IHG boasts good growth as development pipeline surges

InterContinental Hotels Group reported a “good” third quarter on Friday, with global comparable revenue per available room up 2.3%, and ahead 2.2% in the year-to-date through the third quarter.

The FTSE 100 hotels operator opened 11,000 rooms during the period, increasing its net system size 4.1% year-on-year to 786,000 rooms.

It said it also signed on 20,000 new rooms, taking its development pipeline to 235,000 rooms.

“We have delivered a good third quarter performance; RevPAR increased by 2.3% and net rooms growth of 4.1% was our strongest since 2010,” said IHG chief executive Keith Barr.

“We also signed hotels into our pipeline at the fastest third quarter rate since 2008, and have made an excellent start with our plans to accelerate the growth of our brands around the world.”

In the Americas, revenue per available room (RevPAR) was up 0.8% in the third quarter, and 1.1% in the year-to-date.

IHG said that in the US, RevPAR was ahead 0.4% in the quarter and 0.6% year-to-date, with performance in the quarter impacted by a number of events.

Hurricanes Harvey and Irma had a “mixed impact”, the board said, with displacement activity together with the relief and reconstruction efforts benefitting its franchise business, while performance across the managed estate was negatively impacted by the cancellation of group bookings at some hotels.

Meanwhile, the negative impact of calendar shifts was partially offset by incremental demand from the solar eclipse.

Excluding the effect of the hurricanes and other one-off events, IHG said it estimated that underlying US RevPAR was “marginally positive” in the quarter.

Elsewhere in the region, Canada and Latin America continued to grow well, up 7% and 8% respectively, whilst in Mexico RevPAR was flat due to the earthquake in Mexico City.

In Europe, RevPAR was up 7.1% in the third quarter, and 6.6% year-to-date.

IHG said the UK delivered Q3 RevPAR growth of 4.0% with its brands driving outperformance in both London - up 3% - and regionally, where growth was 5%.

RevPAR growth in Germany of 3% reflected a “more moderate” trade fair calendar as expected, the board said, and continued “strong” corporate and leisure demand drove mid-single digit RevPAR growth in Russia.

Markets previously impacted by terrorist attacks grew strongly, including RevPAR growth of 6% in France, and double digit growth in Belgium and Turkey.

Performance across several markets in Southern Europe was also strong due to increased demand over the summer months.

In its Asia, Middle East and Africa operations, IHG said RevPAR was up 0.6% in the quarter, and 1.2% year-to-date.

Outside the Middle East, RevPAR grew 4%, with India RevPAR growth of almost 10% continuing to be driven by tourism, whilst Australasia and Southeast Asia were both up “mid-single digits”.

In Japan, flat RevPAR reflected weak transient demand and disruption from a typhoon in September, the board said.

For the Middle East, RevPAR declined 6% due to the timing of Ramadan, and the ongoing impact of low oil prices, high supply growth and government austerity measures.

Finally, Greater China RevPAR was up 7.8% in the quarter and 5.4% year-to-date.

Third quarter growth of 9% in mainland China was helped by weak comparables driven by one-off events in tier 2-3 cities at the same time last year, the board said.

Tier 1-3 cities all delivered high single digit RevPAR growth benefitting from strong corporate and meetings demand.

Hong Kong RevPAR was down 1%, impacted by renovations at one property, whilst 15% RevPAR growth in Macau reflected improving leisure demand and the ongoing ramp up of one new hotel.

The company made solid strategic progress in the period as well, launching ‘avid hotels’, its new-build brand targeting a $20bn underserved segment in the US.

It would become another “brand of scale” for IHG, the board said, and it was already gaining “strong traction” with owners with more than 150 written expressions of interest since launch, and more than 50 applications in the first four weeks of franchise sales.

“Our new US midscale brand, avid hotels, is generating strong traction with our owner community,” Barr noted.

“With over 150 written expressions of interest and more than 50 applications in the first four weeks of franchise sales, demand from owners has exceeded our original expectations.”

IHG also strengthened its position in the boutique segment with two openings and three signings for Kimpton in the US and, in October, the launch of the brand in its Greater China and AMEA regions.

10 signings and two openings for Hotel Indigo took that brand to 163 open and pipeline properties.

It also expanded its global presence for EVEN hotels, with two third quarter signings in Greater China and one in New Zealand.

“The international expansion of our newest brands is gathering pace,” Keith Barr said.

“This week we continued the global roll out of Kimpton Hotels & Restaurants, with a landmark signing in Bali and two signings in key Chinese urban and resort locations, Shanghai and Sanya Bay.”

Barr added that the company had “several further deals” in progress, which would secure its presence for the brand in 10 major markets around the world.

“We have also expanded the global footprint of EVEN Hotels, with signings in Shanghai, Sanya Bay and Auckland, New Zealand.

The company signed 13,000 rooms into the Holiday Inn brand family pipeline, including a record third quarter for Holiday Inn Express, with almost 7,000 rooms opening.

Net system size was up 4.1% year on year to 786,000 rooms in 5,272 hotels - the company’s fastest pace of growth since 2010, led by AMEA at 14% and Greater China at 10%.

11,000 rooms were opened in 70 hotels in the quarter - IHG’s best third quarter for six years - with 3,000 rooms in 19 hotels removed.

A total of 20,000 rooms in 137 hotels were signed - its highest third quarter signings since 2008.

IHG said it had continued to expand its China franchising solution ‘Franchise Plus’ with 19 new Holiday Inn Express deals signed in the quarter, bringing the total to 63 signings after 17 months.

The board claimed 45% of its 235,000 pipeline rooms were under construction.

“‘Franchise Plus’, our franchising solution for Holiday Inn Express in China, is gaining momentum with six hotels now open and a further 58 in the pipeline, including 19 signings in the quarter,” Barr said.

“We expect a further ramp up in activity over the next 12 months.”

Looking at the books, IHG said the financial position of the group remained “robust”, with an ongoing commitment to an “efficient” balance sheet and an investment grade credit rating.

As it previously announced, on 6 October the company paid an interim ordinary dividend to shareholders of 33 US cents per share.

That took the total returned to shareholders, including from ordinary dividends, to $12.9bn since the demerger in 2003.

“Looking ahead, despite macroeconomic and geopolitical uncertainties around the world, we remain confident in the outlook for the remainder of the year,” Barr concluded.”