IHG: Greater China and U.S. lead company-wide RevPAR growth

 At the half-year mark, InterContinental Hotels Group grew global revenue per available room 6.7 percent, with Greater China posting gains of 12.7 percent and the U.S. up 8.2 percent. Chief Executive Richard Solomons attributed that U.S. RevPAR growth to the Holiday Inn relaunch.

Solomons also hinted at new brand development in the works for the company.

"We've been talking about another midscale brand," he said. "There are some interesting opportunities from a positioning perspective that would make sense. Not at the luxury end and not at the economy end, but we do see opportunity."

The process is long, he warned, saying that it does take a while to deseign and launch a new brand. But he did add that "it's something you want to be working on while you're still getting organic growth" with established brands.

Following is IHG's mid-year 2011 financial report:


Financial summary1 2011 2010 Actual % Change YoY
CER2 CER2 & excluding LDs3
Revenue $850m $772m 10% 8% 6%
Operating profit $269m $219m 23% 21% 17%
Total adjusted EPS 59.2¢ 47.0¢ 26%    
Total basic EPS4 54.0¢ 49.1¢ 10%    
Interim dividend per share 16.0¢5 12.8¢ 25%5    
Net debt $818m $1,019m      
1 All figures are before exceptional items unless otherwise noted. See appendix 3 and 4 for analysis of financial headlines
2 CER =constant exchange rates
3 excluding $10m of significant liquidated damages receipts in 2011
4 After exceptional items
5 partly intended to rebalance interim and final dividend payments


Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:

"In the first half we delivered a strong performance across each of our regions, driven both by increased occupancy from business and leisure travellers as well as progressive rate improvement. Global revenue per available room (RevPAR) grew 6.7% with Greater China up 12.7% and the US up 8.2%, where the Holiday Inn relaunch is delivering sustained outperformance.

"We continue to support our owners, driving guests to our hotels through the most efficient channels. Our industry leading developments in mobile booking sites and apps are now generating over $10m of revenue a month and we expect this to grow quickly as consumer booking preferences evolve.

"We have realised over $140m in the year to date from the sale of our interests in four hotels and have committed to invest over $70m of capital behind our brands, including the roll out of Holiday Inn Express in India and a world class site for Hotel Indigo in New York.

"Our priorities are to develop our brands, invest in our people and strengthen our revenue delivery systems, thereby creating firmer foundations for growth. I have made a number of senior appointments including Tom Singer as CFO and Tracy Robbins our EVP Human Resources and Global Operations Support will be joining the Board. Whilst we continue to monitor the uncertain economic outlook, we look forward with confidence in the currently favourable hotel trading environment of record demand and low supply growth in many markets."

Driving Market Share

  • Total gross revenue6 from hotels in IHG's system of $9.6bn, up 9%.
  • First half global RevPAR growth of 6.7%, 7.6% excluding Egypt, Bahrain and Japan.

    - Americas 7.6% (including US 8.2%); EMEA 4.0%; Asia Pacific 7.0%.

    - Second quarter global RevPAR growth of 6.5%, 7.4% excluding Egypt, Bahrain and Japan.

    - Global rate growth of 2.1% in the first half, with 2.4% in the second quarter.

  • System size 656,674 rooms (4,462 hotels); pipeline 186,116 rooms (1,190 hotels), 26% in Greater China.

    - 24,519 rooms (122 hotels) added, including 6,986 rooms (2 hotels) from the first InterContinental Alliance Resorts in Las Vegas; and 15,006 rooms (97 hotels) removed.

    - Signings of 21,139 rooms (148 hotels) were ahead of H1 2010.

    - 2011 net system growth still expected to be modest, with annual medium term growth from 2012 of 3%-5%.

Growing Margins

  • Sustainable efficiencies drive fee-based margins6 up 0.9% pts to 40.6%.

    - Regional and central costs of $129m increased $16m on 2010 at constant currency ($21m as reported) driven primarily by increased performance based incentive costs and investment in brand innovation.

    - 2011 full year regional and central costs in the region of $260m at constant currency.

see appendix 6 for definition.

Current trading update

  • July global RevPAR up 5.6%, including rate up 2.7%. RevPAR up 6.3% excluding Egypt, Bahrain and Japan.

    - Americas 6.6%; (includes US 6.7%); EMEA 3.0%; Asia Pacific 5.5%.

  • $14m operating profit benefit in the second half compared to 2010 from one significant liquidated damages receipt, cessation of depreciation on a hotel now held for sale and one favourable guarantee settlement.
  • Operating profit impact from events in Middle East, Japan and New Zealand of $7m in the first half with full year estimated impact unchanged at $15m to $20m.

