21st Oct 2014 09:30
LONDON (Alliance News) - Intercontinental Hotels Group PLC Tuesday said global comparable revenue per available room rose 7.0% in the third quarter, its best quarterly performance in over two years and marking an acceleration from the first half of the year, helped by strong growth in the US in particular.
IHG management also said the company is continuing to see strong momentum in the business and remains "encouraged by current trading and positive booking trends". It said it also continues to review opportunities for further asset sales.
"We delivered our best quarterly RevPAR performance in over two years with growth in each of our four regions," said Chief Executive Richard Solomons in a statement. "Whilst some of our markets face heightened uncertainty and risks, we continue to see strong momentum in the business and remain encouraged by current trading and positive booking trends."
The hotels company, whose brands include Holiday Inn, Crowne Plaza and InterContinental Hotels, said RevPAR grew in every region, but its performance in the US was particularly strong with RevPAR up 8.7%. Elsewhere, the figure was up 6.1% in Europe, 4.4% in Asia, Middle East and Africa, and 0.8% in Greater China.
In the Americas, RevPAR growth accelerated to 8.4% in third quarter, driven by its strongest quarterly US RevPAR growth in eight years. It said higher leisure demand and increased group business is helping to drive growth in the region.
In Europe, RevPAR growth was driven by particularly strong UK and German trading.
It said the slowdown in China was largely due to new supply in tier two and three cities as those markets developed, but said trading in tier one cities was still fairly robust.
Overall RevPar growth for the group in the first nine months of 2014 was 6.3%.
It opened 8,000 rooms in the quarter, signed 16,000 rooms into its system, and delivered net system size growth of 2.7%. It said its pipeline now stands at 190,000 rooms across 1,198 hotels, with more than 45% under construction and 90% situated in its priority markets.
"While largely expected, this was nonetheless a strong quarter with an outlook that given its heavy US mix remains robust," analysts at Bank of America Merrill Lynch wrote in a research note Tuesday.
The bank continues to forecast full year RevPAR growth of 6.2% for the group, assuming that the growth run rate continues into the final quarter.
"IHG continues to be well placed for long term structural growth in its core fee based business with we estimate around 5% global market share but around 15% share of the active industry pipeline," the BoAML analysts said.
Numis analyst Wyn Ellis believes that there could be modest consensus upgrades for IHG, having posted such strong third quarter growth.
"Organic growth prospects are promising and the company is particularly well positioned in the United States hotel market, which is at the sweet spot in the cycle (high occupancy, rising demand and limited supply growth are driving strong revenue per available room growth)," said Ellis in a note following IHG's trading statement.
Ellis thinks IHG is well managed with an attractive business model and a sound strategy for growth.
Despite the strong trading update, IHG shares were trading 1% lower Tuesday mid-morning, at 2,226,00 pence.
By Steve McGrath and Rowena Harris-Doughty; [email protected]; @stevemcgrath1; [email protected]; @rharrisdoughty
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