Strong growth and a confident outlook from Holiday Inn and Crowne Plaza owner InterContinental Hotels (IHG) sends shares in the £5.5 billion cap soaring 5.5% to £24.37.
The world’s largest hotel operator recorded a 4.8% rise in global revenue per available room (RevPAR) in the third quarter, led by a rate increase of 3.6%.
The biggest RevPAR growth was in Continental Europe, up 10.1%, driven by solid trading in Germany and a recovery in Southern Europe and Russia.
The otherwise strong trading is marred by challenging conditions in Hong Kong and Macau, which experienced double-digit RevPAR declines leading to a drop for Greater China of 0.7%.
InterContinental now has 727,000 rooms worldwide, up 4.3% on last year, and it says it’s signing hotels into its pipeline at the fastest rate since 2008.
‘Our innovative commercial strategy continues to deliver lowest cost revenues into our hotels, and we are on track to deliver a next generation cloud based Guest Reservation System for roll out in 2017. Looking ahead to the remainder of this year, we are encouraged by current trading trends and remain confident in the outlook,’ says InterContinental chief executive Richard Solomons.
The biggest factor weighing on the stock is the strength of the US dollar, which reduces group RevPAR to a 0.4% decline when reported at actual exchange rates.
‘With Sterling (which is the primary currency for central costs) having depreciated less versus the US dollar than other currencies there will be a negative margin impact on the fee-based business,’ says Numis analyst Wyn Ellis.
The group completed the sale of InterContinental Hong Kong for $929 million on 30 September, which marks the conclusion of its owned asset disposal programme. A decision on the return of funds to shareholders from asset sales will be disclosed in February 2016.
InterContinental’s full year pre-tax profit is expected to rise by 3.6% to $621.7 million with earnings per share growth of 16% to 183.9c.
The currency toll earns it a ‘hold’ rating from Numis with a target price of £26.00, implying share price appreciation of 6.7%.