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Third Quarter Results to 30 September 2008

Third Quarter Results to 30 September 2008


  • Global RevPAR growth of 1.6% at constant currency.
  • 10,081 net rooms added in the quarter. System size of 608,225 rooms (4,108 hotels), up 7% on third quarter 2007.
  • 25,546 rooms signed (164 hotels), taking the pipeline to 243,509 rooms (1,773 hotels), 40% of the existing system size.
  • Total gross revenue* from all hotels in IHG’s system of $5.1bn, up 8% at constant currency.
  • Operating profit including discontinued operations of $153m up 8% at constant currency.
  • Continuing revenue up 7% from $453m to $486m. Continuing operating profit up 14% from $132m to $150m. Revenue and operating profit include $11m benefit from two significant liquidated damages receipts.
  • Excluding significant liquidated damages receipts, continuing revenue up 5% (4% at constant currency) and continuing operating profit up 5% (2% at constant currency).
  • Adjusted continuing earnings per share (“EPS”) up 29% to 34.6¢. Adjusted total EPS of 35.3¢. Basic total EPS of 32.2¢.

All figures and movements unless otherwise noted are at actual exchange rates and before exceptional items. See appendix 3 for analysis of financial headlines. Constant exchange rate comparatives shown in appendix 4. (% CER) = change in constant currency. *See appendix 5 for definition.

Commenting on the results and trading, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:

“In the quarter we delivered RevPAR growth ahead of the industry. We also opened over 19,000 rooms, a new record for the business, and saw our net system size grow by 10,000 rooms.

“We expect the rate of new room openings to remain strong, reflecting the size and quality of our development pipeline which stands at nearly a quarter of a million rooms (1,773 hotels). Around 90,000 new rooms (540 hotels) are under construction, and over half of these are currently expected to open in 2009. A small number of hotels are experiencing construction delays but, at this stage, we are not seeing any material increase in the level of losses from the pipeline. We signed deals for over 160 hotels in the quarter (25,546 rooms), but the current financial conditions are now impacting the availability of debt finance and new signings are taking longer to finalise.

“In October we have seen a sharp deterioration in market conditions with preliminary data for the month showing a global RevPAR decline of 4.5% with a decline of 5.7% in the US. Throughout 2008 we have been controlling costs and capital spending tightly and we are taking the necessary steps to manage both to be below this year’s levels in 2009. Given the power of our brands, the size and resilience of our pipeline and our leading reservations systems, we are positioned well to continue to outperform the industry.”

Rooms: sustained system growth

  • 25,546 rooms (164 hotels) were signed in the quarter (including 2,412 rooms under the Holiday Inn Club Vacations brand), taking the total signed this year to almost 74,000 rooms. Signings were up 68% in EMEA driven by strong signings in the Middle East (8 hotels) and up 42% in Asia Pacific with strong signings in China (11 hotels). Excluding the Holiday Inn Club Vacations rooms, Americas signings were down 42% (9,553 rooms) on the strong 2007 comparative.
  • The pipeline now stands at 243,509 rooms (1,773 hotels), up 21% on third quarter 2007. Over one third of the pipeline is outside the Americas and almost two-thirds are midscale developments.
  • 19,056 rooms (135 hotels) were opened, up 36%, including 10,623 rooms in the Americas. In line with IHG’s strategy of driving quality growth 8,975 rooms were removed, giving net room additions of 10,081 for the quarter, up 36% on 2007.

Americas: RevPAR outperformance across all brands

Revenue performance

RevPAR increased 0.6%, driven by rate growth of 4.0% offset by an occupancy decline of 2.3%. RevPAR declined in the US in August and September, although all IHG’s brands continued to perform ahead of their industry segments. Continuing revenue grew 4% from $234m to $243m, driven by 11% growth in revenues from managed hotels and 4% growth in franchised hotel revenues.

Operating profit performance

Operating profit from continuing operations increased 5% to $126m. Continuing owned and leased hotel profit increased by $1m to $10m driven by 5.8% RevPAR growth at the InterContinental New York and 2.1% at the InterContinental Mark Hopkins, San Francisco. Managed hotel profit increased $3m to $12m driven by 19.1% RevPAR growth in Latin America. Franchised hotel profit increased $1m to $120m driven by 6% growth in royalty fees, partly offset by a reduction in fees received on new signings and changes in hotel ownership.

