The strength of emerging countries as source markets for hotels in the West was confirmed this week as InterContinental said that visitors from the Middle East and Russia had helped propel profits at its flagship property in London despite a drop-off from US guest demand.
But room signings during the first quarter of this year were down nearly 9% on the same period a year earlier and the slip in this key metric ought to cause concern in Windsor.
Pipeline is, as Hotel Analyst has said repeatedly, as important to the future success of brand owners and operators as revpar. IHG's weakening in this area is concerning.
The IHG defence is that last year was exceptional and that while the full year 2008 number of signings is likely to be below 2007, it will still be strong.
In addition, CEO Andy Cosslett said during the first quarter results conference call this week that the rate of openings this year is so far at twice the rate of last year.
The overall pipeline stands at just over 230,000 rooms. As Cosslett pointed out, this would make the pipeline the ninth largest hotel group in the world.
"We continue to see a limited impact on the pipeline or the ability to get deals done," said Cosslett, addressing directly the effects of the credit crunch. Despite the market conditions, IHG has still signed 418 hotels since October, he said and in the Americas the rate of signings in the first quarter of this year was higher than a year ago.
The one area where there had been an impact on the pipeline was where large projects had a residential component but such schemes were a "negligible" part of the pipeline. In all, 40% of IHG's pipeline was in construction, added Cosslett.
A big deal has dropped out of the pipeline in the quarter, however, with IHG pocketing $13m in fees following the exit of this unnamed hotel.
Asset markets remain strong, although deals were taking longer due to heavier due diligence by buyers and the lenders to these buyers. A sign of the strength was the sale of the 17% stake in the Amsterdam Crowne Plaza City Centre which was sold for Eu18m and is the first IHG hotel deal for Host. IHG has a new 40-year management agreement on the property.
There was no news on the sale of the InterContinental in Atlanta with IHG stating that it takes 12 months to adequately market such assets.
A key brand for IHG's pipeline growth is Indigo. In San Diego, it is using its own money to build a property. Cosslett said that the brand should prove particularly useful for penetrating established markets like London and Paris with conversions.
System size was up 6% year-on-year and global revpar, which was affected by Easter, was ahead by 3.5%. Continuing revenue was up 15% to £226m and continuing operating profit was up 38% to £62m or up 24% excluding the liquidated damages from the exit of the Americas project.