InterContinental Hotels Group PLC Third Quarter Trading Update (1106N)

TIDMIHG

RNS Number : 1106N

InterContinental Hotels Group PLC

21 October 2016

21 October 2016

InterContinental Hotels Group PLC

Third Quarter Trading Update

Solid trading and strong signings performance

 
 Highlights 
-------------------------------------------------------------- 
 
    *    Global Q3 comparable RevPAR(1) up 1.3%, and up 1.8% 
         Q3 YTD 
 
 
    *    Enhanced global scale: 7k rooms opened in Q3, 
         increasing net system size 3.8% YoY to 754k rooms 
 
 
    *    Building future growth: 19k rooms signed; highest for 
         Q3 since 2008, taking pipeline to 230k rooms 
 
 
 Richard Solomons, Chief Executive of InterContinental Hotels Group 
  PLC, said: 
------------------------------------------------------------------------------ 
 "We delivered a solid performance in the third quarter, leveraging 
  our global scale to drive 3.8% net system growth and 1.3% RevPAR growth. 
  We remain focused on executing our commercial strategy to drive competitive 
  advantage. This includes broadening the footprint of our global portfolio 
  of brands, across which we drove our highest signings for eight years, 
  including our best ever third quarter performance for Greater China. 
  Enhancements to IHG Rewards Club, including the roll-out of our preferential 
  member pricing initiative, 'Your Rate', continue to drive excellent 
  results. This, together with our initiatives to utilise digital innovation 
  to enhance all stages of the guest journey, means we will continue 
  to generate more customised and informed interactions with our guests 
  and deliver improved returns for owners. 
  Looking ahead, while industry RevPAR growth has slowed, the fundamentals 
  for the sector, and particularly for IHG, remain compelling. This, 
  combined with our winning strategy and the strength of our cash generative 
  business model, will enable us to drive sustainable growth into the 
  future. Despite the uncertain environment in some markets, we remain 
  confident in the outlook for the remainder of the year." 
 
 
   Third Quarter RevPAR performance 
  ------------------------------------------------------------------------------ 
   Americas 
    RevPAR was up 1.9% in Q3, and 2.2% Q3 YTD. In the US RevPAR was up 
    1.4% in Q3, and 1.9% in the first 9 months, with occupancy levels of 
    more than 75% driven by continued record levels of industry demand. 
    Performance continued to be impacted by our concentration in oil producing 
    markets, where RevPAR was down 7.3%, compared to 2.5% growth in the 
    rest of the estate. Elsewhere in the region, Mexico delivered double 
    digit RevPAR growth, we drove a solid performance in Latin America 
    and the Caribbean, and Canada was up 6.7% due to strong trading in 
    urban markets. 
   Europe 
    RevPAR was flat in Q3, and up 1.2% Q3 YTD. Germany delivered mid-single 
    digit RevPAR growth in Q3, and Russia/CIS drove 20% growth benefiting 
    from increased domestic travel. 2.5% RevPAR growth in the UK reflects 
    solid trading in the provinces partially offset by flat performance 
    in London, where industry-wide supply increases continue to have an 
    impact. Ongoing challenging trading conditions in France, Turkey and 
    Belgium resulted in significant RevPAR declines in those countries. 
  ------------------------------------------------------------------------------ 
   Asia, Middle East & Africa 
    RevPAR was down 0.1% in Q3, and down 0.2% Q3 YTD. Performance in the 
    region outside the Middle East was strong, with 3.9% RevPAR growth 
    in Q3 overall. India delivered RevPAR growth of 21%, Japan was flat, 
    and Australasia and Southeast Asia were up low to mid-single digits, 
    the latter led by Vietnam and Thailand. In the Middle East, RevPAR 
    was down 7.7% due to the ongoing impact of low oil prices. 
   Greater China 
    RevPAR was up 0.9% in Q3, and 1.8% Q3 YTD. Q3 growth of 2.2% in mainland 
    China continued to be led by tier one cities, where RevPAR was up nearly 
    6%. A low single digit RevPAR decline in Hong Kong reflects some improvement 
    in trading, but Macau continues to be affected by industry-wide challenging 
    conditions with RevPAR down 14%. 
 
