IHG's Q3 opening pace the highest in a decade

The newly announced Kimpton Bangkok, part of Kimpton's ongoing international expansion. Photo credit: IHG

IHG is powering forward with continued portfolio growth, the expansion of Voco and Avid and the relaunch of luxury brand Regent Hotels & Resorts.

Overall, IHG posted a gain of 5.1 percent year over year in system-size growth during the third quarter, up 4.6 percent, excluding its deal with Regent Hotels & Resorts. The company signed 27,000 rooms and opened 19,000, a 70-percent increase year over year. According to Keith Barr, CEO of IHG, this represents IHG’s strongest Q3 opening pace in the past 10 years. IHG’s total group pipeline currently stands at roughly 267,000 rooms.

“We delivered a good third-quarter performance,” Barr said in a statement. “Our strategic focus on improving our rooms growth yielded strong results, driving net system size up 5.1 percent and our best performance for signings and openings in a decade. Global RevPAR grew 1 percent, with performance in the U.S. impacted by strong [previous-year] demand from the 2017 hurricanes.”

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Though these are strong numbers, IHG’s growth is set to ramp up in the coming months. The company signed deals for 150 new Avid hotels in the Americas, with its first property now open. The brand also is expanding to Germany. In addition, IHG’s new Voco brand is on track to sign 15 hotels by the end of 2018, and IHG also revealed plans to expand its newly acquired Regent Hotels & Resorts portfolio from six to 40 properties overall, with two already in its pipeline.

Also on the luxury front, IHG’s Kimpton Hotels & Restaurants brand is continuing its international expansion. The Kimpton Fitzroy is expected to open in London in the coming weeks, and in Q3 IHG signed Kimpton hotels in Bangkok; Barcelona, Spain; and Tokyo. Kimpton hotels now can be found in 14 countries. 

Stepping Up

During a Q3 2018 earnings call, Paul Edgecliffe-Johnson, CFO at IHG, said the company’s system growth during the quarter was a “material step up” from previous Q3 performances. 

“In the first nine months of the year we opened 40,000 rooms versus 33,000 rooms last year. And we're signing a lot more. We signed 74,000 rooms in the first nine months versus 51,000 last year. So the combination of the step up in signings that we're seeing over prior years is now starting to come through into openings,” Edgecliffe-Johnson said.

Edgecliffe-Johnson pointed to China as a standout market for IHG during Q3, something of a common factor in today’s hospitality landscape as Chinese travelers continue to capture the attention of hotel companies. And with good reason. IHG’s RevPAR in China was up 4.8 percent during Q3 and 8.2 percent year to date. RevPAR growth of 4.5 percent in mainland China was driven by growing transient and corporate demand.

"I have spoken before about the sense of opposition in greater China," he said during the call. "There is significant long-term potential for IHG in this region, and we're continuing to deliver a market-leading performance. We grew our net system size by 17 percent [year over year] in the third quarter and opened 32 hotels compared to 13 in the same period last year, our best ever quarter for openings. The region is on track to deliver a record performance for both signings and openings for the full year."

The Regent Chongqing in China. Photo credit: IHG

IHG’s performance in the Americas may not have compared to growth in China, but still came in at a strong 2 percent increase for Q3. While rate was up 1.1 percent in the U.S., occupancy was down 1.2 percent due to a decline in markets that benefitted from hurricane-related demand increases this time last year, though hurricanes Michael and Florence may offer a residual benefit in occupancy for the coming months.

Canada RevPAR was up 2.4 percent thanks to growing strength in urban markets, while Latin America and the Caribbean posted RevPAR increases of 6.5 percent, and Mexico RevPAR rose 5.4 percent.

Overall, the Europe, Middle East, Asia and Africa region saw RevPAR increases of 2.5 percent, while continental Europe rose 4.3 percent. France was the standout market here, rising 9.8 percent versus a 1.1-percent rise in the UK. Outside of these markets, the Middle East and Australia saw a low single-digit RevPAR decline due to ongoing supply growth, and Japan’s RevPAR rose 2.5 percent.

"In the UK, the rebranding of the portfolio of nine hotels to our luxury and upscale brands will give us representation for Kimpton in Manchester, Edinburgh, Glasgow and London," said Edgecliffe-Johnson. "Building on this momentum, we announced further signings for Kimpton in Barcelona, Tokyo and Bangkok in the third quarter. And our accelerated international expansion of the brand means we're now secured Kimpton representation in 14 countries around the world."

Stormy Weather

The impact of natural disasters and inclement weather on hospitality remains an ongoing discussion, and Edgecliff-Johnson said hurricanes likely will affect the industry through the end of the year, though he expects hurricanes to have a net positive for the end of the year.

“I think we will still see an impact in the hurricanes in the fourth quarter, but the macro environment is good,” Edgecliff-Johnson said during the call. “Rate was still up in the quarter, is up by 110 basis points or so. And the…books were up. And so you want to take out the hurricane impact, then the fundamentals are still very positive."

During a Q&A session, Edgecliff-Johnson was asked about IHG’s Crowne Plaza brand, its ongoing refresh and the impact hurricanes had on the brand. He said Crowne Plaza has been on a “journey” that involves removing ailing hotels from its system and refreshing key products. Overall, he said Crowne Plaza’s lower-than-expected performance can be attributed to natural disasters and positioning, something IHG is working on.

“The performance you're seeing there [with Crowne Plaza] is much more orientated toward what's going on with hurricanes,” Edgecliff-Johnson said. “You have a few large hotels in markets like Dallas and Houston that would have been badly hit, and you'll see an outsized impact on the overall state from that.”