InterContinental Hotels Group, the owner of the Holiday Inn and Crowne Plaza chains, has predicted a full recovery for travel worldwide by 2024, led by a strong US economy and the end of Covid-19 restrictions in China.
The company posted an operating profit of $628mn for 2022, up 27 per cent on $494mn the previous year. IHG said its revenue per available room (revpar), a key industry metric, was up 37 per cent worldwide on last year and only 3.3 per cent lower than 2019.
“A big, big tailwind for us will be the recovery of China in 2023,” said chief executive Keith Barr. “What we’ve seen globally is that with the recovery, leisure has come back at a higher volume globally than pre-pandemic.”
The hotel group, which owns 18 brands, reported revenues of $3.9bn for the year ending December 31, up 33 per cent on last year but still down on sales of $4.6bn in 2019 before the pandemic. China, once the company’s second-largest market, provided just $87mn of hotel revenue.
Barr said that in the US, IHG’s largest market, revpar was now above pre-pandemic levels. In the wider Americas region, it was up 3.3 per cent on 2019 and occupancy is forecast to be 96 per cent of 2019 levels in 2023.
“The projections for [full recovery in] the industry are 2024 because the US will be so significantly ahead,” Barr said. “What’s been amazing to see is just the strength of the US recovery, the general sense that we’re heading towards a soft landing in the US and seeing no crash in demand.”
The rise in profits can be attributed to higher room rates worldwide, he said, but especially in the US, as hotels have put up prices in response to high demand.
IHG is a franchise business that owns very few of the group’s almost 6,000 hotels around the world, taking a percentage cut from operators instead for use of its brand, access to its loyalty scheme and other services. In November, it signed an exclusive partnership with Iberostar, adding 70 all-inclusive resorts to its portfolio.
In China, where the group has more than 600 hotels and hundreds more in the pipeline, Barr is optimistic that domestic travel will have fully recovered by “2024 or 2025”. By February 15 2023, its hotels in the region were at 70 per cent occupancy rates, he said, while trips taken in China during the lunar new year reached almost 90 per cent of 2019 levels.
“As air capacity comes back to China for international travel, there’ll be significant outbound travel [demand],” Barr said.
The group, which also owns the luxury Six Senses resort brand, announced a share buyback of $750mn on Tuesday, following a $500mn buyback in August, and raised its final dividend to 94.5 cents per share, up 10 per cent on the previous year.
Analysts at Jefferies said IHG’s adjusted operating profit of $828mn was marginally below the analyst consensus of $831mn, but noted the benefits of China’s reopening and the resilience of US consumer spending.
The group’s London-listed shares were down 1.5 per cent to 5504p by midday trading on Tuesday.
The travel industry has benefited from the rush to book holidays and attend conferences since pandemic restrictions were lifted. Both Tui and Ryanair have reported record bookings for the summer of 2023.
“We know that travel is one of the last discretionary spending items our guests will stop,” said Barr. “People stop buying something like a new car or a new Xbox before they stop going on holiday and business travel. People recognise the need to connect with people.”