IHG Hotels & Resorts' hotels in Greater China continue to drag on its overall portfolio, but executives say the region is starting to trend back toward 2019 pre-pandemic performance.
During an earnings conference call, IHG CEO Elie Maalouf said 2024 hotel performance in Greater China was down year over year due to “good comps last year. … I think the difference will be less in the fourth quarter.”
IHG's global hotel revenue per available room continues to grow, up 1.5% year over year. Greater China's hotel RevPAR fell by 10.3%.
“We have good momentum through 2024 and into 2025,” Maalouf said, acknowledging that the third quarter showed record group bookings and that growth in that business segment continues to look good through 2025.
More on China
In the third quarter, IHG's hotels in Greater China felt the impact of a shift in the holiday calendar and two typhoons, with the storm that hit Shanghai in September reputedly the strongest typhoon to hit China in 75 years. Maalouf reiterated that the region is otherwise reverting to “normal” travel and hotel demand patterns, following a "bottoming out."
He added that China’s “real estate overhang takes time to be digested, as it did in the U.S. It will take time to turn, but we think it is turning,” he added.
Maalouf said that travel in China continues to be strong to Southeast Asia and Japan and outbound flight capacity is almost back to 2019 levels, although it is not in terms of inbound flights.
“Most [Greater China] decline is rate, not occupancy, as upscale travelers went to other regions,” he said.
Michael Glover, IHG's chief financial officer, said 6,700 hotel rooms were added to the company's Greater China pipeline, and cumulative signings to date there were up more than 20%.
“2024 is to be one of our biggest years in the region, which is very exciting,” he said.
Maalouf added that in recent quarters in China, IHG has given “no key money, no discounts from fees, or different incentives, actually, any incentives. We are in a really strong position in China, and we have the leading brands in most categories,” he said.
Around the world
In IHG's third-quarter earnings release, Maalouf said the British firm has “made great progress this year to further strengthen [our] enterprise platform, grow our brands and deliver on our growth algorithm. The power of this algorithm comes from the compounding nature of growing fee revenues through the combination of RevPAR, system expansion and ancillary fee streams.”
In Europe, Middle East, Asia — not including Greater China — and Africa, IHG's hotels performed the best, with RevPAR increasing by 4.9%.
“EMEAA is pleasingly driven by both pricing and demand,” Glover added.
While there is a range of trading performance across that large region, Glover said IHG's hotels in Continental Europe posted a 7% year-over-year RevPAR increase in the quarter, helped by the Paris Olympics and events in Germany.
The United Kingdom showed a 2% increase in RevPAR, with contributions coming from both London and regional U.K.
Development pipeline
IHG opened 98 hotels in the third quarter with approximately 17,500 rooms, which was more than double what it opened in the same period in 2023, Glover said.
That number did include the rollout of approximately 6,200 keys from IHG's partnership with German operator Novum Hospitality, which both companies announced in April, Glover said.
“Novum will continue to grow the system over the next 12 to 18 months, but the next quarter will see fewer rooms added from it due to that next batch requiring more [property improvement plans],” he added.
Glover said the performance of IHG's overall portfolio showed signs of the “normalization” of the industry that has been echoed throughout the year by most of the major hotel companies. He added IHG continued to show an ability to win deals across all segments.
IHG signed more than 19,200 rooms and 129 hotels in the third quarter — an increase of 14% year over year — growing the company's total pipeline to 327,000 rooms in 2,218 hotels as of the end of the quarter.
Agreements with Las Vegas resorts set to end
Maalouf also gave details on the end of IHG’s affiliation with The Venetian Resort Las Vegas and The Palazzo at The Venetian Resort, which has been in place since 2010. The affiliation ends on Jan. 1, 2025.
Even though that will result in a decline of 7,092 rooms — or approximately 0.7% of IHG’s rooms count — Maalouf said: “The unique nature of the fee structure … [meant the deal] contributed less than $1 million or 0.1% of IHG’s revenue from fee business in 2023 and a net nil contribution to operating profit from reportable segments.”
“The legacy agreement is from 15 years ago, and we were a very different company from 15 years ago. The ending of that agreement will have no effect on the P&L and a slight improvement to the system fund,” Maalouf added.
As of press time, IHG Hotels & Resorts' stock was trading at £86.30 ($111.84) a share, up 21.9% year to date. The London Stock Exchange’s FTSE 100 index was up 7.2% over the same period.
In the third quarter, IHG Hotels & Resorts reduced its share count by a further 3.7% and predicted it will pass the $1 billion mark in share returns before the end of 2024.
Maalouf said he is “certainly pleased with the latest trading performance,” noting IHG’s globally diverse footprint and continued pricing power.