As they have been for all of the year so far, Europe and China were the star performers for Holiday Inn owner Intercontinental Hotels Group PLC (LON:IHG) in the third quarter.
Revenue per available room (RevPAR) – the key metric for hotels – in Europe rose 7.1% in the three months ended September 30, with markets previously hit by terrorist attacks, such as Belgium and Turkey, enjoying a strong return to growth.
READ: InterContinental Hotels weak as it reports slower global rooms revenue growth in the second quarter
RevPAR in Greater China jumped 7.8%, despite revenues in Hong Kong – usually a decent money maker – falling 1%.
The growth in China was driven by a 15% rise in revenues in the gambling paradise of Macau which reflects “improving leisure demand”. Soft comparatives also helped to inflate the figures.
London demand robust
Earlier this week, Thorpe Park owner Merlin Entertainments PLC (LON:MERL) was bemoaning a fall in tourists visiting London after the recent spate of terrorist attacks in the capital.
There were no such complaints from IHG though, which hailed the “outperformance” in London, likely driven by the fall in the pound. RevPAR in the UK as a whole was up 4%.
Natural disasters hit Americas earnings
The recent hurricanes in the US had a “mixed effect”, with some hotels benefitting from the displacement of locals while others suffered from cancellations.
Overall, RevPAR in the Americas was up 0.8% in the quarter, with Canada and Latin America continuing their recent upward trajectory, although Mexico revenues were flat due to the recent earthquake in Mexico City.
The Asia, Middle East & Africa unit was the worst performer and could only muster RevPAR growth of 0.6%.
The timing of Ramadan and high supply growth impacted demand in the Middle East which saw RevPAR decline 6%, while the disruption from last month’s typhoon meant Japan revenues were flat.
India bucked the trend, notching up growth of 10% as more and more tourists flock to the country, while Australasia and South East Asia also made gains.
Q3 group RevPAR up 2.3%
Overall, group RevPAR increased by 2.3% and is up 2.2% year-to-date.
During the quarter InterContinental opened another 11,000 rooms, which means its total ‘net system size’ has increased 4.1% since this time last year to 786,000 rooms or so.
On top of that, the FTSE 100 group signed off on 137 new hotels in the quarter, which will add another 20,000 rooms to the portfolio when they are completed.
In total there are 235,000 in IHG’s pipeline, with almost half of them currently under construction.
Confident in outlook despite challenges
“We have delivered a good third quarter performance; RevPAR increased by 2.3% and net rooms growth of 4.1% was our strongest since 2010,” said chief executive Keith Barr.
“We also signed hotels into our pipeline at the fastest third quarter rate since 2008, and have made an excellent start with our plans to accelerate the growth of our brands around the world.
“Our new US midscale brand, avid hotels, is generating strong traction with our owner community. With over 150 written expressions of interest and more than 50 applications in the first four weeks of franchise sales, demand from owners has exceeded our original expectations.”
Barr added: “Looking ahead, despite macro-economic and geopolitical uncertainties around the world, we remain confident in the outlook for the remainder of the year.”
Brexit driving tourism
“There has been at one very clear economic boost since Brexit – tourism in the UK is booming thanks the weak pound and this has helped hotels," said ETX Capital analyst Neil Wilson.
"Whilst Merlin Entertainment claims tourist are staying away, hotel owners like IHG and Whitbread are reporting gains amid what is a very resilient hotel market.
"UK growth was particularly strong because of the weak pound driving foreign visits. The UK delivered RevPAR growth of 4% - outperformance was most notable outside London at 5%. In the capital growth was 3%.
Wilson added: "Growth in its biggest market the US was weaker, however. Unlike Unilever, IHG at least doesn’t blame the weather, saying the hurricanes Irma and Harvey produced a mixed impact.
"Cancellations hit revenues, but the company seemed to have picked up business as displaced people sought temporary accommodation and relief workers needed places to stay. Even the solar eclipse helped bookings."
Shares were volatile early on Friday, down 0.4% to £40.84 after initially being in the black.
--Updates for analyst comment and share price--