IHG Reports Third Quarter Global RevPAR Growth of 3.9%

Third Quarter Results to 30 September 2012 

Financial summary1	2012	2011	Actual	% Change YoY
				CER2	CER & ex. LDs3
Revenue	$473m	$467m	1%	3%	4%
Operating profit	$167m	$153m	9%	9%	14%
Total adjusted EPS	40.6¢	36.2¢	12%
Total basic EPS4	59.8¢	61.4¢	(3)%
Net debt	$472m	$644m

¹ All figures are before exceptional items unless otherwise noted. See appendices for financial headlines

² CER = constant exchange rates

³ Excluding $6m of significant liquidated damages receipts in 2011

⁴ After exceptional items

Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:

"We have delivered a solid set of results in the quarter with RevPAR growth across all regions and outperformance in key markets such as the US and Greater China. Our preferred brands have driven good underlying revenue growth despite a number of industry wide issues such as the timing of holidays, slowing economic growth in certain markets and the political leadership change in China.

We continue to build a strong foundation for future growth, with a good pace of signings and openings, and we are on track to meet our full year net system growth guidance. Our new brands are gaining traction, with the first signing for EVEN Hotels in New York City in October and 12 signings for HUALUXE Hotels & Resorts year to date.

The global economic environment remains challenging. However, our forward bookings remain encouraging and we are confident that IHG is well positioned to continue to outperform based on the considerable strengths of the business and our focused strategy for high quality growth."

Driving Market Share

• Third quarter global RevPAR growth of 3.9%, with 5.6% global RevPAR growth year to date.
  • Americas third quarter RevPAR up 4.6% (US 4.6%); Europe 2.0%; AMEA 2.9%; Greater China 4.0%.
  • Average daily rate growth of 3.4% in the third quarter, the 9th successive quarter of growth.
• Total system size of 672,252 rooms (4,573 hotels), up 2.1% year to date (0.9% year on year).
  • 8,603 rooms (56 hotels) added and 3,224 rooms (25 hotels) removed in the quarter, with signings of 13,304 (85 hotels). Signings and openings broadly in line with last year after excluding 4,796 rooms on US Army bases (included in both figures for Q3 2011).
  • Our new brands are gaining traction with the first EVEN Hotel signed in October in Manhattan under a management contract. There are 12 HUALUXE Hotels & Resorts in the pipeline, with 8 signed in the quarter.
  • Pipeline of 165,945 rooms (1,042 hotels), c.40% under construction. 13% active global pipeline share.
  • Greater China system size and pipeline up 11% and 7% respectively year on year. Market leading position with 60,115 rooms (181 hotels) open and 51,454 rooms (160 hotels) in the pipeline (31% of group pipeline).

Uses of Cash

• Return of funds to shareholders
  • $500m was returned to shareholders on 22 October 2012 via special dividend with share consolidation. As previously announced, the $500m share buyback programme will commence in Q4 2012.
• Growth investment funded by recycling capital
  • Growth capital expenditure of $10m year to date (with $5m in the quarter) reflects the unpredictable timing of this type of spend, with a number of projects now expected to complete early next year.
  • 2012 full year growth capital expenditure expectations revised to c.$25m, plus c.$125m maintenance capital expenditure ($69m year to date).
  • 2013 growth capital expenditure still anticipated to be $100m - $200m, plus c.$150m maintenance capex.
  • Discussions regarding the disposal of InterContinental New York Barclay continue, but will now be opened up and we expect strong interest from a wider group of prospective buyers.
  • InterContinental London Park Lane is the next major asset being considered for disposal with a key milestone in the process being the opening of InterContinental London Westminster later this month.

Current trading update

• Provisional October global RevPAR growth⁵ of 4.8%.
  • Americas 6.1%; Europe 2.3%, AMEA 3.4%; Greater China 0.3%.

5 See appendix 7 for definition

Americas – Good growth in franchise royalties

RevPAR increased 4.6%, with 4.0% rate growth.  US RevPAR was up 4.6% in the third quarter, with 4.0% rate growth.  On a total basis including the benefit of new hotels, US RevPAR grew 5.7% in the third quarter, ahead of the industry up 5.1%. Softer performance in July and September reflects the shift in timing of certain holidays.

Revenue increased 2% to $226m and operating profit increased 10% to $138m.  After adjusting for owned hotel disposals in 2011 and the results from managed lease hotels6, revenue was up 6% and operating profit up 11%.  This was driven by good RevPAR growth across the region, resulting in a 7% increase in franchise royalties, and a $1m increase in fees associated with the initial franchising, relicensing and termination of hotels.

