Successful strategy reflects market dynamics

Outperforming the market and a growth in rooms in China have helped drive a strong revenue increase for InterContinental Hotels Group PLC.

According to its preliminary results for the year to Dec 31, 2015, IHG's revenue per available room increased by 0.3 percent, with significant declines in Hong Kong and Macao offset by growth of 2.9 percent on the Chinese mainland. Full year growth in the mainland was particularly strong in first-tier cities, up 6 percent.

"Our strong momentum in 2015 was driven by a clear strategy and disciplined execution. We delivered our highest room openings since 2009, our best signings since 2008, 11 percent underlying profit growth and 19 percent underlying net earnings per share growth," said Richard Solomons, chief executive of InterContinental Hotels Group PLC.

Over the past fiscal year, IHG opened 32 hotels on the Chinese mainland, 9,000 guestrooms and suites in all. It also signed agreements for 66 hotels, with a total of 20,000 guestrooms and suites.

As China makes its transition to a consumption-led economy, clear trends have emerged in the mainland's hotel development environment, Paul Edgecliffe-Johnson, IHG's chief financial officer, said at a news conference in London to announce the preliminary results.

First, the government is encouraging the creation of leisure destinations to capture the significant growth in private consumption.

"Our broad portfolio of brands is helping us to capitalize on this. In 2015, we signed around 4,000 rooms in prime leisure markets, such as Sanya and Kunming," said Edgecliffe-Johnson.

Second, the long-term demand for hotels in second- and third-tier cities is being driven by a growing middle class, with much of the demand in the midscale segment. The pace of IHG's new signings in the Chinese mainland was up 24 percent year-on-year, driven by 13,000 Holiday Inn rooms entering the pipeline.

"Our operational excellence, combined with our strong established brands, have allowed us to take advantage of the situation," Edgecliffe-Johnson said, offering as an example Crowne Plaza Sanya City Centre; a 495-room hotel that IHG rebranded in the fourth quarter.

In the medium term, despite economic and political uncertainties in some markets, Solomons said the prospects for the hotel industry remain good and the strength of IHG's business model gives them the confidence to propose a 10 percent increase in the total dividend.

"IHG remains in a strong position," Solomons said. "We've made clear strategic choices, and are executing against these with focused investment which has delivered outperformance in the past, and will continue to do so into the future. At the heart of this is recognizing that guest and owner needs continue to evolve, and adapting accordingly."

wangzhuoqiong@chinadaily.com.cn