Financial Analysis of InterContinental Hotels Group

This proposal aims to analyze the financial performance of InterContinental Hotels Group over the last 10 years by collecting financial data such as liquidity ratio, quick ratio, and current ratio. The research will follow positivism research philosophy and deductive approach.

Running Head: FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
An Analysis and Evaluation of the Financial Performance of the Intercontinental Hotel Group
over the 10 years
Name of the student:
Name of the university:
Author note:

1FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
Abstract:
This proposal will aim at collecting financial data of InterContinental Hotels Group. The data
includes liquidity ratio, quick ratio as well as current ratio. Financial statements of last 10 years
will be reviewed to collect financial data. Information gap will be identified from literature
review. Positivism research philosophy will be used to throughout the research. Deductive
approach will be used to carry forward with this report.

2FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
Table of Contents
1. INTRODUCTION.......................................................................................................................3
1.1 Background of research.........................................................................................................3
1.2 Research Aim and Objectives................................................................................................4
1.3 Rationale................................................................................................................................4
1.4 Scope and limitations.............................................................................................................4
1.5 Research Questions................................................................................................................5
2. LITERATURE REVIEW............................................................................................................5
2.1 Previous research on IHG achievements...............................................................................5
2.2 Analysis of liquidity, quick ratio and current ratio of IHG from the past performances......5
2.3 Financial performance of IHG in past 10 years.....................................................................7
3. METHODOLOGY......................................................................................................................7
3.1 Research Philosophy..............................................................................................................7
Ontology......................................................................................................................................7
Objectivism..............................................................................................................................8
Subjectivism.............................................................................................................................8
Epistemology...............................................................................................................................8
Positivism.................................................................................................................................8
Interpretivism...............................................................................................................................8
3.2 Research Approach................................................................................................................9

3FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
3.3 Research Design....................................................................................................................9
3.4 Data Collection......................................................................................................................9
3.5 Sampling..............................................................................................................................10
3.6 Data Analysis.......................................................................................................................10
3.7 Ethical Considerations.........................................................................................................11
4. TIMETABLE:............................................................................................................................11
REFERENCE LIST.......................................................................................................................13

4FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
1. INTRODUCTION
1.1 Background of research:
InterContinental Hotels Group plc. that is also known as InterContinental Hotels is a
British multinational company that is specialized in hospitality. The company is headquartered in
Denham, Buckinghamshire. The hospitality business of IHG spread to over 100 countries
consisting of 5000 hotels and 800,000 guest rooms in total. The brands that are included in IHG
are Holiday Inn, Even Hotels, Candlewood Suites, Hualuxe, Crowne Plaza, Kimpton Hotels and
Staybridge Suites. An average of 1.8 million visitors are attracted by IHG. The Hotel Group
manages its businesses through marketing cloud management that was started in 2013.
They are aimed at ensuring customer satisfaction. IHG should have positive impact on
people who interact with them. Their main business objective is to provide true hospitality to
everyone. Their main target is to deliver hospitality responsibility effective. However, they are
committed to grow hotels throughout the world in a sustainable way. Along with providing
hospitality to people, the company also creates career building opportunities. They have various
partners including local community stakeholders, non-governmental organizations, humanitarian
agencies and other government bodies. IHG deals with a total of 80 digital marketing vendors.
The company is committed to work with suppliers and partners. They deal with only those
partners who are leaders in their fields. IHG have divided its suppliers and vendors into four
broad categories including marketing, hotel, corporate and global technology. IHG uses a
number of techniques to manage its businesses properly that led to an annual increase in profit.
As a result, it re-launches a number of hotels and resorts brand. Holiday Inns have been opened

5FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
in Indonesia recently. Additionally, it has also launched Kimpton Hotels and Restaurants in
London.
1.2 Research Aim and Objectives
This research proposal will mainly focus on financial performance of InterContinental
Hotels Group plc. and discuss about the sources of financial income. The objectives of research
are:
 To analyze the liquidity of InterContinental Hotels Group plc. in the last 10 years
 To evaluate the efficiency of InterContinental Hotel group
 To collect financial data over the last 10 years that will help in understanding
management strategies for increasing business profit.
1.3 Rationale
This project will be beneficial as information on trading activities of the business
organization will be gained. It will even help in understanding the available liquid assets of the
InterContinental Hotels Group that might be required as a security deposit. The financial
performance will enlighten on how easily these liquid assets can be bought or sold without
having much impact or no impact on price. Conducting research on the company’s last 10 years
financial information, will help in knowing shares owned by the Hotels Group. These shares can
be broken into liquid cash if situation demands so.
1.4 Scope and limitations
The project is aimed at finding financial performance of InterContinental Hotel Group.
On completion of this project, information will be gained on how easily saved money of the
Hotel group is converted into liquid cash.

6FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
The limitations faced while carrying out the research are that trial balance and yearly
balance sheet of the related organization cannot be accessed to gain accurate financial
information. Transaction and withdrawal of money due to specific reasons on a monthly basis
was not found. This information would be required to find the financial performance of IHG.
1.5 Research Questions
 What are the liquidity assets of InterContinental Hotels Group plc. in the last 10 years?
 What is the efficiency of InterContinental Hotel group?
 How financial data over last 10 years will help in understanding management strategies
for increasing business profit?
2. LITERATURE REVIEW
2.1 Previous research on IHG achievements:
Various authors researched on the achievements of IHG in business in the year of 2017
has been justified in the annual report of IHG. The business strategy of IHG mainly focused on
the satisfaction of its guests and owners. This led to the massive quality growth in business in
2017. They focused at shifting the dynamics within the hospitality sector of IHG. The chairman
of the InterContinental Hotels Group said that they were able to open the highest number of
hotels from 2009 including hotels in Greater China and AMEA. These openings led to an
increase in huge amount of profit. According to their financial statements group revenue in the
year 2016 was $1,784m along with operating profit of $763m globally. IHG’s system total gross
revenue is around $25.7bn (InterContinental Hotels Group PLC, 2018). The profit gained by
opening new rooms is +2.7% of the total profit. The hotel groups operate in total 100 countries
while generating a revenue of $1748m in the year 2017.

7FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
2.2 Analysis of liquidity, quick ratio and current ratio of IHG from the past performances:
As per the suggestions of the authors Legrand et al. (2014), the entire analysis of the
liquidity behind the InterContinental Hotel Groups or IHG in the past 10 years should put
forward few financial constraints like quick ratio and current ratio (Assaf et al. 2017). The term
quick ratio defines how the InterContinental Hotel Groups PLC has the ability to achieve the
short term obligations using their most relevant liquid assets. The calculations of the quick ratio
for the company depends upon the total current assets and at the same time it disregards
calculating the total inventories the company has. In addition to that, the result is thus divided by
the Total Current Liabilities for the InterContinental Hotels Group of IHG PLC. This calculation
of the quick ratio is implemented from the times of the quarter that has ended by the month of
June in 2018. The outcome of the quick ratio as suggested by the authors Meena and Dhar (2016)
by that time is somewhat between 0.78.The quick ratio for InterContinental Hotel Group or IHG
PLC as suggested by the author does not indicate that the company can at the current time fully
pay back the current liabilities. As per the facts and figures of the calculation of quick ratio
suggests, the record of the past 10 years clearly shows that the highest it has been 1.41 and the
lowest it has been was 0.40. The median of the quick ratio was 0.68. Amongst the 819
companies included in the Global Industry, the quick ratio of the IHG PLC had reduced lower
than 71 per cent. Where the industry median ranges at a proper rate of 1.20, the IHG PLC
reduces at 0.78 (Meena and Dhar 2016). Although the calculation of the quick ratio in this regard
for the organization group of IHG PLC, it can be said that the rule is conservative since the
inventories are excluded from the current assets.
The quick ratio of the financial statement for the IHG PLC proves that the organization is
overtly leverages and it has been struggling to grow or maintain their sales. There are no additive

8FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
reasons for this, but the reasons that authors have speculated might be the too faster payment of
bills or the collection of the receivables to be extremely slow. In another overview, it can also be
guessed that the inventories are taking up much time than usual for its conversion into cash and
if it has to be sold quickly, it might happen that the organization is not finding it enough cash as
a selling price and the selling of the entire inventory is happening at a lower price than the
original book value for the inventories. Therefore, the inventories are justifiably excluded in
quick ratio counting from the assets as they have been the ready sources for the immediate cash
amounts.
2.3 Financial performance of IHG in past 10 years
The financial report of the past 10 years for the current ratio calculation as per the authors
has been measured as per the ability of the company to pay the obligation for the short terms.
The calculation of the quick ratio has been measured with the help of the total asset of the
company divided by the total current liabilities of the organization (Rodica and Iulita 2017). The
current ratio of the liquidity suggests that the company has several difficulties in meeting the
obligations of the current state. The authors suggest that the InterContinental Hotel Groups has
considerably good prospects for the long term, but there have been the current obligations that
require borrowing against those prospects for meeting the obligations The entire calculation of
the current ratio indicates that the company’s operating cycle has a sense of efficiency and it can
also be said that the product for the organization can be exchanged into cash.
3. METHODOLOGY
Research methodology is defined as the process of collecting data and information that
helps in decision making.

9FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
3.1 Research Philosophy:
Ontology: In ontology philosophy, the researcher is aware of the reality of nature. The
researcher carries out research related to the topic by asking himself different questions. The
researcher is more interested on gaining view of the world on the research topic. This research
philosophy also deals with society concerns. The impact of society on surroundings is involved
in the philosophy.
Objectivism: This is one of the ontology philosophy stance that includes social phenomenon and
meaning of those phenomenon that defines them as separate factor from social actors.
Subjectivism: The social phenomena is created from consequent actions and perceptions of
social actors concerned with their existence.
Epistemology:
Positivism: It is one of the research philosophy that deals with only factual data that is attained
through observation. The measurements that will be undertaken should be trustworthy (Walliman
2017). Researcher’s role is limited to data collection and interpretation of the data to reach
desired conclusion. The research findings in case of positivism is usually quantifiable and
observable (Aliyuet al. 2014). The process depends on quantifiable observation that lead to
statistical analyses of data. Human interests are not included within the study in case of
positivism. Positivism research philosophy mainly follows five principles. According to the
principles, the research conducted should be able to predict and explain the data required.
Hypotheses is developed using inductive reasoning that is tested while the research process is
ongoing (Gray 2013). The ontology associated with positivism are universalism, ordered, real,
independent and external (Gorski 2013).

10FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
Interpretivism: The main difference between interpretivism and positivism is that interpretivism
includes human interest in the study. Researchers use interpretivism by assuming social life of
people. The study of positivism is critiqued in interpretivism. The research philosophy
emphasizes more on qualitative analysis. The philosophical position that is included in
interpretivism are idealism, social constructivism and phenomenology.
In this particular research, positivism research philosophy will be followed that proceed
with collecting real financial data of InterContinental Hotels Group in last 10 years. Accurate
financial data can be collected from the balance sheets and trial balance of the business
organization over last 10 years. Trial balance will give all the expenditures and profits of
InterContinental Hotels Group annually. The information collected will be analyzed and
hypotheses will be developed that will be tested during the research process.
3.2 Research Approach:
Deductive approach is mainly followed in positivist study (Tumele 2015). The
researcher have to focus on facts and the study can be independent of research. In other words, it
can be said that positivist study is purely based on facts and data and considers the world to be
objective and external (Smith 2015). In this particular assignment, positivism is used and
therefore deductive approach will be followed.
3.3 Research Design:
Descriptive research design will be used in this particular assignment. The financial data
that is collected relates to current issues that are being faced by IHC. The financial data that is
collected will enable researcher to describe the current situation completely. Descriptive studies
describes various aspects of the phenomenon. The studies will be helpful in finding efficiency of

11FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
InterContinental Hotels Group. Descriptive studies are used for making observations on the
financial issues that are faced by InterContinental Hotels Group.
3.4 Data Collection:
Primary data collection method: When data is collected directly by the researcher for the first
time it is called primary data. The methods might include surveys, interviews and other research
techniques.
Secondary data collection method: When someone else collects data for purpose of other
people research that data is known as secondary data. Data and information can be either
collected through primary methods or secondary methods (Håkansson 2013). Primary methods
include surveying various stakeholders while secondary methods consist gathering information
from secondary resources like internet, journals and newspaper.
Secondary data can also be divided into quantitative and qualitative. Quantitative data are
collected from statistical models, financial statements and statistics that will test hypotheses as
well as explain observations. However, qualitative data include description about observations
that includes circumstances and events. Information is collected through interviews, diaries and
newspapers. In this particular research we will obtain quantitative secondary data from various
financial statistics of the mentioned Hotels Group.
For this particular research, secondary data collection methods will be used. Internal
sources like financial statements of InterContinental Hotels Group, company information as well
as sales report will be utilized to collect accurate financial data. External sources like business
journals, business magazines, social books and internet sources will be reviewed to acquire data.
3.5 Sampling:

12FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
Literature review was done reviewing three journals from where information gap was
identified. The financial data is collected reviewing more than 15 business magazines that
consisted information about the liquid assets, current ratio and quick ratio of IHG using random
non-probability sampling method. 10 business journals were reviewed to find business activities
of IHG in last 10 years.
3.6 Data Analysis:
There are two types of data analysis methods one is qualitative data analysis and the other
is quantitative data analysis. As in this particular research we will use secondary data therefore
qualitative data analysis will be used. It will involve better interpretation and critical analysis of
facts and figures obtained from secondary sources. Data analysis of financial data of IHG will
help to gain information about the efficiency in business operations of the particular
organization, the efficiency in which the fixed assets of IHG is converted into liquid cash and
lastly the profit earned by IHG each year.
3.7 Ethical Considerations: The ethical considerations that should be kept in mind while
carrying out research are:
 The journals that will be used should be peer reviewed.
 Financial data of IHG should be collected only from published annual reports and
financial statements
 The obtained data will be used only for academic purposes.
4. TIMETABLE:
Tasks
week
1-2
week
3-4
week
5-6
week
7-8
week
9-10
week
11-12
Selection of the Topic for the

13FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
research
Developing the research proposal
Developing the research plan
Review of the literatures
collection of the secondary data
Analyzing the collected data
Making the conclusion of the
research work
Developing recommendations
Submission of final paper
Figure 1. Time Table
(Source: Created by the author)
The total task will be completed in 12 weeks starting with selection of the topic and
ending with submission of the final paper. Secondary data collection will take the highest time as
a number of journals, financial statements and annual reports needs to be reviewed.

14FINANCIAL ANALYSIS OF INTERCONTINENTAL HOTELS GROUP
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