August 7, 2018 / 7:28 AM / a year ago

IHG quarterly room revenue growth accelerates on China demand

(Reuters) - InterContinental Hotels Group Plc’s (IHG) (IHG.L) second-quarter room revenue growth accelerated on robust demand in China, it said on Tuesday.

FILE PHOTO General view of the Intercontinental hotel in Marseille, France, March 7, 2016. REUTERS/Jean-Paul Pelissier/File Photo

The operator of the Crowne Plaza, Holiday Inn and Hotel Indigo chains has been focusing on business customers and expanding its luxury offering to cushion the impact of competition from online rental marketplaces such as Airbnb.

IHG has also been reducing its ownership of hotels and instead expanding via a cheaper fee model, under which it franchises and manages hotels and has lower capital requirements.

The company said it currently has more than 100 Holiday Inn Express hotels under the Franchise Plus model either in the pipeline or open. The model was launched in 2016, tailored for the Chinese market and combining the benefits of a franchise model with those of IHG’s managed model.

“This (strong momentum) was led by Greater China, where double digit growth in both RevPAR and net system size, as well as record signings, reflects the ongoing benefits of our long term strategic focus on this important market,” the company said.

Comparable revenue per available room (RevPAR) in Greater China grew 9.3 percent in the three months to June 30, compared with 4.4 percent a year earlier.

IHG, which traces its history back to 1777, had also benefited from higher corporate demand and occupancies earlier in the year from the Chinese New Year.

However, analysts have cautioned about IHG’s growth in the United States, its largest market in terms of room numbers. Quarterly RevPAR in Americas rose 3.4 percent, compared with a rise of 0.1 percent a year ago.

The company, which has 799,923 rooms globally, said total RevPAR rose 3.7 percent in the three months to June 30, higher than the 3.5 percent growth in first quarter and 1.5 percent a year earlier. It also bumped up its dividend by 10 percent to 36.6 cents.

IHG had launched a cost savings program in September to fund a series of new strategic initiatives.

It said on Tuesday it was on track to deliver about $125 million in annual savings by 2020.

Reporting by Arathy S Nair in Bengaluru; Editing by Amrutha Gayathri

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