InterContinental Hotels Reports 7.3 Percent Increase in Revenue
By Kerry Medina
August 07, 2012 11:16 PM
InterContinental Hotels reported financial results for the first half of 2012. “We have delivered good results in the first half with RevPAR growth from all regions through gains in both occupancy and rate,” said Richard Solomons, chief executive of InterContinental Hotels Group PLC. “Our brands continue to perform well and we have achieved solid underlying margin growth, resulting in increased profits and strong cash flows. We are increasing the interim dividend by 31 percent reflecting these results, our previously stated intention to rebalance the interim and final dividend payments and our confidence in the future prospects of the business.
“Consistent with our asset light strategy and our strong track record of returning funds to shareholders, we today announce a $1 billion return of capital. This recognizes the expected proceeds from the ongoing disposal of InterContinental New York Barclay and our commitment to maintaining an investment grade credit rating. We continue to invest for growth, strengthening both our existing and our new brands, including Even Hotels and Hualuxe Hotels & Resorts. While the global economic environment remains uncertain, IHG continues to trade well and we are confident that our strategy will deliver high quality growth into the future,” Solomons said.
Total gross revenue from hotels in IHG’s system of $10.3 billion was up 7.3 percent. First half global RevPAR saw growth of 6.5 percent (rate up 3.5 percent) in the first half with the second quarter up 6.1 percent (rate up 3.8 percent). Americas first half RevPAR in the Americas for the first half was up 7.1 percent; for Europe, up 1.9 percent; for AMEA, up 7.9 percent; and for Greater China, up 9.7 percent. Total system size was 666,873 rooms (4,542 hotels), up 2 percent year on year.
Holiday Inn continues to outperform, growing RevPAR premiums to the upper midscale segment in the U.S. over the past five years by 6 percentage points for Holiday Inn and 5 percentage points for Holiday Inn Express. Crowne Plaza’s repositioning is underway as planned, with expected completion by end of 2015.
In the Americas, RevPAR increased 7.1 percent with 4.4 percent rate growth and second-quarter RevPAR increased 6.7 percent with 4.7 percent rate growth. U.S. RevPAR was up 7.2 percent in the first half, with 6.9 percent growth in the second quarter. On a total basis including the benefit of new hotels, U.S. RevPAR grew 8 percent in the half, in line with the industry. On the same basis, Holiday Inn and Holiday Inn Express grew 8.5 percent and 8.6 percent, respectively, significantly outperforming the upper midscale segment up 7.7 percent.
Revenue decreased 4 percent to $400 million and operating profit increased 4 percent to $233 million. After adjusting for owned hotel disposals in 2011, the impact of a $10 million liquidated damages receipt in 2011 and the results from managed lease hotels, revenue was up 5 percent and operating profit up 9 percent. This was driven by good RevPAR growth across the region, resulting in a 9 percent increase in franchise royalties, slightly offset by the impact of a refurbishment of one owned hotel in the Caribbean and a $3 million decrease in fees associated with initial franchising, relicensing, and termination of hotels.
In Europe, RevPAR increased 1.9 percent, with 1 percent rate growth. RevPAR was up 1.5 percent in the second quarter, reflecting the continued uncertainty in macro economic conditions across Europe with rate up 0.9 percent. In the second quarter, RevPAR was up UK, 1.9 percent; Germany, 7.1 percent; and France, 0.9 percent. Revenue increased 11 percent (19 percent at CER) to $206 million and operating profit increased 2 percent (8 percent at CER) to $52 million, with an adverse impact on growth from the weakening euro-dollar exchange rate over the period. At CER and after adjusting for a leased hotel disposal and excluding results from managed lease hotels, revenue increased 1 percent and operating profit increased 10 percent, driven in part by a decrease in regional overheads offset by higher costs in the owned and leased hotels.
In the AMEA region, RevPAR increased 7.9 percent with 2.2 percent rate growth, and second-quarter RevPAR increased 8.8 percent with 2.7 percent rate growth. Trading was strong across the region, with most markets showing good RevPAR growth, reflecting economic growth in Southeast Asia, continued recovery from the natural disasters last year, and stronger trading in some markets in the Middle East. AMEA revenue increased 8 percent to $108 million and operating profit increased 11 percent to $40 million. After adjusting for the disposal in the third quarter of 2011 of a hotel asset and partnership interest in Australia, which contributed $3 million to profits in the first half of 2011, operating profit increased 21 percent at CER. This reflects strong RevPAR growth across the managed business.
In Greater China, RevPAR increased 9.7 percent with 3.8 percent rate growth, and second-quarter RevPAR increased 7.9 percent with 4.1 percent rate growth. Continuing strength in RevPAR growth in North and East China of 14.3 percent and 11.2 percent, respectively, was slightly offset by weaker RevPAR growth in South and West China of 3.6 percent. Revenue increased 14 percent (13 percent CER) to $108 million and operating profit increased 20 percent (23 percent CER) to $36 million. This was driven by 7.6 percent RevPAR growth at the InterContinental Hong Kong, and $3 million growth in managed profits reflecting strong RevPAR growth and 13 percent room growth, partly offset by incremental investment within managed operations. Regional costs increased by $3 million reflecting additional resources in the region to support continued growth.