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Leases
 12 Months Ended
Dec. 31, 2020
Presentation of leases for lessee [abstract]  
Leases
15. Leases
Right-of-use
assets
 
   
Property
$m
   
Other
$m
   
Total
$m
 
Cost
      
  
 
 
   
 
 
   
 
 
 
At 1 January 2019
   792    5    797 
  
 
 
   
 
 
   
 
 
 
Additions and other
re-measurements
   39    1    40 
  
 
 
   
 
 
   
 
 
 
Acquisition of businesses (note 11)
   25    –      25 
  
 
 
   
 
 
   
 
 
 
Transfers to assets classified as held for sale (note 12)
   (23)    –      (23) 
  
 
 
   
 
 
   
 
 
 
Terminations
   (15)    (1)    (16) 
  
 
 
   
 
 
   
 
 
 
Exchange and other adjustments
   4    –      4 
  
 
 
   
 
 
   
 
 
 
At 31 December 2019
   822    5    827 
  
 
 
   
 
 
   
 
 
 
Additions and other
re-measurements
  
 
12
 
  
 
1
 
  
 
13
 
  
 
 
   
 
 
   
 
 
 
Derecognition
  
 
(93
) 
  
 
–  
 
  
 
(93
) 
  
 
 
   
 
 
   
 
 
 
Terminations
  
 
(125
) 
  
 
(2
) 
  
 
(127
) 
  
 
 
   
 
 
   
 
 
 
Exchange and other adjustments
  
 
1
 
  
 
–  
 
  
 
1
 
  
 
 
   
 
 
   
 
 
 
At 31 December 2020
  
 
617
 
  
 
4
 
  
 
621
 
  
 
 
   
 
 
   
 
 
 
Depreciation and impairment
      
  
 
 
   
 
 
   
 
 
 
At 1 January 2019
   (282)    (2)    (284) 
  
 
 
   
 
 
   
 
 
 
Provided
   (37)    (1)    (38) 
  
 
 
   
 
 
   
 
 
 
System Fund expense
   (5)    –      (5) 
  
 
 
   
 
 
   
 
 
 
Impairment charge
   (32)    –      (32) 
  
 
 
   
 
 
   
 
 
 
Transfers to assets classified as held for sale (note 12)
   8    –      8 
  
 
 
   
 
 
   
 
 
 
Terminations
   14    1    15 
  
 
 
   
 
 
   
 
 
 
Exchange and other adjustments
   (1)    –      (1) 
  
 
 
   
 
 
   
 
 
 
At 31 December 2019
   (335)    (2)    (337) 
  
 
 
   
 
 
   
 
 
 
Provided
  
 
(34
) 
  
 
(1
) 
  
 
(35
) 
  
 
 
   
 
 
   
 
 
 
System Fund expense
  
 
(4
) 
  
 
–  
 
  
 
(4
) 
  
 
 
   
 
 
   
 
 
 
Impairment charge
  
 
(16
) 
  
 
–  
 
  
 
(16
) 
  
 
 
   
 
 
   
 
 
 
System Fund impairment charge
  
 
(32
) 
  
 
–  
 
  
 
(32
) 
  
 
 
   
 
 
   
 
 
 
Derecognition
  
 
44
 
  
 
–  
 
  
 
44
 
  
 
 
   
 
 
   
 
 
 
Terminations
  
 
64
 
  
 
1
 
  
 
65
 
  
 
 
   
 
 
   
 
 
 
Exchange and other adjustments
  
 
(3
) 
  
 
–  
 
  
 
(3
) 
  
 
 
   
 
 
   
 
 
 
At 31 December 2020
  
 
(316
) 
  
 
(2
) 
  
 
(318
) 
Net book value
      
  
 
 
   
 
 
   
 
 
 
At 31 December 2020
  
 
301
 
  
 
2
 
  
 
303
 
  
 
 
   
 
 
   
 
 
 
At 31 December 2019
   487    3    490 
  
 
 
   
 
 
   
 
 
 
At 1 January 2019
   510    3    513 
  
 
 
   
 
 
   
 
 
 
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 92% of the
right-of-use
asset net book value) is 53 years.
Many of the Group’s property leases contain extension or early termination options, which are used for operational flexibility. One of the Group’s top eight leases 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. The value of the undiscounted rental payments relating to this lease and not included in the value of the lease asset and liability is $288m. 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.
 
