the Group Financial Statements.

Analysed by brand

InterContinental

Kimpton

HUALUXE

Crowne Plaza