InterContinental reports strong start to 2019 but occupancy dips

InterContinental Hotels said it made a strong start to the year as revenue per room increased and it expanded capacity but investors were disappointed by a dip in occupancy rates.

Revenue per available room, excluding currency changes, rose 0.3% in the first quarter as prices increased but occupancy slipped. The strong dollar caused revenue per room at actual exchange rates to fall 2%.

The weak occupancy trend caused concern for investors, sending the shares down almost 4% in early trading. At 10:14 BST the shared were down 0.9% at £49.51.5.

The operator of Holiday Inn and Crowne Plaza hotels opened 12,000 rooms in the first quarter, giving it 843,000 rooms. The FTSE 100 company signed 24,000 rooms - its strongest first-quarter pace for 12 years.

George Salmon, equity analyst at Hargreaves Lansdown, said: “IHG may be drawing investors’ attention to the bulging pipeline, but for those new hotels to deliver people will need to want to stay in them. Unfortunately, occupancy rates are down, meaning the key revenue per available room metric is behind expectations."

Comparable revenue per room rose 0.6% in the US but fell 0.7% in Europe, the Middle East, Asia and Africa. The company said trading in the Middle East was challenging and South Korea fell 30% from levels achieved during the Winter Olympics a year earlier.

Excluding the Middle East and South Korea, revenue per room in those markets rose 1%. UK revenue per room rose 2% with London up 4% and business flat outside London.

Keith Barr, InterContinental’s chief executive, said: "Our strategic focus on driving industry leading net rooms growth is delivering strong results …While macroeconomic and geopolitical uncertainties remain in some markets, the strong fundamentals of our business give us confidence for the balance of the year."