InterContinental Hotels Group (IHG, Financial) is one of the world's leading hotel companies – with 710,295 rooms in over 4,800 hotels in nearly 100 countries around the world.
IHG operates nine hotel brands – InterContinental, Crowne Plaza, Hotel Indigo, Holiday Inn, Holiday Inn Express, Staybridge Suites, Candlewood Suites, EVEN Hotels and HUALUXE Hotels and Resorts.
Recent Financial Results
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:
“2014 was an excellent year for IHG as we delivered against our long-term winning strategy for high quality growth. We achieved strong RevPAR performance of 6.1%, and our best net system size growth since 2009 of 3.4%, increasing our operating profit on an underlying basis by 10%.
We remain committed to reducing the capital intensity of the business and maintaining an efficient balance sheet with disposal proceeds received in the year of almost $400 million and shareholder returns, including ordinary dividends, of over $1bn. We are proposing an increase in the total dividend for the year of 10%.
We expanded our brand portfolio and strengthened our position in boutique hotels, the fastest growing segment in the industry over the last five years, with the acquisition of Kimpton Hotels & Restaurants. The first properties for our innovative, consumer focused, EVEN Hotels and HUALUXE Hotels and Resorts brands are now open. Significant growth milestones were achieved across our established brands as we continue to strengthen our scale positions in the most important global markets.
Looking into 2015, we face many macroeconomic and geopolitical uncertainties, but are confident that our strategy for high quality growth coupled with the momentum in the business positions us well for continued strong performance.”
Financial Highlights
- Strong underlying financial performance
- Strong annual RevPAR performance with global comparable RevPAR up 6.1%, led by 7.4% growth in the Americas. Q4 global comparable RevPAR growth of 5.1%, with 7.0% growth in the Americas.
- $23 billion total gross revenue from hotels in IHG’s system (up 6% year on year; 7% CER)
- Underlying fee revenue up 7% and operating profit up 10%, driven by strong trading and enhanced productivity. Reported operating profit down 3%, reflecting owned hotel disposals and 2013 liquidated damages.
- Group fee-based margin up 1.5%pts to 44.7%, benefiting from strong growth in our scale markets. IHG will continue to invest for long-term growth in developing markets in 2015.
Americas – Excellent RevPAR performance and highest signings in 6 years
America is its largest region, contributing 68% of operating profit before central overheads in the year. The US contributes over 80% of fee revenues in the Americas, where it is also focusing on growth in Mexico, Canada, and Latin America. Comparable RevPAR increased 7.4%, driven by rate growth of 3.7%; fourth quarter RevPAR increased 7.0%. In the US, RevPAR was up 7.5% in both the full year and fourth quarter.
Europe – Strong trading performance in the UK and Germany
Europe contributed 11% of its operating profit before central overheads in the year. Their business in Europe is focused on growth in its priority markets of the UK, Germany, Russia and the CIS, and the top 50 European cities, which contribute approximately 85% of its total fee revenues in the region. Comparable RevPAR increased 5.1% with growth in both ADR and occupancy; fourth quarter RevPAR increased 4.2%. Trading was particularly strong in the UK, up 8.9%, with low double digit growth in the provinces and high single digit growth in London. Germany also performed well with RevPAR up 4.1%.
AMEA – Robust performance led by RevPAR growth in established markets
AMEA contributed 10% of operating profit before central overheads in the year. Asia, Middle East & Africa region is most diverse, including the developed markets of the Middle East, Australia and Japan, and developing markets such as Indonesia and India. 54% of its open hotels in the region are in developed markets, whereas 77% of its pipeline is in developing markets.
Comparable RevPAR increased 3.8%, driven by 2.4% rate growth, with fourth quarter RevPAR up 3.1%. Total RevPAR was up 2.2% as hotels opened in developing markets with lower RevPAR. Our performance was led by the Middle East, up 5.6%, driven by solid performance in Saudi Arabia and recovery in Egypt, and Indonesia, up 9.1%. This was supported by positive trading in the mature markets of Japan, which grew by 6.7%, and Australia, which grew by 3.9%.
Greater China – Record year for openings and 9.5% fee revenue growth in our 30th anniversary year
Greater China contributed 11% of operating profit before central overheads in the year. Over the last 30 years, it has developed the leading managed hotel business in Greater China with 78k rooms open and a further 54k rooms in the pipeline.
Comparable RevPAR increased 1.6%, led by an improvement in occupancy, with fourth quarter RevPAR down 2.0%. Total RevPAR declined by 3.4% as hotels opened in lower RevPAR markets. Performance was significantly ahead of the industry, reflecting IHG’s scale and operational excellence in the region, and was achieved in a challenging environment with slower macro-economic conditions, government austerity measures and protests in Hong Kong.
- Shareholder returns – over $1bn returned to shareholders in 2014
- Final dividend increase proposed of 11% to 52¢, which equates to a full year dividend of 77¢, up 10%, reflecting the cash generative nature of our business model.
- $763m returned to shareholders in July via $2.93 per share special dividend with 12 for 13 share consolidation and $500 million share buyback programme completed, with 3.4m shares repurchased for $110 million in the first half.
To End
IHG’s strategy is focused on increasing the number of franchised and managed hotels it owns. Its hotel development pipeline is the industry's largest, with 1,221 hotels (over 193,000 rooms).
IHG is catering to its clients in a great way and is expected to create greater shareholder returns in the near future. Investors may consider adding this hotel company to their portfolio.
