Despite half-year and second-quarter revenue per available room hovering just below 2019 levels, IHG Hotels & Resorts executives are buoyed by performance that they claim heralds a new era of hotel industry health, a considerable share-buyback scheme and the reinstitution of a dividend significantly higher than its last one in 2019.
RevPAR at the British hotel company's portfolio for the first half and second quarter of the year compared with 2019 levels was down 10.5% and 4.5%, respectively.
On a call with analysts to discuss IHG's half-year 2022 earnings, CEO Keith Barr said the share buyback would consists of $500 million of surplus capital being returned to shareholders.
For the first time since the COVID-19 pandemic, IHG announced a dividend payment of 43.9 cents per share payable in October, a level 10% higher than that of 2019.
Analysts on the conference call questioned why IHG’s latest results trailed those of Marriott International and Hilton, although as of press time the firm’s stock was trading at 49.34 pounds sterling ($59.63) a share, a 9.2% increase year over year.
The London Stock Exchange’s FTSE 100 index was up by about half of that performance, by 4.5% over the same period.
Barr said IHG's hotels in the Americas region were the catalyst for global performance, with RevPAR in the second quarter surpassing the same period in 2019 by 3.5%.
Network Nuances
IHG opened 96 hotels and 14,900 rooms in the first six months of 2022, growing its total portfolio to 6,028 hotels and approximately 883,000 rooms. It signed 210 hotels and 30,700 rooms in the period, with its pipeline standing at 1,858 hotels and approximately 278,000 rooms.
IHG's overall network size was affected by the firm’s decision to pull out of Russia following that country’s invasion of Ukraine, Barr said.
He added IHG was “well on the path to recovery and edging ever closer to 2019 overall performance levels. … We saw strong momentum build in 2022.”
Paul Edgecliffe-Johnson, IHG's chief financial officer and head of group strategy, said revenue in the first half of 2022 was $840 million, an increase of 49% over 2021 but down 17% compared to 2019. Operating profit of $377 million represented a 10% increase over 2021 but an 8% decrease from 2019.
Barr underlined the continued renovation of the Crowne Plaza brand, saying that in 2022 IHG has renovated the same number of hotels under that brand as it has in the previous four years.
Edgecliffe-Johnson said the removal of hotels from IHG's portfolio — largely hotels in Russia — resulted in the overall network declining by 1.8%, a percentage that has been absorbed by new signings.
He said IHG's target to grow its network by approximately 4% for the year will be a challenge, especially as some signed China hotels did not open due to continued pandemic restrictions.
The ending of restrictions across Europe and some return of business travel there, however, is cause for optimism, he said.
“Working capital saw an outflow, principally due to an increase in receivables driven by the stronger RevPAR and a reduction in payables after the payment of bonuses in respect to the prior year,” he said.
Barr said the firm’s strategy is reflected in first-half performance — to drive growth by investment, increase dividends by sustainable means and further return funds to stockholders.
He added spending on travel has proved to be among the most resilient areas of discretionary income, acknowledging inflation and energy prices both are concerns.
“Increasing pricing power," he said, is reflected in a 4% increase in global average daily rate compared to the first half of 2019 and a 7.2% increase in just the second quarter.
“Guests want to travel the world,” he added.