Less-than-stellar performance in China dragged down the global performance metrics of IHG Hotels & Resorts, but continued strength in the U.S. helped executives underline the British hotel firm’s overriding progress.
In the second quarter of the year, revenue per available room in China decreased 7%, while in the U.S. it increased 2.5%. Earnings before interest, taxes, depreciation and amortization improved 11% year over year to $567 million.
Other markets helped boost IHG's portfolio, with global RevPAR for the first six months of the year increasing overall by 3% and for the past quarter by 3.2%.
“RevPAR growth accelerated in the latest quarter, reflecting a strong U.S. rebound in [the second quarter] and the breadth of our global footprint, and development activity continues to increase. Together with system growth, notable margin expansion and the benefit of returning surplus capital through buybacks, adjusted [earnings per share] growth was 12%,” IHG CEO Elie Maalouf said in a statement included in IHG's earnings release.
During a conference call Tuesday, Maalouf said the company's performance in the first half of the year showed IHG is heading in the right direction and that China is beginning to awaken.
He said Chinese consumers are traveling again and checking into hotels, but they are flocking to other countries in the Asia-Pacific region — notably those of Southeast Asia — rather than booking trips to domestic Chinese markets.
IHG reported its first-half numbers a day after global stock prices took a tumble on fears over the strength of the U.S. economy.
Average daily rate in IHG's hotels in Europe, the Middle East, Asia and Africa region increased 3.5% year over year and RevPAR increased by 7.5%. Mainland Europe saw a 4.8% RevPAR increase for the first half, while the United Kingdom posted a 2.5% increase.
IHG's revenue for the first half of the year increased 7% to $1.1 billion.
IHG also opened 126 hotels and approximately 18,000 rooms in the period for a total hotel count of 6,430 and a total rooms count of approximately 955,000. Its pipeline reached 2,225 hotels with approximately 330,000 rooms. Maalouf said IHG's signings in the first half of the year were “record-breaking” for the firm.
In the second quarter, IHG signed an agreement with German hotel firm Novum Hospitality that more than doubled IHG’s room count in the country.
Michael Glover, IHG's chief financial officer, said he was encouraged by the firm’s fee business revenue increasing by 6% in the first six months to $850 million.
He said such numbers permitted IHG to increase its dividend by 10% to $0.53 a share. IHG's $800 million share-buyback program is now 47% completed, Glover added.
As of press time, IHG stock was trading at £73.84 ($94.32) a share, an increase of 30.5% year over year. The London Stock Exchange’s FTSE 100 index was up 5.33% over the same period.