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InterContinental Hotels Group

InterContinental Hotels Group PLC 4.7% increase in net system size

InterContinental Hotels Group (LON: IHG) has provided a third quarter trading update.

Highlights

· 4.7% YOY net system size growth to 865k rooms; on track to exceed 5% for full year 2019

· 13k rooms opened, taking the total to 42k rooms YTD

· Signed 25k rooms in the quarter, 73k rooms YTD

· Group Q3 comparable RevPAR1 down 0.8%, flat for Q3 YTD

Keith Barr, Chief Executive Officer, InterContinental Hotels Group PLC, said:

“Our continued strategic focus on driving net rooms growth enabled us to deliver a 4.7% increase in net system size despite a strong comparable. This will accelerate in the coming quarter and we are on track to deliver industry leading net system growth over the medium term. Third quarter Group RevPAR was down 0.8%, impacted by tougher trading conditions in the US and China, and ongoing unrest in the Hong Kong SAR.

We have made further progress executing against our strategic initiatives, with the first franchise applications already received for Atwell Suites, our new upper midscale brand which was launched for franchise sales at the end of the quarter. We also strengthened our loyalty offer through an exclusive partnership with world-renowned travel club and boutique hotel specialists, Mr & Mrs Smith. This will more than double our luxury and boutique offering to IHG Rewards Club members in new and iconic locations and enhance the loyalty member value proposition.

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. 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.”

Third Quarter performance

Americas

RevPAR was down 0.6% in Q3 and flat Q3 YTD. In the US, RevPAR was down 0.6% in the third quarter, impacted by renovation activity and lower group business. Our Q3 YTD performance of flat RevPAR in the US was in line with the segments in which we compete. Canada was down 2% due to softness in Ontario and Alberta. Elsewhere in the region, Latin America and the Caribbean were up 6% and Mexico was down 2%.

We opened 6.0k rooms (58 hotels) in the quarter, our highest level in seven years. As we continue to focus on enhancing the quality of our estate, we removed 2.8k rooms (20 hotels), resulting in a 2.5% increase in our net system size. We signed 8.0k rooms (77 hotels) in the quarter, including the Six Senses Galápagos Islands.

Europe, Middle East, Asia & Africa

RevPAR was up 0.2% in Q3 and up 0.3% in Q3 YTD. Third quarter RevPAR was up 1% in the UK, with London up 3% driven by international inbound demand and the Provinces flat. Continental Europe RevPAR was up 1%, with France up 1%, and Germany down 7% due to a less favourable trade fair calendar. Elsewhere, the Middle East was down 1%, with the adverse impact of supply growth and political unrest partly offset by timing of the Hajj pilgrimage. Australia and Japan were both down 1%.

We opened 2.6k rooms (16 hotels), driving net rooms growth of 5.4%. We signed 10.0k rooms (34 hotels) in the quarter, our highest ever performance, with five voco hotels (5.6k rooms) including a 4k room property in Makkah.

Greater China

Third quarter RevPAR in Greater China was impacted by ongoing unrest in the Hong Kong SAR where RevPAR was down 36%. We continue to outperform the market in Mainland China, where our Q3 RevPAR declined 2%, due to lower corporate and meetings business partly offset by domestic leisure demand. RevPAR in Tier 1 and 2 cities declined 2%, and Tier 3 and 4 cities fell 3%.

We opened 4.1k rooms (22 hotels) in the quarter, driving net rooms growth of 13.4%. Signings totalled 7.1k rooms (37 hotels) including 20 Holiday Inn Express Franchise Plus hotels, and a further two franchise Holiday Inn properties.

1 RevPAR growth is at constant exchange rates (CER) unless otherwise stated

Update on strategic initiatives

We continue to make good progress against our strategic initiatives to drive industry leading net rooms growth over the medium term.

Build and leverage scale

· Net system size up 4.7% year on year to 865k rooms (5,795 hotels), impacted by the later phasing of openings compared to Q3 2018, when 19k rooms opened. Remain on track to exceed 5% net system size growth in full year 2019.

· 13k rooms opened in the quarter, including our 400th Candlewood Suites property, and our best performance for Holiday Inn Express openings in over a decade.

· Signed 25k rooms in the quarter, including our highest InterContinental Hotels & Resorts signings since 2014.

· Pipeline now stands at 289k rooms.

Optimise our preferred portfolio of brands for owners and guests

· Mainstream

  • avid hotels: Over 200 hotels (19k rooms) signed since launch (11 hotels, (1.0k rooms) in the third quarter). With almost 80 hotels under construction or planning approved, including the brand’s first ground break in Mexico, we are on track to have ~10 properties open by the end of the year.
  • Atwell Suites: Following the registration of franchise documents in September, we have received 10 applications for our new all-suites upper midscale brand. We expect the first Atwell Suites locations to begin construction in early 2020 and open in 2021.

· Upscale

  • Crowne Plaza: Achieved our best signings performance in the first nine months of the year in over a decade. Opened the first Crowne Plaza Accelerate flagship property in Ravinia.
  • Hotel Indigo: Record number of signings year to date; now have deals signed into the pipeline that will take Hotel Indigo to 17 new countries.
  • voco: Twenty-three hotels (9k rooms in total) signed to date, including our fourth signing in Saudi Arabia. On track to grow the voco portfolio to ~30 signed hotels by the end of the year.

· Luxury

  • InterContinental Hotels & Resorts: Signed five hotels, and opened three in the quarter, including the Maldives, taking our total pipeline and system size for the brand to over 270 properties.
  • Six Senses Hotels Resorts Spas: Seven signings since February 2019 acquisition, three deals in the quarter, including the Galápagos Islands.

Strengthen loyalty programme

· Exclusive partnership with Mr & Mrs Smith, the world-renowned travel club and boutique hotel specialists, more than doubling our luxury and boutique offering to IHG Rewards Club members in new and iconic locations.

Foreign exchange

The strengthening of the US dollar against many major currencies globally decreased Group RevPAR to a 1.9% decline in the quarter, when reported at actual exchange rates.

2019 items

In addition to items previously disclosed, full year 2019 is expected to be impacted by the following:

· ~$5m adverse impact from the fee income loss from trading conditions in the Hong Kong SAR

· ~$10m favourable impact from non-recurring items including significant liquidated damages and accounting treatment relating to IFRS 16.