2019 BSC SOP

2019 BSC SOP

1.1 Hotel Gross Operation Revenue (10%) 1. Our Business (40%)

Rationale

Hotel Gross Operating Revenue (“GOR”) is the main indicator of our all-round top line performance. A significant number of business strategies are structured based on the budgeted GOR of our hotels. It is a priority for us as a group to achieve our set budgets and reduce negative variance to drive shareholder value.

Definitions

Scoring Mechanism

1. Hotel Gross Operating Revenue (“GOR”) • GOR comprises revenue generated in local currency from: o Rooms o Food and beverage o Other operating departments o Shops and showcase o Other operating revenue

For a hotel to score points in this metric: • Must attain a minimum GOR performance of 80% • Any achievement below 80% will result in no score • Performance above 80% will additional score • Maximum score will be capped at GOR performance of 110% incrementally receive

2. Actual Gross Operating Revenue (“Actual GOR”) • December flash actual 2019 GOR (in local currency) submitted on TM1 on or before 5 January 2020 • For monthly tracking and reporting, actual + remaining months’ forecast GOR (in local currency) submitted on TM1 on or before 5 th day of the following month

GOR Performance

Score

≥ 110% 12.0 100% - 109% 10.0 – 10.9 90% - 99% 9.0 – 9.9 80% - 89% 5.0 < 80% 0

3. Budgeted Gross Operating Revenue (“Budgeted GOR”) • Full year budgeted GOR (in local currency) as submitted on TM1

Measurement

GOR performance = Actual GOR ÷ Budgeted GOR

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1.2 Hotel EBITDA* (10%) 1. Our Business (40%)

Rationale

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) is the main indicator of our bottom line performance and a measure of the overall operational effectiveness. It takes into account the respective cost of operation and also provides a financial measurement of cash flow from operations. A significant amount of how we execute on our business strategies drives our EBITDA.

Definitions

Scoring Mechanism

1. Hotel Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) • EBITDA is net of departmental contribution, undistributed operating expenses, management fee, and non-operating income & expenses 2. Actual Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) • December flash actual 2019 EBITDA in local currency (before bonus) submitted on TM1 on or before 5 January 2020 • For monthly tracking and reporting, actual + remaining months’ EBITDA in local currency (before bonus) submitted on TM1 on or before 5th day of the following month 3. Budgeted Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) • Budgeted EBITDA in local currency (before bonus) as submitted on TM1

EBITDA Performance

For a hotel to score points in this metric: • Must have a positive EBITDA (i.e. not loss making) • Must attain a minimum EBITDA performance of 80% • Performance above 80% will incrementally receive additional score • Maximum score will be capped at EBITDA performance of 110% Budgeted negative EBITDA, to score points in this metric: • Must at minimum attain budget • Performance above budget will incrementally receive additional score • Rationale for a slight difference in scoring mechanism is to encourage loss making hotels to attain budget and target towards a break even situation

Score

≥ 110% 12.0 100% - 109% 10.0 – 10.9 90% - 99% 9.0 – 9.9 80% - 89% 5.0 < 80% 0

EBITDA Performance

Score

≥ 110% 12.0 105% - 109% 10.5 – 10.9 100% - 105% 10.0 – 10.5 < 100% 0

Measurement

• EBITDA performance = Actual EBITDA ÷ Budgeted EBITDA

• In special situations where a hotel budgeted for negative EBITDA: EBITDA performance = 2 – (Actual EBITDA ÷ Budgeted EBITDA)

*Pre-bonus

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1.3 Hotel Food and Beverage Outlet Profit* (5%) 1. Our Business (40%)

Rationale

Food and beverage (“F&B”) is a key strategic pillar for our business as it contributes to almost half of our group’s revenue. Within the F&B department, this year’s focus is around improving our F&B outlets profitability given the large potential we see in improving and growing this business. To achieve this, every hotel will need to deliver on budget, keeping in view the guiding principles laid out below, so that we are able to improve our guest experience, competitive advantage amongst peers, and solidify our foundations for future growth.

