InterContinental Hotels Group PLC True Hospitality for everyone Annual Report and Form 20-F 2019 www.ihgplc.com Annual Report and Form 20-F 2019 Contents Strategic Report 2 2019 key highlights 4 Chair’s statement 6 Chief Executive Officer’s review 8 Industry overview 10 Our business model 14 Our brands 18 Our strategy 24 Our culture, responsible business and stakeholders 42 Key performance indicators (KPIs) 46 Our risk management 54 Viability statement 55 Performance 55 Key performance measures (including Non-GAAP measures) used by management 60 Group 63 Americas 66 Europe, Middle East, Asia and Africa (EMEAA) 69 Greater China Governance 78 Chair’s overview 79 Corporate Governance 79 Our Board and Committee governance structure 80 Our Board of Directors 82 Our Executive Committee 84 Board meetings 86 Director induction, training and development 86 Board effectiveness evaluation 88 Audit Committee Report 92 Corporate Responsibility Committee Report 93 Nomination Committee Report 94 Statement of compliance with the UK Corporate Governance Code 96 Directors’ Remuneration Report 110 Directors’ Remuneration Policy Group Financial Statements 120 Statement of Directors’ Responsibilities 121 Independent Auditor’s UK Report 128 Independent Auditor’s US Report 132 Group Financial Statements 139 Accounting policies 146 New accounting standards and presentational changes 150 Notes to the Group Financial Statements Parent Company Financial Statements 204 Parent Company Financial Statements 204 Parent Company statement of financial position 205 Parent Company statement of changes in equity 206 Notes to the Parent Company Financial Statements Additional Information 214 Other financial information 221 Directors’ Report 225 Group information 237 Shareholder information 245 Exhibits 246 Form 20-F cross-reference guide 248 Glossary 250 Useful information 252 Forward-looking statements The Strategic Report on pages 2 to 75 was approved by the Board on 17 February 2020. Nicolette Henfrey, Company Secretary Sustainable Proven growth business model Delivering a focused strategy designed to achieve industry-leading net rooms A proven track record of strong growth over the medium term returns for our hotel owners and shareholders page 18 page 10 Our purpose is to provide Culture Strong True brands Our values, behaviours and ethical work practices are critical Hospitality to IHG’s long-term success Our 16 distinct brands sit at the heart of our owner offer and deliver for rich experiences to millions of guests every day page 24 everyone page 14 It shapes our culture, brings our brands to life every day and ensures we grow our business in the right way for all our stakeholders. Talented Responsible people business Our engaged, diverse and We respect the environment and talented people are key to our communities we work in, and success and delivering our engage and nurture our purpose relationships with our stakeholders page 28 page 34 IHG | Annual Report and Form 20-F 2019 1 Strategic Report 2019 key highlights Financial highlights Strategic progress Responsible business Total Revenue from reportable Net system size growth revenue segmentsb 5.9% 3.6% +5.6% Rooms signings Reduction in our carbon Reduction in water $4,627m $2,083m footprint per occupied use per occupied from +3.1% in 2016 room from a 2017 baseline room in water stressed areas (+6.7%) (+7.8%) 97.8 k since 2018 2018: $4,337m 2018: $1,933m 2018: 98.8k Operating Operating profit from New prototypes Two brands Committed to profit reportable segmentsb launched for added to 188k science-based Holiday Inn and portfolio; Hours volunteered by targets in colleagues for Giving for $630m $865m ™ Extended Stay Atwell Suites and Good month accordance (+8.2%) (+4.0%) brands Six Senses Hotels with climate Resorts Spas science 2018: $582ma 2018: $832ma Total gross revenue Global RevPAR growth Signed key global 15k+ people in IHG’s Systemb and regional 200+ benefited from 1st (0.3)% loyalty hotels now signed under the IHG Academy Global hotel company $27.9 bn franchise agreements in to commit to removing 2018: +2.5% partnerships to Greater China programme miniature bathroom enrich member amenities in favour of (+1.8%) bulk-size products experiences 2018: $27.4bn Basic EPSc Dividend per share Trial of attribute Launched +11% pricing underway Top 10 colleague 210.4� 125.8� growth in IHG app for industry- FTSE 100 listing for IHG share plan downloads in the Hampton-Alexander leading Guest review for female representation among (+15%) (+10%) Reservation our senior leadership 2018: 183.7 �a 2018: 114.4� System Where we operate Revenue from reportable Operating proit from Number of rooms Number of rooms segments ($2,083m)b reportable segments ($865m)b open (883,563) in pipeline (283,043) $700m 9% 15% 6% 30% $217m 25% 41% 35% 50% $73m 60% 29% -$125m Key Americas Europe, Middle East, Asia and Africa (EMEAA) Greater China Central a Restated