Growth in revenue per available room (RevPAR) slowed in the third quarter at Holiday Inns owner InterContinental Hotels Group PLC (LON:IHG).
RevPAR, regarded as a key metric in the hotels business, grew 1.3% in the third quarter of 2017, bringing the growth rate down to 1.8% in the first nine months of the year from 2% in the first half.
In the Americas, third quarter RevPAR was up 1.9% but was flat in Europe. Excluding Greater China, RevPAR in the third quarter in the Asia, Middle East & Africa region was down 0.1%, despite a strong performance in the Middle East.
Greater China saw a 0.9% increase in RevPAR and the region registered its best ever third quarter performance.
Currency markets have been volatile, and remain so, and the group said it expected foreign exchange fluctuations to have an impact on 2016 reported profit. If current spot exchange rates had existed throughout the first half of last year, reported operating profit for that period would have been US$9mln higher, the group revealed.
Around 70% of IHG’s debt is denominated in sterling, so the pound’s plunge has proved a windfall in that respect. The UK only comprises 5% of the group’s revenues, but accounts for around half of its gross central overhead and 40% of its overheads in Europe.
“With 50% of group and 40% of European central costs in sterling, as well as 70% of group debt, the lower pound should prove a benefit, even if (as a dollar reporter) a stronger US$ undermines revenue growth.” suggested Nicholas Hyett, at Hargreaves Lansdown.
Richard Solomons, chief executive of IHG, said it was a solid performance in the third quarter.
“We remain focused on executing our commercial strategy to drive competitive advantage. This includes broadening the footprint of our global portfolio of brands, across which we drove our highest signings for eight years, including our best ever third quarter performance for Greater China,” Solomons said.
“Enhancements to IHG Rewards Club, including the roll-out of our preferential member pricing initiative, 'Your Rate', continue to drive excellent results. This, together with our initiatives to utilise digital innovation to enhance all stages of the guest journey, means we will continue to generate more customised and informed interactions with our guests and deliver improved returns for owners.
“Looking ahead, while industry RevPAR growth has slowed, the fundamentals for the sector, and particularly for IHG, remain compelling. This, combined with our winning strategy and the strength of our cash generative business model, will enable us to drive sustainable growth into the future. Despite the uncertain environment in some markets, we remain confident in the outlook for the remainder of the year," Solomons concluded.
Shares were down 1.5% at 3,178p in the first half-hour of trading.