Definitions

Scoring Mechanism

F&B OP Performance

Score

1. F&B Outlet Profit (“F&B OP”) • F&B OP is, excluding Banquet, all F&B-related revenue net of both direct expenses and indirect expenses and adjusted for bonus in local currency 2. Actual F&B Outlet Profit (“Actual F&B OP”) • December flash actual 2019 F&B OP in local currency (before bonus) submitted on TM1 on or before 5 January 2020 • For monthly tracking and reporting, actual + remaining months’ F&B OP in local currency (before bonus) submitted on TM1 on or before 5 th day of the following month 3. Budgeted F&B Outlet Profit (“Budgeted F&B OP”) • Budgeted F&B OP in local currency (before bonus) as submitted on TM1

For a hotel to score points in this metric: • Must have a positive F&B OP (i.e. not loss making) • Must attain a minimum F&B OP performance of 80% • Performance above 80% will incrementally receive additional score • Maximum score will be capped at F&B OP performance of 110%

≥ 110% 6.0 100% - 109% 5.0 – 5.9 90% - 99% 4.0 – 4.9 80% - 89% 3.0 < 80% 0

Budgeted negative F&B OP, to score points in this metric: • Must at minimum attain budget • Performance above budget will incrementally receive additional score • Rationale for a slight difference in scoring mechanism is to encourage loss making hotels to attain budget and target towards a break even situation

F&B OP Performance

Score

≥ 110% 6.0 105% - 109% 5.5 – 5.9 100% - 105% 5.0 – 5.5 < 100% 0

Measurement

• F&B OP performance = Actual F&B OP ÷ Budgeted F&B OP

• In special situations where a hotel budgeted for negative F&B OP: F&B OP performance = 2 – (Actual F&B OP ÷ Budgeted F&B OP)

*Pre-bonus

10

1.4 Forecast Accuracy (5%) 1. Our Business (40%)

Rationale

The ability to have an accurate view of the business is key to providing timely business insight and support operational adjustments where required. This is also essential to the effective execution of business strategies.

Definitions

1. Monthly Actual EBITDA (in local currency) submitted on TM1 on or before 5 th day of the following month

2. Most recent rolling forecast submitted on TM1 on or before 5 th day of the month

3. Monthly variance % of actual EBITDA compared to most recent rolling forecast • January EBITDA actuals will be compared with Budget’s January month

• February EBITDA actuals will be compared with 1+11 forecast’s February month as submitted on TM1 on or before 5th day of February • March EBITDA actuals compared with 2+10 forecast’s March month as submitted on TM1 on or before 5th day of March, April with 3+9’s April, etc.

Measurement

Scoring Mechanism

• Monthly variance % = Actual EBITDA ÷ Most recent rolling forecast - 1

To score points in this metric, the variance must fall within ±10% variance with extra point granted

• A monthly score will be given based on each month’s accuracy

Monthly Variance

Score

Within ±1%

6

• Full year score and YTD tracking will be based on the average of the monthly scores earned o Sum of monthly scores divided by the number of months

Within ±5%

5

Between ±5% to 10%

3

More than ±10%

0

11

1.5 Drive E-direct (5%) 1. Our Business (40%)

Rationale

E-direct channels have been identified as our most profitable and efficient channel. In Jul – Dec 2018, our combined average contribution of the E-direct channel was 13.4%, compared to our competitor benchmark of 14% and same period previous year 9.8%. We have identified book direct as our company-wide strategic initiative and this year we want to focus on the E-Direct business under Retail segments. With all the investments enhancing digital platforms, marketing and loyalty programs, our hotels should be able to increase their share of E-direct business and drive more profitable business.