EMEA: strong performance in the Middle East

Revenue performance

RevPAR increased 4.2%, driven by rate with a small drop in occupancy. The Middle East continued to perform strongly, growing RevPAR by 24.0%. Continental Europe grew RevPAR by 1.6%, including a 5.3% increase in Germany. In the UK, the Holiday Inn family of brands outperformed their market segment recording RevPAR growth of 2.4%. Continuing revenues increased 7% (6% CER). Excluding the $7m liquidated damages receipt from one franchise contract, continuing revenues grew 2% (1% CER).

Operating profit performance

Operating profit from continuing operations increased 15% (13% CER) to $46m. Excluding the $7m liquidated damages receipt, continuing operating profit decreased $1m to $39m. Continuing owned and leased hotels’ profit was flat at $14m, the increased contribution from InterContinental London Park Lane being offset by the impact of a weaker market on InterContinental Paris Le Grand. Managed hotel profit decreased from $21m to $19m with continued growth in fees across Europe and the Middle East being offset by a reduced contribution from a portfolio of managed hotels in the UK. Franchised hotel profit increased from $16m to $25m driven by the $7m liquidated damages receipt and a 17% increase in royalty fee income due to a 9% increase in the number of franchised rooms across EMEA.

Asia Pacific: continued rooms growth drives profits

Revenue performance

RevPAR increased 2.7%. Greater China RevPAR grew 6.3%, with 32.6% growth in August due to the Beijing Olympics. RevPAR was negatively impacted on either side of the games by visa restrictions. In Japan RevPAR declined 4.4% in line with the industry. Across the rest of Asia RevPAR grew 4.3%. Continuing revenues grew 22% (18% at CER) to $73m driven by 19% growth in owned and leased revenues and 15% growth in managed revenues. Excluding the $4m liquidated damages receipt from one franchise contract, continuing revenues grew 15% (12% at CER).

Operating profit performance

Operating profit from continuing operations increased 29% from $14m to $18m. Excluding the $4m liquidated damages receipt, and before a $4m increase in regional overheads, operating profit increased $4m. Owned and leased hotel operating profit grew 17% from $6m to $7m driven by RevPAR growth of 17.7% at the InterContinental Hong Kong after completion of its rolling refurbishment in September 2007. Managed hotel profit increased $4m to $17m driven by the contribution from the increasing number of hotels under IHG management in the region.

Overheads, Interest, Tax and Exceptional items

In the third quarter total regional overheads increased $4m to $38m. This was driven by continued planned investment in marketing, support infrastructure and development in the Asia Pacific region. Central costs decreased $2m to $40m, flat at constant currency.

The tax charge on profit from continuing and discontinued operations, excluding the impact of exceptional items, has been calculated using an estimated effective annual tax rate of 25% (Q3 2007: 22%). The underlying rate before the impact of prior year items was 37%. The reported tax rate may continue to vary year-on-year in the foreseeable future due to prior year settlements and other developments, but in the longer term is expected to trend up over time. The interest charge for the period decreased by $5m to $28m due to a reduction in average net debt and average interest rates.

Exceptional operating charges of $33m in the quarter included $15m relating to the Holiday Inn brand relaunch.

Cash flow and net debt

$497m of cash was generated from operating activities in the nine months to 30 September, up $177m on 2007. In addition $91m of cash was generated from disposals including the sale in the quarter of the Holiday Inn Jamaica for $30m and of a 31% stake in the Crowne Plaza Christchurch for $24m.

Year to date capital expenditure of $70m was $76m below 2007 levels. No shares were repurchased during the third quarter. IHG’s net debt at the period end was $1,351m, including the $201m finance lease on the InterContinental Boston. In the second quarter IHG successfully refinanced $2.1bn of long term debt facilities.


Appendix 1: Asset disposal programme
  Number of hotels Proceeds Net book value
Disposed since April 2003 183 $5.5bn $5.2bn
Remaining hotels 16 $1.8bn

For a full list please visit the investors section of this website.

