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InterContinental Hotels hit by slower revpar growth in China and US

Comparable revenue per available room flattened off to 0.1% from the 0.3% seen in the first quarter

Intercontinental Hotels -

InterContinental Hotels Group PLC (LON:IHG) tried to cheer investors with a 10% hike in the interim dividend after a half-year where the Holiday Inn owner faced weaker revenue available per room (revpar) in the US and China.

Revenues of US$1.01bn in the first six months of 2019 were up 13% on the same period last year but slightly short of the US$1.02bn that analysts expected. 

Comparable revpar softened 0.2% decline in the second quarter from the 0.3% in the first, as North America shrank 0.2% and China 0.5% in the second quarter.

For the first half as a whole, revpar was up 0.1%, with the US flat and Greater China down 0.3%, offset by a 0.2% rise from Europe Middle East Africa and Asia.

Adding more rooms

Despite the “slower revpar growth environment” chief executive Keith Barr pointed to the considerable progress in opening a record number of rooms in the half.

The FTSE 100 group grew its room ‘system’ 5.7% to 856,000 rooms globally, with around 30,000 room additions in the half, a 38% year-on-year rise, while roughly 10,000 less appealing rooms were removed. There are also 282,000 rooms in the pipeline.

Pre-tax profits grew 25% to US$375mln and earnings per share were up 36% to 167.2 cents, with the interim dividend lifted to 39.9 cents. 

Barr said IHG was still on track to deliver around $125mln in annual savings by 2020 for reinvestment in growth initiatives, with roughly 80% to be realised by end of 2019.

“Funded by our efficiency programme, the investments we are making behind our strategic initiatives are driving accelerated rooms growth and position us well to achieve industry leading, sustainable net system size growth over the medium-term,” Barr said.

“Whilst there are always macro-economic and geo-political uncertainties in some markets, our broad geographic spread and the resilient, cash-generative nature of our business gives us confidence in the outlook for the balance of the year.”

Analysts at UBS said: “While revpar was weak, overall results are in line with consensus and net system growth was strong.”

IHG shares fell 1.2% to 5,224p on Tuesday morning.

-- Share price and analyst comment added --

Quick facts: Intercontinental Hotels

Price: 4756.5 GBX

LSE:IHG
Market: LSE
Market Cap: £8.66 billion
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