IHG shares rise as growth slows

InterContinental Hotels Group "shrugged off" slowing revenue growth in the third quarter as its shares rose almost 5 percent on Tuesday, the Financial Times is reporting.

The company reported that RevPAR rose 4.8 percent in the quarter, compared with 5.8 percent in the first half of the year and 5.1 percent in the year-to-date. Despite the slowdown, the performance beat analysts’ forecasts of an increase of 3.9 percent. IHG shares have risen 6.5 percent in the past 12 months, ahead of the FTSE 100, which has climbed just 1.5 percent in the same period. In September, IHG’s shares dropped 7 percent.

RevPAR was up 7.8 percent in the third quarter and 6.1 percent in the first nine months, led by increases in rate. UK growth of 4.8 percent was driven by London and the provinces, with both benefitting from high occupancy levels throughout the period, and strong corporate demand in September. 10.1 percent RevPAR growth in Continental Europe was driven by solid trading in Germany, and double digit growth across Southern Europe and Russia and the CIS, reflecting signs of recovery in these markets.

Asia, Middle East & Africa
RevPAR was up 7.1 percent in the third quarter and 6.1 percent in the first 9 months, driven by solid increases in occupancy and rate. Growth was led by strong performances in Japan, and major markets in South East Asia, the former continuing to benefit from increased inbound travel. Mid-single digit RevPAR growth in Australia, India and the Middle East was consistent with first half trends. In the latter, trading was driven by strong demand in Saudi Arabia, partially offset by challenging market conditions in the UAE.

Greater China
RevPAR was down 0.7 percent in the third quarter, and up 0.7 percent in the first 9 months, as occupancy growth was offset by a decline in rate. Mainland China RevPAR was up 2.1 percent as demand increased and we continue to drive industry outperformance. Growth was led by first-tier cities, with new supply still impacting local market dynamics in developing second- and third-tier cities. This increase was offset by double digit RevPAR declines in Hong Kong and Macau, where trading conditions remain challenging across the industry.

Overall IHG had 726,876 hotel rooms in the third quarter and has agreed to open a further 16,040. It has another 217,709 in the pipeline, which are not yet confirmed.

The company continued to reduce its property portfolio, while retaining management contracts to operate the hotels. In July, it sold its flagship Hong Kong hotel for $938 million—well over the $298 million valuation for the building—a deal it said completed its major asset disposal program.

Activist investors including Nelson Peltz and more recently US hedge fund Marcato have been scrutinizing IHG’s management in recent years. Last year, the company returned more than $1 billion to shareholders, including a $763 million special dividend in May.