Definitions

Guiding Principles

1. E-direct channels • Desktop and mobile website – Shangri-La.com, Hoteljen.com • Shangri-La app • WeChat Interfaced Platforms • E-Partnership, e.g. Fliggy

In hotels’ attempt to drive E-direct, to minimize risk and undesired fluctuations, we are setting ground rules to prevent drastic changes in the hotel’s segmentation mix: • Share is calculated based on Retail & Discount market segments to make sure hotels spend their effort to push the right segments • Hotel’s monthly E-direct share shall be reported and monitored by SLIM Revenue Optimization team monthly • Hotels are expected to maintain a steady uptrend on the E-direct share instead of taking drastic measure to push E-direct business in a particular period • Hotels will be given discipline goals on rate parity which will help drive the E- direct share • For potential ways to increase your share of e-direct. Details will be shared later. • This document will be constantly updated by HQ digital marketing team and should be followed in conjunction with the revenue optimization teams strategies For a hotel to score points in this metric: • YTD growth (YTD – 2018 E-Direct) must attain a minimum performance of 80% of the “2019 Growth Target” • 80% of the growth target or above will incrementally receive additional score • Maximum score will be awarded for 110% and above of the growth target • Dec YTD score will be adopted as the 2019 BSC final result E-Direct Score ≥ 110% 6.0 Scoring Mechanism

2. Retail and Discount room revenue • Retail & Discount room revenue in constant USD for 1 January 2019 – 31 December 2019, as reported on Blueprint, submitted by 7 January 2020 • Retail & Discount segments (under TravelClick Demand 360 definitions) include

Market Segments Public Rates (RAC) Packages (PKG)

Market codes ADV, SMR, RKO

PBC, PCS, PVR, PKG, PGL, PKO

Wholesale Online (IWS) Negotiated Rates (COR)

IWS COT LSG

Long Stay (LSG)

Individual Others (OTH)

OTH, GCR

• For monthly reporting, actual Retail & Discount room revenue in constant USD submitted and made available on Blueprint by 7 th day of the following month

3. Retail and Discount room revenue generated via E-direct channels • Retail and Discount room revenue in constant USD for 1 January 2019 – 31 December 2019 generated from E-direct channels as reported on Blueprint, submitted by 7 January 2020 • For monthly reporting, actual Retail & Discount room revenue generated via e-direct channels in constant USD submitted and made available on Blueprint by 7 th day of the following month

4. E-direct share • E-direct share = Retail & Discount room revenue generated via E-direct channels ÷ Total Retail & Discount room revenue

100% - 109% 5.0 – 5.9 90% - 99% 4.0 – 4.9 80% - 89% 3.0 < 80% 0

Measurement

Every hotel is provided an individual E-direct share target, which is an improvement goal based on their actual 2018 E-direct share of Retail & Discount room revenue. “2019 Growth Target” (i.e. 2019 E-direct Share Target – 2018 E-Direct) per hotel can be found in this link. 12 “YTD Growth Target” is provided for easier tracking (i.e. 2019 Growth Target divided into 12 months and by Dec, hotels are expected to achieve their “2019 Growth Target”).

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1.6 Grow Profitable Market Share RGI (5%) 1. Our Business (40%)

Rationale

RGI premium represent our ability to drive higher RevPAR over a defined set of competitors. Growing RGI year on year, is a measure of our ability to extract more value out of the market and our customers than our competitors. Growing RGI premium demonstrates the value of our strategies to build customer preference and monetize that preference into higher topline returns over defined competitors. As EBITDA is a critical goal with higher weighting, our strategies to drive topline RGI must be profitable and drive incremental profit.

Definitions

Guiding principles

1. RGI Premium • Our RevPAR divided by compset RevPAR. An index over 100% indicates premium against compset. Less than 100% inidcates competitors have preference with customers over our hotel. • RGI premium measures brand preference and our ability to attract more revenue per available room over our competitors. A healthy prmeium is above 115%. • RGI is found on your Smith Travel Market Share report. 2. RGI Growth • Percent change between this year RGI and last year RGI. • Growing our RGI yoy demonstrates our ability to extract more value from our customer and the market than our defined competitive set. • Collective comp set growth can be a proxy for organic growth; growing RGI shows our ability to outperform organic / comp set growth. • RGI growth is found on your Smith Travel Market Share report For the 19 hotels (HJM, MAC, SLBO, SLTN, SLWZ,SLBT, SLCC, SLHH, SLMZ, SLQF, SLQH, SLUB, SBHI, SLDQ, SLGL, SLLS, HJMD, HJP, RSR) that do not have Smith Travel Market Share report, Rate Parity will be used in place of RGI goal.