We signed 5,513 rooms (52 hotels) and opened 4,323 rooms (39 hotels) into the system in the quarter. Openings included 3 Crowne Plaza hotels, 7 hotels for our extended stay brands, Candlewood Suites and Staybridge Suites, and 3 Hotel Indigo hotels. Signings included 43 hotels for the Holiday Inn brand family, with 2 Holiday Inn Club Vacation resorts in the US, 2 Holiday Inn hotels in Colombia and the first Holiday Inn Express hotel in the Bahamas.

Europe – Strong profit growth driven by owned hotels

RevPAR increased 2.0%, with 2.4% rate growth despite continued uncertainty in macro economic conditions across Europe.  3.9% RevPAR growth in the UK reflected stronger trading during the Olympic and Paralympic games with weaker performance in the periods before and after as expected.  8.8% RevPAR growth in Germany reflects good rate growth due to the favourable trade fair calendar and 2.0% RevPAR growth in France was driven by continued strength in Paris, offset by declines in the provinces.

Revenue increased 2% (8% at CER) to $112m and operating profit increased 21% (31% at CER) to $35m.  At CER and after adjusting for a leased hotel disposal and excluding results from managed lease hotels6, revenue increased 6% and operating profit increased 22%. This was driven by 9.1% RevPAR growth at the owned hotels and a $2m decrease in regional overheads ($1m as reported).

We signed 1,171 rooms (11 hotels) in the quarter including Holiday Inn hotels for Georgia and Italy. The expansion of the Hotel Indigo brand continues with 3 hotels (246 rooms) signed across Spain, Germany and France. 924 rooms (6 hotels) were opened into the system, all for the Holiday Inn Brand Family, including 2 Holiday Inn hotels in London and 2 Holiday Inn Express hotels in the UK regions.

AMEA – Underlying profit growth

RevPAR increased 2.9%, with 1.1% rate growth.  Trading conditions remain mixed with strong trading in South East Asia offset by tougher comparatives in Japan, slowing economic growth in some markets and the continued impact from political unrest in some countries in the Middle East.

AMEA revenue decreased 14% (14% at CER) to $51m and operating profit decreased 20% (24% at CER) to $20m. At CER and after adjusting for a $6m liquidated damages receipt in Q3 2011 and the disposal in Q3 2011 of a hotel asset and partnership interest that contributed $1m to profits in Q3 2011, operating profit increased 6%.

We signed 1,373 rooms (6 hotels) in the quarter, including an InterContinental Hotel in the UAE and 2 Holiday Inn Express hotels in Indonesia. 652 rooms (2 hotels) were opened, including Bahrain’s first Holiday Inn Express hotel in the capital city of Manama and Crowne Plaza Doha Airport; the first Crowne Plaza hotel to open in Qatar.

Greater China – Strong growth in revenue and operating profit

RevPAR increased 4.0%, with 3.8% rate growth.  July and August RevPAR growth of 7% and 6% respectively was offset by a 0.9% decline in September.  This was driven by several industry wide issues including lower demand ahead of both the Mid Autumn Festival and Golden Week holiday periods and the political leadership change, the China – Japan island territorial dispute and a broader economic slowdown across the region.

Revenue increased 15% (15% at CER) to $54m and operating profit increased 42% (33% at CER) to $17m. This was driven by 12.0% RevPAR growth at the InterContinental Hong Kong and $3m ($2m CER) growth in managed profits reflecting good RevPAR growth combined with 9% growth in managed rooms.

We opened 2,704 rooms (9 hotels) in the quarter, including 3 Crowne Plaza hotels (1,089 rooms). Signings of 5,247 rooms (16 hotels) take our pipeline to 51,454 rooms (160 hotels), giving us a continued leading share of the active hotel pipeline in Greater China.

Interest, tax, cash flow and exceptional items

The interest charge for the period was $13m (Q3 2011: $15m) due to lower levels of net debt.

Based on the position at the end of the quarter, the tax charge has been calculated using an estimated annual tax rate of 27% (Q3 2011: 26%).  The 2012 full year tax rate is now expected to be in the mid to high 20s, moving towards the low 30s in 2013.  An exceptional tax credit of $59m relates to prior year matters settled, together with associated deferred tax amounts.

Net debt was $472m (including the $211m finance lease on the InterContinental Boston), down $172m on Q3 2011 and down $66m on the year end position, and does not reflect the $500m special dividend paid on 22 October 2012.

The provisional triennial actuarial valuation of the UK defined benefit plan as at 31 March 2012 indicates a deficit of £132m. In anticipation of the finalisation of the related Recovery Plan, a special contribution of £45m was paid to the plan on 23 October 2012.

