First Quarter Results to 31st March 2012
First Quarter Results to 31st March 2012
Continuing strong RevPAR performance drives 16% underlying profit growth
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:
?We have delivered strong performance in the quarter with global revenue per available room (RevPAR) up 7% and continued outperformance in the US and Greater China. The strength of our brands and systems, together with our scale and the close working relationships we have with our hotel owners, continue to underpin our success.
In the quarter we launched EVEN Hotels in the US and HUALUXE Hotels and Resorts in Greater China, reflecting our ability to create distinctive and innovative new brands. These will further develop our already strong position in our two largest markets over the long term, and together with our ongoing work to strengthen our existing brands, will enable us to deliver market share gains into the future.
The global economic backdrop, particularly in Europe, is still challenging, but the considerable strengths of our business including our resilient model and strong balance sheet give us confidence that we will continue to drive high quality growth.?
Driving Market Share
First quarter global RevPAR growth of 7.0%
Global rate growth of 3.3% and occupancy growth of 2.1%pts.
Americas RevPAR up 7.7% (US 7.6%); Europe 2.6%; AMEA 6.9%; Greater China 11.9%.
Total system size of 661,159 rooms (4,506 hotels), up 1% year on year
7,101 rooms (48 hotels) added to the system. Our brands continue to gain traction in new markets, with the first hotels opening for Holiday Inn Express in Thailand and Hotel Indigo in Germany in the quarter. 4,290 rooms (22 hotels) removed.
Total pipeline of 174,554 rooms (1,098 hotels), of which over 40% is under construction.
Signings of 9,331 rooms (59 hotels), ahead of Q1 2011 and includes 5,271 Holiday Inn brand family rooms.
Greater China system and pipeline at record levels with 55,871 rooms (170 hotels) open and a further 51,742 rooms (155 hotels) expected to open over the next 3 ? 5 years (30% of our global pipeline).
Building preferred brands
EVEN Hotels was launched in February as the first mainstream US hotel brand focused on wellness. We will invest up to $150m over the next 3 years to help establish the brand in key US cities. We expect to open the first hotel in H1 2013.
HUALUXE Hotels and Resorts was launched in March as the first upscale, international hotel brand designed for the Chinese consumer. Interest for the brand among owners is high with over 20 letters of intent signed to date. We expect to open the first hotel by early 2014.
Hotel Indigo has recently been recognised as a J.D. Power 2012 Customer Service Champion. This follows on from the 2011 J.D. Power and Associates awards for both Holiday Inn and Hotel Indigo for highest in guest satisfaction among mid-scale and upscale full service hotels respectively.
Holiday Inn and Holiday Inn Express continue to outperform in the US, delivering Q1 total RevPAR growth of 8.6% and 9.6% respectively compared to industry RevPAR growth for the upper midscale segment of 8.0%.
Investing in growth
Gross capital expenditure in the quarter was $21m, against full year guidance of c$150m of maintenance and $100m-$200m of growth capital expenditure.
The disposal process of InterContinental New York Barclay is progressing.
Current trading update
April global RevPAR up 6.1%, including rate up 4.2%.
Americas 5.6%; Europe 5.2%, AMEA 9.1%, Greater China 7.1%.
? All figures are before exceptional items unless otherwise noted See appendix 3 for analysis of financial headlines
1 Before exceptional items
2 CER = constant exchange rates
3 Excluding $10m of significant liquidated damages receipts in 2011
Americas ? Strong growth in franchise royalties
RevPAR increased 7.7%, including rate growth of 4.2%. US RevPAR was up 7.6%, including rate growth of 4.1%. On a total basis including the benefit of new hotels, US RevPAR grew 8.4%, outperforming the industry up 7.9%.
Revenue decreased 7% to $181m and operating profit increased 3% to $100m. After adjusting for (i) owned hotel disposals in 2011 (ii) the impact of a $10m liquidated damages receipt in the managed business in 2011 and (iii) the impact of managed lease* hotels, revenue increased 6% and operating profit increased 16%. This was driven by strong RevPAR growth across the region, slightly offset by the impact of the partial closure of an owned hotel in the Caribbean.
