Thanks to performance in Europe, the Middle East and Asia, IHG Hotels & Resorts has seen a global uptick of 2.6% in revenue per available room in the first quarter, but the company took a slight hit in the Americas.
The British hotel firm also has announced changes in its loyalty program’s fees structure.
IHG's CEO Elie Maalouf said as the company’s portfolio scale and loyalty scheme have grown, so has its ability to make tweaks to the benefit of owners and guests.
“The system fund grows every year. … It is not a zero-sum game. It is not an accountancy change but actual fee streams," he said on the company's latest earnings call with analysts. "It is high-quality and high-margin, and it will grow beyond that. Owners get higher reimbursements for loyalty nights."
When such schemes reach scale — which Maalouf said for IHG equals 1.6 million loyalty members — there “is ample capacity to do everything we are talking about.”
“Unit costs get lower. We are always trying to invest in our owners’ value proposition. It is not a reduction in capability. There is not someone who is winning and someone who is losing,” Maalouf said.
The firm’s chief financial officer, Michael Glover, said IHG is lowering its standard loyalty assessment fee that owners pay.
An accompanying news release added that the firm also is “announcing to owners other marketing and loyalty program benefits, including increasing certain reward night reimbursements that owners receive back [from IHG] when points are redeemed for stays, which will additionally improve IHG’s overall owner offer and owner economics.”
US Uncertainty
Maalouf said RevPAR performance in the Americas was down 0.3% year over year in the quarter, but that is expected to improve later this year. RevPAR at U.S. hotels fell 1.9% in the quarter.
He added performance outside of the U.S. in the Americas was good and that the timing of Easter and the Super Bowl affected the quarter’s performance in the region.
The positive global RevPAR number derived from an 8.9% year-over-year jump in the firm’s Europe, Middle East, Africa and Asia region. In Greater China, RevPAR increased by 2.5%.
“More airline capacity is coming in,” Glover said, referring to Greater China. He said he hopes performance there will increase over the full-year 2024.
As for what to expect in the U.S. for the rest of 2024, Maalouf has high hopes.
“In the U.S. in April, RevPAR has already shown an increase. Projections are for an increase in RevPAR over the year,” he said, adding group bookings in the market have grown by 11%.
But more of the performance boost in IHG's Americas hotel portfolio might come from Mexico.
“Everything is going Mexico’s way over the last 18 months, and resorts are doing well,” he said.
He added “leisure demand remained robust” across the entire portfolio.
Novum Deal
In the quarter, IHG added 46 hotels and 6,200 rooms, a network expansion that is 11% higher than in the same period in 2023. IHG now has a record pipeline of more than 300,000 rooms, Maalouf said.
This number did not include the April 15 deal with Novum Hospitality that added a further 119 hotels and approximately 17,700 rooms to IHG’s portfolio, Maalouf added.
That Novum portfolio consisted of 108 opened hotels, with 15,334 rooms and 11 hotels and 2,369 rooms in the pipeline, mostly in Germany but also in Australia, The Netherlands and the United Kingdom.
Maalouf said 50% of the hotels will be affiliated with its Garner Hotels brand. With the deal, IHG has doubled its presence across Germany and grown IHG's overall portfolio by 1.9%, Maalouf said.
“Novum is a perfect transaction in a straight franchise deal. It is a portfolio that can convert in a very attractive market. Germany is not very branded,” he said.
Glover said any level of key money has not been announced but added IHG announced last year a capital expenditure figure of between $150 million to $200 million of key money across the entire portfolio remained.
“We are not changing that guidance as of now,” he said.
IHG also announced $239 million of share buybacks in the first quarter, which Glover said the company has completed approximately $800 million of share buybacks.
As of press time, IHG stock was trading at £76.92 ($96.45) a share, an increase of 8.1% year over year. The London Stock Exchange’s FTSE 100 index was up 5.37% over the same period.