Holiday Inn owner relies on Europe amid US slowdown
FTSE 100 firm Intercontinental Hotels Group has seen a slowdown in its key US market partly offset by better performance in Europe and China.
Keith Barr, the new chief executive who took over from IHG’S 25-year stalwart Richard Solomons, said the important US market had slowed after years of strong numbers. A project to renovate 300 Holiday Inn Express sites in the US reduced revenue per available room – a key industry performance metric known as REVPAR – by 0.3pc.
Moreover, IHG’S hotels in places where the oil industry dominates the local economy have also suffered as firms in the energy sector look to curb their costs. The market is still feeling the effects of a long downturn, with crude oil hovering around $50 per barrel. This meant US REVPAR growth for the six months to June 30 was 0.7pc, a marked decline on the 2.1pc rate in the comparable period in 2016.
But Europe more than took up the slack, with REVPAR up 6.2pc, well above the 2pc rate from last year.
Mr Barr, who has worked at IHG for 17 years and was chief commercial officer before his promotion, said the European economy’s recovery had lagged that of the US, which was why performance across the pond had been much stronger in recent years. “But we are seeing a healthy economy in Europe now, with countries like France recovering and the weaker pound making the UK a very attractive destination for inbound tourism but also for domestic travellers too,” Mr Barr said.
Greater China, which encompasses Hong Kong, also performed strongly, with REVPAR up 4.1pc, compared to 2.4pc a year ago. Mr Barr said this justified the company’s decision to invest in the region. The strength of Europe and China helped group sales rise just over 2pc to $857m (£658.6m) but efficiency savings meant pre-tax profits rose 9pc to $326m.