 
    1 RevPAR growth is at constant exchange rates (CER) unless otherwise 
    stated. 
  ------------------------------------------------------------------------------ 
 Strategic progress 
-------------------------------------------------------------------------------- 
 Strengthening our preferred brands 
   *    In InterContinental Hotels & Resorts' 70(th) 
        anniversary year, we are strengthening its position 
        as the world's largest luxury hotel brand, signing 12 
        properties year to date. This is our best performance 
        in eight years, and includes the signing of our first 
        InterContinental hotel in the Maldives in Q3. 
 
 
   *    Our innovative new design solutions are driving 
        momentum for the Holiday Inn brand family, with more 
        than 13k room signings, our best Q3 performance since 
        2007. 
 
 
   *    We are strengthening our position in the fast-growing 
        boutique segment, by signing our most Hotel Indigo 
        rooms since Q3 2007, including the first Hotel Indigo 
        in Poland. We continue to expand our Kimpton 
        portfolio with the Gray Hotel in Chicago, the fifth 
        opening for the brand this year. 
 
 
   *    The latest phase of our Crowne Plaza refresh is 
        already driving success, with the brand voted best 
        Upscale Hotel Brand in North America by Business 
        Travel News, up from eighth position last year. 
 
 
   *    We continue to grow our extended stay footprint, with 
        over 7k rooms added to our pipeline so far this year, 
        our best performance in eight years. 
 
 
   *    Building on the appeal that the EVEN Hotels brand has 
        in the US, where we now have five open and six 
        pipeline hotels, we have signed a deal to develop a 
        portfolio of EVEN hotels in Australia and New 
        Zealand. 
 
 
 
  Building and leveraging scale 
   *    Net system size up 3.8% year on year to 754k rooms 
        (5,099 hotels). 
 
 
   *    7k rooms (51 hotels) opened in the quarter and 3k 
        rooms (22 hotels) removed. During Q4 2016, consistent 
        with historic trends we expect an increase in room 
        openings pace, although we expect room removals to be 
        in line with the average of the previous 3 quarters. 
 
 
   *    19k rooms (128 hotels) were signed; our highest Q3 
        since 2008, including 6k rooms in Greater China, 
        driving the region's best ever third quarter and year 
        to date signings performance. 
 
 
   *    IHG's pipeline increased to 230k rooms, with 90% in 
        our ten priority markets and approximately 45% under 
        construction. 
 
 
   *    4% share of industry room supply, 14% share of active 
        industry room pipeline. 
 
 
 
  Driving revenue delivery through technology and loyalty 
   *    'Your Rate by IHG Rewards Club', our preferential 
        member pricing initiative, is helping to drive record 
        growth in enrolments(1) , and a doubling in the 
        growth rate of our direct channels(2) , with no 
        negative impact on ADR(2) . 
 
 
   *    In August we signed a global partnership with Alipay, 
        China's leading 3(rd) party online payment solutions 
        company. This will make IHG the first global hotel 
        company to give Chinese guests the ability to pay via 
        Alipay, available through all of our online and 
        mobile channels, as well as across our full estate of 
        hotels globally. 
 
 
   *    Our innovative cloud-based Guest Reservation System 
        remains on track for phased roll out starting in late 
        2017. 
 
 
 
 Financial position and capital allocation 
------------------------------------------------------------------------- 
 The financial position of the group remains robust, with an on-going 
  commitment to an efficient balance sheet and an investment grade credit 
  rating. 
  In August the group issued a GBP350m, 10-year bond at a 2.125% coupon 
  rate, the lowest funding rate IHG has achieved in the Sterling bond 
  market. 
 
