InterContinental Hotels room revenues recover at year end
By Oliver Haill
Date: Tuesday 19 Feb 2019
(Sharecast News) - InterContinental Hotels reported a recovery in revenue per room in the fourth quarter of 2018, a year that saw the continued rapid expansion of its room network.
Across its many hotel brands, ranging from Holiday Inn, Crowne Plaza and Kimpton to newer chains Avid, Voco and Regent resorts, the FTSE 100 group grew revenue per available room 1.9% in the final three months of the year, up from the disappointing 1.0% in the third quarter. Revpar in the US, the company's largest market, rebounded into positive territory after a dip in the third quarter, while London revpar surged 10% in the quarter, with weakness in sterling persuading attracting more overseas visitors.
For the twelve months to 31 December, revpar came out at 2.5%, slower growth than the 2.7% reported the year before.
Boosted by the addition of a net 38,000 new rooms added to the network and the highest rate of franchise signings in a decade, total group revenue of $1.8bn was up 6% compared to the previous year on an adjusted basis. By the end of the year, the group had 5,603 hotels incorporating roughly 837,000 rooms, up 4.3% year on year.
Over half its new signings were made under the Holiday Inn brand, where a new 'Express' guest room design was available or planning in at least half the estate.
Reported operating profits rose 8% to $816m, ahead of consensus forecasts of $807.5m, while adjusted operating profit was up 6% to $805m and also beat the $791m estimate. Adjusted earnings per share surged 19% to 292.1 cents but were short of the 296.47 cents that analysts had pencilled in.
The total dividend was lifted 10% to 114.4 cents per share, coming on top of the payment of a $500m special dividend last month.
Chief executive Keith Barr said the group had made progress against the strategic initiatives he set out a year ago to accelerate growth and deliver a strong financial performance.
He said investments in the group had "evolved" established brands and strengthened the portfolio organically and by acquisition, through the purchase of the Regent resort hotel. In 2019, there has already been an acquisition of the luxury Six Senses brand and IHG plans to launch a new 'upper midscale' brand.
"The fundamentals of our business remain strong, and while there are macro-economic and geopolitical uncertainties in some markets, we are confident in the year ahead and that our strategy will deliver industry-leading net rooms growth over the medium term."
IHG shares were up 1.5% to 4,697p after an hour and a half of trading on Tuesday.
George Salmon, analyst at Hargreaves Lansdown, noted that occupancy had improved in all areas and this led to a reassuring recovery in revpar in the US after a wobble in the third quarter, while trading in London is showing no signs of Brexit uncertainty.
"With a record number of rooms in the pipeline, investors will be hopeful there's plenty more to come, but stuttering Chinese growth figures and the innate unpredictability of Donald Trump mean there are a few looming doubts over the group's two most important geographies. The capital-light model means IHG's less exposed to the ups and downs of the cycle than it used to be, but a downturn would still hurt."
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