Regional Highlights

Americas - Holiday Inn brand family drives increase in signings on 2010

RevPAR increased 7.6%, including rate growth of 2.1%. US RevPAR was up 8.2%, including rate growth of 2.4%. Second quarter RevPAR growth of 7.5%, with 2.6% rate growth and 8.1% in the US, with 2.8% rate growth.

Revenue increased 6% to $416m (5.3% at CER) and operating profit increased 26% to $225m. After adjusting for the owned hotel disposals and excluding the impact of a $10m liquidated damages receipt and $5m benefit year on year from the conclusion of a specific guarantee negotiation relating to one hotel, revenue was up 8% and operating profit up 19%. This was driven by 10.2% owned hotel RevPAR growth and a $19m increase in franchise royalty fees, net of a $5m reduction in royalties due to a net system size reduction primarily due to Holiday Inn exits.

We signed 11,614 rooms (102 hotels) in the half, up almost 1,500 rooms on the same period in 2010, due to an additional 19 Holiday Inn brand family deals, demonstrating the continued wider benefits of the relaunch. Four new Hotel Indigo deals were signed, including one on the Lower East Side of Manhattan, taking our Hotel Indigo pipeline in the Americas to 5,701 rooms (44 hotels). 16,520 rooms (88 hotels) were opened into the system (2010: 12,320 rooms), including the 6,986 room Las Vegas Sands (LVS) Venetian and Palazzo InterContinental Alliance Resorts.

EMEA - 14.4% owned RevPAR growth drives owned profits up over 50%

RevPAR increased 4.0%, including rate growth of 2.0%. RevPAR grew 5.3% excluding Egypt (10 hotels) and Bahrain (2 hotels) where the political unrest resulted in significant declines. In other Middle East markets RevPAR grew, including 10.2% in Saudi Arabia and 3.4% in the United Arab Emirates. Second quarter EMEA RevPAR growth of 4.8%, with rate growth of 2.1%. 6.0% second quarter RevPAR growth excluding Egypt and Bahrain.

Revenue increased 17% (10% at CER) to $224m and operating profit increased 22% (12% at CER) to $71m. This was driven by 14.4% owned RevPAR growth and a $6m increase in franchise royalties as a result of 5.3% RevPAR growth and a 2% increase in year on year room count. Managed operating profit declined by $1m to $31m as underlying growth across Continental Europe was offset by a $4m impact from the unrest in the Middle East.

We signed 4,547 rooms (24 hotels) in the half, up over 1,200 rooms on the first half of 2010. These included 7 Crowne Plaza hotels, 3 Hotel Indigo hotels and 4 Staybridge Suites hotels. 3,461 rooms (19 hotels) were opened into the system (2010: 2,938), including 2 Hotel Indigo hotels in the UK and 9 Crowne Plaza hotels across 8 different countries demonstrating the strength of this brand across the region.

Asia Pacific - Strong RevPAR and rooms growth drives a 31% profit increase

RevPAR increased 7.0%, including rate growth of 3.7%. Excluding Japan (32 hotels) where the earthquake and resultant events negatively impacted growth, RevPAR grew 11.6%. Greater China continues to be our strongest market with RevPAR up 12.7%, including rate growth of 7.1%. Second quarter Asia Pacific RevPAR growth of 4.4%, with 2.7% rate growth. 9.8% second quarter RevPAR growth excluding Japan.

Revenue increased 14% (10% at CER) to $156m and operating profit increased 31% to $46m, driven by strong RevPAR growth and a 5% increase in year on year room count, led by Greater China, up 11%. Managed operating profit increased $9m to $39m, despite the $3m impact from the natural disasters in Japan and New Zealand.

We signed 4,978 rooms (22 hotels) in the half, comprising: 9 hotels in Greater China; 4 hotels in India as part of the deal with Duet Hotels India; 6 hotels in Indonesia and 3 hotels in Thailand. On 8 August we announced the signing of a 1,224 room Holiday Inn in Macau with Sands China Ltd. 4,538 rooms (15 hotels) were opened into the system, including 3 hotels in India and 9 in Greater China where we now have 154 hotels open and 142 in the pipeline.

Capital recycling strategy driving growth

In the first half we completed the disposal of Hotel Indigo San Diego, Staybridge Suites Denver Cherry Creek, Holiday Inn Atlanta-Gwinnett Place and agreed the sale of a hotel asset and partnership interest in Australia. Proceeds from these sales will total $143m, 36% above book value. We now own just 12 hotels, including InterContinental New York Barclay which is on the market.