We signed 5,097 rooms (43 hotels) in the first quarter and opened 4,244 rooms (33 hotels). Signings included Hotel Indigo hotels in Philadelphia and Wilmington and our six signings outside the US including three Staybridge Suites hotels. In line with our strategy to grow the presence of Holiday Inn in the leisure market, openings in the quarter included three resort hotels for the brand in the US and our eighth Holiday Inn Club Vacation hotel which is located in Las Vegas. This strong activity for the Holiday Inn brand family in the quarter demonstrates the ongoing benefits from the Holiday Inn relaunch.
Europe ? Robust performance in challenging markets
RevPAR increased 2.6%, including rate growth of 1.2%. Despite continued macro economic uncertainty, RevPAR in our key markets remained resilient, with the UK up 2.2%, France up 2.6% and Germany up 3.3%.
Revenue increased 18% (22% at CER) to $90m and operating profit increased 25% (33% at CER) to $15m. After adjusting for the leased hotel disposal in 2011 and the impact of managed lease* hotels, revenue was broadly in line with Q1 2011 and operating profit increased 25%.
We signed 915 rooms (5 hotels) in the quarter, including an InterContinental hotel in St Petersburg, which will be our second for the brand in Russia. We opened 968 rooms (8 hotels) including Hotel Indigo hotels in Edinburgh and also in Berlin, the first for the brand in Continental Europe.
AMEA ? Good RevPAR growth in most markets
RevPAR increased 6.9%, including rate growth of 1.7%. Most markets continue to show strong growth including Saudi Arabia up 9.5%, UAE up 7.4%, South East Asia up 8.9% and Japan up 4.0%. Egypt and Bahrain continue to be impacted by political unrest with RevPAR down 13.6% and 13.9% respectively.
Revenue increased 12% (10% at CER) to $56m and operating profit increased 10% to $22m and by 16% after adjusting for the disposal in Q3 2011 of a hotel asset and partnership interest in Australia.
We signed 603 rooms (2 hotels) in the quarter, and opened 1,175 rooms (4 hotels). Openings included Holiday Inn Express Bangkok Siam, the first hotel for the brand in South East Asia; InterContinental hotels in Thailand and Doha; and the first Crowne Plaza hotel in Central Java.
Greater China ? Increase in rooms and RevPAR drives strong growth
Greater China continues to be our strongest market with RevPAR growth of 11.9%, including rate growth of 3.3%.
Revenue increased 10% to $54m and operating profit increased 25% to $20m. This was driven by a combination of strong RevPAR growth and the contribution from a 13% increase in net system size.
We signed 2,716 rooms (9 hotels) in the quarter, including five Crowne Plaza hotels, taking the pipeline for the brand in the region to 21,671 rooms (58 hotels). We opened 714 rooms (3 hotels) in the quarter, including Hotel Indigo Xiaman Harbour, our second hotel for the brand in Greater China. In April we opened a further 3 hotels (2,232 rooms), including the Holiday Inn Macau Cotai Central (1,224 rooms), the largest Holiday Inn in the world.
Our strong and profitable platform and leading position in Greater China result from our growing scale, expertise of our team and the quality of our relationship with owners, which we have developed over the three decades we have been operating in the region.
Interest, tax and cash flow and exceptional items
The interest charge for the period was $12m (Q1 2011: $16m) due to lower levels of net debt and a small non recurring cash interest receipt.
Based on the position at the end of the quarter, the tax charge has been calculated using an estimated annual tax rate of 29% (Q1 2011: 28%). The 2012 full year tax rate is expected to be in the high 20s, moving towards the low 30s in 2013. An exceptional tax credit of $79m relates to prior year matters settled in the period, together with associated deferred tax amounts.
Net debt was $577m at the end of the quarter (including the $210m finance lease on the InterContinental Boston). This is down from $846m at 31 March 2011 but up $39m on the year end position due to seasonal working capital movements.