IHG puts special payouts on ice despite better profit

InterContinental Hotels Group (IHG) said it would not pay out any additional capital to investors in 2018 as it announced a betterthan-expected profit for 2017 and a new strategy to speed growth.

“The operator of Crowne Plaza, Holiday Inn and InterContinental hotels plans to launch an upscale brand in 2018 and to target a return of about $125 million in annual savings by 2020,’’ it said.

IHG’s focus on business customers has helped it against rising competition from Airbnb, which has traditionally been favoured by travellers and has driven other hoteliers to merge to grow their influence.

Airbnb is looking to attract more business travellers.

IHG says it will stay independent, betting on its strategy of growing via a cheaper fee model, where it franchises and manages hotels rather than owning them.

Last year, it relaunched a midscale brand in the United States that will see the first hotels opening in 2019.

Keith Barr, who was promoted to CEO in July 2017, had investors hoping for greater focus on the booming Chinese market and greater marketing by IHG, two areas where he has experience.

IHG said yesterday that it would expand its franchise offer for Greater China, change the operating model for Kimpton Hotels & Restaurants and combine its Middle East, Asia and Africa as well as Europe operations.

“In recent years, we have built a powerful and effective enterprise which has... driven strong performance across our 5,300 hotels,” Barr said in a statement.

“We are announcing a series of new initiatives that build on our well-established strategy and will drive an acceleration in our growth rate,” he said.

The group reported a 7% rise in 2017 operating profit to $759 million, above the $752.1 million analysts’ forecast provided by IHG and the $707 million it earned a year earlier.

Revenue per available room (RevPAR) grew 4% in the final quarter of 2017, faster than the 1.7% growth a year earlier.