System growth stressed as IHG sees RevPAR dip in Q3
System growth stressed as IHG sees RevPAR dip in Q3
21 OCTOBER 2019 7:47 AM

InterContinental Hotels Group’s Q3 2019 results show struggles in Greater China and global RevPAR, but the company remains positive about its pace of rooms signings, especially to new brands such as Avid, Atwell and Six Senses.

DENHAM, England—InterContinental Hotels Group executives said the company is on course by the end of the year to increase its network size by 5% or more, which will grow its room count to more than 865,000.

On IHG’s third-quarter earnings call, CFO Paul Edgecliffe-Johnson could not show the same confidence in revenue per available room, which for the quarter was down 0.8% compared with Q3 2018.

Political and economic tension in Greater China hurt results, as did the general strengthening of the U.S. dollar against most other major currencies, he said.

RevPAR at the company’s hotels in Greater China declined 6.1% year over year, while in Hong Kong it declined 36%. Such mathematics hurts when 4,100 of the rooms opened in the quarter of a total of approximately 13,000, roughly 25%, are in Greater China.

The British firm’s overall RevPAR in its Europe, Middle East, Asia and Africa region showed slight improvement (+0.3%), with both the United Kingdom and mainland Europe growing RevPAR by 1% year over year.

More encouraging, he said, is that in the quarter the firm signed its first franchise agreement for its newest brand, Atwell Suites, which was launched in May and targets longer-stay guests.

Edgecliffe-Johnson said properties under renovation caused a drag on RevPAR, but he added the Holiday Inn brand and IHG’s business in the United Kingdom is outperforming its competitors.

He disputed one analyst’s speculation that if the industry goes into a downturn, average daily rate would drop as a result of more transparency, in part led by online travel agencies.

He replied that OTAs were present in the last recession, and it is no secret that in a downturn midscale and lower upscale hotels tend to get a larger share of business and thus do well.

Small group bookings in IHG’s midscale U.S. portfolio are suffering, he said.

Other positivity stems from Six Senses Hotels Resorts Spas, which Edgecliffe-Johnson said has signed seven assets since IHG acquired the brand in February, with three of those signings coming in this current quarter.

“Momentum of signings across our luxury portfolio continues to gain pace,” he added.

Edgecliffe-Johnson said executives “remain confident in our financial outcome for the rest of the year.”

Approximately 25,000 rooms were signed in the quarter, and the overall pipeline stands at approximately 289,000 rooms. Almost 4,000 rooms were removed from IHG’s system in the quarter.

As of press time, IHG stock was trading at $58.44 a share, up 1.7% year to date.

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