InterContinental Hotels Group IHG reported mixed results for the first quarter of 2018 on Thursday. Global room revenue was up more than 3%, but there were signs of a weakening in demand in certain key markets.
The bookings for U.S. flights have been flat in recent weeks, but those for China are falling again. London bookings have remained flat since last year.
Marriott and Hilton recently trimmed their forecasts, but IHG said it still expected to meet its $1.25 billion profit target – it cited cost discipline and new revenue streams from credit card partnerships.
IHG’s latest earnings report revealed a lot of interesting information.
1) Momentum in the U.S. is declining: In the Americas, revenue per available room (RevPAR), rose by 3.5%. However, performance declined as the quarter progressed.
The CFO stated that RevPAR was flat when we aggregated the 8 most recent weeks. Michael Glover.
2) Reduced travel by government officials was one factor. The following are some of the most effective ways to increase your ROI: Elie Maalouf According to the company, this business line represents less than 5 percent of revenue and has dropped to just 3.5% for the third quarter. He said that the impact of this is expected continue.
Summer travel can boost results. Glover stated that “we already see revenue on the books ahead of last years for July and August.”
4) China drag continues: RevPAR in Greater China fell 3.5% for a second consecutive quarter. Glover stated that “Travel is occurring at the same volume as last year. This is reflected in occupancy, which has held up even though the rate of decline is year-over-year.” Performance in Tier 2-4 cities dropped 5.7%.
5) Maalouf’s positive take on the situation: China’s economy is improving.
The latest results for May Holiday, Labor Day Holiday, showed record travel. Over 6% more travel than last year. Over 8% more travel spending.
6) EMEAA: RevPAR grew 5% in EMEAA [Europe, Middle East, Africa, and Asia] region. East Asia and Pacific topped the list with 6.8%. Middle East (6.2%) and Continental Europe (5.6%) were next.
Maalouf attributed part of this growth to Chinese tourists: Demand was strong, but rates were lower because the higher-end traveler largely left China. “China to Asia Pacific has increased by double-digits from last year and inbound traffic from Asia into Europe is also up.”
The U.K. performance lagged behind: Glover stated that “London was within this a slight negative.” “Outside London, we were slightly more positive.” He said that London’s drop was due to a decrease in major events in the first three months of the year compared with the previous year.
Ruby Hotels and conversions are driving the development boom. IHG opened over 14,000 rooms globally during the first quarter of this year. This is more than double what was done in the same time period last years. IHG also signed 25,800 hotel rooms, including 5,000 at its hotels. Ruby Hotels acquisition In February,
“This was a record year for signings, with 334,000 rooms booked. [2,265 hotels]Maalouf stated that the increase is 9% over a year earlier.
10) Almost 40% of the signings were convertedIt was double China… we’re optimistic about good growth signings and openings in the Middle East for the rest of the year,” Maalouf said. Maalouf: “It was double China… We’re optimistic about growth and signings in the Middle East throughout the year.”
IHG continues to place a high priority on the expansion of conversion-friendly brand names like Vignette and Garner. Maalouf outlined earlier this year.
The key to this outlook is the new U.S.-branded co-branded card and increased sales of loyalty points.Glover stated that the incremental profit from the sale of loyalty points and the new co-brand agreements in the U.S. should add about 130 basis point to our fee margin growth.
He also mentioned cost discipline. “We only increased overhead costs by 1% last year, while fee revenues grew 6%.”
Maalouf noted that IHG’s pricing was stable and the consumer’s behavior had not changed. “We are not experiencing any price resistance. “Occupancy continues good.”
IHG is a resilient company because of its portfolio mix, he said. “The upper-luxury segment is pretty resilient because people are not sensitive to this wealth bracket. And our midscale segment is resilient thanks to essential travel.”
IHG CEO Elie Maalouf appears onstage Skift Global Forum In September, New York City.
