20 October 2015
Third Quarter Interim Management Statement
Continued momentum drives strong third quarter performance
- Global Q3 comparable RevPAR up 4.8%1, led by rate up 3.6%.
- Expanded our global scale: net system size of 727k rooms, up 4.3% year on year (2.7% excluding Kimpton); 16k rooms signed into our 218k room pipeline, highest Q3 hotel signings since 2008.
- Strengthened the position of our preferred brands, in particular opening more Holiday Inn rooms in the period than ever before.
- Completed the sale of InterContinental Hong Kong, for proceeds of $929m2.
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, commented: “We delivered strong RevPAR growth of 4.8% in the third quarter, driven by rate up 3.6%, and continued to sign hotels into our pipeline at the fastest rate since 2008. This demonstrates both our ability to drive growth through leveraging scale and execution against our winning strategy to create long term value for shareholders.
There is increasing momentum across our portfolio of preferred brands. Holiday Inn delivered a record level of room openings, and we are expanding our global luxury footprint, particularly in Greater China where nearly a quarter of our 5k room signings in the region were driven by InterContinental Hotels & Resorts. We continue to expand the presence of our newer brands, including our second franchise signing for EVEN hotels in the US, and five signings for our industry-leading boutique brands.
The completion of the sale of InterContinental Hong Kong marks the successful conclusion of our major owned asset disposal programme, with over 95% of our profit now from the fee business. Our innovative commercial strategy continues to deliver lowest cost revenues into our hotels, and we are on track to deliver a next generation cloud based Guest Reservation System for roll out in 2017.
Looking ahead to the remainder of this year, we are encouraged by current trading trends and remain confident in the outlook.”
Third Quarter RevPAR performance
RevPAR was up 4.3% in the third quarter and 5.1% in the first 9 months. In the US, RevPAR was up 4.2% in the third quarter and 5.2% in the first 9 months.
Our preferred brands continue to drive record levels of demand in the US, delivering rate growth of 3.8% and a 75.8% occupancy level in the quarter. Performance was boosted by increased leisure demand in the summer, and strong transient and group business in September. Elsewhere in the region, Mexico had double digit growth for the second quarter running, but Canada is still being impacted by weaker performance in oil markets.
RevPAR was up 7.8% in the third quarter and 6.1% in the first 9 months, led by increases in rate. UK growth of 4.8% was driven by London and the provinces, with both benefitting from high occupancy levels throughout the period, and strong corporate demand in September. 10.1% RevPAR growth in Continental Europe was driven by solid trading in Germany, and double digit growth across Southern Europe and Russia and the CIS, reflecting signs of recovery in these markets.
Asia, Middle East & Africa
RevPAR was up 7.1% in the third quarter and 6.1% in the first 9 months, driven by solid increases in occupancy and rate. Growth was led by strong performances in Japan, and major markets in South East Asia, the former continuing to benefit from increased inbound travel. Mid-single digit RevPAR growth in Australia, India and the Middle East was consistent with first half trends. In the latter, trading was driven by strong demand in Saudi Arabia, partially offset by challenging market conditions in the UAE.
RevPAR was down 0.7% in the third quarter, and up 0.7% in the first 9 months, as occupancy growth was offset by a decline in rate. Mainland China RevPAR was up 2.1% as demand increased and we continue to drive industry outperformance. Growth was led by tier 1 cities, with new supply still impacting local market dynamics in developing tier 2 and 3 cities. This increase was offset by double digit RevPAR declines in Hong Kong and Macau, where trading conditions remain challenging across the industry.
Strengthening our preferred brands
- The Holiday Inn brand family continues to grow, with over 10k room signings in the quarter our best in the period for seven years, and more Holiday Inn brand room openings in the third quarter than ever before.
- We leveraged our leading market position in China to sign two landmark InterContinental Hotels & Resorts, a 543 room property in Shanghai and a 490 room property in Tianjin.
- There is increasing momentum behind our newer brands as we signed our second franchise contract for EVEN hotels in the US, and continued to expand our industry-leading boutique brands with five new signings.
- Across our extended stay portfolio we are accelerating our pace of signings, with over 6k rooms added to our pipeline so far this year, including our best third quarter performance since 2008.
