IHG touts H1 system growth while RevPAR flattens

Six Senses Loire Valley
IHG has signed five new Six Senses resorts since acquiring the brand in February, including the Six Senses Loire Valley. Photo credit: IHG

IHG’s net system size grew 5.7 percent in the first half of 2019, the company’s best performance in more than a decade. At the same time, revenue per available room growth hovered near zero around the world. Together, these two factors drove underlying operating profit growth of 2 percent and an underlying fee revenue increase of 3 percent.

“We have invested in our business to make our strategic model work harder, strengthening our established brands to drive an acceleration in our net rooms growth and adding new brands to target high-value opportunities to support future growth,” CEO Keith Barr said on the call with investors. “Importantly, our owners are noticing the work we're doing, too—responding to investment in existing hotels and new signings and through exploring opportunities with new brands within our expanded portfolio.”

RevPAR Levels Out

In the first half of 2019, IHG’s global comparable RevPAR rose just 0.1 percent. In the second quarter alone, comparable RevPAR dipped 0.2 percent.

In the Americas, comparable RevPAR increased 0.1 percent in the first half as a result of 0.8 percent rate growth and a tough occupancy comparable due to hurricane-related demand in H1 2018. Just looking at the second quarter, it decreased 0.5 percent. In the United States, RevPAR stayed flat for the half and dipped 0.7 percent in the second quarter. Canada also stayed flat in the half but fell 1 percent in the second quarter due to softness in Ontario offsetting growth in British Columbia. Thanks to strong performances in Brazil and Colombia, comparable RevPAR in Latin America and the Caribbean grew by 7 percent in H1 and 6 percent in Q2.

IHG’s Europe, Middle East, Africa and Asia market saw the largest regional rise in comparable RevPAR as the metric improved 0.2 percent in H1 and 0.7 percent in Q2. In continental Europe, RevPAR increased 3 percent in H1, while in the Middle East, increasing supply and political unrest contributed to a 5 percent decline.

In Greater China, IHG saw comparable RevPAR decrease 0.3 percent in H1 and 0.5 percent in Q2. In mainland China, the metric fell 1 percent, while in Hong Kong it dipped 0.5 percent and in Macau it rose 5 percent. Despite the region’s negative RevPAR trend, IHG reported underlying revenue grew 8 percent and underlying profit rose 32 percent.

System Growth

Worldwide, IHG added 30,000 new rooms in the first half of 2019. During that same period, 10,000 rooms exited the system, CFO Paul Edgecliffe-Johnson said in the conference call, as the company “continued to focus on the long-term health of [its] established brands.”

In the Americas, the company opened 11,000 rooms across 96 hotels in H1 2019, more than two-thirds of which came from the company’s Holiday Inn brand family, and removed 6,000 rooms (46 hotels) for 2.7 percent increase in net system size. IHG signed a further 14,000 rooms into its pipeline, down from last year due to the boost it received then from launching Avid Hotels.

In the EMEAA market, the company opened 6,000 rooms in the first half of the year and signed 11,000 more into its pipeline. “This strong momentum is a direct result of our increased focus on aligning our resources in the highest opportunity segment and market across the region,” said Edgecliffe-Johnson.

In Greater China, IHG opened 13,000 rooms and signed a further 22,000 into its pipeline for its “best-ever performance for a half,” according to Edgecliffe-Johnson. Overall, the company currently has more than 800 hotels open and in the pipeline in the region.

“It’s worth noting that the acceleration in growth has come almost entirely from our portfolio of established brands and that’s because of the constant innovation and investment we make to ensure they remain attractive to our guest and competitive for our owners,” said Barr. “Examples of this include our new Formula Blue guestroom design for Holiday Inn Express, our open lobby and guestroom designs for Holiday Inn and our Crowne Plaza Accelerate program, which is driving noticeable improvements in guest satisfaction in the Americas.”

New Brand Growth

Over the past couple years, IHG has launched or acquired five new brands: Atwell Suites, Avid Hotels, Voco Hotels, Regent Hotels & Resorts and Six Senses. “Combined these actions are fueling an acceleration in our signings pace, which bodes well for delivering sustained industry-leading growth in the future,” said Barr.

Since Atwell Suites launched in May, Barr said upper-midscale brand has received over 50 written expressions of owner interest. He estimated its first hotels will break ground next year and open in 2021.

Avid Hotels, with just three locations currently open, currently has nearly 200 hotels signed. Barr said planning approval has been obtained or ground has broken on more than 60 hotels so far.

Voco Hotels has opened six hotels across the U.K., Australia and the Middle East since launching a year ago. It has signed 15 more properties to date, including a 4,000-room hotel in Makkah (also known as Mecca), Saudi Arabia. “With the strong pipeline of deals under discussion we're confident in reaching around 30 hotels signed by the end of this year,” said Barr.

This February, IHG bought Six Senses Hotels Resorts Spas from Pegasus Capital Advisors. Since then it has signed five new resorts, including a property in France’s Loire Valley. IHG currently has more than 50 deals under active discussion and Barr said he sees Six Sense growing to more than 60 locations over the next decade. The company’s other luxury acquisition, Regent Hotels & Resorts, is also “attracting significant owner interest,” according to Barr.