⁶ See appendix 7 for definition

Appendix 1: RevPAR Movement Summary

	October 2012	Q3 2012			Q2 YTD
	RevPAR*	RevPAR	Rate	Occ.	RevPAR	Rate	Occ.
Group	4.8%	3.9%	3.4%	0.4pts	5.6%	3.5%	1.3%
Americas	6.1%	4.6%	4.0%	0.4pts	6.3%	4.3%	1.3%
Europe	2.3%	2.0%	2.4%	(0.2)pts	1.9%	1.5%	0.3%
AMEA	3.4%	2.9%	1.1%	1.2pts	6.1%	1.8%	2.8%
G. China	0.3%	4.0%	3.8%	0.1pts	7.6%	3.8%	2.2%

^* See appendix 7 for definition

Appendix 2: Third quarter system & pipeline Summary (rooms)

	System					Pipeline
	Openings	Removals	Net	Total	YoY%	Signings	Total
Group	8,603	(3,224)	5,379	672,252	1%	13,304	165,945
Americas	4,323	(1,823)	2,500	449,383	0%	5,513	73,326
Europe	924	(542)	382	101,505	2%	1,171	14,357
AMEA	652	(86)	566	61,249	(1)%	1,373	26,808
G. China	2,704	(773)	1,931	60,115	11%	5,247	51,454

Appendix 3: Year to date system & pipeline Summary (rooms)

	System					Pipeline
	Openings	Removals	Net	Total	YTD%	Signings	Total
Group	26,052	(12,148)	13,904	672,252	2%	35,408	165,945
Americas	13,297	(6,112)	7,185	449,383	2%	18,246	73,326
Europe	4,149	(2,529)	1,620	101,505	2%	4,135	14,357
AMEA	2,520	(2,354)	166	61,249	0%	2,768	26,808
G. China	6,086	(1,153)	4,933	60,115	9%	10,241	51,454

Appendix 4: Third quarter financial headlines

Three months to 30 September 2012	Total		Americas		Europe		AMEA		G. China		Central
Operating Profit $m	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011
Franchised	156	145	134	123	19	18	3	3	0	1	-	-
Managed	51	51	9	10	7	5	21	25	14	11	-	-
Owned & leased	35	29	9	7	17	15	2	2	7	5	-	-
Regional overheads	(32)	(33)	(14)	(14)	(8)	(9)	(6)	(5)	(4)	(5)	-	-
Profit pre central overheads	210	192	138	126	35	29	20	25	17	12	-	-
Central overheads	(43)	(39)	-	-	-	-	-	-	-	-	(43)	(39)
Group Operating profit	167	153	138	126	35	29	20	25	17	12	(43)	(39)

Appendix 5: Year to date financial headlines

Three months to 30 September 2012	Total		Americas		Europe		AMEA		G. China		Central
Operating Profit $m	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011
Franchised	419	393	358	332	50	51	9	8	2	2	-	-
Managed	154	154	33	43	22	17	63	64	36	30	-	-
Owned & leased	85	76	16	13	37	38	4	4	28	21	-	-
Regional overheads	(87)	(89)	(36)	(37)	(22)	(26)	(16)	(15)	(13)	(11)	-	-
Profit pre central overheads	571	534	371	351	87	80	60	61	53	42	-	-
Central overheads	(118)	(112)	-	-	-	-	-	-	-	-	(118)	(112)
Group Operating profit	453	422	371	351	87	80	60	61	53	42	(118)	(112)

Appendix 6: Constant exchange rate (CER) operating profit movement before exceptional items

	Total***		Americas		Europe		AMEA		G. China
	Actual*	CER**	Actual*	CER**	Actual*	CER**	Actual*	CER**	Actual*	CER**
Exchange rates: Third Quarter GBP:USD EUR:USD 2012 0.63 0.80 2011 0.62 0.71 * US dollar actual currency ** Translated at constant 2011 exchange rates *** After central overheads
Q3 Growth/(decline)	9%	9%	10%	10%	21%	31%	(20)%	(24)%	42%	33%

Appendix 7: Definitions

Total gross revenue: total room revenue from franchised hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, as it is derived mainly from hotels owned by third parties. The metric is highlighted as an indicator of the scale and reach of IHG’s brands. 

Fee based margins: adjusted for owned and leased hotels, managed leases and individually significant liquidated damages payments. 

Managed lease hotels: properties that are structured for legal reasons as operating leases but with the same characteristics as management contracts.

Provisional October RevPAR growth :  represents actuals other than for Americas, Europe and Group for which the last 4 days in October are estimated.

For further information, please contact:

Investor Relations (Catherine Dolton; Isabel Green):		+44 (0) 1895 512 176
Media Relations (Yasmin Diamond, Kari Kerr):		+44 (0) 1895 512 426
		+44 (0) 7770 736 849

Logos, product and company names mentioned are the property of their respective owners.

Reader Comments:

Be the first to leave a comment for this article

Tweet