Appendix 2: Quarter 3 Rooms
  Americas EMEA Asia Pacific Total
Openings 10,623 3,725 4,708 19,056
Removals (7,183) (1,447) (345) (8,975)
Net room additions 3,440 2,278 4,363 10,081
Signings 15,628 3,531 6,387 25,546

Appendix 3: Financial headlines

Three months to 30 Sept $m Total Americas EMEA Asia Pacific Central
  2008 2007 2008 2007 2008 2007 2008 2007 2008 2007
Franchised operating profit 149 136 120 119 25 16 4 1 - -
Managed operating profit 48 43 12 9 19 21 17 13 - -
Continuing owned and leased operating profit 31 29 10 9 14 14 7 6 - -
Continuing operating profit pre regional overheads 228 208 142 137 58 51 28 20 - -
Regional overheads (38) (34) (16) (17) (12) (11) (10) (6) - -
Continuing operating profit pre central overheads 190 174 126 120 46 40 18 14 - -
Central overheads (40) (42) - - - - - - (40) (42)
Continuing operating profit 150 132 126 120 46 40 18 14 (40) (42)
Discontinued owned and leased operating profit 3 6 3 4 - 2 - - - -
Total operating profit 153 138 129 124 46 42 18 14 (40) (42)

Appendix 4: Constant currency continuing operating profit growth before exceptional items

  Americas EMEA Asia Pacific Total***
  Actual currency* Constant currency** Actual currency* Constant currency** Actual currency* Constant currency** Actual currency* Constant currency**
Growth 5.0% 4.2% 15.0% 12.5% 28.6% 28.6% 13.6% 10.6%
Exchange rates EUR:USD GBP:USD RMB:USD
Q3 2008 0.67:1 0.53:1 6.84:1
Q3 2007 0.73:1 0.49:1 7.54:1
  • * US dollar actual currency.
  • ** Translated at constant 2007 exchange rates.
  • *** After Central Overheads.

Appendix 5: Definition of total gross revenue

Total gross revenue is defined as 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.

For further information, please contact:

Investor Relations (Heather Wood; Catherine Dolton):
+44 (0) 1895 512 176

Media Affairs (Leslie McGibbon; Emma Corcoran):
+44 (0) 1895 512 425
+44 (0) 7808 094 471

High resolution images to accompany this announcement are available for the media to download free of charge from This includes profile shots of the key executives.

UK Q&A Conference Call:

A conference call with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director and Interim President of the Americas) will commence at 9.30 am (London time) on 11 November. There will be an opportunity to ask questions.

International dial-in: +44 (0)20 7019 0812
UK Free Call: 0800 018 0795
Conference ID: HOTEL

A recording of the conference call will also be available for 7 days. To access this please dial the relevant number below and use the access number 9599.

International dial-in: +44 (0)20 7970 4998
UK Free Call: 0800 279 9414

US Q&A Conference Call:

There will also be a conference call, primarily for US investors and analysts, at 10.00am (Eastern Standard Time) on 11 November with Andrew Cosslett (Chief Executive). There will be an opportunity to ask questions.

International dial-in: +44 020 7019 0812
US Toll Free: 877 818 6787
Conference ID: HOTEL

A recording of the conference call will also be available for 7 days. To access this please dial the relevant number below and use the access number 9610.

International dial-in: +44 (0)20 7192 0832
US Toll Free: 866 855 7643


The full release and supplementary data will be available on our website from 7.00 am (London time) on Tuesday 11 November. The web address is

Notes to Editors:

InterContinental Hotels Group (IHG) [LON:IHG, NYSE:IHG (ADRs)] is the world's largest hotel group by number of rooms. IHG owns, manages, leases or franchises, through various subsidiaries, over 4,100 hotels and more than 600,000 guest rooms in nearly 100 countries and territories around the world. The Group owns a portfolio of well recognised and respected hotel brands including InterContinental® Hotels & Resorts, Hotel Indigo®, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites® and Candlewood Suites®, and also manages the world's largest hotel loyalty programme, Priority Club® Rewards with 40 million members worldwide.

IHG has more than 1,700 hotels in its development pipeline, which will create 200,000 jobs worldwide over the next few years. InterContinental Hotels Group PLC is the Group's holding company and is incorporated in Great Britain and registered in England and Wales.

IHG offers information and online reservations for all its hotel brands at and information for the Priority Club Rewards programme at For the latest news from IHG, visit our online Press Office.

Cautionary note regarding forward-looking statements

This announcement contains certain forward-looking statements as defined under US law (Section 21E of the Securities Exchange Act of 1934). These forward-looking statements can be identified by the fact that they do not relate to historical or current facts. Forward-looking statements often use words such as ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’ or other words of similar meaning. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed in or implied by, such forward-looking statements. Factors that could affect the business and the financial results are described in ‘Risk Factors’ in the InterContinental Hotels Group PLC Annual report on Form 20-F filed with the United States Securities and Exchange Commission.

Last updated 11 November 2008

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