Share-based payments

12 Months Ended

Dec. 31, 2023

Text Block [Abstract]

Share-based payments

28. Share-based payments

In 2023, the new Deferred Award Plan rules (‘DAP’) replaced the IHG Annual Performance Plan (‘APP’) and Long Term Incentive Plan (‘LTIP’) as a simplified, combined set of plan rules which govern the Company’s discretionary incentive plans.

Awards granted under the DAP can consist of Deferred Annual Incentive (‘DAI’), Long-Term Incentive (‘LTI’), Restricted Stock Unit (‘RSU’) and other ad hoc awards.

The DAP rules were approved at the AGM on 5 May 2023, with all LTI and RSU awards granted after this date and DAI awards granted in respect of 2024 and future APP years being subject to the rules of the DAP. All previously granted awards will still be subject to the LTIP and APP rules respectively. In the transition to the DAP, there have been no changes to accounting for the awards.

Annual Performance/Deferred Annual Incentive Awards

Eligible employees (including Executive Directors) may receive all or part of their bonus in the form of deferred shares and/or receive one-off awards of shares. Deferred shares in relation to annual performance-related bonus plans are released on the third anniversary of the award date. Awards are conditional on the participants remaining in the employment of a participating company or leaving for a qualifying reason. The grant of deferred shares under the APP/DAP is at the discretion of the Remuneration Committee.

The number of shares is calculated by dividing a specific percentage of the participant’s annual performance-related bonus award by the average of the middle market quoted prices on the three consecutive business days following the announcement of the Group’s results for the relevant financial year.

Long Term Incentive Plan and Restricted Stock Units

Executive Directors and eligible employees may receive conditional share awards, which normally have a vesting period of three years, subject to continued employment. In addition, certain LTI awards made to Executive Directors are normally subject to a further two-year holding period after vesting.

LTI awards are subject to performance-based vesting conditions set by the Remuneration Committee, which are normally measured over the vesting period.

Awards are normally made annually and, except in exceptional circumstances, will not exceed 3.5 or 5 times salary for eligible employees under the LTIP or DAP rules respectively.

Colleague Share Plan

The Colleague Share Plan gives eligible corporate employees the opportunity to purchase shares up to an annual limit. After the end of the plan year, the participant will be awarded the right to receive one matching share for every purchased share (subject to continued employment). If the participant holds the purchased shares until the second anniversary of the end of the plan year, the conditional right to matching shares vests.

The total fair value of the Colleague Share Plan is not significant.

More detailed information on the performance measures for awards to Executive Directors is shown in the Directors’ Remuneration Report on pages 128 to 133.

Costs relating to share-based payment transactions

		2023 $m			2022 $m			2021 $m
Equity-settled
Operating profit before System Fund, reimbursables and exceptional items			31			28			26
System Fund			20			16			13
			51			44			39
Cash-settled
Operating profit before System Fund, reimbursables and exceptional items			5			2			2
			56			46			41

No consideration was received in respect of ordinary shares issued under option schemes during 2023, 2022 or 2021.

Option pricing models, assumptions and movements in awards outstanding

		APP							LTIP
		Binomial valuation model							Monte Carlo Simulation, Binomial and Finnerty valuation models
Option pricing models and assumptions			2023		2022		2021			2023		2022		2021
Weighted average share price (pence)			5,571.7		5,018.3		5,009.0			5,318.0		4,875.0		4,980.0
Expected dividend yield										2.52% to 2.77%		2.29% to 2.67%		1.11%
Risk-free interest rate										3.85%		1.29%		0.09%
Volatilitya										29% to 30%		35% to 45%		43%
Term (years)			2.3		1.7		1.5			3.0		3.0		3.0

a  The expected volatility was determined by calculating the historical volatility of the Company’s share price corresponding to the expected life of the share award.

		APP/DAP								LTIP/DAP
Number of share awards (thousands)						Performance-related awards/LTI				Restricted stock units
Outstanding at 1 January 2021			413				814				1,421
Granted			90				281				442
Vested			(147	)			(70	)			(391	)
Lapsed or cancelled			(8	)			(153	)			(122	)
Outstanding at 31 December 2021			348				872				1,350
Granted			236				323				706
Vested			(254	)			(23	)			(391	)
Lapsed or cancelled			(9	)			(239	)			(90	)
Outstanding at 31 December 2022			321				933				1,575
Granted			214				329				683
Vested			(186	)			(180	)			(533	)
Lapsed or cancelled			(17	)			(246	)			(63	)
Outstanding at 31 December 2023			332				836				1,662
Fair value of awards granted during the year (cents)
2023			6,926.4				3,169.7				6,351.0
2022			6,180.2				3,770.0				5,656.4
2021			6,888.5				4,676.3				6,559.7
Weighted average remaining contract life (years)
At 31 December 2023			1.5				1.3				1.3
At 31 December 2022			1.0				1.1				1.2
At 31 December 2021			0.5				1.2				1.2

The above awards do not vest until the performance and service conditions have been met.

The weighted average share price at the date of exercise for share awards vested during the year was 5,470.3p (2022: 4,950.5p). The closing share price on 31 December 2023 was 7,090.0p (31 December 2022: 4,744.0p) and the range during the year was 4,832.0p to 7,118.0p (2022: 4,193.0p to 5,338.0p).