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Intercontinental Hotels up as it hikes dividend and announces plans for upmarket brand launch

Last updated: 07:10 19 Feb 2019 EST, First published: 04:05 19 Feb 2019 EST

Holiday Inn
IHG owns the Holiday Inn hotel chain

Intercontinental Hotels Group PLC (LON:IHG) shares moved higher on Tuesday after the owner of the Holiday Inn and Crowne Plaza brands hiked its final dividend by 10% and also announced plans for a new “upper midscale” brand.

Reporting full-year results, the FTSE 100-listed firm said it was planning the brand launch in 2019 to target a US$18bn market with “strong guest and owner demand”.

READ: Intercontinental Hotels acquires Six Senses hotel and spa chain in US$300mln deal

IHG made a move into the upmarket luxury segment last week when it snapped up spa and hotel chain Six Senses in a US$300mln deal with private equity firm Pegasus Capital Advisers.

The strategy comes as the firm tries to offset a slowdown in revenue per available room (RevPAR) growth for its US segment, which at 1.3% for 2018, had barely moved from its 1.2% growth rate the year before.

Rooms added at fastest rate in a decade

In the results themselves, IHG said it had added 56,000 new rooms in the year, its fastest additions rate in a decade, representing net system size growth of 17% year-on-year and taking its total rooms to 837,000 globally.

In terms of group RevPAR, the company saw 2.5% growth, down 20 basis points from 2.7% for 2017.

IHG’s chief executive, Keith Barr, said that RevPAR growth during the year had underpinned the firm’s decision to hike its final dividend by 10% to US$0.78, reflecting its “confident outlook”.

Combined with a US$500mln special dividend paid out in January, the increased final dividend takes the total sum paid out for the year to US$700mln.

“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," Barr added.

Revenues up, but profits down

IHG's full-year revenues were up 6% at US$1.8bn on the prior year, although pre-tax profits dropped 26% to US$485mln on the back of a US$108mln increase in exceptional costs from restructuring.

George Salmon, equity analyst at Hargreaves Lansdown, commented: "With a record number of rooms in the pipeline, investors will be hopeful there’s plenty more to come, but stuttering Chinese growth figures and the innate unpredictability of Donald Trump mean there are a few looming doubts over the group’s two most important geographies." 

He added: "The capital-light model means IHG’s less exposed to the ups and downs of the cycle than it used to be, but a downturn would still hurt."

In early afternoon trading in London, IHG shares were up 0.5% at 4,650p.

-- Updates share price --

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