In its H1 2017 earnings report, InterContinental Hotels Group showed growth all around, although markets varied, notably in the U.S., as it surpassed 1 million rooms across its net system.
DENHAM, England—InterContinental Hotels Group grew global comparable revenue per available room by 1.5% in the second quarter and by 2.1% in the first half of 2017, while at the same time clearing a benchmark of 1 million rooms systemwide, the company announced.
IHG’s new CEO Keith Barr, who was named to the position in May and officially took the reins in July, led the British hotel company’s first-half 2017 earnings call with investors. Formerly IHG’s chief commercial officer, Barr has worked for the company for 25 years with senior positions in the Americas, Asia/Pacific and Greater China. Richard Solomons, CEO since 2011, announced his retirement in May after 25 years at IHG. His final day at the company is 30 August.
Joining Barr on the earnings call, CFO Paul Edgecliffe-Johnson said the “23,000 rooms added to IHG’s system in H1 2017 is our highest in six years, a net rooms growth of 3.7% in comparison with the same period of 2016.” That pushed the company past 1 million rooms in opened or pipeline properties, he said.
In the company’s earnings release, Barr stated that IHG had “a good first half. RevPAR growth of 2.1% and net system size growth of 3.7% delivered a 7% increase in underlying operating profit and a 27% increase in underlying (earnings per share), underpinning the board’s decision to increase the interim dividend by 10%.”
Market differences were apparent in the H1 2017 and second-quarter results, executives said.
While global comparable RevPAR in the first two quarters grew 2.1%—led by a 0.9% bump in occupancy—RevPAR in the second quarter rose only by 1.5% and declined 0.4% at U.S. properties, Barr noted.
The U.S. RevPAR decline was due to a shift in the timing of Easter from the year before, he said.
Another drain on U.S. performance was a “challenging San Francisco market affected by changes to the Moscone (convention) Center,” Edgecliffe-Johnson said.
But one positive for IHG’s U.S. portfolio during the quarter was the opening of the 900-room InterContinental Los Angeles Downtown in June.
Optimism for the second half of the year is tied to the signing of six new Kimpton Hotels & Restaurant assets, as well as IHG’s new, yet-to-be-named midscale brand announced in June.
“Several letters of intent have been signed for more in Europe,” Barr said of the Kimpton brand.
Better news came out of Canada, where demand was boosted by the country’s 150th anniversary celebrations, and Mexico, where dynamics were improved by a weaker Mexican peso, executives said.
RevPAR increased in the first half of 2017 by 6.7% in the United Kingdom, and by 9% in London, mostly due to robust average daily rate, Edgecliffe-Johnson said.
IHG reached another milestone in China, where it surpassed 300 hotels, and now represents more than 20% of the industry there, he said.
Barr said the continuing focus for the company will be on system growth through a refresh of its current brands, as well as the rollout of its new midscale brand.
IHG reported revenue increased in the first half by 2% to $857 million compared with the same period in 2016, while operating profit rose 8% to $370 million. Underlying earnings per share grew by more than 27% year over year.
“The growth of our fee margin of 150 basis points year on year will be, for the rest of the year, largely in line with our average,” Edgecliffe-Johnson said. He added that capital expenditure of $150 million remained in line with full-year guidance.
As of press time, IHG’s stock was up 6.7% year to date on the London Stock Exchange. The Baird/STR Hotel Stock Index is up 23.2% over the same period.