Profits drop at InterContinental Hotels but revenue rises

Holiday Inn owner InterContinental Hotels Group said it has increased rooms at its quickest rate in a decade as it reported a drop in profit on higher costs.

The hotel operator’s pre-tax profit fell 26% to 485 million US dollars (£375 million) in 2018 compared to the year earlier as it booked higher one-off costs related to the restructuring of its operations. The company plans to deliver 125 million dollars worth of annual savings by 2020.

However, revenue increased 6% to 4.3 billion dollars (£3.3 billion) and revenue per available room – a closely watched metric for the hotel industry – grew 2.5%.

Shares rose 1.5% to 4,696p on the news.

The company said that it added 56,000 new rooms to its hotel estate last year, a 17% increase from 2017. InterContinental currently has 837,000 rooms across its global portfolio.

InterContinental hiked the dividend for the year by 10% to 114.4 cents, which follows the 500 million US dollars special dividend paid in January.

Chief executive Keith Barr said: “We have made excellent progress in 2018 executing against the strategic initiatives I set out a year ago to accelerate our growth, whilst delivering a strong financial performance.

“Our strategic focus on accelerating our net rooms growth helped drive a net system size increase of 4.8%, and our best performance for both openings and signings in a decade, leaving us well positioned for future growth”.

Mr Barr cautioned about economic uncertainty in some geographic markets but said the company is well placed for 2019.

“The fundamentals of our business remain strong, and while there are macro-economic and geopolitical uncertainties in some markets, we are confident in the year ahead and that our strategy will deliver industry-leading net rooms growth over the medium term.”