- 5.1% YOY net system size growth, up 4.6% excluding Regent Hotels & Resorts and the UK portfolio deal
- 27k rooms signed, 19k rooms opened (up 70% YOY) strongest Q3 pace for each in 10 years
- Global Q3 comparable RevPAR1 up 1.0%, with Q3 YTD RevPAR up 2.7%
- Roll out of GRS and IHG Concerto now substantially complete
- 150 avid hotels signed into the Americas pipeline, the first property is now open, and last week the brand was launched in Germany
- Regent Hotels & Resorts’ first signing since acquisition, and voco on track for >15 signings by year end
- $500m to be returned to shareholders by means of special dividend with share consolidation
Keith Barr, Chief Executive of InterContinental Hotels Group PLC, said:
"We delivered a good third quarter performance. Our strategic focus on improving our rooms growth yielded strong results, driving net system size up 5.1% and our best performance for signings and openings in a decade. Global RevPAR grew 1.0%, with performance in the US impacted by strong prior year demand from the 2017 hurricanes.
We continue to make good progress against the series of new strategic initiatives we outlined in February. The international expansion of Kimpton Hotels & Restaurants is accelerating, with presence secured in 14 countries, voco is on track for more than 15 signings by year end, ahead of our initial expectations, and just this week we announced the first signing for our recently relaunched Regent Hotels & Resorts brand. Our first avid hotel is now open and owner demand continues to be strong, with 150 hotels signed across the Americas and the recent launch of the brand in Europe.
The roll-out of IHG Concerto, featuring our innovative new Guest Reservation System, is substantially complete, with over 95% of our global estate operational on the new system, and the remaining hotels due to be migrated over the coming weeks.
Reflecting this rapid implementation of our strategic initiatives and in line with our well-established strategy of returning surplus cash to shareholders, we are today announcing a $500m special dividend with share consolidation, to be paid in early 2019.
The fundamentals for our industry remain strong. We are confident in the outlook for the remainder of the year and in our ability to deliver industry-leading net rooms growth over the medium term."
Third Quarter RevPAR performance
RevPAR was flat in Q3 and up 2.0% Q3 YTD. In the US, rate was up 1.1% and occupancy down 1.2%pts driven by a mid-single digit occupancy decline in markets which benefited from the hurricane-related demand which commenced in Q3 2017. As a result, US RevPAR was down 0.5% in Q3 2018 but up 1.5% Q3 YTD, in line with the performance of the industry upper-midscale segment. Elsewhere in the region, Canada was up 2.4%, benefitting from continued strength in urban markets, whilst Latin America and the Caribbean were up 6.5%, with strong demand in Colombia and Brazil. In Mexico RevPAR was up 5.4%, aided by soft prior year comparables from the earthquake in the Mexico City area.
Europe, Middle East, Asia & Africa
RevPAR was up 2.5% in Q3 and 2.7% Q3 YTD. Continental Europe RevPAR was up 4.3% with France up 9.8% as the market recovery continues, and Germany up 2.4% due to a more favourable trade fair calendar. Russia saw double digit growth, benefitting from the FIFA World Cup. In the UK, RevPAR was up 1.1% (London up 3.6%, Provinces down 0.4%), with strong demand in London from leisure guests and the biennial air show, offsetting softer occupancy in the Provinces. Elsewhere, there was a low single digit RevPAR decline in the Middle East and Australia, with both markets impacted by new supply, whilst Japan, up 2.5%, benefitted from rate growth in key cities.
RevPAR was up 4.8% in Q3 and 8.2% Q3 YTD. Mainland China growth of 4.5% was driven by continued transient and corporate demand, but as expected was lower than H1 levels, due to the strong comparables which commenced in Q3 2017. There was mid-single digit RevPAR growth in tier 1 and tier 2 cities and a slight decline in tier 3 and tier 4 cities which was driven by new supply in Sanya and difficult trading conditions in Changbaishan; excluding these locations, tier 3 and tier 4 cities also saw mid-single digit RevPAR growth. Hong Kong SAR was up 5.2% and Macau SAR up 3.8%, both driven by gains in rate.
Update on strategic initiatives
Build and leverage scale
- Net system size up 5.1% year on year to 826k rooms (5,518 hotels), up 4.6% excluding Regent Hotels & Resorts and the UK portfolio deal.
- 19k rooms opened in the quarter, up 70% on the prior year, and our best Q3 performance in 10 years. This includes the rooms associated with Regent Hotels & Resorts (2.0k rooms) and the UK portfolio deal (1.7k rooms, with a further 0.5k to be added), which completed in the quarter. Our portfolio in Greater China continues to expand at pace, with 17% net system size growth year on year.
- 27k rooms signed, our highest Q3 rooms signings since 2008, and with Greater China on track to have its best ever full year performance in 2018.
- Pipeline now stands at 267k rooms.
Optimise our preferred portfolio of brands for owners and guests
- avid hotels: first property opened for the brand in Oklahoma City, with a further 25 hotels (2.4k rooms) signed in Q3, taking the total Americas pipeline to 150 hotels. Last week we announced the launch of the brand in Europe, signing a Multiple Development Agreement with one owner to open 15 hotels in Germany over the next 5 years, the first by 2020.
- voco: first property expected to open in Australia later this year; with six signings to date in addition to the four properties that will rebrand as part of the UK portfolio deal, we are on track for more than fifteen signings in total for the brand by year end, ahead of our initial expectations.
- Regent Hotels & Resorts: 51% acquisition completed in July, adding 6 properties to our system and 2 to our pipeline. A relaunch of the brand was announced this week together with the first signing since the acquisition, Regent Kuala Lumpur, with numerous further sites under discussion.
- Kimpton Hotels & Restaurants: international expansion continues at pace, with the Kimpton Fitzroy due to open in London in the coming weeks, and further signings in Q3, including sites in Bangkok, Barcelona and Tokyo, taking the brand’s global presence to 14 countries.
Enhance revenue delivery
- Roll out of GRS and IHG Concerto is substantially complete, ahead of schedule and on budget.
- >95% of hotels have successfully migrated to the platform with the remaining hotels scheduled to migrate over the coming weeks.
Superior returns for shareholders and owners
- $500m will be returned to shareholders via a special dividend with share consolidation to be paid in Q1 2019, subject to shareholder approval*.
- This will bring the total returns IHG has made to shareholders since 2003 to $13.5bn.
- We remain on track to deliver ~$125m in annual savings from our reorganisation plan, including System Fund, by 2020 for reinvestment to drive growth.
- Exceptional cash cost to achieve the savings remains unchanged at $200m; $48m in H1’18 ($31m in 2017), with ~$70m expected in H2’18 and the remainder in 2019.
- The financial position of the group remains robust, with an on-going commitment to an efficient balance sheet and an investment grade credit rating.
The strengthening of the US dollar against many major currencies globally decreased group RevPAR to a 0.1% decline in the quarter, when reported at actual exchange rates.
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