Solid Q2s for IHG, Choice and Hyatt

(Cambria Chicago)

Time for a second-quarter earnings whirl.

InterContinental Hotels Group

IHG reported solid revenue growth driven by both revenue per available room and rooms revenue. Second-quarter RevPAR was up 2.5 percent, and global comparable first-half RevPAR increased by 2 percent. IHG saw $11.9 billion total gross revenue from hotels in its system—an increase of 1.7 percent year-on-year.

IHG CEO Richard Solomons examined the numbers in a global context. Recent months, he said, have brought “considerable economic and political uncertainty” to the industry, due to the “Brexit, concerns about the stability of the European Union, more broadly the U.S. Presidential Election campaign and ongoing unrest in other parts of the world. And in the midst of this, we've seen an increase in terrorism with horrifying scenes in France, Belgium and Germany."

For the first half of the year, Solomons continued, IHG reported 3.6 percent net system growth, combined with solid RevPAR increases delivered underlying fee revenue growth of 5 percent. “This top-line growth was underpinned as ever by disciplined execution and a clear focus on costs. We continue to invest in key areas of the business, whilst growing our fee-based margin and generating significant free cash flow.

“Reflecting this performance and our ongoing commitment to generating shareholder value, we have today announced a 9-percent increase in the interim dividend in dollar terms.”

CFO Paul Edgecliffe-Johnson said that IHG had translated 5 percent of revenue growth into 10 percent operating profit growth "by leveraging the scalability of our asset-light business and continuing our focus on disciplined cost management and productivity.

"This is in order to increase our fee margin by 260 basis points year-on-year, while continuing to invest for further growth, but does also reflect that certain costs predominantly in our Americas franchise business will be more weighted towards the second half of the year."

IHG hotels continue to operate at “near-record occupancies” of almost 70 percent, Edgecliffe-Johnson said. “So our comparable RevPAR growth of 2 percent was predominantly rate driven. Second quarter RevPAR accelerated from quarter one in each of our four regions with 2.5 percent growth for the group as a whole.” 

In terms of room growth, IHG’s net system size increased by 3.6 percent year-on-year. “We added 17,000 rooms and we removed 12,000 rooms,” Edgecliffe-Johnson said. 

Choice Hotels International

Choice CEO Steve Joyce said that the company “delivered strong RevPAR gains to our domestic franchise system which continue to exceed the growth levels experienced by the overall industry and primary chain scale segments in which we compete.” 

The company's domestic pipeline of hotels awaiting conversion, under construction or approved for development as of the end of the quarter increased 14 percent from June 30, 2015. The domestic pipeline for the company's Cambria brand totaled 53 hotels, a 112-percent increase from the end of June in 2015.

Highlights for the quarter include:

  • Net income and diluted earnings per share for the three months ended June 30 totaled $38.8 million and $0.68 per share, respectively. Adjusted net income and adjusted diluted EPS for the quarter, which exclude certain special items, increased 12 percent and 15 percent, respectively, over the prior-year period.
  • Revenues for the quarter totaled $241.8 million, an increase of 4 percent from the same period of 2015.
  • Adjusted earnings before interest, taxes, depreciation and amortization from hotel franchising activities, excluding special items, for the three months ended June 30, 2016 totaled $75.1 million, an increase of 7 percent over the prior year period.
  • Franchising revenues for the three months ended June 30, 2016 totaled $105.9 million, an increase of 7 percent from the same period of 2015.
  • Domestic RevPAR performance for the second quarter of 2016 exceeded total industry results by 80 basis points and also exceeded growth reported by Smith Travel Research for the primary chain scale segments in which the company competes.
  • Executed nine new domestic franchise agreements during the quarter for the Cambria brand including projects in Boston, Los Angeles and Seattle.
  • The company purchased 0.4 million shares of common stock under its share repurchase program during the three months ended June 30, 2016 at a total cost of approximately $19.4 million.

Hyatt Hotels Corp.

Hyatt had a positive quarter, with significant growth over the same period last year.

Hyatt’s net income was $67 million, or $0.49 per diluted share, in the second quarter of 2016, compared to $40 million, or $0.27 per diluted share, in the second quarter of 2015. Adjusted net income attributable to Hyatt was $87 million, or $0.64 per diluted share, in the second quarter of 2016 compared to $41 million, or $0.28 per diluted share, in the second quarter of 2015. 

“We reported solid second quarter results while continuing to execute our long-term growth strategy,” Mark Hoplamazian, president and CEO of Hyatt Hotels Corporation, said in a statement. “Adjusted EBITDA grew 9.7 percent in the quarter, excluding the impact of foreign currency translation and transactions. 

“In the second quarter, we gained market share systemwide, with particular strength in the Americas,” Hoplamazian said. “Developer demand for our brands remains strong. Our executed contract base increased to approximately 61,000 rooms, and we remain on track to open more than 60 hotels this year. We also continued to make good progress with respect to our capital recycling efforts. In late June, we sold Andaz 5th Avenue and announced the acquisition of Royal Palms Resort and Spa, which will become part of The Unbound Collection by Hyatt. With the underlying momentum in our business, we expect a solid finish to the year."

But while the company's overall outlook is positive, Hoplamazian cited some "near-term challenges" that could affect Hyatt's future. “In line with current trends, we are revising expectations for comparable systemwide RevPAR growth to a range of approximately 2 percent to 3 percent for the year."

Highlights for the quarter, compared to the same quarter last year, include:

  • Net income increased 67.5 percent to $67 million.
  • Adjusted EBITDA increased 5.6 percent to $227 million, up 7.1 percent in constant currency.
  • Comparable systemwide RevPAR increased 2.3 percent, including an increase of 4.5 percent at comparable owned and leased hotels.
  • Comparable U.S. hotel RevPAR increased 4.2 percent; full-service and select-service hotel RevPAR increased 3.2 percent and 6.9 percent, respectively.
  • Net hotel and net rooms growth was 8 percent and 6 percent, respectively.
  • Comparable owned and leased hotels segment operating margins were stable at 27.6 percent.