IHG eyes ‘very strong’ year despite ‘financing challenges’

Intercontinental Hotels Group expects to close out 2023 with ‘very strong’ financial results, despite ‘financing challenges’ hurting its ability to launch new hotels.

The FTSE 100-listed Holiday-Inn owner’s revenue per available room (RevPAR) – a key performance indicator for the hotel industry – was up 10.5 per cent in the third quarter compared with last year.

China led the way with a mammoth 43.2 per cent jump in RevRAR, while the Americas increased by 4.1 per cent and EMEA was up by 15.9 per cent.

IGH also reported it was on track to return $1billion (£825million) to shareholders this year, through share buybacks and dividend payments. 

The hotel industry has benefited from a boom in leisure travel demand after the pandemic, as people splurge their savings on vacations despite rising costs of living.

Elie Maalouf, CEO of IHG, said: ‘I am excited about the future for IHG, and the attractive, long-term demand drivers for our markets.’

However, Maalouf cautioned that ‘macro-economic uncertainties and some short-term financing challenges [are] holding back new hotel development’.

This took the shine off an optimistic trading update, with IHG shares down more than 3 per cent to around £59.60. 

In August, the firm  boasted ‘very healthy’ demand in the first half after revenues were boosted by the reopening of the Chinese economy.

The Crowne Plaza owner global RevPAR surged by 24 per cent year-on-year in the six months to the end of June, taking total group sales to more than $2.2billion (£1.7billion).

Philip Baker, head of hotels group at Gowling WLG, said: ‘The travel sector continues to demonstrate its resilience and benefit from the increased consumer demand despite the cost of living crisis.

‘[IHG] continues to demonstrate its ability to continue generating cash flow in uncertain times on the back of continuous investment in Europe, the Middle East and Asia. Subsequently, its growth ambitions look increasingly positive as more consumers are capitalising on being able to travel freely again.

‘The efforts of competitors to recover from a difficult period and similarly thrive will doubtlessly be in focus, particularly with the cost-of-living crisis and inflationary pressures impacting consumer spending. 

‘Shareholders will want to see this success sustained and profits boosted after the downturn during the pandemic as the hospitality sector rebounds.’

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