InterContinental sees profits rise despite Hong Kong hit
18 February 2020, 14:34
The Holiday Inn owner said it is also prioritising the ‘health and safety’ of its staff and guests in China amid the coronavirus outbreak.
Holiday Inn owner InterContinental Hotels Group has posted higher annual profits, but revealed woes amid protests in Hong Kong and signs that coronavirus is taking its toll in China.
The group laid bare the impact of the unrest in Hong Kong, with revenues per available room (RevPar) – a key industry measure – slumping by 63% in the final three months of 2019.
On the coronavirus outbreak, the firm – which has 470 hotels and around 800 corporate staff in Greater China – said it is prioritising the “health and safety” of its employees and guests.
While it did not give specific details on the impact seen so far, it confirmed hotels in the region have recently seen reduced occupancy and a rise in cancelled bookings.
Greater China currently accounts for around 15% of open rooms and less than 10% of annual earnings, though it is growing rapidly in the region.
Its full-year results showed a 12% rise in pre-tax profits to 542 million US dollars (£417 million) for 2019.
The group – which also runs the Crowne Plaza brand – said earnings were 8% higher over the year at 630 million US dollars (£485 million) as revenues lifted 7%.
Shares in the group rose 2% as it also announced a 10% increase in the total shareholder dividend payout for 2019.
But it reported a 0.3% fall in global comparable RevPar as it blamed “macro and geopolitical factors”, including the unrest in Hong Kong.
RevPar dropped 4.5% in Greater China as a result, with this measure down 27% in Hong Kong over the year as a whole.
The UK market also saw a weakening performance at the end of the year, with fourth-quarter RevPar down 2%, falling across London and the regions.
Corporate demand for hotel stays was softer across the regional market in particular.
Over the year as a whole, UK RevPar rose 1%, with London ahead 3% and the regions seeing a 1% fall.
InterContinental said it also benefited from expanding its number of rooms at the quickest pace in more than a decade, with a 5.6% rise in its estate.
Chief executive Keith Barr said this helped offset the weaker RevPar seen in the hotels market.
He said investments to grow its brands were being helped by its cost-cutting programme, which he confirmed is “on track to deliver 125 million US dollars (£96 million) of annual savings, with the majority already realised and being reinvested across the business”.
He added: “Given the ongoing impact of coronavirus following the outbreak in China, our top priority remains the health and safety of our colleagues, guests and our partners on the ground, and we are doing all we can to support them at this difficult time.”
Analyst Stefano Bertolini said: “The coronavirus is likely to result in a lost year for InterContinental, but we do not think this materially impacts the long-term attractiveness of the company.”