6th Aug 2024 08:59
(Alliance News) - InterContinental Hotels Group PLC on Tuesday said a strong pick-up in the US in the second quarter underpinned a jump in half-year sales.
Chief Executive Elie Maalouf said: "RevPAR growth accelerated in the latest quarter, reflecting a strong US rebound in [the second quarter] and the breadth of our global footprint, and development activity continues to increase."
The Berkshire, England-based hotel operator said revenue in the first half of the year was USD2.32 billion, up 4.3% from USD2.23 billion a year before. Pretax profit, however, fell 17% to USD472 million from USD567 million.
IHG explained that pretax profit includes a system fund and reimbursables loss of USD10 million compared with a USD87 million profit a year ago. This was driven by a planned reduction of prior system fund surplus.
In May, IHG had announced changes to its system fund, into which hotel owners pay. Owners pay contributions into the fund, which include a marketing and reservation assessment and a loyalty assessment. Following a review of owner charges, IHG said it is lowering its standard loyalty assessment fee that owners pay into the fund. It also announced to owners other marketing and loyalty programme benefits.
IHG also reported an increase in financial expenses to USD52 million from USD16 million.
IHG said global revenue per available room rose 3.0%, with growth of 3.2% in the second quarter. Growth picked up pace from 2.6% reported in the first quarter.
IHG said this was spurred by an upturn in the US. Here, RevPAR rose 1.7% in the half-year, and by 3.3% in the second quarter. It had fallen 0.3% in the first quarter.
In contrast, growth slowed in the Europe, the Middle East, Asia & Africa region, with RevPAR up 7.5% in the half-year. In the second quarter RevPAR rose 6.3%, slowing from 8.9% in the first.
In Greater China RevPAR fell 2.6% for the half-year and 7.0% in the second quarter. It had risen 2.5% in the first quarter. "Comparatives became sequentially tougher due to timing of resurgent domestic demand last year after the lifting of travel restrictions," IHG explained.
IHG declared an interim dividend per share of 53.2 US cents, up 10% annually from 48.3 cents. Including the ongoing USD800 million share buyback, IHG said it remains on track to return over USD1 billion to shareholders in 2024.
Maalouf added: "Our cash generation and strong balance sheet continue to support further investment in growth, and we are confident in capitalising on our scale, leading positions and the attractive, long-term demand drivers for our markets."
Fee margin of 60.6% was up 1.8 percentage points, driven by trading performance and new revenue from sale of loyalty points.
IHG said positive operational leverage is expected to drive a 100 to 150 basis points annual improvement in fee margin as revenue growth is expected to grow faster than the increase in its cost base. Additional drivers of this include structural shifts such as a growing proportion of franchising and increasing scale efficiencies in EMEAA and Greater China.
IHG said it is developing further opportunities to drive fee margin over the longer term, including cutting costs and expansion of ancillary fee streams, such as driving additional growth from loyalty point sales and co-branded credit cards.
Adjusted earnings per share growth is expected to be higher than the growth in operating profit and in line with current consensus expectations, the firm added.
Shares in IHG were up 1.2% to 7,444.00 pence in London on Tuesday morning. The wider FTSE 100 index was up just 0.4%.
By Jeremy Cutler, Alliance News reporter
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