InterContinental Hotels register strong US growth

InterContinental Hotels Group continued to benefit from its $1 billion (Dh 3.67 billion) revamp of Holiday Inn, with strong growth in the US — where the brand is concentrated — helping the company beat analyst expectations in the first half. Underlying operating profits were £14 million higher than consensus forecasts, at £269 million, on turnover that was 10 per cent higher, at $850 million. Revenues per average room — measuring occupancy and rates — drove much of that growth, rising more than 12 per cent in China and more than 8 per cent in the US. Article continues below Revpar fell back slightly in the second quarter from the first, but Richard Solomons, who was promoted from chief financial officer to chief executive this summer, said higher comparatives were partly to blame. "A point or two here or there is not a sign of an acceleration or a deceleration," he said. The shares rose more than 8 per cent to £10.42 yesterday, beating the FTSE 100's near-2 per cent rise. "They've traded very well and current trading looks good," said Nigel Parson at Evolution, pointing to geographic diversity as a strong advantage for the group. Revenues in the Americas rose 6 per cent to $416 million, helping make up for Japan, Egypt and Bahrain, which were hit by natural disasters and political unrest this spring. Those disruptions cost the group $7 million in the first half; the full-year impact is expected to come in between $15 million and $20 million. Asia-Pacific sales were 14 per cent up at $156 million, led by China. Where leisure travellers had helped make up for lagging corporate demand in 2009, Solomon said: "We are seeing more people travelling, on both the leisure and also the business side of things." He said the next rebranding project, refreshing Crowne Plaza in the US, could play a role in coming years similar to the Holiday Inn revamp's boost to revenues coming out of the 2008-09 recession. He dismissed the long-term impact on tourism of the UK's recent riots and looting, saying that the violence would not deter people visiting London for the 2012 Olympic Games, for which InterContinental is the official hotels provider. In the six months to June 30, pre-tax profit jumped from $192 million to $205 million. Diluted earnings per share rose from 47 cents to 53.1 cents, and the interim dividend is raised from 12.8 cents to 16 cents. Compared with its US rival Starwood, which trades at more than 18 times 2012 earnings, IHG looks cheap at a p/e of 13.