In hotels’ attempt to drive RGI growth, to minimize risk and undesired fluctuations, we are setting ground rules to prevent drastic changes in the hotel’s segmentation mix: • Comp sets should consist of hotels we directly compete against for customers. The goal is to grow RGI against a proper comp set. Any comp set change is subject to the approval by EVP Revenue Optimization, Regional EVP Operations and IMBD. • Goal is to grow ‘profitable’ RGI that results in incremental profits. Do not sacrifice EBITDA for RGI gains. • Smith Travel Research (STR) reports are official measurement of achievements towards goal. • For hotels that do not have a valid STR comp set, Rate Parity will be used in place of RGI as a goal.

Scoring Mechanism

For a hotel to score points in this metric: • YTD must attain a minimum performance of 80% of the RGI goal (the target) • 80% of the target or above will incrementally receive additional score • Maximum score will be awarded for 110% and above of the target • Dec YTD score will be adopted as the 2019 BSC final result RGI Score ≥ 110% 6.0

Measurement

Every hotel has been provided an individual RGI goal, which is an improvement goal based on current RGI levels and historical growth trends. Please refer to this link for your RGI goal. Your goal is measured off your primary comp set, for hotels that have more than 1 comp set.

100% - 109% 5.0 – 5.9 90% - 99% 4.0 – 4.9 80% - 89% 3.0 < 80% 0

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1.6 Rate Parity (5%) – For 19 hotels* without STR reports only 1. Our Business (40%)

Rationale

A key strategic pillar to achieving our book direct strategy is achieving pricing parity on all our channels. Our guests are unlikely to book on our own channels which are the most profitable to us such as the Shangri-La App, Shangri-la.com, hoteljen.com if they can find cheaper rates through third parties such as C-trip or Booking.com to whom we pay a large commission for every transaction. Therefore, we must achieve rate parity which is the key enabler of successfully executing our Book Direct strategy.

Guiding principles

Definitions

In the hotels’ attempt to drive rate parity, to minimize risk and undesired fluctuations, we are setting these ground rules to prevent drastic changes in rates: • The tool will take into account a 2% buffer to account for any possible discrepancies caused by rounding, exchange rate, etc. • Only if the variance between the rate on brand.com and a third party is higher than 2%, will this be marked as "lose" (out of parity). For a hotel to score points in this metric: • Must attain a minimum performance of 80% of Rate Parity goal (the target) • 80% of the target or above will incrementally receive additional score • Maximum score will be awarded for 110% and above of the target • Dec YTD score will be adopted as the 2019 BSC final result Scoring Mechanism

1. ForNova A tool, we have subscribed to, which provides us with a system that tracks the rates of our hotels on: • Brand.com; • 3 contracted OTA’s (Booking.com, Expedia, and Ctrip); and • 3 meta's (Tripadvisor, Trivago and Qunar). Up to 3 points of sale (e.g. expedia.com.au, .uk or .jp) have been selected for each OTA / meta based on the main geographic feeder markets of each hotel individually Please refer to this link for the list of points of sale which have been validated by the regional revenue team and also the “2019 YoY Growth Target”

2. Brand.com This includes: • Shangri-La.com • Hoteljen.com

3. Rate shopped Lowest price point available for public sale, this can be flexible or with restrictions (such as Advance Purchase) Rate integrity is established when the price point on brand.com is equal (or lower) than on the OTA/meta (no matter what rate product) Items such as currency, taxes, service charge, etc are taken into account for rate integrity comparison