In line with our strategy to recycle capital to drive growth in our brands, during the half we committed to invest $72m in growth capital expenditure, spending $45m in the first half. These multi-year investments comprise a $12m equity stake in Summit Hotel Properties Inc. in the US with whom we have a hotel sourcing agreement; a $30m joint venture to take Holiday Inn Express into India; and a $30m joint venture to develop a Hotel Indigo on the Lower East side of Manhattan.

Interest, tax, exceptional items, dividend and net debt

The interest charge for the period was $32m (H1 2010: $31m). The tax charge has been calculated using an estimated annual tax rate of 28% (H1 2010: 28%).

Exceptional operating charge includes $37m in relation to the settlement of a commercial dispute in the EMEA region and a $22m litigation provision in the Americas.

The 25% increase in the interim dividend to 16.0¢ reflects strong performance in the first half and the intention to move towards rebalancing the interim and final payouts towards approximately a 30:70 ratio.

Net debt was $818m at the end of the half (including the $208m finance lease on the InterContinental Boston). This is down from $1.0bn at 30 June 2010 but up $75m on the year end 2010 position due to seasonal working capital movements including incentive payments. This is expected to partly reverse for the full year 2011.

Appendix 1: RevPAR Movement Summary

  July 2011 Half Year 2011 Q2 2011
  RevPAR Rate Occ. RevPAR Rate Occ. RevPAR Rate Occ.
Group 5.6% 2.7% 2.0%pts 6.7% 2.1% 2.7%pts 6.5% 2.4% 2.6%pts
Americas 6.6% 3.5% 2.1%pts 7.6% 2.1% 3.3%pts 7.5% 2.6% 3.1%pts
EMEA 3.0% 1.1% 1.3%pts 4.0% 2.0% 1.3%pts 4.8% 2.1% 1.8%pts
Asia Pacific 5.5% 2.1% 2.4%pts 7.0% 3.7% 2.0%pts 4.4% 2.7% 1.1%pts

Appendix 2: Half Year 2011 System & Pipeline Summary (rooms)

  System Pipeline
  Openings Removals Net Total YoY% Signings Total
Group 24,519 (15,006) 9,513 656,674 0% 21,139 186,116
Americas 16,520 (10,488) 6,032 445,407 (1)% 11,614 87,862
EMEA 3,461 (2,186) 1,275 122,127 1% 4,547 31,558
Asia Pacific 4,538 (2,332) 2,206 89,140 5% 4,978 66,696

Appendix 3: Second quarter financial headlines

Three months to 30 June 2011 Total Americas EMEA Asia Pacific Central
Operating Profit $m 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Franchised 140 124 118 107 20 16 2 1 - -
Managed 54 41 15 6 20 19 19 16 - -
Owned and leased 31 22 7 6 17 10 7 6 - -
Regional costs (28) (26) (12) (12) (9) (8) (7) (6) - -
Operating profit pre central costs 197 161 128 107 48 37 21 17 - -
Central costs (40) (25) - - - - - - (40) (25)
Group Operating profit 157 136 128 107 48 37 21 17 (40) (25)

Appendix 4: First half financial headlines

Six months to 30 June 2011 Total Americas EMEA Asia Pacific Central
Operating Profit $m 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Franchised 248 219 209 188 35 28 4 3 - -
Managed 103 75 33 13 31 32 39 30 - -
Owned and leased 47 33 6 4 23 15 18 14 - -
Regional costs (56) (55) (23) (26) (18) (17) (15) (12) - -
Operating profit pre central costs 342 272 225 179 71 58 46 35 - -
Central costs (73) (53) - - - - - - (73) (53)
Group Operating profit 269 219 225 179 71 58 46 35 (73) (53)

Appendix 5: Constant exchange rate (CER) operating profit movement before exceptional items

  Total*** Americas EMEA Asia Pacific
Actual currency* CER** Actual currency* CER** Actual currency* CER** Actual currency* CER**
Exchange rates GBP:USD EUR: USD
2011 0.62 0.71
2010 0.66 0.75

*US dollar actual currency
** Translated at constant 2010 exchange rates
*** After Central Overheads

Growth/ (decline) 23% 21% 26% 26% 22% 12% 31% 31%

Appendix 6: Definitions

Total gross revenue: total room revenue from franchised hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, as it is derived mainly from hotels owned by third parties. The metric is highlighted as an indicator of the scale and reach of IHG"s brands.

Fee based margins: adjusted for owned and leased hotels, managed leases and one individually significant liquidated damages receipt in 2011.

Appendix 7: Investor Information for 2011 Interim Dividend

Ex-dividend Date: 24 August 2011
Record Date: 26 August 2011
Payment Date: 7 October 2011
Dividend payment: Ordinary shares = 9.8 pence per share. ADRs = 16.0 cents per ADR



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