InterContinental Q2 Profit Beats Estimates

Source : The Business Times, August 14, 2008

(LONDON) InterContinental Hotels Group Plc, owner of the Holiday Inn lodging brand, reported second-quarter profit that beat analysts' estimates as demand in Europe and the Middle East helped to counter a slowdown in the US.

InterContinental rose 3 per cent in London trading after the Denham, England-based company also said it reached a target on room openings six months early. Net income of US$101 million beat the US$74 million average of three analysts' estimates compiled by Bloomberg.

The company has added 60,490 net rooms since June 2005, beating its three-year goal. Revenue per available room, a gauge known as revpar, rose 4 per cent, driven by the Middle East and Europe, though the hotelier said that the market has 'become more challenging' in the US. Rival Marriott International Inc recently forecast lower profit, while Starwood Hotels & Resorts Worldwide Inc has said its earnings may miss estimates.

The 'more cautious short-term outlook tone is no worse than expected and already well highlighted in advance by US companies,' Dresdner Kleinwort analysts including Alistair Scobie said in a note. The company's results provided 'overall reassurance', they wrote.

The shares added 22.5 pence to 773 pence in London trading. The stock has dropped 13 per cent this year, better than the 17 per cent decline by the nine-member Bloomberg Europe Lodging Index.

Second-quarter net income fell 21 per cent from the US$128 million year-earlier figure on higher taxes and costs to rebrand the Holiday Inn chain. A year ago, the company had one-time gains of US$9 million from property sales. Revenue climbed 12 per cent to US$504 million.

Europe, Middle East revpar grew 9.9 per cent in Europe, the Middle East and Africa during the second quarter. That included growth of 27 per cent in the Middle East, where its hotels include the 500-room InterContinental Dubai Festival City.

Growth on that basis slowed to 1.6 per cent during the quarter from 2.3 per cent in the previous quarter in the Americas, as a slowing economy and higher fuel prices have hurt demand for business and consumer travel. There was a 'general softening' of revpar in the US in the last four to five months, and the second half will be more challenging, chief executive officer Andrew Cosslett said at a press conference.

'Clearly, gas price rises don't help,' the CEO told journalists on a conference call, adding that the slowdown was mainly on weekends, with demand on weekdays 'pretty strong'. Declining occupancy levels rather than lower room rates prompted the slowdown, he said.

Chinese revpar growth slowed to 0.5 per cent in the second quarter from 3.2 per cent in the prior three months, mainly because of the Sichuan earthquake and new visa restrictions. -- Bloomberg