Building and leveraging scale
- Net system size up 4.3% year on year (2.7% excluding Kimpton) to 727k rooms (4,963 hotels).
- 9k rooms (59 hotels) opened in the quarter and 6k rooms (38 hotels) removed. Consistent with historic trends, we expect an increase in openings pace during the fourth quarter.
- 16k new rooms (111 hotels) were signed, including 5k rooms in Greater China where signings pace was up nearly 30% on the third quarter last year. Financing conditions, particularly in the US, remain favourable for our preferred brands.
- IHG's pipeline increased to 218k rooms, with over 90% in our ten priority markets and approximately 45% under construction.
- 5% share of industry room supply, 14% share of active industry room pipeline.
Driving revenue delivery through technology and loyalty
- We remain on track to deliver a next generation Guest Reservation System for roll out in 2017, including development of new cloud based technology.
- We continue to innovate with digital solutions for our low cost direct channels. Our Lowest Price Promise campaign is driving year-on-year digital revenue growth of over 20% for Holiday Inn Express in the UK, and globally our mobile initiatives are delivering a year-on-year doubling in the usage of our app amongst loyalty members.
Financial position and capital allocation
The financial position of the group remains robust, with an on-going commitment to an efficient balance sheet and an investment grade credit rating.
In August the group issued a 300m, 10-year bond at a 3.750% coupon rate, the lowest funding rate IHG has achieved in the Sterling bond market.
The completion of the sale of InterContinental Hong Kong for proceeds of $929m after initial working capital adjustments and cash tax marks the successful conclusion of our major owned asset disposal programme.
As previously announced, a decision on return of funds to shareholders from asset sales completed in 2015 will be disclosed at preliminary results in February 2016.
The US Dollar continued to strengthen through Q3 which reduced group RevPAR to a 0.4% decline in the quarter when reported at actual exchange rates. A breakdown of constant currency vs. actual currency RevPAR by region is set out in Appendix 2.
In the third quarter, the pound sterling has depreciated less versus the US Dollar than our other major trading currencies. As a result we now expect a $5m impact on reported fee business operating profit for every 1%pt difference in full year group RevPAR growth between constant and actual exchange rates.
- 1RevPAR growth is at constant exchange rates (CER) unless otherwise stated.
- 2After initial working capital adjustments and cash tax, but before transaction costs.
IHG® (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of hotel brands, including InterContinental® Hotels & Resorts, Kimpton® Hotels & Restaurants, HUALUXE™ Hotels and Resorts, Crowne Plaza® Hotels & Resorts, Hotel Indigo®, EVEN® Hotels, Holiday Inn® Hotels & Resorts, Holiday Inn Express®, Staybridge Suites® and Candlewood Suites®.
IHG franchises, leases, manages or owns more than 4,900 hotels and 727,000 guest rooms in nearly 100 countries, with more than 1,300 hotels in its development pipeline. IHG also manages IHG® Rewards Club, the world’s first and largest hotel loyalty programme with more than 90 million members worldwide.
InterContinental Hotels Group PLC is the Group’s holding company and is incorporated in Great Britain and registered in England and Wales. More than 350,000 people work across IHG’s hotels and corporate offices globally.
Visit www.ihg.com for hotel information and reservations and www.ihgrewardsclub.com for more on IHG Rewards Club. For our latest news, visit: www.ihg.com/media and follow us on social media at: www.twitter.com/ihg, www.facebook.com/ihg and www.youtube.com/ihgplc.
Conference call for Analysts and Shareholders
A conference call with Paul Edgecliffe-Johnson (Chief Financial Officer) will commence at 8.00am UK time on 20 October and can be accessed on www.ihgplc.com/Q3. There will be an opportunity to ask questions.
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A replay of the 8.00am conference call will be available following the event – details are below:
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US conference call and Q&A
There will also be a conference call, primarily for US investors and analysts, at 9.00am New York Time on 20 October with Paul Edgecliffe-Johnson (Chief Financial Officer). There will be an opportunity to ask questions.
US Toll Free
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+1 212 999 6659
+1 866 966 5335
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A replay of the 9.00am US conference call will be available following the event – details are below:
US Toll Free
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+1 866 583 1035
The full release and supplementary data will be available on our website from 7.00am (London time) on 20 October. The web address is www.ihgplc.com/Q3.
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.