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IHG’s first quarter RevPAR up 3.5%

IHG’s first quarter RevPAR up 3.5%. Keith Barr, Chief Executive of InterContinental Hotels Group PLC, says, “In the first quarter we delivered RevPAR growth of 3.5%, net system size growth of 4.3% and our best signings pace for eleven years. This strong performance reflects our focus on driving industry leading net rooms growth over the medium term, underpinned by our new strategic initiatives.

There continues to be strong momentum across the business. We have made excellent progress against our initiative to expand our footprint in the $60 billion luxury segment, announcing the acquisition of a 51% stake in Regent Hotels & Resorts in March. In addition, this week we entered into an agreement to rebrand and operate a high-quality portfolio of 13 hotels in the UK. This will establish IHG as the leading luxury operator in this market, launch our luxury boutique brand Kimpton Hotels & Restaurants in the UK, and establish a position for our new upscale brand, principally focused on conversion opportunities. Signings for our new mainstream brand, avid hotels, continue to exceed our expectations, and now total more than 100 hotels, one every other day since launch.

Our roll out of IHG Concerto, incorporating our new Guest Reservation System, continues at pace, with more than 1,000 hotels now using the platform, and we are on-track to complete roll-out by the end of 2018 / early 2019. The fundamentals for our industry remain strong, we have the right strategy, and we are confident in the outlook for the year ahead.”
First Quarter RevPAR performance
RevPAR was up 3.5%, with rate up 1.9% and occupancy up 1.0%pt. The earlier timing of the Easter weekend, which in 2018 was split evenly between March and April, had a negative impact on RevPAR growth in the Americas and Europe.

RevPAR was up 2.9%, with the US up 2.2%. Trading in the US was impacted by a number of both positive and negative factors; we estimate that underlying growth was approximately 2.5%. Elsewhere in the region, Canada was up 7%, benefitting from a robust convention calendar, whilst Latin America and the Caribbean were up 16%, aided by reduced industry supply following hurricane activity in late 2017. In Mexico RevPAR was flat, adversely impacted by the strengthening of the Mexican peso against the US dollar.

Europe, Middle East, Asia & Africa
RevPAR was up 2.9% in Q1. Continental Europe RevPAR was up 6% with continued recovery in terror impacted markets (France and Belgium both up high single digits, Turkey up double digits) offset partly by an adverse trade fair calendar in Germany (down 2%). In the UK, RevPAR was down 1% (London down 3%, provinces up 1%) due to strong prior year comparables and the shift in the timing of Easter. Elsewhere, Middle East RevPAR was down 6% due to high supply growth, Australia was up 4% with strong corporate demand in key cities, whilst Japan, up 3%, benefitted from strong transient demand related to the Chinese New Year.

In February, IHG received liquidated damages totalling $15m relating to the termination of a portfolio of 13 open hotels (2k rooms) and 6 pipeline hotels (1k rooms) in Germany, which will remain in IHG’s system until 2020. Under IFRS 15, the $15m will be recognised over the period until they exit (H1 2018: $2.8m, FY 2018: $6.7m, FY 2019: $7.7m, H1 2020: $1.0m).

Greater China
RevPAR was up 11.0% in Q1, with 10% growth in mainland China, which benefitted from an extended build up to Chinese New Year in February. Double digit RevPAR growth in tier 1 and tier 2 cities was driven by strong transient, corporate and meetings demand. Tier 3 and tier 4 cities continued to see mid-single digit growth, aided by the ongoing ramp-up of our hotels. In Hong Kong, RevPAR was up 15%, with mainland China inbound demand boosted by the strengthening of the Chinese renminbi against the Hong Kong dollar. Macau RevPAR was up 25%, reflecting the ongoing improvement in market conditions.

The acceleration in Q1 RevPAR and rooms growth in Greater China to 11% and 9% respectively reflects the ongoing benefit of our strong strategic focus on this important market.