Wednesday 21 August 2019

InterContinental Hotels sees profits surge, but China division under pressure

The group posted a 25% rise in pre-tax profits to 375 million US dollars (£308 million) for the six months to June 30.

Holiday Inn owner InterContinental Hotels Group has seen half-year profits jump 25% despite slowing growth in its Greater China division (Chris Ison/PA)
Holiday Inn owner InterContinental Hotels Group has seen half-year profits jump 25% despite slowing growth in its Greater China division (Chris Ison/PA)

By Holly Williams, PA Deputy City Editor

Holiday Inn owner InterContinental Hotels Group has seen half-year profits jump 25% despite slowing growth in Greater China amid the trade war with America and protests in Hong Kong.

The group, which also owns brands including Crowne Plaza, posted pre-tax profits of 375 million US dollars (£308 million) for the six months to June 30 on revenues up 12% at 1 billion US dollars (£821 millon).

On an underlying basis, operating profit lifted 14% to 457 million US dollars (£375 million).

But the group saw stagnant growth in the US – its largest market – and pressure on its growing Greater China division.

Across Greater China, revenues per available room (Revpar) – a closely watched metric for the hotel industry – fell 0.5% in the second quarter and 0.3% over the first half as a whole.

In mainland China, Revpar dropped 1% as demand for business travel was lower, which comes amid the escalating trade war between China and the US.

It also revealed an impact from the political unrest in Hong Kong, where half-year Revpar was “marginally down”.

And in the US, Revpar was flat in the first half after falling 0.7% in the second quarter as the firm came up against tough comparatives from a year earlier, when demand for hotel rooms was sent soaring due to hurricane disruption.

Demand for its rooms is still linked to the performance of a global economy over which there is mounting concern Russ Mould, AJ Bell

Keith Barr, chief executive of InterContinental, said: “In a slower Revpar growth environment, we’ve made significant progress, opening a record number of rooms in the first half.”

He added that the group’s broad international spread would help it weather “macro-economic and geopolitical uncertainties in some markets” and keep it on track for the full year.

Shares fell 2% after the results.

There was some brighter news for the UK, where the group said revenues were boosted by demand from Cricket World Cup fans.

It saw UK Revpar rise 2% in the six months to June 30, with a 2% lift also in the second quarter.

It said strong international demand drove a 4% rise in second-quarter Revpar in London and a 1% lift across the regions, benefiting from the Cricket World Cup.

AJ Bell investment director Russ Mould warned that “demand for its rooms is still linked to the performance of a global economy over which there is mounting concern”.

He said: “Revenue per room is under pressure and the US market in particular is stagnating, albeit against a tough comparison with last year when the damage wrought by hurricane season drove demand for rooms.

“And although the company is looking to Asia for growth, the recent disruption in Hong Kong and the impact on Chinese corporate travel of the ongoing trade war with the US are not helping on this front.”

PA Media

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