IHG Q3: Slower but steady RevPAR growth
IHG Q3: Slower but steady RevPAR growth
21 OCTOBER 2016 8:12 AM

In its third-quarter results, InterContinental Hotels Group revealed no depth charges, just steady growth in somewhat turbulent times.

DENHAM, England—A sign of steady but unspectacular growth by the large international hotel companies in the third quarter of 2016 is that their respective CFOs, not their CEOs, are conducting press conferences with analysts. At least that’s been the case so far with AccorHotels and, now, InterContinental Hotels Group.

Steady growth in the Americas, Middle East and China helped InterContinental Hotels Group to increase revenue per available room across its portfolio by 1.3% in Q3 2016 compared with the same period in 2015. Year-to-date, RevPAR increased by 1.8%.

The company’s 2016 performance has slowed from 2015, when RevPAR across its portfolio in the third quarter increased 4.8% over the same quarter in 2014.

Paul Edgecliffe-Johnson, CFO of IHG, said the company’s business “drivers remain compelling to generate sustainable growth, and we look forward to the future with confidence.”

IHG reported the following successes in the quarter, according to Edgecliffe-Johnson, including:

  • The company continues to broaden its portfolio of brands and “takes our pipeline to 230,000 rooms … 14% of all industry rooms.”
  • Hotel Indigo signings are at their highest level in nine years.
  • IHG’s continuing partnership agreement with Australian private equity firm Pro-Invest will see the development of brands even outside of the U.S. for the first time, with a portfolio set to open in Australia and New Zealand.
  • Properties in India recorded a 21% jump in RevPAR, helped by a double-digit increase in visitor numbers. Edgecliffe-Johnson said India is one of IHG’s priority markets.
  • Performance in Vietnam has been helped by changes to visa rules easing transit for Chinese and other visitors.
  • Approximately 6,000 new rooms have been opened in China since June. Edgecliffe-Johnson said the first nine months of 2016 saw the highest comparable number of signings in China, with Q3 being the best quarter.

On the negative side, Edgecliffe-Johnson said operations in U.S. oil-producing markets remained tough.

“Continued supply in oil-producing markets … approximately 3.1% year to date … is significantly more than for the overall U.S. market and will be a drag on those markets,” he said.

Edgecliffe-Johnson said the percentage of IHG’s portfolio in those markets is 14%, compared with 10% industrywide.

He also said independent hotels, which are more leisure-oriented, did better than branded product in Q3 numbers.

Steady if unspectacular
London will begin to see supply affecting performance, Edgecliffe-Johnson said, but flat London numbers over the summer were “helped by Middle Eastern guests due to the timing of Ramadan.”

Performance in Europe was flat due to “ongoing challenging trading conditions” shared by other major international hotel chains, he said.

Edgecliffe-Johnson said 7,000 rooms opened in the quarter, which increased net system size 3.8% year-over-year to 754,000 rooms. The company’s pipeline increased to 230,000 rooms, he added, with 90% of rooms being in IHG’s 10 priority markets and approximately 45% of projects are already under construction.

As of press time, IHG’s stock was down 13.7% year to date on the New York Stock Exchange. The Hotel Stock Index is up 1.4% over the same period.

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