 
 Foreign exchange 
---------------------------------------------------------------------------------------------- 
 The US Dollar continued to strengthen through Q3 which reduced group 
  RevPAR to flat (0.0%) in the quarter when reported at actual exchange 
  rates. A breakdown of constant currency vs. actual currency RevPAR by 
  region is set out in Appendix 2. 
  Currency markets continue to be volatile and we expect foreign exchange 
  to have an impact on 2016 reported profit. If current spot exchange 
  rates(3) had existed throughout H2 2015, reported operating profit for 
  that period would have been $9m higher. 
  Note that whilst the UK comprises around 5% of our group revenues, approximately 
  50% of our gross central overhead and 40% of Europe regional overhead 
  are in sterling. At 30 June 2016 exchange rates, approximately 70% of 
  our debt was denominated in sterling. 
  (1) As at August 2016 
  (2) Since Your Rate by IHG Rewards Club launch on May 3, 2016 
  (3) As at 14 October 2016 
---------------------------------------------------------------------------------------------- 
   Appendix 1: RevPAR Movement Summary 
                          Q3 2016                      YTD 2016 
                RevPAR    Rate      Occ.      RevPAR     Rate       Occ. 
               -------  -------  ----------  -------  ---------  ---------- 
    Group        1.3%     1.0%     0.3%pts     1.8%      1.2%      0.4%pts 
    Americas     1.9%     2.0%     0.0%pts     2.2%      2.1%      0.1%pts 
    Europe       0.0%     1.4%    (1.1)%pts    1.2%      1.5%     (0.2)%pts 
    AMEA        (0.1)%   (2.9)%    2.1%pts    (0.2)%    (1.0)%     0.5%pts 
    G. China     0.9%    (2.7)%    2.4%pts     1.8%     (2.7)%     2.8%pts 

   ----------  -------  -------  ----------  -------  ---------  ---------- 
 
     Appendix 2: RevPAR at constant exchange rates (CER) vs. actual exchange 
     rates (AER) 
                               Q3 2016                           YTD 2016 
                    CER        AER       Difference      CER        AER       Difference 
                 ---------  ---------  -------------  --------  ----------  ------------- 
    Group           1.3%       0.0%       1.3%pts       1.8%       0.2%        1.6%pts 
    Americas        1.9%       1.6%       0.3%pts       2.2%       1.5%        0.7%pts 
    Europe          0.0%      (7.1)%      7.1%pts       1.2%      (3.8)%       5.0%pts 
    AMEA           (0.1)%      4.2%      (4.3)%pts     (0.2)%     (0.2)%       0.0%pts 
    G. China        0.9%      (3.7)%      4.6%pts       1.8%      (2.4)%       4.2%pts 
   ------------  ---------  ---------  -------------  --------  ----------  ------------- 
 
 
    Appendix 3: Q3 system & pipeline summary (rooms) 
   ----------------------------------------------------------------------- 
                               System                        Pipeline 
                Openings   Removals     Net     Total   Signings     Total 
               ---------  ---------  ------  --------  ---------  -------- 
    Group          7,333    (2,789)   4,544   754,265     18,894   229,895 
    Americas       4,328    (2,831)   1,497   483,905      8,154   101,791 
    Europe           883      (117)     766   107,340      1,924    23,858 
    AMEA             294         28     322    73,731      2,703    39,344 
    G. China       1,828        131   1,959    89,289      6,113    64,902 
   ----------  ---------  ---------  ------  --------  ---------  -------- 
 
 
    Appendix 4: Q3 YTD system & pipeline summary (rooms) 
   ------------------------------------------------------------------------------- 
                                   System                            Pipeline 
                Openings   Removals     Net     Total    YoY%   Signings     Total 
               ---------  ---------  ------  --------  ------  ---------  -------- 
    Group         24,769   (14,872)   9,897   754,265    3.8%     53,406   229,895 
    Americas      17,171   (12,841)   4,330   483,905    2.3%     28,193   101,791 
    Europe         1,523      (894)     629   107,340    2.0%      5,668    23,858 
    AMEA           2,148      (990)   1,158    73,731    7.2%      5,362    39,344 
    G. China       3,927      (147)   3,780    89,289   11.8%     14,183    64,902 
   ----------  ---------  ---------  ------  --------  ------  ---------  -------- 
 
    Appendix 5: Definitions 
   ------------------------------------------------------------ 
    AER: Actual exchange rates used for each respective period. 
     CER: Constant exchange rates. 
     RevPAR: Revenue per available room. 
   ------------------------------------------------------------ 
 
