InterContinental Hotels Group and AccorHotels both reported
positive 2016 full-year earnings despite the challenging climate created by
terror, economic uncertainty and geopolitical tension.
"We saw multiple terrorist incidents impact travel in
Europe," IHG CEO Richard Solomons said to begin the company's recent earnings
call, "as well as two major political events in the U.K. and U.S., the
full implications of which are unclear."
During Accor's earnings presentation, chairman and CEO
Sebastien Bazin similarly spoke of "things that hadn’t been foreseen last
year when I gave you our results for 2015," citing a U.K. referendum to
leave the EU, President Donald Trump's victory in the U.S. presidential election,
turmoil in the Middle East, Brazil's economic crisis and terror attacks in
France and Belgium. "The macroeconomic and geopolitical environment [in
2016] was a difficult one to guide the boat through," Bazin said.
Solomons attributed IHG's ability to weather the storm
chiefly to the company's "resilient," asset-light model; 2016 marks
IHG's first year as a fully asset-light company following IHG's sale of its
last owned hotel, the InterContinental Hong Kong.
Bazin, meanwhile, chalked Accor's success up to several
deals last year, including its acquisition
of FRHI, which added 117 rooms to Accor's system; its buy
of Onefinestay; and its investments into other luxury home
rental providers.
Revenue per available room at IHG hotels increased 1.7
percent year over year during the fourth quarter, driven by a 1 percent rise in
average daily rate to $113.74 and a 0.5 percentage-point increase in occupancy
to 66.7 percent. For the full year, ADR rose 1.2 percent year over year to
$115.16, while occupancy increased 0.4 percentage points to 69.7 percent.
Accor's systemwide RevPAR climbed 1.3 percent year over
year, fueled mostly by occupancy, which increased 1 percentage point to 65.6
percent. ADR fell 0.2 percent to €90. For the full year, ADR rose 0.9
percent to €85 and occupancy increased 0.2 percentage points to 67.1 percent.
More on IHG in 2016
IHGs strong presence in oil and gas markets, which
underperformed across the hotel industry throughout 2016, continues to have an
impact. In the U.S., 14 percent of IHG's room volume is located in such markets,
which is higher than the 11 percent of all U.S. hotels, according to CFO Paul
Edgecliffe-Johnson. RevPAR for those U.S. markets declined 6.1 percent during
the fourth quarter and 7.5 percent for the full year.
Comparatively, fourth-quarter U.S. RevPAR grew 1.3 percent
year over year and full-year RevPAR increased 1.8 percent. "In 2017, we
expect ongoing elevated levels of new supply in these oil markets to continue to
hold back their RevPAR growth," Edgecliffe-Johnson said.
Oil markets also weighed down performance in Asia, the
Middle East and Africa. Across that region, RevPAR declined 0.2 percent for the
full year. If you remove the outlier—the Middle East, where RevPAR declined 7
percent—the region's RevPAR rose 3.7 percent, according to Edgecliffe-Johnson.
In Europe, RevPAR grew 3.1 percent during the fourth quarter
and 1.8 percent for the full year. "Our performance in France, Belgium and
Turkey continued to be impacted by security concerns," Edgecliffe-Johnson
said. "Excluding those markets, RevPAR in Europe grew 4 percent (for the
full year)."
IHG added 40,000 rooms to its system in 2016. At the same
time, the company followed through on a longer-term commitment to remove
lower-quality and underperforming hotels, booting 17,000 rooms from its
portfolio last year. The company also signed 76,000 rooms into its pipeline, the
most deals in a single year for IHG since 2008. IHG's full-year operating
profit grew from $680 million in 2015 to $707 million in 2016.
More on Accor in 2016
While Accor recorded a healthy bump
in revenue during the third quarter of 2016, following its acquisition of
FRHI, it had only just begun integrating the luxury hotel company into system.
With a few more months passed, Bazin said the integration is going well,
"exactly the opposite" of what skeptics had suggested might happen
with a merger of such different companies.
"We haven’t lost a single contract, the talent drain
has been nominal and we have signed 20 new management contracts," Bazin
said, "more than the company had signed in the last two years, in
fact." Between the July transaction close and the end of Accor's fiscal
year on Dec. 31, FRHI contributed €310 million in additional revenue.
RevPAR in the Americas declined 2.8 percent year over year
during the fourth quarter, driven by a 3.6 percentage-point drop in occupancy.
For the full year, however, Americas RevPAR increased 2.4 percent, helped by a
7.2 percentage-point increase in ADR to €108. The company's strong development
in the Asia/Pacific region in recent years, driven by a partnership with Huazhu
Hotels Group, fueled a 2.7 percent RevPAR increase during the fourth quarter and
4.9 percent RevPAR growth for the full year.
Strength in Eastern Europe, the U.K. and Germany bolstered performance
across Northern, Central and Eastern Europe. RevPAR there increased 3.5 percent
year over year during the fourth quarter, driven by both occupancy and rate
increases. Full-year RevPAR rose 3.2 percent, fueled mainly by rate growth. In
France, fourth-quarter occupancy increased 1.5 percentage points to 61.5
percent, but ADR declined 2.6 percent to €78. For the full year, ADR fell 1
percentage point to €80 and occupancy decreased 1.2 percentage points to 64.3
percent.
In 2016, Accor added 81,000 new rooms across 347 hotels, including
those affiliated with the FRHI acquisition. The company's full-year net profit
increased 8.1 percent to €266 million.