IHG Reports 1Q Profit

InterContinental Hotels Group (IHG) has announced a profit in its first quarter results. Revenue rose 3% from $396 million during the first quarter of last year to $409 million. Due to a strong performance in RevPAR, operating profit increased 5% from $112 million to $118 million. The accommodation group was also able to reduce its net debt from $846 million to $577 million.

Global RevPAR grew 7% during the period, while rates rose 3.3% and occupancy increased by 2.1 percentage points. IHG added 7,101 rooms in 48 hotels to its group, a 1% increase year-over-year, bringing its total portfolio to 661,159 rooms across 4,506 hotels. Their brands continue to gain ground in new markets, with the first Hotel Indigo opening in Germany and the first Holiday Inn Express opening in Thailand over the quarter. The group also has 174,554 rooms for 1,098 hotels in its pipeline, and over 40% of this is under construction.

Also during the first quarter, IHG launched its EVEN Hotels brand in February. This is the first mainstream brand to focus on wellness in the US. They are planning to invest up to $150 million in the next three years to establish the brand in key cities around the country, and the first venue is due to open in the first half of next year. In March, the group launched HUALUXE Hotels and Resorts as the first international, upscale brand designed for Chinese travellers. They have already received more than 20 letters of intent from interested owners, and they expect to open the first venue by early 2014.

In the Americas, IHG has reported strong growth in royalties from its franchises over the first quarter, with RevPAR rising 7.7% and rates increasing 4.2%. RevPAR in the US was up 7.6%, while rate growth was 4.1%. Revenue in the market fell 7% to $181 million, but operating profit grew 3% to $100 million. After calculating the impact of liquidated damages and managed lease hotels, revenue grew 6% and operating profit rose 16%. The growth was driven by robust RevPAR throughout the region and was only slightly offset by the impact of a Caribbean hotel being partially closed.

In the European region, IHG reported strong performance in challenging markets during the three-month period, with RevPAR rising 2.6% and rate growth at 1.2%. RevPAR remained resilient in their key markets despite continued uncertainty in the economy, with a 2.2% rise in the UK, 2.6% in France and 3.3% in Germany. Revenue in the region rose 18% to $90 million and operating profit grew 25% to $15 million. After adjustments, revenue was in line with last year’s first quarter results and operating profit rose 25%.

In Africa, the Middle East and Asia (AMEA), RevPAR for IHG grew 6.9% and rate growth was 1.7%. The group says most markets are showing robust growth, including a 4% rise in RevPAR in Japan, 7.4% in the United Arab Emirates (UAE), 8.9% in South East Asia, and 9.5% in Saudi Arabia. RevPAR continued to be impacted by political unrest in Egypt and Bahrain, with 13.6% and 13.9% declines respectively. Revenue rose 12% to $56 million and operating profit grew 10% to $22 million over the quarter. After adjusting for the disposal of a hotel asset and partnership interest in Australia during the third quarter of 2011, operating profit rose 16%.

In the Greater China region, strong growth was driven by an increase in rooms and rise in RevPAR. This region continues to be the strongest market for IHG, with RevPAR up 11.9% and rate growth at 3.3% for the period. Revenue grew 10% to $54 million and operating profit rose 25% to $20 million – driven by a combination of a 13% increase in net system size and robust RevPAR growth.

IHG chief executive Richard Solomons says they have delivered a robust performance for the first quarter, with RevPAR up around the world by 7% and the US and Greater China continuing to outperform the market. The strength of their portfolio, their scale and close working relationships with hotel owners continue to underline their success.

Solomons noted that the group launched EVEN Hotels in the US and HUALUXE Hotels and Resorts in Greater China during the period. He says this reflects their ability to create innovative and distinctive new brands, which will further develop their already robust position over the long term in the group’s two biggest markets. Together with their continued work to strengthen their existing brands, these new hotels will allow the group to deliver market share gains in the future.

Solomons added that the backdrop of the economy – especially in Europe – is still challenging. However, the considerable strengths of their business, including their strong balance sheet and resilient model, give them confidence that they will continue driving high quality growth.