    For further information, please contact: 
   ---------------------------------------------------------------------------------------- 
    Investor Relations (Heather Wood; Adam             +44 (0)1895       +44 (0)7808 
     Smith; Neeral Morzaria):                           512176            098724 
    Media Relations (Yasmin Diamond; Zoë          +44 (0)1895       +44 (0)7736 
     Bird):                                             512008            746167 
   -------------------------------------------------  ----------------  ------------------- 
    Conference call for Analysts and Shareholders: 
     A conference call with Paul Edgecliffe-Johnson (Chief Financial Officer) 
     will commence at 9.00am London time on 21 October and can be accessed 
     on www.ihgplc.com/investors/2016-third-quarter-trading-update. There 
     will be an opportunity to ask questions. 
   ---------------------------------------------------------------------------------------- 
    UK Toll                                  [phone] 
     UK Toll Free                             0800 279 3953 
     US Toll                                  [phone] 
    Passcode                                 IHG Investor 
   ---------------------------------------  ----------------------------------------------- 
    A replay of the 9.00am conference call will be available following the 
     event - details are below: 
   ---------------------------------------------------------------------------------------- 
    US Toll                                  [phone] 
     US Toll Free                             800 945 4244 
    Replay pin                               1021 
 
     US conference call and Q&A: 
     There will also be a conference call, primarily for US investors and 
     analysts, at 9.00am New York Time on 21 October with Paul Edgecliffe-Johnson 
     (Chief Financial Officer). There will be an opportunity to ask questions. 
   ---------------------------------------------------------------------------------------- 
    UK Toll                                  [phone] 
     UK Toll Free                             0800 279 3953 
     US Toll                                  [phone] 
    Passcode                                 IHG Investor 
   ---------------------------------------  ----------------------------------------------- 
    A replay of the 9.00am US conference call will be available following 
     the event - details are below: 
   ---------------------------------------------------------------------------------------- 
    US Toll                                  [phone] 
     US Toll Free                             800 456 0339 
    Replay pin                               1021 
   ---------------------------------------  ----------------------------------------------- 
 
    Website: 
    The full release and supplementary data will be available on our website 
    from 7.00am (London time) on 21 October. The web address is 
    www.ihgplc.com/investors/results-and-presentations 
    Notes to Editors: 
 
     IHG(R) (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is 
     a global organisation with a broad portfolio of hotel brands, including 
     InterContinental(R) Hotels & Resorts, Kimpton(R) Hotels & Restaurants, 
     HUALUXE(R) Hotels and Resorts, Crowne Plaza(R) Hotels & Resorts, Hotel 
     Indigo(R), EVEN(R) Hotels, Holiday Inn(R) Hotels & Resorts, Holiday 
     Inn Express(R), Staybridge Suites(R) and Candlewood Suites(R). 
 
     IHG franchises, leases, manages or owns nearly 5,100 hotels and more 
     than 750,000 guest rooms in almost 100 countries, with nearly 1,500 
     hotels in its development pipeline. IHG also manages IHG(R) Rewards 
     Club, the world's first and largest hotel loyalty programme, with nearly 
     99 million members worldwide. 
 
     InterContinental Hotels Group PLC is the Group's holding company and 
     is incorporated in Great Britain and registered in England and Wales. 
     More than 350,000 people work across IHG's hotels and corporate offices 
     globally. 
 
     Visit www.ihg.com for hotel information and reservations and www.ihgrewardsclub.com 
     for more on IHG Rewards Club. For our latest news, visit: www.ihg.com/media 
     and follow us on social media at: www.twitter.com/ihg, www.facebook.com/ihg 
     and www.youtube.com/ihgplc. 
    Cautionary note regarding forward-looking statements: 
     This announcement contains certain forward-looking statements as defined 
     under United States law (Section 21E of the Securities Exchange Act 
     of 1934) and otherwise. These forward-looking statements can be identified 
     by the fact that they do not relate only to historical or current facts. 
     Forward-looking statements often use words such as 'anticipate', 'target', 
     'expect', 'estimate', 'intend', 'plan', 'goal', 'believe' or other words 
     of similar meaning. These statements are based on assumptions and assessments 
     made by InterContinental Hotels Group PLC's management in light of their 
     experience and their perception of historical trends, current conditions, 
     expected future developments and other factors they believe to be appropriate. 
     By their nature, forward-looking statements are inherently predictive, 
     speculative and involve risk and uncertainty. There are a number of 
     factors that could cause actual results and developments to differ materially 
     from those expressed in or implied by, such forward-looking statements. 
     The main factors that could affect the business and the financial results 
     are described in the 'Risk Factors' section in the current InterContinental 
     Hotels Group PLC's Annual report and Form 20-F filed with the United 
     States Securities and Exchange Commission. 
 

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October 21, 2016 02:00 ET (06:00 GMT)