Impairment testing of
right-of-use
assets
For impairment testing of hotel properties, each hotel is deemed to be a CGU. 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 reflect the five-year RevPAR recovery period outlined on page 135 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, using the assumptions described on page 136. $32m of this impairment charge was borne by the System Fund in line with existing principles for cost allocation relating to this facility.
Other
right-of-use
assets were also tested for impairment with no resulting charge, the most significant of which was the InterContinental Boston, which has
non-current
assets with a total carrying value of $195m. Details of the testing performed and sensitivities are contained on page 137.
Terminations
The lease of the InterContinental San Juan was terminated in 2020, resulting in a total gain of $30m (see note 6). Other terminations relate mainly to office properties where the lease was terminated in the period.
Lease liabilities
Total lease liabilities are analysed as follows:
 
   
2020
$m
   2019
$m		 
Currency
    
  
 
 
   
 
 
 
US dollars
  
 
385
 
   514 
  
 
 
   
 
 
 
Sterling
  
 
10
 
   52 
  
 
 
   
 
 
 
Euros
  
 
7
 
   43 
  
 
 
   
 
 
 
Other
  
 
48
 
   51 
  
 
 
   
 
 
 
  
 
450
 
   660 
  
 
 
   
 
 
 
Analysed as:
    
  
 
 
   
 
 
 
Current
   34    65 
  
 
 
   
 
 
 
Non-current
   416    595 
  
 
 
   
 
 
 
  
 
450
 
   660 
  
 
 
   
 
 
 
Amounts recognised in profit or loss
The following amounts were recognised as expense/(income) in the year:
 
   
2020
$m
   2019
$m		   2018
$m		 
Depreciation of
right-of-use
assets
  
 
35
 
   38    35 
  
 
 
   
 
 
   
 
 
 
System Fund depreciation of
right-of-use
assets
  
 
4
 
   5    4 
  
 
 
   
 
 
   
 
 
 
Impairment charge
  
 
16
 
   32    —   
  
 
 
   
 
 
   
 
 
 
System Fund impairment charge
  
 
32
 
   —      —   
  
 
 
   
 
 
   
 
 
 
Derecognition of
right-of-use
assets and lease liabilities
  
 
(22
) 
   —      —   
  
 
 
   
 
 
   
 
 
 
Gain on lease termination
  
 
(30
) 
   —      —   
  
 
 
   
 
 
   
 
 
 
Expense relating to variable lease payments
  
 
7
 
   58    48 
  
 
 
   
 
 
   
 
 
 
Expense relating to short-term leases and
low-value
assets
  
 
2
 
   3    3 
  
 
 
   
 
 
   
 
 
 
Income from
sub-leasing
right-of-use
assets
  
 
(1
) 
   (2)    (2) 
  
 
 
   
 
 
   
 
 
 
Recognised in operating (loss)/profit
  
 
43
 
   134    88 
  
 
 
   
 
 
   
 
 
 
Interest on lease liabilities
  
 
37
 
   41    39 
  
 
 
   
 
 
   
 
 
 
Total recognised in the Group income statement
  
 
80
 
   175    127 
  
 
 
   
 
 
   
 
 
 
Amounts recognised in the Group statement of cash flows
Total cash paid during the year relating to leases of $104m (2019: $159m, 2018: $132m) comprises $39m (2019: $100m, 2018: $97m) paid in respect of operating activities and $65m (2019: $59m, 2018: $35m) paid in respect of financing activities.
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.
Variable lease payments relating to the UK portfolio and two German hotels are discussed in note 6.
Exposure to future cash outflows
At 31 December 2020, the Group was committed to future cash outflows of $nil (2019: $3m) relating to leases that have not yet commenced. A lease liability is recorded when the leased assets are available for use by the Group.
The maturity analysis of lease liabilities is disclosed in note 24.
The undiscounted future cash flows receivable from subleased properties amount to $2m (2019: $3m, 2018: $3m).