IHG Hotels & Resorts’ executives are confident the actions they have taken over the last 18 months will see business exceed pre-pandemic levels, both due to the gradual return of corporate travel and its systems growth.

Their bullishness follows the United Kingdom-based company's announcement that operating profit in the first six months of 2021 was $138 million, a stark contrast to the same period in 2020 when losses measured $233 million.

“Confidence breeds confidence,” said CEO Keith Barr, speaking during the company's first half 2021 earnings announcement and conference call.

IHG's portfolio also showed some positive trends in revenue per available room, year-over-year increased 20% in the first half of 2021.

“We’re seeing corporate travel, which is discretionary, coming back, but the question is how that will accelerate through [the third quarter] and [fourth quarter] and into 2022. No one has hard facts on that, but it is directly related to vaccination take-up and regulations. That is out of our control but trending in the right direction,” he said.

Barr said business travelers who had to travel city to city are still taking those trips.

“IHG is traveling to do our jobs, and we’re seeing other companies do that, too,” he said, adding pricing would be key to any return, with most pricing at the moment being aimed at the leisure market and being relatively aggressive.

Net unit growth remains fundamental to IHG’s return, Barr said. He announced plans for a new “luxury, lifestyle brand,” but gave few details other than it will be driven by conversions.

“We’re keeping a tight lid on the brand’s name and key features for a few more weeks, but it will be at a different price point to Voco, and it will be a collection brand,” Barr said. “Our luxury and lifestyle portfolio has increased from two brands and 241 properties to five brands and 433 properties, and the segment now accounts for 13% of the pipeline."

IHG's established brands continue to scale, Barr said.

“Avid, our next brand of scale, is on track to reach 50 open hotels by the end of 2021 and has a pipeline of 175. … Holiday Inn Express has now reached the milestone of more than 3,000 open hotels, with 667 in the pipeline,” Barr said.

He added Holiday Inn Express’ Formula Blue 2.0 rooms prototype in the Americas has delivered 10% cost savings for owners.

Kimpton, which IHG acquired in 2015, also continues to grow, he said, with 75 open hotels and 32 properties in the pipeline.

Overall, in the first half of 2021, IHG opened 132 hotels and signed 203 properties.

Paul Edgecliffe-Johnson, CFO and head of group strategy, said he is confident IHG’s fee-based business model will be resilient as demand returns.

“Recovery skews to domestic leisure markets where restrictions have been lifted,” he said.

Overall RevPAR continues to be down compared 2019 levels, but it is moving in the right direction, he said.

In the U.S., RevPAR decreased 33.6% in the first six months of 2021 compared with the same period in 2019. In that region, the firm added 9,000 new rooms, with 5,000 of those added in the second quarter.

In Greater China, RevPAR was down 26% in in the first quarter compared to 2019 but down only 16% in the second quarter. IHG has 98,000 rooms in the pipeline in that region. In Europe, Middle East and Africa, 80,000 rooms are in the pipeline, and 9,000 were signed in the first half of the year.

In February, IHG reviewed 200 Holiday Inn and Crowne Plaza hotels, which resulted in 56 hotels, or 13,000 rooms, in the U.S. and EMEA exiting the company's system and more than 30 agreeing to undertake performance-improvement plans, Barr said.

“That review will be completed by the end of the year,” he said, adding that across the Americas digital check-in is now available in 3,000 hotels.

Edgecliffe-Johnson said capital expenditure was $23 million lower than in the same period in 2020, but it will increase through the remainder of 2021.

Barr said his three top priorities are to invest in the business to drive growth, restore an ordinary dividend when viable to do so and return surplus funds to shareholders.

Edgecliffe-Johnson said no dividend will be paid in 2021.

Total revenue remains down compared to first half 2020 numbers, but not by much, executives said.

Comparing first half 2021 against the same period 2020, which included roughly three months before the onset of the economic impacts of the COVID-19 pandemic, IHG saw earnings drop only 6% from $1.25 billion to $1.18 billion.

Compared with pre-pandemic 2019, gross revenue in the first six months of 2021 was down 42%, with global RevPAR down 42.6%. In the second quarter of 2021, RevPAR was down 36.3% year over year.

Edgecliffe-Johnson said average daily rate in June 2021 was at 90% of 2019 levels, which he attributed to the sophistication of the company's revenue-management tools.

“Fifty percent of hotels in July saw RevPAR above 2019 levels,” he added.

Barr said global RevPAR was still down compared to 2019 due to markets, notably in Europe, that retain strict pandemic regulations and lockdowns.

“We’re seeing significant improvement in the second quarter, sustained into July," he said. "There is much to be confident about when we look at Greater China and the U.S. and others of our major markets. Resort leisure demand is massive, but 2021 is a transitional year with a larger-than-usual removal rate.”

Barr said lenders are feeling confident but he understands why they have been quiet thus far.

“A pause was the right thing for the industry,” he added.