Rooms Hotels

InterContinental Hotels Group gets solid earnings in U.S. to drive profit this quarter

Nov 06, 2012 12:16 pm

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Despite strong prospects in China and other parts of Asia, the hotel giant still sees a disproportionate chunk of its profit coming out of the Americas.

— Jason Clampet

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UggBoy♥UggGirl  / Flickr.com

Exterior of the InterContinental Park Lane, which IHG plans to sell. UggBoy♥UggGirl / Flickr.com


InterContinental Hotels Group Plc, the world’s largest provider of hotel rooms, said third-quarter profit rose 9 percent as earnings growth in the U.S. outpaced other regions.

Operating profit excluding exceptional items climbed to $167 million from $153 million a year earlier, the Denham, England-based company said today in a statement. That beat the $164.6 million average estimate of five analysts in a Bloomberg survey.

InterContinental, owner of the Holiday Inn chain, is benefiting from increased demand in emerging markets such as the greater China region, which accounts for about 10 percent of revenue. About a third of the hotelier’s global expansion in the next five years will be in the China region. The Americas is the company’s biggest market, accounting for about half of revenue.

“Our preferred brands have driven good underlying revenue growth, despite a number of industrywide issues such the timing of holidays, slowing economic growth in certain markets” and China’s leadership change, Chief Executive Officer Richard Solomons said in the statement. While the global economic environment “remains challenging,” the company is confident it’s “well positioned to continue to outperform,” he said

InterContinental gained as much as 2.6 percent in London trading. The shares were up 1.4 percent at 1,545 pence at the close in London, bringing this year’s gain to 33 percent.

Americas franchises

The company said revenue climbed to $473 million from $467 million. Revenue from franchises in the Americas rose 7 percent to $151 million, the company said.

“You’ve seen some resilience in the underlying economy and business in the U.S. and we’ve benefitted from that again, gaining share from our competitors,” Solomons said on a conference call with reporters today. Hurricane Sandy will have a “marginal financial impact” on the company, Solomons said.

The company’s revenue per available room, an industry measure of profitability, rose 6.1 percent in the Americas in October, the most of any region, according to preliminary operating results in the statement.

While talks to sell the Intercontinental New York Barclay are continuing, the process will be opened to further bidding and strong interest from prospective buyers is expected, the company said in today’s statement. The InterContinental London Park Lane is the next major asset the company is considering selling.

China slowdown

Revpar in the Greater China region declined 0.9 percent in September, in part due to political changes and an economic slowdown, InterContinental said. Xi Jinping is scheduled to take over as president of China in March, replacing Hu Jintao after ten years in power.

“These are just some short-term blips,” Solomons said on the call. “We’ve significantly outperformed the market.”

China tightened visa rules for visitors in August, adding requirements for a letter of invitation and proof of hotel reservations in a move that could slow its push to become the world’s biggest tourism destination. The World Tourism Organization has predicted that China may become the world’s top destination for overseas visitors by 2015.

With assistance from Christopher Spillane in London. Editors: Andrew Blackman, Jeff St.Onge. To contact the reporters on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net; Neil Callanan in London at ncallanan@bloomberg.net. To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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