to reflect the adoption of IFRS 16 (see pages 146 to 149) in the Group Financial Statements. b 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 55 to 59 and reconciliations to IFRS figures, where they have been adjusted, are on pages 214 to 218. c Adjusted EPSb 303.3¢ (+3%); 2018: 293.2¢a 2 IHG | Annual Report and Form 20-F 2019 Our brands Mainstream Upscale Luxury IHG | Annual Report and Form 20-F 2019 | Strategic Report | 2019 key highlights 3 Strategic Report Chair’s statement After a crucial period of transformation across our business, teams, priorities and processes, 2019 was a year in which a sharper and more agile execution of IHG’s strategy moved us closer to ambitious levels of growth and strengthened our long-term prospects. The backdrop to this important work is one of an increasingly competitive industry. All peers are seeking to deliver on both evolving consumer expectations and aggressive growth strategies, focusing on system size expansion, market consolidation and big investments in service, loyalty, partnerships and technology. We are clear that what will underpin IHG’s scale and success in key growth markets globally is a focus on enhancing and growing at pace, a distinct, high-quality portfolio of brands designed for great guest Patrick Cescau experiences and strong owner returns. Chair Despite a weaker RevPAR environment, the fundamental drivers supporting our industry remain strong, with a growing Final dividend Total Shareholder Return global economy, increasing disposable income and an expanding middle class all fuelling long-term demand. 85.9� 25.1% As a company we recognise the increasing to be paid on 14 May 2020 IHG’s Total Shareholder Return in 2019 importance of ensuring our culture, actions (2018: 78.1�) versus the FTSE 100 Index at 17.3% and aspirations also reflect a broader responsibility to contribute to society, local communities and the environment. This is particularly important at a time of increasing political, societal, economic and environmental complexity. Climate change, trade tensions, nationalism and eroding trust Full-year dividend Return of funds in institutions represent some of the biggest Five-year progress (�) Since March 2003, the Group themes of our time. IHG’s ability to act with has returned over $11 billion integrity, transparency and conviction is key 2019 125.8 of funds to shareholders by to our reputation with all stakeholders and to 2018 114.4 way of special dividends, long-term future growth. 2017 104.0 capital returns and share repurchase programmes. Accelerating growth 2016 94.0 Over the past two years, our transformation 2015 85.0 has sparked the change needed to take IHG to the next level in terms of our capability and growth aspirations. This includes a refined structure and ways of working, and more targeted investments that strengthen Since 2014: our brands and business – be it fresh • $500 million special dividend designs, signature marketing campaigns, paid 29 January 2019 new hotel tools, or new additions to our • $400 million special dividend brand portfolio, such as Six Senses Hotels paid 22 May 2017 Resorts Spas (Six Senses) and Atwell Suites • $1.5 billion special dividend in 2019. Collectively this is delivering paid 23 May 2016 positive results. • $500 million share buyback On a performance level, our system size completed in 2014 growth continues to accelerate in line with • $750 million special dividend our aim to reach industry-leading levels, paid 14 July 2014 and we have achieved record signings in key markets that will support future growth. 4 IHG | Annual Report and Form 20-F 2019 Equally important to an effective Board is the “ Over the past two years, our right mix of diversity, experience and backgrounds around the table – something we want to ensure is felt consistently transformation has sparked the throughout IHG. In 2019 we were delighted to again be named in the Hampton- change needed to take IHG to the Alexander Review as one of the top 10 FTSE 100 companies for female representation across our Executive Committee and direct next level in terms of our capability reports. At a Board level, I am pleased to report that an external evaluation found the and growth aspirations.” Board to be well functioning and effective. During the year, we appointed Arthur de Haast as an Independent Non- Executive Director, effective from 1 January 2020. Chair of the Capital Markets Advisory Council of NYSE-listed professional services Together, this illustrates the attractiveness of The evolution of our culture and nurturing of firm Jones Lang LaSalle, Arthur brings more our evolving brand portfolio for guests and talent is critical to IHG’s long-term success, than 30 years of capital markets, hotels, shows the trust owners have in our ability to and as a Board we engage regularly with hospitality and sustainability experience to listen to their needs and drive strong returns.