Rate Parity

Score

≥ 110% 6.0^ 100% - 109% 5.0 – 5.9 90% - 99% 4.0 – 4.9 80% - 89% 3.0 < 80% 0

Measurement

Rate integrity score = percentage of times a rate found on brand.com was equal or lower than on the OTA/meta (measured from 1 January – 31 December 2019) The measurement can be found on the dashboard when entering the ForNova online tool and change time view to "Month". Rate integrity performance = actual rate integrity score ÷ rate integrity score target

^ For hotels with goal > 90%, 6.0 will be awarded if hotel achieves rate parity score of ≥ 95%

*HJM, MAC, SLBO, SLTN, SLWZ,SLBT, SLCC, SLHH, SLMZ, SLQF, SLQH, SLUB, SBHI, SLDQ, SLGL, SLLS, HJMD, HJP, RSR

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2. Our People (20%) 2.1 Implementation of Shangri-La Academy (5%)

Rationale

To implement a consistent Shangri-La Academy branding for Learning (physical training room and communication materials) and to build the capability of the hotel to roll out digital learning platform for employees.

Guiding Principles

Definitions

1. The hotel is determined to have implemented a consistent Shangri-La branding when:

• To ensure Shangri-La Academy brand rollout and consistency across the organization • To equip learning managers of all hotels with the ability to roll out LMS platform in their hotel

• Shangri-La Academy signage for the learning room is installed and visible to all colleagues (in the case where a hotel does not have learning room signage is used during learning sessions)

• All materials used during training and for communication is following the Shangri-La Academy branding guidelines and identity

2. The learning manager is determined to have the ability to roll out the LMS platform if he/ she has been trained and certified in the following areas:

• Creation of digital learning program

• Launching & Cascading of the LMS platform

• Maintaining the LMS platform

Measurement

Scoring Mechanism

• Roll out the rebranded Shangri-La Academy following corporate guidelines and launch programs to change the employees’ mindset from Training to Learning. • The learning manager of each hotel must be trained and certified to have the ability to roll out the LMS platform in hotel.

For a hotel to score points in this metric:

a) Must roll out rebranded Shangri-La Academy following corporate guidelines and launch programs to change the employees’ mindset from Training to Learning b) The learning manager of each hotel must be trained and certified to have the ability to roll out the LMS platform Score

The Area Director of learning and development will audit the hotels during their visits and will report on both points by 31 Oct 2019.

Attainment of (a) and (b)

5

Attainment of (a) but not (b)

0

Non-attainment of (a) and (b)

0

15

2. Our People (20%) 2.2 Core Learning Program (5%)

Rationale

To drive consistent standards and enhance safety culture, all eligible colleagues are to complete and pass the core learning programs (Code of Conduct, Hotel Security, “FLS”, “InfoSec”, “SFSMS”).

Guiding Principles

Definitions

• To encourage colleagues to fully participate in our core learning, creating a culture of learning and fulfilling our statutory requirements. • Audits of hotels on this topic will be conducted during HR partner’s visits and internal audit assessment; hence, maintenance of proper records is necessary

Core Learning Programs that all applicable employees are expected to complete and pass:

Core learning program

Applicable* to

a) Code of Conduct

All employees

b) Hotel Security

All employees

c) Fire Life Safety (“FLS”)

All employees

d) Information Security Training (“InfoSec”)

All employees

e) Shangri-La Food Safety Management System Basics (“SFSMS”)

All food handlers

*Applicable to employees joined on or before 1 October 2019

Scoring Mechanism

Measurement

For a hotel to score points in this metric:

• CLP completion rate = Number of applicable FTEs that have completed ALL core training programs ÷ total number of applicable FTEs in the hotel (as at 1 Oct 2019) • Pass results for the respective programs will be based on the stipulated percentage as communicated by Shangri-La Academy

• All applicable employees must complete (minimum CLP completion rate of 100%) and pass the learning programs • Any achievement below 100% will result in no score

CLP completion with pass results Score

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