Revenue

12 Months Ended

Dec. 31, 2020

3. Revenue

Disaggregation of revenue

The following table presents Group revenue disaggregated by type of revenue stream and by reportable segment:


Year ended 31 December 2020	Americas $m		EMEAA $m		Greater China $m		Central $m		Group $m
Franchise and base management fees		452		93		61		—		606

Incentive management fees		5		14		16		—		35

Central revenue		—		—		—		182		182

Revenue from fee business		457		107		77		182		823

Revenue from owned, leased and managed lease hotels		55		114		—		—		169

		512		221		77		182		992

System Fund revenues (note 33)										765

Reimbursement of costs										637

Total revenue										2,394

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 have been 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 is now recorded within Central revenue (see page 139). This change is 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 the prior year, Central revenue and operating profit in 2019 would have been $18m and $22m higher respectively (2018: $15m and $20m respectively); System Fund revenues would have reduced and System Fund operating loss would have increased by the same amounts.


Year ended 31 December 2019	Americas $m		EMEAA $m		Greater China $m		Central $m		Group $m
Franchise and base management fees		840		247		87		—		1,174

Incentive management fees		13		90		48		—		151

Central revenue		—		—		—		185		185

Revenue from fee business		853		337		135		185		1,510

Revenue from owned, leased and managed lease hotels		187		386		—		—		573

		1,040		723		135		185		2,083

System Fund revenues (note 33)										1,373

Reimbursement of costs										1,171

Total revenue										4,627


Year ended 31 December 2018	Americas $m		EMEAA $m		Greater China $m		Central $m		Group $m
Franchise and base management fees		835		227		94		—		1,156

Incentive management fees		18		93		49		—		160

Central revenue		—		—		—		170		170

Revenue from fee business		853		320		143		170		1,486

Revenue from owned, leased and managed lease hotels		198		249		—		—		447

		1,051		569		143		170		1,933

System Fund revenues (note 33)										1,233

Reimbursement of costs										1,171

Total revenue										4,337

Contract balances


	2020 $m			2019 $m
Trade receivables (note 18)		309			515

Contract assets		336			334

Deferred revenue		(1,569	)		(1,564	)

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 138.

Contract assets

Contract assets are recorded in respect of key money payments; the difference, if any, between the initial face and market value of loans made to owners; and the value of payments under performance guarantees.


	2020 $m			2019 $m
At 1 January		334			290

Costs paid		74			64

Recognised as a deduction to revenue		(25	)		(22	)

Impairment charges		(53	)		—

Repayments		—			(1	)

Exchange and other adjustments		6			3

At 31 December		336			334

Analysed as:

Current		25			23

Non-current		311			311

		336			334

Key money is recognised as a contract asset when the trigger event for payment is met and payment becomes unconditional. The Group also has future commitments for key money payments which are contingent upon future events and may reverse.

At 31 December 2020, the amount of performance guarantees included within trade and other payables was $1m (2019: $2m) and the maximum payout remaining under such guarantees was $72m (2019: $85m). In estimating amounts due under performance guarantees, the Group has considered ‘force majeure’ provisions within its management agreements.

Impairment of contract assets relates primarily to deposits made to SVC of $33m (see page 137). The remaining impairment of $20m relates to key money and performance guarantee payments on individual properties which are supported by future franchise and management fees. As a result of the expected impact of

Covid-19

and the subsequent recovery period on trading, all significant contract assets were tested for impairment using cash flow projections which reflect the five-year RevPAR recovery period outlined on page 135. The key assumptions are the RevPAR growth forecasts and the

pre-tax

discount rates used, which were

8.4%-9.3%

for Americas,

9.5%-10.4%

for Europe, 14.1% for other EMEAA and 13.3% for Greater China.

Of the total impairment including SVC balances, $42m relates to the Americas region and $11m relates to the EMEAA region.

Deferred revenue

Deferred revenue is recognised when payment is received before the related performance obligation is satisfied. The main categories of deferred revenue relate to the loyalty programme,

co-branding

agreements and franchise application and

re-licensing

fees.


	Loyalty programme $m			Other co-brand fees $m			Application & re-licensing fees $m			Other $m			Total $m
At 1 January 2019		1,181			77			175			73			1,506

Acquisition of businesses		—			—			—			2			2

Increase in deferred revenue		533			—			26			64			623

Recognised as revenue		(481	)		(11	)		(25	)		(49	)		(566	)

Exchange and other adjustments		—			—			(4	)		3			(1	)

At 31 December 2019		1,233			66			172			93			1,564

Increase in deferred revenue		344			—			14			45			403

Recognised as revenue		(332	)		(11	)		(20	)		(39	)		(402	)

Exchange and other adjustments		—			—			—			4			4

At 31 December 2020		1,245			55			166			103			1,569

Analysed as:

Current		376			11			22			43			452

Non-current		869			44			144			60			1,117

		1,245			55			166			103			1,569

At 31 December 2019

Current		476			11			25			43			555

Non-current		757			55			147			50			1,009

		1,233			66			172			93			1,564

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 on the previous page, 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 related to performance obligations that were unsatisfied at 31 December 2020 are as follows:


	2020						2019
Expected timing of recognition	Loyalty and co-brand $m		Other $m		Total $m		Loyalty and co-brand $m		Other $m		Total $m
Less than one year		387		65		452		487		68		555

Between one and two years		313		40		353		292		34		326

Between two and three years		249		29		278		176		30		206

Between three and four years		176		24		200		115		27		142

Between four and five years		73		22		95		79		27		106

More than five years		102		89		191		150		79		229

		1,300		269		1,569		1,299		265		1,564

Contract costs

Movements in contract costs, typically developer commissions, are as follows:


	2020 $m			2019 $m
At 1 January		72			60

Costs incurred		11			19

Amortisation		(9	)		(7	)

Exchange and other adjustments		1			—

At 31 December		75			72

Analysed as:

Current		5			5

Non-current		70			67

		75			72

Contract costs were tested for impairment during the year. As contract costs typically constitute a very small percentage of deal value, no impairment was identified.