Q3: IHG sees good pace, ponders soft brand, more luxury
 
Q3: IHG sees good pace, ponders soft brand, more luxury
20 OCTOBER 2017 1:36 PM

According to its third-quarter 2017 numbers, InterContinental Hotels Group notched strong RevPAR, openings and signing numbers during the quarter. Executives also said a soft brand and luxury brand may be in the works. 

DENHAM, England—Investigating a launch of a soft collection and adding something new in the luxury segment are two areas InterContinental Hotels Group might look at in the future, executives said.

Speaking on the company’s third-quarter 2017 earnings conference call, IHG CFO Paul Edgecliffe-Johnson said the company remains interested in adding a soft collection.

“Clearly some of our competitors have had success with that. Now with (new brand) Avid launched and traveling well, Holiday Inn franchising in China doing well, there are some areas we’ll look at, and that is one,” he said. “And something in the luxury space, too. There is space for the group to do something else in luxury.”

New CEO Keith Barr was absent from the call.

Edgecliffe-Johnson also addressed potential global mergers-and-acquisitions opportunities following the recent news of AccorHotels’ acquisition of Australian firm Mantra Group.

“Our preference would be to find something where we are already well-established,” he said, adding that it would be a goal for the future, not necessarily now.

Edgecliffe-Johnson pointed to three key markers from the quarter:

  • RevPAR gains: Revenue per available room was “up year-on-year 2.3% … our strongest pace since 2010.”
  • Strong openings numbers: He said the quarter had the “fastest opening rate since 2011” and added that it removed “3,000 rooms, most of which were in the Americas.”
  • Signups: New hotel signings in the quarter reflected the company’s “highest signing rate since 2008,” he said, emphasizing that the number included 17,000 rooms in China.

Platform push
Edgecliffe-Johnson reiterated the chain’s growth, with financial growth to be pushed by rate, rather than occupancy.

“Our hotels are largely full so it is hard to push occupancy,” he said.

It is not just with new brand Avid and its established Holiday Inn brands that IHG sees unit growth.

“This week we announced our first Kimpton hotels in Southeast Asia and China,” Edgecliffe-Johnson said, adding that the company’s wellness brand, Even Hotels, would see openings in Shanghai and Sanya Yalong Bay, China; and Auckland, New Zealand.

Edgecliffe-Johnson said IHG’s year-on-year net system growth was 4.1%, which is “100 basis points better than we were doing last year, and with removals of between 2% and 3%, at the lower end of that.”

“So it is rational to expect to see a higher level of openings coming through … to continue to go through into future years, even if it is not at 100 basis points,” he said. “Despite macroeconomic and geopolitical events around the world, we remain confident for the rest of the year.”

According to Q3 numbers, RevPAR health varied. In Greater China, year-over-year RevPAR increased 7.8%, and in Europe, RevPAR was up 7.1%. But in the Americas, RevPAR increased by just 0.8% during the quarter. In Asia, the Middle East and Africa RevPAR was equally muted and rose by 0.6%.

As of Friday afternoon, IHG’s stock is up 2.2% year to date on the London Stock Exchange. For the same period, the Baird/STR Hotel Stock Index has risen 29.6%.

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