Strategic Report

Industry overview
From growing consumer demand for branded
hotels, to an expanding middle class and greater
disposable incomes, we operate in an industry
with growth potential.

The global hotel industry is a $525bn

industry, made up of 18 million rooms. Overview of global hotel industry
54% of rooms are affiliated with a global
or regional chain (‘branded’), up from Geography Branded hotels Segment
50% in 2012, and 46% are unaffiliated The US is the largest hotel The top five hotel groups The hotel industry
(‘independent’). The top five hotel groups, market, whilst China have increased their can be categorised
IHG, Marriott, Hilton, Wyndham and Accor continues to growa market share by 6%a by price levela
account for 25% of market share, up from
19% in 2012, and for 58% of the global 2018 24.9% 6%
9%
development pipeline of hotels in 2017 23.8% 19%
16%
planning or under construction.
2016 23.2%
In what is a fragmented market, % of room 40%
2015 22.7% 14% % rooms
revenue
competitor pressures in the branded space
51% 2014 19.8% 23%
are intensifying as all major players pursue
growth strategies through acquisitions, 2013 19.2% 22%
organic growth or diversification. As the 2012 19.0%
digital landscape has evolved, consumer
Americas % rooms Luxury  Upper
choice of where to stay and how to book has Midscale
Rest of the world  Upper
developed and hotel companies compete in Upscale Midscale
Greater China
an environment that includes Online Travel Upscale Economy
Intermediaries and alternative lodging
solutions, such as peer-to-peer home rental
companies and serviced apartments.
Hotel industry growth drivers: 10-year annual growth rate
There are several metrics that recognise Global GDP Global household income Global corporate profits

2.5 % 2.8 % 4.2 %

industry performance. RevPAR is an
important indicator of the value guests
ascribe to a given hotel, brand or market and
+ CAGRb + CAGRb + CAGRb
grows when guests stay more often or pay Indicator of economic Growing consumer spending Good indicator of
higher rates. Rooms supply is significant growth – hotel performance and leisure travel, supported business travel demand
because it is reflective of the attractiveness correlates with GDP by cheaper air travel – continues to grow
of investing in the hotel industry from an
owner perspective and is influenced mainly
by the profitability of a brand or market. Global hotel industry performance
Driven by strong economic fundamentals,
Global Industry RevPAR ($)a Global rooms supply (m rooms)a
the global hotel industry has seen growth in
RevPAR growth suggests Supply growth reflects the
both RevPAR and rooms supply for the past
solid lodging demand attractiveness of the hotel industry
nine years as part of a larger travel and
tourism sector. It also plays an important
2018 82.8 2018 17.8
role economically, accounting for 1 in 10
2017 79.8 2017 17.4
jobs around the world.
2016 76.7 2016 17.0
The hotel industry is cyclical; long-term
2015 75.2 2015 16.7
fluctuations in RevPAR tend to reflect the
interplay between industry demand, supply 2014 71.9 2014 16.4
and the macroeconomic environment.
In the short term, at a local market level, Hotel business models
political, economic and natural factors
such as terrorism, oil market conditions There are two principal business models • Owner-operated, asset-heavy model
and hurricanes can impact demand used by branded hotel groups: –– Owned – operated and branded by
and supply. the owner who bears all of the cost
• Fee-based, asset-light model
but benefits from all of the income.
–– Franchised – owned and operated
by parties distinct from the brand, –– Leased – similar to owned, except
who pay fees to the hotel company for the owner-operator does not have
the use of their brand. outright ownership of the hotel but
leases it from the ultimate owner.
–– Managed – operated by a party
distinct from the hotel owner, who Asset-heavy business models allow tighter
pays management fees and, if the control over hotel operations, whilst
hotel uses a third-party brand name, asset-light models enable faster growth
Source: STR, Inc fees to that third-party also. with lower capital investment.
a

b
Source: Oxford Economics

8 IHG | Annual Report and Form 20-F 2018