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InterContinental Hotels weak as 1% Q3 RevPar rise disappoints; to pay US$500mln special dividend

Net system size growth was 5.1% year-on-year to 826,000 rooms, but up 4.6% excluding Regent Hotels & Resorts and its UK portfolio deal

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IHG said it logged its best performance for signings and openings in a decade

Intercontinental Hotels Group PLC (LON:IHG) saw its shares fall on Friday as the blue-chip firm reported a 1% growth in global comparable revenue per available room in the third quarter, less than some forecasts, and also unveiled plans to return US$500mln to shareholders.

On regional levels, in the Americas, IHG's revenue per available room (RevPAR) was flat in the third quarter of 2018, with activity in the US having been boosted by strong hurricane-related demand in the same period in 2017.

READ: Intercontinental Hotels sees RevPAR growth ease in China

RevPar in Europe, Middle East, Asia and Africa (EMEA) region increased by 2.5% during the third quarter. Growth of 4.3% in Continental Europe was aided by a 9.8% increase in France where the market continues to recover.

In Greater China, RevPAR rose 4.8% during the quarter. IHG said an increase of 4.5% in Mainland China was driven by continued transient and corporate demand, but, as expected, was lower than first half-levels because of strong comparables in the year-ago period.

Net system size growth was 5.1% year-on-year to 826,000 rooms (5,518 hotels), but up 4.6% excluding Regent Hotels & Resorts and its UK portfolio deal.

Keith Barr, IHG’s chief executive, said: "We delivered a good third quarter performance. Our strategic focus on improving our rooms growth yielded strong results, driving net system size up 5.1% and our best performance for signings and openings in a decade. Global RevPAR grew 1.0%, with performance in the US impacted by strong prior year demand from the 2017 hurricanes."

IHG said the international expansion of Kimpton Hotels & Restaurants is accelerating, with locations secured in 14 countries, and that its voco brand is on track for more than 15 signings by year-end, ahead of its initial expectations.

Planning US$500mln special dividend

The company said it is planning a US$500mln special dividend with share consolidation, to be paid in early 2019. The move reflects “rapid” implementation of its strategic initiatives.

“The fundamentals for our industry remain strong. We are confident in the outlook for the remainder of the year and in our ability to deliver industry-leading net rooms growth over the medium term,” said Barr.

Shares weak

In late morning trading, IHG shares were 5.3% lower at 3,994p.

Nicholas Hyett, equity analyst at Hargreaves Lansdown commented: “Revenue per available rooms is a little lower than hoped for, largely as a result of weak occupancy numbers in the US.

“With IHG rapidly expanding its rate of room growth, including some sizeable acquisitions and new brand launches, lower revenues are far from welcome.”

He added: “Having been behind the wider sector in terms of new openings earlier in the cycle, the worry is that IHG is playing catch up just as the market starts to cool.”

 -- Adds analyst comment, share price --

Quick facts: Intercontinental Hotels

Price: 4806 GBX

LSE:IHG
Market: LSE
Market Cap: £8.75 billion
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