The recovery of the majority of IHG Hotels & Resorts' hotel markets in 2022 gives executives reason for optimism in 2023, especially in the Americas.
IHG reported hotel revenue per available room for full-year 2022 was down 3.3% from 2019 levels globally, but up by the same percentage at its hotels in the Americas region.
Europe, Middle East, Asia and Africa, meanwhile, lagged 2019 RevPAR by 7.5%, but that metric improved as the year progressed, said Paul Edgecliffe-Johnson, IHG's chief financial officer and head of group strategy. In the fourth quarter, IHG's hotels in the region showed a year-over-year RevPAR improvement of 8.8%.
Edgecliffe-Johnson said during Tuesday's earnings conference call that IHG performance in 2023 should largely mirror 2019, “but much depends on the cost environment.”
“If the rate environment stays the same, then, yes, a good year,” he said.
IHG CEO Keith Barr said global RevPAR in 2022 remained slightly depressed due to COVID-19 restrictions in China being in place for much of the year. He added RevPAR in Greater China was down 38% compared to 2019 across the whole year and down 42% year-over-year in the fourth quarter.
“At times of [2022], one-third of IHG estate in Greater China was either closed or used as quarantine hotels,” he said.
“That said, last Wednesday [Feb. 15], 70% occupancy in China,” Barr said.
Barr said there are plenty of reasons to be optimistic, notably economists’ predictions that any recession will be softer than first thought.
The “inherent desire to travel for both business and leisure has been clear to see,” he said.
He added headwinds could include reduced air-travel capacity and higher pricing, macroeconomic uncertainties, availability and cost of financing with its impact on new hotel development, and availability and cost of labor, which will affect both development and operations.
Increasing Iberostar
In November, IHG signed a 30-year deal with Spain-based Iberostar Hotels & Resorts to add about 70 hotels and more than 24,000 rooms to IHG's loyalty platform.
The agreement did not alter ownership considerations for either side but expanded IHG’s resorts and lifestyle offerings.
Barr said during Tuesday's earnings call that the Iberostar brand also has a pipeline of five new-build hotels.
“Iberostar is a 65-year-old family business, and that is important for them, to be with a globally focused, good partner,” he said.
He added that with the deal, IHG now has 300 resorts across all of its brands.
Barr said there are more opportunities for such deals, which would be internationally focused and piggyback off IHG’s enterprise platforms of loyalty, distribution and procurement.
“Luxury and lifestyle portfolio is now 13% of our estate and 20% of pipeline, approaching twice the size of five years earlier,” he said.
“And 2023 will be a landmark year for the [Six Senses] brand,” he said, adding that its pipeline is 193% of its current system size.
Even an established brand such as Hotel Indigo has a pipeline of 108% and relatively new brand Avid is in 24 U.S. states, with plans to be in 34 by 2025.
“Pricing power is being clearly demonstrated and expected to be sustained,” he said.
Edgecliffe-Johnson said overall IHG now has 4% of industrywide opened rooms and 10% of the pipeline in the Americas.
In Europe, the Middle East, Africa and Asia, IHG's pipeline has reached 83,000 rooms. Almost 26,000 rooms were signed in 2022, which included approximately 7,000 Iberostar rooms.
Greater China has a slightly greater hotel pipeline at approximately 98,000 rooms, with 22,000 signed in 2022.
Across its entire portfolio, IHG realized in 2022 an adjusted net growth of 4.3% for a total of approximately 912,000 rooms in 6,164 hotels.
Edgecliffe-Johnson said globally, IHG's available rooms grew by 0.5% in 2022, which accounts for removed rooms and the company's exit from Russia.
“We had a number of 4% [systems growth] in mind at the beginning of 2022, but we said that’d be stretching. It was challenging to get there, but we did, with a focus on different ways of growing,” he said.
“Iberostar was an asset-light addition. We still aspire to have industry leading growth, between 4% and 5%. A lot depends on what happens in China, which will start slowly as construction firms come back,” he said.
Edgecliffe-Johnson added there is no guidance yet for 2023 on network growth, but that “it would be typically close to what Hilton and Marriott do. That’s a reasonable proxy.”
Barr said IHG now has more than 115 million loyalty members that spent 22% more than non-loyalty program guests.
Share Repurchases and Dividends
IHG annoucned it is returning approximately $750 million to shareholders, and Barr said the decision to return cash merely is a “reset.”
“[The return to shareholders] previously was at a level lower … so effectively this is how we were reimagining and reengineering the business. Now, this is where we expected to be,” he said.
Edgecliffe-Johnson said the return is in addition to a $500 million in share repurchases that executives announced in January.
Barr added that more than $14 billion had been returned to shareholders since 2008, which consisted of $2.6 billion in ordinary dividends and $11.7 billion in additional returns.
As of press time, IHG's stock was trading at $68.28, up 17% year to date. The New York Stock Exchange Composite was up 4.3% for the same period.