InterContinental Hotels Group PLC Announces Half Year Results

  • InterContinental Hotels & Resorts
  • 08.10.10
InterContinental Hotels Group PLC announced its half year results through June 30, 2010. The following is an excerpt from the report.

The total gross revenue from all hotels in IHG’s system of $8.9 billion, is up 9 percent at constant currency. The global constant currency first half RevPAR growth of 3.9 percent was driven by occupancy. The global constant currency second quarter RevPAR growth of 7.4 percent, including a rate decline of 0.5 percent. 19,003 rooms (148 hotels) were added, 9,982 (65 hotels) on a net basis. The total system includes 656,661 rooms (4,503 hotels), up 4 percent. 19,126 rooms (130 hotels) were signed, taking the pipeline to 197,431 rooms (1,302 hotels). Interim dividend was up 5 percent to 12.8¢, equivalent to 8.0p at the closing exchange rate on 6 August 2010. InterContinental Buckhead, Atlanta sold on July 1 for $105 million, in line with strategy to reduce capital intensity. July global constant currency RevPAR of 8.1 percent included 6.4 percent Americas, 10.0 percent EMEA and 15.0 percent Asia Pacific.

The $1 billion relaunch of Holiday Inn remains on track. 2,585 hotels are now operating under the new Holiday Inn standards, 76 percent of the total estate. Relaunched hotels are performing at the top end of IHG's expected range. IHG continues to drive up the overall quality of the estate with 75,000 new rooms under construction of which 140 hotels (21,000 rooms) are expected to open in the remainder of this year. 9,021 rooms (83 hotels) were removed from the system in the first half. Total room removals are still expected to be in the region of 40,000 in 2010.

With 132 hotels open and 148 in the development pipeline, IHG continues to build its leading position in Greater China. Over 50 percent of its pipeline comprises IHG's upscale brands, illustrating the potential speed of revenue growth from this rapidly expanding market. System delivery continued to improve with 68 percent of rooms revenue booked through IHG’s channels or by Priority Club Rewards members direct to hotel (2009: 66 percent). Priority Club Rewards members now total almost 52 million (2009: 44 million).

Regarding the company's focus on efficiency, first half regional and central costs of $108 million increased $9 million at constant exchange rates ($12 million at reported rates) due to higher performance based short-term incentive costs. IHG is on track to maintain the $75 million of sustainable savings achieved in 2009 across regional and central costs and managed and franchised cost of sales.

Andrew Cosslett, chief executive of InterContinental Hotels Group PLC said, "Trading strengthened as the first half progressed with global revenue per available room (RevPAR) up 3.9 percent overall and 7.4 percent in the second quarter. Asia is leading the recovery with Greater China reporting RevPAR up 29.4 percent in the half. As anticipated, occupancy drove RevPAR increases, with business travellers returning in greater numbers. Rates are now stabilising across the world, with most markets seeing rate growth towards the end of the first half. The economic environment does remain uncertain, however, with short booking windows and limited visibility.

"During the downturn we worked closely with our owners to reduce costs, drive revenue and build the strength of our system and brands. In the first half we signed 130 hotels and opened 148, despite the tough financing environment," he said. "The quality of these new hotels is exceptionally high, particularly in China where both our pipeline and system of open hotels are skewed towards more upscale developments. We have now completed the relaunch of nearly 2,600 Holiday Inn hotels worldwide out of a total of 3,400, and the performance of these hotels continues to meet or beat our expectations.

"These efforts put us in great shape to increase share in what is now a rising market. Having maintained the dividend through the recession and balancing the improvement in trading with the continued economic uncertainty, the Board is announcing an increase in the dividend of 5 percent," Cosslett said.

Americas Revenue Performance:
RevPAR increased 2.2 percent in the first half, with second quarter growth of 5.8 percent. In the United States, Holiday Inn and Holiday Inn Express outperformed their segments by 1.4 and 0.4 percentage points respectively, reporting RevPAR growth of 0.1 percent at Holiday Inn (including 3.2 percent for Q2) and 0.4 percent at Holiday Inn Express (including 3.6 percent for Q2). Revenues increased 5 percent to $393 million.

Operating profit increased 20 percent from $149 million to $179 million. Franchised hotels’ operating profit grew 6 percent driven by a royalty fee revenue increase of 8 percent. In the managed business, operating profit of $13 million compares to a loss of $9 million in 2009, which included a $19 million charge for priority guarantee shortfalls. Owned and leased hotels’ operating profit of $4 million was flat on 2009 reflecting RevPAR growth of 5.9 percent offset by a $3 million reinstatement of depreciation on hotels classified as held for sale in the first half of 2009.

EMEA Revenue Performance:
RevPAR increased 4.0 percent in the first half, with second quarter growth of 7.2 percent. Performance was strongest in Germany where RevPAR grew 16.5 percent, whilst mixed trading conditions across the Middle East led to a 4.8 percent RevPAR decline in that region. RevPAR growth of just 1.2 percent in the United Kingdom was due primarily to previously contracted lower rate business. Revenues increased 3 percent to $192 million (4 percent CER). Excluding one liquidated damages receipt of $3 million in 2009, revenues increased 5 percent to $192 million (5 percent CER).
Excluding the impact of the $3 million liquidated damages receipt in 2009, operating profit grew 5 percent to $58 million (9 percent CER). On this same basis franchised hotels’ operating profit grew $1 million to $28 million driven by a 4 percent increase in room count offset by a $2 million reduction in initial franchising, relicensing and termination fees. Managed hotels’ operating profit declined by $1 million to $32 million, with growth in Europe being offset by difficult trading in certain parts of the Middle East. Owned and leased hotels’ operating profit grew $5 million to $15 million driven by 15.0 percent RevPAR growth at InterContinental Park Lane and 13.1 percent growth at InterContinental Paris Le Grand.

Asia Pacific Revenue performance:
RevPAR increased 13.0 percent in the first half, with second quarter growth of 16.1 percent. Greater China was the strongest performing region with RevPAR growth of 29.4 percent, boosted by the Global Expo in Shanghai where RevPAR grew 48.4 percent. Revenues increased 29 percent to $137 million (25 percent CER).

Operating profit increased 106 percent to $35 million (94 percent CER). Franchised hotels’ operating profit increased $1 million to $3 million. Managed hotels’ operating profit grew 76 percent to $30 million (65 percent CER) primarily driven by 31.2 percent RevPAR growth across IHG’s managed operations in Greater China and 12 percent rooms growth across the region. Operating profit at owned and leased hotels increased 27 percent to $14 million reflecting RevPAR growth of 16.5 percent at InterContinental Hong Kong.

InterContinental Hotels Group (IHG) [LON:IHG, NYSE:IHG (ADRs)] is one of the world's largest hotel groups by number of rooms. IHG franchises, leases, manages or owns, through various subsidiaries, over 4,500 hotels and more than 650,000 guest rooms in 100 countries and territories around the world. The Group owns a portfolio of well recognized 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 one of the world's largest hotel loyalty programs, Priority Club® Rewards, with 52 million members worldwide.

IHG has over 1,300 hotels in its development pipeline, which will create 160,000 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.

This announcement contains certain forward-looking statements as defined under U.S. 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.

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