InterContinental Revenue Growth Slows in October

November 9, 2011

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World number one hotelier InterContinental Hotels Group said revenue growth had slowed in October as unrest in the Middle East impacted trading, overshadowing third quarter profit which was at the top end of expectations.

Growth in revenue per available room (RevPAR), a key industry measure, slowed to 4.7 percent in October from 6.4 percent in the third quarter, the hotelier said.

InterContinental, home to the Crowne Plaza as well as Holiday Inn and InterContinental brands, said political unrest had led to a significant decline in revenue at its 10 hotels in Egypt and two hotels in Bahrain.

"What we saw in October was a slowdown in our reported numbers in Europe but there are reasons behind that. In the back end of the month and into November the pace looks quite good," chief executive Richard Solomons told reporters.

InterContinental said USD$2 million had been knocked off its operating profit in the third quarter as a result of the impact on bookings from the Middle East unrest and the earthquake and tsunami in Japan earlier this year. It expects the full year impact to be USD$15 million, in line with previous guidance.

InterContinental, which runs over 4,400 hotels, posted a 33 percent rise in third-quarter operating profit to USD$153 million, driven by strong growth in China and the United States.

Solomon told reporters the group's mid-market brands had showed resilience in an uncertain economic environment.

"One of the important measures for us is that whatever the market environment, our brands continue to outperform which is what they have done consistently right through this year," he said.

The company was boosted by 8 percent growth in RevPAR in its key US market, where it benefited from the re-launch of Holiday Inn, and 10.8 percent growth in China.

"The tail winds of the hotel industry look very good in terms of the demographics and developing markets," Solomons said. "In some of our markets, particularly in Asia and parts of the Middle East, the economic picture is good and activity remains strong."

InterContinental said total revenue rose by 11 percent in the third quarter to USD$467 million.

Major hoteliers that have reported results recently have been generally upbeat as uncertainty in the global economy failed to put a dent in corporate travel.

Accor said in October it had yet to see signs of an economic slowdown and expected steady growth to continue in the fourth quarter.

Starwood swung to a third-quarter profit and raised its profit outlook for the year while Marriott's third-quarter profit beat market expectations.

"IHG's share price has recovered slightly from its August lows but still represents good value -- it is valued at just over half the multiple of Starwood," said Evolution analyst Nigel Parson.