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Profit, RevPAR up for IHG in 2012

InterContinental Hotels Group has reported strong preliminary results for the year to December 31, 2012, with revenue, profit, RevPAR and occupancy all up.

The United States continues to fuel the strong performance of the company, with RevPAR in the U.S up 6.3 per cent, above the global growth of 5.2% and well above Europe’s 1.7% growth.

It was a strong Q4 in the United States that pushed RevPAR up, with the U.S recording 5.7% growth compared to just 1.8% in Asia, Middle East and Africa (AMEA).

IHG recorded USD$21.2 billion in total gross revenue from hotels in IHG’s system – a figure that’s up an impressive 5%.

“2012 was another year of significant progress for IHG with our preferred brands driving RevPAR up 5.2%, led by the US up 6.3%,” said InterContinental Hotels Group PLC’s Chief Executive, Richard Solomons.

“Together with 2.7% net rooms growth, which is fuelled increasingly by our expansion in developing markets, this drove up fee revenues by an impressive 6.8%. This growing scale allowed us to reinvest in the business while achieving better than anticipated margin progression.

“The financing environment remained tough through 2012 in many of our key markets, but we still signed on average one hotel a day into our pipeline. This reflects the excellent relationship we enjoy with our owners and further strengthens our foundation for high quality growth. We extended our portfolio of preferred brands, launching in the first quarter of 2012 the innovative Hualuxe Hotels and Resorts, and Even Hotels.

“The USD$1bn return of capital, announced in August, underlines the benefit of our asset light strategy in delivering strong free cash flow, and our commitment to return value to shareholders. IHG’s proven strategy and resilient business model position us for further good performance in 2013, despite the challenging economic environment. The 16% increase in our dividend demonstrates the confidence we have in our ability to deliver sustained high quality growth, as we prepare to celebrate our 10th anniversary as a standalone business,” he said.

2013 has already started strongly for IHG, with January global RevPAR up 6.6% and rate up 2.1%. The Americas was up 7.0%, Europe up (0.1)%, and AMEA up 6.0%.

Greater China was up 21.0% and, according to IHG, it “principally reflects the shift in timing of Chinese New Year in 2013 into February from January”.

Click on the image above for a review of the results from IHG’s Chief Financial Officer, Tom Singer.

Here is a breakdown from IHG, region-by-region, for performance in 2013:

THE AMERICAS
RevPAR increased 6.1%, with 4.1% rate growth, and fourth quarter RevPAR increased 5.7%. US RevPAR was up 6.3% in 2012, with 6.2% growth in the fourth quarter, despite uncertainty regarding the presidential election and “fiscal cliff”. On a total basis, including the benefit of new hotels, US RevPAR grew 7.0% in the year, outperforming the industry, which was up 6.8%.
Revenue increased 1% to $837 million and operating profit increased 8% to $486m. After adjusting for owned hotel disposals, liquidated damages receipts in the managed business of $3 million in 2012 and $10 million in 2011 and results from managed lease hotels, revenue was up 6% and operating profit up 10%. This was predominantly driven by the franchise business, where royalties were up 9% due to 6.0% RevPAR growth and 2.3% net system size growth. Owned profits increased 41%, driven by double digit RevPAR growth at InterContinental hotels in Boston and San Francisco and 4% RevPAR growth at InterContinental New York Barclay.
IHG opened 17,000 rooms, up 8% on 2011 on an underlying basis, including 6 Hotel Indigo hotels, and IHG’s second InterContinental hotel in Mexico City. The company signed 26,000 rooms, with the first Even hotel, a flagship property in Manhattan, New York City, signed in October. The Holiday Inn brand family accounted for around 70% of hotel openings and signings in the year, demonstrating the ongoing benefits of the re-launch.

EUROPE
RevPAR increased 1.7%, with 1.2% rate growth and fourth quarter RevPAR increased 1.2%. Despite challenging economic conditions across Europe, RevPAR during the year grew by 2.5% in the UK and by 5.4% in Germany, where the industry benefited from a busy trade fair schedule.
Revenue increased 8% (13% at CER) to $436 million and operating profit increased 11% (16% at CER) to $115 million. At CER and after adjusting for a leased hotel disposal and excluding results from managed lease hotels, revenue increased 5% and operating profit increased 16%. This was driven by a 2.1% increase in net system size and solid RevPAR growth, including 8.0% at InterContinental London Park Lane and 2.5% at InterContinental Le Grand Paris, plus a $4m decrease in regional overheads.
IHG signed 7,000 rooms (48 hotels), up 22% on 2011, including the first 2 Holiday Inn Express hotels in Russia, 6 Holiday Inn brand family hotels in Germany and 7 Hotel Indigo hotels, with firsts for this brand in France, Israel and Spain. 5,000 rooms (39 hotels) were opened into the system, the highest number of hotel openings in the region in the last 4 years. Openings included InterContinental London Westminster, the second for the brand in London, and 5 Hotel Indigo hotels, doubling the system size in Europe for the brand.

AMEA (Asia, Middle East and Africa)
RevPAR increased 4.9%, with 1.8% growth in the fourth quarter. Strong trading in South East Asia and Japan was offset by slowing economic growth in some other markets in 2012. In the Middle East, political tensions continue to impact trading in some countries such as Lebanon, but markets such as Saudi Arabia and the UAE have performed well, with RevPAR up 8.0% and 5.5% in the year, respectively.
AMEA revenue increased 1% (0% CER) to $218 million and operating profit increased 5% (4% CER) to $88 million. At CER and after adjusting for a $6 million liquidated damages receipt and the related disposal in 2011 of a hotel and partnership interest in Australia, revenue increased 3% and operating profit increased 16%, benefiting from robust trading in the managed business and careful cost control.
IHG signed 8,000 rooms (36 hotels) in the region, of which 4,000 were Holiday Inn-brand family rooms signed in India and Indonesia. They also signed 6 InterContinental hotels, including 2 resort locations in Australia and Thailand. IHG opened 4,000 rooms (16 hotels) in the year, including 4 Crowne Plaza hotels, 2 Crowne Plaza Resorts and the first Holiday Inn Express in India, in Ahmedabad.

GREATER CHINA
RevPAR increased 5.4% with rate growth of 3.1%. RevPAR was down 0.3% in the fourth quarter reflecting the ongoing industry-wide impact of the China-Japan territorial island dispute, the political leadership change and the broader economic slowdown across the region.
Revenue increased 12% (12% CER) to $230 million, with fee growth of 16%, and operating profit was up 21% (22% CER) to $81 million. This was driven by 19% profit growth in the managed business where RevPAR was up 5.6% and net rooms up 10% (following 14% rooms growth in 2011). InterContinental Hong Kong also had a strong year with 6.7% RevPAR growth and good cost control, driving owned operating profit up 22%.
IHG opened 8,000 rooms in the year, taking the company’s system size in the region up 12% to 62,000, the 7th consecutive year of double digit room growth. Openings included 8 Crowne Plaza hotels, 2 Hotel Indigo hotels and Holiday Inn Macau Cotai Central, which at 1,224 rooms is the largest Holiday Inn in the world. Signings of 13,000 rooms were up 11% on 2011, taking IHG’s pipeline to a staggering 51,000 rooms. Signings included 15 Hualuxe hotels.

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