IHG experienced a 0.8 percent decline in revenue per available room in the third quarter, according to the Q3 trading update it released today. This came as the company saw its net system size grow 4.7 percent year over year to 864,699 rooms (5,795 hotels).
“Despite the weaker RevPAR environment and the challenges some of our markets are currently experiencing, we remain confident in our financial outcome for the rest of the year,” stated Keith Barr, CEO of IHG. “Our broad geographical spread combined with the resilience of our asset-light, cash-generative model, our disciplined approach to cost management and the continued execution against our strategic initiatives positions us well for the future.”
The company said its decline in RevPAR was impacted by tougher trading conditions in the United States and China and ongoing unrest in Hong Kong. The company estimated fee income loss from trading conditions in Hong Kong will have a roughly $5 million adverse impact for full-year 2019.
IHG noted the strengthening of the U.S. dollar against many major currencies globally resulted in RevPAR declining further at actual exchange rates (AER) than at constant exchange rates (CER). The company’s 0.8 percent decline in RevPAR more than doubled to a 1.9 percent decrease when using actual exchange rates.
IHG’s Europe, Middle East, Asia and Africa and Greater China regions were especially impacted by this. The EMEAA region’s 0.2 percent increase in RevPAR at CER translated to a 2.4 percent decrease at AER. Greater China’s 6.1 percent decline at CER became an 8.5 percent drop. The Americas were less affected as its 0.6 percent dip at CER only showed a 1 percent decrease.
Regional Differences in RevPAR
Using IHG’s constant exchange-rate numbers, IHG’s RevPAR in the Americas was down 0.6 percent in Q3 and flat year to date due to RevPAR declines in the United States, Canada and Mexico and despite RevPAR increases in Latin America and the Caribbean.
In the United States, IHG said renovation activity and lower group business contributed to a 0.6 percent decrease in RevPAR in Q3. The company’s YTD RevPAR performance was flat, putting it in line with segments in which it is competing, according to IHG. In Canada, the company said softness in Ontario and Alberta contributed to a 2 percent decline in RevPAR. In Mexico, RevPAR also was down 2 percent, while in Latin America and the Caribbean, the metric was up 6 percent.
In the EMEAA region, IHG’s RevPAR grew 0.2 percent in Q3 in 0.3 percent YTD. The United Kingdom and continental Europe were both up 1 percent. IHG’s RevPAR in the Middle East was down 1 percent, with the adverse impact of supply growth and political unrest partly offset by the timing of the Hajj pilgrimage. Australia and Japan also were down 1 percent.
According to the company, RevPAR in Greater China took the greatest hit of IHG’s three regions as the metric declined 6.1 percent. Rate and occupancy also experienced their biggest declines—5.5 percent and 0.4 percent, respectively—in Greater China. IHG attributed its weak performance to ongoing unrest in Hong Kong, where RevPAR dropped 36 percent. On mainland China, RevPAR declined 2 percent due to lower corporate and meetings business, according to IHG.
Supply Growth
IHG’s net system size grew by 8,784 rooms in Q3. The company said it remains on track to exceed 5 percent net-system-size growth in the full year. It signed 25,145 rooms in Q3, bringing its total pipeline to 289,135 rooms.
IHG opened 6,023 rooms in the Americas in Q3. The removal of 2,823 rooms led to a 2.5 percent YOY increase in net system size in the region. IHG also signed 8,040 rooms during the quarter.
During Q3, IHG opened 2,567 rooms in the EMEAA region. With the removal of 738 rooms, IHG grew its net system size in the region by 5.4 percent, more than double the rate in the Americas. The company signed 10,025 rooms during the quarter, more than in either the Americas or Greater China.
IHG saw its largest YOY rise in net system size in Greater China—13.4 percent. The company opened 4,145 rooms in Greater China for a net system growth of 3,755, also highest of the three regions. Signings totaled 7,080 rooms, including 20 Holiday Inn Express Franchise Plus hotels.