Morningstar | InterContinental's Development Metrics Support a Strengthening Brand; Shares Slightly Overvalued
InterContinental's development metrics (pipeline and organic net unit growth up 11% and 5%, respectively) point to a strengthening brand advantage (source of its narrow moat), which is in line with our view. We don't plan a material change to our $62 per share valuation for the company. Shares are trading around 15 times our 2019 enterprise value to EBITDA, and we view shares as slightly overvalued.InterContinental's brands remain in good standing, evidenced by first-quarter signings of 24,000 rooms, the strongest first-quarter level since 2007. And room signings were twice the 12,000 units opened in the quarter, which were twice the 6,000 rooms the company removed in the period, leading to 11% pipeline growth. We remain confident in our forecast of 3.6% average annual unit growth over the next 10 years, which we plan to leave intact.
Regional performance tracked largely in line with our 2019 forecast and echoed recent peer results. InterContinental's Americas region (61% of total rooms) posted revPAR and net unit growth of 0.8% and 2.9%, respectively. We plan to maintain our 2019 room and revPAR growth estimates of 1.5% and 2.4%, respectively, as comparisons ease later this year. EMEAA (25% of total rooms) saw revPAR decline of 0.7%, as Korea and Middle East regions remain challenged with supply, mitigated by steady Continental Europe revPAR lift of 1%. As a result, we may lower our 2019 2% revPAR forecast toward 1.5%. But the Six Sense acquisition in February led to 7.5% net unit growth in the region, ahead of our 2019 4.6% room lift forecast, which we plan to increase to 7%, offsetting our regional revPAR estimate reduction.
Greater China (14% of total rooms) revPAR was flat, as it faced year ago revPAR growth of 11%. We see revPAR improvement the rest of 2019, as comparisons ease, leaving our 2019 revPAR growth forecast of 7% little changed. We also plan to maintain our 2019 11% net unit growth for the region, after the company posted room lift of 13%.
InterContinental Hotels Group is a hotel companies. Co.'s hotel brands are InterContinental Hotels & Resorts, Kimpton Hotels & Restaurants, Hualuxe Hotels & Resorts, Hotel Indigo, EVEN Hotels, Crowne Plaza Hotels & Resorts, Holiday Inn, Holiday Inn Express, Staybridge Suites, Holiday Inn Club Vacations, Holiday Inn Resorts, Candlewood Suites, and Avid Hotels. As of Mar 2 2017, Co.'s had total hotels of 5,348 with 4,433 franchised, 907 managed, eight owned and leased hotels, and 1,655 total hotels in the pipeline.
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