IHG has reported both good momentum and strong performance across its operations.
Highlights
- Global Q3 comparable RevPAR up 4.8%, led by rate up 3.6%.
- Expanded global scale: net system size of 727k rooms, up 4.3% year on year (2.7% excluding Kimpton); 16k rooms signed into the 218k room pipeline, highest Q3 hotel signings since 2008.
- Strengthened the position of the 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 $929m.
Richard Solomons, Chief Executive reported:
“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
Americas
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.
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.
Europe
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
Greater China
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.
Strategic progress
Strengthening preferred brands
- The Holiday Inn brand family continues to grow, with over 10k room signings in the quarter, the best in the period for seven years, and more Holiday Inn brand room openings in the third quarter than ever before.
- Leveraged the 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 the newer brands as IHG signed its second franchise contract for EVEN hotels in the US, and continued to expand its industry-leading boutique brands with five new signings.
- Across theextended stay portfolio IHG is accelerating its pace of signings, with over 6k rooms added to the pipeline so far this year, including the 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, 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 the preferred brands.
- IHG’s pipeline increased to 218k rooms, with over 90% in the 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
- Remain on track to deliver a next generation Guest Reservation System for roll out in 2017, including development of new cloud based technology.
Continue to innovate with digital solutions for the low cost direct channels. The Lowest Price Promise campaign is driving year-on-year digital revenue growth of over 20% for Holiday Inn Express in the UK, and globally mobile initiatives are delivering a year-on-year doubling in the usage of the app amongst loyalty members.